N-CSRS

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM N-CSRS

CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT

COMPANIES

Investment Company Act file number 811-22641

    Franklin Alternative Strategies Funds    

(Exact name of registrant as specified in charter)

One Franklin Parkway, San Mateo, CA 94403-1906

(Address of principal executive offices)    (Zip code)

Craig S. Tyle, One Franklin Parkway, San Mateo, CA 94403-1906

(Name and address of agent for service)

Registrant’s telephone number, including area code:    650 312-2000

Date of fiscal year end: 5/31

Date of reporting period:    11/30/18

Item 1. Reports to Stockholders.

Semiannual Report and Shareholder Letter November 30, 2018

Franklin K2 Alternative Strategies Fund

A SERIES OF FRANKLIN ALTERNATIVE STRATEGIES FUNDS

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Franklin Templeton Investments

Successful investing begins with ambition. And achievement only comes when you reach for it. That’s why we continually strive to deliver better outcomes for investors. No matter what your goals are, our deep, global investment expertise allows us to offer solutions that can help.

During our more than 70 years of experience, we’ve managed through all kinds of markets—up, down and those in between. We’re always preparing for what may come next. It’s because of this, combined with our strength as one of the world’s largest asset managers that we’ve earned the trust of millions of investors around the world.

Dear Fellow Shareholder:

During the six months ended November 30, 2018, global markets benefited from crude oil price gains through the end of September, upbeat economic data in certain regions, generally healthy corporate earnings, and optimism near period-end that the U.S. Federal Reserve would raise interest rates at a slower pace than during the past two years. However, global markets also reflected investor concerns about stricter regulation of technology companies, U.S. and European Union political uncertainties, changing interest-rate policies of major central banks, and how the U.S.-China trade dispute could affect global growth and corporate earnings. In this environment, global developed stock markets, as measured by the MSCI World Index, had a -1.45% total return for the period.¹ Global emerging market stocks, as measured by the MSCI Emerging Markets Index, had a -9.68% total return.¹ Global government bonds, as measured by the FTSE World Government Bond Index, had a -2.51% total return.¹

We are committed to our long-term perspective and disciplined investment approach as we conduct a rigorous, 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.

On the following pages, the Fund’s portfolio management team reviews investment decisions that pertain to performance during the past six months in light of the economic environment and other factors. 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 continuing to serve your investment needs in the years ahead.

Sincerely,

Madison S. Gulley, CFA

President and Chief Executive Officer – Investment Management

Franklin Alternative Strategies Funds

This letter reflects our analysis and opinions as of November 30, 2018, 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.

CFA^® is a trademark owned by CFA Institute.

1. Source: Morningstar.

See www.franklintempletondatasources.com for additional data provider information.

Not FDIC Insured | May Lose Value | No Bank Guarantee

franklintempleton.com Not part of the semiannual report 1

Contents

Semiannual Report

Franklin K2 Alternative Strategies Fund	3
Performance Summary	7
Your Fund’s Expenses	9
Consolidated Financial Highlights and Consolidated Statement of Investments	10
Consolidated Financial Statements	66
Notes to Consolidated Financial Statements	70
Shareholder Information	87

Visit franklintempleton.com for fund updates, to access your account, or to find helpful financial planning tools.

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Semiannual Report

Franklin K2 Alternative Strategies Fund

This semiannual report for Franklin K2 Alternative Strategies Fund covers the period ended November 30, 2018.

Your Fund’s Goal and Main Investments

The Fund seeks capital appreciation with lower volatility relative to the broad equity markets. The Fund seeks to achieve its investment goal by allocating its assets across multiple nontraditional or alternative strategies, including, but not limited to, some or all of the following strategies: long short equity, relative value, event driven and global macro. The Fund is structured as a multi-manager fund, meaning the Fund’s assets are independently managed by multiple subadvisors, while the Fund’s investment manager retains overall responsibility for the Fund’s investments. The Fund may invest in a wide range of securities and other investments including, but not limited to: equity securities including common stocks, preferred stocks, convertible securities, rights and warrants, private and registered investment vehicles and exchange-traded funds (ETFs); debt securities including bonds, notes, debentures, banker’s acceptances and commercial paper; loans and loan participations; and mortgage-backed or other asset-backed securities, including collateralized debt obligations; as well as derivatives, commodities and currencies.

Performance Overview

The Fund’s Class A shares had a -0.79% cumulative total return for the six months under review. For comparison, the Fund’s primary benchmark, the HFRX Global Hedge Fund Index, which is designed to be representative of the overall composition of the hedge fund universe, had a -4.25% total return for the same period.¹ Also for comparison, the Fund’s secondary benchmark, the ICE BofA Merrill Lynch U.S. 3-Month Treasury Bill Index, which tracks the performance of short-term U.S. government securities with a remaining term to final maturity of less than three months, posted a +1.04% total return for the same period.² You can find more of the Fund’s performance data in the Performance Summary beginning on page 7.

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) 342-5236.

Economic and Market Overview

The global economy expanded during the six months under review, despite weakness in certain regions. Global developed and emerging market stocks were aided by higher crude oil prices in the first four months of the period, encouraging corporate earnings reports, and indications from the U.S. Federal Reserve (Fed) near period-end that led to expectations of a slower pace of interest-rate increases. However, various factors weighed on global markets during the period, including concerns about tighter regulation of technology companies, political uncertainties in the U.S. and the European Union, major central banks’ interest-rate path and unwinding of monetary stimulus measures, and the impact of the U.S.-China trade dispute on global growth and corporate earnings. In this environment, global stocks, as measured by the MSCI All Country World Index, had a -2.44% total return for the six months ended November 30, 2018.²

The U.S. economy grew during the six-month period. The economy grew faster in 2018’s second quarter, driven by consumer spending, business investment, exports and government spending, but moderated in the third quarter due to declines in exports and housing investment. The unemployment rate declined from 3.8% in May 2018 to a nearly 49-year low of 3.7% at period-end.³ Annual inflation, as measured by the Consumer Price Index, decreased from 2.8% in May 2018 to 2.2% at period-end.³ The Fed raised its target range for the federal funds rate in June and September 2018 and continued reducing its balance sheet as part of an ongoing plan to normalize monetary policy. Near period-end, Fed Chair Jerome Powell, in his speech at the Economic Club of New York, mentioned the

1. Source: FactSet. Hedge Fund Research, Inc. – www.hedgefundresearch.com. The HFRX Global Hedge Fund Index is being used under license from Hedge Fund Research, Inc., which does not endorse or approve of any of the contents of this report.

2. 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. Unlike most asset class indexes, HFR Index returns reflect fees and expenses.

3. Source: U.S. Bureau of Labor Statistics.

See www.franklintempletondatasources.com 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 Consolidated Statement of Investments (SOI). The Consolidated SOI begins on page 15.

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Fed’s current policy rate was “just below” estimates of what it believed would be neutral for economic growth, suggesting it might slow its pace of rate increases.

In Europe, the U.K.’s quarterly economic growth accelerated in 2018’s second and third quarters, amid growth in the services sector. The Bank of England raised its key policy rate once during the review period. The eurozone’s quarterly growth moderated in the third quarter. The bloc’s annual inflation rate ended the period higher than in May 2018. The European Central Bank (ECB) kept its benchmark interest rate unchanged during the period. In October 2018, the ECB further reduced its monthly bond purchases and reiterated its plan to conclude the program at the end of 2018, while keeping interest rates unchanged through at least the summer of 2019.

In Asia, Japan’s quarterly gross domestic product (GDP) grew in 2018’s second quarter but contracted in the third quarter. The Bank of Japan left its benchmark interest rate unchanged during the period and continued its monetary stimulus measures.

In emerging markets, Brazil’s quarterly GDP growth accelerated in 2018’s third quarter. Russia’s annual GDP growth rate accelerated in 2018’s second quarter but moderated in the third quarter. The Bank of Russia raised its key interest rate once during the period. China’s annual GDP growth moderated in 2018’s second and third quarters. The People’s Bank of China left its benchmark interest rate unchanged during the period, but it took measures to improve financial liquidity to mitigate the negative effects of the U.S.-China trade dispute and support economic growth. Overall, emerging market stocks, as measured by the MSCI Emerging Markets Index, had a -9.68% total return during the period.²

Investment Strategy

We manage the Fund using a multi-manager approach. While we are responsible for the Fund’s overall investments, we allocate assets to multiple subadvisors, each of whom independently manages a separate portion of the Fund’s portfolio in accordance with some or all of the following strategies: long short equity, relative value, event driven and global macro. We allocate the Fund’s assets among these strategies utilizing a top-down approach, generating the Fund’s strategy weightings by taking into account market conditions, risk factors, diversification, liquidity, transparency, and availability of various subadvisors and other investment options, among other things. We allocate the Fund’s assets to specific subadvisors utilizing a bottom-up approach, selecting subadvisors and their weighting within the Fund’s portfolio by taking into account their correlations to various markets and to each other, their risk profiles and their return expectations. Long short equity strategies

generally seek to produce returns from investments in the equity markets by taking long and short positions in stocks and stock indexes (through the use of derivatives or through a position in an ETF). Relative value strategies encompass a wide range of investment techniques that are intended to profit from pricing inefficiencies. Event driven strategies generally invest in securities of companies undergoing significant corporate events. Global macro strategies generally focus on broad-based economic opportunities across numerous markets and investments. In addition, the debt securities in which the Fund may invest may have variable or fixed interest rates, may be of any maturity or credit rating, and may include sovereign debt, high yield (“junk”) bonds and distressed debt securities (securities of companies that are, or are about to be, involved in reorganizations, financial restructurings, or bankruptcy) and securities that are in default.

The Fund may take long and/or short positions in a wide range of asset classes, including equities, fixed income, commodities and currencies, among others. Long positions benefit from an increase in the price of the underlying instrument or asset class, while short positions benefit from a decrease in that price. The Fund may use derivatives for hedging and non-hedging (investment) purposes, although no subadvisor is required to hedge any of the Fund’s positions or to use derivatives. Such derivative investments may include futures contracts, swaps, options and currency forward contracts. As a result of the Fund’s use of derivatives, the Fund may have economic leverage, which means the sum of the Fund’s investment exposures through its use of derivatives may significantly exceed the amount of assets invested in the Fund, although these exposures may vary over time. The Fund may engage in active and frequent trading as part of its investment strategies.

What is a futures contract?

A futures contract is an agreement between the Fund and a counterparty made through a U.S. or foreign futures exchange to buy or sell an underlying instrument or asset at a specific price on a future date.

What are swap agreements?

Swap agreements, such as interest-rate, currency and credit default swaps, are contracts between the Fund and another party (the swap counterparty). In a basic swap transaction, the Fund agrees with the swap counterparty to exchange the returns (or differentials in rates of return) earned or realized on a particular “notional amount” of underlying instruments. The notional amount is the set amount selected by the parties as the basis on which to calculate the obligations that they have agreed to exchange. The parties typically do not actually exchange the notional amount. Instead, they agree to exchange the returns that would be earned or realized if the notional amount were invested in given instruments or at given interest rates.

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What is an option?

An option is a contract to buy or sell a specific financial product known as the option’s underlying instrument at a specific price. The buyer of an option has the right, but not the obligation, to buy or sell the underlying instrument at or until a specified expiration date. Conversely, the seller (“writer”) of an option who opens a transaction is obligated to buy or sell the underlying instrument should the option holder exercise that right.

What is a currency forward contract?

A currency forward contract is an agreement between the Fund and a counterparty to buy or sell a foreign currency in exchange for another currency at a specific exchange rate on a future date. Currency forward contracts are privately traded in the interbank market, not on a centralized exchange.

Manager’s Discussion

During the six months under review, performance was dispersed across the Fund’s four underlying strategies, reflecting the benefits of a diversified alternatives portfolio. The long short equity and global macro strategies detracted from results, while the event driven and relative value strategies contributed. The Fund also implemented a conditional risk overlay (CRO), which supported performance as volatility returned to global equity markets. The CRO strategy was active at period-end. The allocation percentages for each strategy are listed in the Strategy Allocation table on this page.

What is a conditional risk overlay (CRO) strategy?

From time to time, the Fund’s investment manager may implement its CRO strategy, which seeks to neutralize certain market sensitivities that may exist in the Fund. The CRO strategy involves investing in derivatives or other instruments in an effort to reduce volatility and provide a hedge against market declines. When implemented, the strategy will reduce the Fund’s ability to benefit from positive market movements.

The Fund’s long short equity strategy subadvisors were Chilton Investment, Impala Asset Management, Jennison Associates, Portland Hill Asset Management and Wellington Management. While Chilton delivered positive performance, the other subadvisors experienced negative returns, with Impala and Portland Hill among the worst performers. In terms of aggregate sector performance, the top detractors were consumer discretionary, information technology and industrials, due to net long positioning in these sectors. Conversely, long positioning in consumer staples and communication services made positive contributions.

The Fund allocated assets to two new global macro strategy subadvisors in July: discretionary subadvisor H2O AM and systematic subadvisor Grantham, Mayo, Van Otterloo & Co. They

Strategy Allocation*
Based on Total Investments as of 11/30/18
Strategy	Long Positions		Short Positions
Relative Value		40.4%		-16.3%
Long Short Equity		40.3%		-24.3%
Event Driven		21.8%		-8.7%
Global Macro		48.7%		-92.2%
Risk Overlay		0.00%		-3.32%

*Figures represent the net Fund exposure and include certain derivatives held in the portfolio (or their underlying reference assets) or unsettled trades and may not total 100% or may be negative due to rounding, use of any derivatives or other factors.

Subadvisors

11/30/18

Long Short Equity

Chilton Investment Company, LLC

Impala Asset Management LLC

Jennison Associates, LLC

Portland Hill Asset Management Limited

Wellington Management Company, LLP

Relative Value

Chatham Asset Management, LLC

Lazard Asset Management, LLC

Loomis Sayles & Company, L.P.

Event Driven

Bardin Hill Arbitrage IC Management LP

P. Schoenfeld Asset Management L.P.

Global Macro

Emso Asset Management Limited

Graham Capital Management, L.P.

Grantham, Mayo, Van Otterloo & Co. LLC

H2O AM LLP

joined existing subadvisors Graham Capital Management and Emso Asset Management. Emso contributed a modest gain for the six-month period, while Graham weakened performance. The two new subadvisors also detracted from results for the partial period in which they were allocated assets. The strategy was generally positioned short in equity indexes, which hindered returns. In contrast, short positioning in non-U.S. currencies and interest-rate derivatives benefited performance.

The Fund’s two event driven strategy subadvisors strengthened returns: P. Schoenfeld Asset Management and Bardin Hill Arbitrage IC Management (formerly Halcyon Arbitrage IC Management). The strategy benefited from robust mergers-and-acquisitions activity over the period. In terms of aggregate sector performance, health care, consumer discretionary and utilities strengthened returns. Conversely,

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FRANKLIN K2 ALTERNATIVE STRATEGIES FUND

telecommunication services and consumer staples weakened returns.

The Fund’s relative value strategy subadvisors were Basso Capital Management, Chatham Asset Management, Lazard Asset Management and Loomis Sayles & Company. During the review period, we eliminated our allocation to Basso as our outlook for the subadvisor’s strategy had not improved. Lazard and Chatham generated positive performance, while Loomis’s return was generally flat. Basso had a negative impact on performance. In terms of aggregate sector performance, consumer discretionary, communication services and industrials contributed. In contrast, long exposures to the energy and financials sectors detracted from the strategy’s performance.

Thank you for your participation in Franklin K2 Alternative Strategies Fund. We look forward to continuing to serve your investment needs.

Brooks Ritchey Co-Lead Portfolio Manager

Robert Christian Co-Lead Portfolio Manager

Anthony Zanolla, CFA Portfolio Manager

The foregoing information reflects our analysis, opinions and portfolio holdings as of November 30, 2018, 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.

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FRANKLIN K2 ALTERNATIVE STRATEGIES FUND

Performance Summary as of November 30, 2018

The performance table does 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 11/30/18¹

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 5.50% and the minimum is 0%. Class A: 5.50% maximum initial sales charge; Advisor Class: no sales charges. For other share classes, visit franklintempleton.com.

Share Class	Cumulative Total Return2		Average Annual Total Return3
A4
6-Month		-0.79%		-6.23%
1-Year		+0.50%		-5.01%
5-Year		+15.33%		+1.73%
Since Inception (10/11/13)		+17.98%		+2.14%
Advisor
6-Month		-0.61%		-0.61%
1-Year		+0.76%		+0.76%
5-Year		+16.93%		+3.18%
Since Inception (10/11/13)		+19.62%		+3.55%

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) 342-5236.

See page 8 for Performance Summary footnotes.

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FRANKLIN K2 ALTERNATIVE STRATEGIES FUND

PERFORMANCE SUMMARY

Total Annual Operating Expenses⁵

Share Class	With Waiver		Without Waiver
A		2.61%		2.82%
Advisor		2.36%		2.57%

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 market values of securities owned by the Fund will go up or down, sometimes rapidly or unpredictably. The Fund’s performance depends on the manager’s skill in selecting, overseeing and allocating Fund assets to the subadvisors. The Fund is actively managed and could experience losses if the investment manager’s and subadvisors’ judgment about particular investments made for the Fund’s portfolio prove to be incorrect. Some subadvisors may have little or no experience managing the assets of a registered investment company. Foreign investments are subject to greater investment risk such as political, economic, credit and information risks as well as risk of currency fluctuations. Investments in derivatives involve costs and create economic leverage, which may result in significant volatility and cause the Fund to participate in losses (as well as gains) that significantly exceed the Fund’s initial investment. Lower-rated or high-yield debt securities involve greater credit risk, including the possibility of default or bankruptcy. Currency management strategies could result in losses to the Fund if currencies do not perform as the investment manager or subadvisor expects. The Fund may make short sales of securities, which involves the risk that losses may exceed the original amount invested. Merger arbitrage investments risk loss if a proposed reorganization in which the Fund invests is renegotiated or terminated. Liquidity risk exists when securities have become more difficult to sell, or are unable to be sold, at the price at which they have been valued. The Fund’s prospectus also includes a description of the main investment risks.

1. The Fund has an expense reduction contractually guaranteed through 9/30/19 and a fee waiver related to the management fee paid by a subsidiary. The Fund also has a fee waiver associated with any investments it makes in a Franklin Templeton money fund and/or other Franklin Templeton fund, contractually guaranteed through 9/30/19. Fund investment results reflect the expense reduction and fee waivers; without these reductions, 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, if any, has not been annualized.

4. Prior to 9/10/18, these shares were offered at a higher initial sales charge of 5.75%, thus actual returns would have differed. Total returns with sales charges have been restated to reflect the current maximum initial sales charge of 5.50%.

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 Consolidated 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.

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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 $64.50.

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.

			Actual (actual return after expenses)				Hypothetical (5% annual return before expenses)
Share Class	Beginning Account Value 6/1/18		Ending Account Value 11/30/18		Expenses Paid During Period 6/1/18–11/30/181,2		Ending Account Value 11/30/18		Expenses Paid During Period 6/1/18–11/30/181,2		Net Annualized Expense Ratio2
A	$	1,000	$	992.10	$	12.88	$	1,012.13	$	13.01		2.58	%
C	$	1,000	$	987.60	$	16.59	$	1,008.37	$	16.77		3.33	%
R	$	1,000	$	990.40	$	14.12	$	1,010.88	$	14.27		2.83	%
R6	$	1,000	$	993.90	$	11.20	$	1,013.84	$	11.31		2.24	%
Advisor	$	1,000	$	993.90	$	11.65	$	1,013.39	$	11.76		2.33	%

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 183/365 to reflect the one-half year period.

2. Reflects expenses after fee waivers and expense reimbursements. Does not include acquired fund fees and expenses.

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Consolidated Financial Highlights

Franklin K2 Alternative Strategies Fund

	Six Months Ended November 30, 2018 (unaudited)			Year Ended May 31,
				2018			2017			2016			2015			2014a
Class A
Per share operating performance (for a share outstanding throughout the period)
Net asset value, beginning of period	$	11.38		$	11.14		$	10.55		$	11.16		$	10.64		$	10.00
Income from investment operationsb:
Net investment income (loss)c		—	d		0.01			0.03			(0.05	)		(0.11	)		(0.02	)
Net realized and unrealized gains (losses)		(0.09	)		0.38			0.61			(0.38	)		0.70			0.70
Total from investment operations		(0.09	)		0.39			0.64			(0.43	)		0.59			0.68
Less distributions from:
Net investment income		—			(0.15	)		(0.05	)		(0.14	)		(0.07	)		(0.04	)
Net realized gains		—			—			—			(0.04	)		—			—
Total distributions		—			(0.15	)		(0.05	)		(0.18	)		(0.07	)		(0.04	)
Net asset value, end of period	$	11.29		$	11.38		$	11.14		$	10.55		$	11.16		$	10.64
Total returne		(0.79)%			3.57%			6.07%			(3.89)%			5.53%			6.82%
Ratios to average net assetsf
Expenses before waiver, payments by affiliates and expense reductiong		2.77%			2.81%			3.07%			3.22%			3.40%			3.33%
Expenses net of waiver, payments by affiliates and expense reductiong		2.58%			2.59%			2.73%			2.88%	h		2.99%	h		2.83%
Expenses incurred in connection with securities sold short		0.38%			0.39%			0.53%			0.67%			0.65%			0.56%
Net investment income (loss)		0.09%			0.06%			0.10%			(0.44)%			(0.95)%			(0.35)%
Supplemental data
Net assets, end of period (000’s)		$107,205			$119,214			$119,385			$177,412			$148,991			$96,889
Portfolio turnover rate		105.03%			234.77%			209.45%			229.90%			295.81%			181.06%

^aFor the period October 11, 2013 (commencement of operations) to May 31, 2014.

^bThe amount shown for a share outstanding throughout the period may not correlate with the Consolidated 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.

^dAmount rounds to less than $0.01 per share.

^eTotal return does not reflect sales commissions or contingent deferred sales charges, if applicable, and is not annualized for periods less than one year.

^fRatios are annualized for periods less than one year.

^gIncludes dividend and/or interest expense on securities sold short and security borrowing fees, if any. See below for the ratios of such expenses to average net assets for the periods presented. See Note 1(f).

^hBenefit of expense reduction rounds to less than 0.01%.

10 Semiannual Report   |    The accompanying notes are an integral part of these consolidated financial statements. franklintempleton.com

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

CONSOLIDATED FINANCIAL STATEMENTS

Franklin K2 Alternative Strategies Fund (continued)

	Six Months Ended November 30, 2018 (unaudited)			Year Ended May 31,
				2018			2017			2016			2015			2014a
Class C
Per share operating performance (for a share outstanding throughout the period)
Net asset value, beginning of period	$	11.25		$	11.00		$	10.45		$	11.09		$	10.60		$	10.00
Income from investment operationsb:
Net investment income (loss)c		(0.04	)		(0.08	)		(0.04	)		(0.12	)		(0.17	)		(0.08	)
Net realized and unrealized gains (losses)		(0.10	)		0.39			0.59			(0.39	)		0.69			0.72
Total from investment operations		(0.14	)		0.31			0.55			(0.51	)		0.52			0.64
Less distributions from:
Net investment income		—			(0.06	)		—			(0.09	)		(0.03	)		(0.04	)
Net realized gains		—			—			—			(0.04	)		—			—
Total distributions		—			(0.06	)		—			(0.13	)		(0.03	)		(0.04	)
Net asset value, end of period	$	11.11		$	11.25		$	11.00		$	10.45		$	11.09		$	10.60
Total returnd		(1.24)%			2.82%			5.26%			(4.62)%			4.87%			6.42%
Ratios to average net assetse
Expenses before waiver, payments by affiliates and expense reductionf		3.52%			3.56%			3.79%			3.96%			4.04%			4.03%
Expenses net of waiver, payments by affiliates and expense reductionf		3.33%			3.34%			3.45%			3.62%	g		3.63%	g		3.53%
Expenses incurred in connection with securities sold short		0.38%			0.39%			0.53%			0.67%			0.65%			0.56%
Net investment income (loss)		(0.66)%			(0.69)%			(0.62)%			(1.18)%			(1.59)%			(1.05)%
Supplemental data
Net assets, end of period (000’s)		$48,234			$53,196			$55,496			$71,154			$37,937			$16,618
Portfolio turnover rate		105.03%			234.77%			209.45%			229.90%			295.81%			181.06%

^aFor the period October 11, 2013 (commencement of operations) to May 31, 2014.

^bThe amount shown for a share outstanding throughout the period may not correlate with the Consolidated 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.

^dTotal 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.

^fIncludes dividend and/or interest expense on securities sold short and security borrowing fees, if any. See below for the ratios of such expenses to average net assets for the periods presented. See Note 1(f).

^gBenefit of expense reduction rounds to less than 0.01%.

franklintempleton.com The accompanying notes are an integral part of these consolidated financial statements.    |   Semiannual Report 11

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

CONSOLIDATED FINANCIAL STATEMENTS

Franklin K2 Alternative Strategies Fund (continued)

	Six Months Ended November 30, 2018 (unaudited)			Year Ended May 31,
				2018			2017			2016			2015			2014a
Class R
Per share operating performance (for a share outstanding throughout the period)
Net asset value, beginning of period	$	11.42		$	11.17		$	10.61		$	11.15		$	10.62		$	10.00
Income from investment operationsb:
Net investment income (loss)c		(0.01	)		(0.02	)		(0.25	)		(0.10	)		(0.16	)		(0.05	)
Net realized and unrealized gains (losses)		(0.10	)		0.39			0.86			(0.40	)		0.73			0.71
Total from investment operations		(0.11	)		0.37			0.61			(0.50	)		0.57			0.66
Less distributions from:
Net investment income		—			(0.12	)		(0.05	)		—			(0.04	)		(0.04	)
Net realized gains		—			—			—			(0.04	)		—			—
Total distributions		—			(0.12	)		(0.05	)		(0.04	)		(0.04	)		(0.04	)
Net asset value, end of period	$	11.31		$	11.42		$	11.17		$	10.61		$	11.15		$	10.62
Total returnd		(0.96)%			3.28%			5.79%			(4.51)%			5.39%			6.62%
Ratios to average net assetse
Expenses before waiver, payments by affiliates and expense reductionf		3.02%			3.06%			3.32%			3.46%			3.57%			3.63%
Expenses net of waiver, payments by affiliates and expense reductionf		2.83%			2.84%			2.98%			3.12%	g		3.16%	g		3.13%
Expenses incurred in connection with securities sold short		0.38%			0.39%			0.53%			0.67%			0.65%			0.56%
Net investment income (loss)		(0.16)%			(0.19)%			(0.15)%			(0.68)%			(1.12)%			(0.65)%
Supplemental data
Net assets, end of period (000’s)		$709			$648			$597			$341			$9,173			$11,660
Portfolio turnover rate		105.03%			234.77%			209.45%			229.90%			295.81%			181.06%

^aFor the period October 11, 2013 (commencement of operations) to May 31, 2014.

^bThe amount shown for a share outstanding throughout the period may not correlate with the Consolidated 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.

^dTotal return is not annualized for periods less than one year.

^eRatios are annualized for periods less than one year.

^fIncludes dividend and/or interest expense on securities sold short and security borrowing fees, if any. See below for the ratios of such expenses to average net assets for the periods presented. See Note 1(f).

^gBenefit of expense reduction rounds to less than 0.01%.

12 Semiannual Report   |    The accompanying notes are an integral part of these consolidated financial statements. franklintempleton.com

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

CONSOLIDATED FINANCIAL STATEMENTS

Franklin K2 Alternative Strategies Fund (continued)

	Six Months Ended November 30, 2018 (unaudited)			Year Ended May 31,
				2018			2017			2016			2015			2014a
Class R6
Per share operating performance (for a share outstanding throughout the period)
Net asset value, beginning of period	$	11.41		$	11.17		$	10.59		$	11.18		$	10.66		$	10.00
Income from investment operationsb:
Net investment income (loss)c		0.02			0.03			0.02			(0.01	)		(0.08	)		(0.01	)
Net realized and unrealized gains (losses)		(0.09	)		0.40			0.65			(0.37	)		0.70			0.71
Total from investment operations		(0.07	)		0.43			0.67			(0.38	)		0.62			0.70
Less distributions from:
Net investment income		—			(0.19	)		(0.09	)		(0.17	)		(0.10	)		(0.04	)
Net realized gains		—			—			—			(0.04	)		—			—
Total distributions		—			(0.19	)		(0.09	)		(0.21	)		(0.10	)		(0.04	)
Net asset value, end of period	$	11.34		$	11.41		$	11.17		$	10.59		$	11.18		$	10.66
Total returnd		(0.61)%			3.83%			6.40%			(3.45)%			5.80%			7.02%
Ratios to average net assetse
Expenses before waiver, payments by affiliates and expense reductionf		2.43%			2.46%			2.73%			2.87%			2.98%			3.19%
Expenses net of waiver, payments by affiliates and expense reductionf		2.24%			2.24%			2.39%			2.53%	g		2.60%	g		2.69%
Expenses incurred in connection with securities sold short		0.38%			0.39%			0.53%			0.67%			0.65%			0.56%
Net investment income (loss)		0.43%			0.41%			0.44%			(0.09)%			(0.56)%			(0.21)%
Supplemental data
Net assets, end of period (000’s)		$36,849			$31,805			$265,247			$265,517			$239,754			$215,526
Portfolio turnover rate		105.03%			234.77%			209.45%			229.90%			295.81%			181.06%

^aFor the period October 11, 2013 (commencement of operations) to May 31, 2014.

^bThe amount shown for a share outstanding throughout the period may not correlate with the Consolidated 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.

^dTotal return is not annualized for periods less than one year.

^eRatios are annualized for periods less than one year.

^fIncludes dividend and/or interest expense on securities sold short and security borrowing fees, if any. See below for the ratios of such expenses to average net assets for the periods presented. See Note 1(f).

^gBenefit of expense reduction rounds to less than 0.01%.

franklintempleton.com The accompanying notes are an integral part of these consolidated financial statements.    |   Semiannual Report 13

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

CONSOLIDATED FINANCIAL STATEMENTS

Franklin K2 Alternative Strategies Fund (continued)

	Six Months Ended November 30, 2018 (unaudited)			Year Ended May 31,
				2018			2017			2016			2015			2014a
Advisor Class
Per share operating performance (for a share outstanding throughout the period)
Net asset value, beginning of period	$	11.40		$	11.16		$	10.58		$	11.18		$	10.65		$	10.00
Income from investment operationsb:
Net investment income (loss)c		0.02			0.04			0.04			(0.02	)		(0.02	)		(0.02	)
Net realized and unrealized gains (losses)		(0.09	)		0.38			0.62			(0.38	)		0.64			0.71
Total from investment operations		(0.07	)		0.42			0.66			(0.40	)		0.62			0.69
Less distributions from:
Net investment income		—			(0.18	)		(0.08	)		(0.16	)		(0.09	)		(0.04	)
Net realized gains		—			—			—			(0.04	)		—			—
Total distributions		—			(0.18	)		(0.08	)		(0.20	)		(0.09	)		(0.04	)
Net asset value, end of period	$	11.33		$	11.40		$	11.16		$	10.58		$	11.18		$	10.65
Total returnd		(0.61)%			3.75%			6.29%			(3.58)%			5.88%			6.92%
Ratios to average net assetse
Expenses before waiver, payments by affiliates and expense reductionf		2.52%			2.56%			2.82%			2.96%			3.07%			3.21%
Expenses net of waiver, payments by affiliates and expense reductionf		2.33%			2.34%			2.48%			2.62%	g		2.66%	g		2.71%
Expenses incurred in connection with securities sold short		0.38%			0.39%			0.53%			0.67%			0.65%			0.56%
Net investment income (loss)		0.34%			0.31%			0.35%			(0.18)%			(0.62)%			(0.23)%
Supplemental data
Net assets, end of period (000’s)		$996,625			$896,278			$674,828			$722,216			$329,139			$54,593
Portfolio turnover rate		105.03%			234.77%			209.45%			229.90%			295.81%			181.06%

^aFor the period October 11, 2013 (commencement of operations) to May 31, 2014.

^bThe amount shown for a share outstanding throughout the period may not correlate with the Consolidated 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.

^dTotal return is not annualized for periods less than one year.

^eRatios are annualized for periods less than one year.

^fIncludes dividend and/or interest expense on securities sold short and security borrowing fees, if any. See below for the ratios of such expenses to average net assets for the periods presented. See Note 1(f).

^gBenefit of expense reduction rounds to less than 0.01%.

14 Semiannual Report   |    The accompanying notes are an integral part of these consolidated financial statements. franklintempleton.com

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

Consolidated Statement of Investments, November 30, 2018 (unaudited)

Franklin K2 Alternative Strategies Fund
		Country		Shares/ Warrants		Value
	Common Stocks and Other Equity Interests 45.5%
	Aerospace & Defense 1.1%
	The Boeing Co.		United States		15,634	$	5,421,246
a	Esterline Technologies Corp.		United States		13,610		1,615,915
	Harris Corp.		United States		16,085		2,299,351
b	Heico Corp.		United States		34,337		2,902,163
a	Kratos Defense & Security Solutions Inc.		United States		20,964		278,821
	United Technologies Corp.		United States		2,561		312,042
							12,829,538
	Air Freight & Logistics 0.8%
a	CEVA Logistics AG		Switzerland		174,746		5,221,128
b	FedEx Corp.		United States		16,539		3,787,431
							9,008,559
	Airlines 0.6%
	Alaska Air Group Inc.		United States		12,088		885,567
c	Delta Air Lines Inc.		United States		987		59,921
a	Jetblue Airways Corp.		United States		45,064		879,649
b	Southwest Airlines Co.		United States		60,318		3,293,966
a	Spirit Airlines Inc.		United States		5,480		351,377
a	United Continental Holdings Inc.		United States		14,728		1,424,198
							6,894,678
	Automobiles 0.4%
	Thor Industries Inc.		United States		62,618		4,246,127
	Banks 0.8%
	Bank of America Corp.		United States		177,367		5,037,223
	Barclays PLC		United Kingdom		108,406		224,995
	Cadence Bancorp, A		United States		36,621		751,097
c	Citigroup Inc.		United States		873		56,561
c	JPMorgan Chase & Co.		United States		34,925		3,883,311
							9,953,187
	Beverages 0.6%
b	Brown-Forman Corp., B		United States		1,236		58,982
b	Constellation Brands Inc., A		United States		14,720		2,881,587
	Davide Campari-Milano SpA		Italy		523,898		4,377,135
c	Molson Coors Brewing Co., B		United States		865		56,891
							7,374,595
	Biotechnology 3.4%
c	Abbvie Inc.		United States		634		59,767
a	Aeglea BioTherapeutics Inc.		United States		19,046		160,367
a	Agios Pharmaceuticals Inc.		United States		3,937		259,055
a	Aileron Therapeutics Inc.		United States		6,614		14,352
a	Aimmune Therapeutics Inc.		United States		9,493		225,459
a	Alexion Pharmaceuticals Inc.		United States		13,766		1,695,283
a	Allakos Inc.		United States		7,213		424,918
a	Allogene Therapeutics Inc.		United States		14,136		442,174
c	Amgen Inc.		United States		292		60,809
a	Amicus Therapeutics Inc.		United States		102,944		1,136,502
a	AnaptysBio Inc.		United States		1,893		141,180
a	Apellis Pharmaceuticals Inc.		United States		12,096		185,553

franklintempleton.com Semiannual Report 15

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

CONSOLIDATED STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin K2 Alternative Strategies Fund (continued)

		Country		Shares/ Warrants		Value
	Common Stocks and Other Equity Interests (continued)
	Biotechnology (continued)
a	Arbutus Biopharma Corp.		Canada		5,156	$	22,480
a	Argenx SE, ADR		Netherlands		6,563		635,102
a,d	Ascletis Pharma Inc., 144A		China		143,510		132,431
a	Audentes Therapeutics Inc.		United States		22,325		545,846
a,e	Autolus Therapeutics PLC, ADR		United Kingdom		2,607		101,725
a	BioCryst Pharmaceuticals Inc.		United States		78,595		721,502
a,b	BioMarin Pharmaceutical Inc.		United States		36,341		3,489,826
a	Bluebird Bio Inc.		United States		11,977		1,471,854
a	Blueprint Medicines Corp.		United States		4,563		261,779
a	Celgene Corp.		United States		10,935		789,726
a	CRISPR Therapeutics AG		Switzerland		10,798		413,887
a	DBV Technologies SA, ADR		France		25,630		387,013
a	Eiger Biopharmaceuticals Inc.		United States		20,581		218,364
a	Epizyme Inc.		United States		44,721		331,830
a,b	Exact Sciences Corp.		United States		23,739		1,851,167
a	Fate Therapeutics Inc.		United States		5,718		87,828
a	Fibrogen Inc.		United States		7,430		322,165
c	Gilead Sciences Inc.		United States		787		56,617
a	GlycoMimetics Inc.		United States		33,674		386,914
a	Heron Therapeutics Inc.		United States		5,644		162,152
a	Immunogen Inc.		United States		23,995		132,212
a	Immunomedics Inc.		United States		51,880		1,042,269
a,d	Innovent Biologics Inc., 144A		China		19,463		52,862
a	Kodiak Sciences Inc.		United States		19,599		181,291
a,e	La Jolla Pharmaceutical Co.		United States		28,847		417,416
a	Madrigal Pharmaceuticals Inc.		United States		4,689		542,283
a	Mirati Therapeutics Inc.		United States		10,266		396,165
a	Natera Inc.		United States		49,672		860,319
a	Neurocrine Biosciences Inc.		United States		10,894		961,613
a	ProQR Therapeutics NV		Netherlands		46,615		888,482
a	Proteostasis Therapeutics Inc.		United States		72,767		368,929
a	Repligen Corp.		United States		5,188		335,508
a	Retrophin Inc.		United States		14,446		354,505
a	Rubius Therapeutics Inc.		United States		11,804		252,370
a,b	Sage Therapeutics Inc.		United States		18,388		2,119,953
a,b	Sarepta Therapeutics Inc.		United States		22,629		2,929,777
b	Shire PLC, ADR		United Kingdom		41,676		7,317,472
	Shire PLC		United Kingdom		22,284		1,291,982
a	Solid Biosciences Inc.		United States		16,150		503,557
a	Spring Bank Pharmaceuticals Inc.		United States		13,047		146,648
a,e	Sutro Biopharma Inc.		United States		3,907		40,984
a	Tesaro Inc.		United States		9,075		420,899
a	Unum Therapeutics Inc.		United States		14,530		100,257
a	Vertex Pharmaceuticals Inc.		United States		8,118		1,467,653
a,e	Viking Therapeutics Inc.		United States		10,892		122,971
							40,444,004
	Building Products 0.4%
	USG Corp.		United States		124,769		5,370,058
	Capital Markets 0.2%
d	Anima Holding SpA, 144A		Italy		131,081		548,774

16 Semiannual Report franklintempleton.com

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

CONSOLIDATED STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin K2 Alternative Strategies Fund (continued)

		Country		Shares/ Warrants		Value
	Common Stocks and Other Equity Interests (continued)
	Capital Markets (continued)
	Moody’s Corp.		United States		14,707	$	2,339,442
c	Morgan Stanley		United States		169		7,502
							2,895,718
	Chemicals 1.2%
a,b	Ingevity Corp.		United States		30,580		2,997,146
b	Linde PLC		United Kingdom		11,213		1,783,428
b	The Sherwin-Williams Co.		United States		22,645		9,603,065
a,f,g	TerraVia Holdings Inc., Contingent Distribution		United States		1,117,000		—
							14,383,639
	Commercial Services & Supplies 0.8%
	Atento SA		Spain		144,493		723,910
	Cintas Corp.		United States		22,123		4,145,408
	Edenred		France		25,763		982,325
	Republic Services Inc., A		United States		47,873		3,702,498
c	Waste Management Inc.		United States		337		31,594
							9,585,735
	Communications Equipment 0.8%
a	ARRIS International PLC		United States		181,044		5,594,259
c	Cisco Systems Inc.		United States		1,244		59,550
a	Commscope Holding Co. Inc.		United States		74,739		1,352,776
a	Mitel Networks Corp.		Canada		94,865		1,057,745
	Motorola Solutions Inc.		United States		12,930		1,697,063
a	Quantenna Communications Inc.		United States		11,578		173,438
							9,934,831
	Construction Materials 0.2%
a	Cemex SAB de CV, ADR		Mexico		72,599		373,159
	HeidelbergCement AG		Germany		32,396		2,152,863
							2,526,022
	Consumer Finance 0.0%†
c	Capital One Financial Corp.		United States		627		56,229
	Containers & Packaging 0.6%
b	Ball Corp.		United States		148,833		7,309,189
	Diversified Consumer Services 0.1%
a	Frontdoor Inc.		United States		50,506		1,176,285
	Diversified Financial Services 0.0%†
a	ARYA Sciences Acquisition Corp.		United States		18,316		188,655
	Element Fleet Management Corp.		Canada		10,299		54,648
							243,303
	Diversified Telecommunication Services 0.3%
a,d	China Tower Corp. Ltd., H, 144A		China		3,266,000		484,223
	China Unicom Hong Kong Ltd., ADR		China		54,511		639,959
a	ORBCOMM Inc.		United States		47,040		445,939
a	Telecom Italia SpA		Italy		1,365,663		888,683
b	Verizon Communications Inc.		United States		25,142		1,516,063
							3,974,867

franklintempleton.com Semiannual Report 17

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

CONSOLIDATED STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin K2 Alternative Strategies Fund (continued)

		Country		Shares/ Warrants		Value
	Common Stocks and Other Equity Interests (continued)
	Electric Utilities 0.0%†
c	FirstEnergy Corp.		United States		1,473	$	55,723
	PPL Corp.		United States		1,791		54,787
							110,510
	Electrical Equipment 0.0%†
c	Eaton Corp. PLC		United States		626		48,164
	Electronic Equipment, Instruments & Components 0.5%
	Chroma Ate Inc.		Taiwan		85,000		328,393
a	Fabrinet		Thailand		9,560		504,099
a	Flex Ltd.		Singapore		262,885		2,300,244
a	Itron Inc.		United States		25,683		1,390,991
a	Zebra Technologies Corp., A		United States		5,331		958,514
							5,482,241
	Energy Equipment & Services 0.4%
a	Ocean Rig UDW Inc., A		United States		159,049		4,410,429
	Entertainment 1.8%
	Entertainment One Ltd.		Canada		81,329		381,162
a	NetFlix Inc.		United States		7,751		2,217,794
a	Nexon Co. Ltd.		Japan		51,360		607,189
a	Spotify Technology SA		United States		8,309		1,133,181
b	Twenty-First Century Fox Inc., A		United States		214,489		10,610,771
c	Viacom Inc., B		United States		1,732		53,449
	Vivendi SA		France		74,501		1,855,546
	The Walt Disney Co.		United States		36,840		4,254,652
							21,113,744
	Equity Real Estate Investment Trusts (REITs) 0.6%
	Gaming And Leisure Properties Inc.		United States		1,714		59,013
	Host Hotels & Resorts Inc.		United States		14,861		282,359
a	Lasalle Hotel Properties		United States		217,651		6,977,891
a	Uniti Group Inc.		United States		2,906		57,917
							7,377,180
	Food & Staples Retailing 0.4%
	Costco Wholesale Corp.		United States		18,632		4,309,209
c	Walgreens Boots Alliance Inc.		United States		688		58,253
							4,367,462
	Food Products 0.1%
	Chocoladefabriken Lindt & Spruengli AG		Switzerland		15		1,205,645
	Health Care Equipment & Supplies 1.2%
	Abbott Laboratories		United States		22,556		1,670,272
a	ABIOMED Inc.		United States		878		292,093
a	Align Technology Inc.		United States		3,418		785,764
a	Axogen Inc.		United States		12,506		418,701
a	Boston Scientific Corp.		United States		44,362		1,671,116
a,b	DexCom Inc.		United States		10,652		1,380,393
a	Edwards Lifesciences Corp.		United States		8,398		1,360,560
a	IDEXX Laboratories Inc.		United States		14,029		2,858,548
a	Inogen Inc.		United States		1,996		294,131

18 Semiannual Report franklintempleton.com

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

CONSOLIDATED STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin K2 Alternative Strategies Fund (continued)

		Country		Shares/ Warrants		Value
	Common Stocks and Other Equity Interests (continued)
	Health Care Equipment & Supplies (continued)
a	Insulet Corp.		United States		1,762	$	147,885
a	Intuitive Surgical Inc.		United States		2,957		1,569,783
a	iRhythm Technologies Inc.		United States		3,719		275,503
c	Medtronic PLC		United States		172		16,775
a	Nevro Corp.		United States		9,902		411,032
	Teleflex Inc.		United States		2,850		784,947
							13,937,503
	Health Care Providers & Services 2.4%
c	AmerisourceBergen Corp., A		United States		621		55,207
	Anthem Inc.		United States		4,672		1,355,207
a,b	Centene Corp.		United States		15,676		2,229,911
b	Cigna Corp.		United States		11,077		2,474,380
	CVS Health Corp.		United States		63,998		5,132,616
a,b	Express Scripts Holding Co.		United States		81,326		8,252,149
a	Guardant Health Inc.		United States		8,009		286,162
a	Healthequity Inc.		United States		4,304		381,722
b	Humana Inc.		United States		7,678		2,529,671
c	McKesson Corp.		United States		435		54,157
b,c	UnitedHealth Group Inc.		United States		21,303		5,993,812
							28,744,994
	Health Care Technology 0.1%
a	Inspire Medical Systems Inc.		United States		1,855		85,219
a	Tabula Rasa HealthCare Inc.		United States		10,326		779,406
a	Teladoc Health Inc.		United States		4,779		298,449
							1,163,074
	Hotels, Restaurants & Leisure 0.7%
a	Belmond Ltd., A		United Kingdom		24,774		450,887
b	Domino’s Pizza Inc.		United States		9,885		2,741,308
e	Papa John’s International Inc.		United States		31,596		1,516,292
	Royal Caribbean Cruises Ltd.		United States		32,837		3,712,880
a	Seaworld Entertainment Inc.		United States		15,011		427,513
c	Yum! Brands Inc.		United States		634		58,467
							8,907,347
	Household Durables 0.3%
a	Mohawk Industries Inc.		United States		2,175		278,531
a	NVR Inc.		United States		688		1,685,600
a	Sodastream International Ltd.		Israel		8,408		1,207,809
							3,171,940
	Industrial Conglomerates 0.0%†
	Smiths Group PLC		United Kingdom		17,888		316,718
	Insurance 0.8%
c	Aflac Inc.		United States		1,229		56,215
	Aspen Insurance Holdings Ltd.		Bermuda		130,417		5,459,256
	Kemper Corp.		United States		22,724		1,729,296
c	MetLife Inc.		United States		1,245		55,564
	Principal Financial Group Inc.		United States		1,149		56,669
c	Prudential Financial Inc.		United States		598		56,069

franklintempleton.com Semiannual Report 19

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

CONSOLIDATED STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin K2 Alternative Strategies Fund (continued)

		Country		Shares/ Warrants		Value
	Common Stocks and Other Equity Interests (continued)
	Insurance (continued)
	RSA Insurance Group PLC		United Kingdom		44,331	$	306,506
a,e	Trupanion Inc.		United States		52,610		1,574,617
							9,294,192
	Interactive Media & Services 1.4%
a,b	Alphabet Inc., A		United States		4,620		5,126,583
a	Alphabet Inc., C		United States		1,643		1,798,148
a,b	Facebook Inc., A		United States		29,137		4,096,953
	Tencent Holdings Ltd.		China		99,795		3,979,556
a	Yandex NV, A		Russia		43,102		1,271,509
							16,272,749
	Internet & Direct Marketing Retail 1.5%
a,b	Alibaba Group Holding Ltd., ADR		China		34,025		5,473,262
a,b	Amazon.com Inc.		United States		2,071		3,500,342
a,b	Booking Holdings Inc.		United States		1,149		2,173,770
a,d	Delivery Hero AG, 144A		Germany		9,344		339,990
a	eBay Inc.		United States		36,105		1,077,734
b	Expedia Group Inc.		United States		13,350		1,612,546
a	Just Eat PLC		United Kingdom		98,615		732,092
	NutriSystem Inc.		United States		24,025		893,490
a	Qurate Retail Inc., A		United States		66,402		1,475,452
							17,278,678
	IT Services 4.1%
c	Accenture PLC, A		United States		5,368		883,144
	Alliance Data Systems Corp.		United States		9,873		1,978,154
c	Automatic Data Processing Inc.		United States		5,405		796,805
	Booz Allen Hamilton Holding Corp., A		United States		1,100		56,441
c	Broadridge Financial Solutions Inc.		United States		537		56,852
a	EPAM Systems Inc.		United States		11,583		1,508,686
a	ExlService Holdings Inc.		United States		40,356		2,339,034
a	FleetCor Technologies Inc.		United States		19,596		3,789,866
	Genpact Ltd.		United States		111,364		3,383,238
	Global Payments Inc.		United States		36,011		4,026,390
a	GoDaddy Inc., A		United States		25,963		1,694,345
b,c	MasterCard Inc., A		United States		39,710		7,984,490
c	Paychex Inc.		United States		831		58,802
a,b	PayPal Holdings Inc.		United States		105,569		9,058,876
	Sabre Corp.		United States		2,248		57,481
a,e	StoneCo. Ltd.		Brazil		1,300		30,641
b	Total System Services Inc.		United States		30,509		2,665,571
a	VeriSign Inc.		United States		12,341		1,925,937
c	Visa Inc., A		United States		21,950		3,110,535
	Western Union Co.		United States		3,000		56,190
a,b	WEX Inc.		United States		21,123		3,273,431
							48,734,909
	Leisure Products 0.5%
b	Brunswick Corp.		United States		51,145		2,712,731
	Hasbro Inc.		United States		31,258		2,844,478
							5,557,209

20 Semiannual Report franklintempleton.com

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

CONSOLIDATED STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin K2 Alternative Strategies Fund (continued)

		Country		Shares/ Warrants		Value
	Common Stocks and Other Equity Interests (continued)
	Life Sciences Tools & Services 1.6%
	Eurofins Scientific SE		Luxembourg		4,050	$	1,756,065
	Gerresheimer AG		Germany		50,407		3,589,454
a,b	Illumina Inc.		United States		10,437		3,522,487
a	Iqvia Holdings Inc.		United States		27,884		3,487,452
a,b	Mettler-Toledo International Inc.		United States		2,435		1,550,267
a	Pacific Biosciences of California Inc.		United States		136,500		1,067,430
a	PRA Health Sciences Inc.		United States		6,273		732,310
a,e	Quanterix Corp.		United States		7,123		133,485
c	Thermo Fisher Scientific Inc.		United States		12,914		3,222,689
							19,061,639
	Machinery 0.3%
	Altra Industrial Motion Corp., W		United States		3		95
c	Cummins Inc.		United States		389		58,762
c	Illinois Tool Works Inc.		United States		429		59,653
c	PACCAR Inc.		United States		961		59,793
	Trinity Industries Inc.		United States		24,480		583,358
	Xylem Inc.		United States		40,603		2,963,207
							3,724,868
	Marine 0.0%†
a	Star Bulk Carriers Corp.		Greece		10,160		97,231
	Media 0.5%
c	Comcast Corp., A		United States		26,071		1,017,030
c	The Interpublic Group of Cos. Inc.		United States		2,372		55,742
	ITV PLC		United Kingdom		293,248		542,567
a	Liberty Global PLC, C		United Kingdom		55,613		1,350,840
c	Omnicom Group Inc.		United States		747		57,496
a	Postmedia Network Canada Corp.		Canada		666,338		596,803
c	Sinclair Broadcast Group Inc., A		United States		1,804		56,736
e	Sirius XM Holdings, Inc.		United States		9,107		56,737
	Stroeer SE & Co. KGaA		Germany		51,085		2,668,442
							6,402,393
	Metals & Mining 1.2%
a	AK Steel Holding Corp.		United States		6,168		18,997
	First Quantum Minerals Ltd.		Zambia		195,669		1,796,682
	Nevsun Resources Ltd.		Canada		1,396,824		6,255,299
	Teck Resources Ltd., B		Canada		264,225		5,363,768
b	Vale SA, B, ADR		Brazil		75,787		1,038,282
							14,473,028
	Multiline Retail 0.1%
c	Kohl’s Corp.		United States		695		46,683
b	Macy’s Inc.		United States		34,921		1,194,997
c	Target Corp.		United States		664		47,117
							1,288,797
	Multi-Utilities 0.1%
a	Innogy SE		Germany		22,870		959,271

franklintempleton.com Semiannual Report 21

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

CONSOLIDATED STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin K2 Alternative Strategies Fund (continued)

		Country		Shares/ Warrants		Value
	Common Stocks and Other Equity Interests (continued)
	Oil, Gas & Consumable Fuels 1.1%
	Anadarko Petroleum Corp.		United States		1,101	$	58,243
	Canadian Natural Resources Ltd.		Canada		2,000		50,261
c	Chevron Corp.		United States		488		58,043
c	ConocoPhillips		United States		892		59,033
	Diamondback Energy Inc.		United States		70,283		7,757,838
	EnCana Corp.		Canada		6,937		46,617
a,b	Equitrans Midstream Corp.		United States		55,091		1,229,631
c	Exxon Mobil Corp.		United States		425		33,787
a	Halcon Resources Corp., wts., 9/09/20		United States		2,159		151
b	Hess Corp.		United States		47,983		2,585,804
c	Marathon Petroleum Corp.		United States		875		57,015
c	Murphy Oil Corp.		United States		1,890		60,291
c	Occidental Petroleum Corp.		United States		795		55,865
a	Whiting Petroleum Corp.		United States		4,509		136,487
a	Wildhorse Resource Development Corp.		United States		24,103		445,423
							12,634,489
	Pharmaceuticals 1.2%
a	Aerie Pharmaceuticals Inc.		United States		21,065		840,283
c	Allergan PLC		United States		9,848		1,542,197
a	Assembly Biosciences Inc.		United States		48,611		1,253,192
	AstraZeneca PLC, ADR		United Kingdom		45,927		1,828,813
c	Bristol-Myers Squibb Co.		United States		19,389		1,036,535
a	Charlottes Web Holdings Inc.		United States		20,522		235,548
	Eli Lilly & Co.		United States		14,200		1,684,688
a	GW Pharmaceuticals PLC, ADR		United Kingdom		5,607		689,773
	Hikma Pharmaceuticals PLC		Jordan		10,168		230,755
a,d	Hua Medicine, 144A		China		113,586		110,334
c	Johnson & Johnson		United States		390		57,291
a	Marinus Pharmaceuticals Inc.		United States		27,015		126,160
c	Merck & Co. Inc.		United States		22,368		1,774,677
a	Mylan NV		United States		12,438		421,151
a	Ocular Therapeutix Inc.		United States		46,103		307,046
	Pfizer Inc.		United States		12,776		590,634
a	Restorbio Inc.		United States		29,946		391,095
a,c	Tilray Inc.		Canada		10,546		1,080,438
							14,200,610
	Professional Services 1.7%
a	CoStar Group Inc.		United States		2,592		957,459
	Dun & Bradstreet Corp.		United States		43,671		6,268,535
	Equifax Inc.		United States		23,693		2,432,560
	Experian PLC		United Kingdom		65,899		1,600,913
a,b	Huron Consulting Group Inc.		United States		20,236		1,126,538
d	Intertrust NV, 144A		Netherlands		219,998		3,529,193
c	Robert Half International Inc.		United States		895		55,338
	TransUnion		United States		27,503		1,775,869
a	TriNet Group Inc.		United States		53,527		2,457,425
							20,203,830
	Road & Rail 1.1%
b	CSX Corp.		United States		82,153		5,966,772

22 Semiannual Report franklintempleton.com

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

CONSOLIDATED STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin K2 Alternative Strategies Fund (continued)

		Country		Shares/ Warrants		Value
	Common Stocks and Other Equity Interests (continued)
	Road & Rail (continued)
	Norfolk Southern Corp.		United States		19,519	$	3,332,674
b	Old Dominion Freight Line Inc.		United States		9,163		1,252,857
b	Union Pacific Corp.		United States		17,132		2,634,559
							13,186,862
	Semiconductors & Semiconductor Equipment 1.2%
a,b	Advanced Micro Devices Inc.		United States		55,002		1,171,543
b,c	Broadcom Inc.		United States		1,841		437,072
a	First Solar Inc.		United States		5,537		246,120
a	FormFactor Inc.		United States		75,130		1,238,894
a	Integrated Device Technology Inc.		United States		139,528		6,688,972
c	Intel Corp.		United States		1,198		59,073
	KLA-Tencor Corp.		United States		4,453		438,888
	Marvell Technology Group Ltd.		Bermuda		24,754		398,787
	Microchip Technology Inc.		United States		5,004		375,300
	QUALCOMM Inc.		United States		12,390		721,841
a,d,g	SunEdison Inc., Contingent Distribution, 144A		United States		35,000		831
	Taiwan Semiconductor Manufacturing Co. Ltd., ADR		Taiwan		41,842		1,572,841
	Teradyne Inc.		United States		18,879		673,791
c	Texas Instruments Inc.		United States		211		21,068
							14,045,021
	Software 3.7%
a	Adobe Inc.		United States		5,014		1,257,962
a	Atlassian Corp. PLC, A		Austrailia		17,021		1,462,785
	Blackbaud Inc.		United States		11,238		823,183
a,e	Ceridian Hcm Holding Inc.		United States		19,700		790,364
a,b	Dell Technologies Inc., V		United States		83,110		8,766,443
a	Gemalto NV		Netherlands		17,574		1,005,923
a	Guidewire Software Inc.		United States		20,982		1,950,487
a	HubSpot Inc.		United States		8,505		1,182,450
c	Intuit Inc.		United States		14,486		3,107,682
b,c	Microsoft Corp.		United States		100,788		11,176,381
a	Red Hat Inc.		United States		32,258		5,759,988
a	RingCentral Inc., A		United States		12,109		1,003,836
a,b	Salesforce.com Inc.		United States		14,274		2,037,756
a	ServiceNow Inc.		United States		9,165		1,698,000
a	Workday Inc., A		United States		11,090		1,818,760
a	Zscaler Inc.		United States		10,200		400,452
							44,242,452
	Specialty Retail 1.3%
c	American Eagle Outfitters Inc.		United States		2,725		57,034
c	Best Buy Co. Inc.		United States		845		54,579
a	Carmax Inc.		United States		41,211		2,722,811
c	Dick’s Sporting Goods Inc.		United States		1,509		54,294
b,c	The Home Depot Inc.		United States		46,042		8,302,293
a	Hudson Ltd., A		United Kingdom		41,296		856,892
a,b	MarineMax Inc.		United States		25,485		541,047
	Pets at Home Group PLC		United Kingdom		166,908		272,445
a	Sports Direct International PLC		United Kingdom		155,760		575,183

franklintempleton.com Semiannual Report 23

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

CONSOLIDATED STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin K2 Alternative Strategies Fund (continued)

		Country		Shares/ Warrants		Value
	Common Stocks and Other Equity Interests (continued)
	Specialty Retail (continued)
	Tiffany & Co.		United States		16,046	$	1,460,186
							14,896,764
	Technology Hardware, Storage & Peripherals 0.3%
	Apple Inc.		United States		18,200		3,250,156
a	Cray Inc.		United States		23,704		621,282
c	Hewlett Packard Enterprise Co.		United States		3,703		55,545
							3,926,983
	Textiles, Apparel & Luxury Goods 0.3%
a	Lululemon Athletica Inc.		United States		2,146		284,452
a,b	Michael Kors Holdings Ltd.		United States		44,270		1,936,812
b	Tapestry Inc.		United States		41,204		1,604,072
							3,825,336
	Tobacco 0.0%†
c	Altria Group Inc.		United States		931		51,047
	Trading Companies & Distributors 0.3%
	Brenntag AG		Germany		81,642		3,773,809
	Transportation Infrastructure 0.1%
	BBA Aviation PLC		United Kingdom		291,364		882,134
	Wireless Telecommunication Services 0.3%
	Millicom International Cellular SA, IDR		Colombia		27,552		1,622,192
a,b	T-Mobile U.S. Inc.		United States		19,026		1,302,330
b	Vodafone Group PLC, ADR		United Kingdom		5,878		126,318
							3,050,840
	Total Common Stocks and Other Equity Interests (Cost $471,144,641)						540,628,656
	Exchange Traded Funds 0.5%
b	Financial Select Sector SPDR ETF		United States		9,155		246,910
	Invesco QQQ Trust Series 1		United States		1,755		297,244
	iShares China Large-Capital ETF		United States		4,505		189,300
b	iShares MSCI Emerging Markets ETF		United States		12,317		505,983
b	iShares Russell 2000 ETF		United States		15,075		2,300,747
b	SPDR EURO STOXX 50 ETF		Euro Community		6,359		223,074
b	SPDR S&P 500 ETF Trust		United States		7,108		1,959,320
	Total Exchange Traded Funds (Cost $5,592,530)						5,722,578
	Convertible Preferred Stocks (Cost $86,130) 0.0%†
	Oil, Gas & Consumable Fuels 0.0%†
a	Chesapeake Energy Corp., 5.75%, cvt. pfd.		United States		139		83,400
	Preferred Stocks 0.0%†
	Food Products 0.0%†
a	Bunge Ltd., 4.875%, cvt. pfd.		United States		2,819		281,618
	Diversified Financial Services 0.0%†
a,f	Aergen Structured Investments Cayman Blocker LLC, pfd.		Ireland		4,480		4
	Total Preferred Stocks (Cost $269,731)						281,622

24 Semiannual Report franklintempleton.com

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

CONSOLIDATED STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin K2 Alternative Strategies Fund (continued)

		Country		Principal Amount*			Value
	Convertible Bonds 6.4%
	Air Freight & Logistics 0.1%
b	Atlas Air Worldwide Holdings Inc., senior note, 1.875%, 6/01/24		United States		680,000		$	732,105
	Banks 0.0%†
d	Hope Bancorp Inc., senior bond, 144A, 2.00%, 5/15/38		United States		559,000			499,715
	Biotechnology 0.6%
	Alder Biopharmaceuticals Inc., senior note, 2.50%, 2/01/25		United States		354,000			326,810
b,d	Amicus Therapeutics Inc., senior note, 144A, 3.00%, 12/15/23		United States		963,000			1,887,363
e	BioMarin Pharmaceutical Inc., senior sub. note, 0.599%, 8/01/24		United States		270,000			284,277
	Flexion Therapeutics Inc., senior note, 3.375%, 5/01/24		United States		50,000			46,148
	Ionis Pharmaceuticals Inc., senior note, 1.00%, 11/15/21		United States		215,000			238,476
d	Karyopharm Therapeutics Inc., senior note, 144A, 3.00%, 10/15/25		United States		552,000			513,209
d	Ligand Pharmaceuticals Inc., senior note, 144A, 0.75%, 5/15/23		United States		684,000			637,720
b	Neurocrine Biosciences Inc., senior note, 2.25%, 5/15/24		United States		522,000			701,438
b	PDL BioPharma Inc., senior note, 2.75%, 12/01/21		United States		694,000			726,098
	Radius Health Inc., senior note, 3.00%, 9/01/24		United States		684,000			526,415
	Repligen Corp., senior note, 2.125%, 6/01/21		United States		324,000			667,264
	Retrophin Inc., senior note, 2.50%, 9/15/25		United States		555,000			512,753
								7,067,971
	Building Products 0.0%†
d,e	Patrick Industries Inc., senior note, 144A, 1.00%, 2/01/23		United States		540,000			437,846
	Capital Markets 0.1%
b,d	Cowen Inc., senior note, 144A, 3.00%, 12/15/22		United States		465,000			511,035
	Chemicals 0.0%†
h	Mitsubishi Chemical Holdings Corp., senior note, Reg S, zero cpn., 3/30/22		Japan		30,000,000	JPY		273,818
	Commercial Services & Supplies 0.1%
	RWT Holdings Inc., senior note, 5.625%, 11/15/19		United States		787,000			795,638
	Team Inc., senior note, 5.00%, 8/01/23		United States		520,000			554,388
								1,350,026
	Communications Equipment 0.2%
	CalAmp Corp., senior note,
	1.625%, 5/15/20		United States		325,000			315,094
	d 144A, 2.00%, 8/01/25		United States		411,000			356,041
	Finisar Corp., senior bond, 0.50%, 12/15/36		United States		265,000			255,228
	Infinera Corp., senior note, 2.125%, 9/01/24		United States		533,000			409,470
d	Palo Alto Networks Inc., senior note, 144A, 0.75%, 7/01/23		United States		1,175,000			1,126,966
								2,462,799
	Construction & Engineering 0.1%
d	HC2 Holdings Inc., senior note, 144A, 7.50%, 6/01/22		United States		110,000			102,850
d	KBR Inc., senior note, 144A, 2.50%, 11/01/23		United States		607,000			588,759
h	Mirait Holdings Corp., senior note, Reg S, zero cpn., 12/30/21		Japan		25,000,000	JPY		276,977
e	Tutor Perini Corp., senior note, 2.875%, 6/15/21		United States		80,000			76,900
								1,045,486
	Construction Materials 0.1%
b	Cemex SAB de CV, sub. note, 3.72%, 3/15/20		Mexico		1,736,000			1,699,685
	Consumer Finance 0.4%
b	Encore Capital Group Inc., senior note,
	2.875%, 3/15/21		United States		848,000			737,601
	3.25%, 3/15/22		United States		1,090,000			962,343

franklintempleton.com Semiannual Report 25

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

CONSOLIDATED STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin K2 Alternative Strategies Fund (continued)

		Country		Principal Amount*			Value
	Convertible Bonds (continued)
	Consumer Finance (continued)
	Ezcorp Inc., senior note,
	b 2.125%, 6/15/19		United States		1,524,000		$	1,501,692
	d 144A, 2.375%, 5/01/25		United States		547,000			462,981
	PRA Group Inc., senior note,
	b 3.00%, 8/01/20		United States		625,000			588,352
	3.50%, 6/01/23		United States		654,000			608,890
								4,861,859
	Diversified Consumer Services 0.1%
d	Chegg Inc., senior note, 144A, 0.25%, 5/15/23		United States		706,000			843,983
	Diversified Financial Services 0.1%
d	Element Fleet Management Corp., sub. note, 144A, 5.125%, 6/30/19		Canada		886,000	CAD		663,808
	Electric Utilities 0.1%
h	The Chugoku Electric Power Co. Inc., senior note, Reg S, zero cpn., 1/24/20		Japan		30,000,000	JPY		283,455
h	Kyushu Electric Power Co. Inc., secured note, Reg S, zero cpn., 3/31/20		Japan		40,000,000	JPY		370,435
								653,890
	Electrical Equipment 0.0%†
b	SolarCity Corp., senior note, 1.625%, 11/01/19		United States		407,000			382,790
	Electronic Equipment, Instruments & Components 0.2%
b	Knowles Corp., senior note, 3.25%, 11/01/21		United States		530,000			578,665
e	Nice Systems Inc., senior note, 1.25%, 1/15/24		Israel		273,000			398,375
	OSI Systems Inc., senior note, 1.25%, 9/01/22		United States		543,000			504,106
	Vishay Intertechnology Inc.,
	senior bond, 2.25%, 5/15/41		United States		286,000			363,313
	d senior note, 144A, 2.25%, 6/15/25		United States		776,000			730,433
								2,574,892
	Energy Equipment & Services 0.2%
h	Fugro NV, sub. note, Reg S,
	4.00%, 10/26/21		Netherlands		600,000	EUR		641,766
	4.50%, 11/02/24		Netherlands		300,000	EUR		346,909
	Nabors Industries Inc., senior note, 0.75%, 1/15/24		United States		135,000			90,366
	SEACOR Holdings Inc., senior bond, 3.00%, 11/15/28		United States		715,000			679,003
								1,758,044
	Entertainment 0.1%
d	iQIYI Inc., senior note, 144A, 3.75%, 12/01/23		China		694,000			720,039
d	Live Nation Entertainment Inc., senior note, 144A, 2.50%, 3/15/23		United States		127,000			135,907
d	Sea Ltd., senior note, 144A, 2.25%, 7/01/23		Thailand		548,000			516,679
								1,372,625
	Equity Real Estate Investment Trusts (REITs) 0.2%
b	Colony Capital Inc., senior note, 3.875%, 1/15/21		United States		622,000			589,345
	iStar Inc., senior note, 3.125%, 9/15/22		United States		250,000			236,926
b	Starwood Waypoint Homes, senior note, 3.00%, 7/01/19		United States		1,653,000			1,956,325
								2,782,596
	Health Care Equipment & Supplies 0.2%
d	DexCom Inc., senior note, 144A, 0.75%, 12/01/23		United States		694,000			726,476
d	Insulet Corp., senior note, 144A, 1.375%, 11/15/24		United States		273,000			298,458

26 Semiannual Report franklintempleton.com

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

CONSOLIDATED STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin K2 Alternative Strategies Fund (continued)

		Country		Principal Amount*			Value
	Convertible Bonds (continued)
	Health Care Equipment & Supplies (continued)
h	Nipro Corp., senior note, Reg S, zero cpn., 1/29/21		Japan		40,000,000	JPY	$	405,387
d	Wright Medical Group Inc., senior note, 144A, 1.625%, 6/15/23		United States		646,000			671,188
								2,101,509
	Health Care Technology 0.1%
b	Allscripts Healthcare Solutions Inc., senior note, 1.25%, 7/01/20		United States		577,000			559,339
	Evolent Health Inc., senior note,
	2.00%, 12/01/21		United States		492,000			628,222
	d 144A, 1.50%, 10/15/25		United States		479,000			495,626
								1,683,187
	Hotels, Restaurants & Leisure 0.1%
	Huazhu Group Ltd., senior note, 0.375%, 11/01/22		China		740,000			742,590
	Independent Power & Renewable Electricity Producers 0.1%
d	NRG Energy Inc., senior bond, 144A, 2.75%, 6/01/48		United States		801,000			860,392
	Interactive Media & Services 0.1%
d	Momo Inc., senior note, 144A, 1.25%, 7/01/25		China		278,000			239,753
	Zillow Group Inc., senior note, 2.00%, 12/01/21		United States		751,000			765,020
								1,004,773
	Internet & Direct Marketing Retail 0.1%
	Ctrip.Com International Ltd., senior note, 1.00%, 7/01/20		China		276,000			258,405
d	MercadoLibre Inc., senior note, 144A, 2.00%, 8/15/28		Argentina		684,000			688,121
d	Wayfair Inc., senior note, 144A, 1.125%, 11/01/24		United States		555,000			617,104
								1,563,630
	IT Services 0.6%
d	Akamai Technologies Inc., senior note, 144A, 0.125%, 5/01/25		United States		774,000			739,302
b	Carbonite Inc., senior note, 2.50%, 4/01/22		United States		543,000			696,714
	CSG Systems International Inc., senior bond, 4.25%, 3/15/36		United States		646,000			661,554
d	GDS Holdings Ltd., senior note, 144A, 2.00%, 6/01/25		China		557,000			459,370
b,d	MongoDB Inc., senior note, 144A, 0.75%, 6/15/24		United States		548,000			746,248
b,d	Okta Inc., senior note, 144A, 0.25%, 2/15/23		United States		695,000			1,002,838
d	Perficient Inc., senior note, 144A, 2.375%, 9/15/23		United States		548,000			509,138
b,d	Square Inc., senior note, 144A, 0.50%, 5/15/23		United States		843,000			972,175
d	Twilio Inc., senior note, 144A, 0.25%, 6/01/23		United States		581,000			860,664
								6,648,003
	Life Sciences Tools & Services 0.0%†
d	Illumina Inc., senior note, 144A, zero cpn., 8/15/23		United States		274,000			294,769
	Machinery 0.0%†
	The Greenbrier Cos. Inc., senior note, 2.875%, 2/01/24		United States		45,000			47,909
b	Navistar International Corp., senior sub. note, 4.75%, 4/15/19		United States		398,000			398,004
								445,913
	Media 0.2%
	DISH Network Corp.,
	senior bond, 3.375%, 8/15/26		United States		225,000			198,090
	senior note, 2.375%, 3/15/24		United States		370,000			308,931
	Liberty Interactive LLC,
	senior bond, 4.00%, 11/15/29		United States		1,122,000			762,960
	senior note, 3.75%, 2/15/30		United States		811,000			543,370

franklintempleton.com Semiannual Report 27

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

CONSOLIDATED STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin K2 Alternative Strategies Fund (continued)

		Country		Principal Amount*			Value
	Convertible Bonds (continued)
	Media (continued)
	Liberty Media Corp., senior bond,
	2.25%, 9/30/46		United States		24,149		$	12,571
	d 144A, 2.25%, 12/01/48		United States		828,000			861,544
								2,687,466
	Metals & Mining 0.2%
b	Cleveland-Cliffs Inc., senior note, 1.50%, 1/15/25		United States		658,000			838,527
d	Endeavour Mining Corp., senior note, 144A, 3.00%, 2/15/23		Ivory Coast		250,000			219,225
d	First Majestic Silver Corp., senior note, 144A, 1.875%, 3/01/23		Canada		521,000			440,766
b	SSR Mining Inc., senior bond, 2.875%, 2/01/33		Canada		735,000			725,353
								2,223,871
	Mortgage Real Estate Investment Trusts (REITs) 0.0%†
	Redwood Trust Inc., senior note, 4.75%, 8/15/23		United States		293,000			278,606
	Oil, Gas & Consumable Fuels 0.3%
	Chesapeake Energy Corp., senior note, 5.50%, 9/15/26		United States		288,000			249,971
	Golar LNG Ltd., senior note, 2.75%, 2/15/22		Bermuda		543,000			551,379
	Green Plains Inc., senior note,
	b 3.25%, 10/01/19		United States		1,506,000			1,574,559
	4.125%, 9/01/22		United States		602,000			559,547
e	SM Energy Co., senior note, 1.50%, 7/01/21		United States		30,000			29,367
d	Teekay Corp., senior note, 144A, 5.00%, 1/15/23		Bermuda		438,000			350,123
	Whiting Petroleum Corp., senior note, 1.25%, 4/01/20		United States		45,000			42,718
								3,357,664
	Personal Products 0.1%
d	Herbalife Nutrition Ltd., senior note, 144A, 2.625%, 3/15/24		United States		518,000			568,287
	Pharmaceuticals 0.3%
d	Canopy Growth Corp., senior note, 144A, 4.25%, 7/15/23		Canada		929,000	CAD		884,495
b	Innoviva Inc., sub. note, 2.125%, 1/15/23		United States		781,000			864,584
	The Medicines Co., senior note, 2.50%, 1/15/22		United States		547,000			510,954
	Pacira Pharmaceuticals Inc., senior note, 2.375%, 4/01/22		United States		554,000			580,609
b,d	Tilray Inc., senior note, 144A, 5.00%, 10/01/23		Canada		1,094,000			928,290
								3,768,932
	Professional Services 0.0%†
d	FTI Consulting Inc., senior note, 144A, 2.00%, 8/15/23		United States		416,000			400,067
	Real Estate Management & Development 0.0%†
	Forestar Group Inc., senior note, 3.75%, 3/01/20		United States		445,000			438,424
	Semiconductors & Semiconductor Equipment 0.3%
	Advanced Micro Devices Inc., senior note, 2.125%, 9/01/26		United States		219,000			602,640
d	Cree Inc., senior note, 144A, 0.875%, 9/01/23		United States		718,000			707,098
	Inphi Corp., senior note, 0.75%, 9/01/21		United States		515,000			509,850
b	Microchip Technology Inc., senior sub. bond, 1.625%, 2/15/27		United States		1,094,000			1,108,112
b	On Semiconductor Corp., senior note, 1.625%, 10/15/23		United States		735,000			849,780
	Synaptics Inc., senior note, 0.50%, 6/15/22		United States		267,000			236,157
								4,013,637
	Software 0.8%
d	Alteryx Inc., senior note, 144A, 0.50%, 6/01/23		United States		557,000			834,615
d	Atlassian Inc., senior note, 144A, 0.625%, 5/01/23		United States		729,000			896,490

28 Semiannual Report franklintempleton.com

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

CONSOLIDATED STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin K2 Alternative Strategies Fund (continued)

		Country		Principal Amount*			Value
	Convertible Bonds (continued)
	Software (continued)
d	Avaya Holdings Corp., senior note, 144A, 2.25%, 6/15/23		United States		684,000		$	594,757
d	Docusign Inc., senior note, 144A, 0.50%, 9/15/23		United States		636,000			596,305
b,d	Envestnet Inc., senior note, 144A, 1.75%, 6/01/23		United States		588,000			617,755
	Everbridge Inc., senior note, 1.50%, 11/01/22		United States		274,000			465,365
d	Five9 Inc., senior note, 144A, 0.125%, 5/01/23		United States		553,000			666,603
	HubSpot Inc., senior note, 0.25%, 6/01/22		United States		400,000			617,230
d	MINDBODY Inc., senior note, 144A, 0.375%, 6/01/23		United States		534,000			464,834
d	Nutanix Inc., senior note, 144A, zero cpn., 1/15/23		United States		268,000			305,759
	PROS Holdings Inc., senior bond, 2.00%, 6/01/47		United States		749,000			704,584
d	Rapid7 Inc., senior note, 144A, 1.25%, 8/01/23		United States		752,000			768,321
	Rovi Corp., senior note, 0.50%, 3/01/20		United States		55,000			52,347
	Servicenow Inc., senior note, zero cpn., 6/01/22		United States		590,000			855,155
d	Splunk Inc., senior note, 144A, 0.50%, 9/15/23		United States		684,000			687,254
	Verint Systems Inc., senior note, 1.50%, 6/01/21		United States		70,000			69,570
								9,196,944
	Technology Hardware, Storage & Peripherals 0.1%
d	Electronics For Imaging Inc., senior note, 144A, 2.25%, 11/15/23		United States		402,000			409,729
d	Western Digital Corp., senior note, 144A, 1.50%, 2/01/24		United States		578,000			481,604
								891,333
	Wireless Telecommunication Services 0.1%
d	Boingo Wireless Inc., senior note, 144A, 1.00%, 10/01/23		United States		547,000			497,940
b,d	NII Holdings Inc., senior note, 144A, 4.25%, 8/15/23		United States		745,000			817,223
								1,315,163
	Total Convertible Bonds (Cost $76,588,044)							76,460,133
	Corporate Bonds and Notes 12.9%
	Aerospace & Defense 0.0%†
d	Leonardo US Holdings Inc., senior bond, 144A, 6.25%, 1/15/40		Italy		236,000			223,020
d	TransDigm UK Holdings PLC, senior note, 144A, 6.875%, 5/15/26		United States		215,000			212,850
								435,870
	Automobiles 0.1%
d,i	BMW US Capital LLC, senior note, 144A, FRN, 2.747%, (3-Month USD LIBOR + 0.41%), 4/12/21		Germany		465,000			462,599
i	General Motors Financial Co. Inc., senior note, FRN, 3.189%, (3-Month USD LIBOR + 0.85%), 4/09/21		United States		275,000			273,227
d	Nissan Motor Acceptance Corp., senior note, 144A, 3.65%, 9/21/21		United States		375,000			371,546
i	Toyota Motor Credit Corp., senior note, FRN, 2.726%, (3-Month USD LIBOR + 0.39%), 1/17/19		United States		40,000			40,013
								1,147,385
	Banks 0.5%
d	Banco Macro SA, senior note, 144A, 17.50%, 5/08/22		Argentina		1,740,000	ARS		30,436
i	Bank of America Corp., senior note, FRN, 3.379%, (3-Month USD LIBOR + 1.04%), 1/15/19		United States		20,000			20,018
i	Bank of America NA, senior note, FRN, 2.957%, (3-Month USD LIBOR + 0.25%), 8/28/20		United States		755,000			752,425
	Citibank NA, senior note, 3.05%, 5/01/20		United States		435,000			432,878
i	HSBC Holdings PLC, senior note, FRN, 2.984%, (3-Month USD LIBOR + 0.65%), 9/11/21		United Kingdom		375,000			372,363

franklintempleton.com Semiannual Report 29

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

CONSOLIDATED STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin K2 Alternative Strategies Fund (continued)

		Country		Principal Amount*		Value
	Corporate Bonds and Notes (continued)
	Banks (continued)
i	JPMorgan Chase & Co., senior note, FRN, 3.418%, (3-Month USD LIBOR + 0.68%), 6/01/21		United States		480,000	$	480,020
i	JPMorgan Chase Bank NA, senior note, FRN, 2.968%, (3-Month USD LIBOR + 0.23%), 9/01/20		United States		755,000		752,767
	Mitsubishi UFJ Financial Group Inc.,
	i senior note, FRN, 3.158%, (3-Month USD LIBOR + 0.65%), 7/26/21		Japan		380,000		380,727
	senior note, 3.535%, 7/26/21		Japan		380,000		379,963
	Qwest Capital Funding Inc., senior bond, 6.875%, 7/15/28		United States		260,000		227,453
d,i	Standard Chartered PLC, 144A, FRN,
	senior note, 3.558%, (3-Month USD LIBOR + 1.15%), 1/20/23		United Kingdom		200,000		198,713
	senior note, 4.247%, (3-Month USD LIBOR + 1.15%), 1/20/23		United Kingdom		200,000		198,666
i	US Bank NA, senior note, FRN, 3.009%, (3-Month USD LIBOR + 0.38%), 11/16/21		United States		380,000		379,592
h,j	VTB Capital SA, loan participation, sub. bond, Reg S, 6.95%, 10/17/22		Russia		486,000		474,021
	Wells Fargo Bank NA, senior note, 3.625%, 10/22/21		United States		250,000		250,023
							5,330,065
	Biotechnology 0.0%†
i	Gilead Sciences Inc., senior note, FRN, 2.558%, (3-Month USD LIBOR + 0.22%), 3/20/19		United States		430,000		430,083
	Capital Markets 0.0%†
i	The Bank of New York Mellon, senior note, FRN, 3.036%, (3-Month USD LIBOR + 0.30%), 12/04/20		United States		385,000		384,796
	Chemicals 0.0%†
e	Hexion Inc. / Hexion Nova Scotia Finance ULC, secured note, 9.00%, 11/15/20		United States		1,019,000		489,120
	Commercial Services & Supplies 1.8%
d	GFL Environmental Inc., senior note, 144A, 5.625%, 5/01/22		Canada		676,000		637,130
d	Harland Clarke Holdings Corp., 144A,
	b senior note, 9.25%, 3/01/21		United States		14,203,500		13,173,746
	senior secured note, 8.375%, 8/15/22		United States		388,000		360,840
	R.R. Donnelley & Sons Co.,
	senior bond, 8.875%, 4/15/21		United States		141,000		149,812
	senior bond, 6.50%, 11/15/23		United States		2,789,000		2,761,110
	senior bond, 6.00%, 4/01/24		United States		2,557,000		2,525,038
	senior bond, 6.625%, 4/15/29		United States		201,000		188,940
	senior note, 7.00%, 2/15/22		United States		1,497,000		1,504,485
							21,301,101
	Construction & Engineering 0.0%†
	Great Lakes Dredge & Dock Corp., senior note, 8.00%, 5/15/22		United States		98,000		100,470
	Consumer Finance 0.7%
i	American Express Co., senior note, FRN, 3.192%, (3-Month USD LIBOR + 0.60%), 11/05/21		United States		260,000		259,687
d	Everi Payments Inc., senior note, 144A, 7.50%, 12/15/25		United States		4,917,000		4,806,367
	Navient Corp., senior note, 6.75%, 6/15/26		United States		2,656,000		2,410,320
							7,476,374

30 Semiannual Report franklintempleton.com

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

CONSOLIDATED STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin K2 Alternative Strategies Fund (continued)

		Country		Principal Amount*			Value
	Corporate Bonds and Notes (continued)
	Diversified Financial Services 1.1%
d,i	Banco Supervielle SA, senior note, 144A, FRN, 39.125%, (ARS Badlar + 4.50%), 8/09/20		Argentina		3,800,000	ARS	$	93,301
d	Financiera de Desarrollo Territorial SA Findeter, senior bond, 144A, 7.875%, 8/12/24		Colombia		795,000,000	COP		249,494
	Hexion Inc., senior secured note,
	b 6.625%, 4/15/20		United States		1,844,000			1,530,520
	d,e 144A, 10.375%, 2/01/22		United States		487,000			407,862
h	MDC-GMTN BV, Reg S, 4.50%, 11/07/28		United Arab Emirates		261,000			263,121
d	One Call Corp., 144A,
	secured note, second lien, 10.00%, 10/01/24		United States		5,329,000			4,129,975
	senior secured note, first lien, 7.50%, 7/01/24		United States		6,616,000			6,318,280
								12,992,553
	Electric Utilities 0.3%
h	1MDB Energy Ltd., senior note, Reg S, 5.99%, 5/11/22		Malaysia		1,300,000			1,325,017
d	Enel SpA, sub. bond, 144A, 8.75% to 9/24/23, FRN thereafter, 9/24/73		Italy		545,000			573,613
h	Eskom Holdings SOC Ltd., Reg S,
	secured bond, 6.35%, 8/10/28		South Africa		200,000			189,900
	senior bond, 5.75%, 1/26/21		South Africa		414,000			391,257
d,k	Vertiv Intermediate Holding Corp., senior note, 144A, PIK, 12.00%, 2/15/22		United States		918,000			884,722
								3,364,509
	Equity Real Estate Investment Trusts (REITs) 0.3%
d	AHP Health Partners Inc., senior note, 144A, 9.75%, 7/15/26		United States		3,432,000			3,440,580
	Food & Staples Retailing 0.1%
d,i	Alimentation Couche-Tard Inc., senior note, 144A, FRN, 2.834%, (3-Month USD LIBOR + 0.50%), 12/13/19		Canada		245,000			244,997
d	Chobani LLC / Chobani Finance Corp. Inc., senior note, 144A, 7.50%, 4/15/25		United States		699,000			575,801
	Unilever Capital Corp., senior note, 3.00%, 3/07/22		United Kingdom		380,000			374,074
								1,194,872
	Food Products 0.6%
i	Campbell Soup Co., senior note, FRN, 2.834%, (3-Month USD LIBOR + 0.50%), 3/16/20		United States		235,000			234,303
d	Dean Foods Co., senior note, 144A, 6.50%, 3/15/23		United States		8,074,000			7,105,120
d	Marb Bondco PLC, senior note, 144A, 6.875%, 1/19/25		Brazil		265,000			244,628
								7,584,051
	Hotels, Restaurants & Leisure 1.1%
d	The Enterprise Development Authority, senior note, 144A, 12.00%, 7/15/24		United States		1,224,000			1,175,040
d	Golden Nugget Inc., senior note, 144A, 8.75%, 10/01/25		United States		3,386,000			3,411,395
d	Mohegan Gaming & Entertainment, senior note, 144A, 7.875%, 10/15/24		United States		9,370,000			9,006,912
								13,593,347

franklintempleton.com Semiannual Report 31

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

CONSOLIDATED STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin K2 Alternative Strategies Fund (continued)

		Country		Principal Amount*		Value
	Corporate Bonds and Notes (continued)
	Insurance 0.1%
d,i	AIA Group Ltd., senior note, 144A, FRN, 2.858%, (3-Month USD LIBOR + 0.52%), 9/20/21		Hong Kong		200,000	$	200,285
d,i	New York Life Global Funding, secured note, 144A, FRN, 2.912%, (3-Month USD LIBOR + 0.32%), 8/06/21		United States		380,000		379,583
							579,868
	Internet Software & Services 0.0%†
d,e	GTT Communications Inc., senior note, 144A, 7.875%, 12/31/24		United States		80,000		73,800
d	Uber Technologies Inc., senior note, 144A,
	7.50%, 11/01/23		United States		190,000		186,200
	8.00%, 11/01/26		United States		185,000		181,763
							441,763
	Machinery 0.1%
	Caterpillar Financial Services Corp., senior note,
	3.15%, 9/07/21		United States		265,000		263,846
	i FRN, 2.564%, (3-Month USD LIBOR + 0.23%), 3/15/21		United States		235,000		234,809
	John Deere Capital Corp., senior note, 3.125%, 9/10/21		United States		750,000		745,732
							1,244,387
	Media 3.4%
d	American Media Inc., 144A,
	secured note, second lien, 5.50%, 9/01/21		United States		275,950		275,605
	sub. note, zero cpn., 3/01/22		United States		20,963,513		19,862,929
	Clear Channel Worldwide Holdings Inc., senior sub. note, 7.625%, 3/15/20		United States		1,095,000		1,097,737
	The McClatchy Co.,
	senior bond, 6.875%, 3/15/29		United States		4,095,000		5,221,125
	d senior secured note, 144A, 9.00%, 7/15/26		United States		8,132,000		8,274,310
d,k	Postmedia Network Inc., secured note, second lien, 144A, PIK, 10.25%, 7/15/23		Canada		5,015,722		5,899,743
							40,631,449
	Multiline Retail 0.1%
b,d,e	Neiman Marcus Group Ltd. LLC, senior note, 144A, 8.00%, 10/15/21		United States		2,317,000		1,146,915
	Oil, Gas & Consumable Fuels 1.3%
d,e	Bellatrix Exploration Ltd., senior note, 144A, 8.50%, 5/15/20		Canada		625,000		439,062
d	Bruin E&P Partners LLC, senior note, 144A, 8.875%, 8/01/23		United States		390,000		364,162
d,e	California Resources Corp., secured note, second lien, 144A, 8.00%, 12/15/22		United States		3,758,000		2,874,870
	Callon Petroleum Co., senior note, 6.125%, 10/01/24		United States		85,000		82,450
	Eclipse Resources Corp., senior note, 8.875%, 7/15/23		United States		195,000		191,100
h,i	EP PetroEcuador via Noble Sovereign Funding I Ltd., FRN, Reg S, 7.966%, (3-Month USD LIBOR + 5.63%), 9/24/19		Ecuador		169,895		170,319
d	Gran Tierra Energy International Holdings Ltd., senior note, 144A, 6.25%, 2/15/25		Canada		200,000		188,500
	Halcon Resources Corp., senior note, 6.75%, 2/15/25		United States		645,000		498,262
d	Jagged Peak Energy LLC, senior note, 144A, 5.875%, 5/01/26		United States		185,000		176,212
b,d	Jones Energy Holdings LLC / Jones Energy Finance Corp., senior secured note, 144A, 9.25%, 3/15/23		United States		239,000		226,751
d	Lonestar Resources America Inc., senior note, 144A, 11.25%, 1/01/23		United States		95,000		96,900
d	MEG Energy Corp., senior bond, 144A, 6.375%, 1/30/23		Canada		110,000		102,988
d	Par Petroleum LLC / Petroleum Finance Corp., first lien, 144A, 7.75%, 12/15/25		United States		430,000		421,400

32 Semiannual Report franklintempleton.com

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

CONSOLIDATED STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin K2 Alternative Strategies Fund (continued)

		Country		Principal Amount*		Value
	Corporate Bonds and Notes (continued)
	Oil, Gas & Consumable Fuels (continued)
	Petrobras Global Finance BV,
	senior bond, 5.75%, 2/01/29		Brazil		270,000	$	247,860
	senior bond, 5.625%, 5/20/43		Brazil		190,000		157,459
	senior note, 6.125%, 1/17/22		Brazil		708,000		727,980
	senior note, 4.375%, 5/20/23		Brazil		834,000		799,639
	senior note, 6.25%, 3/17/24		Brazil		822,000		834,125
	senior note, 5.999%, 1/27/28		Brazil		365,000		344,378
	Petroleos Mexicanos,
	h senior bond, Reg S, 6.50%, 1/23/29		Mexico		553,000		510,225
	senior bond, 5.50%, 1/21/21		Mexico		499,000		498,002
	senior note, 4.875%, 1/24/22		Mexico		712,000		690,996
	senior note, 3.50%, 1/30/23		Mexico		535,000		483,319
	senior note, 4.625%, 9/21/23		Mexico		619,000		576,295
	Resolute Energy Corp., senior note, 8.50%, 5/01/20		United States		2,064,000		2,083,092
e	Sanchez Energy Corp., senior note, 7.75%, 6/15/21		United States		532,000		158,270
d	Transportadora de Gas del Sur SA, senior note, 144A, 6.75%, 5/02/25		Argentina		155,000		145,313
d	Vine Oil & Gas LP / Vine Oil & Gas Finance Corp., senior note, 144A,
	8.75%, 4/15/23		United States		415,000		349,638
	9.75%, 4/15/23		United States		190,000		163,163
d	YPF Sociedad Anonima, 144A,
	senior bond, 6.95%, 7/21/27		Argentina		220,000		187,275
	i senior note, FRN, 36.75%, (ARS Badlar + 4.00%), 7/07/20		Argentina		245,000		90,270
							14,880,275
	Paper & Forest Products 1.2%
	Resolute Forest Products Inc., senior note, 5.875%, 5/15/23		United States		14,418,000		14,562,180
	Pharmaceuticals 0.1%
	Pfizer Inc., senior note, 3.00%, 9/15/21		United States		755,000		753,847
	Specialty Retail 0.0%†
i	The Home Depot Inc., senior note, FRN, 3.009%, (3-Month USD LIBOR + 0.31%), 3/01/22		United States		310,000		310,143
	Total Corporate Bonds and Notes (Cost $145,158,754)						153,816,003
	Corporate Bonds and Notes in Reorganization 0.7%
	Electric Utilities 0.4%
l	Bruce Mansfield Unit 1 2007 Pass-Through Trust, secured bond, 6.85%, 6/01/34		United States		5,647,214		4,094,230
	Media 0.3%
l	IHeartcommunications Inc., senior secured note, 11.25%, 3/01/21		United States		5,327,000		3,795,488
	Oil, Gas & Consumable Fuels 0.0%†
h,l	Petroleos de Venezuela SA, senior note, Reg S, 6.00%, 10/28/22		Venezuela		506,036		72,110
	Total Corporate Bonds and Notes in Reorganization (Cost $6,816,592)						7,961,828
i,m	Senior Floating Rate Interests 0.9%
	Aerospace & Defense 0.0%†
	TransDigm Group Inc.,
	4.84%, (1-Month USD LIBOR + 2.50%), 6/09/23		United States		202,348		198,339
	4.84%, (1-Month USD LIBOR + 2.50%), 8/22/24		United States		24,689		24,100

franklintempleton.com Semiannual Report 33

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

CONSOLIDATED STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin K2 Alternative Strategies Fund (continued)

		Country		Principal Amount*		Value
i,m	Senior Floating Rate Interests (continued)
	Aerospace & Defense (continued)
	TransDigm Group Inc., (continued)
	4.84%, (1-Month USD LIBOR + 2.50%), 5/30/25		United States		28,669	$	27,990
							250,429
	Auto Components 0.0%†
	Tectum Holdings, Term Loan, 6.065%, (1-Month USD LIBOR + 3.75%), 4/22/24		United States		215,276		212,518
	Automobiles 0.0%†
	SAIC Motor Corp. Ltd., 4.09%, (1-Month USD LIBOR + 1.75%), 10/31/25		United States		160,000		159,180
	Building Products 0.0%†
	Quickrete Holdings Inc., Term Loan, 5.09%, (1-Month USD LIBOR + 2.75%), 11/15/23		United States		274,219		269,322
	Capital Markets 0.0%†
	BCP Raptor LLC, Term Loan B, 6.64%, (2-Month USD LIBOR + 4.25%), 6/24/24		United States		193,375		187,139
	Donnelley Financial Solutions Inc., Term Loan B, 5.222%, (1-Week USD LIBOR + 3.00%), 9/29/23		United States		35,321		35,189
							222,328
	Chemicals 0.1%
	Axalta Coating Systems Dutch Holding BV, Term Loan B, 4.14%, (3-Month USD LIBOR + 1.75%), 6/01/24		United States		147,948		146,180
	Consolidated Energy Ltd., Initial Term Loan, 4.818%, (1-Month USD LIBOR + 2.50%), 5/07/25		United States		254,363		251,183
	Plaskolite Inc., Term Loan, first lien, 5.84%, (1-Month USD LIBOR + 3.50%), 11/03/22		United States		124,376		124,220
	WR Grace & Co., Term Loan B-1, 4.14%, (3-Month USD LIBOR + 1.75%), 4/03/25		United States		149,734		149,173
							670,756
	Commercial Services & Supplies 0.1%
	Camelot Finance LP, Term Loan, 5.59%, (1-Month USD LIBOR + 3.25%), 10/03/23		United States		126,145		124,931
	GFL Environmental Inc., Term Loan,
	5.386%, (3-Month USD LIBOR + 3.00%), 5/30/25		United States		88,950		86,893
	7.00%, (3-Month USD LIBOR + 1.75%), 5/30/25		United States		11,077		10,821
	Presidio LLC, Term Loan B,
	5.09%, (1-Month USD LIBOR + 2.75%), 2/02/24		United States		1,685		1,672
	5.146%, (3-Month USD LIBOR + 2.75%), 2/02/24		United States		136,772		135,780
							360,097
	Communications Equipment 0.0%†
	Plantronics Inc., Initial Term Loan B, 4.84%, (1-Month USD LIBOR + 2.50%), 7/02/25		United States		212,392		209,472
	Construction & Engineering 0.0%†
	Engility Corp., Term Loan B, 5.09%, (1-Month USD LIBOR + 2.75%), 8/14/23		United States		79,159		79,208
	Construction Materials 0.0%†
	ABC Supply, Term Loan B, 4.34%, (1-Month USD LIBOR + 2.00%), 10/31/23		United States		213,914		208,566
n	Summit Materials LLC, 4.345%, (1-Month USD LIBOR + 2.00%), 11/21/24		United States		80,000		78,550
							287,116

34 Semiannual Report franklintempleton.com

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

CONSOLIDATED STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin K2 Alternative Strategies Fund (continued)

		Country		Principal Amount*		Value
i,m	Senior Floating Rate Interests (continued)
	Diversified Financial Services 0.2%
	The AES Corp., Term Loan, 4.456%, (3-Month USD LIBOR + 1.75%), 5/31/22		United States		288,967	$	288,832
	B.C. Unlimited Liability Co., Term Loan B-3, 4.59%, (1-Month USD LIBOR + 2.25%), 2/16/24		United States		275,791		270,160
	BBB Industries US Holdings Inc., 6.814%, (1-Month USD LIBOR + 4.50%), 8/01/25		United States		150,000		148,875
	Diversey Inc.,
	5.391%, (2-Month USD LIBOR + 3.00%), 9/06/24		United States		479		467
	5.527%, (3-Month USD LIBOR + 3.00%), 9/06/24		United States		189,521		184,783
n	Grizzly Short Fund, 5.646%, (3-Month USD LIBOR + 3.25%), 10/01/25		United States		80,000		79,350
	USI Inc., Term Loan, 5.39%, (3-Month USD LIBOR + 3.00%), 5/16/24		United States		243,244		237,832
	Ziggo BV, Term Loan E, 4.807%, (1-Month USD LIBOR + 2.50%), 4/15/25		United States		343,079		340,475
							1,550,774
	Diversified Telecommunication Services 0.0%†
	Sprint Communications Inc., Term Loan B, 4.88%, (1-Month USD LIBOR + 2.50%), 2/02/24		United States		221,626		218,948
	Electrical Equipment 0.0%†
	Graftech International Ltd., Initial Term Loan, 5.84%, (1-Month USD LIBOR + 3.50%), 2/12/25		United States		163,363		161,521
	Electronic Equipment, Instruments & Components 0.0%†
	Dell International LLC, Term Loan A-2, 4.10%, (1-Month USD LIBOR + 1.75%), 9/07/21		United States		209,000		207,672
	Energy Equipment & Services 0.0%†
	U.S. Silica Holdings Inc., Term Loan, 6.38%, (1-Month USD LIBOR + 4.00%), 5/01/25		United States		218,900		194,775
	Equity Real Estate Investment Trusts (REITs) 0.0%†
	Iron Mountain Inc., Term Loan B, 4.09%, (1-Month USD LIBOR + 1.75%), 1/02/26		United States		218,900		215,250
	Food & Staples Retailing 0.0%†
n	ARAMARK Services Inc., Term Loan B-3, 4.09%, (1-Month USD LIBOR + 1.75%), 3/11/25		United States		149,226		148,433
	Food Products 0.1%
	JBS USA LLC / Finance Inc., Initial Term Loan,
	4.84%, (3-Month USD LIBOR + 2.50%), 10/30/22		United States		240,686		238,336
	4.89%, (3-Month USD LIBOR + 2.50%), 10/30/22		United States		41,979		41,569
	Post Holdings Inc., Term Loan B, 4.32%, (1-Month USD LIBOR + 2.00%), 5/24/24		United States		137,246		136,817
							416,722
	Health Care Providers & Services 0.0%†
	Universal Health Services Inc., 4.09%, (1-Month USD LIBOR + 1.75%), 10/31/25		United States		45,000		44,990
	Health Care Technology 0.0%†
	Quintiles IMS Inc., Term Loan B-2, 4.39%, (3-Month USD LIBOR + 2.00%), 1/17/25		United States		79,200		78,631
	Hotels, Restaurants & Leisure 0.0%†
	Wyndham Hotels, 4.09%, (1-Month USD LIBOR + 1.75%), 5/30/25		United States		65,000		64,441

franklintempleton.com Semiannual Report 35

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

CONSOLIDATED STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin K2 Alternative Strategies Fund (continued)

		Country		Principal Amount*		Value
i,m	Senior Floating Rate Interests (continued)
	Independent Power & Renewable Electricity Producers 0.0%†
	Vistra Energy Corp., Term Loan B-3,
	4.303%, (1-Month USD LIBOR + 2.00%), 12/31/25		United States		148,202	$	146,395
	4.34%, (1-Month USD LIBOR + 2.00%), 12/31/25		United States		53,834		53,178
							199,573
	Insurance 0.0%†
	Hyperion Insurance Group Ltd., Initial Term Loan, 5.88%, (1-Month USD LIBOR + 3.50%), 12/20/24		United Kingdom		37,033		36,922
	Internet & Direct Marketing Retail 0.0%†
	BWay, Initial Term Loan, 5.658%, (3-Month USD LIBOR + 3.25%), 4/03/24		United States		237,000		231,174
	Internet Software & Services 0.0%†
	GTT Communications Inc., 5.09%, (1-Month USD LIBOR + 2.75%), 5/31/25		United States		168		163
	Rackspace Hosting Inc., Term Loan B, first lien,
	5.418%, (2-Month USD LIBOR + 3.00%), 11/03/23		United States		191		173
	5.582%, (3-Month USD LIBOR + 3.00%), 11/03/23		United States		42,778		38,821
	Uber Technologies Inc., Term Loan, 5.807%, (1-Month USD LIBOR + 3.50%), 7/13/23		United States		294,296		290,342
							329,499
	IT Services 0.1%
	First Data Corp., Term Loan B, 4.315%, (1-Month USD LIBOR + 2.00%), 7/08/22		United States		220,543		217,272
	Global Payments Inc., Term Loan B, 4.086%, (1-Month USD LIBOR + 1.75%), 10/17/25		United States		95,000		94,109
	Micro Focus, Term Loan B, 4.84%, (1-Month USD LIBOR + 2.50%), 6/21/24		United States		189,663		186,396
	Neustar Inc., Term Loan B-4, first lien, 5.84%, (1-Month USD LIBOR + 3.50%), 8/08/24		United States		108,900		107,777
	Sedgwick CMS Holdings Inc., Initial Term Loan, first lien, 5.09%, (1-Month USD LIBOR + 2.75%), 3/01/21		United States		243,727		242,991
							848,545
	Life Sciences Tools & Services 0.0%†
	Iqvia Holdings Inc., Term Loan B, 4.14%, (3-Month USD LIBOR + 1.75%), 6/11/25		United States		204,488		202,826
	Machinery 0.0%†
	Altra Industrial Motion Corp., Term Loan B, 4.34%, (1-Month USD LIBOR + 2.00%), 10/01/25		United States		45,000		44,733
	North American Lifting Holdings Inc., Initial Term Loan, 6.89%, (3-Month USD LIBOR + 4.50%), 11/27/20		United States		15,257		14,399
							59,132
	Media 0.1%
	Cablevision SA, Term Loan B, 4.557%, (1-Month USD LIBOR + 2.25%), 7/17/25		United States		242,278		238,553
	CBS Radio Inc., Term Loan B, 5.065%, (1-Month USD LIBOR + 2.75%), 11/18/24		United States		218,892		216,703
	Lamar Media Corp., Term Loan B, 4.125%, (1-Month USD LIBOR + 1.75%), 3/14/25		United States		39,800		39,676
	UPC Financing Partnership, Term Loan, 4.807%, (1-Month USD LIBOR + 2.50%), 1/15/26		United States		96,442		95,417
							590,349

36 Semiannual Report franklintempleton.com

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

CONSOLIDATED STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin K2 Alternative Strategies Fund (continued)

		Country		Principal Amount*		Value
i,m	Senior Floating Rate Interests (continued)
	Oil, Gas & Consumable Fuels 0.0%†
	California Resources Corp., Initial Term Loan, 7.065%, (1-Month USD LIBOR + 4.75%), 12/31/22		United States		123,000	$	123,615
	Gavilan Resources LLC, Initial Term Loan, second lien, 8.306%, (1-Month USD LIBOR + 6.00%), 3/01/24		United States		200,000		170,500
							294,115
	Personal Products 0.0%†
	Coty Inc., Term Loan B, 4.567%, (1-Month USD LIBOR + 2.25%), 4/07/25		United States		219,450		206,557
	Pharmaceauticals 0.0%†
	Valeant Bausch, Term Loan B, 4.972%, (1-Week USD LIBOR + 2.75%), 11/27/25		United States		120,000		118,425
	Professional Services 0.0%†
	On Assignment Inc., Term Loan B-2, 4.34%, (1-Month USD LIBOR + 2.00%), 4/02/25		United States		43,084		42,788
	Trans Union LLC, Term Loan B-4, 4.34%, (1-Month USD LIBOR + 2.00%), 6/19/25		United States		54,863		54,314
							97,102
	Semiconductors & Semiconductor Equipment 0.0%†
	Microchip Technology Inc., Term Loan B, 4.35%, (1-Month USD LIBOR + 2.00%), 5/29/25		United States		99,477		99,303
	Software 0.1%
	Change Healthcare Holdings Inc., Term Loan, 5.09%, (1-Month USD LIBOR + 2.75%), 3/01/24		United States		154,225		152,545
	SS&C Technologies Inc.,
	Term Loan B-3, 4.59%, (1-Month USD LIBOR + 2.25%), 4/16/25		United States		73,189		71,629
	Term Loan B-5, 4.55%, (1-Month USD LIBOR + 2.25%), 4/16/25		United States		136,175		133,269
							357,443
	Specialty Retail 0.0%†
	Harbor Freight Tools USA Inc., Initial Term Loan, 4.84%, (1-Month USD LIBOR + 2.50%), 8/18/23		United States		114,938		111,513
	Textiles, Apparel & Luxury Goods 0.0%†
	Hanesbrands Inc., Term Loan B, 4.09%, (1-Month USD LIBOR + 1.75%), 12/16/24		United States		84,363		84,561
	Trading Companies & Distributors 0.0%†
	Reece Ltd., Term Loan B, 4.40%, (3-Month USD LIBOR + 2.00%), 7/02/25		United States		211,731		209,614
	United Rentals Inc., Term Loan, 4.09%, (1-Month USD LIBOR + 1.75%), 10/31/25		United States		110,000		109,691
							319,305
	Wireless Telecommunication Services 0.1%
	Telenet Financing USD LLC, Term Loan B, 4.557%, (1-Month USD LIBOR + 2.25%), 8/15/26		United States		128,182		126,286
	Unitymedia Hessen GmbH & Co. KG, Term Loan,
	4.307%, (1-Month USD LIBOR + 2.00%), 6/01/23		United States		80,000		79,350
	4.557%, (1-Month USD LIBOR + 2.25%), 9/30/25		United States		301,134		298,852
	Virgin Media Talk, Term Loan I, 4.807%, (1-Month USD LIBOR + 2.50%), 1/15/26		United States		230,000		227,502
							731,990
	Total Senior Floating Rate Interests (Cost $11,111,914)						10,940,917
	Foreign Government and Agency Securities 2.1%
h	Government of Angola, senior bond, Reg S, 9.375%, 5/08/48		Angola		200,000		194,270

franklintempleton.com Semiannual Report 37

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

CONSOLIDATED STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin K2 Alternative Strategies Fund (continued)

		Country		Principal Amount*			Value
	Foreign Government and Agency Securities (continued)
	Government of Argentina,
	3.75%, 2/08/19		Argentina		7,259,000	ARS	$	256,899
	2.26% to 3/31/19, 4.74% thereafter, 12/31/38		Argentina		1,644,071	EUR		1,028,372
	i senior note, FRN, 64.951%, (ARLLMONP), 6/21/20		Argentina		10,866,182	ARS		312,526
	h senior note, Reg S, 3.875%, 1/15/22		Argentina		1,171,000	EUR		1,175,640
	senior note, 5.625%, 1/26/22		Argentina		1,546,000			1,373,234
	senior note, 4.625%, 1/11/23		Argentina		719,000			602,252
h	Government of Bahrain, senior bond, Reg S,
	7.00%, 1/26/26		Bahrain		467,000			472,557
	7.50%, 9/20/47		Bahrain		400,000			375,000
	Government of Brazil, senior bond, 4.875%, 1/22/21		Brazil		640,000			653,760
h	Government of Ecuador, senior note, Reg S, 10.75%, 3/28/22		Ecuador		316,000			327,613
h	Government of Hellenic Republic, senior bond, Reg S, 3.90%, 1/30/33		Greece		436,877	EUR		449,448
h	Government of Nigeria, senior note, Reg S, 7.625%, 11/21/25		Nigeria		363,000			350,466
h	Government of Paraguay, senior note, Reg S, 4.625%, 1/25/23		Paraguay		945,000			942,992
h	Government of Russia, Reg S,
	senior bond, 5.25%, 6/23/47		Russia		2,800,000			2,562,896
	senior note, 5.00%, 4/29/20		Russia		400,000			406,370
	senior note, 4.50%, 4/04/22		Russia		400,000			402,720
h	Government of Saudi Arabia, Reg S, 2.375%, 10/26/21		Saudi Arabia		800,000			770,200
	Government of South Africa,
	5.50%, 3/09/20		South Africa		746,000			755,355
	8.75%, 1/31/44		South Africa		24,725,000	ZAR		1,599,318
	8.75%, 2/28/48		South Africa		38,614,644	ZAR		2,495,132
	R186, 10.50%, 12/21/26		South Africa		53,482,978	ZAR		4,192,579
	Government of Turkey, senior bond,
	7.00%, 6/05/20		Turkey		1,124,000			1,133,972
	5.625%, 3/30/21		Turkey		203,000			198,607
h	National Highways Authority of India, senior note, Reg S, 7.30%, 5/18/22		India		50,000,000	INR		678,377
	Provincia de Buenos Aires,
	i FRN, 54.086%, (ARS Badlar + 3.83%), 5/31/22		Argentina		18,295,000	ARS		439,975
	h,i FRN, Reg S, 54.256%, (ARS Badlar + 3.75%), 4/12/25		Argentina		3,670,000	ARS		87,235
	d senior note, 144A, 6.50%, 2/15/23		Argentina		185,000			155,992
h	ZAR Sovereign Capital Fund Property Ltd., senior note, Reg S, 3.903%, 6/24/20		South Africa		573,000			568,326
	Total Foreign Government and Agency Securities (Cost $27,807,824)							24,962,083
	Asset-Backed Securities and Commercial Mortgage-Backed Securities 2.1%
	Airlines 0.0%†
	Latam Airlines Pass Through Trust, 2015-1, B, secured note, 4.50%, 8/15/25		Chile		578,531			557,414
	Banks 0.0%†
d,o	Banco Hipotecario SA, senior note, 144A, FRN,
	36.333%, (ARS Badlar + 2.50%), 1/12/20		Argentina		3,890,000	ARS		98,224
	54.625%, (ARS Badlar + 4.00%), 11/07/22		Argentina		3,160,000	ARS		77,619
								175,843
	Consumer Finance 0.1%
o	American Express Credit Account Master Trust, 2017-8, A, FRN, 2.40%, (1-Month USD LIBOR + 0.12%), 5/16/22		United States		210,000			209,951

38 Semiannual Report franklintempleton.com

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

CONSOLIDATED STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin K2 Alternative Strategies Fund (continued)

		Country		Principal Amount*		Value
	Asset-Backed Securities and Commercial Mortgage-Backed Securities (continued)
	Consumer Finance (continued)
o	Bank of America Credit Card Trust, 2014-A1, A, FRN, 2.66%, (1-Month USD LIBOR + 0.38%), 6/15/21		United States		100,000	$	100,022
o	Chase Issuance Trust, 2014-A5, A5, FRN, 2.65%, (1-Month USD LIBOR + 0.37%), 4/15/21		United States		120,000		120,116
	Citibank Credit Card Issuance Trust, 2017-A8, A8, 1.86%, 8/08/22		United States		425,000		416,150
o	Discover Card Execution Note Trust, 2018-A3, A3, FRN, 2.51%, (1-Month USD LIBOR + 0.23%), 12/15/23		United States		345,000		345,495
							1,191,734
	Diversified Financial Services 1.3%
d	Accelerated Assets LLC, 2018-1, B, 144A, 4.51%, 12/02/33		United States		92,582		92,458
d	Adams Outdoor Advertising LP, 2018-1, A, 144A, 4.81%, 11/15/48		United States		190,000		191,507
d	AIM Aviation Finance Ltd., 2015-1A, B1, 144A, 5.072%, 2/15/40		Cayman Islands		227,224		225,345
	Ally Auto Receivables Trust, 2016-3, A3, 1.44%, 8/17/20		United States		51,195		51,000
	AmeriCredit Automobile Receivables Trust,
	o 2017-3, A2B, FRN, 2.493%, (1-Month USD LIBOR + 0.24%), 12/18/20		United States		349,371		349,452
	2018-2, D, 4.01%, 7/18/24		United States		155,000		154,883
	o 2018-3, A2B, FRN, 2.495%, (1-Month USD LIBOR + 0.25%), 1/18/22		United States		230,000		230,040
	2018-3, D, 4.04%, 11/18/24		United States		205,000		205,349
d	Ascentium Equipment Receivables Trust, 2017-2A, C, 144A, 2.87%, 8/10/22		United States		25,000		24,555
d	Bayview Opportunity Master Fund IIB Trust, 2018-RN5, A1, 144A, 3.82%, 4/28/33		United States		43,438		43,448
d	Bayview Opportunity Master Fund IIIA Trust, 2017-RN8, A1, 144A, 3.352%, 11/28/32		United States		33,401		33,310
d	Bayview Opportunity Master Fund IV Trust, 2018-RN2, A1, 144A, 3.598%, 2/25/33		United States		43,906		43,625
d	Bayview Opportunity Master Fund IVB Trust, 2018-RN9, A1, 144A, 4.213%, 10/29/33		United States		130,529		130,529
d	Blackbird Capital Aircraft Lease Securitization Ltd., 2016-1A, A, 144A, 4.213%, 12/16/41		United States		225,781		228,580
	California Republic Auto Receivables Trust, 2018-1, D, 4.33%, 4/15/25		United States		115,000		115,035
	Carmax Auto Owner Trust,
	o 2017-4, A2B, FRN, 2.41%, (1-Month USD LIBOR + 0.13%), 4/15/21		United States		147,794		147,776
	2018-2, D, 3.99%, 4/15/25		United States		100,000		99,929
	2018-4, D, 4.15%, 4/15/25		United States		60,000		60,416
d	Chesapeake Funding II LLC, 144A,
	o 2017-4A, A2, FRN, 2.62%, (1-Month USD LIBOR + 0.34%), 11/15/29		United States		155,814		156,113
	2018-1A, D, 3.92%, 4/15/30		United States		115,000		114,415
d	Cig Auto Receivables Trust, 2017-1A, A, 144A, 2.71%, 5/15/23		United States		21,901		21,757
d	Club Credit Trust, 2017-P1, A, 144A, 2.42%, 9/15/23		United States		20,646		20,594
d	Coinstar Funding LLC, 2017-1A, A2, 144A, 5.216%, 4/25/47		United States		241,325		243,286
d,o	Colony Starwood Homes Trust, 2016-2A, E, 144A, FRN, 5.63%, (1-Month USD LIBOR + 3.35%), 12/17/33		United States		84,981		85,596
d	CPS Auto Receivables Trust, 144A,
	2014-B, D, 4.62%, 5/15/20		United States		110,000		110,499
	2018-D, C, 3.83%, 9/15/23		United States		100,000		100,340
d	CSMC Trust, 2018-RPL2, A1, 144A, 4.03%, 8/25/62		United States		227,440		226,810
	Drive Auto Receivables Trust,
	2018-1, D, 3.81%, 5/15/24		United States		220,000		219,399
	o 2018-5, A2B, FRN, 2.407%, (1-Month USD LIBOR + 0.32%), 7/15/21		United States		305,000		304,561

franklintempleton.com Semiannual Report 39

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

CONSOLIDATED STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin K2 Alternative Strategies Fund (continued)

		Country		Principal Amount*		Value
	Asset-Backed Securities and Commercial Mortgage-Backed Securities (continued)
	Diversified Financial Services (continued)
	Drive Auto Receivables Trust, (continued)
	2018-5, D, 4.30%, 4/15/26		United States		125,000	$	125,590
d	Driven Brands Funding LLC, 2018-1A, A2, 144A, 4.739%, 4/20/48		United States		59,700		59,873
d	DT Auto Owner Trust, 144A,
	2016-1A, D, 4.66%, 12/15/22		United States		180,000		181,193
	2016-2A, D, 5.43%, 11/15/22		United States		240,000		242,739
	2018-2A, D, 4.15%, 3/15/24		United States		90,000		90,166
	2018-3A, C, 3.79%, 7/15/24		United States		120,000		120,494
o	Fifth Third Auto Trust, 2017-1, A2B, FRN, 2.43%, (1-Month USD LIBOR + 0.15%), 4/15/20		United States		28,105		28,108
d	First Investors Auto Owner Trust, 2016-1A, D, 144A, 4.70%, 4/18/22 United States				110,000		111,572
d	Five Guys Funding LLC, 2017-1A, A2, 144A, 4.60%, 7/25/47		United States		129,025		129,314
	Ford Credit Auto Owner Trust,
	d 2014-2, A, 144A, 2.31%, 4/15/26		United States		100,000		99,270
	o 2017-C, A2B, FRN, 2.427%, (1-Month USD LIBOR + 0.12%), 9/15/20		United States		203,380		203,667
d	GCAT LLC, 144A,
	2017-2, A1, 3.50%, 4/25/47		United States		47,123		46,800
	2018-1, A1, 3.844%, 6/25/48		United States		75,424		75,173
	2018-2, A1, 4.09%, 6/26/23		United States		132,787		132,863
d	GLS Auto Receivables Trust, 2018-3A, B, 144A, 3.78%, 8/15/23		United States		70,000		70,106
d,o	Gosforth Funding PLC, 2018-1A, A1, 144A, FRN, 3.139%, (3-Month USD LIBOR + 0.45%), 8/25/60		United Kingdom		194,411		194,653
d	Hertz Vehicle Financing II LP, 2017-2A, A, 144A, 3.29%, 10/25/23		United States		100,000		97,566
d,o	Home Partners of America Trust, 144A, FRN,
	2016-2, E, 6.07%, (1-Month USD LIBOR + 3.78%), 10/17/33		United States		100,000		100,459
	2016-2, F, 6.99%, (1-Month USD LIBOR + 4.70%), 10/17/33		United States		100,000		100,382
	Honda Auto Receivables Owner Trust, 2017-3, A3, 1.79%, 9/20/21		United States		115,000		113,353
d	Horizon Aircraft Finance I Ltd., 2018-1, A, 144A, 4.458%, 12/15/38		United States		265,000		266,186
d,o	Invitation Homes Trust, 144A, FRN,
	2018-SFR1, E, 4.158%, (1-Month USD LIBOR + 2.00%), 3/17/37		United States		100,000		100,359
	2018-SFR2, E, 4.28%, (1-Month USD LIBOR + 2.00%), 6/17/37		United States		200,000		200,941
d	Merlin Aviation Holdings DAC, 2016-1, A, 144A, 4.50%, 12/15/32		United States		155,396		156,908
d,o	Navistar Financial Dealer Note Master Owner Trust II, 2018-1, A, 144A, FRN, 2.945%, (1-Month USD LIBOR + 0.63%), 9/25/23		United States		60,000		60,003
d,o	NextGear Floorplan Master Owner Trust, 144A, FRN,
	2017-1A, A1, 3.157%, (1-Month USD LIBOR + 0.85%), 4/18/22		United States		240,000		241,491
	2017-2A, A1, 2.96%, (1-Month USD LIBOR + 0.68%), 10/17/22		United States		220,000		220,798
	2018-1A, A1, 2.92%, (1-Month USD LIBOR + 0.64%), 2/15/23		United States		200,000		200,365
o	Nissan Auto Lease Trust, 2017-B, A2B, FRN, 2.49%, (1-Month USD LIBOR + 0.21%), 12/16/19		United States		197,047		197,007
	Nissan Auto Receivables Owner Trust,
	2016-C, A3, 1.18%, 1/15/21		United States		55,366		54,823
	o 2017-C, A2B, FRN, 2.35%, (1-Month USD LIBOR + 0.07%), 10/15/20		United States		272,411		272,321
	2018-A, A3, 2.65%, 5/16/22		United States		250,000		248,496
d	OneMain Financial Issuance Trust, 144A,
	2015-1A, A, 3.19%, 3/18/26		United States		38,108		38,169
	2015-2A, D, 5.64%, 7/18/25		United States		285,000		286,977
	2015-3A, B, 4.16%, 11/20/28		United States		155,000		156,287
	2016-2A, B, 5.94%, 3/20/28		United States		335,000		340,698
d	Planet Fitness Master Issuer LLC, 2018-1A, A2I, 144A, 4.262%, 9/05/48		United States		170,000		170,455

40 Semiannual Report franklintempleton.com

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

CONSOLIDATED STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin K2 Alternative Strategies Fund (continued)

		Country		Principal Amount*		Value
	Asset-Backed Securities and Commercial Mortgage-Backed Securities (continued)
	Diversified Financial Services (continued)
d	RMAT LP, 2018-NPL1, A1, 144A, 4.09%, 5/25/48		United States		128,527	$	128,077
	Santander Drive Auto Receivables Trust,
	2018-2, D, 3.88%, 2/15/24		United States		275,000		274,888
	2018-3, D, 4.07%, 8/15/24		United States		210,000		210,494
	o 2018-5, A2B, FRN, 2.483%, (1-Month USD LIBOR + 0.23%), 7/15/21		United States		275,000		275,227
	2018-5, C, 3.81%, 12/16/24		United States		150,000		150,535
d	SCF Equipment Leasing 2018-1 LLC, 2018-1A, C, 144A, 4.21%, 4/20/27		United States		255,000		255,956
d	Shenton Aircraft Investment I Ltd., 2015-1A, A, 144A, 4.75%, 10/15/42		United States		112,223		113,468
d	S-Jets Ltd., 2017-1, A, 144A, 3.967%, 8/15/42		Bermuda		261,250		259,746
o	SLM Private Credit Student Loan Trust, FRN,
	2003-A, A3, 4.77%, (28-Day T-Bill), 6/15/32		United States		65,000		65,028
	2003-B, A3, 4.75%, (28-Day T-Bill), 3/15/33		United States		300,000		300,461
	2003-B, A4, 4.77%, (28-Day T-Bill), 3/15/33		United States		50,000		49,833
d,o	SMB Private Education Loan Trust, 2017-B, A2B, 144A, FRN, 3.03%, (1-Month USD LIBOR + 0.75%), 10/15/35		United States		100,000		100,109
d	Sofi Consumer Loan Program Trust, 2018-2, A2, 144A, 3.35%, 4/26/27		United States		155,000		153,910
d	Sofi Professional Loan Program LLC, 2016-A, B, 144A, 3.57%, 1/26/38		United States		103,708		101,228
d	Sprite Ltd., 2017-1, B, 144A, 5.75%, 12/15/37		Cayman Islands		233,753		233,469
d	Stanwich Mortgage Loan Trust, 2018-NPB1, A1, 144A, 4.016%, 5/16/23		United States		220,521		219,455
d,o	Starwood Retail Property Trust, 2014-STAR, E, 144A, FRN, 6.43%, (1-Month USD LIBOR + 4.15%), 11/15/27		United States		200,000		184,940
d	TAL Advantage V LLC, 2013-2A, A, 144A, 3.55%, 11/20/38		United States		50,000		49,428
d	Thunderbolt Aircraft Lease Ltd., 2017-A, B, 144A, 5.75%, 5/17/32		United States		209,620		215,771
	Toyota Auto Receivables Owner Trust,
	2016-C, A3, 1.14%, 8/17/20		United States		32,695		32,471
	o 2017-D, A2B, FRN, 2.33%, (1-Month USD LIBOR + 0.05%), 8/17/20		United States		273,259		273,241
d,o	Verizon Owner Trust, 144A, FRN,
	2017-3A, A1B, 2.571%, (1-Month USD LIBOR + 0.27%), 4/20/22		United States		295,000		295,403
	2018-1A, A1B, 2.561%, (1-Month USD LIBOR + 0.26%), 9/20/22		United States		175,000		175,033
d	Veros Automobile Receivables Trust, 2017-1, A, 144A, 2.84%, 4/17/23		United States		35,729		35,620
d	VOLT LXI LLC, 2017-NPL8, A1, 144A, 3.125%, 6/25/47		United States		47,223		46,930
d	VOLT LXIII LLC, 2018-NPL4, A1A, 144A, 4.336%, 7/27/48		United States		100,024		100,167
d	VOLT LXX LLC, 2018-NPL6, A1A, 144A, 4.115%, 9/25/48		United States		109,158		109,117
d	VOLT LXXII LLC, 2018-NPL8, A1A, 144A, 4.213%, 10/26/48		United States		534,315		535,898
d	Westlake Automobile Receivables Trust, 144A,
	2018-1A, D, 3.41%, 5/15/23		United States		60,000		59,220
	2018-2A, D, 4.00%, 1/16/24		United States		50,000		50,184
	o 2018-3A, A2B, FRN, 2.63%, (1-Month USD LIBOR + 0.35%), 1/18/22		United States		315,000		315,121
							14,936,660
	Equity Real Estate Investment Trusts (REITs) 0.1%
d	American Homes 4 Rent, 144A,
	2014-SFR2, E, 6.231%, 10/17/36		United States		250,000		270,886
	2014-SFR3, E, 6.418%, 12/17/36		United States		100,000		109,541
	2015-SFR1, E, 5.639%, 4/17/52		United States		210,000		220,844
d	Colony American Finance Ltd., 2015-1, D, 144A, 5.649%, 10/15/47		United States		115,000		116,143
d	Diamond Resorts Owner Trust, 144A,
	2017-1A, C, 6.07%, 10/22/29		United States		53,427		53,806
	2018-1, C, 4.53%, 1/21/31		United States		153,649		153,348

franklintempleton.com Semiannual Report 41

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

CONSOLIDATED STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin K2 Alternative Strategies Fund (continued)

		Country		Principal Amount*			Value
	Asset-Backed Securities and Commercial Mortgage-Backed Securities (continued)
	Equity Real Estate Investment Trusts (REITs) (continued)
d	Oak Hill Advisors Residential Loan Trust, 2017-NPL2, A1, 144A, 3.00%, 7/25/57		United States		144,467		$	142,098
								1,066,666
	Mortgage Real Estate Investment Trusts (REITs) 0.6%
d	Ajax Mortgage Loan Trust,
	2016-C, A, 144A, 4.00%, 10/25/57		United States		108,840			108,937
	p 2017-B, A, 144A, FRN, 3.163%, 9/25/56		United States		121,633			119,424
o	American Home Mortgage Investment Trust, 2006-1, 11A1, FRN, 2.561%, (1-Month USD LIBOR + 0.28%), 3/25/46		United States		265,811			253,215
p	ARM Trust, 2005-1, 3A1, FRN, 4.192%, 5/25/35		United States		80,704			81,482
	Banc of America Alternative Loan Trust, 2003-8, 1CB1, 5.50%, 10/25/33		United States		7,512			7,648
	Banc of America Funding Trust,
	2005-5, 1A1, 5.50%, 9/25/35		United States		11,123			11,825
	2007-4, 5A1, 5.50%, 11/25/34		United States		113,403			112,703
p	Banc of America Mortgage Trust, FRN,
	2005-A, 2A1, 3.686%, 2/25/35		United States		7,409			7,376
	2005-I, 4A1, 4.099%, 10/25/35		United States		90,259			87,641
	BCAP LLC Trust, 2007-AA2, 22A1, 6.00%, 3/25/22		United States		81,044			80,538
d,p	CCRESG Commercial Mortgage Trust, 2016-HEAT, D, 144A, FRN, 5.671%, 4/10/29		United States		100,000			102,140
	Citigroup Mortgage Loan Trust,
	p 2005-3, 2A3, FRN, 4.518%, 8/25/35		United States		53,911			53,429
	d,p 2009-10, 6A2, 144A, FRN, 4.75%, 9/25/34		United States		37,612			37,268
	d,p 2018-A, A1, 144A, FRN, 4.00%, 1/25/68		United States		99,016			98,732
	d 2018-C, A1, 144A, 4.125%, 3/25/59		United States		164,523			165,243
d,o	Communication Mortgage Trust, 2016-SAVA, C, 144A, FRN, 5.28%, (1-Month USD LIBOR + 3.00%), 10/15/34		United States		155,000			155,178
	Countrywide Alternative Loan Trust,
	2003-22CB, 1A1, 5.75%, 12/25/33		United States		50,186			51,060
	2004-16CB, 1A1, 5.50%, 7/25/34		United States		32,346			33,261
	2004-16CB, 3A1, 5.50%, 8/25/34		United States		34,977			35,902
	2004-28CB, 5A1, 5.75%, 1/25/35		United States		6,289			6,277
	2004-J3, 1A1, 5.50%, 4/25/34		United States		32,044			32,504
	2005-J1, 2A1, 5.50%, 2/25/25		United States		5,750			5,854
	2004-J10, 2CB1, 6.00%, 9/25/34		United States		91,988			95,236
p	Countrywide Home Loans Mortgage Pass-Through Trust, FRN,
	2004-12, 8A1, 4.441%, 8/25/34		United States		7,610			7,509
	2004-HYB4, 2A1, 4.172%, 9/20/34		United States		72,018			70,042
	Credit Suisse First Boston Mortgage Securities Corp.,
	2003-27, 4A4, 5.75%, 11/25/33		United States		20,035			20,466
	p 2003-AR26, 7A1, FRN, 4.342%, 11/25/33		United States		6,837			6,889
	p 2003-AR28, 4A1, FRN, 4.582%, 12/25/33		United States		3,594			3,641
d	CSMC OA LLC, 2014-USA, E, 144A, 4.373%, 9/15/37		United States		300,000			271,052
o	Deutsche Mortgage Securities Inc. Mortgage Loan Trust, 2004-4, 7AR1, FRN, 2.665%, (1-Month USD LIBOR + 0.35%), 6/25/34		United States		67,376			65,778
o	DSLA Mortgage Loan Trust, 2005-AR5, 2A1A, FRN, 2.612%, (1-Month USD LIBOR + 0.33%), 9/19/45		United States		49,011			40,436
h,o	Dukinfield II PLC, 2016-2, A, FRN, Reg S, 1.879%, (3-Month GBP LIBOR + 1.25%), 12/20/52		United Kingdom		185,886	GBP		238,317

42 Semiannual Report franklintempleton.com

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

CONSOLIDATED STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin K2 Alternative Strategies Fund (continued)

		Country		Principal Amount*			Value
	Asset-Backed Securities and Commercial Mortgage-Backed Securities (continued)
	Mortgage Real Estate Investment Trusts (REITs) (continued)
h,o	Eurosail-UK PLC, 2007-2X, A3C, FRN, Reg S, 0.95%, (3-Month GBP LIBOR + 0.15%), 3/13/45		United Kingdom		52,445	GBP	$	65,054
o	FHLMC Structured Agency Credit Risk Debt Notes, FRN,
	2015-DNA1, M2, 4.165%, (1-Month USD LIBOR + 1.85%), 10/25/27		United States		206,894			209,873
	2015-DNA1, M3, 5.615%, (1-Month USD LIBOR + 3.30%), 10/25/27		United States		250,000			274,900
p	GMACM Mortgage Loan Trust, FRN,
	2005-AR1, 3A, 4.053%, 3/18/35		United States		85,169			86,000
	2005-AR4, 3A1, 4.295%, 7/19/35		United States		108,715			106,145
p	GS Mortgage Securities Trust, FRN,
	2007-GG10, AM, 5.973%, 8/10/45		United States		17,844			18,174
	d 2011-GC5, D, 144A, 5.558%, 8/10/44		United States		195,000			190,691
	GSR Mortgage Loan Trust,
	2005-4F, 6A1, 6.50%, 2/25/35		United States		10,649			10,709
	p 2005-AR6, 4A5, FRN, 4.437%, 9/25/35		United States		78,936			79,813
o	Harborview Mortgage Loan Trust, FRN,
	2003-2, 1A, 3.022%, (1-Month USD LIBOR + 0.74%), 10/19/33		United States		61,269			59,564
	2004-11, 2A2A, 2.922%, (1-Month USD LIBOR + 0.64%), 1/19/35		United States		119,789			112,004
	2004-2, 1A1, 2.802%, (1-Month USD LIBOR + 0.52%), 6/19/34		United States		105,955			104,967
	IndyMac Index Mortgage Loan Trust, FRN,
	p 2004-AR6, 4A, 4.555%, 10/25/34		United States		188,122			194,593
	o 2004-AR7, A5, 3.535%, (1-Month USD LIBOR + 1.22%), 9/25/34		United States		58,801			54,075
	o 2004-AR12, A1, 3.061%, (1-Month USD LIBOR + 0.78%), 12/25/34		United States		180,723			165,349
	p 2005-AR11, A3, 3.895%, 8/25/35		United States		66,169			59,433
	o 2006-AR2, 2A1, 2.525%, (1-Month USD LIBOR + 0.21%), 2/25/46		United States		272,983			232,666
p	JP Morgan Chase Commercial Mortgage Securities Trust, 2007-LDPX, AM, FRN, 5.464%, 1/15/49		United States		11,702			11,724
	JP Morgan Mortgage Trust,
	p 2003-A2, 3A1, FRN, 4.115%, 11/25/33		United States		9,480			9,579
	2004-S1, 2A1, 6.00%, 9/25/34		United States		116,950			121,332
	p 2005-A1, 6T1, FRN, 4.301%, 2/25/35		United States		15,925			15,859
	p 2005-A3, 4A1, FRN, 4.714%, 6/25/35		United States		4,532			4,586
	p 2006-A1, 1A2, FRN, 4.445%, 2/25/36		United States		55,699			51,960
	p 2007-A1, 4A2, FRN, 4.571%, 7/25/35		United States		4,858			5,006
o	Lehman XS Trust Series, 2006-2N, 1A1, FRN, 2.541%, (1-Month USD LIBOR + 0.26%), 2/25/46		United States		52,749			48,773
h,o	Ludgate Funding PLC, FRN, Reg S,
	2007-1, A2B, 0.665%, (3-Month EURIBOR + 0.16%), 1/01/61		United Kingdom		32,458	EUR		34,532
	2008-W1X, A1, 1.28%, (3-Month GBP LIBOR + 0.60%), 1/01/61		United Kingdom		145,708	GBP		178,124
p	MASTR Adjustable Rate Mortgages Trust, 2004-7, 3A1, FRN, 4.201%, 7/25/34		United States		34,277			33,623
	MASTR Alternative Loan Trust,
	2004-2, 8A4, 5.50%, 3/25/34		United States		181,795			184,481
	2004-8, 2A1, 6.00%, 9/25/34		United States		65,484			69,885
p	Merrill Lynch Mortgage Investors MLCC, 2006-2, 2A, FRN, 4.139%, 5/25/36		United States		7,397			7,477
d,p	Morgan Stanley Capital I Trust, 2011-C2, E, 144A, FRN, 5.668%, 6/15/44		United States		150,000			143,001
h,o	Newgate Funding PLC, 2007-3X, A2B, FRN, Reg S, 0.279%, (3-Month EURIBOR + 0.60%), 12/15/50		United Kingdom		68,147	EUR		74,564
d	PRPM LLC,
	2017-2A, A1, 144A, 3.47%, 9/25/22		United States		189,360			187,772
	2017-2A, A2, 144A, 5.00%, 9/25/22		United States		100,000			98,974
	p 2017-3A, A1, 144A, FRN, 3.47%, 11/25/22		United States		90,839			90,266

franklintempleton.com Semiannual Report 43

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

CONSOLIDATED STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin K2 Alternative Strategies Fund (continued)

		Country		Principal Amount*			Value
	Asset-Backed Securities and Commercial Mortgage-Backed Securities (continued)
	Mortgage Real Estate Investment Trusts (REITs) (continued)
o	RALI Trust, 2006-QO4, 2A1, FRN, 2.505%, (1-Month USD LIBOR + 0.19%), 4/25/46		United States		76,287		$	71,438
d	RCO Mortgage LLC, 2017-1, A1, 144A, 3.375%, 8/25/22		United States		79,251			78,928
	Residential Asset Securitization Trust, 2003-A9, A2, 4.00%, 8/25/33		United States		119,905			116,070
p	RFMSI Trust, FRN,
	2005-SA1, 1A1, 4.596%, 3/25/35		United States		124,195			103,392
	2006-SA2, 3A1, 4.958%, 8/25/36		United States		132,660			124,491
h,o	RMAC Securities PLC, 2006-NS1X, A2C, FRN, Reg S, 0.229%, (3-Month EURIBOR + 0.15%), 6/12/44		United Kingdom		44,878	EUR		48,128
	Structured ARM Loan Trust, FRN,
	p 2004-12, 7A3, 4.384%, 9/25/34		United States		16,803			17,095
	o 2005-14, A1, 2.625%, (1-Month USD LIBOR + 0.31%), 7/25/35		United States		291,448			238,384
	Structured Asset Securities Corp. Trust, 2005-1, 7A7, 5.50%, 2/25/35		United States		12,067			12,120
h,o	Towd Point Mortgage Funding 2016-Granite1 PLC, 2016-GR1X, B, FRN, Reg S, 2.159%, (3-Month GBP LIBOR + 1.40%), 7/20/46		United Kingdom		100,000	GBP		128,098
p	Wells Fargo Bank, N.A., Adjustable Rate Mortgage Trust, 2004-4, 3A1, FRN, 4.212%, 3/25/35		United States		34,049			34,037
	Wells Fargo Mortgage Backed Securities Trust,
	p 2003-M, A1, FRN, 4.852%, 12/25/33		United States		19,188			19,717
	p 2004-I, 2A1, FRN, 4.326%, 7/25/34		United States		89,701			91,438
	p 2004-O, A1, FRN, 4.681%, 8/25/34		United States		7,137			7,356
	2005-16, A18, 6.00%, 12/25/35		United States		3,712			3,716
	p 2005-AR10, 2A4, FRN, 4.39%, 5/01/35		United States		10,416			10,747
	p 2005-AR12, 2A5, FRN, 4.257%, 6/25/35		United States		30,262			31,056
d,p	WFRBS Commercial Mortgage Trust, 144A, FRN,
	2011-C3, D, 5.855%, 3/15/44		United States		90,000			81,415
	2012-C6, D, 5.769%, 4/15/45		United States		150,000			150,251
	2012-C7, E, 4.976%, 6/15/45		United States		75,000			62,238
								7,292,646
	Total Asset-Backed Securities and Commercial Mortgage-Backed Securities (Cost $25,128,149)							25,220,963

	Number of Contracts		Notional Amount#
Options Purchased 0.2%
Calls – Exchange-Traded 0.1%
iQIYI Inc., ADR, December Strike Price $21.00, Expires 12/28/18		28		2,800	2,800
NASDAQ 100 Stock Index, December Strike Price $7,900.00, Expires 12/21/18		3		300	15
Neurocrine Biosciences Inc., December Strike Price $120.00, Expires 12/21/18		11		1,100	138
NII Holdings Inc., March Strike Price $7.50, Expires 3/15/19		14		1,400	1,512
Nutanix Inc., December Strike Price $42.50, Expires 12/21/18		58		5,800	20,242
Okta Inc., December Strike Price $65.00, Expires 12/21/18		22		2,200	9,680
S&P 500 Index, December Strike Price $3,000.00, Expires 12/31/18		134		13,400	11,390
Sea Ltd., ADR, January Strike Price $15.00, Expires 1/18/19		70		7,000	4,200
Shire PLC, ADR, April Strike Price $200.00, Expires 4/18/19		274		27,400	32,880
SPDR S&P 500 ETF Trust, December Strike Price $300.00, Expires 12/21/18		123		12,300	738
Square Inc., December Strike Price $76.00, Expires 12/07/18		26		2,600	1,300
Technology Select Sector SPDR Fund, January Strike Price $71.00, Expires 1/18/19		164		16,400	13,448

44 Semiannual Report franklintempleton.com

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

CONSOLIDATED STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin K2 Alternative Strategies Fund (continued)

	Number of Contracts		Notional Amount#			Value
Options Purchased (continued)
Calls – Exchange-Traded (continued)
Telecom Italia SpA, March Strike Price 0.52 EUR, Expires 3/15/19		4,662		4,662,000		$	382,646
Telecom Italia SpA, June Strike Price 0.64 EUR, Expires 6/21/19		2,170		2,170,000			101,952
thyssenkrupp AG, June Strike Price 18.00 EUR, Expires 6/21/19		731		73,100			83,584
thyssenkrupp AG, June Strike Price 22.00 EUR, Expires 6/21/19		1,069		106,900			37,517
Twenty-First Century Fox Inc., A, January Strike Price $41.00, Expires 1/18/19		84		8,400			73,500
Twenty-First Century Fox Inc., A, January Strike Price $46.00, Expires 1/18/19		469		46,900			174,703
Vivendi SA, March Strike Price 24.00 EUR, Expires 3/15/19		1,153		115,300			69,182
							1,021,427
Calls – Over-the-Counter 0.0%†
Currency Options 0.0%†
AUD/USD, Counterparty JPHQ, December Strike Price 0.73 AUD, Expires 12/14/18		1		1,000,000			9,355
EUR/NOK, Counterparty JPHQ, December Strike Price 9.70 EUR, Expires 12/31/18		1		500,000	EUR		5,475
EUR/USD, Counterparty JPHQ, January Strike Price 1.20 EUR, Expires 1/10/19		1		500,000			113
EUR/USD, Counterparty JPHQ, April Strike Price 1.28 EUR, Expires 4/17/19		1		4,500,000			1,423
GBP/USD, Counterparty JPHQ, March Strike Price 1.40 GBP, Expires 3/08/19		1		3,000,000			8,803
GBP/USD, Counterparty JPHQ, May Strike Price 1.35 GBP, Expires 5/16/19		1		500,000			8,741
GBP/USD, Counterparty JPHQ, May Strike Price 1.35 GBP, Expires 5/16/19		1		500,000			8,056
USD/CAD, Counterparty JPHQ, December Strike Price $1.32, Expires 12/21/18		1		750,000			7,690
USD/HKD, Counterparty JPHQ, April Strike Price $7.95, Expires 4/02/19		1		4,000,000			782
USD/HKD, Counterparty JPHQ, September Strike Price $7.95, Expires 9/16/19		1		2,000,000			1,028
USD/HKD, Counterparty JPHQ, September Strike Price $7.95, Expires 9/18/19		1		3,000,000			1,559
USD/TWD, Counterparty JPHQ, April Strike Price $31.50, Expires 4/02/19		1		3,000,000			12,242
							65,267
Puts – Exchange-Traded 0.1%
DAX Stock Index, December Strike Price 10,650.00 EUR, Expires 12/21/18		34		170			9,738
DAX Stock Index, December Strike Price 11,000.00 EUR, Expires 12/21/18		33		165			22,304
DJ EURO STOXX 50 Index, December Strike Price 2,975.00 EUR, Expires 12/21/18		95		950			10,647
DJ EURO STOXX 50 Index, December Strike Price 3,075.00 EUR, Expires 12/21/18		94		940			25,753
Euro-Bund, December Strike Price 159.50 EUR, Expires 12/21/18		15		15,000			679
FTSE MIB Index, December Strike Price 17,500.00 EUR, Expires 12/21/18		23		58			3,645
Invesco QQQ ETF, January Strike Price $158.00, Expires 1/18/19		1,081		108,100			223,767
ON Semiconductor Corp., December Strike Price $17.00, Expires 12/21/18		58		5,800			1,276
Rapid7 Inc., December Strike Price $30.00, Expires 12/21/18		17		1,700			1,785
S&P 500 Index, December Strike Price $2,500.00, Expires 12/14/18		341		34,100			64,790
S&P 500 Index, December Strike Price $2,550.00, Expires 12/14/18		175		17,500			62,125
S&P 500 Index, December Strike Price $2,600.00, Expires 12/21/18		49		4,900			47,040
S&P 500 Index, January Strike Price $2,600.00, Expires 1/18/19		9		900			19,260
Shire PLC, ADR, April Strike Price $170.00, Expires 4/18/19		13		1,300			11,310
SPDR S&P 500 ETF Trust, December Strike Price $273.00, Expires 12/21/18		27		2,700			9,909
The Walt Disney Co., January Strike Price $95.00, Expires 1/18/19		169		16,900			2,535
The Walt Disney Co., April Strike Price $95.00, Expires 4/18/19		86		8,600			6,794
							523,357

franklintempleton.com Semiannual Report 45

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

CONSOLIDATED STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin K2 Alternative Strategies Fund (continued)

		Number of Contracts		Notional Amount#			Value
	Options Purchased (continued)
	Puts – Over-the-Counter 0.0%†
	Currency Options 0.0%†
	EUR/GBP, Counterparty DBAB, January Strike Price 0.90 EUR, Expires 1/14/19		1		837,000	EUR	$	21,380
	Total Options Purchased (Cost $2,521,444)							1,631,431
	Total Investments before Short Term Investments (Cost $772,225,753)							847,709,614
		Country		Shares
	Short Term Investments 24.0%
	Money Market Funds 20.2%
s,t	Dreyfus Government Cash Management, Institutional, 2.09%		United States		13,714,041			13,714,041
s	Fidelity Investments Money Market Government Portfolio, Institutional, 2.10%		United States		226,755,842			226,755,842
	Total Money Market Funds (Cost $240,469,883)							240,469,883
				Principal Amount*
	Repurchase Agreements (Cost $18,035,346) 1.5%
u	Joint Repurchase Agreement, 2.278%, 12/03/18 (Maturity Value $18,038,771)		United States		18,035,346			18,035,346
	BNP Paribas Securities Corp. (Maturity Value $11,648,356) Deutsche Bank Securities Inc. (Maturity Value $3,478,236) HSBC Securities (USA) Inc. (Maturity Value $2,912,179)
	Collateralized by U.S. Government Agency Securities, 3.00% - 4.50%, 7/15/40 - 2/20/45; U.S. Treasury Bond, 6.25%, 8/15/23; and U.S. Treasury Note, 0.875% - 3.50%, 1/15/19 - 5/15/23 (valued at $18,402,083)
q	Investments from Cash Collateral Received for Loaned Securities 0.8%
				Shares
	Money Market Fund 0.6%
r,s	Institutional Fiduciary Trust Money Market Portfolio, 1.91%		United States		7,395,000			7,395,000
				Principal Amount*
	Repurchase Agreement 0.2%
u	Joint Repurchase Agreement, 1.96%, 12/03/18 (Maturity Value $1,998,253)		United States		1,997,878			1,997,878
	Merrill Lynch Pierce Fenner & Smith, Inc.
	Collateralized by a U.S. Government Agency Obligation, 1.38%, 6/30/23 (valued at $2,025,470)
	Total Investments from Cash Collateral Received for Loaned Securities (Cost $9,392,878)							9,392,878
	U.S. Government and Agency Securities 1.5%
v	U.S. Treasury Bill,
	b 1/03/19		United States		14,000,000			13,973,086
	1/24/19-10/10/19		United States		4,245,000			4,182,034
	Total U.S. Government and Agency Securities (Cost $18,155,283)							18,155,120

46 Semiannual Report franklintempleton.com

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

CONSOLIDATED STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin K2 Alternative Strategies Fund (continued)

						Value
	Total Investments (Cost $1,058,279,143) 95.3%					$	1,133,762,841
	Options Written (0.0)%†						(390,304	)
	Securities Sold Short (22.8)%						(270,364,878	)
	Other Assets, less Liabilities 27.5%						326,614,008
	Net Assets 100.0%					$	1,189,621,667
		Number of Contracts		Notional Amount#
w	Options Written (0.0)%†
	Calls – Exchange-Traded (0.0)%†
	AbbVie Inc., December Strike Price $92.50, Expires 12/21/18		2		200		(590	)
	AbbVie Inc., January Strike Price $95.00, Expires 1/18/19		2		200		(540	)
	AbbVie Inc., February Strike Price $97.50, Expires 2/15/19		2		200		(536	)
	Accenture PLC, A, December Strike Price $170.00, Expires 12/21/18		1		100		(190	)
	Accenture PLC, A, January Strike Price $170.00, Expires 1/18/19		1		100		(307	)
	Accenture PLC, A, February Strike Price $175.00, Expires 2/15/19		1		100		(240	)
	Aflac Inc., December Strike Price $45.00, Expires 12/21/18		4		400		(448	)
	Aflac Inc., January Strike Price $47.50, Expires 1/18/19		4		400		(204	)
	Allergan PLC, December Strike Price $170.00, Expires 12/21/18		1		100		(41	)
	Allergan PLC, January Strike Price $175.00, Expires 1/18/19		2		200		(152	)
	Altria Group Inc., December Strike Price $65.00, Expires 12/21/18		3		300		(9	)
	Altria Group Inc., January Strike Price $65.00, Expires 1/18/19		3		300		(21	)
	Altria Group Inc., March Strike Price $65.00, Expires 3/15/19		3		300		(93	)
	American Eagle Outfitters Inc., December Strike Price $24.00, Expires 12/21/18		9		900		(270	)
	American Eagle Outfitters Inc., January Strike Price $25.00, Expires 1/18/19		9		900		(315	)
	American Eagle Outfitters Inc., February Strike Price $26.00, Expires 2/15/19		9		900		(338	)
	AmerisourceBergen Corp., A, December Strike Price $97.50, Expires 12/21/18		3		300		(68	)
	AmerisourceBergen Corp., A, February Strike Price $100.00, Expires 2/15/19		3		300		(323	)
	Amgen Inc., December Strike Price $200.00, Expires 12/21/18		1		100		(1,080	)
	Amgen Inc., January Strike Price $200.00, Expires 1/18/19		1		100		(1,176	)
	Automatic Data Processing Inc., December Strike Price $150.00, Expires 12/21/18		3		300		(480	)
	Best Buy Co. Inc., December Strike Price $75.00, Expires 12/21/18		3		300		(21	)
	Best Buy Co. Inc., January Strike Price $77.50, Expires 1/18/19		2		200		(46	)
	Best Buy Co. Inc., March Strike Price $80.00, Expires 3/15/19		3		300		(270	)
	Bristol-Myers Squibb Co., December Strike Price $55.00, Expires 12/21/18		3		300		(186	)
	Bristol-Myers Squibb Co., January Strike Price $57.50, Expires 1/18/19		3		300		(117	)
	Broadcom Inc., December Strike Price $240.00, Expires 12/21/18		1		100		(770	)
	Broadcom Inc., January Strike Price $250.00, Expires 1/18/19		1		100		(610	)
	Broadridge Financial Solutions Inc., December Strike Price $110.00, Expires 12/21/18		1		100		(54	)
	Capital One Financial Corp., December Strike Price $95.00, Expires 12/21/18		2		200		(50	)
	Capital One Financial Corp., January Strike Price $97.50, Expires 1/18/19		2		200		(101	)
	Capital One Financial Corp., March Strike Price $97.50, Expires 3/15/19		2		200		(326	)
	Chevron Corp., December Strike Price $120.00, Expires 12/21/18		2		200		(464	)
	Chevron Corp., January Strike Price $125.00, Expires 1/18/19		2		200		(314	)
	Cisco Systems Inc., December Strike Price $48.00, Expires 12/21/18		4		400		(392	)
	Citigroup Inc., December Strike Price $67.50, Expires 12/21/18		3		300		(201	)
	Citigroup Inc., January Strike Price $70.00, Expires 1/18/19		2		200		(160	)
	Citigroup Inc., March Strike Price $70.00, Expires 3/15/19		3		300		(486	)
	Comcast Corp., December Strike Price $40.00, Expires 12/21/18		5		500		(245	)
	Comcast Corp., January Strike Price $41.25, Expires 1/18/19		4		400		(184	)

franklintempleton.com Semiannual Report 47

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

CONSOLIDATED STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin K2 Alternative Strategies Fund (continued)

		Number of Contracts		Notional Amount*		Value
w	Options Written (continued)
	Calls – Exchange-Traded (continued)
	Comcast Corp., February Strike Price $42.50, Expires 2/15/19		5		500	$	(260	)
	ConocoPhillips, December Strike Price $70.00, Expires 12/21/18		2		200		(164	)
	ConocoPhillips, January Strike Price $72.50, Expires 1/18/19		2		200		(170	)
	Cummins Inc., January Strike Price $155.00, Expires 1/18/19		1		100		(380	)
	Cummins Inc., March Strike Price $155.00, Expires 3/15/19		1		100		(654	)
	Cummins Inc., March Strike Price $160.00, Expires 3/15/19		1		100		(450	)
	Delta Air Lines Inc., December Strike Price $60.00, Expires 12/21/18		3		300		(663	)
	Delta Air Lines Inc., January Strike Price $60.00, Expires 1/18/19		3		300		(945	)
	Delta Air Lines Inc., March Strike Price $62.50, Expires 3/15/19		3		300		(873	)
	Dick’s Sporting Goods Inc., December Strike Price $42.00, Expires 12/21/18		5		500		(10	)
	Dick’s Sporting Goods Inc., January Strike Price $45.00, Expires 1/18/19		5		500		(25	)
	Eaton Corp. PLC, December Strike Price $77.50, Expires 12/21/18		2		200		(300	)
	Eaton Corp. PLC, January Strike Price $77.50, Expires 1/18/19		2		200		(460	)
	Eaton Corp. PLC, January Strike Price $80.00, Expires 1/18/19		2		200		(240	)
	Euro-Bund, December Strike Price 162.00 EUR, Expires 12/21/18		5		5,000		(4,868	)
	Exxon Mobil Corp., December Strike Price $80.00, Expires 12/21/18		2		200		(286	)
	Exxon Mobil Corp., December Strike Price $82.50, Expires 12/21/18		2		200		(104	)
	FirstEnergy Corp., December Strike Price $40.00, Expires 12/21/18		4		400		(40	)
	FirstEnergy Corp., January Strike Price $41.00, Expires 1/18/19		4		400		(50	)
	Gilead Sciences Inc., December Strike Price $75.00, Expires 12/21/18		2		200		(154	)
	Gilead Sciences Inc., January Strike Price $77.50, Expires 1/18/19		2		200		(182	)
	Gilead Sciences Inc., February Strike Price $77.50, Expires 2/15/19		3		300		(507	)
	Hewlett Packard Enterprise Co., December Strike Price $16.00, Expires 12/21/18		12		1,200		(264	)
	Hewlett Packard Enterprise Co., January Strike Price $17.00, Expires 1/18/19		12		1,200		(144	)
	The Home Depot Inc., December Strike Price $190.00, Expires 12/21/18		1		100		(75	)
	The Home Depot Inc., January Strike Price $195.00, Expires 1/18/19		2		200		(224	)
	Illinois Tool Works Inc., December Strike Price $140.00, Expires 12/21/18		1		100		(285	)
	Intel Corp., December Strike Price $50.00, Expires 12/21/18		3		300		(294	)
	Intel Corp., January Strike Price $52.50, Expires 1/18/19		3		300		(195	)
	The Interpublic Group of Cos. Inc., January Strike Price $25.00, Expires 1/18/19		7		700		(210	)
	Intuit Inc., December Strike Price $230.00, Expires 12/21/18		2		200		(200	)
	Johnson & Johnson, December Strike Price $150.00, Expires 12/21/18		3		300		(267	)
	JPMorgan Chase & Co., December Strike Price $115.00, Expires 12/21/18		1		100		(82	)
	Kohl’s Corp., December Strike Price $87.50, Expires 12/21/18		2		200		(4	)
	Kohl’s Corp., January Strike Price $90.00, Expires 1/18/19		2		200		(22	)
	Kohl’s Corp., April Strike Price $95.00, Expires 4/18/19		2		200		(100	)
	Marathon Petroleum Corp., December Strike Price $70.00, Expires 12/21/18		2		200		(178	)
	Marathon Petroleum Corp., January Strike Price $72.50, Expires 1/18/19		2		200		(202	)
	Mastercard Inc., A, December Strike Price $210.00, Expires 12/21/18		1		100		(169	)
	Mastercard Inc., A, January Strike Price $220.00, Expires 1/18/19		1		100		(143	)
	McKesson Corp., December Strike Price $135.00, Expires 12/21/18		2		200		(85	)
	McKesson Corp., January Strike Price $140.00, Expires 1/18/19		2		200		(110	)
	Medtronic PLC, January Strike Price $100.00, Expires 1/18/19		1		100		(126	)
	Merck & Co. Inc., December Strike Price $77.50, Expires 12/21/18		2		200		(450	)
	Merck & Co. Inc., January Strike Price $80.00, Expires 1/18/19		2		200		(296	)
	MetLife Inc., December Strike Price $47.50, Expires 12/21/18		4		400		(84	)
	MetLife Inc., January Strike Price $50.00, Expires 1/18/19		4		400		(56	)
	Microsoft Corp., December Strike Price $115.00, Expires 12/21/18		1		100		(105	)
	Microsoft Corp., January Strike Price $115.00, Expires 1/18/19		1		100		(222	)
	Molson Coors Brewing Co., B, December Strike Price $67.50, Expires 12/21/18		2		200		(160	)
	Molson Coors Brewing Co., B, January Strike Price $70.00, Expires 1/18/19		2		200		(150	)

48 Semiannual Report franklintempleton.com

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

CONSOLIDATED STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin K2 Alternative Strategies Fund (continued)

		Number of Contracts		Notional Amount*		Value
w	Options Written (continued)
	Calls – Exchange-Traded (continued)
	Morgan Stanley, January Strike Price $49.00, Expires 1/18/19		1		100	$	(39	)
	Murphy Oil Corp., December Strike Price $32.50, Expires 12/21/18		6		600		(690	)
	Murphy Oil Corp., January Strike Price $35.00, Expires 1/18/19		6		600		(540	)
	Occidental Petroleum Corp., December Strike Price $75.00, Expires 12/21/18		2		200		(72	)
	Occidental Petroleum Corp., January Strike Price $77.50, Expires 1/18/19		2		200		(92	)
	Okta Inc., December Strike Price $75.00, Expires 12/21/18		22		2,200		(3,212	)
	Omnicom Group Inc., December Strike Price $80.00, Expires 12/21/18		2		200		(100	)
	Omnicom Group Inc., January Strike Price $82.50, Expires 1/18/19		2		200		(100	)
	PACCAR Inc., December Strike Price $62.50, Expires 12/21/18		3		300		(465	)
	PACCAR Inc., January Strike Price $63.20, Expires 1/18/19		3		300		(623	)
	Paychex Inc., December Strike Price $72.50, Expires 12/21/18		2		200		(215	)
	Prudential Financial Inc., December Strike Price $100.00, Expires 12/21/18		2		200		(84	)
	Prudential Financial Inc., January Strike Price $100.00, Expires 1/18/19		1		100		(115	)
	Prudential Financial Inc., March Strike Price $105.00, Expires 3/15/19		2		200		(194	)
	Robert Half International Inc., December Strike Price $65.00, Expires 12/21/18		2		200		(208	)
	Shire PLC, ADR, April Strike Price $190.00, Expires 4/18/19		13		1,300		(4,290	)
	Sinclair Broadcast Group Inc., December Strike Price $33.00, Expires 12/21/18		6		600		(270	)
	Sinclair Broadcast Group Inc., January Strike Price $34.00, Expires 1/18/19		6		600		(420	)
	Target Corp., December Strike Price $90.00, Expires 12/21/18		3		300		(6	)
	Target Corp., January Strike Price $92.50, Expires 1/18/19		3		300		(12	)
	Texas Instruments Inc., December Strike Price $100.00, Expires 12/21/18		1		100		(246	)
	Texas Instruments Inc., January Strike Price $105.00, Expires 1/18/19		1		100		(172	)
	Thermo Fisher Scientific Inc., January Strike Price $250.00, Expires 1/18/19		2		200		(1,574	)
	Tilray Inc., January Strike Price $75.00, Expires 1/15/21		38		3,800		(117,306	)
	UnitedHealth Group Inc., December Strike Price $280.00, Expires 12/21/18		1		100		(610	)
	UnitedHealth Group Inc., January Strike Price $290.00, Expires 1/18/19		1		100		(485	)
	Viacom Inc., B, December Strike Price $35.00, Expires 12/21/18		5		500		(25	)
	Visa Inc., December Strike Price $150.00, Expires 12/21/18		1		100		(50	)
	Walgreens Boots Alliance Inc., January Strike Price $87.50, Expires 1/18/19		3		300		(579	)
	Walgreens Boots Alliance Inc., April Strike Price $90.00, Expires 4/18/19		3		300		(885	)
	Waste Management Inc., December Strike Price $95.00, Expires 12/21/18		3		300		(285	)
	Yum! Brands Inc., December Strike Price $92.50, Expires 12/21/18		2		200		(302	)
							(163,371	)
	Calls – Over-the-Counter (0.0)%†
	Currency Options (0.0)%†
	AUD/USD, Counterparty JPHQ, May Strike Price 0.76 AUD, Expires 5/02/19		1		1,000,000		(6,593	)
	GBP/USD, Counterparty JPHQ, March Strike Price 1.35 GBP, Expires 3/08/19		1		1,000,000		(9,267	)
	USD/CAD, Counterparty JPHQ, December Strike Price $1.35, Expires 12/21/18		1		1,500,000		(2,783	)
	USD/HKD, Counterparty JPHQ, April Strike Price $7.85, Expires 4/02/19		1		2,000,000		(1,271	)
	USD/HKD, Counterparty JPHQ, September Strike Price $7.85, Expires 9/18/19		1		1,500,000		(1,582	)
							(21,496	)
	Puts – Exchange-Traded (0.0)%†
	DAX Stock Index, December Strike Price 10,000.00 EUR, Expires 12/21/18		34		170		(2,252	)
	DAX Stock Index, December Strike Price 10,450.00 EUR, Expires 12/21/18		33		165		(5,753	)
	DJ EURO STOXX 50 Index, December Strike Price 2,750.00 EUR, Expires 12/21/18		95		950		(2,366	)
	DJ EURO STOXX 50 Index, December Strike Price 2,925.00 EUR, Expires 12/21/18		94		940		(7,130	)
	Euro-Bund, December Strike Price 157.50 EUR, Expires 12/21/18		23		23,000		(260	)
	FTSE MIB Index, December Strike Price 16,000.00 EUR, Expires 12/21/18		26		65		(883	)

franklintempleton.com Semiannual Report 49

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

CONSOLIDATED STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin K2 Alternative Strategies Fund (continued)

		Number of Contracts		Notional Amount*			Value
w	Options Written (continued)
	Puts – Exchange-Traded (continued)
	NII Holdings Inc., March Strike Price $5.00, Expires 3/15/19		14		1,400		$	(1,785	)
	S&P 500 Index, December Strike Price $2,400.00, Expires 12/21/18		34		3,400			(4,930	)
	S&P 500 Index, January Strike Price $2,450.00, Expires 1/18/19		9		900			(8,145	)
	Sea Ltd., ADR, February Strike Price $12.50, Expires 2/15/19		35		3,500			(3,325	)
	SPDR S&P 500 ETF Trust, December Strike Price $260.00, Expires 12/21/18		27		2,700			(2,754	)
	thyssenkrupp AG, June Strike Price 13.00 EUR, Expires 6/21/19		731		73,100			(35,585	)
	Twenty-First Century Fox Inc., April Strike Price $39.00, Expires 4/18/19		553		55,300			(98,157	)
								(173,325	)
	Puts – Over-the-Counter (0.0)%†
	Currency Options (0.0)%†
	EUR/NOK, Counterparty JPHQ, December Strike Price 9.40 EUR, Expires 12/31/18		1		500,000	EUR		(188	)
	EUR/USD, Counterparty JPHQ, January Strike Price 1.14 EUR, Expires 1/10/19		1		500,000			(4,950	)
	GBP/USD, Counterparty JPHQ, May Strike Price 1.22 GBP, Expires 5/16/19		1		500,000			(9,230	)
	GBP/USD, Counterparty JPHQ, May Strike Price 1.22 GBP, Expires 5/16/19		1		500,000			(9,569	)
	USD/HKD, Counterparty JPHQ, September Strike Price $7.85, Expires 9/16/19		1		1,000,000			(1,046	)
	USD/TWD, Counterparty JPHQ, July Strike Price $29.50, Expires 7/03/19		1		1,000,000			(7,129	)
								(32,112	)
	Total Options Written (Premiums Received $487,226)							(390,304	)

		Country		Shares
x	Securities Sold Short (22.8)%
	Common Stocks (6.1)%
	Aerospace & Defense (0.1)%
	Huntington Ingalls Industries Inc.		United States		1,271	(273,901	)
	Lockheed Martin Corp.		United States		817	(245,451	)
	Northrop Grumman Corp.		United States		1,778	(462,067	)
	Raytheon Co.		United States		1,524	(267,218	)
	United Technologies Corp.		United States		2,116	(257,813	)
						(1,506,450	)
	Air Freight & Logistics (0.0)%†
	Atlas Air Worldwide Holdings Inc.		United States		2,904	(154,638	)
	Airlines (0.1)%
	Japan Airlines Co. Ltd.		Japan		13,657	(492,549	)
	SAS AB		Sweden		212,815	(522,240	)
						(1,014,789	)
	Banks (0.0)%†
	Hope Bancorp Inc.		United States		3,905	(59,356	)
	Beverages (0.1)%
	Boston Beer Inc., A		United States		2,691	(738,787	)
	Molson Coors Brewing Co., B		United States		8,843	(581,604	)
						(1,320,391	)
	Biotechnology (0.3)%
	Alder Biopharmaceuticals Inc.		United States		12,538	(167,758	)
	Amicus Therapeutics Inc.		United States		138,513	(1,529,183	)

50 Semiannual Report franklintempleton.com

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

CONSOLIDATED STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin K2 Alternative Strategies Fund (continued)

		Country		Shares		Value
x	Securities Sold Short (continued)
	Biotechnology (continued)
	Karyopharm Therapeutics Inc.		United States		25,967	$	(270,057	)
	Ligand Pharmaceuticals Inc.		United States		1,057		(166,763	)
	Neurocrine Biosciences Inc.		United States		5,562		(490,958	)
	PDL BioPharma Inc.		United States		119,838		(367,903	)
	Radius Health Inc.		United States		8,409		(140,178	)
	Repligen Corp.		United States		9,573		(619,086	)
	Retrophin Inc.		United States		7,566		(185,670	)
							(3,937,556	)
	Building Products (0.0)%†
	Patrick Industries Inc.		United States		2,459		(97,671	)
	Capital Markets (0.0)%†
	Cowen Inc., A		United States		18,248		(290,326	)
	Chemicals (0.0)%†
	Mitsubishi Chemical Holdings Corp.		Japan		8,400		(68,715	)
	Commercial Services & Supplies (0.0)%†
	Team Inc.		United States		16,237		(271,320	)
	Communications Equipment (0.1)%
	CalAmp Corp.		United States		7,027		(124,378	)
	Infinera Corp.		United States		26,533		(114,357	)
	Palo Alto Networks Inc.		United States		1,618		(279,833	)
							(518,568	)
	Construction & Engineering (0.0)%†
	HC2 Holdings Inc.		United States		9,432		(29,805	)
	KBR Inc.		United States		13,662		(253,703	)
	Mirait Holdings Corp.		Japan		12,300		(180,304	)
							(463,812	)
	Construction Materials (0.1)%
	Cemex SAB de CV, ADR		Mexico		15,229		(78,277	)
	Martin Marietta Materials Inc.		United States		3,078		(586,944	)
							(665,221	)
	Consumer Finance (0.1)%
	Encore Capital Group Inc.		United States		17,236		(482,264	)
	Ezcorp Inc., A		United States		25,891		(246,482	)
	PRA Group Inc.		United States		9,614		(293,419	)
							(1,022,165	)
	Diversified Consumer Services (0.1)%
	Chegg Inc.		United States		19,647		(549,134	)
	Electric Utilities (0.0)%†
	The Chugoku Electric Power Co. Inc.		Japan		10,500		(132,643	)
	Kyushu Electric Power Co. Inc.		Japan		12,700		(149,136	)
							(281,779	)
	Electrical Equipment (0.0)%†
	Emerson Electric Co.		United States		1,006		(67,925	)

franklintempleton.com Semiannual Report 51

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

CONSOLIDATED STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin K2 Alternative Strategies Fund (continued)

		Country		Shares		Value
x	Securities Sold Short (continued)
	Electronic Equipment, Instruments & Components (0.1)%
	Knowles Corp.		United States		16,808	$	(256,154	)
	OSI Systems Inc.		United States		2,624		(189,978	)
	Vishay Intertechnology Inc.		United States		21,525		(448,796	)
							(894,928	)
	Energy Equipment & Services (0.2)%
	Fugro NV, IDR		Netherlands		24,280		(295,216	)
	SEACOR Holdings Inc.		United States		329		(13,667	)
	Transocean Ltd.		United States		256,514		(2,380,450	)
							(2,689,333	)
	Entertainment (0.2)%
	Electronic Arts Inc.		United States		2,570		(216,060	)
	iQIYI Inc., ADR		China		11,014		(223,694	)
	Live Nation Entertainment Inc.		United States		598		(33,296	)
	Sea Ltd., ADR		Thailand		19,770		(263,732	)
	Twenty-First Century Fox Inc., A		United States		31,203		(366,635	)
	The Walt Disney Co.		United States		17,375		(2,006,639	)
							(3,110,056	)
	Equity Real Estate Investment Trusts (REITs) (0.5)%
	Invitation Homes Inc.		United States		80,563		(1,728,888	)
	Pebblebrook Hotel Trust		United States		122,341		(4,272,148	)
							(6,001,036	)
	Food Products (0.2)%
	Mondelez International Inc., A		United States		38,270		(1,721,385	)
	Health Care Equipment & Supplies (0.1)%
	DexCom Inc.		United States		2,746		(355,854	)
	Insulet Corp.		United States		2,114		(177,428	)
	Nipro Corp.		Japan		15,100		(205,253	)
	Wright Medical Group NV		United States		6,789		(189,821	)
							(928,356	)
	Health Care Providers & Services (0.5)%
	Cigna Corp.		United States		17,892		(3,996,715	)
	CVS Health Corp.		United States		29,144		(2,337,349	)
							(6,334,064	)
	Health Care Technology (0.1)%
	Allscripts Healthcare Solutions Inc.		United States		8,266		(84,396	)
	Evolent Health Inc., A		United States		24,124		(619,987	)
							(704,383	)
	Hotels, Restaurants & Leisure (0.0)%†
	Choice Hotels International Inc.		United States		2,603		(202,696	)
	Huazhu Group Ltd., ADR		China		5,124		(161,611	)
							(364,307	)
	Independent Power & Renewable Electricity Producers (0.0)%†
	NRG Energy Inc.		United States		9,132		(350,943	)
	Industrial Conglomerates (0.1)%
	3M Co.		United States		2,810		(584,255	)

52 Semiannual Report franklintempleton.com

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

CONSOLIDATED STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin K2 Alternative Strategies Fund (continued)

		Country		Shares		Value
x	Securities Sold Short (continued)
	Interactive Media & Services (0.1)%
	CarGurus Inc., A		United States		23,471	$	(913,257	)
	Momo Inc., ADR		China		1,729		(54,204	)
	Zillow Group Inc., C		United States		5,832		(213,159	)
							(1,180,620	)
	Internet & Direct Marketing Retail (0.1)%
	Alibaba Group Holding Ltd., ADR		China		2,448		(393,785	)
	MercadoLibre Inc.		Argentina		1,221		(429,756	)
	Wayfair Inc., A		United States		3,380		(358,956	)
							(1,182,497	)
	IT Services (0.3)%
	Akamai Technologies Inc.		United States		3,687		(253,481	)
	Carbonite Inc.		United States		14,086		(399,056	)
	CSG Systems International Inc.		United States		2,806		(98,407	)
	GDS Holdings Ltd., ADR		China		8,308		(245,003	)
	International Business Machines Corp.		United States		966		(120,045	)
	MongoDB Inc., A		United States		5,547		(459,846	)
	Okta Inc., A		United States		11,482		(730,829	)
	Perficient Inc.		United States		7,063		(178,765	)
	Square Inc., A		United States		7,887		(550,828	)
	Twilio Inc., A		United States		6,997		(661,147	)
							(3,697,407	)
	Machinery (0.1)%
	AGCO Corp.		United States		6,943		(414,358	)
	Kennametal Inc.		United States		5,310		(222,064	)
	Navistar International Corp.		United States		133		(4,262	)
							(640,684	)
	Marine (0.1)%
	Kirby Corp.		United States		7,455		(569,115	)
	Metals & Mining (0.1)%
	AK Steel Holding Corp.		United States		6,168		(18,997	)
	Cleveland-Cliffs Inc.		United States		64,440		(598,003	)
	Endeavour Mining Corp.		Ivory Coast		5,010		(62,444	)
	First Majestic Silver Corp.		Canada		30,479		(146,299	)
							(825,743	)
	Mortgage Real Estate Investment Trusts (REITs) (0.0)%†
	Redwood Trust Inc.		United States		9,295		(155,134	)
	Oil, Gas & Consumable Fuels (0.8)%
	Chesapeake Energy Corp.		United States		138,749		(405,147	)
	Diamondback Energy Inc.		United States		70,283		(7,757,837	)
	Golar LNG Ltd.		Bermuda		6,110		(162,770	)
	Green Plains Inc.		United States		41,307		(671,239	)
	Teekay Corp.		Bermuda		16,187		(71,385	)
							(9,068,378	)
	Paper & Forest Products (0.0)%†
	Domtar Corp.		United States		5,307		(231,279	)
	Louisiana-Pacific Corp.		United States		10,026		(229,194	)
							(460,473	)

franklintempleton.com Semiannual Report 53

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

CONSOLIDATED STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin K2 Alternative Strategies Fund (continued)

		Country		Shares		Value
x	Securities Sold Short (continued)
	Personal Products (0.0)%†
	Herbalife Nutrition Ltd.		United States		5,896	$	(337,546	)
	Pharmaceuticals (0.6)%†
	Canopy Growth Corp.		Canada		13,749		(467,217	)
	Endocyte Inc.		United States		17,037		(402,584	)
	Innoviva Inc.		United States		25,308		(462,124	)
	The Medicines Co.		United States		8,237		(182,285	)
	Pacira Pharmaceuticals Inc.		United States		4,478		(216,422	)
	Takeda Pharmaceutical Co. Ltd.		Japan		104,715		(3,925,140	)
	Tilray Inc.		Canada		9,900		(1,014,255	)
							(6,670,027	)
	Professional Services (0.0)%†
	FTI Consulting Inc.		United States		901		(63,295	)
	Road & Rail (0.0)%†
	Genesee & Wyoming Inc., A		United States		5,426		(451,877	)
	Schneider National Inc., B		United States		2,087		(46,603	)
							(498,480	)
	Semiconductors & Semiconductor Equipment (0.2)%
	Advanced Micro Devices Inc.		United States		25,701		(547,431	)
	Cree Inc.		United States		5,731		(252,966	)
	Inphi Corp.		United States		4,574		(182,457	)
	Microchip Technology Inc.		United States		10,304		(772,800	)
	ON Semiconductor Corp.		United States		17,877		(342,881	)
	Synaptics Inc.		United States		1,202		(46,229	)
							(2,144,764	)
	Software (0.5)%
	Alteryx Inc., A		United States		10,266		(617,808	)
	Atlassian Corp. PLC, A		Austrailia		6,375		(547,868	)
	Avaya Holdings Corp.		United States		11,042		(171,924	)
	Docusign Inc., A		United States		3,005		(125,489	)
	Envestnet Inc.		United States		2,895		(158,183	)
	Everbridge Inc.		United States		6,908		(378,351	)
	Five9 Inc.		United States		8,516		(365,166	)
	HubSpot Inc.		United States		3,637		(505,652	)
	MINDBODY Inc., A		United States		4,872		(135,247	)
	Nice Ltd., ADR		Israel		2,086		(242,268	)
	Nutanix Inc., A		United States		4,530		(202,536	)
	PROS Holdings Inc.		United States		4,459		(143,446	)
	Rapid7 Inc.		United States		10,558		(335,744	)
	ServiceNow Inc.		United States		3,612		(669,195	)
	Splunk Inc.		United States		2,537		(283,459	)
	VMware Inc., A		United States		8,516		(1,425,067	)
							(6,307,403	)
	Technology Hardware, Storage & Peripherals (0.0)%†
	Electronics for Imaging Inc.		United States		6,282		(173,886	)
	Textiles, Apparel & Luxury Goods (0.0)%†
	Under Armour Inc., C		United States		6,918		(154,479	)
	Trading Companies & Distributors (0.0)%†
	Fastenal Co.		United States		2,519		(149,276	)

54 Semiannual Report franklintempleton.com

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

CONSOLIDATED STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin K2 Alternative Strategies Fund (continued)

		Country		Shares		Value
x	Securities Sold Short (continued)
	Wireless Telecommunication Services (0.2)%
	Boingo Wireless Inc.		United States		6,196	$	(155,148	)
	NII Holdings Inc.		United States		92,053		(498,006	)
	Sprint Corp.		United States		182,253		(1,144,549	)
							(1,797,703	)
	Total Common Stocks (Proceeds $76,433,126)						(72,049,772	)
	Exchange Traded Funds (15.9)%
	Consumer Discretionary Select Sector SPDR Fund		United States		7,828		(845,346	)
	ETFMG Prime Cyber Security ETF		United States		83,614		(3,056,928	)
	Health Care Select Sector SPDR Fund		United States		301,657		(28,919,856	)
	Invesco QQQ Trust Series 1		United States		28,265		(4,787,243	)
	iShares Core S&P Small-Cap ETF		United States		47,335		(3,753,666	)
	iShares Edge MSCI USA Momentum Factor ETF		United States		37,701		(4,101,492	)
	iShares MSCI Taiwan ETF		Taiwan		38,734		(1,289,842	)
	iShares NASDAQ Biotechnology ETF		United States		185,081		(20,192,337	)
	iShares North American Tech ETF		United States		31,741		(5,939,693	)
	iShares North American Tech-Multimedia Networking ETF		United States		123,735		(6,338,944	)
	iShares North American Tech-Software ETF		United States		20,399		(3,787,074	)
	iShares PHLX Semiconductor ETF		United States		28,109		(4,729,339	)
	iShares Russell 2000 Growth ETF		United States		24,363		(4,647,486	)
	iShares Russell Mid-Cap Growth ETF		United States		13,049		(1,634,126	)
	iShares S&P Small-Cap 600 Growth ETF		United States		11,110		(2,044,906	)
	iShares STOXX Europe 600 UCITS ETF		Germany		21,428		(857,790	)
	iShares U.S. Technology ETF		United States		15,705		(2,732,513	)
	SPDR S&P 500 ETF Trust		United States		298,344		(82,238,524	)
	SPDR S&P MidCap 400 ETF Trust		United States		6,532		(2,238,778	)
	Vanguard Small-Cap Growth ETF		United States		27,392		(4,633,905	)
	Total Exchange Traded Funds (Proceeds $186,947,889)						(188,769,788	)
				Principal Amount*
	Corporate Bonds and Notes (0.7)%
	Chemicals (0.2)%
d	CVR Partners LP / CVR Nitrogen Finance Corp., senior note, 144A, 9.25%, 6/15/23		United States		2,132,000		(2,247,234	)
	Olin Corp., senior bond, 5.125%, 9/15/27		United States		575,000		(542,829	)
							(2,790,063	)
	Electric Utilities (0.0)%†
	Talen Energy Supply LLC, senior note, 6.50%, 6/01/25		United States		178,000		(130,162	)
	Food Products (0.1)%
d	TreeHouse Foods Inc., senior note, 144A, 6.00%, 2/15/24		United States		1,252,000		(1,242,610	)
	Internet Software & Services (0.3)%
d	GTT Communications Inc., senior note, 144A, 7.875%, 12/31/24		United States		3,059,000		(2,821,928	)
	Media (0.1)%
d	MDC Partners Inc., senior note, 144A, 6.50%, 5/01/24		United States		1,662,000		(1,421,010	)
	Total Corporate Bonds and Notes (Proceeds $8,615,151)						(8,405,773	)
	U.S. Government and Agency Securities (Proceeds $1,124,971) (0.1)%
	U.S. Treasury Note, 3.125%, 11/15/28		United States		1,128,000		(1,139,545	)
	Total Securities Sold Short (Proceeds $273,121,137)					$	(270,364,878	)

franklintempleton.com Semiannual Report 55

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

CONSOLIDATED STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin K2 Alternative Strategies Fund (continued)

*The principal amount is stated in U.S. dollars unless otherwise indicated.

^#Notional amount is the number of units specified in the contract, and can include currency units, bushels, shares, pounds, barrels or other units. Currency units are stated in U.S. dollars unless otherwise indicated.

^†Rounds to less than 0.1% of net assets.

^aNon-income producing.

^bA portion or all of the security has been segregated as collateral for securities sold short, open swap contracts, open forward exchange contracts, open futures contracts and open written option contracts. At November 30, 2018, the aggregate value of these securities and/or cash pledged amounted to $223,615,771, representing 18.8% of net assets.

^cA portion or all of the security is held in connection with written option contracts open at period end.

^dSecurity was purchased pursuant to Rule 144A under the Securities Act of 1933 and may be sold in transactions exempt from registration only to qualified institutional buyers or in public offering registered under the Securities Act of 1933. These securities have been deemed liquid under guidelines approved by the Trust’s Board of Trustees. At November 30, 2018, the net value of these securities was $146,890,454, representing 12.4% of net assets.

^eA portion or all of the security is on loan at November 30, 2018. See Note 1(g).

^fFair valued using significant unobservable inputs. See Note 11 regarding fair value measurements.

^gContingent distributions represent the right to receive additional distributions, if any, during the reorganization of the underlying company.

^hSecurity was purchased pursuant to Regulation S under the Securities Act of 1933, which exempts from registration securities offered and sold outside of the United States. Such a security cannot be sold in the United States without either an effective registration statement filed pursuant to the Securities Act of 1933, or pursuant to an exemption from registration. These securities have been deemed liquid under guidelines approved by the Trust’s Board of Trustees. At November 30, 2018, the aggregate value of these securities was $16,525,644, representing 1.4% of net assets.

ⁱThe coupon rate shown represents the rate at period end.

^jSee Note 1(e) regarding loan participation notes.

^kIncome may be received in additional securities and/or cash.

^lSee Note 7 regarding defaulted securities.

^mSee Note 1(i) regarding senior floating rate interests.

ⁿSee Note 8 regarding unfunded loan commitments.

^oThe coupon rate shown represents the rate inclusive of any caps or floors, if applicable, in effect at period end.

^pAdjustable rate security with an interest rate that is not based on a published reference index and spread. The rate is based on the structure of the agreement and current market conditions. The coupon rate shown represents the rate at period end.

^qSee Note 1(g) regarding securities on loan.

^rSee Note 3(f) regarding investments in affiliated management investment companies.

^sThe rate shown is the annualized seven-day yield at period end.

^tA portion or all of the security is owned by K2 Holdings Investment Corp., a wholly-owned subsidiary of the Fund. See Note 1(h).

^uSee Note 1(c) regarding joint repurchase agreement.

^vThe security was issued on a discount basis with no stated coupon rate.

^wSee Note 1(d) regarding written options.

^xSee Note 1(f) regarding securities sold short.

56 Semiannual Report franklintempleton.com

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

CONSOLIDATED STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin K2 Alternative Strategies Fund (continued)

At November 30, 2018, the Fund had the following futures contracts outstanding. See Note 1(d).

Futures Contracts
Description	Type		Number of Contracts		Notional Amount*		Expiration Date		Value/Unrealized Appreciation (Depreciation)
Commodity Contractsa
Aluminum		Long		58	$	2,851,788		12/17/18	$	(111,762	)
Aluminum		Short		58		2,851,788		12/17/18		130,363
Aluminum		Long		1		49,106		3/18/19		(3	)
Aluminum		Short		45		2,209,781		3/18/19		13,713
Brent Crude Oil		Short		8		475,680		12/28/18		16,698
Cocoa		Short		11		227,070		3/14/19		12,336
Coffee		Short		9		362,981		3/19/19		44,562
Copper		Long		19		2,957,825		12/17/18		10,657
Copper		Short		19		2,957,825		12/17/18		(49,780	)
Copper		Long		13		2,013,863		3/18/19		(4,138	)
Copper		Short		13		2,013,863		3/18/19		(2,150	)
Corn		Short		43		812,162		3/14/19		9,133
Cotton No.2		Short		22		868,010		3/07/19		(2,092	)
Gasoline RBOB		Short		10		588,798		12/31/18		27,110
Gold 100 Oz		Short		6		735,600		2/26/19		4,616
Hard Red Winter Wheat		Short		25		625,312		3/14/19		33,157
Natural Gas		Long		23		1,060,760		12/27/18		243,799
Silver		Short		48		3,412,080		3/27/19		69,518
Soybean		Short		18		816,750		3/14/19		(19,449	)
Soybean Meal		Short		17		532,440		3/14/19		1,164
Sugar		Short		9		129,427		2/28/19		(216	)
Wheat		Short		36		928,350		3/14/19		(5,334	)
Zinc		Long		40		2,595,000		12/17/18		101,328
Zinc		Short		40		2,595,000		12/17/18		(6,405	)
Zinc		Long		1		63,375		3/18/19		(590	)
Zinc		Short		30		1,901,250		3/18/19		(53,470	)
										462,765
Equity Contracts
CAC 40 10 Euro Index		Long		28		1,581,778		12/21/18		(26,302	)
CAC 40 10 Euro Indexa		Short		10		564,921		12/21/18		(877	)
CME E-Mini Russell 2000 Indexa		Long		10		767,300		12/21/18		19,465
CME E-Mini Russell 2000 Index		Short		76		5,831,480		12/21/18		667,946
DAX Index		Long		6		1,910,088		12/21/18		(135,832	)
DAX Indexa		Short		21		6,685,309		12/21/18		308,815
DJ EURO STOXX 50 Index		Long		56		2,005,276		12/21/18		(112,639	)
DJ EURO STOXX 50 Indexa		Short		444		15,898,970		12/21/18		645,573
DJIA Mini E-CBOT Indexa		Long		6		766,170		12/21/18		19,688
FTSE 100 Index		Long		70		6,216,137		12/21/18		(266,548	)
FTSE 100 Indexa		Short		176		15,629,145		12/21/18		564,000
FTSE/JSE Top 40 Index		Short		19		615,458		12/20/18		77,016
FTSE/MIB Index		Short		2		217,070		12/21/18		3,908
Hang Seng Index		Long		22		3,730,074		12/28/18		13,890
Hang Seng Indexa		Short		18		3,051,879		12/28/18		(19,589	)
JPX-Nikkei 400 Index		Long		23		298,859		12/13/18		(7,418	)
MSCI Emerging Market Index		Long		103		5,147,940		12/21/18		(108,138	)
MSCI Taiwan Index		Short		6		218,100		12/27/18		(2,144	)
NASDAQ 100 E-Mini Indexa		Long		12		1,667,880		12/21/18		40,602
NASDAQ 100 E-Mini Index		Short		1		138,990		12/21/18		13,403
Nikkei 225 Indexa		Long		9		1,673,677		12/13/18		8,876
S&P 500 E-Mini Indexa		Long		4		551,660		12/21/18		10,715
S&P 500 E-Mini Index		Short		399		55,028,085		12/21/18		2,968,486
SGX MSCI Singapore Index		Long		23		584,347		12/28/18		4,863
SPI 200 Index		Long		14		1,451,490		12/20/18		(120,598	)

franklintempleton.com Semiannual Report 57

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

CONSOLIDATED STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin K2 Alternative Strategies Fund (continued)

Futures Contracts (continued)
Description	Type		Number of Contracts		Notional Amount*		Expiration Date		Value/Unrealized Appreciation (Depreciation)
Equity Contracts (continued)
STOXX 600 Banks Index		Long		577	$	4,673,823		12/21/18	$	(436,064	)
STOXX 600 Banks Index		Short		185		1,498,540		12/21/18		136,882
TOPIX Index		Long		13		1,910,232		12/13/18		(46,976	)
TOPIX Indexa		Short		7		1,028,586		12/13/18		(13,514	)
Yen Denominated Nikkei 225 Index		Short		7		691,274		12/13/18		58,309
										4,265,798
Interest Rate Contracts
3 Month EURIBORa		Long		312		88,494,073		12/16/19		134,669
10 Yr. Japanese Government Bond		Short		7		9,322,028		12/13/18		(54,140	)
90 Day Eurodollara		Short		624		151,281,000		12/16/19		112,490
90 Day Sterlinga		Short		164		25,824,180		12/18/19		7,216
90 Day Sterlinga		Short		44		6,922,832		6/17/20		419
Australian 10 Yr. Bond		Long		20		1,898,957		12/17/18		7,398
Australian 10 Yr. Bonda		Short		26		2,468,644		12/17/18		(33,086	)
Canadian 10 Yr. Bond		Long		10		1,003,199		3/20/19		5,477
Euro BUXL 30 Yr. Bond		Long		2		404,388		12/06/18		5,836
Euro BUXL 30 Yr. Bond		Short		3		606,582		12/06/18		(7,507	)
Euro-BTP		Long		40		5,640,602		12/06/18		160,872
Euro-BTP		Short		2		282,030		12/06/18		(4,640	)
Euro-BTP		Long		56		7,768,779		3/07/19		48,363
Euro-Bund		Short		7		1,280,162		12/06/18		(14,450	)
Euro-SCHATZ		Short		146		18,513,013		12/06/18		(8,638	)
Euro-SCHATZ		Short		140		17,735,563		3/07/19		(2,888	)
Long Gilt		Short		9		1,406,458		3/27/19		(5,153	)
U.S. Treasury 5 Yr. Note		Short		139		15,701,570		3/29/19		(17,410	)
U.S. Treasury 10 Yr. Note		Short		12		1,433,437		3/20/19		(3,224	)
U.S. Treasury Long Bond		Long		4		559,625		3/20/19		2,411
U.S. Treasury Long Bonda		Short		161		22,524,906		3/20/19		(85,098	)
U.S. Treasury Ultra 10 Yr. Bond		Short		17		2,150,500		3/20/19		(192	)
U.S. Treasury Ultra Bond		Long		3		457,219		3/20/19		1,867
U.S. Treasury Ultra Bond		Short		7		1,066,844		3/20/19		(1	)
										250,591
Total Futures Contracts									$	4,979,154

*As of period end.

^aA portion or all of the contracts are owned by K2 Holdings Investment Corp., a wholly-owned subsidiary of the Fund. See Note 1(h).

At November 30, 2018, the Fund had the following forward exchange contracts outstanding. See Note 1(d).

Forward Exchange Contracts
Currency	Counterpartya		Type		Quantity		Contract Amount*		Settlement Date			Unrealized Appreciation		Unrealized Depreciation
OTC Forward Exchange Contracts
British Pound		JPHQ		Sell		178,070		227,062			12/03/18	$	111	$	—
Euro		JPHQ		Sell		200,000		178,070		GBP	12/03/18		1,151		(695	)
Euro		DBAB		Buy		40,000		45,756			12/03/18		—		(457	)
Euro		DBAB		Sell		40,000		45,557			12/03/18		258		—
Euro		JPHQ		Buy		200,000		226,435			12/03/18		60		—
Malaysian Ringgit		MSCS		Buy		190,000		45,357			12/03/18		47		—
Malaysian Ringgit		MSCS		Sell		190,000		45,411			12/03/18		7		—
Mexican Peso		DBAB		Buy		895,000		44,274			12/03/18		—		(322	)
Mexican Peso		DBAB		Sell		895,000		44,418			12/03/18		466		—
South African Rand		JPHQ		Buy		4,093,619		295,478			12/03/18		—		(206	)
South African Rand		JPHQ		Sell		4,093,619		300,000			12/03/18		4,728		—

58 Semiannual Report franklintempleton.com

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

CONSOLIDATED STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin K2 Alternative Strategies Fund (continued)

Forward Exchange Contracts (continued)
Currency	Counterpartya		Type		Quantity		Contract Amount*		Settlement Date			Unrealized Appreciation		Unrealized Depreciation
OTC Forward Exchange Contracts (continued)
Brazilian Real		JPHQ		Buy		10,223,671		2,740,673			12/04/18	$	—	$	(97,394	)
Brazilian Real		JPHQ		Sell		10,223,671		2,645,193			12/04/18		1,914		—
Euro		JPHQ		Sell		400,000		356,212		GBP	12/04/18		984		—
Euro		JPHQ		Sell		200,000		1,948,068		NOK	12/04/18		184		—
Mexican Peso		JPHQ		Buy		10,177,728		500,000			12/04/18		—		(268	)
Indian Rupee		JPHQ		Buy		29,333,200		400,000			12/05/18		20,631		—
Indian Rupee		JPHQ		Sell		29,333,200		414,428			12/05/18		—		(6,203	)
Indonesian Rupiah		JPHQ		Buy		4,537,950,000		300,000			12/05/18		17,053		—
Indonesian Rupiah		JPHQ		Sell		4,537,950,000		310,287			12/05/18		—		(6,766	)
Philippine Peso		JPHQ		Buy		10,940,460		203,021			12/05/18		5,629		(8	)
Philippine Peso		JPHQ		Sell		10,940,460		200,000			12/05/18		—		(8,642	)
Hungarian Forint		MSCS		Sell		6,310,000		22,311			12/06/18		225		—
Canadian Dollar		BOFA		Buy		1,482,659		1,131,809			12/07/18		—		(15,652	)
Canadian Dollar		UBSW		Buy		232,737		177,423			12/07/18		—		(2,217	)
Colombian Peso		JPHQ		Buy		3,224,721,207		995,838			12/07/18		862		—
Colombian Peso		JPHQ		Sell		3,224,721,207		1,039,892			12/07/18		43,192		—
South Korean Won		JPHQ		Buy		1,508,400,764		1,346,185			12/07/18		—		(191	)
South Korean Won		JPHQ		Sell		1,508,400,764		1,342,890			12/07/18		—		(3,104	)
Brazilian Real		HSBC		Sell		145,000		38,618			12/10/18		1,141		—
Chilean Peso		DBAB		Buy		35,945,000		53,315			12/10/18		206		—
Chilean Peso		DBAB		Sell		35,945,000		52,899			12/10/18		—		(622	)
Chinese Yuan		BOFA		Buy		415,000		59,988			12/10/18		—		(223	)
Japanese Yen		DBAB		Sell		3,335,000		29,497			12/10/18		85		—
Peruvian Nuevo Sol		MSCS		Buy		195,000		57,793			12/10/18		—		(141	)
Philippine Peso		MSCS		Buy		3,255,000		61,336			12/10/18		719		—
Russian Ruble		MSCS		Sell		2,495,000		37,626			12/10/18		438		—
Singapore Dollar		GSCO		Sell		55,000		40,044			12/10/18		—		(54	)
Swedish Krona		GSCO		Sell		205,000		22,825			12/10/18		281		—
Thai Baht		HSBC		Sell		1,245,000		37,787			12/11/18		—		(87	)
British Pound		BNYM		Sell		2,075,591		2,661,510			12/14/18		14,214		—
Euro		BNYM		Sell		16,131,408		18,279,588			12/14/18		3,900		(14,546	)
Hong Kong Dollar		BNYM		Sell		15,506,000		1,982,155			12/14/18		—		(512	)
Swiss Franc		BNYM		Sell		379,093		377,696			12/14/18		—		(2,426	)
New Zealand Dollar		MSCS		Sell		70,000		47,338			12/17/18		—		(793	)
Taiwan Dollar		JPHQ		Sell		65,156,579		2,134,602			12/18/18		15,927		—
British Pound		BNYM		Buy		231,185		294,895			12/19/18		67		—
British Pound		BNYM		Sell		738,596		972,481			12/19/18		30,128		—
Canadian Dollar		BNYM		Sell		1,938,000		1,478,644			12/19/18		19,158		—
Canadian Dollar		HSBC		Buy		65,000		49,167			12/19/18		—		(216	)
Chinese Yuan		JPHQ		Sell		14,098,239		2,037,719			12/19/18		10,579		—
Colombian Peso		JPHQ		Buy		7,132,830,400		2,219,677			12/19/18		—		(16,688	)
Euro		BNYM		Buy		2,836,938		3,251,450			12/19/18		—		(33,107	)
Euro		BNYM		Sell		7,650,412		8,963,889			12/19/18		284,934		—
Euro		JPHQ		Buy		3,314,382		3,780,633			12/19/18		10,085		(30,742	)
Euro		JPHQ		Sell		3,314,382		3,862,591			12/19/18		102,616		—
Indian Rupee		JPHQ		Buy		190,480,761		2,650,885			12/19/18		76,830		(779	)
Indian Rupee		JPHQ		Sell		250,547,129		3,419,714			12/19/18		—		(167,138	)
Japanese Yen		BNYM		Buy		80,220,000		714,655			12/19/18		—		(6,476	)
Japanese Yen		BNYM		Sell		256,966,000		2,318,623			12/19/18		50,136		—
Mexican Peso		JPHQ		Buy		27,656,194		1,410,311			12/19/18		—		(55,528	)
Mexican Peso		JPHQ		Sell		27,656,194		1,449,711			12/19/18		94,928		—
Russian Ruble		JPHQ		Buy		49,208,821		696,477			12/19/18		36,061		—
Russian Ruble		JPHQ		Sell		23,111,954		344,633			12/19/18		581		—
South African Rand		JPHQ		Buy		1,351,641		88,871			12/19/18		8,431		—
South African Rand		JPHQ		Sell		91,008,408		5,976,805			12/19/18		204		(574,892	)
Swiss Franc		BNYM		Sell		1,111,861		1,155,979			12/19/18		40,398		—
Turkish Lira		JPHQ		Buy		3,760,556		559,774			12/19/18		153,459		—
Turkish Lira		JPHQ		Sell		3,760,556		574,530			12/19/18		—		(138,703	)

franklintempleton.com Semiannual Report 59

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

CONSOLIDATED STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin K2 Alternative Strategies Fund (continued)

Forward Exchange Contracts (continued)
Currency	Counterpartya		Type		Quantity		Contract Amount*		Settlement Date		Unrealized Appreciation		Unrealized Depreciation
OTC Forward Exchange Contracts (continued)
British Pound		DBAB		Buy		4,175,000		5,500,599		12/20/18	$	1	$	(173,480	)
British Pound		DBAB		Sell		4,477,000		5,794,426		12/20/18		81,989		(23	)
Canadian Dollar		DBAB		Sell		8,381,000		6,460,772		12/20/18		148,937		—
Euro		DBAB		Buy		2,904,000		3,374,910		12/20/18		40		(80,171	)
Euro		DBAB		Sell		4,676,000		5,447,284		12/20/18		142,089		(36	)
Japanese Yen		DBAB		Buy		355,217,000		3,145,969		12/20/18		2,908		(12,686	)
Japanese Yen		DBAB		Sell		406,929,000		3,631,677		12/20/18		39,558		(636	)
Swiss Franc		DBAB		Buy		79,000		79,774		12/20/18		—		(501	)
Swiss Franc		DBAB		Sell		5,321,000		5,333,879		12/20/18		9,867		(15,462	)
Australian Dollar		JPHQ		Sell		6,252,486		4,520,129		12/21/18		—		(51,508	)
Australian Dollarb		MSCO		Buy		9,154,000		6,570,264		12/21/18		122,984		(110	)
Australian Dollarb		MSCO		Sell		16,786,000		11,968,125		12/21/18		—		(305,313	)
British Pound		JPHQ		Buy		356,132		456,365		12/21/18		—		(1,926	)
British Pound		JPHQ		Sell		718,981		932,999		12/21/18		15,549		—
British Poundb		MSCO		Buy		7,524,000		9,753,829		12/21/18		—		(152,889	)
British Poundb		MSCO		Sell		11,998,000		15,646,851		12/21/18		337,040		(140	)
Canadian Dollar		JPHQ		Buy		487,521		367,064		12/21/18		175		(70	)
Canadian Dollar		JPHQ		Sell		4,125,270		3,122,412		12/21/18		15,523		—
Canadian Dollarb		MSCO		Buy		10,122,000		7,777,697		12/21/18		—		(154,454	)
Canadian Dollarb		MSCO		Sell		14,300,000		10,908,697		12/21/18		138,854		—
Euro		JPHQ		Buy		1,523,787		1,733,152		12/21/18		3,719		(7,847	)
Euro		JPHQ		Sell		400,000		455,159		12/21/18		1,475		(192	)
Eurob		MSCO		Buy		9,845,000		11,386,963		12/21/18		3,782		(219,734	)
Eurob		MSCO		Sell		17,018,000		19,750,424		12/21/18		441,730		(1,441	)
Hong Kong Dollar		JPHQ		Sell		13,968,075		1,786,441		12/21/18		52		—
Japanese Yen		JPHQ		Sell		1,980,342		17,426		12/21/18		—		(60	)
Japanese Yenb		MSCO		Buy		3,477,093,000		30,975,020		12/21/18		21,720		(294,288	)
Japanese Yenb		MSCO		Sell		5,546,510,000		49,550,504		12/21/18		582,546		(7,278	)
Mexican Peso		JPHQ		Buy		113,634,607		5,500,586		12/21/18		64,258		—
Mexican Pesob		MSCO		Buy		55,244,000		2,824,040		12/21/18		855		(119,520	)
Mexican Pesob		MSCO		Sell		14,755,000		762,610		12/21/18		40,038		—
New Zealand Dollar		JPHQ		Sell		3,918,002		2,647,541		12/21/18		—		(46,622	)
New Zealand Dollarb		MSCO		Buy		3,804,000		2,515,295		12/21/18		100,476		—
New Zealand Dollarb		MSCO		Sell		11,271,000		7,402,531		12/21/18		159		(347,983	)
Norwegian Krone		JPHQ		Buy		14,997,589		1,769,036		12/21/18		—		(22,148	)
Russian Ruble		JPHQ		Buy		1,283,468		18,832		12/21/18		269		—
Singapore Dollar		JPHQ		Sell		746,970		541,270		12/21/18		—		(3,420	)
South African Rand		JPHQ		Sell		8,218,108		589,932		12/21/18		229		(1,754	)
Swedish Krona		JPHQ		Buy		8,944,814		988,577		12/21/18		—		(3,644	)
Swedish Krona		JPHQ		Sell		2,053,633		227,146		12/21/18		1,016		—
Swiss Franc		JPHQ		Sell		3,828,467		3,804,442		12/21/18		—		(37,800	)
Swiss Francb		MSCO		Buy		7,518,000		7,658,412		12/21/18		4,508		(117,870	)
Swiss Francb		MSCO		Sell		15,772,000		16,199,278		12/21/18		388,573		(18,038	)
Turkish Lira		JPHQ		Buy		3,422,262		615,831		12/21/18		32,473		—
British Pound		MSCS		Sell		100,000		128,088		12/24/18		458		—
British Pound		BNYM		Sell		657,000		868,028		12/28/18		29,274		—
British Pound		MSCO		Buy		58,006		74,481		12/28/18		—		(428	)
British Pound		MSCO		Sell		20,704		26,613		12/28/18		181		—
Canadian Dollar		MSCO		Buy		2,083,183		1,586,300		12/28/18		—		(17,037	)
Canadian Dollar		MSCO		Sell		4,489,912		3,418,040		12/28/18		35,817		(27	)
Colombian Peso		MSCS		Sell		780,000,000		240,444		12/28/18		—		(326	)
Danish Krone		MSCO		Buy		1,810,254		279,619		12/28/18		—		(4,147	)
Danish Krone		MSCO		Sell		1,810,254		277,085		12/28/18		1,613		—
Euro		BNYM		Buy		1,490,000		1,721,486		12/28/18		—		(29,517	)
Euro		BNYM		Sell		4,241,000		5,011,166		12/28/18		195,300		—
Euro		MSCO		Buy		1,009,660		1,152,672		12/28/18		195		(6,348	)
Euro		MSCO		Sell		81,743		93,266		12/28/18		443		—
Hungarian Forint		UBSW		Sell		534,910,000		1,863,733		12/28/18		—		(13,054	)

60 Semiannual Report franklintempleton.com

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

CONSOLIDATED STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin K2 Alternative Strategies Fund (continued)

Forward Exchange Contracts (continued)
Currency	Counterpartya		Type		Quantity		Contract Amount*		Settlement Date		Unrealized Appreciation		Unrealized Depreciation
OTC Forward Exchange Contracts (continued)
Japanese Yen		MSCO		Buy		84,046,248		750,739		12/28/18	$	—	$	(8,043	)
Japanese Yen		MSCO		Sell		30,469,837		271,330		12/28/18		2,075		—
Swedish Krona		MSCO		Buy		4,563,009		503,913		12/28/18		—		(1,065	)
Swiss Franc		MSCO		Buy		139,838		140,756		12/28/18		—		(292	)
Swiss Franc		MSCO		Sell		139,838		140,560		12/28/18		95		—
Taiwan Dollar		MSCS		Sell		1,400,000		45,396		12/28/18		—		(167	)
Turkish Lira		MSCO		Buy		2,167,891		385,444		12/28/18		23,535		—
Turkish Lira		MSCO		Sell		876,132		150,455		12/28/18		—		(14,830	)
British Pound		DBAB		Sell		481,000		615,242		12/31/18		1,065		—
Euro		DBAB		Sell		183,000		206,874		12/31/18		—		(994	)
South African Rand		MSCS		Sell		30,985,000		2,212,977		12/31/18		—		(14,259	)
Brazilian Real		JPHQ		Buy		10,223,671		2,641,025		1/03/19		—		(2,003	)
Mexican Peso		DBAB		Sell		895,000		44,063		1/03/19		324		—
Indian Rupee		JPHQ		Sell		26,574,850		354,667		1/09/19		—		(24,875	)
Brazilian Real		JPHQ		Sell		1,127,888		301,257		1/11/19		10,273		—
British Pound		JPHQ		Buy		48,316		62,164		1/16/19		—		(422	)
British Pound		MSCO		Sell		1,915,644		2,492,451		1/16/19		44,494		—
South Korean Won		JPHQ		Sell		860,509,310		761,813		1/17/19		—		(7,323	)
Japanese Yen		DBAB		Buy		306,230,488		2,703,020		1/22/19		8,755		—
Japanese Yen		MSCO		Sell		10,629,275		93,825		1/22/19		—		(301	)
Swiss Franc		UBSW		Buy		123,815		125,450		1/23/19		—		(764	)
Swiss Franc		UBSW		Sell		2,375,922		2,404,658		1/23/19		12,028		—
Brazilian Real		JPHQ		Sell		3,743,814		1,012,538		1/25/19		47,577		—
Chilean Peso		JPHQ		Sell		256,493,611		377,668		1/25/19		—		(4,430	)
Peruvian Nuevo Sol		JPHQ		Sell		270,749		80,853		1/25/19		937		—
South Korean Won		JPHQ		Sell		1,508,400,764		1,349,437		2/07/19		31		—
New Zealand Dollar		DBAB		Sell		2,083,067		1,401,038		2/14/19		—		(32,706	)
New Zealand Dollar		JPHQ		Buy		112,070		76,824		2/14/19		312		—
Australian Dollar		JPHQ		Buy		180,028		131,908		2/19/19		—		(141	)
Australian Dollar		MSCO		Buy		146,605		107,613		2/19/19		—		(309	)
Australian Dollar		MSCO		Sell		6,712,045		4,845,459		2/19/19		—		(67,263	)
Euro		MSCO		Buy		116,654		133,807		2/19/19		—		(754	)
Euro		MSCO		Sell		5,505,051		6,265,078		2/19/19		—		(13,873	)
Swiss Franc		MSCO		Sell		3,000,000		3,046,830		2/25/19		16,889		—
Colombian Peso		JPHQ		Sell		3,224,721,207		992,527		2/28/19		—		(612	)
Euro		JPHQ		Sell		2,388,113		2,721,625		3/20/19		—		(9,111	)
Indian Rupee		JPHQ		Sell		50,915,148		722,098		3/20/19		472		—
British Pound		MSCO		Buy		120,000		157,119		3/29/19		—		(3,242	)
British Pound		MSCO		Sell		211,000		279,574		3/29/19		9,007		—
Mexican Peso		MSCO		Buy		37,863,000		1,850,758		3/29/19		—		(25,281	)
Mexican Peso		MSCO		Sell		37,863,000		1,914,496		3/29/19		89,019		—
Total Forward Exchange Contracts											$	4,326,569	$	(3,688,786	)
Net unrealized appreciation (depreciation)											$	637,783

*In U.S. dollars unless otherwise indicated.

^aMay be comprised of multiple contracts with the same counterparty, currency and settlement date.

^bA portion or all of the contracts are owned by K2 Holdings Investment Corp., a wholly-owned subsidiary of the Fund. See Note 1(h).

franklintempleton.com Semiannual Report 61

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

CONSOLIDATED STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin K2 Alternative Strategies Fund (continued)

At November 30, 2018, the Fund had the following credit default swap contracts outstanding. See Note 1(d).

Credit Default Swap Contracts
Description	Periodic Payment Rate Received (Paid)			Payment Frequency			Maturity Date		Notional Amounta			Value			Unamortized Upfront Payments (Receipts)			Unrealized Appreciation (Depreciation)			Ratingb
Centrally Cleared Swap Contracts
Contracts to Buy Protectionc
Single Name
Government of Mexico		(1.00	%)		Quarterly			6/20/23		1,744,000		$	27,314		$	3,310		$	24,004
Government of Mexico		(1.00	%)		Quarterly			12/20/23		866,000			17,690			14,756			2,934
Government of South Africa		(1.00	%)		Quarterly			12/20/21		2,644,000			65,094			181,272			(116,178	)
Government of South Africa		(1.00	%)		Quarterly			6/20/22		1,495,000			47,826			77,628			(29,802	)
Government of South Korea		(1.00	%)		Quarterly			12/20/21		1,947,567			(43,560	)		(56,447	)		12,887
Government of South Korea		(1.00	%)		Quarterly			12/20/22		164,487			(4,311	)		(3,929	)		(382	)
Government of Turkey		(1.00	%)		Quarterly			9/20/20		1,976,000			78,154			157,717			(79,563	)
Government of Turkey		(1.00	%)		Quarterly			12/20/20		1,723,000			77,849			104,521			(26,672	)
Government of Turkey		(1.00	%)		Quarterly			12/20/21		429,000			29,789			26,235			3,554
Government of Turkey		(1.00	%)		Quarterly			6/20/23		294,000			31,831			42,891			(11,060	)
Contracts to Sell Protectionc,d
Single Name
Government of Russia		1.00	%		Quarterly			9/20/20		2,800,131			(9,346	)		(339,144	)		329,798			BB+
Government of Russia		1.00	%		Quarterly			6/20/21		413,000			(2,853	)		(30,563	)		27,710			BB+
Government of Russia		1.00	%		Quarterly			12/20/21		374,000			(3,595	)		(13,889	)		10,294			BB+
Government of South Africa		1.00	%		Quarterly			12/20/22		874,000			(34,225	)		(17,002	)		(17,223	)		BB+
Government of Turkey		1.00	%		Quarterly			12/20/22		826,000			(77,738	)		(37,352	)		(40,386	)		B+
Traded Index
CDX.NA.HY.31		5.00	%		Quarterly			12/20/23		1,500,000			81,389			54,650			26,739
Total Centrally Cleared Swap Contracts												$	281,308		$	164,654		$	116,654
OTC Swap Contracts
Contracts to Buy Protectionc						Counterparty
Single Name
Enel SpA		(1.00	%)		Quarterly	BOFA		6/20/23		550,000	EUR		3,270			(286	)		3,556
Enel SpA		(1.00	%)		Quarterly	MSCS		12/20/23		330,000	EUR		4,340			2,212			2,128
Traded Index
CDX.EM.30		(1.00	%)		Quarterly	MSCS		12/20/23		1,480,000			67,294			69,405			(2,111	)
Total OTC Swap Contracts												$	74,904		$	71,331		$	3,573
Total Credit Default Swap Contracts												$	356,212		$	235,985		$	120,227

^aIn U.S. dollars unless otherwise indicated. For contracts to sell protection, the notional amount is equal to the maximum potential amount of the future payments and no recourse provisions have been entered into in association with the contracts.

^bBased on Standard and Poor’s (S&P) Rating for single name swaps.

^cPerformance triggers for settlement of contract include default, bankruptcy or restructuring for single name swaps and failure to pay or bankruptcy of the underlying securities for traded index swaps.

^dThe Fund enters contracts to sell protection to create a long credit position.

62 Semiannual Report franklintempleton.com

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

CONSOLIDATED STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin K2 Alternative Strategies Fund (continued)

At November 30, 2018, the Fund had the following interest rate swap contracts outstanding. See Note 1(d).

Interest Rate Swap Contracts
Description	Payment Frequency		Maturity Date		Notional Amount*			Value/Unrealized Appreciation (Depreciation)
Centrally Cleared Swap Contracts
Receive Fixed rate 2.11% Pay Floating rate 3 Month USD-LIBOR		Quarterly		1/05/20		57,430,000		$	(218,730	)
Receive Fixed rate 2.61% Pay Floating rate 3 Month USD-LIBOR		Quarterly		4/13/20		7,740,000			(33,307	)
Receive Fixed rate 2.83% Pay Floating rate 3 Month USD-LIBOR		Quarterly		7/16/20		41,050,000			226,226
Receive Fixed rate 2.83% Pay Floating rate 3 Month USD-LIBOR		Quarterly		7/24/20		14,400,000			77,351
Receive Fixed rate 8.35% Pay Floating rate BRL-BRLCDI		Annually		1/04/21		18,658,675	BRL		45,407
Receive Fixed rate 2.10% Pay Floating rate 3 Month CABA		Semi-Annually		9/14/21		2,900,000	CAD		(28,767	)
Receive Fixed rate 2.11% Pay Floating rate 3 Month CABA		Semi-Annually		9/15/21		7,000,000	CAD		(66,851	)
Receive Fixed rate 2.12% Pay Floating rate 3 Month CABA		Semi-Annually		9/15/21		7,000,000	CAD		(66,009	)
Receive Fixed rate 2.07% Pay Floating rate 3 Month CABA		Semi-Annually		9/20/21		5,360,000	CAD		(56,715	)
Receive Fixed rate 2.12% Pay Floating rate 3 Month CABA		Semi-Annually		9/20/21		7,000,000	CAD		(65,564	)
Receive Fixed rate 2.37% Pay Floating rate 3 Month CABA		Semi-Annually		4/09/22		9,077,000	CAD		(47,273	)
Receive Floating rate 6 Month CZK-PRIBOR Pay Fixed rate 1.67%		Annually		3/21/23		18,133,702	CZK		25,229
Receive Floating rate 6 Month CZK-PRIBOR Pay Fixed rate 1.74%		Annually		3/21/23		9,453,969	CZK		11,712
Receive Floating rate 6 Month CZK-PRIBOR Pay Fixed rate 1.86%		Annually		3/21/23		39,226,029	CZK		39,073
Receive Floating rate 6 Month CZK-PRIBOR Pay Fixed rate 1.88%		Annually		9/19/23		32,090,072	CZK		35,295
Receive Floating rate MIBOR Pay Fixed rate 6.67%		Annually		6/20/23		68,165,992	INR		7,189
Receive Fixed rate 7.87% Pay Floating rate 1 Month MXN TIIE		Monthly		9/13/23		18,187,067	MXN		(37,463	)
Receive Fixed rate 7.89% Pay Floating rate 1 Month MXN TIIE		Monthly		9/13/23		5,702,534	MXN		(11,502	)
Receive Fixed rate 7.91% Pay Floating rate 1 Month MXN TIIE		Monthly		9/13/23		14,910,921	MXN		(29,384	)
Receive Fixed rate 7.95% Pay Floating rate 1 Month MXN TIIE		Monthly		9/13/23		23,311,467	MXN		(44,293	)
Receive Fixed rate 7.88% Pay Floating rate 1 Month MXN TIIE		Monthly		12/13/23		14,655,455	MXN		(31,739	)
Receive Fixed rate 8.07% Pay Floating rate 1 Month MXN TIIE		Monthly		12/13/23		7,866,180	MXN		(13,846	)
Receive Fixed rate 8.81% Pay Floating rate 1 Month MXN TIIE		Monthly		12/13/23		60,005,254	MXN		(14,336	)
Receive Floating rate 3 Month CABA Pay Fixed rate 2.37%		Semi-Annually		9/15/27		1,960,000	CAD		43,781
Receive Floating rate 3 Month CABA Pay Fixed rate 2.37%		Semi-Annually		9/15/27		2,800,000	CAD		63,878
Receive Floating rate 3 Month CABA Pay Fixed rate 2.36%		Semi-Annually		9/20/27		2,290,000	CAD		51,730
Receive Floating rate 3 Month CABA Pay Fixed rate 2.39%		Semi-Annually		9/20/27		2,800,000	CAD		58,806

franklintempleton.com Semiannual Report 63

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

CONSOLIDATED STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin K2 Alternative Strategies Fund (continued)

Interest Rate Swap Contracts (continued)
Description	Payment Frequency			Maturity Date		Notional Amount*			Value/Unrealized Appreciation (Depreciation)
Centrally Cleared Swap Contracts (continued)
Receive Floating rate 3 Month USD-LIBOR Pay Fixed rate 2.43%		Semi-Annually			1/05/28		10,697,000		$	451,955
Receive Floating rate 3 Month CABA Receive Fixed rate 2.56%		Semi-Annually			4/09/28		3,069,000	CAD		33,703
Receive Floating rate 3 Month USD-LIBOR Pay Fixed 2.93%		Semi-Annually			7/16/28		9,100,000			15,567
Receive Floating rate 6 Month HUF-BURBOR Pay Fixed rate 3.43%		Annually			12/19/28		373,846,017	HUF		(84,611	)
Receive Floating rate 6 Month HUF-BURBOR Pay Fixed rate 3.43%		Annually			12/19/28		282,910,499	HUF		(63,574	)
Receive Floating rate 6 Month GBP-LIBOR Pay Fixed rate 1.41%		Semi-Annually			8/04/67		133,000	GBP		22,854
Receive Floating rate 6 Month GBP-LIBOR Pay Fixed rate 1.60%		Semi-Annually			12/19/68		1,752,805	GBP		131,691
Total Centrally Cleared Swap Contracts										427,483
OTC Swap Contracts			Counterparty
Receive Floating rate 3 Month KLIBOR Pay Fixed rate 4.14%		Quarterly	MSCS		5/18/23		2,611,289	MYR		(8,226	)
Receive Floating rate 3 Month KLIBOR Pay Fixed rate 4.14%		Quarterly	BOFA		5/21/23		2,647,855	MYR		(8,310	)
Receive Floating rate 3 Month KLIBOR Pay Fixed rate 4.02%		Quarterly	BOFA		6/08/23		5,870,335	MYR		(12,476	)
Total OTC Swap Contracts										(29,012	)
Total Interest Rate Swap Contracts									$	398,471

*In U.S. dollars unless otherwise indicated.

At November 30, 2018, the Fund had the following total return swap contracts outstanding. See Note 1(d).

Total Return Swap Contracts

Underlying Instrument

Financing Rate

Payment Frequency

Counterparty

Maturity Date

Notional Value*

Value/Unrealized Appreciation (Depreciation)

OTC Swap Contracts

Equity Contracts - Longa

Air China Ltd.

1-Day HONIX + 0.95

%

Monthly

MSCS

7/09/19

6,279,963

HKD

$

23,644

Alphabet Inc.

1-Month LIBOR + 0.50

%

Monthly

MSCS

9/22/20

1,089,143

229,122

Altaba Inc.

1-Day FEDEF + 0.40

%

Monthly

MSCS

12/20/18

4,633,590

1,029,903

AngloAmerican PLC

1-Month LIBOR + 0.50

%

Monthly

MSCS

1/18/19

325,579

GBP

(49,989

)

Anima Holding SpA

1-Month LIBOR + 0.40

%

Monthly

MSCS

12/19/18

182,938

EUR

(562

)

Barclays PLC

1-Month LIBOR + 0.40

%

Monthly

MSCS

4/12/19

871,684

GBP

(51,717

)

BNP Paribas SA

1-Month LIBOR + 0.40

%

Monthly

MSCS

12/19/18

1,690,754

EUR

(51,244

)

Caterpillar Inc.

1-Month LIBOR + 0.50

%

Monthly

MSCS

9/22/20

2,896,540

(95,361

)

Celesio AG

1-Day EONIA + 0.65

%

Monthly

MSCS

11/04/19

3,160,765

EUR

(43,295

)

Danone SA

1-Month LIBOR + 0.40

%

Monthly

MSCS

12/19/18

3,292,732

EUR

4,465

Delta Air Lines Inc.

1-Month LIBOR + 0.50

%

Monthly

MSCS

9/22/20

3,839,709

496,867

Dominion Energy Midstream Partners LP

1-Day FEDEF + 1.00

%

Monthly

MSCS

12/20/18

1,032,419

15,165

EDP Renovaveis SA

1-Day EONIA + 0.65

%

Monthly

MSCS

9/04/19

787,315

EUR

22,999

Express Scripts Holding Co.

1-Day FEDEF + 0.40

%

Monthly

MSCS

12/20/18

3,568,304

197,815

Hikma Pharmaceuticals PLC

1-Month LIBOR + 0.40

%

Monthly

MSCS

4/12/19

216,930

GBP

(1,535

)

Iliad SA

1-Month LIBOR + 0.40

%

Monthly

MSCS

12/19/18

2,277,066

EUR

627,617

Innogy SE

1-Day EONIA + 0.65

%

Monthly

MSCS

9/04/19

4,098,502

EUR

353,815

ITV PLC

1-Month LIBOR + 0.40

%

Monthly

MSCS

4/12/19

1,974,524

GBP

(34,915

)

64 Semiannual Report franklintempleton.com

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

CONSOLIDATED STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin K2 Alternative Strategies Fund (continued)

Total Return Swap Contracts (continued)

Underlying Instrument

Financing Rate

Payment Frequency

Counterparty

Maturity Date

Notional Value*

Value/Unrealized Appreciation (Depreciation)

OTC Swap Contracts (continued)

Equity Contracts - Longa (continued)

Knight-Swift Transportation Holdings Inc.

1-Month LIBOR + 0.50

%

Monthly

MSCS

9/22/20

1,006,765

$

(17,905

)

L3 Technologies Inc.

1-Day FEDEF + 0.40

%

Monthly

MSCS

12/20/18

2,314,732

(99,965

)

LafargeHolcim Ltd.

1-Month LIBOR + 0.40

%

Monthly

MSCS

7/26/19

3,219,584

CHF

(121,265

)

Monster Beverage Corp.

1-Month LIBOR + 0.50

%

Monthly

MSCS

9/22/20

624,033

31,970

Nestle SA

1-Month LIBOR + 0.40

%

Monthly

MSCS

7/26/19

2,776,498

CHF

(1,456

)

NVR Inc.

1-Month LIBOR + 0.50

%

Monthly

MSCS

9/22/20

2,382,154

325,096

OneMarket Ltd.

1-Month LIBOR + 0.55

%

Monthly

MSCS

2/20/20

—

12,479

Plastic Omnium SA

1-Month EURIBOR + 0.50

%

Monthly

MSCS

1/10/19

377,251

EUR

(116,053

)

Rio Tinto PLC

1-Month LIBOR + 0.50

%

Monthly

MSCS

1/18/19

780,872

GBP

(41,486

)

Rio Tinto PLC

1-Month LIBOR + 0.50

%

Monthly

MSCS

9/22/20

2,744,510

22,139

RSA Insurance Group PLC

1-Month LIBOR + 0.40

%

Monthly

MSCS

4/12/19

1,122,364

GBP

12,550

RWE AG

1-Day EONIA + 0.65

%

Monthly

MSCS

10/30/19

2,033,529

EUR

(80,872

)

Ryanair Holdings PLC

1-Month EURIBOR + 0.40

%

Monthly

MSCS

12/19/18

756,806

EUR

(69,271

)

SCOR SE

1-Month LIBOR + 0.45

%

Monthly

DBAB

11/25/19

457,702

EUR

(618

)

Shangri-La Asia Ltd.

1-Day HONIX + 0.95

%

Monthly

MSCS

7/09/19

3,753,374

HKD

(8,800

)

Shire PLC

1-Day FEDEF + 1.25

%

Monthly

MSCS

2/20/20

5,440,867

148,273

Smiths Group PLC

1-Month LIBOR + 0.40

%

Monthly

MSCS

4/12/19

832,749

GBP

51,097

Societe Generale SA

1-Month LIBOR + 0.40

%

Monthly

MSCS

12/19/18

1,647,234

EUR

(41,867

)

Sports Direct International PLC

1-Month LIBOR + 0.40

%

Monthly

MSCS

4/12/19

545,741

GBP

6,664

Take-Two Interactive Software Inc.

1-Month LIBOR + 0.50

%

Monthly

MSCS

9/22/20

1,957,736

28,826

Twenty-First Century Fox Inc.

1-Month LIBOR + 0.40

%

Monthly

DBAB

8/20/19

1,670,584

(506

)

Vivendi SA

1-Day EONIA + 0.65

%

Monthly

MSCS

10/30/19

55,402

EUR

1,562

Vodafone Group PLC

1-Day SONIA + 0.65

%

Monthly

MSCS

2/06/19

3,073,582

GBP

(144,488

)

2,568,898

Equity Contracts - Shortb

Accor SA

1-Day EONIA - 0.40

%

Monthly

MSCS

1/10/19

141,516

EUR

16,735

Air France-KLM

1-Day EONIA - 0.40

%

Monthly

MSCS

1/10/19

804,442

EUR

(129,979

)

Alibaba Group Holding Ltd

1-Day FEDEF - 0.35

%

Monthly

MSCS

12/20/18

4,730,553

233,739

Cigna Corp.

1-Day FEDEF - 0.35

%

Monthly

MSCS

12/20/18

1,889,880

(129,406

)

Colruyt SA

1-Day EONIA - 0.40

%

Monthly

MSCS

12/19/18

1,072,977

EUR

4,789

CVS Health Corp.

1-Day FEDEF - 0.35

%

Monthly

MSCS

12/20/18

2,874

8,594

Diamondback Energy Inc.

1-Day FEDEF - 0.40

%

Monthly

MSCS

2/06/19

22,363

3,046

Dominion Energy Inc.

1-Day FEDEF - 0.35

%

Monthly

MSCS

12/20/18

1,011,635

(26,292

)

Gemalto NV

1-Day EONIA - 0.40

%

Monthly

MSCS

10/30/19

911,204

EUR

(445

)

Glencore PLC

1-Day SONIA - 0.35

%

Monthly

MSCS

1/18/19

144,887

GBP

15,503

Harris Corp.

1-Day FEDEF - 0.35

%

Monthly

MSCS

12/20/18

2,360,569

103,562

iShares STOXX Europe 600 UCITS ETF

1-Day EONIA - 0.63

%

Monthly

MSCS

1/10/19

16,928

EUR

1,230

Jardine Lloyd Thompson Group

1-Day SONIA - 0.35

%

Monthly

MSCS

2/06/19

205,111

GBP

(1,073

)

Kering SA

1-Day EONIA - 0.40

%

Monthly

MSCS

1/10/19

249,397

EUR

5,856

MSPSGAS2

1-Day FEDEF - 0.35

%

Monthly

MSCS

9/22/20

177,562

18,350

NASDAQ 100 Total Return Index

1-Day FEDEF - 0.15

%

Monthly

MSCS

10/28/20

735,005

(13,478

)

S&P 500 Total Return Index

1-Day FEDEF - 0.20

%

Monthly

MSCS

11/08/19

2,005,711

(48,880

)

Takeda Pharmaceutical Co. Ltd.

1-Day FEDEF - 0.40

%

Monthly

MSCS

5/21/20

2,184,706

211,509

Technology Select Sector SPDR Index

1-Day FEDEF - 0.35

%

Monthly

MSCS

9/22/20

2,125,193

19,546

Turk Hava Yollari AO

1-Day FEDEF - 0.75

%

Monthly

MSCS

9/16/20

240,838

(24,886

)

Unilever NV

1-Day EONIA - 0.35

%

Monthly

MSCS

12/19/18

1,429,644

EUR

(29,547

)

The Walt Disney Co.

1-Month LIBOR - 0.35

%

Monthly

DBAB

8/20/19

355,897

5,178

243,651

Total Total Return Swap Contracts

$

2,812,549

*In U.S. dollars unless otherwise indicated.

^aThe Fund receives the total return on the underlying instrument and pays a variable financing rate.

^bThe Fund receives the variable financing rate and pays the total return on the underlying instrument.

See Note 9 regarding other derivative information.

See Abbreviations on page 86.

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FRANKLIN ALTERNATIVE STRATEGIES FUNDS

Consolidated Financial Statements

Consolidated Statement of Assets and Liabilities

November 30, 2018 (unaudited)

Franklin K2 Alternative Strategies Fund

Assets:
*Investments in securities:
Cost - Unaffiliated issuers	$	1,030,850,919
Cost - Non-controlled affiliates (Note 3f)		7,395,000
Cost - Unaffiliated repurchase agreements		20,033,224
Value - Unaffiliated issuers	$	1,106,334,617
Value - Non-controlled affiliates (Note 3f)		7,395,000
Value - Unaffiliated repurchase agreements		20,033,224
Cash		45,067,362
Receivables:
Investment securities sold		12,471,809
Capital shares sold		6,942,713
Dividends and interest		4,331,026
Deposits with brokers for:
Exchange traded options written		411,117
Securities sold short		250,684,317
OTC derivative contracts		11,950,000
Futures contracts		10,994,251
Centrally cleared swap contracts		4,934,055
Due from brokers		9,607,490
OTC swap contracts (upfront payments $74,315)		71,617
Unrealized appreciation on OTC forward exchange contracts		4,326,569
Unrealized appreciation on OTC swap contracts		4,295,389
Other assets		16,786
Total assets		1,499,867,342
Liabilities:
Payables:
Investment securities purchased		14,755,053
Capital shares redeemed		1,977,646
Management fees		1,709,779
Distribution fees		62,167
Transfer agent fees		206,921
Variation margin on futures contracts		231,569
Variation margin on centrally cleared swap contracts		28,414
Due to brokers		5,640,505
OTC swap contracts (upfront receipts $291)		286
Options written, at value (premiums received $487,226)		390,304
Securities sold short, at value (proceeds $273,121,137)		270,364,878
Payable upon return of securities loaned		9,392,878
Unrealized depreciation on OTC forward exchange contracts		3,688,786
Unrealized depreciation on OTC swap contracts		1,508,279
Unrealized depreciation on unfunded loan commitments (Note 8)		7,718
Accrued expenses and other liabilities		280,492
Total liabilities		310,245,675
Net assets, at value	$	1,189,621,667
Net assets consist of:
Paid-in capital	$	1,124,286,547
Total distributable earnings (loss)		65,335,120
Net assets, at value	$	1,189,621,667
*Includes securities loaned	$	9,130,930

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FRANKLIN ALTERNATIVE STRATEGIES FUNDS

CONSOLIDATED FINANCIAL STATEMENTS

Consolidated Statement of Assets and Liabilities (continued)

November 30, 2018 (unaudited)

Franklin K2 Alternative Strategies Fund

Class A:
Net assets, at value	$107,204,594
Shares outstanding	9,493,715
Net asset value per sharea	$11.29
Maximum offering price per share (net asset value per share ÷ 94.50%)	$11.95
Class C:
Net assets, at value	$48,234,293
Shares outstanding	4,340,318
Net asset value and maximum offering price per sharea	$11.11
Class R:
Net assets, at value	$708,741
Shares outstanding	62,653
Net asset value and maximum offering price per share	$11.31
Class R6:
Net assets, at value	$36,849,290
Shares outstanding	3,249,525
Net asset value and maximum offering price per share	$11.34
Advisor Class:
Net assets, at value	$996,624,749
Shares outstanding	87,996,590
Net asset value and maximum offering price per share	$11.33

^aRedemption price is equal to net asset value less contingent deferred sales charges, if applicable.

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FRANKLIN ALTERNATIVE STRATEGIES FUNDS

CONSOLIDATED FINANCIAL STATEMENTS

Consolidated Statement of Operations

for the six months ended November 30, 2018 (unaudited)

Franklin K2 Alternative Strategies Fund

Investment income:
Dividends: (net of foreign taxes)*
Unaffiliated issuers	$	4,085,394
Interest: (net of foreign taxes)~
Unaffiliated issuers		11,490,089
Income from securities loaned (net of fees and rebates)		120,268
Total investment income		15,695,751
Expenses:
Management fees (Note 3a)		11,183,029
Distribution fees: (Note 3c)
Class A		140,921
Class C		261,633
Class R		1,565
Transfer agent fees: (Note 3e)
Class A		61,130
Class C		28,375
Class R		339
Class R6		3,394
Advisor Class		530,523
Custodian fees (Note 4) .		92,758
Reports to shareholders		66,330
Registration and filing fees		68,797
Professional fees		286,289
Trustees’ fees and expenses		171,880
Dividends and interest on securities sold short		2,250,359
Other		55,587
Total expenses		15,202,909
Expense reductions (Note 4)		(140,000	)
Expenses waived/paid by affiliates (Note 3f and 3g)		(951,935	)
Net expenses		14,110,974
Net investment income		1,584,777
Realized and unrealized gains (losses):
Net realized gain (loss) from:
Investments:
Unaffiliated issuers		10,511,276
Written options		505,590
Foreign currency transactions		391,783
Forward exchange contracts		4,263,967
Futures contracts		(4,366,574	)
Securities sold short		(5,587,018	)
Swap contracts		2,080,987
Net realized gain (loss)		7,800,011
Net change in unrealized appreciation (depreciation) on:
Investments:
Unaffiliated issuers		(27,523,445	)
Translation of other assets and liabilities denominated in foreign currencies		35,899
Forward exchange contracts		(980,806	)
Written options		(36,572	)
Futures contracts		5,557,210
Securities sold short		7,613,861
Swap contracts		(3,862,247	)
Net change in unrealized appreciation (depreciation)		(19,196,100	)
Net realized and unrealized gain (loss)		(11,396,089	)
Net increase (decrease) in net assets resulting from operations	$	(9,811,312	)
*Foreign taxes withheld on dividends	$	44,905
~Foreign taxes withheld on interest	$	420

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FRANKLIN ALTERNATIVE STRATEGIES FUNDS

CONSOLIDATED FINANCIAL STATEMENTS

Consolidated Statements of Changes in Net Assets

Franklin K2 Alternative Strategies Fund

	Six Months Ended November 30, 2018 (unaudited)			Year Ended May 31, 2018
Increase (decrease) in net assets:
Operations:
Net investment income	$	1,584,777		$	2,548,305
Net realized gain (loss)		7,800,011			17,117,174
Net change in unrealized appreciation (depreciation)		(19,196,100	)		20,905,020
Net increase (decrease) in net assets resulting from operations		(9,811,312	)		40,570,499
Distributions to shareholders: (Note 1k)
Class A		—			(1,546,194	)
Class C		—			(285,639	)
Class R		—			(5,635	)
Class R6		—			(2,505,528	)
Advisor Class		—			(11,772,288	)
Total distributions to shareholders		—			(16,115,284	)
Capital share transactions: (Note 2)
Class A		(11,281,609	)		(2,755,965	)
Class C		(4,364,367	)		(3,461,065	)
Class R		64,767			38,619
Class R6		5,274,179			(238,755,438	)
Advisor Class		108,598,757			206,066,759
Total capital share transactions		98,291,727			(38,867,090	)
Net increase (decrease) in net assets		88,480,415			(14,411,875	)
Net assets:
Beginning of period		1,101,141,252			1,115,553,127
End of period (Note 1k)	$	1,189,621,667		$	1,101,141,252

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FRANKLIN ALTERNATIVE STRATEGIES FUNDS

Notes to Consolidated Financial Statements (unaudited)

Franklin K2 Alternative Strategies Fund

1. Organization and Significant Accounting Policies

Franklin Alternative Strategies Funds (Trust) is registered under the Investment Company Act of 1940 (1940 Act) as an open-end management investment company, consisting of four separate funds and applies the specialized accounting and reporting guidance in U.S. Generally Accepted Accounting Principles (U.S. GAAP). Franklin K2 Alternative Strategies Fund (Fund) is included in this report. The Fund offers five classes of shares: Class A, Class C, Class R, Class R6 and Advisor Class. Beginning on October 19, 2018, Class C shares automatically convert to Class A shares after they have been held for 10 years. Each class of shares may differ by its initial sales load, contingent deferred sales charges, voting rights on matters affecting a single class, its exchange privilege and fees due to differing arrangements for distribution and transfer agent fees.

The following summarizes the Fund’s significant accounting policies.

a. Financial Instrument Valuation

The Fund’s investments in financial instruments are carried at fair value daily. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants on the measurement date. The Fund calculates the net asset value (NAV) per share each business day as of 4 p.m. Eastern time or the regularly scheduled close of the New York Stock Exchange (NYSE), whichever is earlier. Under compliance policies and procedures approved by the Trust’s Board of Trustees (the Board), the Fund’s administrator has responsibility for oversight of valuation, including leading the cross-functional Valuation Committee (VC). The Fund may utilize independent pricing services, quotations from securities and financial instrument dealers, and other market sources to determine fair value.

Equity securities, exchange traded funds and derivative financial instruments listed on an exchange or on the NASDAQ National Market System are valued at the last quoted sale price or the official closing price of the day, respectively. Foreign equity securities are valued as of the close of trading on the foreign stock exchange on which the security is primarily traded or as of 4 p.m. Eastern time. The value is then converted into its U.S. dollar equivalent at the foreign exchange rate in effect at 4 p.m. Eastern time on the day that the value of the security is determined. Over-the-counter (OTC) securities are valued

within the range of the most recent quoted bid and ask prices. Securities that trade in multiple markets or on multiple exchanges are valued according to the broadest and most representative market. Certain equity securities are valued based upon fundamental characteristics or relationships to similar securities.

Debt securities generally trade in the OTC market rather than on a securities exchange. The Fund’s pricing services use multiple valuation techniques to determine fair value. In instances where sufficient market activity exists, the pricing services may utilize a market-based approach through which quotes from market makers are used to determine fair value. In instances where sufficient market activity may not exist or is limited, the pricing services also utilize proprietary valuation models which may consider market characteristics such as benchmark yield curves, credit spreads, estimated default rates, anticipated market interest rate volatility, coupon rates, anticipated timing of principal repayments, underlying collateral, and other unique security features in order to estimate the relevant cash flows, which are then discounted to calculate the fair value. Securities denominated in a foreign currency are converted into their U.S. dollar equivalent at the foreign exchange rate in effect at 4 p.m. Eastern time on the date that the values of the foreign debt securities are determined.

Investments in open-end mutual funds are valued at the closing NAV. Investments in repurchase agreements are valued at cost, which approximates fair value.

Certain derivative financial instruments are centrally cleared or trade in the OTC market. The Fund’s pricing services use various techniques including industry standard option pricing models and proprietary discounted cash flow models to determine the fair value of those instruments. The Fund’s net benefit or obligation under the derivative contract, as measured by the fair value of the contract, is included in net assets.

The Fund has procedures to determine the fair value of financial instruments for which market prices are not reliable or readily available. Under these procedures, the Fund primarily employs a market-based approach which may use related or comparable assets or liabilities, recent transactions, market multiples, book values, and other relevant information for the investment to determine the fair value of the investment. An income-based valuation approach may also be used in which the anticipated future cash flows of the investment are discounted to calculate fair value. Discounts may also be applied due to the nature or

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Franklin K2 Alternative Strategies Fund (continued)

duration of any restrictions on the disposition of the investments. Due to the inherent uncertainty of valuations of such investments, the fair values may differ significantly from the values that would have been used had an active market existed.

Trading in securities on foreign securities stock exchanges and OTC markets may be completed before 4 p.m. Eastern time. In addition, trading in certain foreign markets may not take place on every Fund’s business day. Occasionally, events occur between the time at which trading in a foreign security is completed and 4 p.m. Eastern time that might call into question the reliability of the value of a portfolio security held by the Fund. As a result, differences may arise between the value of the Fund’s portfolio securities as determined at the foreign market close and the latest indications of value at 4 p.m. Eastern time. The VC monitors price movements for significant events following the close of trading in foreign stock markets through a series of country specific market proxies (such as baskets of American Depositary Receipts, futures contracts and exchange traded funds). These price movements are measured against established trigger thresholds for each specific market proxy to assist in determining if an event has occurred that may call into question the reliability of the values of the foreign securities held by the Fund. If such an event occurs, the securities may be valued using fair value procedures, which may include the use of independent pricing services.

When the last day of the reporting period is a non-business day, certain foreign markets may be open on those days that the Fund’s NAV is not calculated, which could result in differences between the value of the Fund’s portfolio securities on the last business day and the last calendar day of the reporting period. Any significant security valuation changes due to an open foreign market are adjusted and reflected by the Fund for financial reporting purposes.

b. Foreign Currency Translation

Portfolio securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollars based on the exchange rate of such currencies against U.S. dollars on the date of valuation. The Fund may enter into foreign currency exchange contracts to facilitate transactions denominated in a foreign currency. Purchases and sales of securities, income and expense items denominated in foreign currencies are translated into U.S. dollars at the exchange rate in effect on the transaction date. Portfolio securities and assets and liabilities denominated in foreign currencies contain risks that those currencies will

decline in value relative to the U.S. dollar. Occasionally, events may impact the availability or reliability of foreign exchange rates used to convert the U.S. dollar equivalent value. If such an event occurs, the foreign exchange rate will be valued at fair value using procedures established and approved by the Board.

The Fund does not separately report the effect of changes in foreign exchange rates from changes in market prices on securities held. Such changes are included in net realized and unrealized gain or loss from investments in the Consolidated Statement of Operations.

Realized foreign exchange gains or losses arise from sales of foreign currencies, currency gains or losses realized between the trade and settlement dates on securities transactions and the difference between the recorded amounts of dividends, interest, and foreign withholding taxes and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign exchange gains and losses arise from changes in foreign exchange rates on foreign denominated assets and liabilities other than investments in securities held at the end of the reporting period.

c. Joint Repurchase Agreement

The Fund enters into a joint repurchase agreement whereby its uninvested cash balance is deposited into a joint cash account with other funds managed by the investment manager or an affiliate of the investment manager and is used to invest in one or more repurchase agreements. The value and face amount of the joint repurchase agreement are allocated to the funds based on their pro-rata interest. A repurchase agreement is accounted for as a loan by the Fund to the seller, collateralized by securities which are delivered to the Fund’s custodian. The fair value, including accrued interest, of the initial collateralization is required to be at least 102% of the dollar amount invested by the funds, with the value of the underlying securities marked to market daily to maintain coverage of at least 100%. Repurchase agreements are subject to the terms of Master Repurchase Agreements (MRAs) with approved counterparties (sellers). The MRAs contain various provisions, including but not limited to events of default and maintenance of collateral for repurchase agreements. In the event of default by either the seller or the Fund, certain MRAs may permit the non-defaulting party to net and close-out all transactions, if any, traded under such agreements. The Fund may sell securities it holds as collateral and apply the proceeds towards the repurchase price and any other amounts owed by the seller to the Fund in the event of default

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Franklin K2 Alternative Strategies Fund (continued)

1. Organization and Significant Accounting Policies (continued)

c. Joint Repurchase Agreement (continued)

by the seller. This could involve costs or delays in addition to a loss on the securities if their value falls below the repurchase price owed by the seller. The joint repurchase agreement held by the Fund at period end, as indicated in the Consolidated Statement of Investments, had been entered into on November 30, 2018.

d. Derivative Financial Instruments

The Fund invested in derivative financial instruments in order to manage risk or gain exposure to various other investments or markets. Derivatives are financial contracts based on an underlying or notional amount, require no initial investment or an initial net investment that is smaller than would normally be required to have a similar response to changes in market factors, and require or permit net settlement. Derivatives contain various risks including the potential inability of the counterparty to fulfill their obligations under the terms of the contract, the potential for an illiquid secondary market, and/or the potential for market movements which expose the Fund to gains or losses in excess of the amounts shown in the Consolidated Statement of Assets and Liabilities. Realized gain and loss and unrealized appreciation and depreciation on these contracts for the period are included in the Consolidated Statement of Operations.

Derivative counterparty credit risk is managed through a formal evaluation of the creditworthiness of all potential counterparties. The Fund attempts to reduce its exposure to counterparty credit risk on OTC derivatives, whenever possible, by entering into International Swaps and Derivatives Association (ISDA) master agreements with certain counterparties. These agreements contain various provisions, including but not limited to collateral requirements, events of default, or early termination. Termination events applicable to the counterparty include certain deteriorations in the credit quality of the counterparty. Termination events applicable to the Fund include failure of the Fund to maintain certain net asset levels and/or limit the decline in net assets over various periods of time. In the event of default or early termination, the ISDA master agreement gives the non-defaulting party the right to net and close-out all transactions traded, whether or not arising under the ISDA agreement, to one net amount payable by one counterparty to the other. However, absent an event of default or early termination, OTC derivative assets and liabilities are presented gross and not offset

in the Consolidated Statement of Assets and Liabilities. Early termination by the counterparty may result in an immediate payment by the Fund of any net liability owed to that counterparty under the ISDA agreement.

Collateral requirements differ by type of derivative. Collateral or initial margin requirements are set by the broker or exchange clearing house for exchange traded and centrally cleared derivatives. Initial margin deposited is held at the exchange and can be in the form of cash and/or securities. For OTC derivatives traded under an ISDA master agreement, posting of collateral is required by either the Fund or the applicable counterparty if the total net exposure of all OTC derivatives with the applicable counterparty exceeds the minimum transfer amount, which typically ranges from $100,000 to $250,000, and can vary depending on the counterparty and the type of the agreement. Generally, collateral is determined at the close of Fund business each day and any additional collateral required due to changes in derivative values may be delivered by the Fund or the counterparty the next business day, or within a few business days. Collateral pledged and/or received by the Fund for OTC derivatives, if any, is held in segregated accounts with the Fund’s custodian/counterparty broker and can be in the form of cash and/or securities. Unrestricted cash may be invested according to the Fund’s investment objectives. To the extent that the amounts due to the Fund from its counterparties are not subject to collateralization or are not fully collateralized, the Fund bears the risk of loss from counterparty non-performance.

The Fund entered into exchange traded futures contracts primarily to manage and/or gain exposure to commodity price, interest rate and equity price risk. A futures contract is an agreement between the Fund and a counterparty to buy or sell an asset at a specified price on a future date. Required initial margins are pledged by the Fund, and the daily change in fair value is accounted for as a variation margin payable or receivable in the Consolidated Statement of Assets and Liabilities.

The Fund entered into OTC forward exchange contracts primarily to manage and/or gain exposure to certain foreign currencies. A forward exchange contract is an agreement between the Fund and a counterparty to buy or sell a foreign currency at a specific exchange rate on a future date.

The Fund entered into credit default swap contracts primarily to manage and/or gain exposure to credit risk. A credit default swap is an agreement between the Fund and a counterparty whereby the buyer of the contract receives credit protection and

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Franklin K2 Alternative Strategies Fund (continued)

the seller of the contract guarantees the credit worthiness of a referenced debt obligation. These agreements may be privately negotiated in the over-the-counter market (OTC credit default swaps) or may be executed in a multilateral trade facility platform, such as a registered exchange (centrally cleared credit default swaps). The underlying referenced debt obligation may be a single issuer of corporate or sovereign debt, a credit index, a basket of issuers or indices, or a tranche of a credit index or basket of issuers or indices. In the event of a default of the underlying referenced debt obligation, the buyer is entitled to receive the notional amount of the credit default swap contract from the seller in exchange for the referenced debt obligation, a net settlement amount equal to the notional amount of the credit default swap less the recovery value of the referenced debt obligation, or other agreed upon amount. For centrally cleared credit default swaps, required initial margins are pledged by the Fund, and the daily change in fair value is accounted for as a variation margin payable or receivable in the Consolidated Statement of Assets and Liabilities. Over the term of the contract, the buyer pays the seller a periodic stream of payments, provided that no event of default has occurred. Such periodic payments are accrued daily as an unrealized appreciation or depreciation until the payments are made, at which time they are realized. Upfront payments and receipts are reflected in the Consolidated Statement of Assets and Liabilities and represent compensating factors between stated terms of the credit default swap agreement and prevailing market conditions (credit spreads and other relevant factors). These upfront payments and receipts are amortized over the term of the contract as a realized gain or loss in the Consolidated Statement of Operations.

The Fund entered into interest rate swap contracts primarily to manage interest rate risk. An interest rate swap is an agreement between the Fund and a counterparty to exchange cash flows based on the difference between two interest rates, applied to a notional amount. These agreements may be privately negotiated in the over-the-counter market (OTC interest rate swaps) or may be executed on a registered exchange (centrally cleared interest rate swaps). For centrally cleared interest rate swaps, required initial margins are pledged by the Fund, and the daily change in fair value is accounted for as a variation margin payable or receivable in the Consolidated Statement of Assets and Liabilities. Over the term of the contract, contractually required payments to be paid and to be received are accrued daily and recorded as unrealized depreciation and appreciation until the payments are made, at which time they are realized.

The Fund entered into OTC total return swap contracts primarily to manage and/or gain exposure to interest rate, equity price, commodity price and credit risk of an underlying instrument such as a stock, bond, index or basket of securities or indices. A total return swap is an agreement between the Fund and a counterparty to exchange a return linked to an underlying instrument for a floating or fixed rate payment, both based upon a notional amount. Over the term of the contract, contractually required payments to be paid or received are accrued daily and recorded as unrealized appreciation or depreciation until the payments are made, at which time they are recognized as realized gain or loss.

The Fund purchased or wrote exchange traded and/or OTC option contracts primarily to manage and/or gain exposure to interest rate, equity price and foreign exchange rate risk. An option is a contract entitling the holder to purchase or sell a specific amount of shares or units of an asset or notional amount of a swap (swaption), at a specified price. When an option is purchased or written, an amount equal to the premium paid or received is recorded as an asset or liability, respectively. Upon exercise of an option, the acquisition cost or sales proceeds of the underlying investment is adjusted by any premium received or paid. Upon expiration of an option, any premium received or paid is recorded as a realized gain or loss. Upon closing an option other than through expiration or exercise, the difference between the premium received or paid and the cost to close the position is recorded as a realized gain or loss.

See Note 9 regarding other derivative information.

e. Loan Participation Notes

The Fund invests in loan participation notes (Participations). Participations are loans originally issued to a borrower by one or more financial institutions (the Lender) and subsequently sold to other investors, such as the Fund. Participations typically result in the Fund having a contractual relationship only with the Lender and not with the borrower. The Fund has the right to receive from the Lender any payments of principal, interest and fees which the Lender received from the borrower. The Fund generally has no rights to either enforce compliance by the borrower with the terms of the loan agreement or to any collateral relating to the original loan. As a result, the Fund assumes the credit risk of both the borrower and the Lender that is selling the Participation. The Participations may also involve interest rate risk and liquidity risk, including the potential default or insolvency of the borrower and/or the Lender.

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Franklin K2 Alternative Strategies Fund (continued)

1. Organization and Significant Accounting Policies (continued)

f. Securities Sold Short

The Fund is engaged in selling securities short, which obligates the Fund to replace a borrowed security with the same security at current fair value. The Fund incurs a loss if the price of the security increases between the date of the short sale and the date on which the Fund replaces the borrowed security. The Fund realizes a gain if the price of the security declines between those dates. Gains are limited to the price at which the Fund sold the security short, while losses are potentially unlimited in size. The Fund is required to establish a margin account with the broker lending the security sold short. While the short sale is outstanding, the broker retains the proceeds of the short sale to the extent necessary to meet margin requirements until the short position is closed out. A deposit must also be maintained with the Fund’s custodian/counterparty broker consisting of cash and/or securities having a value equal to a specified percentage of the value of the securities sold short. The Fund is obligated to pay fees for borrowing the securities sold short and is required to pay the counterparty any dividends and/or interest due on securities sold short. Such dividends and/or interest and any security borrowing fees are recorded as an expense to the Fund.

g. Securities Lending

The Fund participates in an agency based securities lending program to earn additional income. The Fund receives cash collateral against the loaned securities in an amount equal to at least 102% of the fair value of the loaned securities. Collateral is maintained over the life of the loan in an amount not less than 100% of the fair value of the loaned securities, as determined at the close of Fund business each day; any additional collateral required due to changes in security values is delivered to the Fund on the next business day. The collateral is deposited into a joint cash account with other funds and is used to invest in a money market fund managed by Franklin Advisers, Inc., an affiliate of the Fund, and/or a joint repurchase agreement. The Fund may receive income from the investment in cash collateral, in addition to lending fees and rebates paid by the borrower. Income from securities loaned, net of fees paid to the securities lending agent and/or third party vendor, is reported separately in the Consolidated Statement of Operations. The Fund bears the market risk with respect to the collateral investment, securities loaned, and the risk that the agent may default on its obligations to the Fund. If the borrower defaults on its

obligations to return the securities loaned, the Fund has the right to repurchase the securities in the open market using the collateral received. The securities lending agent has agreed to indemnify the Fund in the event of default by a third party borrower.

h. Investments in K2 Holdings Investment Corp. (K2 Subsidiary)

The Fund invests in certain financial instruments and commodity-linked derivative investments through its investment in the K2 Subsidiary. The K2 Subsidiary is a Cayman Islands exempted company with limited liability, is a wholly-owned subsidiary of the Fund, and is able to invest in certain financial instruments and commodity-linked derivative investments consistent with the investment objective of the Fund. At November 30, 2018, the K2 Subsidiary’s investments, as well as any other assets and liabilities of the K2 Subsidiary, are reflected in the Fund’s Consolidated Statement of Investments and Consolidated Statement of Assets and Liabilities. The financial statements have been consolidated and include the accounts of the Fund and the K2 Subsidiary. All intercompany transactions and balances have been eliminated. For tax purposes, the Fund is required to increase its taxable income by its share of the K2 Subsidiary’s income. Net losses incurred by the K2 Subsidiary cannot offset income earned by the Fund and cannot be carried back or forward by the K2 Subsidiary to offset income from prior or future years. At November 30, 2018, the net assets of the K2 Subsidiary were $18,636,874, representing 1.6% of the Fund’s consolidated net assets. The Fund’s investment in the K2 Subsidiary is limited to 25% of consolidated assets.

i. Senior Floating Rate Interests

The Fund invests in senior secured corporate loans that pay interest at rates which are periodically reset by reference to a base lending rate plus a spread. These base lending rates are generally the prime rate offered by a designated U.S. bank or the London InterBank Offered Rate (LIBOR). Senior secured corporate loans often require prepayment of principal from excess cash flows or at the discretion of the borrower. As a result, actual maturity may be substantially less than the stated maturity. Senior secured corporate loans in which the Fund invests are generally readily marketable, but may be subject to certain restrictions on resale.

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Franklin K2 Alternative Strategies Fund (continued)

j. Income and Deferred Taxes

It is the Fund’s policy to qualify as a regulated investment company under the Internal Revenue Code. The Fund intends to distribute to shareholders substantially all of its taxable income and net realized gains to relieve it from federal income and excise taxes. As a result, no provision for U.S. federal income taxes is required.

The Fund may be subject to foreign taxation related to income received, capital gains on the sale of securities and certain foreign currency transactions in the foreign jurisdictions in which it invests. Foreign taxes, if any, are recorded based on the tax regulations and rates that exist in the foreign markets in which the Fund invests. When a capital gain tax is determined to apply, the Fund records an estimated deferred tax liability in an amount that would be payable if the securities were disposed of on the valuation date.

The Fund may recognize an income tax liability related to its uncertain tax positions under U.S. GAAP when the uncertain tax position has a less than 50% probability that it will be sustained upon examination by the tax authorities based on its technical merits. As of November 30, 2018, the Fund has determined that no tax liability is required in its consolidated financial statements related to uncertain tax positions for any open tax years (or expected to be taken in future tax years). Open tax years are those that remain subject to examination and are based on the statute of limitations in each jurisdiction in which the Fund invests.

k. Security Transactions, Investment Income, Expenses and Distributions

Security transactions are accounted for on trade date. Realized gains and losses on security transactions are determined on a specific identification basis. Interest income and estimated expenses are accrued daily. Amortization of premium and accretion of discount on debt securities are included in interest income. Dividend income and dividends declared on securities sold short are recorded on the ex-dividend date except for certain dividends from securities where the dividend rate is not available. In such cases, the dividend is recorded as soon as the information is received by the Fund. Distributions to shareholders are recorded on the ex-dividend date. Distributable earnings are determined according to income tax regulations (tax basis) and may differ from earnings recorded in accordance with U.S. GAAP. These differences may be permanent or temporary. Permanent differences are reclassified among capital accounts to

reflect their tax character. These reclassifications have no impact on net assets or the results of operations. Temporary differences are not reclassified, as they may reverse in subsequent periods.*

Common expenses incurred by the Trust are allocated among the Funds based on the ratio of net assets of each Fund to the combined net assets of the Trust or based on the ratio of number of shareholders of each Fund to the combined number of shareholders of the Trust. Fund specific expenses are charged directly to the Fund that incurred the expense.

Realized and unrealized gains and losses and net investment income, excluding class specific expenses, are allocated daily to each class of shares based upon the relative proportion of net assets of each class. Differences in per share distributions by class are generally due to differences in class specific expenses.

l. Accounting Estimates

The preparation of financial statements in accordance with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the amounts of income and expenses during the reporting period. Actual results could differ from those estimates.

m. Guarantees and Indemnifications

Under the Trust’s organizational documents, its officers and trustees are indemnified by the Trust against certain liabilities arising out of the performance of their duties to the Trust. Additionally, in the normal course of business, the Trust, on behalf of the Fund, enters into contracts with service providers that contain general indemnification clauses. The Trust’s maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Trust that have not yet occurred. Currently, the Trust expects the risk of loss to be remote.

*Effective during the current reporting period, it is no longer required to present certain line items as shown below on the Consolidated Statements of Changes in Net Assets. Such disclosure changes are included in the Consolidated Statements of Changes in Net Assets, therefore prior period amounts are presented below.

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Franklin K2 Alternative Strategies Fund (continued)

1. Organization and Significant Accounting Policies (continued)

For the year ended May 31, 2018, distributions to shareholders were as follows:

Distributions from net investment income:
Class A	$	(1,546,194	)
Class C		(285,639	)
Class R		(5,635	)
Class R6		(2,505,528	)
Advisor Class		(11,772,288	)

For the year ended May 31, 2018, distributions in excess of net investment income included in net assets was $(14,677,700).

2. Shares of Beneficial Interest

At November 30, 2018, there were an unlimited number of shares authorized (without par value). Transactions in the Fund’s shares were as follows:

	Six Months Ended November 30, 2018						Year Ended May 31, 2018
	Shares			Amount			Shares			Amount
Class A Shares:
Shares solda		1,439,884		$	16,459,379			3,176,630		$	35,979,221
Shares issued in reinvestment of distributions		—			—			129,508			1,467,319
Shares redeemed		(2,417,722	)		(27,740,988	)		(3,551,224	)		(40,202,505	)
Net increase (decrease)		(977,838	)	$	(11,281,609	)		(245,086	)	$	(2,755,965	)
Class C Shares:
Shares sold		405,763		$	4,586,954			1,190,986		$	13,334,868
Shares issued in reinvestment of distributions		—			—			23,870			268,067
Shares redeemeda		(795,671	)		(8,951,321	)		(1,527,860	)		(17,064,000	)
Net increase (decrease)		(389,908	)	$	(4,364,367	)		(313,004	)	$	(3,461,065	)
Class R Shares:
Shares sold		22,451		$	255,327			13,905		$	158,094
Shares issued in reinvestment of distributions		—			—			496			5,635
Shares redeemed		(16,564	)		(190,560	)		(11,085	)		(125,110	)
Net increase (decrease)		5,887		$	64,767			3,316		$	38,619
Class R6 Shares:
Shares sold		640,599		$	7,319,844			532,029		$	6,021,672
Shares issued in reinvestment of distributions		—			—			220,254			2,497,684
Shares redeemed		(177,354	)		(2,045,665	)		(21,717,786	)		(247,274,794	)
Net increase (decrease)		463,245		$	5,274,179			(20,965,503	)	$	(238,755,438	)
Advisor Class Shares:
Shares sold		19,396,830		$	223,048,226			32,825,857		$	372,819,294
Shares issued in reinvestment of distributions		—			—			757,060			8,585,060
Shares redeemed		(9,992,848	)		(114,449,469	)		(15,458,901	)		(175,337,595	)
Net increase (decrease)		9,403,982		$	108,598,757			18,124,016		$	206,066,759

^aMay include a portion of Class C shares that were automatically converted to Class A.

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Franklin K2 Alternative Strategies Fund (continued)

3. Transactions with Affiliates

Franklin Resources, Inc. is the holding company for various subsidiaries that together are referred to as Franklin Templeton Investments. Certain officers and trustees of the Trust are also officers and/or directors of the following subsidiaries:

Subsidiary	Affiliation
K2/D&S Management Co., L.L.C. (K2 Advisors)	Investment manager
Franklin Templeton Services, LLC (FT Services)	Administrative manager
Franklin Templeton Distributors, Inc. (Distributors)	Principal underwriter
Franklin Templeton Investor Services, LLC (Investor Services)	Transfer agent

a. Management Fees

The Fund and K2 Subsidiary pay an investment management fee to K2 Advisors of 1.90% per year of the average daily net assets of the Fund and K2 Subsidiary. Management fees paid by the Fund are reduced on assets invested in the K2 Subsidiary, in an amount not to exceed the management fees paid by the K2 Subsidiary.

Under each subadvisory agreement, the below entities provide subadvisory services to the Fund or K2 Subsidiary. The subadvisory fees are paid by K2 Advisors based on the Fund and K2 Subsidiary average daily net assets, and are not an additional expense of the Fund or K2 Subsidiary.

Subadvisors

Bardin Hill Arbitrage IC Management LP

Chatham Asset Management, LLC

Chilton Investment Company, LLC

Emso Asset Management Limited

Graham Capital Management, L.P.

Grantham, Mayo, Van Otterloo & Co. LLC

H2O AM LLP

Impala Asset Management, LLC

Jennison Associates, LLC

Lazard Asset Management, LLC

Loomis Sayles & Company, L.P.

P. Schoenfeld Asset Management L.P.

Portland Hill Capital LLP

Wellington Management Company, LLP

b. Administrative Fees

Under an agreement with K2 Advisors, FT Services provides administrative services to the Fund and K2 Subsidiary. The fee is paid by K2 Advisors based on the Fund and K2 Subsidiary average daily net assets, and is not an additional expense of the Fund or K2 Subsidiary.

c. Distribution Fees

The Board has adopted distribution plans for each share class, with the exception of Class R6 and Advisor Class shares, pursuant to Rule 12b-1 under the 1940 Act. Under the Fund’s Class A reimbursement distribution plan, the Fund reimburses Distributors for costs incurred in connection with the servicing, sale and distribution of the Fund’s shares up to the maximum annual plan rate. Under the Class A reimbursement distribution plan, costs exceeding the maximum for the current plan year cannot be reimbursed in

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Franklin K2 Alternative Strategies Fund (continued)

3. Transactions with Affiliates (continued)

c. Distribution Fees (continued)

subsequent periods. In addition, under the Fund’s Class C and R compensation distribution plans, the Fund pays Distributors for costs incurred in connection with the servicing, sale and distribution of the Fund’s shares up to the maximum annual plan rate for each class. The plan year, for purposes of monitoring compliance with the maximum annual plan rates, is February 1 through January 31.

The maximum annual plan rates, based on the average daily net assets, for each class, are as follows:

Class A	0.30%
Class C	1.00%
Class R	0.50%

The Board has set the current rate at 0.25% per year for Class A shares until further notice and approval by the Board.

d. Sales Charges/Underwriting Agreements

Front-end sales charges and contingent deferred sales charges (CDSC) do not represent expenses of the Fund. These charges are deducted from the proceeds of sales of Fund shares prior to investment or from redemption proceeds prior to remittance, as applicable. Distributors has advised the Fund of the following commission transactions related to the sales and redemptions of the Fund’s shares for the period:

Sales charges retained net of commissions paid to unaffiliated brokers/dealers	$	14,387
CDSC retained	$	4,347

Effective September 10, 2018, the Board approved changes to certain front-end sales charges and dealer commissions on Class A shares. Further details are disclosed in the Fund’s Prospectus.

e. Transfer Agent Fees

Each class of shares pays transfer agent fees to Investor Services for its performance of shareholder servicing obligations. The fees are based on an annualized asset based fee of 0.02% plus a transaction based fee. In addition, each class reimburses Investor Services for out of pocket expenses incurred and, except for Class R6, reimburses shareholder servicing fees paid to third parties. These fees are allocated daily based upon their relative proportion of such classes’ aggregate net assets. Class R6 pays Investor Services transfer agent fees specific to that class.

For the period ended November 30, 2018, the Fund paid transfer agent fees of $623,761, of which $188,453 was retained by Investor Services.

f. Investments in Affiliated Management Investment Companies

The Fund invests in one or more affiliated management investment companies for purposes other than exercising a controlling influence over the management or policies. Management fees paid by the Fund are waived on assets invested in the affiliated management investment companies, as noted in the Consolidated Statement of Operations, in an amount not to exceed the management and administrative fees paid directly or indirectly by each affiliate. During the period ended November 30, 2018, the Fund held investments in affiliated management investment companies as follows:

	Number of Shares Held at Beginning of Period		Gross Additions		Gross Reductions			Number of Shares Held at End of Period		Value at End of Period		Dividend Income		Realized Gain (Loss)		Net Change in Unrealized Appreciation (Depreciation)
Non-Controlled Affiliates
Institutional Fiduciary Trust Money Market Portfolio, 1.91%		10,700,000		43,662,000		(46,967,000	)		7,395,000	$	7,395,000	$	71,381	$	—	$	—

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Franklin K2 Alternative Strategies Fund (continued)

g. Waiver and Expense Reimbursements

K2 Advisors and Investor Services have contractually agreed in advance to waive or limit their respective fees and to assume as their own expense certain expenses otherwise payable by the Fund so that the expenses (excluding distribution fees, acquired fund fees and expenses, expenses related to securities sold short and certain non-routine expenses or costs, including those relating to litigation, indemnification, reorganizations, and liquidations) for each class of the Fund do not exceed 1.95%, and Class R6 does not exceed 1.87% based on the average net assets of each class until September 30, 2019. Total expenses waived or paid are not subject to recapture subsequent to the Fund’s fiscal year end.

Prior to October 1, 2018, expenses (excluding certain fees and expenses as previously disclosed) for Class R6 were limited to 1.85% based on the average net assets of the class.

4. Expense Offset Arrangement

The Fund has entered into an arrangement with its custodian whereby credits realized as a result of uninvested cash balances are used to reduce a portion of the Fund’s custodian expenses. During the period ended November 30, 2018, the custodian fees were reduced as noted in the Consolidated Statement of Operations.

5. Income Taxes

For tax purposes, the Fund may elect to defer any portion of a late-year ordinary loss to the first day of the following fiscal year. At May 31, 2018, the Fund deferred late-year ordinary losses of $4,481,585.

At November 30, 2018, the cost of investments and net unrealized appreciation (depreciation) for income tax purposes were as follows:

Cost of investments	$	830,695,221
Unrealized appreciation	$	105,823,793
Unrealized depreciation		(64,110,646	)
Net unrealized appreciation (depreciation)	$	41,713,147

Differences between income and/or capital gains as determined on a book basis and a tax basis are primarily due to differing treatments of investments in the K2 Subsidiary and wash sales.

6. Investment Transactions

Purchases and sales of investments and securities sold short (excluding short term securities) for the period ended November 30, 2018, aggregated $1,167,513,322 and $1,187,819,634, respectively.

At November 30, 2018, in connection with securities lending transactions, the Fund loaned equity investments and corporate bonds and notes and received $9,392,878 of cash collateral. The gross amounts of recognized liability for such transactions is included in payable upon return of securities loaned in the Consolidated Statement of Assets and Liabilities. The agreements can be terminated at any time.

7. Credit Risk and Defaulted Securities

The Fund may purchase the pre-default or defaulted debt of distressed companies. Distressed companies are financially troubled and could be or are already involved in financial restructuring or bankruptcy. Risks associated with purchasing these securities include the possibility that the bankruptcy or other restructuring process takes longer than expected, or that distributions in restructuring are less than anticipated, either or both of which may result in unfavorable consequences to the Fund. If it becomes probable that the

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FRANKLIN ALTERNATIVE STRATEGIES FUNDS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Franklin K2 Alternative Strategies Fund (continued)

7. Credit Risk and Defaulted Securities (continued)

income on debt securities, including those of distressed companies, will not be collected, the Fund discontinues accruing income and recognizes an adjustment for uncollectible interest.

At November 30, 2018, the aggregate long value of distressed company securities for which interest recognition has been discontinued was $7,961,828, representing 0.7% of the Fund’s net assets. For information as to specific securities, see the accompanying Consolidated Statement of Investments.

8. Unfunded Loan Commitments

The Fund entered into certain credit agreements, all or a portion of which may be unfunded. The Fund is obligated to fund these loan commitments at the borrowers’ discretion. Unfunded loan commitments and funded portions of credit agreements are marked to market daily. Funded portions of credit agreements are presented in the Consolidated Statement of Investments.

At November 30, 2018, unfunded commitments were as follows:

Borrower	Unfunded Commitment
Altice USA Inc., Term Loan B	$	109,254
ARAMARK Services Inc., Term Loan B-3		40,000
Arby’s, Term Loan B		50,000
Charter Communications Operating LLC, Term Loan B		115,000
Grifols Worldwide Operations USA Inc., Term Loan B		75,000
Grizzly Short Fund		95,000
Jeld-Wen Inc., Term Loan B		189,996
Meredith Corp., Term Loan B		190,584
Messer Industrial Builders LLC, Term Loan B		75,000
Summit Materials LLC		110,000
	$	1,049,834

9. Other Derivative Information

At November 30, 2018, the Fund’s investments in derivative contracts are reflected in the Consolidated Statement of Assets and Liabilities as follows:

	Asset Derivatives				Liability Derivatives
Derivative Contracts Not Accounted for as Hedging Instruments	Consolidated Statement of Assets and Liabilities Location	Fair Value			Consolidated Statement of Assets and Liabilities Location	Fair Value
Interest rate contracts	Investments in securities, at value	$	679	a	Options written, at value	$	5,128
	Variation margin on futures contracts		487,018	b	Variation margin on futures contracts		236,427	b
	Variation margin on centrally cleared swap contracts		1,341,447	b	Variation margin on centrally cleared swap contracts		913,964	b
					Unrealized depreciation on OTC swap contracts		29,012

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Franklin K2 Alternative Strategies Fund (continued)

	Asset Derivatives				Liability Derivatives
Derivative Contracts Not Accounted for as Hedging Instruments	Consolidated Statement of Assets and Liabilities Location	Fair Value			Consolidated Statement of Assets and Liabilities Location	Fair Value
Foreign exchange contracts	Investments in securities, at value	$	86,647	a	Options written, at value	$	53,608
	Unrealized appreciation on OTC forward exchange contracts		4,326,569		Unrealized depreciation on OTC forward exchange contracts		3,688,786
Credit contracts	Variation margin on centrally cleared swap contracts		437,920	b	Variation margin on centrally cleared swap contracts		321,266	b
	OTC swap contracts (upfront payments)		71,617		OTC swap contracts (upfront receipts)		286
	Unrealized appreciation on OTC swap contracts		5,684		Unrealized depreciation on OTC swap contracts		2,111
Equity contracts	Investments in securities, at value		1,544,105	a	Options written, at value		331,568
	Variation margin on futures contracts		5,562,437	b	Variation margin on futures contracts		1,296,639	b
	Unrealized appreciation on OTC swap contracts		4,289,705		Unrealized depreciation on OTC swap contracts		1,477,156
Commodity contracts	Variation margin on futures contracts		718,154	b	Variation margin on futures contracts		255,389	b
Totals		$	18,871,982			$	8,611,340

^aPurchased option contracts are included in investments in securities, at value in the Consolidated Statement of Assets and Liabilities.

^bThis amount reflects the cumulative appreciation (depreciation) of futures contracts and centrally cleared swap contracts as reported in the Consolidated Statement of Investments. Only the variation margin receivable/payable at period end is separately reported within the Consolidated Statement of Assets and Liabilities. Prior variation margin movements were recorded to cash upon receipt or payment.

For the period ended November 30, 2018, the effect of derivative contracts in the Fund’s Consolidated Statement of Operations was as follows:

Derivative Contracts Not Accounted for as Hedging Instruments	Consolidated Statement of Operations Location	Net Realized Gain (Loss) for the Period			Consolidated Statement of Operations Location	Net Change in Unrealized Appreciation (Depreciation) for the Period
	Net realized gain (loss) from:				Net change in unrealized appreciation (depreciation) on:
Interest rate contracts	Investments	$	(95,748	)a	Investments	$	66,673	a
	Written options		26,341		Written options		(14,144	)
	Futures contracts		568,518		Futures contracts		(564,034	)
	Swap contracts		(783,587	)	Swap contracts		124,485
Foreign exchange contracts	Investments		56,533	a	Investments		(22,123	)a
	Written options		23,869		Written options		9,704
	Foreign exchange contracts		4,263,967		Forward exchange contracts		(980,806	)
Credit contracts	Swap contracts		(260,371	)	Swap contracts		182,359

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Franklin K2 Alternative Strategies Fund (continued)

9. Other Derivative Information (continued)

Derivative Contracts Not Accounted for as Hedging Instruments	Consolidated Statement of Operations Location	Net Realized Gain (Loss) for the Period			Consolidated Statement of Operations Location	Net Change in Unrealized Appreciation (Depreciation) for the Period
Equity contracts	Investments	$	(3,656,652	)a	Investments	$	843,101	a
	Written options		455,380		Written options		(32,132	)
	Futures contracts		(2,274,999	)	Futures contracts		4,689,872
	Swap contracts		3,153,188		Swap contracts		(4,169,091	)
Commodity contracts	Futures contracts		(2,660,093	)	Futures contracts		1,431,372
	Swap contracts		(28,243	)
Totals		$	(1,211,897	)		$	1,565,236

^aPurchased option contracts are included in net realized gain (loss) from investments and net change in unrealized appreciation (depreciation) on investments in the Consolidated Statement of Operations.

For the period ended November 30, 2018, the average month end notional amount of futures contracts, options and swap contracts represented $613,199,134, 19,030,195 shares/units and $369,343,675, respectively. The average month end contract value of forward exchange contracts was $335,631,325.

At November 30, 2018, the Fund’s OTC derivative assets and liabilities are as follows:

	Gross Amounts of Assets and Liabilities Presented in the Consolidated Statement of Assets and Liabilities
	Assetsa		Liabilitiesa
Derivatives
Forward Exchange Contracts	$	4,326,569	$	3,688,786
Options Purchased		86,647		—
Options Written		—		53,608
Swap Contracts		4,367,006		1,508,565
Total	$	8,780,222	$	5,250,959

^aAbsent an event of default or early termination, OTC derivative assets and liabilities are presented gross and not offset in the Consolidated Statement of Assets and Liabilities.

At November 30, 2018, the Fund’s OTC derivative assets, which may be offset against the Fund’s OTC derivative liabilities and collateral received from the counterparty, are as follows:

			Amounts Not Offset in the Consolidated Statement of Assets and Liabilities
	Gross Amounts of Assets Presented in the Consolidated Statement of Assets and Liabilities		Financial Instruments Available for Offset			Financials Instruments Collateral Receiveda			Cash Collateral Receiveda			Net Amount (Not Less than Zero)
Counterparty
BNYM	$	667,509	$	(86,584	)	$	(533,102	)	$	—		$	47,823
BOFA		3,556		(3,556	)		—			—			—
DBAB		463,106		(319,220	)		—			—			143,886
GSCO		281		(54	)		—			(227	)		—
HSBC		1,141		(303	)		—			—			838

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Franklin K2 Alternative Strategies Fund (continued)

			Amounts Not Offset in the Consolidated Statement of Assets and Liabilities
	Gross Amounts of Assets Presented in the Consolidated Statement of Assets and Liabilities		Financial Instruments Available for Offset			Financials Instruments Collateral Receiveda			Cash Collateral Receiveda			Net Amount (Not Less than Zero)
JPHQ	$	375,711	$	(309,290	)	$	—		$	—		$	66,421
JPHQc		490,096		—			—			—			490,096
MSCO		223,363		(163,240	)		—			—			60,123
MSCOd		2,183,265		(1,739,058	)		—			—			444,207
MSCS		75,639		(26,023	)		—			—			49,616
MSCSc		4,284,527		—			—			—			4,284,527
UBSW		12,028		(12,028	)		—			—			—
Total	$	8,780,222	$	(2,659,356	)	$	(533,102	)	$	(227	)	$	5,587,537

At November 30, 2018, the Fund’s OTC derivative liabilities, which may be offset against the Fund’s OTC derivative assets and collateral pledged to the counterparty, are as follows:

			Amounts Not Offset in the Consolidated Statement of Assets and Liabilities
	Gross Amounts of Liabilities Presented in the Consolidated Statement of Assets and Liabilities		Financial Instruments Available for Offset			Financials Instruments Collateral Pledgeda,b		Cash Collateral Pledgeda		Net Amount (Not Less than Zero)
Counterparty
BNYM	$	86,584	$	(86,584	)	$	—	$	—	$	—
BOFA		36,947		(3,556	)		—		—		33,391
DBAB		319,220		(319,220	)		—		—		—
GSCO		54		(54	)		—		—		—
HSBC		303		(303	)		—		—		—
JPHQ		309,290		(309,290	)		—		—		—
JPHQc		1,078,173		—			—		—		1,078,173
MSCO		163,240		(163,240	)		—		—		—
MSCOd		1,739,058		(1,739,058	)		—		—		—
MSCS		26,023		(26,023	)		—		—		—
MSCSc		1,476,032		—			—		—		1,476,032
UBSW		16,035		(12,028	)		—		—		4,007
Total	$	5,250,959	$	(2,659,356	)	$	—	$	—	$	2,591,603

^aIn some instances, the collateral amounts disclosed in the table above were adjusted due to the requirement to limit the collateral amounts to avoid the effect of overcollateralization. Actual collateral received and/or pledged may be more than the amounts disclosed herein.

^bSee the accompanying Consolidated Statement of Investments for securities pledged as collateral for derivatives.

^cRepresents derivatives not subject to an ISDA master agreement.

^dRepresents derivatives owned by the K2 Holdings Investment Corp., a wholly-owned subsidiary of the Fund. See Note 1(h).

See Note 1(d) regarding derivative financial instruments.

See Abbreviations on page 86.

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FRANKLIN ALTERNATIVE STRATEGIES FUNDS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Franklin K2 Alternative Strategies Fund (continued)

10. Credit Facility

The Fund, together with other U.S. registered and foreign investment funds (collectively, Borrowers), managed by Franklin Templeton Investments, are borrowers in a joint syndicated senior unsecured credit facility totaling $2 billion (Global Credit Facility) which matures on February 8, 2019. This Global Credit Facility provides a source of funds to the Borrowers for temporary and emergency purposes, including the ability to meet future unanticipated or unusually large redemption requests.

Under the terms of the Global Credit Facility, the Fund shall, in addition to interest charged on any borrowings made by the Fund and other costs incurred by the Fund, pay its share of fees and expenses incurred in connection with the implementation and maintenance of the Global Credit Facility, based upon its relative share of the aggregate net assets of all of the Borrowers, including an annual commitment fee of 0.15% based upon the unused portion of the Global Credit Facility. These fees are reflected in other expenses in the Consolidated Statement of Operations. During the period ended November 30, 2018, the Fund did not use the Global Credit Facility.

11. Fair Value Measurements

The Fund follows a fair value hierarchy that distinguishes between market data obtained from independent sources (observable inputs) and the Fund’s own market assumptions (unobservable inputs). These inputs are used in determining the value of the Fund’s financial instruments and are summarized in the following fair value hierarchy:

• Level 1 – quoted prices in active markets for identical financial instruments

• Level 2 – other significant observable inputs (including quoted prices for similar financial instruments, interest rates, prepayment speed, credit risk, etc.)

• Level 3 – significant unobservable inputs (including the Fund’s own assumptions in determining the fair value of financial instruments)

The input levels are not necessarily an indication of the risk or liquidity associated with financial instruments at that level.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Franklin K2 Alternative Strategies Fund (continued)

11. Fair Value Measurements (continued)

A summary of inputs used as of November 30, 2018, in valuing the Fund’s assets and liabilities carried at fair value, is as follows:

	Level 1		Level 2		Level 3			Total
Assets:
Investments in Securities:a
Common Stocks and Other Equity Interests	$	540,627,825	$	831	$	—	b	$	540,628,656
Exchange Traded Funds		5,722,578		—		—			5,722,578
Convertible Preferred Stocks		—		83,400		—			83,400
Preferred Stocks		281,618		—		4			281,622
Convertible Bonds		—		76,460,133		—			76,460,133
Corporate Bonds and Notes		—		153,816,003		—			153,816,003
Corporate Bonds and Notes in Reorganization		—		7,961,828		—			7,961,828
Senior Floating Rate Interests		—		10,940,917		—			10,940,917
Foreign Government and Agency Securities		—		24,962,083		—			24,962,083
Asset-Backed Securities and Commercial Mortgage-Backed Securities		—		25,220,963		—			25,220,963
Options Purchased		1,544,784		86,647		—			1,631,431
Short Term Investments		266,020,003		20,033,224		—			286,053,227
Total Investments in Securities	$	814,196,808	$	319,566,029	$	4		$	1,133,762,841
Other Financial Instruments:
Futures Contracts	$	6,767,609	$	—	$	—		$	6,767,609
Forward Exchange Contracts		—		4,326,569		—			4,326,569
Swap Contracts		—		6,074,756		—			6,074,756
Total Other Financial Instruments	$	6,767,609	$	10,401,325	$	—		$	17,168,934
Liabilities:
Other Financial Instruments:
Options Written	$	336,696	$	53,608	$	—		$	390,304
Securities Sold Shorta		260,819,560		9,545,318		—			270,364,878
Futures Contracts		1,788,455		—		—			1,788,455
Forward Exchange Contracts		—		3,688,786		—			3,688,786
Swap Contracts		—		2,743,509		—			2,743,509
Unfunded Loan Commitments		—		7,718		—			7,718
Total Other Financial Instruments	$	262,944,711	$	16,038,939	$	—		$	278,983,650

^aFor detailed categories, see the accompanying Consolidated Statement of Investments.

^bIncludes securities determined to have no value at November 30, 2018.

A reconciliation of assets in which Level 3 inputs are used in determining fair value is presented when there are significant Level 3 financial instruments at the beginning and/or end of the period.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Franklin K2 Alternative Strategies Fund (continued)

12. Subsequent Events

The Fund has evaluated subsequent events through the issuance of the consolidated financial statements and determined that no events have occurred that require disclosure.

Abbreviations

Counterparty		Currency		Selected Portfolio
BNYM	The Bank of New York Mellon Corp.	ARS	Argentine Peso	ADR	American Depositary Receipt
BOFA	Bank of America, N.A.	AUD	Australian Dollar	ARLLMONP	Argentina Blended Policy Rate
DBAB	Deutsche Bank, AG	BRL	Brazilian Real	ARM	Adjustable Rate Mortgage
GSCO HSBC	Goldman Sachs International HSBC Bank USA, N.A.	CAD CHF	Canadian Dollar Swiss Franc	BADLAR	Argentina Deposit Rates Badlar Private Banks ARS
JPHQ	JP Morgan Chase Bank, N.A.	COP	Colombian Peso	BRLCDI	Brazil Cetip DI Interbank Deposit Rate
MSCO	Morgan Stanley & Co., LLC	CZK	Czech Koruna	BURBOR	Budapest Interbank Offered Rate
MSCS	Morgan Stanley Capital Services LLC	EUR	Euro	CABA	Canadian Bank’s Acceptance
UBSW	UBS AG	GBP	British Pound	CAC	Cotation Assistee en Continu
		HKD	Hong Kong Dollar	CBOT	Chicago Board of Trade
		HUF	Hungarian Forint	CME	Chicago Mercantile Exchange
		INR	Indian Rupee	DAX	Deutscher Aktienindex
		JPY	Japanese Yen	DJIA	Dow Jones Industrial Average
		MXN	Mexican Peso	EONIA	Euro OverNight Index Average
Index		MYR	Malaysian Ringgit	ETF	Exchange Traded Fund
		NOK	Norwegian Krone	EURIBOR	Euro Interbank Offered Rate
CDX.EM	CDX Emerging Markets Index	TWD	Taiwan Dollar	FEDEF	Federal Funds Effective Rate
CDX.NA.HY	CDX North America High Yield Index	USD	United States Dollar	FHLMC	Federal Home Loan Mortgage Corp.
		ZAR	South African Rand	FRN	Floating Rate Note
				FTSE	Financial Times Stock Exchange
				HONIX	Hong Kong Overnight Index Rate
				IDR	International Depositary Receipt
				JSE	Johannesburg Stock Exchange Index
				KLIBOR	Kuala Lumpur Interbank Offered Rate
				LIBOR	London InterBank Offered Rate
				MIB	Milano Italia Borsa
				MIBOR	Mumbai Interbank Offered Rate
				MSCI	Morgan Stanley Capital International
				PIK	Payment In-Kind
				PRIBOR	Prague Interbank Offered Rate
				REIT	Real Estate Investment Trust
				SGX	Singapore Exchange
				SONIA	Sterling Overnight Index Average
				SPDR	S&P Depositary Receipt
				SPI	Swiss Performance Index
				TIIE	Interbank Equilibrium Interest Rate
				TOPIX	Tokyo Price Index

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FRANKLIN K2 ALTERNATIVE STRATEGIES FUND

Shareholder Information

Proxy Voting Policies and Procedures

The Fund’s investment manager has established Proxy Voting Policies and Procedures (Policies) that the Fund uses to determine how to vote proxies relating to portfolio securities. Shareholders may view the Fund’s complete Policies online at franklintempleton.com. Alternatively, shareholders may request copies of the Policies free of charge by calling the Proxy Group collect at (954) 527-7678 or by sending a written request to: Franklin Templeton Companies, LLC, 300 S.E. 2nd Street, Fort Lauderdale, FL 33301, Attention: Proxy Group. Copies of the Fund’s proxy voting records are also made available online at franklintempleton.com and posted on the U.S. Securities and Exchange Commission’s website at sec.gov and reflect the most recent 12-month period ended June 30.

Quarterly Consolidated Statement of Investments

The Trust, on behalf of the Fund, files a complete consolidated statement of investments with the U.S. Securities and Exchange Commission for the first and third quarters for each fiscal year on Form N-Q. Shareholders may view the filed Form N-Q by visiting the Commission’s website at sec.gov. The filed form may also be viewed and copied at the Commission’s Public Reference Room in Washington, DC. Information regarding the operations of the Public Reference Room may be obtained by calling (800) SEC-0330.

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Semiannual Report and Shareholder Letter

Franklin K2 Alternative Strategies Fund

Investment Manager

K2/D&S Management Co., L.L.C.

Distributor

Franklin Templeton Distributors, Inc.

(800) DIAL BEN^® / 342-5236

franklintempleton.com

Shareholder Services

(800) 632-2301

Authorized for distribution only when accompanied or preceded by a summary prospectus and/or prospectus. Investors should carefully consider a fund’s investment goals, risks, charges and expenses before investing. A prospectus contains this and other information; please read it carefully before investing.

To help ensure we provide you with quality service, all calls to and from our service areas are monitored and/or recorded.

© 2018-2019 Franklin Templeton Investments. All rights reserved. 068 S 01/19

Internet Delivery of Shareholder Reports: Effective January 1, 2021, as permitted by the SEC, paper copies of the Fund’s shareholder reports will no longer be sent by mail, unless you specifically request them from the Fund or your financial intermediary. Instead, the reports will be made available on a website, and you will be notified by mail each time a report is posted and provided with a website link to access the report.

If you already elected to receive shareholder reports electronically, you will not be affected by this change and you need not take any action. If you have not signed up for electronic delivery, we would encourage you to join fellow shareholders who have. You may elect to receive shareholder reports and other communications electronically from the Fund by calling (800) 632-2301 or by contacting your financial intermediary.

You may elect to continue to receive paper copies of all your future shareholder reports free of charge by contacting your financial intermediary or, if you invest directly with a Fund, calling (800) 632-2301 to let the Fund know of your request. Your election to receive reports in paper will apply to all funds held in your account.

Franklin Templeton Investments

Successful investing begins with ambition. And achievement only comes when you reach for it. That’s why we continually strive to deliver better outcomes for investors. No matter what your goals are, our deep, global investment expertise allows us to offer solutions that can help.

During our more than 70 years of experience, we’ve managed through all kinds of markets—up, down and those in between. We’re always preparing for what may come next. It’s because of this, combined with our strength as one of the world’s largest asset managers that we’ve earned the trust of millions of investors around the world.

Dear Fellow Shareholder:

The six months ended November 30, 2018, benefited from mostly upbeat economic data as the U.S. job market continued to improve and the unemployment rate declined. During the second and third quarters, U.S. corporate profits rose, supported by healthy economic growth and tax cuts.

In September 2018, the Standard & Poor’s 500^® Index (S&P 500^®) reached an all-time high, but experienced heightened volatility in October and much of November due to investor concerns about U.S. Federal Reserve (Fed) interest-rate policies, trade tensions, a moderating global economy and a likely slowing U.S. economy, and some weaker-than-expected revenue guidance. However, U.S. stocks recovered near period-end given optimism about a potentially slower pace of Fed rate increases and possible U.S. China trade talks in December. The 10-year Treasury yield rose to multi-year highs in October and November 2018 amid concerns about inflation and the Fed’s interest-rate path. Expectations that other central banks might scale back monetary stimulus and better-than-expected U.S. economic reports also pushed the yield higher. Overall, the 10-year Treasury yield rose from 2.83% at the beginning of the period to 3.01% at period-end. Commodities, as measured by the Bloomberg Commodity Index, had a -8.01% total return during the six-month period, largely due to a stronger U.S. dollar and ongoing trade tensions.¹

We are committed to our long-term perspective and disciplined investment approach as we conduct a rigorous, 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.

On the following pages, the Fund’s portfolio management team reviews investment decisions that pertain to performance during the past six months in light of the economic environment and other factors. 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 continuing to serve your investment needs in the years ahead.

1. Source: Morningstar.

See www.franklintempletondatasources.com for additional data provider information.

 Not FDIC Insured  |  May  Lose Value  |  No Bank Guarantee 

franklintempleton.com Not part of the semiannual report         1

Sincerely,

Madison S. Gulley, CFA

President and Chief Executive Officer –

Investment Management

Franklin Alternative Strategies Funds

This letter reflects our analysis and opinions as of November 30, 2018, 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.

Contents
Semiannual Report	3
Franklin Pelagos Commodities Strategy Fund	3
Performance Summary	8
Your Fund’s Expenses	10
Consolidated Financial Highlights and Consolidated Statement of Investments	11
Consolidated Financial Statements	20
Notes to Consolidated Financial Statements	24
Shareholder Information	34

Visit franklintempleton.com for fund updates, to access your account, or to find helpful financial planning tools.

CFA^® is a trademark owned by CFA Institute.

2         Not part of the semiannual report franklintempleton.com

Semiannual Report

Franklin Pelagos Commodities Strategy Fund

This semiannual report for Franklin Pelagos Commodities Strategy Fund covers the period ended November 30, 2018.

Your Fund’s Goal and Main Investments

The Fund seeks long-term total return by providing exposure to the commodities markets. It invests mainly in commodity-linked derivative instruments and securities of the U.S. government, its agencies and instrumentalities and other fixed income securities.

Performance Overview

The Fund’s Class A shares had a -8.52% cumulative total return for the six months under review. In comparison, the benchmark Bloomberg Commodity Index, which measures performance of exchange-traded futures contracts on physical commodities, had a -8.01% total return for the same period.¹ You can find more of the Fund’s performance data in the Performance Summary beginning on page 8.

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) 342-5236.

What is a futures contract?

A futures contract is an agreement between the Fund and a counterparty made through a US or foreign futures exchange to buy or sell an underlying instrument or asset at a specific price on a future date.

Economic and Market Overview

The U.S. economy grew during the six months under review. The economy grew faster in 2018’s second quarter, driven by consumer spending, business investment, exports and government spending, but moderated in the third quarter due to declines in exports and housing investment. The manufacturing

Portfolio Composition*

11/30/18

% of Consolidated Net Assets
U.S. Treasury Bill	93.9%
FHLMC	3.6%
FFCB	2.0%
Institutional Fiduciary Trust Money Market Portfolio	1.7%
Other Assets, less Liabilities**	-1.2%

See abbreviations on page 33.

*Figures reflect certain derivatives held in the portfolio (or their underlying reference assets) and may not total 100% or may be negative due to rounding, use of any derivatives, unsettled trades or other factors.

**Includes unrealized appreciation/depreciation on open commodity futures and swap contracts, as well as other assets and liabilities. See supplementary commodity exposure tables on page 6 for additional information related to the Fund’s economic exposure to commodities.

and services sectors expanded during the period. The unemployment rate declined from 3.8% in May 2018 to a nearly 49-year low of 3.7% at period-end.² Annual inflation, as measured by the Consumer Price Index, decreased from 2.8% in May 2018 to 2.2% at period-end.²

The U.S. Federal Reserve (Fed) raised its target range for the federal funds rate 0.25% at its June 2018 meeting and continued to reduce its balance sheet as part of its ongoing plan to normalize monetary policy. In his congressional testimony in July 2018 and at the Fed symposium in August, Fed Chair Jerome Powell reiterated the Fed’s intention to gradually raise interest rates. At its September 2018 meeting, the Fed raised its target range for the federal funds rate 0.25% to 2.00%–2.25%, as widely expected. Furthermore, the Fed raised its forecast for U.S. economic growth in 2018 and 2019 and projected one more rate increase in 2018. At its November meeting, the Fed held its target range for the federal funds rate unchanged but suggested it would continue to gradually raise rates, leading financial markets to expect a December rate increase. However, near period-end, the Fed Chair, in his speech at the Economic Club of New York, mentioned the Fed’s current policy rate was

1. Source: Morningstar.

The index is unmanaged and includes reinvestment of any income or distributions. It does 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.

2. Source: Bureau of Labor Statistics.

See www.franklintempletondatasources.com 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 Consolidated Statement of Investments (SOI). The Consolidated SOI begins on page 16.

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FRANKLIN PELAGOS COMMODITIES STRATEGY FUND

“just below” estimates of what it believed would be neutral for economic growth, suggesting it might slow its pace of rate increases.

U.S. equity markets rose overall during the period, benefiting from mostly upbeat economic data and better U.S. corporate earnings.

However, markets reflected concerns about tighter regulation of technology companies, the pace of the Fed’s rate increases, U.S. political uncertainties, the Trump administration’s protectionist policies, and the potential impact of the U.S.-China trade dispute on global growth and corporate earnings. These concerns were partially offset by an overall easing of tensions in the Korean peninsula, intermittent U.S.-China trade negotiations, ongoing trade negotiations between the U.S. and the European Union, and a new trade deal between the U.S., Mexico and Canada (pending ratification by the three countries’ legislatures). After reaching a new all-time high in September 2018, the broad U.S. stock market, as measured by the Standard & Poor’s 500 Index (S&P 500), experienced heightened volatility in October and parts of November amid investor concerns about the Fed’s interest-rate path, trade tensions, a potentially moderating U.S. economy, a slower global economy, and several big companies’ weaker-than-expected forward guidance. Equities rallied near period-end, however, driven by the expected results of the U.S. mid-term elections, hopes for a slower pace of rate increases, and optimism about potential U.S.-China trade negotiations in December. In this environment, the S&P 500 generated a +3.02% total return for the six-month period.¹

Commodity prices, as measured by the Bloomberg Commodity Index, had a -8.01% total return during the period, largely due to a stronger U.S. dollar and concerns about a slowdown in global growth amid continued trade tensions.¹ Oil prices gained early in the period amid U.S. sanctions against Iran, which raised expectations of tightening supplies and declining U.S. stockpiles. However, in October and November, oil prices plummeted amid signs of weaker demand growth, rising U.S. supply and increased exports by the Organization of the Petroleum Exporting Countries. Gold prices were hurt by a strengthening U.S. dollar and rising U.S. Treasury yields. Industrial metals prices generally declined, hurt by slower global growth and weaker economic indicators from China, the largest consumer of base metals. Among agricultural commodities, soybean, corn and wheat prices fell, generally reflecting record harvests and global oversupply, while sugar prices were relatively flat.

Investment Strategy

We utilize an actively managed fundamental and quantitative investment process to provide exposure to a variety of commodity sectors and indexes by investing in commodity-linked derivative instruments including commodity-linked total return swaps, commodity futures, commodity index futures and options on commodity futures and commodity index futures, which may provide exposure to foreign and emerging markets. By investing in these derivative instruments, we seek to gain exposure to the returns of real assets that trade in the commodities markets without direct investment in physical commodities. Real assets include such things as industrial and precious metals, gas, oil, livestock, agricultural or meat products and other items.

What is a swap agreement?

A swap agreement, such as a commodity-linked total return swap, is a contract between the Fund and a counterparty to exchange on a future date the returns, or differentials in return, that would have been earned or realized if a notional amount were invested in specific instruments.

What is an option?

An option is a contract to buy or sell a specific financial product known as the option’s underlying instrument at a specific price. The buyer of an option has the right, but not the obligation, to buy or sell the underlying instrument at or until a specified expiration date. Conversely, the seller (“writer”) of an option who opens a transaction is obligated to buy or sell the underlying instrument should the option holder exercise that right.

Manager’s Discussion

During the semiannual period under review, the Fund obtained its commodities exposure through swaps on commodities indexes and through commodities futures. The asset coverage for this exposure was met by the Fund’s investments in U.S. Treasury bills and other fixed income securities. The Fund’s investments are summarized in the Portfolio Composition table on page 3, and the Fund’s commodities exposure is summarized in the Fund Exposure to Commodities section on page 6.

During the period, the Fund did not have positive contribution from any of the broad commodities sectors. Performance was diminished due to the returns of economically sensitive commodities and those tied to trade issues. Crude oil and oil products, such as gasoline and diesel traded higher in the initial months of the period, but eventually traded lower for the

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FRANKLIN PELAGOS COMMODITIES STRATEGY FUND

remainder of the period as the Organization of the Petroleum Exporting Countries (OPEC) and non-OPEC producers returned oil production to market, the U.S. issued waivers to allow Iran to export oil to some countries despite recent sanctions, U.S. production continued to advance, and evidence of an economic slowdown materialized. Industrial metals were weaker as a group due to expectations of supply growth in China and globally, as well as trade-related issues. The market for soybeans and soybean products was weak as China retaliated against U.S. tariffs by largely halting their purchases of U.S. soybeans. Additionally, the U.S. dollar moved higher over the period. The Fund underperformed its benchmark, the Bloomberg Commodity Index, during the period.

In the energy sector, crude oil prices moved higher through early October, but succumbed to a variety of pressures late in the period. From the period high in early October, West Texas Intermediate crude oil prices declined by approximately one third to end the period. The OPEC and non-OPEC producers’ crude oil production increased during the summer following an adjustment to the groups’ prior production cut agreement that allowed increases in production. Proposed sanctions against Iran provided some expectation for a tighter market, but waivers issued to several countries negated those benefits. The summer U.S. driving season provided adequate demand for crude oil, with refineries operating at high seasonal levels and continuing to operate at high utilization rates through the period-end. Oil products also traded weaker as those strong refinery runs helped build inventories to seasonally high levels. Returns from U.S. natural gas were positive over the period, reflecting the hotter-than-normal summer and storage levels that have been below five-year averages. Natural gas prices realized strong gains and high volatility during November as the weather turned colder than normal. U.S. natural gas production continued to increase, while exports increased. Relative to its benchmark, the Fund’s returns from crude oil detracted from performance, while returns from natural gas benefited the Fund.

In metals, returns of both industrial and precious metals were negative over the period. Nickel prices were particularly weak, but this followed very strong returns prior to the period. Stainless steel prices began the period near yearly highs, but fell by period-end. Stainless steel continues to represent the lion’s share of nickel demand though electric vehicle demand has been receiving much attention. Aluminum prices suffered during the postponement of U.S sanctions against Russian producer Rusal. The backdrop for industrial metals weakened as China’s economic data was weaker than expected, and European and even U.S. data appeared to show signs of

slowing down. The U.S. dollar was up during the period, likely hindering precious metals prices. Both gold and silver prices declined during the period. Inflation indicators weakened in the U.S., especially toward period-end, and created a headwind to precious metals returns. Exchange-traded fund holdings of both gold and silver decreased modestly. Relative to its benchmark, the Fund’s returns from metals outperformed due to positioning in industrial metals.

Agriculture and livestock also largely experienced negative returns during the period. The trade confrontation with China and mostly favorable growing conditions led to adequate supplies and lower demand for U.S. products, especially soybeans, soybean meal, cotton and corn. Only live cattle had positive returns for the period. China halted purchases of soybeans in retaliation for tariffs on Chinese goods. Soybean meal, used for animal feed, was affected by these trade issues, but also by the African swine flu that began spreading through pig herds in China. As a result of trade issues and the favorable U.S. growing season, stocks of beans were at high levels during the period. Corn growing conditions were also favorable, but wheat production was hampered by poor weather in parts of Europe, the Black Sea region, Australia and India. Lean hog prices modestly declined for the period as a result of multiple factors. Trade and tariff issues included the pork industries for the U.S., China, and Mexico. Although trade issues with Mexico were resolved, those with China persisted. Plus, the African swine flu epidemic in China devastated some pig herds and has been discovered in all regions. Smaller herds would lower supply, but China’s consumers have pulled back on consumption too. Relative to its benchmark, the Fund outperformed in agriculture and livestock, driven by positioning in wheat, coffee and lean hogs over the period.

The Fund underperformed its benchmark during the period, primarily due to the energy sector. Crude oil experienced significant losses during the last two months of the period as OPEC production increased, waivers were issued allowing Iran to export oil to certain countries despite recent sanctions, U.S. production continued to grow, and evidence of economic weakness pressured prices.

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FRANKLIN PELAGOS COMMODITIES STRATEGY FUND

Fund Exposure to Commodities

The following table summarizes the Fund’s economic exposure to commodities derived through its investment in commodity-linked total return swap contracts. At November 30, 2018, the Fund’s exposure based on notional value represented 81.0% of consolidated net assets.

Commodity-Linked Total Return Swap Exposure*

	% of Consolidated Net Assets Long
Gold		9.0%
Natural Gas		8.8%
Brent Crude Oil		6.2%
Soybeans		5.6%
WTI Crude Oil		5.6%
Copper		5.5%
Nickel		4.7%
Heating Oil		4.1%
Wheat		4.0%
Unleaded Gasoline		3.7%
Silver		3.2%
Soybean Meal		3.1%
Aluminum		2.6%
Corn		2.6%
Soybean Oil		2.4%
Live Cattle		2.4%
Lean Hogs		1.8%
Sugar		1.7%
Cotton		1.5%
Kansas Wheat		1.5%
Coffee		1.0%

*Figures reflect certain derivatives held in the portfolio (or their underlying reference assets) and may not total 100% or may be negative due to rounding, use of any derivatives, unsettled trades or other factors. The Fund’s exposure was calculated using the commodity sector weightings of the FP Custom Master Index multiplied by the Fund’s percentage notional exposure.

The following table summarizes the Fund’s economic exposure to commodities derived through its investment in futures contracts. At November 30, 2018, the Fund’s exposure based on notional value represented 19.1% of consolidated net assets.

Commodity Futures Exposure*

	% of Consolidated Net Assets Long
Gold 100 Oz		3.4%
Cotton		3.0%
Copper		2.8%
Lean Hogs		2.0%
Wheat		1.9%
WTI Crude Oil		1.9%
Brent Crude Oil		1.8%
Natural Gas		1.4%
Silver		0.9%

*Figures are stated as a percentage of total and may not equal 100% or may be negative due to rounding, use of any derivatives, unsettled trades or other factors.

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FRANKLIN PELAGOS COMMODITIES STRATEGY FUND

Thank you for your participation in Franklin Pelagos Commodities Strategy Fund. We look forward to continuing to serve your financial needs.

	Stephen P. Burke
	John C. Pickart, CFA Portfolio Management Team

The foregoing information reflects our analysis, opinions and portfolio holdings as of November 30, 2018, 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.

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FRANKLIN PELAGOS COMMODITIES STRATEGY FUND

Performance Summary as of November 30, 2018

The performance table does 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 11/30/18¹

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 5.50% and the minimum is 0%. Class A: 5.50% maximum initial sales charge; Advisor Class: no sales charges. For other share classes, visit franklintempleton.com.

Share Class	Cumulative  Total Return2		Average Annual  Total Return3
A4
6-Month		-8.52%		-13.59%
1-Year		-2.66%		-7.98%
5-Year		-30.39%		-8.03%
Since Inception (1/10/14)		-29.84%		-8.07%
Advisor
6-Month		-8.31%		-8.31%
1-Year		-2.29%		-2.29%
5-Year		-28.49%		-6.49%
Since Inception (12/7/11)		-36.00%		-6.19%

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) 342-5236.

See page 9 for Performance Summary footnotes.

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FRANKLIN PELAGOS COMMODITIES STRATEGY FUND

PERFORMANCE SUMMARY

Total Annual Operating Expenses5
Share Class	With Waiver		Without Waiver
A		1.20%		1.86%
Advisor		0.95%		1.61%

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 physical commodities, either directly or through derivative instruments such as commodity-linked total return swaps, commodity futures, commodity index futures and options on commodity futures and commodities index futures, presents unique risks, is speculative and can be extremely volatile. Market prices of commodities may fluctuate rapidly based on numerous factors, including: changes in supply and demand relationships; weather; agriculture; trade; domestic and foreign political and economic events and policies; diseases; pestilence; technological developments; currency exchange rate fluctuations; and monetary and other governmental policies, action and inaction. Derivative instruments involve costs and can create leverage in the Fund’s portfolio, which may result in significant volatility and cause the Fund to participate in losses (as well as gains) in an amount that significantly exceeds the Fund’s initial investment. The Fund may not achieve the anticipated benefits and may realize losses, which could be significant. Bond prices generally move in the opposite direction of interest rates. Thus, as prices of bonds in the Fund adjust to a rise in interest rates, the Fund’s share price may decline. Foreign investing carries additional risks such as currency and market volatility and political, social and economic instability, risks which are heightened in less developed or emerging market countries. 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 an expense reduction contractually guaranteed through 9/30/19 and a fee waiver related to the management fee paid by a subsidiary. The Fund also has a fee waiver associated with any investments it makes in a Franklin Templeton money fund and/or other Franklin

Templeton fund. Fund investment results reflect the expense reduction and fee waivers; without these reductions, 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, if any, has not been annualized.

4. Prior to 9/10/18, these shares were offered at a higher initial sales charge of 5.75%, thus actual returns would have differed. Total returns with sales charges have been restated to reflect the current maximum initial sales charge of 5.50%.

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 Consolidated 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.

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FRANKLIN PELAGOS COMMODITIES STRATEGY 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 $64.50.

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.

		Actual (actual return after expenses)		Hypothetical (5% annual return before expenses)
Share Class	Beginning Account Value 6/1/18	Ending Account Value 11/30/18	Expenses Paid During Period 6/1/18–11/30/181,2	Ending Account Value 11/30/18	Expenses Paid During Period 6/1/18–11/30/181,2	Net Annualized Expense Ratio2
A	$1,000	$914.80	$5.76	$1,019.05	$6.07	1.20%
C	$1,000	$912.00	$9.35	$1,015.29	$9.85	1.95%
R	$1,000	$914.10	$6.77	$1,018.00	$7.13	1.41%
R6	$1,000	$917.90	$2.93	$1,022.01	$3.09	0.61%
Advisor	$1,000	$916.90	$4.57	$1,020.31	$4.81	0.95%

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 183/365 to reflect the one-half year period.

2. Reflects expenses after fee waivers and expense reimbursements. Does not include acquired fund fees and expenses.

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FRANKLIN ALTERNATIVE STRATEGIES FUNDS

Consolidated Financial Highlights

Franklin Pelagos Commodities Strategy Fund

	Six Months Ended November 30, 2018	Year Ended May 31,
	(unaudited)	2018		2017	2016	2015	2014	a
Class A
Per share operating performance
(for a share outstanding throughout the period)
Net asset value, beginning of period	$ 6.81	$6.12		$ 6.47	$ 7.12	$ 9.44	$ 8.88
Income from investment operationsb:
Net investment income (loss)c	0.03	(—)	d	(0.04)	(0.08)	(0.09)	(0.08)
Net realized and unrealized gains (losses)	(0.61)	0.69		(0.31)	(0.57)	(2.23)	0.64
Total from investment operations	(0.58)	0.69		(0.35)	(0.65)	(2.32)	0.56
Net asset value, end of period	$ 6.23	$6.81		$ 6.12	$ 6.47	$ 7.12	$ 9.44
Total returne	(8.52)%	11.27%		(5.41)%	(9.13)%	(24.58)%	6.31%
Ratios to average net assetsf
Expenses before waiver and payments by affiliates	1.59%	1.65%		1.71%	2.14%	2.05%	3.38%
Expenses net of waiver and payments by affiliatesg	1.20%	1.20%		1.20%	1.21%	1.25%	1.25%
Net investment income (loss)	0.82%	0.06%	h	(0.61)%	(0.79)%	(0.94)%	(0.94)%
Supplemental data
Net assets, end of period (000’s)	$7,406	$6,549		$4,846	$3,814	$2,080	$601
Portfolio turnover rate	—%	—%		42.22%	28.03%	62.10%	34.28%

^aFor the period January 10, 2014 (commencement of operations) to May 31, 2014.

^bThe amount shown for a share outstanding throughout the period may not correlate with the Consolidated 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.

^dAmount rounds to less than $0.01 per share.

^eTotal return does not reflect sales commissions or contingent deferred sales charges, if applicable, and is not annualized for periods less than one year.

^fRatios are annualized for periods less than one year.

^gBenefit of expense reduction rounds to less than 0.01%.

^hRatio is calculated based on the Fund level net investment income, as reflected in the Consolidated Statement of Operations, and adjusted for class specific expenses. The amount may not correlate with the per share amount due to the timing of income earned and/or fluctuating fair value of the investments of the Fund in relation to the timing of sales and repurchases of Fund shares.

franklintempleton.com The accompanying notes are an integral part of these consolidated financial statements. | Semiannual Report     11

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

CONSOLIDATED FINANCIAL HIGHLIGHTS

Franklin Pelagos Commodities Strategy Fund (continued)

	Six Months Ended November 30, 2018			Year Ended May 31,
	(unaudited)			2018		2017		2016		2015		2014a
Class C
Per share operating performance
(for a share outstanding throughout the period)
Net asset value, beginning of period		$ 6.59			$ 5.97		$ 6.36		$ 7.05		$ 9.41		$ 8.88
Income from investment operationsb:
Net investment income (loss)c		(—)	d		(0.04)		(0.10)		(0.16)		(0.15)		(0.09)
Net realized and unrealized gains (losses)		(0.58)			0.66		(0.29)		(0.53)		(2.21)		0.62
Total from investment operations		(0.58)			0.62		(0.39)		(0.69)		(2.36)		0.53
Net asset value, end of period		$ 6.01			$ 6.59		$ 5.97		$ 6.36		$ 7.05		$ 9.41
Total returne		(8.80)%			10.39%		(6.13)%		(9.79)%		(25.08)%		5.97%
Ratios to average net assetsf
Expenses before waiver and payments by affiliates		2.34%			2.40%		2.46%		2.88%		2.75%		4.08%
Expenses net of waiver and payments by affiliatesg		1.95%			1.95%		1.95%		1.95%		1.95%		1.95%
Net investment income (loss)		0.07%	h		(0.69)%		(1.36)%		(1.53)%		(1.64)%		(1.64)%
Supplemental data
Net assets, end of period (000’s)		$719			$1,162		$963		$862		$377		$60
Portfolio turnover rate		—%			—%		42.22%		28.03%		62.10%		34.28%

^aFor the period January 10, 2014 (commencement of operations) to May 31, 2014.

^bThe amount shown for a share outstanding throughout the period may not correlate with the Consolidated 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.

^dAmount rounds to less than $0.01 per share.

^eTotal return does not reflect sales commissions or contingent deferred sales charges, if applicable, and is not annualized for periods less than one year. fRatios are annualized for periods less than one year.

^gBenefit of expense reduction rounds to less than 0.01%.

^hRatio is calculated based on the Fund level net investment income, as reflected in the Consolidated Statement of Operations, and adjusted for class specific expenses. The amount may not correlate with the per share amount due to the timing of income earned and/or fluctuating fair value of the investments of the Fund in relation to the timing of sales and repurchases of Fund shares.

12     Semiannual Report | The accompanying notes are an integral part of these consolidated financial statements. franklintempleton.com

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

CONSOLIDATED FINANCIAL HIGHLIGHTS

Franklin Pelagos Commodities Strategy Fund (continued)

	Six Months Ended November 30, 2018 (unaudited)		Year Ended May 31,
			2018		2017		2016		2015		2014a
Class R
Per share operating performance
(for a share outstanding throughout the period)
Net asset value, beginning of period		$  6.75		$  6.08		$  6.44		$  7.10		$  9.44		$  8.88
Income from investment operationsb:
Net investment income (loss)c		0.02		(0.02)		(0.05)		(0.06)		(0.10)		(0.06)
Net realized and unrealized gains (losses)		(0.60)		0.69		(0.31)		(0.60)		(2.24)		0.62
Total from investment operations		(0.58)		0.67		(0.36)		(0.66)		(2.34)		0.56
Net asset value, end of period		$  6.17		$  6.75		$  6.08		$  6.44		$  7.10		$  9.44
Total returnd		(8.59)%		11.02%		(5.59)%		(9.30)%		(24.79)%		6.31%
Ratios to average net assetse
Expenses before waiver and payments by affiliates		1.80%		1.86%		1.85%		2.34%		2.27%		3.58%
Expenses net of waiver and payments by affiliatesf		1.41%		1.41%		1.34%		1.41%		1.47%		1.45%
Net investment income (loss)		0.61%		(0.15)%		(0.75)%		(0.99)%		(1.16)%		(1.14)%
Supplemental data
Net assets, end of period (000’s)		$20		$26		$23		$9		$4		$5
Portfolio turnover rate		—%		—%		42.22%		28.03%		62.10%		34.28%

^aFor the period January 10, 2014 (commencement of operations) to May 31, 2014.

^bThe amount shown for a share outstanding throughout the period may not correlate with the Consolidated 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.

^dTotal 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%.

franklintempleton.com     The accompanying notes are an integral part of these consolidated financial statements. | Semiannual Report     13

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

CONSOLIDATED FINANCIAL HIGHLIGHTS

Franklin Pelagos Commodities Strategy Fund (continued)

	Six Months Ended November 30, 2018 (unaudited)		Year Ended May 31,
			2018		2017		2016		2015		2014a
Class R6
Per share operating performance
(for a share outstanding throughout the period)
Net asset value, beginning of period		$  6.94		$  6.21		$  6.53		$  7.16		$  9.46		$  8.88
Income from investment operationsb:
Net investment income (loss)c		0.05		0.04		(0.01)		(0.02)		(0.04)		(0.03)
Net realized and unrealized gains (losses)		(0.62)		0.70		(0.31)		(0.61)		(2.26)		0.61
Total from investment operations		(0.57)		0.74		(0.32)		(0.63)		(2.30)		0.58
Less distributions from net investment income.		—		(0.01)		—		—		—		—
Net asset value, end of period		$  6.37		$  6.94		$  6.21		$  6.53		$  7.16		$  9.46
Total returnd		(8.21)%		11.89%		(4.90)%		(8.80)%		(24.31)%		6.53%
Ratios to average net assetse
Expenses before waiver and payments by affiliates		0.99%		1.02%		1.02%		1.10%		1.53%		1.58%
Expenses net of waiver and payments by affiliatesf		0.61%		0.65%		0.70%		0.76%		0.86%		0.86%
Net investment income (loss)		1.41%		0.61%		(0.11)%		(0.34)%		(0.55)%		(0.55)%
Supplemental data
Net assets, end of period (000’s)		$263,051		$288,037		$118,839		$131,500		$53,068		$67,732
Portfolio turnover rate		—%		—%		42.22%		28.03%		62.10%		34.28%

^aFor the period January 10, 2014 (commencement of operations) to May 31, 2014.

^bThe amount shown for a share outstanding throughout the period may not correlate with the Consolidated 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.

^dTotal 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%.

14         Semiannual Report    |    The accompanying notes are an integral part of these consolidated financial statements. franklintempleton.com

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

CONSOLIDATED FINANCIAL HIGHLIGHTS

Franklin Pelagos Commodities Strategy Fund (continued)

	Six Months Ended November 30, 2018 (unaudited)		Year Ended May 31,
			2018			2017		2016		2015		2014
Advisor Class
Per share operating performance
(for a share outstanding throughout the period)
Net asset value, beginning of period		$ 6.98		$6.26			$ 6.60		$ 7.25		$ 9.58		$ 9.43
Income from investment operationsa:
Net investment income (loss)b		0.04		—	c		(0.03)		(0.09)		(0.07)		(0.05)
Net realized and unrealized gains (losses)		(0.62)		0.72			(0.31)		(0.56)		(2.26)		0.20
Total from investment operations		(0.58)		0.72			(0.34)		(0.65)		(2.33)		0.15
Net asset value, end of period		$ 6.40		$6.98			$ 6.26		$ 6.60		$ 7.25		$ 9.58
Total returnd		(8.31)%		11.50%			(5.15)%		(8.97)%		(24.32)%		1.59%
Ratios to average net assetse
Expenses before waiver and payments by affiliates		1.34%		1.40%			1.46%		1.88%		1.75%		1.88%
Expenses net of waiver and payments by affiliatesf		0.95%		0.95%			0.95%		0.95%		0.95%		1.04%
Net investment income (loss)		1.07%		0.31%			(0.36)%		(0.53)%		(0.64)%		(0.70)%
Supplemental data
Net assets, end of period (000’s)		$1,862		$1,736			$2,062		$675		$248		$126
Portfolio turnover rate		—%		—%			42.22%		28.03%		62.10%		34.28%

^aThe amount shown for a share outstanding throughout the period may not correlate with the Consolidated 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.

^bBased on average daily shares outstanding.

^cAmount rounds to less than $0.01 per share.

^dTotal 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%.

franklintempleton.com The accompanying notes are an integral part of these consolidated financial statements.    |    Semiannual Report         15

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

Consolidated Statement of Investments, November 30, 2018 (unaudited)

Franklin Pelagos Commodities Strategy Fund

	Principal Amount		Value
U.S. Government and Agency Securities (Cost $10,000,000) 3.6%
FHLMC, 1.25%, 7/26/19		$10,000,000		$     9,924,239
Short Term Investments 97.6%
U.S. Government and Agency Securities 95.9%
a,b FFCB, 12/03/18		5,465,000		5,465,000
b U.S. Treasury Bill,
a,c1/03/19		37,400,000		37,328,101
a4/11/19		34,000,000		33,705,468
5/23/19		53,000,000		52,381,638
7/18/19		52,000,000		51,176,179
8/15/19		39,000,000		38,297,634
10/10/19		44,500,000		43,514,897
Total U.S. Government and Agency Securities (Cost $262,024,327)				261,868,917
Total Investments before Money Market Funds
(Cost $272,024,327)				271,793,156
		Shares
Money Market Funds (Cost $4,659,085) 1.7%
d,e Institutional Fiduciary Trust Money Market Portfolio, 1.91%		4,659,085		4,659,085
Total Investments (Cost $276,683,412) 101.2%				276,452,241
f Other Assets, less Liabilities (1.2)%				(3,394,693)
Net Assets 100.0%				$273,057,548

^aA portion or all of the security is owned by FPC Holdings Corp., a wholly-owned subsidiary of the Fund. See Note 1(c).

^bThe security was issued on a discount basis with no stated coupon rate.

^cA portion or all of the security has been segregated as collateral for open futures and swap contracts. At November 30, 2018, the value of this security and/or cash pledged amounted to $7,142,246, representing 2.6% of net assets.

^dSee Note 3(f) regarding investments in affiliated management investment companies.

^eThe rate shown is the annualized seven-day effective yield at period end.

^fIncludes unrealized appreciation/depreciation on open commodity futures and swap contracts, as well as other assets and liabilities.

16         Semiannual Report franklintempleton.com

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

CONSOLIDATED STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin Pelagos Commodities Strategy Fund (continued)

At November 30, 2018, the Fund had the following futures contracts outstanding. See Note 1(b).

Futures Contracts^a

Description	Type		Number of Contracts		Notional Amount*		Expiration Date		Value/ Unrealized Appreciation (Depreciation)
Commodity Contracts
Brent Crude Oil		Long		84		$5,004,720		1/31/19		$    (638,844	)
Copper		Long		109		7,595,938		3/27/19		(35,708	)
Cotton		Long		208		8,206,640		3/07/19		109,619
Gold 100 Oz		Long		76		9,317,600		2/26/19		(20,019	)
Lean Hogs		Long		242		5,602,300		12/14/18		(25,170	)
Natural Gas		Long		83		3,827,960		12/27/18		1,031,506
Silver		Long		33		2,345,805		3/27/19		(43,507	)
Wheat		Long		200		5,157,500		3/14/19		119,794
WTI Crude Oil		Long		100		5,093,000		12/19/18		(2,052,237	)
Total Futures Contracts										$(1,554,566	)

*As of period end.

At November 30, 2018, the Fund had the following commodity-linked total return swap contracts outstanding. See Note 1(b).

Commodity-Linked Total Return Swap Contracts^a

Underlying Instruments

Pay Fixed Rate

Payment Frequency

Counterparty

Maturity Date

Notional Value

Value/ Unrealized Appreciation (Depreciation)

OTC Swap Contracts

Longb

FP Custom Master Indexc

0.22%

At maturity

MSCS

12/05/18

$

221,297,492

$

(2,702,508)

Morgan Stanley MSCBBCV3 Indexc

0.00%

At maturity

MSCS

12/31/18

33,000,000

—

Morgan Stanley MSCBBE03 Indexc

0.00%

At maturity

MSCS

12/31/18

22,000,000

—

Total Commodity-Linked Total Return Swap Contracts

$

(2,702,508)

^aA portion or all of the contract is owned by FPC Holdings Corp., a wholly-owned subsidiary of the Fund. See Note 1(c).

^bThe Fund receives the total return on the underlying instrument and pays a fixed financing rate.

^cRepresents a custom index comprised of a basket of underlying instruments. Additional information regarding the underlying instruments and their respective values including fees are as follows:

Underlying Instruments	Notional Valued		Value/ Unrealized Appreciation (Depreciation)		Percentage of Net Assets ( %)
FPCustom Master Index
Bloomberg Commodity Aluminum Subindex	$	7,081,520	$	(71,250)		—e
Bloomberg Commodity Brent Crude Oil Subindex		17,039,907		(3,228,098)		(1.2)
Bloomberg Commodity Coffee Subindex		2,655,570		(356,456)		(0.1)
Bloomberg Commodity Copper Subindex		15,048,229		(200,042)		(0.1)
Bloomberg Commodity Corn Subindex		7,081,520		(93,415)		—e

franklintempleton.com Semiannual Report         17

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

CONSOLIDATED STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin Pelagos Commodities Strategy Fund (continued)

Commodity-Linked Total Return Swap Contracts^a (continued)

Underlying Instruments	Notional Valued			Value/ Unrealized Appreciation (Depreciation)			Percentage of Net Assets (%)
FPCustom Master Index (continued)
Bloomberg Commodity Cotton Subindex		$   4,204,652			$      (86,407	)		—	e
Bloomberg Commodity Gold Subindex		24,564,022			(272,968	)		(0.1	)
Bloomberg Commodity Heating Oil Subindex		11,064,874			(1,748,927	)		(0.6	)
Bloomberg Commodity Kansas Wheat Subindex		4,204,652			(215,422	)		(0.1	)
Bloomberg Commodity Lean Hogs Subindex		4,868,545			350,816			0.1
Bloomberg Commodity Live Cattle Subindex		6,417,627			3,207			—	e
Bloomberg Commodity Natural Gas Subindex		24,121,427			9,601,307			3.5
Bloomberg Commodity Nickel Subindex		12,835,254			(816,298	)		(0.3	)
Bloomberg Commodity Silver Subindex		8,851,900			(402,692	)		(0.1	)
Bloomberg Commodity Soybean Meal Subindex		8,409,305			(61,318	)		—	e
Bloomberg Commodity Soybean Oil Subindex		6,638,925			(86,244	)		—	e
Bloomberg Commodity Soybeans Subindex		15,269,527			119,268			—	e
Bloomberg Commodity Sugar Subindex		4,647,247			(210,796	)		(0.1	)
Bloomberg Commodity Unleaded Gasoline Subindex		10,179,685			(1,836,965	)		(0.7	)
Bloomberg Commodity Wheat Subindex		10,843,577			(70,753	)		—	e
Bloomberg Commodity WTI Crude Oil Subindex		15,269,527			(3,019,055	)		(1.1	)
Total		$221,297,492			$(2,702,508	)		(0.9	)
Morgan Stanley MSCBBCV3 Index
Bloomberg Commodity Aluminum Subindex		1,032,900			—			—
Bloomberg Commodity Aluminum Subindex 3 Month Forward		(1,032,900	)		—			—
Bloomberg Commodity Brent Crude Oil Subindex		2,640,000			—			—
Bloomberg Commodity Brent Crude Oil Subindex 3 Month Forward		(2,640,000	)		—			—
Bloomberg Commodity Coffee Subindex		825,000			—			—
Bloomberg Commodity Coffee Subindex 3 Month Forward		(825,000	)		—			—
Bloomberg Commodity Copper Subindex		(2,847,900	)		—			—
Bloomberg Commodity Copper Subindex 3 Month Forward		2,847,900			—			—
Bloomberg Commodity Cotton Subindex		825,000			—			—
Bloomberg Commodity Cotton Subindex 3 Month Forward		(825,000	)		—			—
Bloomberg Commodity Gas Oil Subindex		2,640,000			—			—
Bloomberg Commodity Gas Oil Subindex 3 Month Forward		(2,640,000	)		—			—
Bloomberg Commodity Heating Oil Subindex		2,640,000			—			—
Bloomberg Commodity Heating Oil Subindex 3 Month Forward		(2,640,000	)		—			—
Bloomberg Commodity Live Cattle Subindex.		(1,815,000	)		—			—
Bloomberg Commodity Live Cattle Subindex 3 Month Forward		1,815,000			—			—
Bloomberg Commodity Nickel Subindex		2,847,900			—			—
Bloomberg Commodity Nickel Subindex 3 Month Forward		(2,847,900	)		—			—
Bloomberg Commodity Soybean Meal Subindex		2,062,500			—			—
Bloomberg Commodity Soybean Meal Subindex 3 Month Forward		(2,062,500	)		—			—
Bloomberg Commodity Sugar Subindex		(2,640,000	)		—			—
Bloomberg Commodity Sugar Subindex 3 Month Forward		2,640,000			—			—
Bloomberg Commodity Unleaded Gasoline Subindex		825,000			—			—
Bloomberg Commodity Unleaded Gasoline Subindex 3 Month Forward		(825,000	)		—			—
Bloomberg Commodity Wheat Subindex		(3,877,500	)		—			—
Bloomberg Commodity Wheat Subindex 3 Month Forward		3,877,500			—			—
Bloomberg Commodity WTI Crude Oil Subindex		2,640,000			—			—

18         Semiannual Report franklintempleton.com

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

CONSOLIDATED STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin Pelagos Commodities Strategy Fund (continued)

Commodity-Linked Total Return Swap Contracts^a(continued)

Underlying Instruments	Notional Valued		Value/ Unrealized Appreciation (Depreciation)		Percentage of Net Assets (%)
Morgan Stanley MSCBBCV3 Index (continued)
Bloomberg Commodity WTI Crude Oil Subindex 3 Month Forward		$    (2,640,000)		$                —		—
Bloomberg Commodity Zinc Subindex		(2,847,900)		—		—
Bloomberg Commodity Zinc Subindex 3 Month Forward		2,847,900		—		—
Morgan Stanley MSCBBE03 Index
Bloomberg Commodity Coffee Subindex		(2,200,000)		—		—
Bloomberg Commodity Coffee Subindex 3 Month Forward		2,200,000		—		—
Bloomberg Commodity Corn Subindex		3,300,000		—		—
Bloomberg Commodity Corn Subindex 6 Month Forward		(3,300,000)		—		—
Bloomberg Commodity Cotton Subindex		2,200,000		—		—
Bloomberg Commodity Cotton Subindex 6 Month Forward		(2,200,000)		—		—
Bloomberg Commodity Nickel Subindex		(1,100,000)		—		—
Bloomberg Commodity Nickel Subindex 3 Month Forward		1,100,000		—		—
Bloomberg Commodity Soybean Meal Subindex		(3,850,000)		—		—
Bloomberg Commodity Soybean Meal Subindex 3 Month Forward		2,750,000		—		—
Bloomberg Commodity Soybean Meal Subindex 6 Month Forward		1,100,000		—		—
Bloomberg Commodity Soybeans Subindex		(4,950,000)		—		—
Bloomberg Commodity Soybeans Subindex 3 Month Forward		3,300,000		—		—
Bloomberg Commodity Soybeans Subindex 6 Month Forward		1,650,000		—		—
Bloomberg Commodity WTI Crude Oil Subindex		(4,400,000)		—		—
Bloomberg Commodity WTI Crude Oil Subindex 3 Month Forward		1,650,000		—		—
Bloomberg Commodity WTI Crude Oil Subindex 6 Month Forward		2,750,000		—		—

^dNotional value represents the fair value at period end of each underlying instrument (including the financing rate fee which is calculated based on the swap contract’s original notional value of $224,000,000 for the FP Custom Master Index, $33,000,000 for the Morgan Stanley MSCBBCV3 Index and $22,000,000 for the Morgan Stanley MSCBBE03 Index, allocated to each underlying instrument on a pro-rata basis).

^eRounds to less than 0.1%.

See Note 7 regarding other derivative information.

See Abbreviations on page 33.

franklintempleton.com The accompanying notes are an integral part of these consolidated financial statements.    |    Semiannual Report         19

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

Consolidated Financial Statements

Consolidated Statement of Assets and Liabilities

November 30, 2018 (unaudited)

Franklin Pelagos Commodities Strategy Fund

Assets:
Investments in securities:
Cost - Unaffiliated issuers	$272,024,327
Cost - Non-controlled affiliates (Note 3f)	4,659,085
Value - Unaffiliated issuers	$271,793,156
Value - Non-controlled affiliates (Note 3f)	4,659,085
Cash	878,143
Receivables:
Investment securities sold	4,208
Capital shares sold	18,982
Interest.	5,252
Affiliates	13,166
Variation margin on futures contracts	284,188
Other assets	28
Total assets	277,656,208
Liabilities:
Payables:
Capital shares redeemed	2,996
Management fees	103,789
Distribution fees	2,129
Due to brokers	1,744,367
Unrealized depreciation on OTC swap contracts	2,702,508
Accrued expenses and other liabilities	42,871
Total liabilities	4,598,660
Net assets, at value	$273,057,548
Net assets consist of:
Paid-in capital	$292,756,050
Total distributable earnings (loss)	(19,698,502	)
Net assets, at value	$273,057,548

20         Semiannual Report    |    The accompanying notes are an integral part of these consolidated financial statements. franklintempleton.com

            FRANKLIN ALTERNATIVE STRATEGIES FUNDS

        CONSOLIDATED FINANCIAL STATEMENTS

Consolidated Statement of Assets and Liabilities (continued)

November 30, 2018 (unaudited)

Franklin Pelagos Commodities Strategy Fund

Class A:
Net assets, at value	$	7,405,570
Shares outstanding		1,187,922
Net asset value per sharea		$6.23
Maximum offering price per share (net asset value per share ÷ 94.50%)		$6.59
Class C:
Net assets, at value	$	719,376
Shares outstanding		119,677
Net asset value and maximum offering price per sharea		$6.01
Class R:
Net assets, at value	$	20,222
Shares outstanding		3,275
Net asset value and maximum offering price per share		$6.17
Class R6:
Net assets, at value		$263,050,696
Shares outstanding		41,267,752
Net asset value and maximum offering price per share		$6.37
Advisor Class:
Net assets, at value	$	1,861,684
Shares outstanding		291,072
Net asset value and maximum offering price per share		$6.40

^aRedemption price is equal to net asset value less contingent deferred sales charges, if applicable.

franklintempleton.com The accompanying notes are an integral part of these consolidated financial statements.    |    Semiannual Report         21

FRANKLIN ALTERNATIVE STRATEGIES FUNDS                

CONSOLIDATED FINANCIAL STATEMENTS                

Consolidated Statement of Operations

for the six months ended November 30, 2018 (unaudited)

Franklin Pelagos Commodities Strategy Fund

Investment income:
Dividends:
Non-controlled affiliates (Note 3f)	$          29,269
Interest:
Unaffiliated issuers	2,858,357
Total investment income	2,887,626
Expenses:
Management fees (Note 3a)	1,215,856
Distribution fees: (Note 3c)
Class A	8,557
Class C	4,853
Class R	55
Transfer agent fees: (Note 3e)
Class A	12,511
Class C	1,774
Class R	43
Class R6	29,745
Advisor Class	3,172
Custodian fees (Note 4)	1,539
Reports to shareholders	13,339
Registration and filing fees	44,967
Professional fees	47,094
Trustees’ fees and expenses	24,056
Other	33,025
Total expenses	1,440,586
Expense reductions (Note 4)	(1,137	)
Expenses waived/paid by affiliates (Note 3f and 3g)	(532,921	)
Net expenses	906,528
Net investment income	1,981,098
Realized and unrealized gains (losses):
Net realized gain (loss) from:
Investments:
Unaffiliated issuers	(8,299	)
Futures contracts	(1,457,361	)
Swap contracts	(16,125,952	)
Net realized gain (loss)	(17,591,612	)
Net change in unrealized appreciation (depreciation) on:
Investments:
Unaffiliated issuers	52,086
Futures contracts	(2,415,927	)
Swap contracts	(6,489,131	)
Net change in unrealized appreciation (depreciation)	(8,852,972	)
Net realized and unrealized gain (loss)	(26,444,584	)
Net increase (decrease) in net assets resulting from operations	$(24,463,486)

22         Semiannual Report  |  The accompanying notes are an integral part of these consolidated financial statements. franklintempleton.com

    FRANKLIN ALTERNATIVE STRATEGIES FUNDS

    CONSOLIDATED FINANCIAL STATEMENTS

Consolidated Statements of Changes in Net Assets

Franklin Pelagos Commodities Strategy Fund

	Six Months Ended
	November 30, 2018			Year Ended
	(unaudited)			May 31, 2018
Increase (decrease) in net assets:
Operations:
Net investment income		$    1,981,098			$        978,846
Net realized gain (loss)		(17,591,612	)		14,266,808
Net change in unrealized appreciation (depreciation)		(8,852,972	)		5,347,829
Net increase (decrease) in net assets resulting from operations		(24,463,486	)		20,593,483
Distributions to shareholders: (Note 1e)
Class R6		—			(155,612	)
Total distributions to shareholders		—			(155,612	)
Capital share transactions: (Note 2)
Class A		1,461,806			1,120,485
Class C		(353,238	)		96,764
Class R		(3,470	)		184
Class R6		(1,368,924	)		149,683,677
Advisor Class		274,751			(560,990	)
Total capital share transactions		10,925			150,340,120
Net increase (decrease) in net assets		(24,452,561	)		170,777,991
Net assets:
Beginning of period		297,510,109			126,732,118
End of period (Note 1e)		$273,057,548			$297,510,109

franklintempleton.com The accompanying notes are an integral part of these consolidated financial statements.  |  Semiannual Report           23

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

Notes to Consolidated Financial Statements (unaudited)

Franklin Pelagos Commodities Strategy Fund

1.  Organization and Significant Accounting Policies

Franklin Alternative Strategies Funds (Trust) is registered under the Investment Company Act of 1940 (1940 Act) as an open-end management investment company, consisting of four separate funds and applies the specialized accounting and reporting guidance in U.S. Generally Accepted Accounting Principles (U.S. GAAP). Franklin Pelagos Commodities Strategy Fund (Fund) is included in this report. The Fund offers five classes of shares: Class A, Class C, Class R, Class R6 and Advisor Class. Beginning on October 19, 2018, Class C shares automatically convert to Class A shares after they have been held for 10 years. Each class of shares may differ by its initial sales load, contingent deferred sales charges, voting rights on matters affecting a single class, its exchange privilege and fees due to differing arrangements for distribution and transfer agent fees.

The following summarizes the Fund’s significant accounting policies.

a.  Financial Instrument Valuation

The Fund’s investments in financial instruments are carried at fair value daily. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants on the measurement date. The Fund calculates the net asset value (NAV) per share each business day as of 4 p.m. Eastern time or the regularly scheduled close of the New York Stock Exchange (NYSE), whichever is earlier. Under compliance policies and procedures approved by the Trust’s Board of Trustees (the Board), the Fund’s administrator has responsibility for oversight of valuation, including leading the cross-functional Valuation Committee (VC). The Fund may utilize independent pricing services, quotations from securities and financial instrument dealers, and other market sources to determine fair value.

Debt securities generally trade in the over-the-counter (OTC) market rather than on a securities exchange. The Fund’s pricing services use multiple valuation techniques to determine fair value. In instances where sufficient market activity exists, the pricing services may utilize a market-based approach through which quotes from market makers are used to determine fair value. In instances where sufficient market activity may not exist or is limited, the pricing services also utilize proprietary valuation models which may consider market characteristics such as benchmark yield curves, credit spreads, estimated

default rates, anticipated market interest rate volatility, coupon rates, anticipated timing of principal repayments, underlying collateral, and other unique security features in order to estimate the relevant cash flows, which are then discounted to calculate the fair value.

Investments in open-end mutual funds are valued at the closing NAV.

Derivative financial instruments listed on an exchange are valued at the official closing price of the day. Certain derivative financial instruments are centrally cleared or trade in the OTC market. The Fund’s pricing services use various techniques including industry standard option pricing models and proprietary discounted cash flow models to determine the fair value of those instruments. The Fund’s net benefit or obligation under the derivative contract, as measured by the fair value of the contract, is included in net assets.

The Fund has procedures to determine the fair value of financial instruments for which market prices are not reliable or readily available. Under these procedures, the Fund primarily employs a market-based approach which may use related or comparable assets or liabilities, recent transactions, market multiples, book values, and other relevant information for the investment to determine the fair value of the investment. An income-based valuation approach may also be used in which the anticipated future cash flows of the investment are discounted to calculate fair value. Discounts may also be applied due to the nature or duration of any restrictions on the disposition of the investments. Due to the inherent uncertainty of valuations of such investments, the fair values may differ significantly from the values that would have been used had an active market existed.

b.  Derivative Financial Instruments

The Fund invested in derivative financial instruments in order to manage risk or gain exposure to various other investments or markets. Derivatives are financial contracts based on an underlying or notional amount, require no initial investment or an initial net investment that is smaller than would normally be required to have a similar response to changes in market factors, and require or permit net settlement. Derivatives contain various risks including the potential inability of the counterparty to fulfill their obligations under the terms of the contract, the potential for an illiquid secondary market, and/or the potential for market movements which expose the Fund to gains or losses

24         Semiannual Report franklintempleton.com

    FRANKLIN ALTERNATIVE STRATEGIES FUNDS

    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Franklin Pelagos Commodities Strategy Fund (continued)

in excess of the amounts shown in the Consolidated Statement of Assets and Liabilities. Realized gain and loss and unrealized appreciation and depreciation on these contracts for the period are included in the Consolidated Statement of Operations.

Derivative counterparty credit risk is managed through a formal evaluation of the creditworthiness of all potential counter-parties. The Fund attempts to reduce its exposure to counterparty credit risk on OTC derivatives, whenever possible, by entering into International Swaps and Derivatives Association (ISDA) master agreements with certain counterparties. These agreements contain various provisions, including but not limited to collateral requirements, events of default, or early termination. Termination events applicable to the counterparty include certain deteriorations in the credit quality of the counterparty. Termination events applicable to the Fund include failure of the Fund to maintain certain net asset levels and/or limit the decline in net assets over various periods of time. In the event of default or early termination, the ISDA master agreement gives the non-defaulting party the right to net and close-out all transactions traded, whether or not arising under the ISDA agreement, to one net amount payable by one counterparty to the other. However, absent an event of default or early termination, OTC derivative assets and liabilities are presented gross and not offset in the Consolidated Statement of Assets and Liabilities. Early termination by the counterparty may result in an immediate payment by the Fund of any net liability owed to that counterparty under the ISDA agreement.

Collateral requirements differ by type of derivative. Collateral or initial margin requirements are set by the broker or exchange clearing house for exchange traded and centrally cleared derivatives. Initial margin deposited is held at the exchange and can be in the form of cash and/or securities. For OTC derivatives traded under an ISDA master agreement, posting of collateral is required by either the Fund or the applicable counterparty if the total net exposure of all OTC derivatives with the applicable counterparty exceeds the minimum transfer amount, which typically ranges from $100,000 to $250,000, and can vary depending on the counterparty and the type of the agreement. Generally, collateral is determined at the close of Fund business each day and any additional collateral required due to changes in derivative values may be delivered by the Fund or the counterparty the next business day, or within a few business days. Collateral pledged and/or received by the Fund for OTC derivatives, if any, is held in segregated accounts with the Fund’s custodian/counterparty broker and can be in the form

of cash and/or securities. Unrestricted cash may be invested according to the Fund’s investment objectives. To the extent that the amounts due to the Fund from its counterparties are not subject to collateralization or are not fully collateralized, the Fund bears the risk of loss from counterparty non-performance.

The Fund entered into exchange traded futures contracts primarily to gain exposure to commodity price risk. A futures contract is an agreement between the Fund and a counterparty to buy or sell an asset at a specified price on a future date. Required initial margins are pledged by the Fund, and the daily change in fair value is accounted for as a variation margin payable or receivable in the Consolidated Statement of Assets and Liabilities.

The Fund entered into OTC commodity-linked total return swap contracts primarily to gain exposure to commodity price risk of an underlying instrument such as a stock, bond, index or basket of securities or indices. A total return swap is an agreement between the Fund and a counterparty to exchange a return linked to an underlying instrument for a floating or fixed rate payment, both based upon a notional amount. Over the term of the contract, contractually required payments to be paid or received are accrued daily and recorded as unrealized appreciation or depreciation until the payments are made, at which time they are recognized as realized gain or loss.

See Note 7 regarding other derivative information.

c. Investments in FPC Holdings Corp. (FP Subsidiary)

The Fund invests in certain financial instruments and commodity-linked derivative investments through its investment in the FP Subsidiary. The FP Subsidiary is a Cayman Islands exempted company with limited liability, is a wholly-owned subsidiary of the Fund, and is able to invest in certain financial instruments and commodity-linked derivative investments consistent with the investment objective of the Fund. At November 30, 2018, the FP Subsidiary’s investments as well as any other assets and liabilities of the FP Subsidiary are reflected in the Fund’s Consolidated Statement of Investments and Consolidated Statement of Assets and Liabilities. The financial statements have been consolidated and include the accounts of the Fund and the FP Subsidiary. All intercompany transactions and balances have been eliminated. For tax purposes, the Fund is required to increase its taxable income by its share of the FP Subsidiary’s income. Net losses incurred by the FP Subsidiary cannot offset income earned by

franklintempleton.com Semiannual Report         25

FRANKLIN ALTERNATIVE STRATEGIES FUNDS                 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)                

Franklin Pelagos Commodities Strategy Fund (continued)

1. Organization and Significant Accounting Policies (continued)

c. Investments in FPC Holdings Corp. (FP Subsidiary) (continued)

the Fund and cannot be carried back or forward by the FP Subsidiary to offset income from prior or future years. At November 30, 2018, the net assets of the FP Subsidiary were $57,765,730, representing 21.2% of the Fund’s consolidated net assets. The Fund’s investment in the FP Subsidiary is limited to 25% of consolidated assets.

d. Income Taxes

It is the Fund’s policy to qualify as a regulated investment company under the Internal Revenue Code. The Fund intends to distribute to shareholders substantially all of its taxable income and net realized gains to relieve it from federal income and excise taxes. As a result, no provision for U.S. federal income taxes is required.

The Fund may recognize an income tax liability related to its uncertain tax positions under U.S. GAAP when the uncertain tax position has a less than 50% probability that it will be sustained upon examination by the tax authorities based on its technical merits. As of November 30, 2018, the Fund has determined that no tax liability is required in its consolidated financial statements related to uncertain tax positions for any open tax years (or expected to be taken in future tax years). Open tax years are those that remain subject to examination and are based on the statute of limitations in each jurisdiction in which the Fund invests.

e. Security Transactions, Investment Income, Expenses and Distributions

Security transactions are accounted for on trade date. Realized gains and losses on security transactions are determined on a specific identification basis. Interest income and estimated expenses are accrued daily. Amortization of premium and accretion of discount on debt securities are included in interest income. Dividend income is recorded on the ex-dividend date. Distributions to shareholders are recorded on the ex-dividend date. Distributable earnings are determined according to income

tax regulations (tax basis) and may differ from earnings recorded in accordance with U.S. GAAP. These differences may be permanent or temporary. Permanent differences are reclassified among capital accounts to reflect their tax character. These reclassifications have no impact on net assets or the results of operations. Temporary differences are not reclassified, as they may reverse in subsequent periods.*

Common expenses incurred by the Trust are allocated among the Funds based on the ratio of net assets of each Fund to the combined net assets of the Trust or based on the ratio of number of shareholders of each Fund to the combined number of shareholders of the Trust. Fund specific expenses are charged directly to the Fund that incurred the expense.

Realized and unrealized gains and losses and net investment income, excluding class specific expenses, are allocated daily to each class of shares based upon the relative proportion of net assets of each class. Differences in per share distributions by class are generally due to differences in class specific expenses.

f. Accounting Estimates

The preparation of financial statements in accordance with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the amounts of income and expenses during the reporting period. Actual results could differ from those estimates.

g. Guarantees and Indemnifications

Under the Trust’s organizational documents, its officers and trustees are indemnified by the Trust against certain liabilities arising out of the performance of their duties to the Trust. Additionally, in the normal course of business, the Trust, on behalf of the Fund, enters into contracts with service providers that contain general indemnification clauses. The Trust’s maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Trust that have not yet occurred. Currently, the Trust expects the risk of loss to be remote.

*Effective during the current reporting period, it is no longer required to present certain line items as shown below on the Consolidated Statements of Changes in Net Assets. Such disclosure changes are included in the Consolidated Statements of Changes in Net Assets, therefore prior period amounts are presented below.

26         Semiannual Report franklintempleton.com

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Franklin Pelagos Commodities Strategy Fund(continued)

For the year ended May 31, 2018, distributions to shareholders were as follows:

Distributions from net investment income:
Class R6	$	(155,612	)

For the year ended May 31, 2018, undistributed net investment income included in net assets was $630,716.

2. Shares of Beneficial Interest

At November 30, 2018, there were an unlimited number of shares authorized (without par value). Transactions in the Fund’s shares were as follows:

	Six Months Ended November 30, 2018						Year Ended May 31, 2018
	Shares			Amount			Shares			Amount
Class A Shares:
Shares solda		352,221		$	2,274,865			397,914			$ 2,583,465
Shares redeemed		(125,774	)		(813,059	)		(227,728	)		(1,462,980)
Net increase (decrease)		226,447		$	1,461,806			170,186			$ 1,120,485
Class C Shares:
Shares sold		12,016		$	75,717			66,363			$417,943
Shares redeemeda		(68,642	)		(428,955	)		(51,364	)		(321,179)
Net increase (decrease)		(56,626	)	$	(353,238	)		14,999			$96,764
Class R Shares:
Shares sold		21		$	134			47			$306
Shares redeemed		(564	)		(3,604	)		(18	)		(122)
Net increase (decrease)		(543	)	$	(3,470	)		29			$184
Class R6 Shares:
Shares sold		1,085,696		$	7,085,037			23,421,423			$156,598,917
Shares issued in reinvestment of distributions		—			—			23,435			155,612
Shares redeemed		(1,292,141	)		(8,453,961	)		(1,097,586	)		(7,070,852)
Net increase (decrease)		(206,445	)	$	(1,368,924	)		22,347,272			$149,683,677
Advisor Class Shares:
Shares sold		79,400		$	518,191			222,426			$ 1,453,033
Shares redeemed		(36,992	)		(243,440	)		(303,092	)		(2,014,023)
Net increase (decrease)		42,408		$	274,751			(80,666	)		$(560,990)

^aMay include a portion of Class C shares that were automatically converted to Class A.

3. Transactions with Affiliates

Franklin Resources, Inc. is the holding company for various subsidiaries that together are referred to as Franklin Templeton Investments. Certain officers and trustees of the Trust are also officers and/or directors of the following subsidiaries:

Subsidiary	Affiliation
FASA, LLC (FASA)	Investment manager
Franklin Templeton Services, LLC (FT Services)	Administrative manager
Franklin Templeton Distributors, Inc. (Distributors)	Principal underwriter
Franklin Templeton Investor Services, LLC (Investor Services)	Transfer agent

franklintempleton.com Semiannual Report         27

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Franklin Pelagos Commodities Strategy Fund (continued)

3.   Transactions with Affiliates (continued)

a.   Management Fees

The Fund and FP Subsidiary pay an investment management fee to FASA of 0.85% per year of the average daily net assets of the Fund and FP Subsidiary. Management fees paid by the Fund are reduced on assets invested in the FP Subsidiary, in an amount not to exceed the management fees paid by the FP Subsidiary.

b.   Administrative Fees

Under an agreement with FASA, FT Services provides administrative services to the Fund and FP Subsidiary. The fee is paid by FASA based on the Fund and FP Subsidiary average daily net assets, and is not an additional expense of the Fund or FP Subsidiary.

c.   Distribution Fees

The Board has adopted distribution plans for each share class, with the exception of Class R6 and Advisor Class shares, pursuant to Rule 12b-1 under the 1940 Act. Under the Fund’s Class A reimbursement distribution plan, the Fund reimburses Distributors for costs incurred in connection with the servicing, sale and distribution of the Fund’s shares up to the maximum annual plan rate. Under the Class A reimbursement distribution plan, costs exceeding the maximum for the current plan year cannot be reimbursed in subsequent periods. In addition, under the Fund’s Class C and R compensation distribution plans, the Fund pays Distributors for costs incurred in connection with the servicing, sale and distribution of the Fund’s shares up to the maximum annual plan rate for each class. The plan year, for purposes of monitoring compliance with the maximum annual plan rates, is February 1 through January 31.

The maximum annual plan rates, based on the average daily net assets, for each class, are as follows:

Class A	0.30%
Class C	1.00%
Class R	0.50%

The Board has set the current rate at 0.25% per year for Class A shares until further notice and approval by the Board.

d.   Sales Charges/Underwriting Agreements

Front-end sales charges and contingent deferred sales charges (CDSC) do not represent expenses of the Fund. These charges are deducted from the proceeds of sales of Fund shares prior to investment or from redemption proceeds prior to remittance, as applicable. Distributors has advised the Fund of the following commission transactions related to the sales and redemptions of the Fund’s shares for the period:

Sales charges retained net of commissions paid to unaffiliated brokers/dealers	$	2,142
CDSC retained	$	47

Effective September 10, 2018, the Board approved changes to certain front-end sales charges and dealer commissions on Class A shares. Further details are disclosed in the Fund’s Prospectus.

e.   Transfer Agent Fees

Each class of shares pays transfer agent fees to Investor Services for its performance of shareholder servicing obligations. The fees are based on an annualized asset based fee of 0.02% plus a transaction based fee. In addition, each class reimburses Investor Services for out of pocket expenses incurred and, except for Class R6, reimburses shareholder servicing fees paid to third parties. These fees are allocated daily based upon their relative proportion of such classes’ aggregate net assets. Class R6 pays Investor Services transfer agent fees specific to that class.

28         Semiannual Report franklintempleton.com

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Franklin Pelagos Commodities Strategy Fund (continued)

For the period ended November 30, 2018, the Fund paid transfer agent fees of $47,245, of which $37,271 was retained by Investor Services.

f.    Investments in Affiliated Management Investment Companies

The Fund invests in one or more affiliated management investment companies for purposes other than exercising a controlling influence over the management or policies. Management fees paid by the Fund are waived on assets invested in the affiliated management investment companies, as noted in the Consolidated Statement of Operations, in an amount not to exceed the management and administrative fees paid directly or indirectly by each affiliate. During the period ended November 30, 2018, the Fund held investments in affiliated management investment companies as follows:

	Number of Shares Held at Beginning of Period		Gross Additions		Gross Reductions			Number of Shares Held at End of Period		Value at End of Period		Dividend Income		Realized Gain (Loss)		Net Change in Unrealized Appreciation (Depreciation)
Non-Controlled Affiliates
Institutional Fiduciary Trust Money Market Portfolio, 1.91%		556,761		111,903,905		(107,801,581	)		4,659,085		$4,659,085		$29,269		$     —		$     —

g.    Waiver and Expense Reimbursements

FASA and Investor Services have contractually agreed in advance to waive or limit their respective fees and to assume as their own expense certain expenses otherwise payable by the Fund so that the expenses (excluding distribution fees, acquired fund fees and expenses and certain non-routine expenses or costs, including those relating to litigation, indemnification, reorganizations, and liquidations) for each class of the Fund do not exceed 0.95% and Class R6 does not exceed 0.58% based on the average net assets of each class until September 30, 2019. Total expenses waived or paid are not subject to recapture subsequent to the Fund’s fiscal year end.

Prior to October 1, 2018, expenses (excluding certain fees and expenses as previously disclosed) for Class R6 were limited to 0.63% based on the average net assets of the class.

h.    Other Affiliated Transactions

At November 30, 2018, the shares of the Fund were owned by the following entities:

	Shares		Percentage of Outstanding Sharesa
Franklin Moderate Allocation Fund		15,811,560		36.9%
Franklin Growth Allocation Fund		10,095,766		23.5%
Franklin Conservative Allocation Fund		10,044,826		23.4%
Franklin LifeSmart 2025 Retirement Target Fund		1,029,685		2.4%
Franklin LifeSmart 2035 Retirement Target Fund		926,863		2.2%
Franklin Real Return Fund		897,760		2.1%
Franklin LifeSmart 2045 Retirement Target Fund		649,592		1.5%
Franklin LifeSmart 2030 Retirement Target Fund		410,730		1.0%
Franklin LifeSmart 2040 Retirement Target Fund		334,620		0.8%
Franklin LifeSmart 2020 Retirement Target Fund		327,165		0.8%
Franklin LifeSmart 2050 Retirement Target Fund		290,284		0.7%
Franklin LifeSmart 2055 Retirement Target Fund		105,738		0.2%
Franklin NextStep Moderate Fund		41,744		0.1%
Franklin NextStep Growth Fund		22,003		0.1%
		40,988,336		95.7%

^aInvestment activities of significant shareholders could have a material impact on the Fund.

franklintempleton.com Semiannual Report           29

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Franklin Pelagos Commodities Strategy Fund (continued)

4. Expense Offset Arrangement

The Fund has entered into an arrangement with its custodian whereby credits realized as a result of uninvested cash balances are used to reduce a portion of the Fund’s custodian expenses. During the period ended November 30, 2018, the custodian fees were reduced as noted in the Consolidated Statement of Operations.

5. Income Taxes

For tax purposes, capital losses may be carried over to offset future capital gains, if any. At May 31, 2018, the capital loss carryforwards were as follows:

Capital loss carryforwards not subject to expiration:
Short Term	$	8,605
Long Term		221,851
Total capital loss carryforwards	$	230,456

At November 30, 2018, the cost of investments and net unrealized appreciation (depreciation) for income tax purposes were as follows:

Cost of investments	$292,769,900
Unrealized appreciation	$1,282,405
Unrealized depreciation	(21,853,051)
Net unrealized appreciation (depreciation)	$(20,570,646)

Differences between income and/or capital gains as determined on a book basis and a tax basis are primarily due to differing treatment of investments in the FP Subsidiary.

6. Investment Transactions

Sales of investments (excluding short term securities) for the period ended November 30, 2018, aggregated $10,000,000. There were no purchases of investments (other than short term securities) for the period ended November 30, 2018.

7. Other Derivative Information

At November 30, 2018, the Fund’s investments in derivative contracts are reflected in the Consolidated Statement of Assets and Liabilities as follows:

	Asset Derivatives				Liability Derivatives
Derivative Contracts Not Accounted for as Hedging Instruments	Consolidated Statement of Assets and Liabilities Location	Fair Value			Consolidated Statement of Assets and Liabilities Location	Fair Value
Commodity contracts	Variation margin on futures contracts	$	1,260,919	a	Variation margin on futures contracts	$	2,815,485	a
	Unrealized appreciation on OTC swap contracts		—		Unrealized depreciation on OTC swap contracts		2,702,508
Totals		$	1,260,919			$	5,517,993

^aThis amount reflects the cumulative appreciation (depreciation) of futures contracts as reported in the Consolidated Statement of Investments. Only the variation margin receivable/payable at period end is separately reported within the Consolidated Statement of Assets and Liabilities. Prior variation margin movements were recorded to cash upon receipt or payment.

30         Semiannual Report franklintempleton.com

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Franklin Pelagos Commodities Strategy Fund(continued)

For the period ended November 30, 2018, the effect of derivative contracts in the Fund’s Consolidated Statement of Operations was as follows:

Derivative Contracts Not Accounted for as Hedging Instruments	Consolidated Statement of Operations Location	Net Realized Gain (Loss) for the Period	Consolidated Statement of Operations Location	Net Change in Unrealized Appreciation (Depreciation) for the Period
	Net realized gain (loss) from:		Net change in unrealized
			appreciation (depreciation) on:
Commodity contracts	Futures contracts	$(1,457,361)	Futures contracts	$(2,415,927)
	Swap contracts	(16,125,952)	Swap contracts	(6,489,131)
Totals		$(17,583,313)		$(8,905,058)

For the period ended November 30, 2018, the average month end notional amount of futures contracts and swap contracts represented $54,868,896 and $271,528,571, respectively.

At November 30, 2018, the Fund’s OTC derivative assets and liabilities are as follows:

	Gross Amounts of Assets and Liabilities Presented in the Consolidated Statement of Assets and  Liabilities
	Assetsa		Liabilitiesa
Derivatives
Swap contracts		$—		$2,702,508

^aAbsent an event of default or early termination, OTC derivative assets and liabilities are presented gross and not offset in the Consolidated Statement of Assets and Liabilities.

At November 30, 2018, the Fund’s OTC derivative assets, which may be offset against the Fund’s OTC derivative liabilities and collateral received from the counterparty, are as follows:

			Amounts Not Offset in the Consolidated Statement of Assets and Liabilities
	Gross Amounts of Liabilities Presented in the Consolidated Statement of Assets and Liabilities		Financial Instruments Available for Offseta		Financial Instruments Collateral Pledgedb,c			Cash Collateral Pledged		Net Amount (Not less than zero)
Counterparty
MSCS		$2,702,508		$ —		$(2,702,508	)		$ —		$—

^a At November 30, 2018, the Fund had no OTC derivative assets.

^bIn some instances, the collateral amount disclosed in the table above was adjusted due to the requirement to limit the collateral amount to avoid the effect of overcollateralization. Actual collateral received and/or pledged may be more than the amount disclosed herein.

^cSee the accompanying Consolidated Statement of Investments for securities pledged as collateral for derivatives.

See Note 1(b) regarding derivative financial instruments.

See Abbreviations on page 33.

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FRANKLIN ALTERNATIVE STRATEGIES FUNDS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Franklin Pelagos Commodities Strategy Fund (continued)

8. Credit Facility

The Fund, together with other U.S. registered and foreign investment funds (collectively, Borrowers), managed by Franklin Templeton Investments, are borrowers in a joint syndicated senior unsecured credit facility totaling $2 billion (Global Credit Facility) which matures on February 8, 2019. This Global Credit Facility provides a source of funds to the Borrowers for temporary and emergency purposes, including the ability to meet future unanticipated or unusually large redemption requests.

Under the terms of the Global Credit Facility, the Fund shall, in addition to interest charged on any borrowings made by the Fund and other costs incurred by the Fund, pay its share of fees and expenses incurred in connection with the implementation and maintenance of the Global Credit Facility, based upon its relative share of the aggregate net assets of all of the Borrowers, including an annual commitment fee of 0.15% based upon the unused portion of the Global Credit Facility. These fees are reflected in other expenses in the Consolidated Statement of Operations. During the period ended November 30, 2018, the Fund did not use the Global Credit Facility.

9. Fair Value Measurements

The Fund follows a fair value hierarchy that distinguishes between market data obtained from independent sources (observable inputs) and the Fund’s own market assumptions (unobservable inputs). These inputs are used in determining the value of the Fund’s financial instruments and are summarized in the following fair value hierarchy:

• Level 1 – quoted prices in active markets for identical financial instruments

• Level 2 – other significant observable inputs (including quoted prices for similar financial instruments, interest rates, prepayment speed, credit risk, etc.)

• Level 3 – significant unobservable inputs (including the Fund’s own assumptions in determining the fair value of financial instruments)

The input levels are not necessarily an indication of the risk or liquidity associated with financial instruments at that level.

A summary of inputs used as of November 30, 2018, in valuing the Fund’s assets and liabilities carried at fair value, is as follows:

	Level 1		Level 2		Level 3		Total
Assets:
Investments in Securities:a
U.S. Government and Agency Securities	$	—	$	9,924,239	$	—	$	9,924,239
Short Term Investments		261,063,002		5,465,000		—		266,528,002
Total Investments in Securities	$	261,063,002	$	15,389,239	$	—	$	276,452,241
Other Financial Instruments:
Futures Contracts	$	1,260,919	$	—	$	—	$	1,260,919
Liabilities:
Other Financial Instruments:
Futures Contracts	$	2,815,485	$	—	$	—	$	2,815,485
Swap Contracts.		—		2,702,508		—		2,702,508
Total Other Financial Instruments	$	2,815,485	$	2,702,508	$	—	$	5,517,993

^aFor detailed categories, see the accompanying Consolidated Statement of Investments.

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FRANKLIN ALTERNATIVE STRATEGIES FUNDS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Franklin Pelagos Commodities Strategy Fund (continued)

10. Subsequent Events

The Fund has evaluated subsequent events through the issuance of the consolidated financial statements and determined that no events have occurred that require disclosure.

Abbreviations

Counterparty		Selected Portfolio
MSCS	Morgan Stanley Capital Services LLC	FFCB	Federal Farm Credit Bank
		FHLMC	Federal Home Loan Mortgage Corp.

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FRANKLIN ALTERNATIVE STRATEGIES FUNDS

FRANKLIN PELAGOS COMMODITIES STRATEGY FUND

Shareholder Information

Proxy Voting Policies and Procedures

The Fund’s investment manager has established Proxy Voting Policies and Procedures (Policies) that the Fund uses to determine how to vote proxies relating to portfolio securities. Shareholders may view the Fund’s complete Policies online at franklintempleton.com. Alternatively, shareholders may request copies of the Policies free of charge by calling the Proxy Group collect at (954) 527-7678 or by sending a written request to: Franklin Templeton Companies, LLC, 300 S.E. 2nd Street, Fort Lauderdale, FL 33301, Attention: Proxy Group. Copies of the Fund’s proxy voting records are also made available online at franklintempleton.com and posted on the U.S. Securities and Exchange Commission’s website at sec.gov and reflect the most recent 12-month period ended June 30.

Quarterly Consolidated Statement of Investments

The Trust, on behalf of the Fund, files a complete consolidated statement of investments with the U.S. Securities and Exchange Commission for the first and third quarters for each fiscal year on Form N-Q. Shareholders may view the filed Form N-Q by visiting the Commission’s website at sec.gov. The filed form may also be viewed and copied at the Commission’s Public Reference Room in Washington, DC. Information regarding the operations of the Public Reference Room may be obtained by calling (800) SEC-0330.

34         Semiannual Report franklintempleton.com

Semiannual Report and Shareholder Letter Franklin Pelagos Commodities Strategy Fund   Investment Manager FASA, LLC   Distributor Franklin Templeton Distributors, Inc. (800) DIAL BEN^® / 342-5236 franklintempleton.com   Shareholder Services (800) 632-2301

Authorized for distribution only when accompanied or preceded by a summary prospectus and/or prospectus. Investors should

carefully consider a fund’s investment goals, risks, charges and expenses before investing. A prospectus contains this and other

information; please read it carefully before investing.

To help ensure we provide you with quality service, all calls to and from our service areas are monitored and/or recorded.

© 2018-2019 Franklin Templeton Investments. All rights reserved. 995 S 01/19

Semiannual Report and Shareholder Letter November 30, 2018

Franklin K2 Long Short Credit Fund

A SERIES OF FRANKLIN ALTERNATIVE STRATEGIES FUNDS

Sign up for electronic delivery at franklintempleton.com/edelivery

Franklin Templeton Investments

Successful investing begins with ambition. And achievement only comes when you reach for it. That’s why we continually strive to deliver better outcomes for investors. No matter what your goals are, our deep, global investment expertise allows us to offer solutions that can help.

During our more than 70 years of experience, we’ve managed through all kinds of markets—up, down and those in between. We’re always preparing for what may come next. It’s because of this, combined with our strength as one of the world’s largest asset managers that we’ve earned the trust of millions of investors around the world.

Dear Fellow Shareholder:

During the six months ended November 30, 2018, global markets benefited from crude oil price gains through the end of September, upbeat economic data in certain regions, generally healthy corporate earnings, and optimism near period-end that the U.S. Federal Reserve would raise interest rates at a slower pace than during the past two years. However, global markets also reflected investor concerns about stricter regulation of technology companies, U.S. and European Union political uncertainties, changing interest-rate policies of major central banks, and how the U.S.-China trade dispute could affect global growth and corporate earnings. In this environment, global developed stock markets, as measured by the MSCI World Index, had a -1.45% total return for the period.¹ Global emerging market stocks, as measured by the MSCI Emerging Markets Index, had a -9.68% total return.¹ Global government bonds, as measured by the FTSE World Government Bond Index, had a -2.51% total return.¹

We are committed to our long-term perspective and disciplined investment approach as we conduct a rigorous, 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.

On the following pages, the Fund’s portfolio management team reviews investment decisions that pertain to performance during the past six months in light of the economic environment and other factors. 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 continuing to serve your investment needs in the years ahead.

Sincerely,

Madison S. Gulley, CFA

President and Chief Executive Officer – Investment Management

Franklin Alternative Strategies Funds

This letter reflects our analysis and opinions as of November 30, 2018, 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.

CFA^® is a trademark owned by CFA Institute.

1. Source: Morningstar.

See www.franklintempletondatasources.com for additional data provider information.

Not FDIC Insured | May Lose Value | No Bank Guarantee

franklintempleton.com Not part of the semiannual report 1

Contents

Semiannual Report

Franklin K2 Long Short Credit Fund	3
Performance Summary	7
Your Fund’s Expenses	9
Financial Highlights and Statement of Investments	10
Financial Statements	32
Notes to Financial Statements	36
Shareholder Information	50

Visit franklintempleton.com for fund updates, to access your account, or to find helpful financial planning tools.

2 Semiannual Report franklintempleton.com

Semiannual Report

Franklin K2 Long Short Credit Fund

This semiannual report for Franklin K2 Long Short Credit Fund covers the period ended November 30, 2018.

Your Fund’s Goal and Main Investments

The Fund seeks total return through a combination of current income, capital preservation and capital appreciation. The Fund seeks to achieve its investment goal by allocating its assets across multiple non-traditional or alternative fixed income and credit strategies, including, but not limited to, some or all of the following: credit long short, structured credit and emerging market fixed income. The Fund is structured as a multi-manager fund, meaning the Fund’s assets are managed by multiple subadvisors, and the Fund’s investment manager has overall responsibility for the Fund’s investments.

Under normal market conditions, the Fund invests at least 80% of its net assets, plus the amount of any borrowings for investment purposes, in credit-related investments. The Fund invests in a wide range of securities and other investments including, but not limited to: corporate bonds, mortgage-backed securities (MBS) and asset-backed securities (ABS), U.S. government and agency securities, collateralized debt and loan obligations, foreign government and supranational debt securities, loans and loan participations and derivatives with similar economic characteristics. The Fund may also invest in repurchase agreements, reverse repurchase agreements, mortgage real estate investment trusts (REITs) and other similar transactions.

Performance Overview

The Fund’s Class A shares posted a +0.86% cumulative total return for the six months under review. For comparison, the Fund’s primary benchmark, the HFRX Fixed Income-Credit Index, which measures performance of strategies with exposure to credit across a broad continuum of credit substrategies, had a -1.52% total return for the same period.¹ Also for comparison, the Fund’s secondary benchmark, the ICE BofA Merrill Lynch U.S. 3-Month Treasury Bill Index, which is an index of short-term U.S. government securities with a remaining term to final

maturity of less than three months, posted a +1.04% total return.² You can find more of the Fund’s performance data in the Performance Summary beginning on page 7.

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) 342-5236.

Economic and Market Overview

The global economy expanded during the six months under review, despite weakness in certain regions. Global developed and emerging market stocks were aided by higher crude oil prices in the first four months of the period, encouraging corporate earnings reports, and indications from the U.S. Federal Reserve (Fed) near period-end that led to expectations of a slower pace of interest-rate increases. However, various factors weighed on global markets during the period, including concerns about tighter regulation of technology companies, political uncertainties in the U.S. and the European Union, major central banks’ interest-rate path and unwinding of monetary stimulus measures, and the impact of the U.S.-China trade dispute on global growth and corporate earnings. In this environment, global stocks, as measured by the MSCI All Country World Index, had a -2.44% total return for the six months ended November 30, 2018.²

The U.S. economy grew during the six-month period. The economy grew faster in 2018’s second quarter, driven by consumer spending, business investment, exports and government spending, but moderated in the third quarter due to declines in exports and housing investment. The unemployment rate declined from 3.8% in May 2018 to a nearly 49-year low of 3.7% at period-end.³ Annual inflation, as measured by the Consumer Price Index, decreased from 2.8% in May 2018 to 2.2% at period-end.³ The Fed raised its target range for the federal funds

1. Source: FactSet. Hedge Fund Research, Inc. – www.hedgefundresearch.com. The HFRX Fixed Income-Credit Index is being used under license from Hedge Fund Research, Inc., which does not endorse or approve of any of the contents of this report.

2. 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. Unlike most asset class indexes, HFR Index returns reflect fees and expenses.

3. Source: U.S. Bureau of Labor Statistics.

See www.franklintempletondatasources.com 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 15.

franklintempleton.com Semiannual Report 3

FRANKLIN K2 LONG SHORT CREDIT FUND

rate in June and September 2018 and continued reducing its balance sheet as part of an ongoing plan to normalize monetary policy. Near period-end, Fed Chair Jerome Powell, in his speech at the Economic Club of New York, mentioned the Fed’s current policy rate was “just below” estimates of what it believed would be neutral for economic growth, suggesting it might slow its pace of rate increases.

In Europe, the U.K.’s quarterly economic growth accelerated in 2018’s second and third quarters, amid growth in the services sector. The Bank of England raised its key policy rate once during the review period. The eurozone’s quarterly growth moderated in the third quarter. The bloc’s annual inflation rate ended the period higher than in May 2018. The European Central Bank (ECB) kept its benchmark interest rate unchanged during the period. In October 2018, the ECB further reduced its monthly bond purchases and reiterated its plan to conclude the program at the end of 2018, while keeping interest rates unchanged through at least the summer of 2019.

In Asia, Japan’s quarterly gross domestic product (GDP) grew in 2018’s second quarter but contracted in the third quarter. The Bank of Japan left its benchmark interest rate unchanged during the period and continued its monetary stimulus measures.

In emerging markets, Brazil’s quarterly GDP growth accelerated in 2018’s third quarter. Russia’s annual GDP growth rate accelerated in 2018’s second quarter but moderated in the third quarter. The Bank of Russia raised its key interest rate once during the period. China’s annual GDP growth moderated in 2018’s second and third quarters. The People’s Bank of China left its benchmark interest rate unchanged during the period, but it took measures to improve financial liquidity to mitigate the negative effects of the U.S.-China trade dispute and support economic growth. Overall, emerging market stocks, as measured by the MSCI Emerging Markets Index, had a -9.68% total return during the period.²

Investment Strategy

We manage the Fund using a multi-manager approach. While we have overall responsibility for the Fund’s investments, we allocate the Fund’s assets to multiple subadvisors, each of whom independently manages a separate portion of the Fund’s portfolio in accordance with some or all of the following strategies: credit long short, structured credit and emerging market fixed income. We allocate the Fund’s assets among these strategies utilizing a top-down approach, generating the Fund’s strategy and subadvisor weightings by taking into account market conditions, risk factors, diversification, liquidity, transparency, and other investment options, among other things.

We allocate the Fund’s assets to specific subadvisors utilizing a bottom-up approach, selecting subadvisors and their weighting within the Fund’s portfolio by taking into account their correlation to various markets and to each other, risk profiles and their return expectations.

Credit long short strategies seek to isolate issuer-specific exposure, while limiting general market risks, by taking long and/or short positions in debt securities and other related instruments. Structured credit strategies aim to profit from trading in interest-rate sensitive securities such as residential and commercial MBS, REITs, credit default swaps on various indexes, collateralized loan obligations and ABS. Emerging market fixed income strategies invest in corporate and/or sovereign securities in emerging markets countries with a focus on fixed income. The Fund may invest in debt securities of any credit quality or rating, including high yield (“junk”) bonds, distressed debt securities (securities of companies that are, or are about to be, involved in reorganizations, financial restructurings, or bankruptcy) and securities that are in default. The Fund may engage in active and frequent trading as part of its investment strategies.

What are swap agreements?

Swap agreements, such as interest-rate, currency and credit default swaps, are contracts between the Fund and another party (the swap counterparty). In a basic swap transaction, the Fund agrees with the swap counterparty to exchange the returns (or differentials in rates of return) earned or realized on a particular “notional amount” of underlying instruments. The notional amount is the set amount selected by the parties as the basis on which to calculate the obligations that they have agreed to exchange. The parties typically do not actually exchange the notional amount. Instead, they agree to exchange the returns that would be earned or realized if the notional amount were invested in given instruments or at given interest rates.

The Fund takes long and/or short positions in a wide range of asset classes, including credit, fixed income, equities and currencies, among others. The Fund may gain long or short exposure to select instruments by utilizing derivatives, engaging in short sales or entering into a series of purchase and sale contracts or repurchase agreements. Long positions benefit from an increase in the price of the underlying instrument, while short positions benefit from a decrease in that price. The Fund may also use derivatives for hedging and nonhedging (investment) purposes, although no subadvisor is required to hedge any of the Fund’s positions or to use derivatives. Such derivative investments may include currency forward contracts; futures contracts; put and call options on currencies, securities, indexes and exchange-traded funds; and swaps. The Fund may engage in active and frequent trading as part of its investment strategies.

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FRANKLIN K2 LONG SHORT CREDIT FUND

Subadvisors

11/30/18

Credit Long Short

Apollo Credit Management LLC

Chatham Asset Management, LLC

Structured Credit

Ellington Global Asset Management, L.L.C.

Medalist Partners, LP

Emerging Markets Fixed Income

Emso Asset Management Limited

What is a currency forward contract?

A currency forward contract is an agreement between the Fund and a counterparty to buy or sell a foreign currency in exchange for another currency at a specific exchange rate on a future date. Currency forward contracts are privately traded in the interbank market, not on a centralized exchange.

What is a futures contract?

A futures contract is an agreement between the Fund and a counterparty made through a U.S. or foreign futures exchange to buy or sell an underlying instrument or asset at a specific price on a future date.

What is an option?

An option is a contract to buy or sell a specific financial product known as the option’s underlying instrument at a specific price. The buyer of an option has the right, but not the obligation, to buy or sell the underlying instrument at or until a specified expiration date. Conversely, the seller (“writer”) of an option who opens a transaction is obligated to buy or sell the underlying instrument should the option holder exercise that right.

Manager’s Discussion

The Fund’s subadvisors for the six months under review were Apollo Credit Management, Chatham Asset Management, Ellington Global Asset Management, Emso Asset Management and Medalist Partners. All subadvisors contributed to the Fund’s positive performance for the six-month period, led by Apollo and Ellington. These subadvisors are also listed in the Subadvisors table on this page.

In terms of strategy performance, the largest contributor to the Fund’s performance was credit long short, followed by structured credit and emerging markets fixed income. All strategies contributed to positive performance.

Portfolio Composition*

Based on Total Investments as of 11/30/18

*Figures represent the net Fund exposure and include certain derivatives held in the portfolio (or their underlying reference assets) and may not total 100% or may be negative due to rounding, use of any derivatives or other factors.

The percentages of the Fund’s long and short positions at period-end are listed in the Portfolio Composition bar chart on this page.

By asset class, the top contributors to the Fund’s aggregate performance were credit and currency, while interest-rate exposures detracted.

In terms of aggregate sector exposures, the top performance drivers for the Fund were consumer discretionary, MBS and ABS. In contrast, energy and equity index hedges dampened absolute performance.

Credit long short subadvisors Apollo and Chatham benefited from long positioning in the consumer discretionary, real estate and communication services sectors as U.S. economic growth persisted. In contrast, portfolio hedges for U.S. large-capitalization stocks and long energy sector positions generally detracted from performance, although they proved beneficial in October and November as equity markets sold off.

Within the structured credit subadvisors, MBS and ABS helped drive performance for Ellington and Medalist, with net interest a key contributor for these sectors. No sector detracted from the strategy.

Emso, the emerging markets fixed income subadvisor, also contributed to the Fund’s returns. Short exposures, especially in U.K. and Czech Republic interest rates, as well as the South African currency, benefited results. However, performance was hindered by long exposures to sovereign government debt in Argentina and interest rates in Mexico.

franklintempleton.com Semiannual Report 5

FRANKLIN K2 LONG SHORT CREDIT FUND

Thank you for your participation in Franklin K2 Long Short Credit Fund. We look forward to continuing to serve your investment needs.

Charmaine Chin Co-Lead Portfolio Manager

Jeff Schmidt Co-Lead Portfolio Manager

Robert Christian Co-Lead Portfolio Manager

The foregoing information reflects our analysis, opinions and portfolio holdings as of November 30, 2018, 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.

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FRANKLIN K2 LONG SHORT CREDIT FUND

Performance Summary as of November 30, 2018

The performance table does 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 11/30/18¹

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 5.50% and the minimum is 0%. Class A: 5.50% maximum initial sales charge; Advisor Class: no sales charges. For other share classes, visit franklintempleton.com.

Share Class	Cumulative Total Return2		Average Annual Total Return3
A4
6-Month		+0.86%		-4.68%
1-Year		+1.80%		-3.82%
Since Inception (9/8/15)		+15.80%		+2.84%
Advisor
6-Month		+0.86%		+0.86%
1-Year		+2.02%		+2.02%
Since Inception (9/8/15)		+16.18%		+4.76%

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) 342-5236.

See page 8 for Performance Summary footnotes.

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FRANKLIN K2 LONG SHORT CREDIT FUND

PERFORMANCE SUMMARY

Total Annual Operating Expenses⁵

Share Class	With Waiver		Without Waiver
A		3.11%		3.59%
Advisor		2.86%		3.34%

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 market values of securities owned by the Fund will go up or down, sometimes rapidly or unpredictably. The Fund’s performance depends on the manager’s skill in selecting, overseeing and allocating Fund assets to the subadvisors. The Fund is actively managed and could experience losses if the manager’s and subadvisors’ judgment about particular Fund portfolio investments prove to be incorrect. Some subadvisors may have little or no experience managing the assets of a registered investment company. Bond prices generally move in the opposite direction of interest rates. Changes in the financial strength of a bond issuer or in a bond’s credit rating may affect its value. Lower-rated or high-yield debt securities (junk bonds) involve greater credit risk, including the possibility of default or bankruptcy. Liquidity risk exists when securities become more difficult to sell, or are unable to be sold, at the price at which they’ve been valued. Investments in derivatives involve costs and create economic leverage, which may result in significant volatility and cause the Fund to participate in losses (as well as gains) that significantly exceed the Fund’s initial investment. The Fund may make short sales of securities, which involves the risk that losses may exceed the original amount invested. The Fund’s prospectus also includes a description of the main investment risks.

1. The Fund has an expense reduction contractually guaranteed through 9/30/19. Fund investment results reflect the expense reduction; without this reduction, 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, if any, has not been annualized.

4. Prior to 9/10/18, these shares were offered at a higher initial sales charge of 5.75%, thus actual returns would have differed. Total returns with sales charges have been restated to reflect the current maximum initial sales charge of 5.50%.

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.

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FRANKLIN K2 LONG SHORT CREDIT 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 $64.50.

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.

			Actual (actual return after expenses)				Hypothetical (5% annual return before expenses)
Share Class	Beginning Account Value 6/1/18		Ending Account Value 11/30/18		Expenses Paid During Period 6/1/18–11/30/181,2		Ending Account Value 11/30/18		Expenses Paid During Period 6/1/18–11/30/181,2		Net Annualized Expense Ratio2
A	$	1,000	$	1,008.60	$	14.80	$	1,010.33	$	14.82		2.94	%
C	$	1,000	$	1,003.90	$	19.14	$	1,005.97	$	19.16		3.81	%
R	$	1,000	$	1,006.70	$	16.50	$	1,008.62	$	16.52		3.28	%
R6	$	1,000	$	1,008.60	$	14.10	$	1,011.03	$	14.12		2.80	%
Advisor	$	1,000	$	1,008.60	$	14.15	$	1,010.98	$	14.17		2.81	%

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 183/365 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 Semiannual Report 9

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

Financial Highlights

Franklin K2 Long Short Credit Fund

	Six Months Ended November 30, 2018 (unaudited)			Year Ended May 31,
				2018			2017			2016a
Class A
Per share operating performance (for a share outstanding throughout the period)
Net asset value, beginning of period	$	10.50		$	10.49		$	10.15		$	10.00
Income from investment operationsb:
Net investment incomec		0.19			0.29			0.23			0.21
Net realized and unrealized gains (losses)		(0.10	)		0.08			0.53			0.08
Total from investment operations		0.09			0.37			0.76			0.29
Less distributions from:
Net investment income		—			(0.19	)		(0.32	)		(0.08	)
Net realized gains		—			(0.17	)		(0.10	)		(0.06	)
Total distributions		—			(0.36	)		(0.42	)		(0.14	)
Net asset value, end of period	$	10.59		$	10.50		$	10.49		$	10.15
Total returnd		0.86%			3.63%			7.58%			2.99%
Ratios to average net assetse
Expenses before waiver, payments by affiliates and expense reductionsf		3.43%			3.51%			3.50%			3.37%
Expenses net of waiver, payments by affiliates and expense reductionsf		2.94%			2.98%	g		2.75%			2.30%	g
Expenses incurred in connection with securities sold short		0.86%			0.89%			0.76%			0.40%
Net investment income		3.50%			2.71%			2.24%			2.85%
Supplemental data
Net assets, end of period (000’s)		$37,974			$45,088			$41,001			$28,198
Portfolio turnover rate		68.46%			251.81%			317.70%			511.62%

^aFor the period September 8, 2015 (commencement of operations) to May 31, 2016.

^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.

^dTotal 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.

^fIncludes dividend and/or interest expense on securities sold short and security borrowing fees, if any. See below for the ratios of such expenses to average net assets for the periods presented. See Note 1(e).

^gBenefit of expense reduction rounds to less than 0.01%.

10 Semiannual Report   |    The accompanying notes are an integral part of these financial statements. franklintempleton.com

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

FINANCIAL HIGHLIGHTS

Franklin K2 Long Short Credit Fund (continued)

	Six Months Ended November 30, 2018 (unaudited)			Year Ended May 31,
				2018			2017			2016a
Class C
Per share operating performance (for a share outstanding throughout the period)
Net asset value, beginning of period	$	10.34		$	10.35		$	10.07		$	10.00
Income from investment operationsb:
Net investment incomec		0.14			0.19			0.14			0.09
Net realized and unrealized gains (losses)		(0.10	)		0.07			0.52			0.12
Total from investment operations		0.04			0.26			0.66			0.21
Less distributions from:
Net investment income		—			(0.10	)		(0.28	)		(0.08	)
Net realized gains		—			(0.17	)		(0.10	)		(0.06	)
Total distributions		—			(0.27	)		(0.38	)		(0.14	)
Net asset value, end of period	$	10.38		$	10.34		$	10.35		$	10.07
Total returnd		0.39%			2.70%			6.56%			2.20%
Ratios to average net assetse
Expenses before waiver, payments by affiliates and expense reductionsf		4.30%			4.37%			4.44%			3.62%
Expenses net of waiver, payments by affiliates and expense reductionsf		3.81%			3.84%	g		3.69%			2.55%	g
Expenses incurred in connection with securities sold short		0.86%			0.89%			0.76%			0.40%
Net investment income		2.63%			1.85%			1.30%			2.60%
Supplemental data
Net assets, end of period (000’s)		$2,763			$2,503			$1,507			$270
Portfolio turnover rate		68.46%			251.81%			317.70%			511.62%

^aFor the period September 8, 2015 (commencement of operations) to May 31, 2016.

^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.

^dTotal 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.

^fIncludes dividend and/or interest expense on securities sold short and security borrowing fees, if any. See below for the ratios of such expenses to average net assets for the periods presented. See Note 1(e).

^gBenefit of expense reduction rounds to less than 0.01%.

franklintempleton.com The accompanying notes are an integral part of these financial statements.    |   Semiannual Report 11

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

FINANCIAL HIGHLIGHTS

Franklin K2 Long Short Credit Fund (continued)

	Six Months Ended November 30, 2018 (unaudited)			Year Ended May 31,
				2018			2017			2016a
Class R
Per share operating performance (for a share outstanding throughout the period)
Net asset value, beginning of period	$	10.41		$	10.41		$	10.10		$	10.00
Income from investment operationsb:
Net investment incomec		0.17			0.25			0.20			0.08
Net realized and unrealized gains (losses)		(0.10	)		0.09			0.53			0.16
Total from investment operations		0.07			0.34			0.73			0.24
Less distributions from:
Net investment income		—			(0.17	)		(0.32	)		(0.08	)
Net realized gains		—			(0.17	)		(0.10	)		(0.06	)
Total distributions		—			(0.34	)		(0.42	)		(0.14	)
Net asset value, end of period	$	10.48		$	10.41		$	10.41		$	10.10
Total returnd		0.67%			3.29%			7.29%			2.48%
Ratios to average net assetse
Expenses before waiver, payments by affiliates and expense reductionsf		3.77%			3.82%			3.83%			3.37%
Expenses net of waiver, payments by affiliates and expense reductionsf		3.28%			3.29%	g		3.08%			2.30%	g
Expenses incurred in connection with securities sold short		0.86%			0.89%			0.76%			0.40%
Net investment income		3.16%			2.40%			1.91%			2.85%
Supplemental data
Net assets, end of period (000’s)		$163			$162			$127			$12
Portfolio turnover rate		68.46%			251.81%			317.70%			511.62%

^aFor the period September 8, 2015 (commencement of operations) to May 31, 2016.

^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.

^dTotal return is not annualized for periods less than one year.

^eRatios are annualized for periods less than one year.

^fIncludes dividend and/or interest expense on securities sold short and security borrowing fees, if any. See below for the ratios of such expenses to average net assets for the periods presented. See Note 1(e).

^gBenefit of expense reduction rounds to less than 0.01%.

12 Semiannual Report   |    The accompanying notes are an integral part of these financial statements. franklintempleton.com

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

FINANCIAL HIGHLIGHTS

Franklin K2 Long Short Credit Fund (continued)

	Six Months Ended November 30, 2018 (unaudited)			Year Ended May 31,
				2018			2017			2016a
Class R6
Per share operating performance (for a share outstanding throughout the period)
Net asset value, beginning of period	$	10.51		$	10.50		$	10.15		$	10.00
Income from investment operationsb:
Net investment incomec		0.19			0.31			0.24			0.23
Net realized and unrealized gains (losses)		(0.10	)		0.08			0.53			0.06
Total from investment operations		0.09			0.39			0.77			0.29
Less distributions from:
Net investment income		—			(0.21	)		(0.32	)		(0.08	)
Net realized gains		—			(0.17	)		(0.10	)		(0.06	)
Total distributions		—			(0.38	)		(0.42	)		(0.14	)
Net asset value, end of period	$	10.60		$	10.51		$	10.50		$	10.15
Total returnd		0.86%			3.76%			7.71%			3.01%
Ratios to average net assetse
Expenses before waiver, payments by affiliates and expense reductionsf		3.38%			3.35%			3.43%			3.35%
Expenses net of waiver, payments by affiliates and expense reductionsf		2.80%			2.83%	g		2.68%			2.28%	g
Expenses incurred in connection with securities sold short		0.86%			0.89%			0.76%			0.40%
Net investment income		3.64%			2.86%			2.31%			2.87%
Supplemental data
Net assets, end of period (000’s)		$174			$13			$13,052			$12,384
Portfolio turnover rate		68.46%			251.81%			317.70%			511.62%

^aFor the period September 8, 2015 (commencement of operations) to May 31, 2016.

^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.

^dTotal return is not annualized for periods less than one year.

^eRatios are annualized for periods less than one year.

^fIncludes dividend and/or interest expense on securities sold short and security borrowing fees, if any. See below for the ratios of such expenses to average net assets for the periods presented. See Note 1(e).

^gBenefit of expense reduction rounds to less than 0.01%.

franklintempleton.com The accompanying notes are an integral part of these financial statements.    |   Semiannual Report 13

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

FINANCIAL HIGHLIGHTS

Franklin K2 Long Short Credit Fund (continued)

	Six Months Ended November 30, 2018 (unaudited)			Year Ended May 31,
				2018			2017			2016a
Advisor Class
Per share operating performance (for a share outstanding throughout the period)
Net asset value, beginning of period	$	10.51		$	10.50		$	10.15		$	10.00
Income from investment operationsb:
Net investment incomec		0.19			0.30			0.24			0.20
Net realized and unrealized gains (losses)		(0.10	)		0.09			0.53			0.09
Total from investment operations		0.09			0.39			0.77			0.29
Less distributions from:
Net investment income		—			(0.21	)		(0.32	)		(0.08	)
Net realized gains		—			(0.17	)		(0.10	)		(0.06	)
Total distributions		—			(0.38	)		(0.42	)		(0.14	)
Net asset value, end of period	$	10.60		$	10.51		$	10.50		$	10.15
Total returnd		0.86%			3.75%			7.70%			2.99%
Ratios to average net assetse
Expenses before waiver, payments by affiliates and expense reductionsf		3.30%			3.37%			3.44%			3.36%
Expenses net of waiver, payments by affiliates and expense reductionsf		2.81%			2.84%	g		2.69%			2.29%	g
Expenses incurred in connection with securities sold short		0.86%			0.89%			0.76%			0.40%
Net investment income		3.63%			2.85%			2.30%			2.86%
Supplemental data
Net assets, end of period (000’s)		$62,114			$45,514			$25,125			$23,058
Portfolio turnover rate		68.46%			251.81%			317.70%			511.62%

^aFor the period September 8, 2015 (commencement of operations) to May 31, 2016.

^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.

^dTotal return is not annualized for periods less than one year.

^eRatios are annualized for periods less than one year.

^fIncludes dividend and/or interest expense on securities sold short and security borrowing fees, if any. See below for the ratios of such expenses to average net assets for the periods presented. See Note 1(e).

^gBenefit of expense reduction rounds to less than 0.01%.

14 Semiannual Report   |    The accompanying notes are an integral part of these financial statements. franklintempleton.com

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

Statement of Investments, November 30, 2018 (unaudited)

Franklin K2 Long Short Credit Fund
		Country		Shares/Rights		Value
	Common Stocks and Other Equity Interests 1.3%
	Capital Markets 0.2%
a	Churchill Capital Corp.		United States		14,458	$	146,026
a	Gores Holdings III Inc.		United States		3,614		36,592
							182,618
	Equity Real Estate Investment Trusts (REITs) 0.6%
b	Northstar Realty Europe Corp.		United States		14,784		241,866
	Vici Properties Inc.		United States		16,616		361,731
							603,597
	Independent Power & Renewable Electricity Producers 0.4%
b	Clearway Energy Inc., A		United States		11,419		205,884
	Clearway Energy Inc., C		United States		8,572		156,525
							362,409
	Media 0.1%
a	Altice Europe NV, A		Netherlands		28,532		69,092
a	Postmedia Network Canada Corp.		Canada		56,068		50,217
							119,309
	Metals & Mining 0.0%†
	Vedanta Ltd., ADR		India		4,386		48,904
	Pharmaceuticals 0.0%†
a	Sanofi, Contingent Value, rts., 12/31/20		France		26,594		13,297
	Total Common Stocks and Other Equity Interests (Cost $1,184,328)						1,330,134
				Principal Amount*
	Convertible Bonds 2.4%
	Automobiles 0.5%
	Tesla Inc., senior note, 0.25%, 3/01/19		United States		454,000		487,766
	Equity Real Estate Investment Trusts (REITs) 0.2%
	iStar Inc., senior note, 3.125%, 9/15/22		United States		283,000		268,200
	Independent Power & Renewable Electricity Producers 0.9%
c	NRG Yield Inc., senior note, 144A, 3.50%, 2/01/19		United States		599,000		599,000
	Pattern Energy Group Inc., senior note, 4.00%, 7/15/20		United States		359,000		355,742
							954,742
	Internet & Direct Marketing Retail 0.2%
	Wayfair Inc., senior note, 0.375%, 9/01/22		United States		144,000		170,773
	Media 0.1%
c	Gannett Co. Inc., senior note, 144A, 4.75%, 4/15/24		United States		152,000		160,876
	Metals & Mining 0.5%
	Royal Gold Inc., senior note, 2.875%, 6/15/19		United States		483,000		482,705
	Total Convertible Bonds (Cost $2,484,610)						2,525,062
	Corporate Bonds and Notes 32.9%
	Automobiles 0.3%
c	Tesla Inc., senior note, 144A, 5.30%, 8/15/25		United States		338,000		293,215
	Building Products 0.1%
c	USG Corp., senior bond, 144A, 4.875%, 6/01/27		United States		69,000		69,259

franklintempleton.com Semiannual Report 15

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin K2 Long Short Credit Fund (continued)

		Country		Principal Amount*		Value
	Corporate Bonds and Notes (continued)
	Commercial Services & Supplies 3.2%
c	GFL Environmental Inc., senior note, 144A, 5.625%, 5/01/22		Canada		101,000	$	95,193
c	Harland Clarke Holdings Corp., 144A,
	senior note, 9.25%, 3/01/21		United States		2,308,500		2,141,134
	senior secured note, 8.375%, 8/15/22		United States		57,000		53,010
	R.R. Donnelley & Sons Co.,
	senior bond, 8.875%, 4/15/21		United States		21,000		22,312
	senior bond, 6.50%, 11/15/23		United States		411,000		406,890
	senior bond, 6.00%, 4/01/24		United States		377,000		372,287
	senior bond, 6.625%, 4/15/29		United States		30,000		28,200
	senior note, 7.00%, 2/15/22		United States		231,000		232,155
							3,351,181
	Communications Equipment 0.4%
c	Riverbed Technology Inc., senior note, 144A, 8.875%, 3/01/23		United States		457,000		381,595
	Construction & Engineering 0.0%†
	Great Lakes Dredge & Dock Corp., senior note, 8.00%, 5/15/22		United States		12,000		12,302
	Construction Materials 0.2%
c	Standard Industries Inc., senior note, 144A, 5.50%, 2/15/23		United States		218,000		214,458
	Consumer Finance 1.0%
c	Everi Payments Inc., senior note, 144A, 7.50%, 12/15/25		United States		735,000		718,462
	Navient Corp., senior note, 6.75%, 6/15/26		United States		385,000		349,388
							1,067,850
	Diversified Financial Services 1.5%
c	One Call Corp., 144A,
	secured note, second lien, 10.00%, 10/01/24		United States		795,000		616,125
	senior secured note, first lien, 7.50%, 7/01/24		United States		932,000		890,060
							1,506,185
	Diversified Telecommunication Services 2.1%
c	Altice France SA, senior secured note, 144A, 8.125%, 2/01/27		France		135,000		132,637
	Frontier Communications Corp., senior note,
	10.50%, 9/15/22		United States		465,000		374,325
	11.00%, 9/15/25		United States		361,000		256,310
	Hughes Satellite Systems Corp., senior secured note, 5.25%, 8/01/26		United States		183,000		171,334
b,c	Intelsat Jackson Holdings SA, senior secured note, first lien, 144A, 9.50%, 9/30/22		Luxembourg		1,046,000		1,210,745
							2,145,351
	Electric Utilities 0.1%
c,d	Vertiv Intermediate Holding Corp., senior note, 144A, PIK, 12.00%, 2/15/22		United States		136,000		131,070
	Energy Equipment & Services 1.5%
c	Transocean Inc., senior note, 144A,
	9.00%, 7/15/23		United States		163,000		167,177
	7.50%, 1/15/26		United States		634,000		592,790
c	Transocean Pontus Ltd., senior secured note, 144A, 6.125%, 8/01/25		United States		227,000		222,460
c	Vantage Drilling International, senior secured note, 144A, 9.25%, 11/15/23		United States		464,000		465,160
	Weatherford International Ltd., senior note, 5.125%, 9/15/20		United States		121,000		102,245
							1,549,832

16 Semiannual Report franklintempleton.com

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin K2 Long Short Credit Fund (continued)

		Country		Principal Amount*		Value
	Corporate Bonds and Notes (continued)
	Equity Real Estate Investment Trusts (REITs) 0.7%
c	AHP Health Partners Inc., senior note, 144A, 9.75%, 7/15/26		United States		535,000	$	536,337
	iStar Inc., senior note, 5.25%, 9/15/22		United States		214,000		204,905
							741,242
	Food & Staples Retailing 0.4%
c	Chobani LLC / Chobani Finance Corp. Inc., senior note, 144A, 7.50%, 4/15/25		United States		102,000		84,023
c	Sigma Holdco BV, senior note, 144A, 7.875%, 5/15/26		Netherlands		311,000		278,345
							362,368
	Food Products 2.8%
c	Dean Foods Co., senior note, 144A, 6.50%, 3/15/23		United States		1,192,000		1,048,960
b,c	JBS USA LLC / Finance Inc., senior bond, 144A, 6.75%, 2/15/28		United States		1,940,000		1,889,075
							2,938,035
	Gas Utilities 0.8%
	Clearway Energy Operating LLC, senior note,
	5.375%, 8/15/24		United States		65,000		61,912
	5.00%, 9/15/26		United States		114,000		104,025
	Pacific Gas & Electric Co.,
	senior bond, 4.25%, 5/15/21		United States		124,000		117,184
	senior bond, 3.25%, 9/15/21		United States		28,000		25,690
	senior bond, 3.25%, 6/15/23		United States		73,000		64,599
	senior bond, 3.85%, 11/15/23		United States		50,000		45,234
	senior bond, 6.05%, 3/01/34		United States		155,000		149,317
	senior bond, 6.35%, 2/15/38		United States		34,000		32,663
	senior note, 2.45%, 8/15/22		United States		70,000		62,078
	c senior note, 144A, 4.25%, 8/01/23		United States		157,000		146,418
							809,120
	Health Care Providers & Services 0.4%
c	CHS / Community Health Systems Inc., senior secured note, 144A, 8.625%, 1/15/24		United States		435,000		443,156
	Hotels, Restaurants & Leisure 1.9%
c	The Enterprise Development Authority, senior note, 144A, 12.00%, 7/15/24		United States		178,000		170,880
c	Golden Nugget Inc., senior note, 144A, 8.75%, 10/01/25		United States		504,000		507,780
c	Mohegan Gaming & Entertainment, senior note, 144A, 7.875%, 10/15/24		United States		1,332,000		1,280,385
							1,959,045
	Household Durables 1.3%
	Beazer Homes USA Inc., senior note, 5.875%, 10/15/27		United States		180,000		148,500
c	K Hovnanian Enterprises Inc., secured note, 144A, 10.00%, 7/15/22		United States		1,009,000		938,370
	William Lyon Homes Inc., senior note,
	6.00%, 9/01/23		United States		92,000		84,870
	5.875%, 1/31/25		United States		254,000		217,805
							1,389,545
	Independent Power & Renewable Electricity Producers 0.8%
c	Atlantica Yield PLC, senior note, 144A, 7.00%, 11/15/19		Spain		796,000		815,900

franklintempleton.com Semiannual Report 17

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin K2 Long Short Credit Fund (continued)

		Country		Principal Amount*		Value
	Corporate Bonds and Notes (continued)
	Industrial Conglomerates 0.4%
	General Electric Co., senior bond,
	6.15%, 8/07/37		United States		217,000	$	205,901
	5.875%, 1/14/38		United States		204,000		190,049
							395,950
	Insurance 0.0%†
c	Ambac Assurance Corp., sub. bond, 144A, 5.10%, 6/07/20		United States		2		3
c,e	Ambac LSNI LLC, senior secured note, 144A, FRN, 7.396%, (3-Month USD LIBOR + 5.00%), 2/12/23		Cayman Islands		8		9
							12
	Leisure Equipment & Products 0.5%
	Mattel Inc.,
	senior bond, 5.45%, 11/01/41		United States		127,000		99,695
	c senior note, 144A, 6.75%, 12/31/25		United States		431,000		407,295
							506,990
	Media 6.8%
c	Altice Luxembourg SA, senior note, 144A, 7.75%, 5/15/22		Luxembourg		299,000		285,919
c	American Media Inc., 144A,
	secured note, second lien, 5.50%, 9/01/21		United States		305,508		305,126
	sub. note, zero cpn., 3/01/22		United States		2,911,010		2,758,182
	The McClatchy Co.,
	senior bond, 6.875%, 3/15/29		United States		566,000		721,650
	c senior secured note, 144A, 9.00%, 7/15/26		United States		1,464,000		1,489,620
c,d	Postmedia Network Inc., secured note, second lien, 144A, PIK, 10.25%, 7/15/23		Canada		508,542		598,172
c	Univision Communications Inc., senior secured note, 144A, 5.125%, 2/15/25		United States		990,000		905,474
							7,064,143
	Oil, Gas & Consumable Fuels 2.7%
c	California Resources Corp., secured note, second lien, 144A, 8.00%, 12/15/22		United States		437,000		334,305
e,f	EP PetroEcuador via Noble Sovereign Funding I Ltd., FRN, Reg S, 7.966%, (3-Month USD LIBOR + 5.63%), 9/24/19		Ecuador		52,632		52,763
c	Par Petroleum LLC / Petroleum Finance Corp., first lien, 144A, 7.75%, 12/15/25		United States		58,000		56,840
	Petrobras Global Finance BV, senior note,
	6.125%, 1/17/22		Brazil		132,000		135,725
	4.375%, 5/20/23		Brazil		207,000		198,472
	6.25%, 3/17/24		Brazil		168,000		170,478
	Petroleos Mexicanos,
	f senior bond, Reg S, 6.50%, 1/23/29		Mexico		99,000		91,342
	senior bond, 5.50%, 1/21/21		Mexico		95,000		94,810
	senior note, 4.875%, 1/24/22		Mexico		181,000		175,660
	senior note, 3.50%, 1/30/23		Mexico		136,000		122,862
	senior note, 4.625%, 9/21/23		Mexico		90,000		83,791
c	Sable Permian Resources Land LLC / AEPB Finance Corp., 144A,
	secured note, 8.00%, 6/15/20		United States		290,000		272,600
	senior secured note, first lien, 13.00%, 11/30/20		United States		800,000		836,000
	Southwestern Energy Co., senior note, 4.10%, 3/15/22		United States		155,000		149,963
							2,775,611
	Paper & Forest Products 2.1%
b	Resolute Forest Products Inc., senior note, 5.875%, 5/15/23		United States		2,122,000		2,143,220

18 Semiannual Report franklintempleton.com

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin K2 Long Short Credit Fund (continued)

		Country		Principal Amount*			Value
	Corporate Bonds and Notes (continued)
	Pharmaceuticals 0.1%
	Teva Pharmaceutical Finance Netherlands III BV, senior bond, 4.10%, 10/01/46		Israel		150,000		$	105,688
	Specialty Retail 0.8%
	Bed Bath & Beyond Inc., senior bond, 5.165%, 8/01/44		United States		541,000			363,823
c	Carvana Co., senior note, 144A, 8.875%, 10/01/23		United States		438,000			418,290
c	PetSmart Inc., senior note, 144A, 8.875%, 6/01/25		United States		64,000			43,680
								825,793
	Total Corporate Bonds and Notes (Cost $33,094,897)							33,998,116
	Corporate Bonds and Notes in Reorganization (Cost $13,923) 0.0%†
	Oil, Gas & Consumable Fuels 0.0%†
f,g	Petroleos de Venezuela SA, senior note, Reg S, 6.00%, 10/28/22		Venezuela		98,020			13,968
	Foreign Government and Agency Securities 4.7%
	Government of Argentina,
	3.75%, 2/08/19		Argentina		1,833,000	ARS		64,871
	2.26% to 3/31/19, 4.74% thereafter, 12/31/38		Argentina		313,282	EUR		196,130
	e senior note, FRN, 64.951%, (ARLLMONP), 6/21/20		Argentina		1,733,578	ARS		49,860
	f senior note, Reg S, 3.875%, 1/15/22		Argentina		200,000	EUR		200,792
	senior note, 5.625%, 1/26/22		Argentina		416,000			369,512
	senior note, 4.625%, 1/11/23		Argentina		122,000			102,190
f	Government of Bahrain, senior bond, Reg S, 7.00%, 1/26/26		Bahrain		200,000			202,380
	Government of Brazil, senior bond, 4.875%, 1/22/21		Brazil		200,000			204,300
f	Government of Ecuador, senior note, Reg S, 10.75%, 3/28/22		Ecuador		200,000			207,350
f	Government of Hellenic Republic, senior bond, Reg S, 3.90%, 1/30/33		Greece		78,115	EUR		80,363
f	Government of Paraguay, senior note, Reg S, 4.625%, 1/25/23		Paraguay		200,000			199,575
f	Government of Russia, Reg S,
	senior bond, 5.25%, 6/23/47		Russia		600,000			549,192
	senior note, 5.00%, 4/29/20		Russia		100,000			101,593
	senior note, 4.50%, 4/04/22		Russia		200,000			201,360
f	Government of Saudi Arabia, Reg S, 2.375%, 10/26/21		Saudi Arabia		200,000			192,550
	Government of South Africa,
	5.50%, 3/09/20		South Africa		215,000			217,696
	8.75%, 2/28/48		South Africa		6,826,493	ZAR		441,102
	R186, 10.50%, 12/21/26		South Africa		9,990,604	ZAR		783,173
	Government of Turkey, senior bond, 7.00%, 6/05/20		Turkey		335,000			337,972
f	National Highways Authority of India, senior note, Reg S, 7.30%, 5/18/22		India		10,000,000	INR		135,675
	Total Foreign Government and Agency Securities (Cost $5,232,712)							4,837,636
	U.S. Government and Agency Securities 0.7%
	U.S. Treasury Bond,
	3.00%, 2/15/48		United States		291,000			274,188
	3.125%, 5/15/48		United States		3,000			2,897
	U.S. Treasury Note, 2.50%, 3/31/23		United States		445,000			438,846
	Total U.S. Government and Agency Securities (Cost $736,732)							715,931

franklintempleton.com Semiannual Report 19

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin K2 Long Short Credit Fund (continued)

		Country		Principal Amount*		Value
	Asset-Backed Securities and Commercial Mortgage-Backed Securities 33.4%
	Diversified Financial Services 14.8%
h	Adjustable Rate Mortgage Trust, 2005-4, 3A1, FRN, 4.282%, 8/25/35		United States		127,138	$	125,547
	Alternative Loan Trust, 2005-J10, 2A4, 6.00%, 10/25/35		United States		483,255		380,248
c,i	Anchorage Capital CLO 6 Ltd., 2017-6A, DR, 144A, FRN, 5.986%, (3-Month USD LIBOR + 3.55%), 7/15/30		United States		450,000		452,245
i	Asset Backed Securities Corp. Home Equity Loan Trust, 2001-HE1, M2, FRN, 4.032%, (1-Month USD LIBOR + 1.73%), 4/15/31		United States		421,674		419,416
c,i	Barings CLO Ltd., 2017-IA, DR, 144A, FRN, 5.019%, (3-Month USD LIBOR + 2.55%), 1/20/28		United States		600,000		591,024
	Bear Stearns ALT-A Trust, FRN,
	h 2004-12, 2A4, 4.071%, 1/25/35		United States		410,155		392,275
	i 2004-6, B1, 5.165%, (1-Month USD LIBOR + 2.85%), 7/25/34		United States		346,495		358,947
	Chaseflex Trust, 2005-2, 1A1, 6.00%, 6/25/35		United States		575,753		549,302
	Citimortgage Alternative Loan Trust, 2007-A1, 2A1, 5.50%, 1/25/22		United States		73,292		72,628
c,i	CSMC Trust, 2017-CHOP, E, 144A, FRN, 5.607%, (1-Month USD LIBOR + 3.30%), 7/15/32		United States		121,000		120,819
h	First Horizon Alternative Mortgage Securities Trust, 2004-AA2, 2A1, FRN, 4.112%, 8/25/34		United States		468,873		465,012
i	FNMA, 2011-11, SA, FRN, IO, 6.45%, (1-Month USD LIBOR + 4.135%), 11/25/41		United States		2,704,876		444,681
c,i	Goldenttree Loan Management US CLO 1 Ltd., 2017-1A, D, 144A, FRN, 5.819%, (3-Month USD LIBOR + 3.35%), 4/20/29		United States		1,000,000		1,005,405
c,i	Grippen Park CLO Ltd., 2017-1A, D, 144A, FRN, 5.769%, (3-Month USD LIBOR + 3.30%), 1/20/30		United States		500,000		498,635
i	GSAMP Trust, 2004-HE2, M2, FRN, 3.965%, (1-Month USD LIBOR + 1.65%), 9/25/34		United States		151,063		147,374
c	GSMSC Pass-Through Trust, 144A, FRN,
	i 2009-4R, 2A3, 2.765%, (1-Month USD LIBOR + 0.45%), 12/26/36		United States		860,244		480,493
	h 2009-5R, 3A2, 5.50%, 10/26/35		United States		307,155		263,571
c,i	Home Partners of America Trust, 144A, FRN,
	2017-1, F, 5.842%, (1-Month USD LIBOR + 3.54%), 7/17/34		United States		500,000		504,271
	2018-1, E, 4.153%, (1-Month USD LIBOR + 1.85%), 7/17/37		United States		1,200,000		1,192,782
c,i	Hospitality Mortgage Trust, 2017-HIT, F, 144A, FRN, 6.817%, (1-Month USD LIBOR + 4.50%), 5/08/30		United States		400,000		400,843
c,i	KREF Ltd., 2018-FL1, D, 144A, FRN, 4.852%, (1-Month USD LIBOR + 2.55%), 6/15/36		United States		500,000		501,723
c,i	Magnetite Ltd., 2017-19A, D, 144A, FRN, 5.736%, (3-Month USD LIBOR + 3.30%), 7/17/30		United States		1,500,000		1,505,148
h	Master Adjustable Rate Mortgages Trust, 2004-10, B1, FRN, 4.308%, 10/25/34		United States		631,466		370,159
i	Morgan Stanley ABS Capital I Inc. Trust, 2004-NC6, M3, FRN, 4.49%, (1-Month USD LIBOR + 2.18%), 7/25/34		United States		327,049		326,669
	Residential Asset Securitization Trust, 2006-A1, 1A1, 6.00%, 4/25/36		United States		447,357		338,162
c,h	Seasoned Credit Risk Transfer Trust, 2016-1, M2, 144A, FRN, 3.75%, 9/25/55		United States		500,000		428,515
c	S-Jets Ltd., 2017-1, A, 144A, 3.967%, 8/15/42		Bermuda		916,667		911,390
h	STARM Mortgage Loan Trust, 2007-2, 4A1, FRN, 3.824%, 4/25/37		United States		135,127		111,702
i	Terwin Mortgage Trust, 2003-6HE, M2, FRN, 4.94%, (1-Month USD LIBOR + 2.63%), 11/25/33		United States		160,429		140,482
c,i	TPG Real Estate Finance Issuer Ltd., 2018-FL2, D, 144A, FRN, 4.943%, (1-Month USD LIBOR + 2.70%), 11/15/37		United States		300,000		301,488
c	Wendys Funding LLC, 2018-1A, A2I, 144A, 3.573%, 3/15/48		United States		496,250		481,387
c,i	Westchester CLO Ltd., 2007-1A, E, 144A, FRN, 6.841%, (3-Month USD LIBOR + 4.30%), 8/01/22		United States		949,582		951,135
							15,233,478

20 Semiannual Report franklintempleton.com

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin K2 Long Short Credit Fund (continued)

		Country		Principal Amount*		Value
	Asset-Backed Securities and Commercial Mortgage-Backed Securities (continued)
	Mortgage Real Estate Investment Trusts (REITs) 18.6%
h	American Home Mortgage Assets Trust, 2005-1, 1A1, FRN, 4.454%, 11/25/35		United States		214,225	$	189,350
h	Banc of America Mortgage Trust, FRN,
	2005-K, 2A1, 4.235%, 12/25/35		United States		313,103		306,975
	2005-L, 1A1, 4.023%, 1/25/36		United States		240,267		217,516
	2005-L, 3A1, 3.595%, 1/25/36		United States		351,880		330,579
c,h	BCAP LLC Trust, 2010-RR1, 1A4, 144A, FRN, 3.677%, 3/26/37		United States		440,536		386,827
h	Bear Stearns ARM Trust, FRN,
	2002-11, 1A2, 3.633%, 2/25/33		United States		4,937		4,581
	2006-2, 4A1, 3.87%, 7/25/36		United States		73,756		67,057
c,i	BX Trust, 144A, FRN,
	2017-APPL, E, 5.457%, (1-Month USD LIBOR + 3.15%), 7/15/34		United States		1,610,526		1,616,035
	2018-IND, G, 4.357%, (1-Month USD LIBOR + 2.05%), 11/15/35		United States		1,000,000		998,352
	Citigroup Mortgage Loan Trust, FRN,
	i 2004-OPT1, M4, 3.32%, (1-Month USD LIBOR + 1.01%), 10/25/34		United States		588,602		544,519
	h 2007-AR5, 2A1A, 3.907%, 4/25/37		United States		165,729		158,274
	c,i 2008-RR1, A1A1, 144A, 2.385%, (1-Month USD LIBOR + 0.07%), 1/25/37		United States		801,935		750,558
	Countrywide Alternative Loan Trust,
	2005-73CB, 1A2, 6.25%, 1/25/36		United States		223,692		227,933
	i 2005-IM1, A1, FRN, 2.915%, (1-Month USD LIBOR + 0.60%), 1/25/36		United States		190,821		184,377
	2006-4CB, 2A3, 5.50%, 4/25/36		United States		99,520		97,775
	CS First Boston Mortgage Securities Corp.,
	2002-9, 1A2, 7.50%, 3/25/32		United States		519,536		580,411
	h 2004-AR3, CB2, FRN, 4.076%, 4/25/34		United States		135,406		125,041
	c,i 2004-CF2, 2M2, 144A, FRN, 3.715%, (1-Month USD LIBOR + 1.40%), 5/25/44		United States		313,512		301,490
	CSMC Mortgage-Backed Trust, 2006-4, 9A1, 6.50%, 5/25/36		United States		855,874		522,344
c,h	FHLMC Seasoned Credit Risk Transfer Trust, 2017-2, M1, 144A, FRN, 4.00%, 8/25/56		United States		500,000		475,000
c,h	FHLMC Structured Agency Credit Risk Debt Notes, 144A, FRN,
	2018-SPI1, M2, 3.745%, 2/25/48		United States		693,000		628,789
	2018-SPI2, M2, 3.819%, 5/25/48		United States		350,000		318,065
	2018-SPI3, M2, 4.167%, 8/25/48		United States		400,000		372,632
	GSR Mortgage Loan Trust,
	2004-6F, 2A4, 5.50%, 5/25/34		United States		233,349		238,327
	h 2004-9, B1, FRN, 4.182%, 8/25/34		United States		170,281		164,143
	2007-1F, 1A1, 5.00%, 12/25/35		United States		240,670		260,518
	Home Equity Mortgage Trust, 2004-6, M2, 5.821%, 4/25/35		United States		140,275		141,100
c,i	Hyatt Hotel Portfolio Trust, 2017-HYT2, F, 144A, FRN, 5.357%, (1-Month USD LIBOR + 3.05%), 8/09/32		United States		625,000		625,597
	Impac CMB Trust,
	2004-4, 2A2, 4.674%, 9/25/34		United States		183,978		189,674
	i 2004-8, 3B, FRN, 4.94%, (1-Month USD LIBOR + 2.63%), 8/25/34		United States		173,916		168,438
	i 2005-2, 2B, FRN, 4.79%, (1-Month USD LIBOR + 2.48%), 4/25/35		United States		140,894		135,093
	i 2005-4, 2B1, FRN, 4.79%, (1-Month USD LIBOR + 2.48%), 5/25/35		United States		183,719		176,950
i	IndyMac Home Equity Loan Asset-Backed Trust, 2001-A, AV, FRN, 2.835%, (1-Month USD LIBOR + 0.52%), 3/25/31		United States		725,376		704,233
i	IndyMac INDX Mortgage Loan Trust, FRN,
	2004-AR14, 2A1A, 3.035%, (1-Month USD LIBOR + 0.72%), 1/25/35		United States		828,487		724,895
	2005-16IP, A1, 2.955%, (1-Month USD LIBOR + 0.64%), 7/25/45		United States		256,531		248,746
	2006-AR12, A1, 2.505%, (1-Month USD LIBOR + 0.19%), 9/25/46		United States		134,936		120,918
	2006-AR29, A2, 2.395%, (1-Month USD LIBOR + 0.08%), 11/25/36		United States		194,925		184,356

franklintempleton.com Semiannual Report 21

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin K2 Long Short Credit Fund (continued)

		Country		Principal Amount*		Value
	Asset-Backed Securities and Commercial Mortgage-Backed Securities (continued)
	Mortgage Real Estate Investment Trusts (REITs) (continued)
h	JP Morgan Mortgage Trust, FRN,
	2006-A5, 6A1, 3.644%, 8/25/36		United States		433,190	$	353,762
	2006-A7, 2A3, 4.141%, 1/25/37		United States		178,823		171,820
	2007-A2, 2A1, 4.08%, 4/25/37		United States		272,898		259,063
	JPMorgan Chase Commercial Mortgage Securities Trust,
	2006-LDP9, AM, 5.372%, 5/15/47		United States		146,481		146,640
	c,i 2018-ASH8, F, 144A, FRN, 6.307%, (1-Month USD LIBOR + 4.00%), 2/15/35		United States		1,000,000		1,000,456
	JPMorgan Mortgage Acquisition Trust, 2007-CH2, AF2, 4.717%, 1/25/37		United States		198,197		146,844
	Lehman Mortgage Trust, 2005-3, 2A3, 5.50%, 1/25/36		United States		110,329		107,575
h	MASTR Seasoned Securitization Trust, 2004-1, 4A1, FRN, 4.625%, 10/25/32		United States		67,757		68,783
c,i	Motel 6 Trust, 2017-MTL6, E, 144A, FRN, 5.557%, (1-Month USD LIBOR + 3.25%), 8/15/34		United States		432,185		434,273
h	Provident Funding Mortgage Loan Trust, FRN,
	2003-1, B1, 4.335%, 8/25/33		United States		79,890		75,932
	2004-1, B1, 4.019%, 4/25/34		United States		46,701		44,218
h	RALI Trust, FRN,
	2005-QA2, NB1, 3.948%, 2/25/35		United States		82,371		73,343
	2005-QA8, NB2, 4.022%, 7/25/35		United States		100,079		88,244
	2005-QA8, NB3, 5.011%, 7/25/35		United States		42,072		32,858
c	RCO Mortgage LLC, 2017-1, A2, 144A, 5.125%, 8/25/22		United States		250,000		251,148
i	Securitized Asset Backed Receivables LLC Trust, 2004-OP2, A2, FRN, 3.015%, (1-Month USD LIBOR + 0.70%), 8/25/34		United States		199,024		190,718
h	Structured ARM Loan Trust, FRN,
	2004-2, 1A1, 4.907%, 3/25/34		United States		143,989		143,303
	2004-4, B1, 4.359%, 4/25/34		United States		486,655		458,258
i	WaMu Mortgage Pass-Through Certificates Trust, 2007-OA3, 2A1A, FRN, 2.813%, (1 Year CMT + 0.76%), 4/25/47		United States		73,919		73,344
i	Washington Mutual Mortgage Pass-Through Certificates, 2006-4, 3A2B, FRN, 2.395%, (1-Month USD LIBOR + 0.08%), 5/25/36		United States		361,752		267,195
h	Washington Mutual MSC Mortgage Pass-Through Certificates Series Trust, FRN,
	2003-AR2, M, 3.641%, 5/25/33		United States		145,221		126,811
	2003-AR3, B1, 4.141%, 6/25/33		United States		348,485		314,503
	Wells Fargo Mortgage Backed Securities Trust,
	h2004-G, B1, FRN, 4.425%, 6/25/34		United States		241,294		224,540
	h2005-AR2, 2A2, FRN, 4.016%, 3/25/35		United States		89,201		91,379
	2006-19, A4, 5.25%, 12/26/36		United States		248,550		249,011
	2007-3, 3B1, 5.50%, 4/25/22		United States		334,826		310,982
							19,192,471
	Total Asset-Backed Securities and Commercial Mortgage-Backed Securities (Cost $33,889,140)						34,425,949

22 Semiannual Report franklintempleton.com

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin K2 Long Short Credit Fund (continued)

		Number of Contracts		Notional Amount#		Value
	Options Purchased 0.2%
	Calls – Exchange-Traded 0.2%
	Acadia Healthcare Co. Inc., December Strike Price $35.00, Expires 12/21/18		177		17,700	$	30,090
	Acadia Healthcare Co. Inc., December Strike Price $40.00, Expires 12/21/18		130		13,000		8,450
	Beazer Homes USA Inc., May Strike Price $11.00, Expires 5/17/19		137		13,700		26,304
	Canadian Solar Inc., January Strike Price $17.00, Expires 1/18/19		27		2,700		2,970
	Dean Foods Co., December Strike Price $7.00, Expires 12/21/18		136		13,600		136
	Hertz Global Holdings Inc., December Strike Price $23.00, Expires 12/21/18		70		7,000		1,050
	iShares MSCI Emerging Markets ETF, December Strike Price $44.00, Expires 12/21/18		53		5,300		530
	Lennar Corp., May Strike Price $45.00, Expires 5/17/19		27		2,700		8,910
	SPDR EURO STOXX 50 ETF, January Strike Price $39.00, Expires 1/18/19		47		4,700		141
							78,581
	Calls – Over-the-Counter 0.0%†
	Buckeye Partners LP, Counterparty JPHQ, February Strike Price $40.00, Expires 2/15/19		8,500		8,500		425
	Puts – Exchange-Traded 0.0%†
	Carvana Co., May Strike Price $27.00, Expires 5/17/19		29		2,900		6,815
	Colony NorthStar Inc., March Strike Price $5.00, Expires 3/15/19		67		6,700		1,173
	GTT Communications Inc., February Strike Price $35.00, Expires 2/15/19		18		1,800		8,370
	Hi-Crush Partners LP, March Strike Price $5.00, Expires 3/15/19		103		10,300		8,240
	Kohl’s Corp., April Strike Price $60.00, Expires 4/18/19		18		1,800		7,020
	Macy’s Inc., February Strike Price $30.00, Expires 2/15/19		33		3,300		3,036
	S&P 500 Index, December Strike Price $2,500.00, Expires 12/14/18		51		5,100		9,690
	S&P 500 Index, December Strike Price $2,550.00, Expires 12/14/18		26		2,600		9,230
	Simon Property Group Inc., April Strike Price $165.00, Expires 4/18/19		16		1,600		5,240
	Southwestern Energy Co., March Strike Price $5.00, Expires 3/15/19		49		4,900		3,479
	SPDR S&P 500 ETF Trust, December Strike Price $270.00, Expires 12/07/18		40		4,000		5,080
	Tesla Inc., March Strike Price $50.00, Expires 3/15/19		14		1,400		490
	Teva Pharmaceutical Industries Ltd., ADR, January Strike Price $15.00, Expires 1/18/19		40		4,000		440
							68,303
	Total Options Purchased (Cost $219,060)						147,309
	Total Investments before Short Term Investments (Cost $76,855,402)						77,994,105
		Country		Shares
	Short Term Investments 18.6%
	Money Market Funds (Cost $15,520,815) 15.0%
j	Fidelity Investments Money Market Government Portfolio, Institutional, 2.10%		United States		15,520,815		15,520,815

franklintempleton.com Semiannual Report 23

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin K2 Long Short Credit Fund (continued)

		Country		Principal Amount*			Value
	Short Term Investments (continued)
	Repurchase Agreements (Cost $3,713,585) 3.6%
k	Joint Repurchase Agreement, 2.278%, 12/03/18 (Maturity Value $3,714,290)		United States		3,713,585		$	3,713,585
	BNP Paribas Securities Corp. (Maturity Value $2,398,466) Deutsche Bank Securities Inc. (Maturity Value $716,189) HSBC Securities (USA) Inc. (Maturity Value $599,635)
	Collateralized by U.S. Government Agency Securities, 3.00% - 4.50%, 7/15/40 - 2/20/45; U.S. Treasury Bond, 6.25%, 8/15/23; and U.S. Treasury Note, 0.875% - 3.50%, 1/15/19 - 5/15/23 (valued at $3,789,098)
	Total Investments (Cost $96,089,802) 94.2%							97,228,505
	Options Written (0.0)%†							(42,360	)
	Securities Sold Short (5.2)%							(5,353,093	)
	Other Assets, less Liabilities 11.0%							11,354,591
	Net Assets 100.0%						$	103,187,643
		Number of Contracts		Notional Amount#
l	Options Written (0.0)%†
	Calls – Exchange-Traded (0.0)%†
	Acadia Healthcare Co. Inc., December Strike Price $45.00, Expires 12/21/18		260		26,000			(6,500	)
	Tesla Inc., February Strike Price $360.00, Expires 2/15/19		11		1,100			(35,860	)
	Total Options Written (Premiums Received $38,618)							(42,360	)
		Country		Shares
m	Securities Sold Short (5.2)%
	Common Stocks (0.2)%
	Equity Real Estate Investment Trusts (REITs) (0.1)%
	Seritage Growth Properties, A		United States		3,188			(120,953	)
	Internet & Direct Marketing Retail (0.1)%
	Wayfair Inc., A		United States		1,315			(139,653	)
	Total Common Stocks (Proceeds $271,683)						(260,606)
				Principal Amount*
	Corporate Bonds and Notes (4.3)%
	Auto Components (0.1)%
c	Drivetime Automotive Group Inc. / Bridgecrest Acceptance Corp., senior secured note, 144A, 8.00%, 6/01/21		United States		155,000			(157,325	)
	Chemicals (0.5)%
c	CVR Partners LP / CVR Nitrogen Finance Corp., senior note, 144A, 9.25%, 6/15/23		United States		314,000			(330,972	)
f	K+S AG, Reg S,
	senior bond, 3.00%, 6/20/22		Germany		83,000	EUR		(96,864	)
	senior note, 2.625%, 4/06/23		Germany		56,000	EUR		(64,580	)
								(492,416	)
	Diversified Financial Services (0.1)%
e,f	Garfunkelux Holdco 3 SA, senior secured note, FRN, Reg S, 4.50%, (3-Month EURIBOR + 4.50%), 9/01/23		Luxembourg		100,000	EUR		(97,051	)

24 Semiannual Report franklintempleton.com

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin K2 Long Short Credit Fund (continued)

		Country		Principal Amount*			Value
m	Securities Sold Short (continued)
	Diversified Telecommunication Services (0.4)%
c	Frontier Communications Corp., secured note, 144A, 8.50%, 4/01/26		United States		300,000		$	(273,396	)
	Hughes Satellite Systems Corp., senior note, 6.625%, 8/01/26		United States		183,000			(170,876	)
								(444,272	)
	Energy Equipment & Services (0.0)%†
c	Precision Drilling Corp., senior note, 144A, 7.125%, 1/15/26		Canada		6,000			(5,595	)
	Food Products (0.2)%
c	TreeHouse Foods Inc., senior note, 144A, 6.00%, 2/15/24		United States		185,000			(183,612	)
	Health Care Providers & Services (0.7)%
c	Mallinckrodt International Finance SA / Mallinckrodt CB LLC, senior note, 144A,
	5.75%, 8/01/22		United States		646,000			(589,475	)
	5.625%, 10/15/23		United States		126,000			(108,832	)
								(698,307	)
	Internet Software & Services (0.6)%
c	GTT Communications Inc., senior note, 144A, 7.875%, 12/31/24		United States		696,000			(642,060	)
	Machinery (0.3)%
f	Galapagos Holding SA, senior secured note, first lien, Reg S, 7.00%, 6/15/22		Luxembourg		13,000	EUR		(3,906	)
f	Loxam SAS, senior sub. note, Reg S, 6.00%, 4/15/25		France		151,000	EUR		(174,279	)
f	Tereos Finance Groupe I SA, senior note, Reg S, 4.125%, 6/16/23		France		100,000	EUR		(102,250	)
								(280,435	)
	Media (0.2)%
c	MDC Partners Inc., senior note, 144A, 6.50%, 5/01/24		United States		245,000			(209,475	)
	Multiline Retail (0.1)%
	Kohl’s Corp., senior bond, 4.25%, 7/17/25		United States		89,000			(87,115	)
	Oil, Gas & Consumable Fuels (0.7)%
	Chesapeake Energy Corp., senior note, 8.00%, 6/15/27		United States		147,000			(140,385	)
	Southwestern Energy Co., senior bond, 7.75%, 10/01/27		United States		538,000			(546,716	)
								(687,101	)
	Pharmaceuticals (0.1)%
	Teva Pharmaceutical Finance Co. LLC, senior bond, 6.15%, 2/01/36		Israel		122,000			(114,439	)
	Semiconductors & Semiconductor Equipment (0.2)%
	Micron Technology Inc., senior bond, 5.50%, 2/01/25		United States		220,000			(221,925	)
	Specialty Retail (0.1)%
c	Staples Inc., senior note, 144A, 8.50%, 9/15/25		United States		151,000			(134,390	)
	Total Corporate Bonds and Notes (Proceeds $4,650,055)						(4,455,518)
	Foreign Government and Agency Securities (Proceeds $285,075) (0.3)%
	Italian Treasury Bond, senior bond, 2.80%, 12/01/28		Italy		248,000	EUR		(271,571	)
	U.S. Government and Agency Securities (0.4)%
	U.S. Treasury Bond, 3.00%, 8/15/48		United States		245,000			(230,855	)
	U.S. Treasury Note,
	2.875%, 5/15/28		United States		133,000			(131,577	)
	2.875%, 8/15/28		United States		3,000			(2,966	)
	Total U.S. Government and Agency Securities (Proceeds $366,717)						(365,398)
	Total Securities Sold Short (Proceeds $5,573,530)						$	(5,353,093	)

franklintempleton.com Semiannual Report 25

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin K2 Long Short Credit Fund (continued)

^†Rounds to less than 0.1% of net assets.

*The principal amount is stated in U.S. dollars unless otherwise indicated.

^#Notional amount is the number of units specified in the contract, and can include currency units, bushels, shares, pounds, barrels or other units. Currency units are stated in U.S. dollars unless otherwise indicated.

^aNon-income producing.

^bA portion or all of the security has been segregated as collateral for securities sold short, open swap contracts, open forward exchange contracts, open futures contracts and open written option contracts. At November 30, 2018, the aggregate value of these securities and/or cash pledged amounted to $6,083,350, representing 5.9% of net assets.

^cSecurity was purchased pursuant to Rule 144A under the Securities Act of 1933 and may be sold in transactions exempt from registration only to qualified institutional buyers or in public offering registered under the Securities Act of 1933. These securities have been deemed liquid under guidelines approved by the Trust’s Board of Trustees. At November 30, 2018, the net value of these securities was $42,120,534, representing 40.8% of net assets.

^dIncome may be received in additional securities and/or cash.

^eThe coupon rate shown represents the rate at period end.

^fSecurity was purchased pursuant to Regulation S under the Securities Act of 1933, which exempts from registration securities offered and sold outside of the United States. Such a security cannot be sold in the United States without either an effective registration statement filed pursuant to the Securities Act of 1933, or pursuant to an exemption from registration. These securities have been deemed liquid under guidelines approved by the Trust’s Board of Trustees. At November 30, 2018, the net value of these securities was $1,689,973, representing 1.6% of net assets.

^gSee Note 7 regarding defaulted securities.

^hAdjustable rate security with an interest rate that is not based on a published reference index and spread. The rate is based on the structure of the agreement and current market conditions. The coupon rate shown represents the rate at period end.

ⁱThe coupon rate shown represents the rate inclusive of any caps or floors, if applicable, in effect at period end.

^jThe rate shown is the annualized seven-day yield at period end.

^kSee Note 1(c) regarding joint repurchase agreement.

^lSee Note 1(d) regarding written options.

^mSee Note 1(e) regarding securities sold short.

At November 30, 2018, the Fund had the following futures contracts outstanding. See Note 1(d).

Futures Contracts
Description	Type		Number of Contracts		Notional Amount*		Expiration Date		Value/Unrealized Appreciation (Depreciation)
Equity Contracts
S&P 500 E-Mini Index		Short		1	$	137,915		12/21/18	$	7,600
Interest Rate Contracts
Euro BUXL 30 Yr. Bond		Short		1		202,194		12/06/18		(2,503	)
Euro-BTP		Short		1		141,015		12/06/18		(2,320	)
U.S. Treasury Long Bond		Long		1		139,906		3/20/19		603
										(4,220	)
Total Futures Contracts									$	3,380

*As of period end.

At November 30, 2018, the Fund had the following forward exchange contracts outstanding. See Note 1(d).

Forward Exchange Contracts
Currency	Counterpartya		Type		Quantity		Contract Amount		Settlement Date		Unrealized Appreciation		Unrealized Depreciation
OTC Forward Exchange Contracts
Brazilian Real		JPHQ		Buy		1,826,912	$	489,743		12/04/18	$	—	$	(17,404	)
Brazilian Real		JPHQ		Sell		1,826,912		472,681		12/04/18		342		—
Chinese Yuan		JPHQ		Sell		2,519,764		364,343		12/19/18		2,034		—
Colombian Peso		JPHQ		Buy		1,381,457,943		429,668		12/19/18		—		(3,001	)
Euro		JPHQ		Buy		682,832		781,839		12/19/18		1,789		(8,994	)
Euro		JPHQ		Sell		682,832		795,856		12/19/18		21,222		—
Indian Rupee		JPHQ		Buy		34,256,905		475,144		12/19/18		15,436		(156	)
Indian Rupee		JPHQ		Sell		46,563,812		635,481		12/19/18		—		(31,130	)
Mexican Peso		JPHQ		Buy		6,031,477		307,572		12/19/18		—		(12,110	)
Mexican Peso		JPHQ		Sell		6,031,477		316,164		12/19/18		20,702		—
Russian Ruble		JPHQ		Buy		10,731,841		151,893		12/19/18		7,865		—
Russian Ruble		JPHQ		Sell		5,670,900		84,561		12/19/18		142		—

26 Semiannual Report franklintempleton.com

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin K2 Long Short Credit Fund (continued)

Forward Exchange Contracts
Currency	Counterpartya		Type		Quantity		Contract Amount		Settlement Date		Unrealized Appreciation		Unrealized Depreciation
OTC Forward Exchange Contracts (continued)
South African Rand		JPHQ		Buy		298,659	$	19,637		12/19/18	$	1,863	$	—
South African Rand		JPHQ		Sell		18,027,965		1,173,046		12/19/18		38		(124,785	)
Turkish Lira		JPHQ		Buy		820,350		122,112		12/19/18		33,477		—
Turkish Lira		JPHQ		Sell		820,350		125,331		12/19/18		—		(30,258	)
Brazilian Real		JPHQ		Buy		1,826,912		471,936		1/03/19		—		(358	)
Canadian Dollar		JPHQ		Sell		500,000		387,032		1/31/19		10,115		—
Euro		JPHQ		Sell		500,000		594,790		1/31/19		25,348		—
Euro		JPHQ		Sell		423,675		482,844		3/20/19		—		(1,616	)
Indian Rupee		JPHQ		Sell		10,211,266		144,820		3/20/19		95		—
Total Forward Exchange Contracts											$	140,468	$	(229,812	)
Net unrealized appreciation (depreciation)													$	(89,344	)

^aMay be comprised of multiple contracts with the same counterparty, currency and settlement date.

At November 30, 2018, the Fund had the following credit default swap contracts outstanding. See Note 1(d).

Credit Default Swap Contracts
Description	Periodic Payment Rate Received (Paid)			Payment Frequency			Maturity Date		Notional Amounta			Value			Unamortized Upfront Payments (Receipts)			Unrealized Appreciation (Depreciation)			Ratingb
Centrally Cleared Swap Contracts
Contracts to Buy Protectionc
Single Name
Government of Mexico		(1.00	%)		Quarterly			6/20/23		341,000		$	5,341		$	647		$	4,694
Government of Mexico		(1.00	%)		Quarterly			12/20/23		196,000			4,004			3,337			667
Government of South Africa		(1.00	%)		Quarterly			12/20/21		394,000			9,700			26,965			(17,265	)
Government of South Africa		(1.00	%)		Quarterly			6/20/22		376,000			12,028			19,788			(7,760	)
Government of South Korea		(1.00	%)		Quarterly			12/20/21		355,184			(7,944	)		(10,020	)		2,076
Government of South Korea		(1.00	%)		Quarterly			12/20/22		50,290			(1,318	)		(1,201	)		(117	)
Government of Turkey		(1.00	%)		Quarterly			12/20/20		503,000			22,727			41,382			(18,655	)
Government of Turkey		(1.00	%)		Quarterly			6/20/21		159,000			9,147			10,950			(1,803	)
Government of Turkey		(1.00	%)		Quarterly			12/20/21		98,000			6,805			5,993			812
Government of Turkey		(1.00	%)		Quarterly			6/20/22		6,000			492			316			176
Government of Turkey		(1.00	%)		Quarterly			6/20/23		171,000			18,514			24,947			(6,433	)
Traded Index
CDX.NA.HY.25		(5.00	%)		Quarterly			12/20/20		1,401,600			(68,069	)		14,016			(82,085	)
CDX.NA.HY.31		(5.00	%)		Quarterly			12/20/23		1,000,000			(44,259	)		(74,612	)		30,353
CDX.NA.HY.31		(5.00	%)		Quarterly			12/20/23		500,000			(22,130	)		(26,205	)		4,075
Contracts to Sell Protectionc,d
Single Name
Government of Russia		1.00	%		Quarterly			6/20/21		457,000			(3,157	)		(33,432	)		30,275			BB+
Government of Russia		1.00	%		Quarterly			12/20/21		189,000			(1,817	)		(7,019	)		5,202			BB+
Government of South Africa		1.00	%		Quarterly			12/20/22		184,000			(7,205	)		(3,412	)		(3,793	)		BB+
Government of Turkey		1.00	%		Quarterly			12/20/22		136,000			(12,799	)		(6,150	)		(6,649	)		B+
Total Centrally Cleared Swap Contracts												$	(79,940	)	$	(13,710	)	$	(66,230	)
OTC Swap Contracts
Contracts to Buy Protectionc
Single Name						Counterparty
Altice Luxembourg S.A.		(5.00	%)		Quarterly	BZWS		12/20/22		18,000	EUR		963			284			679
Altice Luxembourg S.A.		(5.00	%)		Quarterly	BZWS		12/20/22		74,000	EUR		3,958			881			3,077
Altice Luxembourg S.A.		(5.00	%)		Quarterly	GSCO		12/20/23		70,000	EUR		6,873			3,810			3,063

franklintempleton.com Semiannual Report 27

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin K2 Long Short Credit Fund (continued)

Credit Default Swap Contracts (continued)
Description	Periodic Payment Rate Received (Paid)			Payment Frequency		Counterparty		Maturity Date		Notional Amounta			Value			Unamortized Upfront Payments (Receipts)			Unrealized Appreciation (Depreciation)			Ratingb
OTC Swap Contracts (continued)
Contracts to Buy Protectionc (continued)
Single Name (continued)
Altice Luxembourg S.A.		(5.00	%)		Quarterly		GSCO		12/20/23		291,000	EUR	$	28,570		$	27,087		$	1,483
Altice Luxembourg S.A.		(5.00	%)		Quarterly		JPHQ		12/20/22		94,000	EUR		5,027			1,843			3,184
Avis Budget Group Inc.		(5.00	%)		Quarterly		GSCO		12/20/22		234,000			(19,826	)		(18,041	)		(1,785	)
Avis Budget Group Inc.		(5.00	%)		Quarterly		GSCO		12/20/22		82,000			(6,948	)		(4,880	)		(2,068	)
Avis Budget Group Inc.		(5.00	%)		Quarterly		GSCO		12/20/22		47,000			(3,982	)		(3,538	)		(444	)
Avis Budget Group Inc.		(5.00	%)		Quarterly		JPHQ		12/20/22		78,000			(6,609	)		(6,164	)		(445	)
Avis Budget Group Inc.		(5.00	%)		Quarterly		JPHQ		12/20/22		75,000			(6,354	)		(3,524	)		(2,830	)
Avis Budget Group Inc.		(5.00	%)		Quarterly		JPHQ		6/20/23		101,000			(6,861	)		(7,116	)		255
Beazer Homes USA Inc.		(5.00	%)		Quarterly		BZWS		12/20/23		28,000			800			694			106
Beazer Homes USA Inc.		(5.00	%)		Quarterly		BZWS		12/20/23		69,000			1,972			1,282			690
Beazer Homes USA Inc.		(5.00	%)		Quarterly		BZWS		12/20/23		42,000			1,200			2,083			(883	)
Beazer Homes USA Inc.		(5.00	%)		Quarterly		GSCO		12/20/23		42,000			1,200			1,875			(675	)
Caterpillar Financial Services Corp.		(1.00	%)		Quarterly		JPHQ		6/20/21		618,000			(12,418	)		1,337			(13,755	)
CenturyLink Inc.		(1.00	%)		Quarterly		JPHQ		12/20/23		98,000			12,211			8,096			4,115
CenturyLink Inc.		(1.00	%)		Quarterly		JPHQ		12/20/23		111,000			13,831			9,037			4,794
Dean Foods Co.		(5.00	%)		Quarterly		GSCO		12/20/22		47,000			204			(2,289	)		2,493
Dean Foods Co.		(5.00	%)		Quarterly		GSCO		12/20/22		32,000			139			(1,470	)		1,609
Dean Foods Co.		(5.00	%)		Quarterly		GSCO		6/20/23		110,000			3,690			(5,523	)		9,213
Dean Foods Co.		(5.00	%)		Quarterly		GSCO		6/20/23		41,000			1,375			(1,429	)		2,804
Dean Foods Co.		(5.00	%)		Quarterly		GSCO		6/20/23		36,000			1,207			(988	)		2,195
Dean Foods Co.		(5.00	%)		Quarterly		GSCO		6/20/23		33,000			1,107			(905	)		2,012
Dean Foods Co.		(5.00	%)		Quarterly		GSCO		6/20/23		12,000			402			(394	)		796
Dean Foods Co.		(5.00	%)		Quarterly		GSCO		12/20/23		14,000			825			741			84
Dean Foods Co.		(5.00	%)		Quarterly		GSCO		12/20/23		28,000			1,650			1,384			266
Dean Foods Co.		(5.00	%)		Quarterly		JPHQ		12/20/23		34,000			2,003			91			1,912
Dell Inc.		(1.00	%)		Quarterly		JPHQ		12/20/23		65,000			5,273			4,282			991
Ford Motor Co.		(5.00	%)		Quarterly		GSCO		12/20/22		363,000			(47,584	)		(56,291	)		8,707
Ford Motor Credit Co. LLC		(5.00	%)		Quarterly		GSCO		12/20/22		187,000			(25,428	)		(28,998	)		3,570
Frontier Communications Corp.		(5.00	%)		Quarterly		BZWS		12/20/22		22,000			6,433			5,798			635
Frontier Communications Corp.		(5.00	%)		Quarterly		BZWS		12/20/22		57,000			16,668			15,506			1,162
Frontier Communications Corp.		(5.00	%)		Quarterly		GSCO		12/20/22		17,000			4,971			4,480			491
Frontier Communications Corp.		(5.00	%)		Quarterly		GSCO		12/20/22		29,000			8,480			7,889			591
Frontier Communications Corp.		(5.00	%)		Quarterly		GSCO		12/20/22		56,000			16,376			14,996			1,380
Frontier Communications Corp.		(5.00	%)		Quarterly		GSCO		12/20/22		115,000			33,629			30,410			3,219
Frontier Communications Corp.		(5.00	%)		Quarterly		JPHQ		12/20/22		49,000			14,329			12,446			1,883
Frontier Communications Corp.		(5.00	%)		Quarterly		JPHQ		12/20/22		75,000			21,932			18,016			3,916
Frontier Communications Corp.		(5.00	%)		Quarterly		JPHQ		12/20/22		94,000			27,488			25,471			2,017
Frontier Communications Corp.		(5.00	%)		Quarterly		JPHQ		12/20/23		65,000			23,857			22,767			1,090
Frontier Communications Corp.		(5.00	%)		Quarterly		MSCS		12/20/22		15,000			4,386			3,471			915
Frontier Communications Corp.		(5.00	%)		Quarterly		MSCS		12/20/22		26,000			7,603			6,966			637
General Electric Co.		(1.00	%)		Quarterly		BOFA		12/20/23		113,000			5,741			5,176			565
General Electric Co.		(1.00	%)		Quarterly		JPHQ		12/20/23		68,000			3,455			3,115			340
General Electric Co.		(1.00	%)		Quarterly		MSCS		12/20/23		227,000			11,532			10,397			1,135
The Hertz Corp.		(5.00	%)		Quarterly		BZWS		6/20/20		62,000			(2,233	)		(243	)		(1,990	)
The Hertz Corp.		(5.00	%)		Quarterly		BZWS		6/20/22		102,000			3,600			10,687			(7,087	)
The Hertz Corp.		(5.00	%)		Quarterly		BZWS		6/20/23		29,000			2,406			4,193			(1,787	)
The Hertz Corp.		(5.00	%)		Quarterly		BZWS		6/20/23		63,000			5,227			9,498			(4,271	)
The Hertz Corp.		(5.00	%)		Quarterly		GSCO		12/20/20		138,000			(4,500	)		(497	)		(4,003	)
The Hertz Corp.		(5.00	%)		Quarterly		GSCO		12/20/20		87,000			(2,837	)		(315	)		(2,522	)
The Hertz Corp.		(5.00	%)		Quarterly		GSCO		12/20/20		41,000			(1,337	)		(148	)		(1,189	)
The Hertz Corp.		(5.00	%)		Quarterly		GSCO		6/20/22		69,000			2,435			4,246			(1,811	)

28 Semiannual Report franklintempleton.com

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin K2 Long Short Credit Fund (continued)

Credit Default Swap Contracts (continued)
Description	Periodic Payment Rate Received (Paid)			Payment Frequency		Counterparty		Maturity Date		Notional Amounta			Value			Unamortized Upfront Payments (Receipts)			Unrealized Appreciation (Depreciation)			Ratingb
OTC Swap Contracts (continued)
Contracts to Buy Protectionc (continued)
Single Name (continued)
The Hertz Corp.		(5.00	%)		Quarterly		GSCO		6/20/22		42,000		$	1,482		$	4,398		$	(2,916	)
The Hertz Corp.		(5.00	%)		Quarterly		GSCO		12/20/22		30,000			1,820			2,378			(558	)
The Hertz Corp.		(5.00	%)		Quarterly		GSCO		12/20/22		45,000			2,730			4,130			(1,400	)
The Hertz Corp.		(5.00	%)		Quarterly		GSCO		12/20/22		102,000			6,189			7,715			(1,526	)
The Hertz Corp.		(5.00	%)		Quarterly		GSCO		12/20/22		105,000			6,371			7,879			(1,508	)
The Hertz Corp.		(5.00	%)		Quarterly		JPHQ		12/20/20		98,000			(1,236	)		(2,443	)		1,207
The Hertz Corp.		(5.00	%)		Quarterly		MSCS		6/20/22		22,000			776			3,064			(2,288	)
iStar Inc.		(5.00	%)		Quarterly		GSCO		12/20/23		101,000			(10,243	)		(8,582	)		(1,661	)
iStar Inc.		(5.00	%)		Quarterly		GSCO		12/20/23		38,000			(3,854	)		(3,604	)		(250	)
iStar Inc.		(5.00	%)		Quarterly		JPHQ		12/20/23		32,000			(2,689	)		(2,689	)		—
Itochu Corp.		(1.00	%)		Quarterly		GSCO		6/20/22		17,300,000	JPY		(4,176	)		(3,672	)		(504	)
Itochu Corp.		(1.00	%)		Quarterly		JPHQ		6/20/22		4,307,000	JPY		(1,040	)		(943	)		(97	)
JFE Holdings Inc.		(1.00	%)		Quarterly		GSCO		6/20/22		5,746,000	JPY		(1,305	)		(1,258	)		(47	)
JFE Holdings Inc.		(1.00	%)		Quarterly		JPHQ		6/20/22		3,802,000	JPY		(863	)		(845	)		(18	)
K. Hovnanian Enterprises Inc.		(5.00	%)		Quarterly		GSCO		6/20/23		62,000			21,512			11,796			9,716
K. Hovnanian Enterprises Inc.		(5.00	%)		Quarterly		GSCO		6/20/23		99,000			34,350			15,933			18,417
K. Hovnanian Enterprises Inc.		(5.00	%)		Quarterly		GSCO		6/20/23		103,000			35,737			16,710			19,027
K. Hovnanian Enterprises Inc.		(5.00	%)		Quarterly		JPHQ		12/20/22		49,000			15,187			13,389			1,798
K. Hovnanian Enterprises Inc.		(5.00	%)		Quarterly		JPHQ		6/20/23		25,000			8,674			4,340			4,334
K. Hovnanian Enterprises Inc.		(5.00	%)		Quarterly		JPHQ		6/20/23		44,000			15,267			6,144			9,123
K. Hovnanian Enterprises Inc.		(5.00	%)		Quarterly		MSCS		12/20/23		21,000			7,757			6,723			1,034
Kohl’s Corp		(1.00	%)		Quarterly		GSCO		12/20/23		913,000			21,266			14,049			7,217
Kohl’s Corp		(1.00	%)		Quarterly		MSCS		12/20/23		138,000			3,214			2,647			567
Lloyds Bank PLC		(1.00	%)		Quarterly		BOFA		12/20/22		196,000	EUR		1,711			(1,953	)		3,664
Lloyds Bank PLC		(1.00	%)		Quarterly		GSCO		12/20/23		210,000	EUR		4,340			358			3,982
Lloyds Bank PLC		(1.00	%)		Quarterly		JPHQ		12/20/22		196,000	EUR		1,711			(2,128	)		3,839
Lloyds Bank PLC		(1.00	%)		Quarterly		JPHQ		12/20/23		67,000	EUR		1,385			1,117			268
Marubeni Corp.		(1.00	%)		Quarterly		GSCO		6/20/22		27,269,000	JPY		(5,729	)		(4,789	)		(940	)
Marubeni Corp.		(1.00	%)		Quarterly		JPHQ		6/20/22		6,291,000	JPY		(1,322	)		(1,168	)		(154	)
MBIA Inc.		(5.00	%)		Quarterly		JPHQ		6/20/21		269,000			(25,859	)		(21,845	)		(4,014	)
Mitsui O.S.K. Lines Ltd.		(1.00	%)		Quarterly		JPHQ		6/20/22		9,678,000	JPY		(508	)		(528	)		20
Mitsui O.S.K. Lines Ltd.		(1.00	%)		Quarterly		JPHQ		6/20/22		3,618,000	JPY		(190	)		(198	)		8
Sharp Corp.		(1.00	%)		Quarterly		JPHQ		12/20/18		4,914,000	JPY		(102	)		(24	)		(78	)
Staples Inc.		(5.00	%)		Quarterly		BZWS		12/20/23		75,000			381			2,239			(1,858	)
Transocean Inc.		(5.00	%)		Quarterly		BZWS		6/20/22		2,000			(65	)		55			(120	)
Transocean Inc.		(5.00	%)		Quarterly		GSCO		6/20/22		43,000			(1,396	)		1,498			(2,894	)
Transocean Inc.		(5.00	%)		Quarterly		GSCO		6/20/23		98,000			135			(2,983	)		3,118
Transocean Inc.		(5.00	%)		Quarterly		GSCO		6/20/23		109,000			150			(2,363	)		2,513
Transocean Inc.		(5.00	%)		Quarterly		GSCO		6/20/23		34,000			47			(2,029	)		2,076
Transocean Inc.		(5.00	%)		Quarterly		GSCO		12/20/23		60,000			1,133			(5,790	)		6,923
Transocean Inc.		(5.00	%)		Quarterly		GSCO		12/20/23		60,000			1,133			(5,367	)		6,500
Weatherford International Ltd.		(1.00	%)		Quarterly		BZWS		12/20/19		45,000			6,272			7,776			(1,504	)
Weatherford International Ltd.		(1.00	%)		Quarterly		GSCO		12/20/19		76,000			10,592			9,884			708
Weatherford International Ltd.		(1.00	%)		Quarterly		GSCO		6/20/21		1,000			279			133			146
Weatherford International Ltd.		(1.00	%)		Quarterly		JPHQ		6/20/21		2,000			558			280			278
Weatherford International Ltd.		(1.00	%)		Quarterly		JPHQ		6/20/21		30,000			8,367			3,217			5,150
Weatherford International Ltd.		(1.00	%)		Quarterly		JPHQ		6/20/21		25,000			6,972			3,357			3,615
Weatherford International Ltd.		(1.00	%)		Quarterly		JPHQ		6/20/21		37,000			10,319			4,874			5,445
Weatherford International Ltd.		(1.00	%)		Quarterly		JPHQ		6/20/21		37,000			10,319			5,256			5,063
Weatherford International Ltd.		(1.00	%)		Quarterly		MSCS		6/20/21		25,000			6,972			3,283			3,689
Weatherford International Ltd.		(1.00	%)		Quarterly		MSCS		6/20/21		62,000			17,291			9,237			8,054

franklintempleton.com Semiannual Report 29

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin K2 Long Short Credit Fund (continued)

Credit Default Swap Contracts (continued)
Description	Periodic Payment Rate Received (Paid)			Payment Frequency		Counterparty		Maturity Date		Notional Amounta			Value			Unamortized Upfront Payments (Receipts)			Unrealized Appreciation (Depreciation)			Ratingb
OTC Swap Contracts (continued)
Contracts to Sell Protectionc,d
Single Name
Avis Budget Group Inc.		5.00	%		Quarterly		BZWS		12/20/22		27,000		$	1,748		$	2,142		$	(394	)		BB
Galapagos Holding SA		5.00	%		Quarterly		GSCO		6/20/23		8,000	EUR		(5,718	)		(1,727	)		(3,991	)		CCC+
The Hertz Corp.		5.00	%		Quarterly		JPHQ		12/20/23		98,000			(12,012	)		(9,055	)		(2,957	)		B+
Weatherford International Ltd.		1.00	%		Quarterly		GSCO		12/20/20		58,000			(13,028	)		(10,596	)		(2,432	)		CCC
Weatherford International Ltd.		1.00	%		Quarterly		GSCO		12/20/20		35,000			(7,862	)		(7,730	)		(132	)		CCC
Weatherford International Ltd.		1.00	%		Quarterly		JPHQ		12/20/20		92,000			(20,666	)		(19,437	)		(1,229	)		CCC
Weatherford International Ltd.		1.00	%		Quarterly		JPHQ		12/20/20		70,000			(15,724	)		(15,125	)		(599	)		CCC
Weatherford International Ltd.		1.00	%		Quarterly		JPHQ		12/20/20		32,000			(7,188	)		(6,503	)		(685	)		CCC
Total OTC Swap Contracts													$	299,483		$	168,209		$	131,274
Total Credit Default Swap Contracts													$	219,543		$	154,499		$	65,044

^aIn U.S. dollars unless otherwise indicated. For contracts to sell protection, the notional amount is equal to the maximum potential amount of the future payments and no recourse provisions have been entered into in association with the contracts.

^bBased on Standard and Poor’s (S&P) Rating for single name swaps.

^cPerformance triggers for settlement of contract include default, bankruptcy or restructuring for single name swaps and failure to pay or bankruptcy of the underlying securities for traded index swaps.

^dThe Fund enters contracts to sell protection to create a long credit position.

At November 30, 2018, the Fund had the following interest rate swap contracts outstanding. See Note 1(d).

Interest Rate Swap Contracts
Description	Payment Frequency		Maturity Date		Notional Amount*			Value/Unrealized Appreciation (Depreciation)
Centrally Cleared Swap Contracts
Receive Floating rate 3 Month GBP-LIBOR Pay Fixed rate 1.75%		Semi-Annually		3/21/20		1,012,000		$	8,638
Receive Floating rate 3 Month USD-LIBOR Pay Fixed rate 1.75%		Semi-Annually		6/20/20		1,500,000			(4,195	)
Receive Floating rate 3 Month USD-LIBOR Pay Fixed rate 2.25%		Semi-Annually		6/20/28		1,100,000			(1,882	)
Receive Fixed rate 8.35% Pay Floating rate BRL-BRLCDI		Annually		1/04/21		3,614,272	BRL		8,796
Receive Floating rate 6 Month CZK-PRIBOR Pay Fixed rate 1.67%		Annually		3/21/23		4,762,919	CZK		6,627
Receive Floating rate 6 Month CZK-PRIBOR Pay Fixed rate 1.74%		Annually		3/21/23		1,690,199	CZK		2,094
Receive Floating rate 6 Month CZK-PRIBOR Pay Fixed rate 1.86%		Annually		3/21/23		7,291,583	CZK	$	7,263
Receive Floating rate 6 Month CZK-PRIBOR Pay Fixed rate 1.88%		Annually		9/19/23		11,119,590	CZK		12,230
Receive Floating rate MIBOR Pay Fixed rate 6.67%		Annually		6/20/23		13,265,333	INR		1,399
Receive Fixed rate 7.87% Pay Floating rate 1 Month MXN TIIE		Monthly		9/13/23		4,661,493	MXN		(9,602	)
Receive Fixed rate 7.89% Pay Floating rate 1 Month MXN TIIE		Monthly		9/13/23		3,106,038	MXN		(6,265	)
Receive Fixed rate 7.91% Pay Floating rate 1 Month MXN TIIE		Monthly		9/13/23		3,834,360	MXN		(7,556	)
Receive Fixed rate 7.95% Pay Floating rate 1 Month MXN TIIE		Monthly		9/13/23		3,262,659	MXN		(6,199	)

30 Semiannual Report franklintempleton.com

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin K2 Long Short Credit Fund (continued)

Interest Rate Swap Contracts (continued)
Description	Payment Frequency			Maturity Date		Notional Amount*			Value/Unrealized Appreciation (Depreciation)
Centrally Cleared Swap Contracts (continued)
Receive Fixed rate 8.81% Pay Floating rate 1 Month MXN TIIE		Monthly			12/13/23		13,101,845	MXN	$	(3,130	)
Receive Floating rate 6 Month HUF-BURBOR Pay Fixed rate 3.43%		Annually			12/19/28		50,581,586	HUF		(11,366	)
Receive Floating rate 6 Month HUF-BURBOR Pay Fixed rate 3.43%		Annually			12/19/28		66,839,953	HUF		(15,128	)
Receive Floating rate 6 Month GBP-LIBOR Pay Fixed rate 1.41%		Semi-Annually			8/04/67		108,000	GBP		18,558
Receive Floating rate 6 Month GBP-LIBOR Pay Fixed rate 1.60%		Semi-Annually			12/19/68		232,915	GBP		17,499
Total Centrally Cleared Swap Contracts										17,781
OTC Swap Contracts			Counterparty
Receive Floating rate 3 Month KLIBOR Pay Fixed rate 4.14%		Quarterly	MSCS		5/18/23		511,748	MYR		(1,612	)
Receive Floating rate 3 Month KLIBOR Pay Fixed rate 4.14%		Quarterly	BOFA		5/21/23		518,950	MYR		(1,628	)
Receive Floating rate 3 Month KLIBOR Pay Fixed rate 4.02%		Quarterly	BOFA		6/08/23		1,221,199	MYR		(2,595	)
Total OTC Swap Contracts										(5,835	)
Total Interest Rate Swap Contracts									$	11,946

*In U.S. dollars unless otherwise indicated.

At November 30, 2018, the Fund had the following total return swap contracts outstanding. See Note 1(d).

Total Return Swap Contracts
Underlying Instrument	Financing Rate			Payment Frequency		Counterparty		Maturity Date		Notional Value		Value/ Unrealized Appreciation (Depreciation)
OTC Swap Contracts
Equity Contracts - Longa
Buckeye Partners LP		1-Month LIBOR + 0.85	%		Monthly		BZWS		2/28/19	$	588,848	$	(183,847	)
Buckeye Partners LP		1-Month LIBOR + 0.65	%		Monthly		JPHQ		6/10/19		30,923		(6,802	)
Energy Transfer Equity LP		1-Month LIBOR + 0.65	%		Monthly		JPHQ		11/29/19		355,278		(38,905	)
Northstar Realty Europe Corp.		1-Month LIBOR + 0.65	%		Monthly		GSCO		3/14/19		26,951		13,720
Suncoke Energy Partners LP		1-Month LIBOR + 2.50	%		Monthly		MSCS		6/02/20		125,702		(25,067	)
Total Total Return Swap Contracts												$	(240,901	)

^aThe Fund receives the total return on the underlying instrument and pays a variable financing rate.

See Note 8 regarding other derivative information.

See Abbreviations on page 49.

franklintempleton.com The accompanying notes are an integral part of these financial statements.    |   Semiannual Report 31

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

Financial Statements

Statement of Assets and Liabilities

November 30, 2018 (unaudited)

Franklin K2 Long Short Credit Fund

Assets:
Investments in securities:
Cost - Unaffiliated issuers	$	92,376,217
Cost - Unaffiliated repurchase agreements		3,713,585
Value - Unaffiliated issuers	$	93,514,920
Value - Unaffiliated repurchase agreements		3,713,585
Cash		2,752,619
Foreign currency, at value (cost $579,618)		645,789
Receivables:
Investment securities sold		1,088,356
Capital shares sold		212,916
Dividends and interest		815,327
Affiliates		19,447
Deposits with brokers for:
Securities sold short		5,354,826
Exchange traded written options		105,186
OTC derivative contracts		560,000
Futures contracts		8,300
Centrally cleared swap contracts		889,165
Due from brokers		429,146
Variation margin on centrally cleared swap contracts		1,449
OTC swap contracts (upfront payments $517,367)		456,336
Unrealized appreciation on OTC forward exchange contracts		140,468
Unrealized appreciation on OTC swap contracts		229,293
Other assets		12
Total assets		110,937,140
Liabilities:
Payables:
Investment securities purchased		1,185,463
Capital shares redeemed		38,468
Management fees		106,966
Distribution fees		5,174
Variation margin on futures contracts		752
Due to brokers		75,206
OTC swap contracts (upfront receipts $326,292)		288,127
Options written, at value (premiums received $38,618)		42,360
Securities sold short, at value (proceeds $5,573,530)		5,353,093
Unrealized depreciation on OTC forward exchange contracts		229,812
Unrealized depreciation on OTC swap contracts		344,755
Accrued expenses and other liabilities		79,321
Total liabilities		7,749,497
Net assets, at value	$	103,187,643
Net assets consist of:
Paid-in capital	$	98,812,819
Total distributable earnings (loss)		4,374,824
Net assets, at value	$	103,187,643

32 Semiannual Report   |    The accompanying notes are an integral part of these financial statements. franklintempleton.com

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

FINANCIAL STATEMENTS

Statement of Assets and Liabilities (continued)

November 30, 2018 (unaudited)

Franklin K2 Long Short Credit Fund

Class A:
Net assets, at value	$	37,973,900
Shares outstanding		3,586,553
Net asset value per sharea		$10.59
Maximum offering price per share (net asset value per share ÷ 94.50%)		$11.21
Class C:
Net assets, at value	$	2,762,653
Shares outstanding		266,114
Net asset value and maximum offering price per sharea		$10.38
Class R:
Net assets, at value	$	162,891
Shares outstanding		15,549
Net asset value and maximum offering price per share		$10.48
Class R6:
Net assets, at value	$	173,931
Shares outstanding		16,407
Net asset value and maximum offering price per share		$10.60
Advisor Class:
Net assets, at value	$	62,114,268
Shares outstanding		5,857,172
Net asset value and maximum offering price per share		$10.60

^aRedemption price is equal to net asset value less contingent deferred sales charges, if applicable.

franklintempleton.com The accompanying notes are an integral part of these financial statements.    |   Semiannual Report 33

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

FINANCIAL STATEMENTS

Statement of Operations

for the six months ended November 30, 2018 (unaudited)

Franklin K2 Long Short Credit Fund

Investment income:
Dividends: (net of foreign taxes)*
Unaffiliated issuers	$	547,937
Interest:
Unaffiliated issuers:
Paydown gain (loss)		142,572
Paid in cash		2,474,576
Total investment income		3,165,085
Expenses:
Management fees (Note 3a)		934,558
Distribution fees: (Note 3c)
Class A		28,427
Class C		13,323
Class R		394
Transfer agent fees: (Note 3e)
Class A		13,172
Class C		821
Class R		51
Class R6		84
Advisor Class		16,203
Custodian fees (Note 4) .		41,951
Reports to shareholders		17,995
Registration and filing fees		45,152
Professional fees		95,896
Trustees’ fees and expenses		15,056
Dividends and interest on securities sold short		314,522
Security borrowing fees		106,907
Other		22,094
Total expenses		1,666,606
Expense reductions (Note 4)		(5,541	)
Expenses waived/paid by affiliates (Note 3f)		(239,307	)
Net expenses		1,421,758
Net investment income		1,743,327
Realized and unrealized gains (losses):
Net realized gain (loss) from:
Investments:
Unaffiliated issuers		(709,279	)
Written options		35,838
Foreign currency transactions		(23,237	)
Forward exchange contracts		492,252
Futures contracts		(27,864	)
Securities sold short		804,489
Swap contracts		(106,900	)
Net realized gain (loss)		465,299
Net change in unrealized appreciation (depreciation) on:
Investments:
Unaffiliated issuers		(1,122,458	)
Translation of other assets and liabilities denominated in foreign currencies		(60,296	)
Forward exchange contracts		(300,232	)
Written options		(10,454	)
Futures contracts		15,525
Securities sold short		(145,773	)
Swap contracts		201,957
Net change in unrealized appreciation (depreciation)		(1,421,731	)
Net realized and unrealized gain (loss)		(956,432	)
Net increase (decrease) in net assets resulting from operations	$	786,895
*Foreign taxes withheld on dividends	$	13

34 Semiannual Report   |    The accompanying notes are an integral part of these financial statements. franklintempleton.com

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

FINANCIAL STATEMENTS

Statements of Changes in Net Assets

Franklin K2 Long Short Credit Fund

	Six Months Ended November 30, 2018 (unaudited)			Year Ended May 31, 2018
Increase (decrease) in net assets:
Operations:
Net investment income	$	1,743,327		$	2,327,629
Net realized gain (loss)		465,299			481,921
Net change in unrealized appreciation (depreciation)		(1,421,731	)		206,551
Net increase (decrease) in net assets resulting from operations		786,895			3,016,101
Distributions to shareholders: (Note 1g)
Class A		—			(1,512,713	)
Class C		—			(44,183	)
Class R		—			(5,125	)
Class R6		—			(420,793	)
Advisor Class		—			(1,068,736	)
Total distributions to shareholders		—			(3,051,550	)
Capital share transactions: (Note 2)
Class A		(7,478,516	)		4,137,021
Class C		249,963			996,451
Class R		(29	)		34,638
Class R6		160,688			(13,046,394	)
Advisor Class		16,189,584			20,379,574
Total capital share transactions		9,121,690			12,501,290
Net increase (decrease) in net assets		9,908,585			12,465,841
Net assets:
Beginning of period		93,279,058			80,813,217
End of period (Note 1g)	$	103,187,643		$	93,279,058

franklintempleton.com The accompanying notes are an integral part of these financial statements.    |   Semiannual Report 35

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

Notes to Financial Statements (unaudited)

Franklin K2 Long Short Credit Fund

1. Organization and Significant Accounting Policies

Franklin Alternative Strategies Funds (Trust) is registered under the Investment Company Act of 1940 (1940 Act) as an open-end management investment company, consisting of four separate funds and applies the specialized accounting and reporting guidance in U.S. Generally Accepted Accounting Principles (U.S. GAAP). Franklin K2 Long Short Credit Fund (Fund) is included in this report. The Fund offers five classes of shares: Class A, Class C, Class R, Class R6 and Advisor Class. Beginning on October 19, 2018, Class C shares automatically convert to Class A shares after they have been held for 10 years. Each class of shares may differ by its initial sales load, contingent deferred sales charges, voting rights on matters affecting a single class, its exchange privilege and fees due to differing arrangements for distribution and transfer agent fees.

The following summarizes the Fund’s significant accounting policies.

a. Financial Instrument Valuation

The Fund’s investments in financial instruments are carried at fair value daily. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants on the measurement date. The Fund calculates the net asset value (NAV) per share each business day as of 4 p.m. Eastern time or the regularly scheduled close of the New York Stock Exchange (NYSE), whichever is earlier. Under compliance policies and procedures approved by the Trust’s Board of Trustees (the Board), the Fund’s administrator has responsibility for oversight of valuation, including leading the cross-functional Valuation Committee (VC). The Fund may utilize independent pricing services, quotations from securities and financial instrument dealers, and other market sources to determine fair value.

Equity securities and derivative financial instruments listed on an exchange or on the NASDAQ National Market System are valued at the last quoted sale price or the official closing price of the day, respectively. Foreign equity securities are valued as of the close of trading on the foreign stock exchange on which the security is primarily traded or as of 4 p.m. Eastern time. The value is then converted into its U.S. dollar equivalent at the foreign exchange rate in effect at 4 p.m. Eastern time on the day that the value of the security is determined. Over-the-counter (OTC) securities are valued within the range of the most recent quoted bid and ask prices. Securities that trade in multiple markets or on

multiple exchanges are valued according to the broadest and most representative market. Certain equity securities are valued based upon fundamental characteristics or relationships to similar securities.

Debt securities generally trade in the OTC market rather than on a securities exchange. The Fund’s pricing services use multiple valuation techniques to determine fair value. In instances where sufficient market activity exists, the pricing services may utilize a market-based approach through which quotes from market makers are used to determine fair value. In instances where sufficient market activity may not exist or is limited, the pricing services also utilize proprietary valuation models which may consider market characteristics such as benchmark yield curves, credit spreads, estimated default rates, anticipated market interest rate volatility, coupon rates, anticipated timing of principal repayments, underlying collateral, and other unique security features in order to estimate the relevant cash flows, which are then discounted to calculate the fair value. Securities denominated in a foreign currency are converted into their U.S. dollar equivalent at the foreign exchange rate in effect at 4 p.m. Eastern time on the date that the values of the foreign debt securities are determined.

Investments in open-end mutual funds are valued at the closing NAV. Investments in repurchase agreements are valued at cost, which approximates fair value.

Certain derivative financial instruments are centrally cleared or trade in the OTC market. The Fund’s pricing services use various techniques including industry standard option pricing models and proprietary discounted cash flow models to determine the fair value of those instruments. The Fund’s net benefit or obligation under the derivative contract, as measured by the fair value of the contract, is included in net assets.

The Fund has procedures to determine the fair value of financial instruments for which market prices are not reliable or readily available. Under these procedures, the Fund primarily employs a market-based approach which may use related or comparable assets or liabilities, recent transactions, market multiples, book values, and other relevant information for the investment to determine the fair value of the investment. An income-based valuation approach may also be used in which the anticipated future cash flows of the investment are discounted to calculate fair value. Discounts may also be applied due to the nature or duration of any restrictions on the disposition of the investments. Due to the inherent uncertainty of valuations of

36 Semiannual Report franklintempleton.com

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

Franklin K2 Long Short Credit Fund (continued)

such investments, the fair values may differ significantly from the values that would have been used had an active market existed.

Trading in securities on foreign securities stock exchanges and OTC markets may be completed before 4 p.m. Eastern time. In addition, trading in certain foreign markets may not take place on every Fund’s business day. Occasionally, events occur between the time at which trading in a foreign security is completed and 4 p.m. Eastern time that might call into question the reliability of the value of a portfolio security held by the Fund. As a result, differences may arise between the value of the Fund’s portfolio securities as determined at the foreign market close and the latest indications of value at 4 p.m. Eastern time. The VC monitors price movements for significant events following the close of trading in foreign stock markets through a series of country specific market proxies (such as baskets of American Depositary Receipts, futures contracts and exchange traded funds). These price movements are measured against established trigger thresholds for each specific market proxy to assist in determining if an event has occurred that may call into question the reliability of the values of the foreign securities held by the Fund. If such an event occurs, the securities may be valued using fair value procedures, which may include the use of independent pricing services.

When the last day of the reporting period is a non-business day, certain foreign markets may be open on those days that the Fund’s NAV is not calculated, which could result in differences between the value of the Fund’s portfolio securities on the last business day and the last calendar day of the reporting period. Any significant security valuation changes due to an open foreign market are adjusted and reflected by the Fund for financial reporting purposes.

b. Foreign Currency Translation

Portfolio securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollars based on the exchange rate of such currencies against U.S. dollars on the date of valuation. The Fund may enter into foreign currency exchange contracts to facilitate transactions denominated in a foreign currency. Purchases and sales of securities, income and expense items denominated in foreign currencies are translated into U.S. dollars at the exchange rate in effect on the transaction date. Portfolio securities and assets and liabilities denominated in foreign currencies contain risks that those currencies will decline in value relative to the U.S. dollar. Occasionally, events

may impact the availability or reliability of foreign exchange rates used to convert the U.S. dollar equivalent value. If such an event occurs, the foreign exchange rate will be valued at fair value using procedures established and approved by the Board.

The Fund does not separately report the effect of changes in foreign exchange rates from changes in market prices on securities held. Such changes are included in net realized and unrealized gain or loss from investments in the Statement of Operations.

Realized foreign exchange gains or losses arise from sales of foreign currencies, currency gains or losses realized between the trade and settlement dates on securities transactions and the difference between the recorded amounts of dividends, interest, and foreign withholding taxes and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign exchange gains and losses arise from changes in foreign exchange rates on foreign denominated assets and liabilities other than investments in securities held at the end of the reporting period.

c. Joint Repurchase Agreement

The Fund enters into a joint repurchase agreement whereby its uninvested cash balance is deposited into a joint cash account with other funds managed by the investment manager or an affiliate of the investment manager and is used to invest in one or more repurchase agreements. The value and face amount of the joint repurchase agreement are allocated to the funds based on their pro-rata interest. A repurchase agreement is accounted for as a loan by the Fund to the seller, collateralized by securities which are delivered to the Fund’s custodian. The fair value, including accrued interest, of the initial collateralization is required to be at least 102% of the dollar amount invested by the funds, with the value of the underlying securities marked to market daily to maintain coverage of at least 100%. Repurchase agreements are subject to the terms of Master Repurchase Agreements (MRAs) with approved counterparties (sellers). The MRAs contain various provisions, including but not limited to events of default and maintenance of collateral for repurchase agreements. In the event of default by either the seller or the Fund, certain MRAs may permit the non-defaulting party to net and close-out all transactions, if any, traded under such agreements. The Fund may sell securities it holds as collateral and apply the proceeds towards the repurchase price and any other amounts owed by the seller to the Fund in the event of default by the seller. This could involve costs or delays in addition to a loss on the securities if their value falls below the repurchase price owed by the seller. The joint repurchase agreement held

franklintempleton.com Semiannual Report 37

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

Franklin K2 Long Short Credit Fund (continued)

1. Organization and Significant Accounting Policies (continued)

c. Joint Repurchase Agreement (continued)

by the Fund at period end, as indicated in the Statement of Investments, had been entered into on November 30, 2018.

d. Derivative Financial Instruments

The Fund invested in derivative financial instruments in order to manage risk or gain exposure to various other investments or markets. Derivatives are financial contracts based on an underlying or notional amount, require no initial investment or an initial net investment that is smaller than would normally be required to have a similar response to changes in market factors, and require or permit net settlement. Derivatives contain various risks including the potential inability of the counterparty to fulfill their obligations under the terms of the contract, the potential for an illiquid secondary market, and/or the potential for market movements which expose the Fund to gains or losses in excess of the amounts shown in the Statement of Assets and Liabilities. Realized gain and loss and unrealized appreciation and depreciation on these contracts for the period are included in the Statement of Operations.

Derivative counterparty credit risk is managed through a formal evaluation of the creditworthiness of all potential counterparties. The Fund attempts to reduce its exposure to counterparty credit risk on OTC derivatives, whenever possible, by entering into International Swaps and Derivatives Association (ISDA) master agreements with certain counterparties. These agreements contain various provisions, including but not limited to collateral requirements, events of default, or early termination. Termination events applicable to the counterparty include certain deteriorations in the credit quality of the counterparty. Termination events applicable to the Fund include failure of the Fund to maintain certain net asset levels and/or limit the decline in net assets over various periods of time. In the event of default or early termination, the ISDA master agreement gives the non-defaulting party the right to net and close-out all transactions traded, whether or not arising under the ISDA agreement, to one net amount payable by one counterparty to the other. However, absent an event of default or early termination, OTC derivative assets and liabilities are presented gross and not offset in the Statement of Assets and Liabilities. Early termination by the counterparty may result in an immediate payment by the Fund of any net liability owed to that counterparty under the ISDA agreement.

Collateral requirements differ by type of derivative. Collateral or initial margin requirements are set by the broker or exchange clearing house for exchange traded and centrally cleared derivatives. Initial margin deposited is held at the exchange and can be in the form of cash and/or securities. For OTC derivatives traded under an ISDA master agreement, posting of collateral is required by either the Fund or the applicable counterparty if the total net exposure of all OTC derivatives with the applicable counterparty exceeds the minimum transfer amount, which typically ranges from $100,000 to $250,000, and can vary depending on the counterparty and the type of the agreement. Generally, collateral is determined at the close of Fund business each day and any additional collateral required due to changes in derivative values may be delivered by the Fund or the counterparty the next business day, or within a few business days. Collateral pledged and/or received by the Fund for OTC derivatives, if any, is held in segregated accounts with the Fund’s custodian/counterparty broker and can be in the form of cash and/or securities. Unrestricted cash may be invested according to the Fund’s investment objectives. To the extent that the amounts due to the Fund from its counterparties are not subject to collateralization or are not fully collateralized, the Fund bears the risk of loss from counterparty non-performance.

The Fund entered into exchange traded futures contracts primarily to manage and/or gain exposure to interest rate and equity price risk. A futures contract is an agreement between the Fund and a counterparty to buy or sell an asset at a specified price on a future date. Required initial margins are pledged by the Fund, and the daily change in fair value is accounted for as a variation margin payable or receivable in the Statement of Assets and Liabilities.

The Fund entered into OTC forward exchange contracts primarily to manage and/or gain exposure to certain foreign currencies. A forward exchange contract is an agreement between the Fund and a counterparty to buy or sell a foreign currency at a specific exchange rate on a future date.

The Fund entered into credit default swap contracts primarily to manage and/or gain exposure to credit risk. A credit default swap is an agreement between the Fund and a counterparty whereby the buyer of the contract receives credit protection and the seller of the contract guarantees the credit worthiness of a referenced debt obligation. These agreements may be privately negotiated in the over-the-counter market (OTC credit default swaps) or may be executed in a multilateral trade facility platform, such as a registered exchange (centrally cleared credit

38 Semiannual Report franklintempleton.com

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

Franklin K2 Long Short Credit Fund (continued)

default swaps). The underlying referenced debt obligation may be a single issuer of corporate or sovereign debt, a credit index, a basket of issuers or indices, or a tranche of a credit index or basket of issuers or indices. In the event of a default of the underlying referenced debt obligation, the buyer is entitled to receive the notional amount of the credit default swap contract from the seller in exchange for the referenced debt obligation, a net settlement amount equal to the notional amount of the credit default swap less the recovery value of the referenced debt obligation, or other agreed upon amount. For centrally cleared credit default swaps, required initial margins are pledged by the Fund, and the daily change in fair value is accounted for as a variation margin payable or receivable in the Statement of Assets and Liabilities. Over the term of the contract, the buyer pays the seller a periodic stream of payments, provided that no event of default has occurred. Such periodic payments are accrued daily as an unrealized appreciation or depreciation until the payments are made, at which time they are realized. Upfront payments and receipts are reflected in the Statement of Assets and Liabilities and represent compensating factors between stated terms of the credit default swap agreement and prevailing market conditions (credit spreads and other relevant factors). These upfront payments and receipts are amortized over the term of the contract as a realized gain or loss in the Statement of Operations.

The Fund entered into interest rate swap contracts primarily to manage interest rate risk. An interest rate swap is an agreement between the Fund and a counterparty to exchange cash flows based on the difference between two interest rates, applied to a notional amount. These agreements may be privately negotiated in the over-the-counter market (OTC interest rate swaps) or may be executed on a registered exchange (centrally cleared interest rate swaps). For centrally cleared interest rate swaps, required initial margins are pledged by the Fund, and the daily change in fair value is accounted for as a variation margin payable or receivable in the Statement of Assets and Liabilities. Over the term of the contract, contractually required payments to be paid and to be received are accrued daily and recorded as unrealized depreciation and appreciation until the payments are made, at which time they are realized.

The Fund entered into OTC total return swap contracts primarily to manage and/or gain exposure to interest rate, equity price and credit risk of an underlying instrument such as a stock, bond, index or basket of securities or indices. A total return swap is an agreement between the Fund and a counterparty to exchange a return linked to an underlying instrument for a

floating or fixed rate payment, both based upon a notional amount. Over the term of the contract, contractually required payments to be paid or received are accrued daily and recorded as unrealized appreciation or depreciation until the payments are made, at which time they are recognized as realized gain or loss.

The Fund purchased or wrote exchange traded and/or OTC option contracts primarily to manage and/or gain exposure to equity price risk. An option is a contract entitling the holder to purchase or sell a specific amount of shares or units of an asset or notional amount of a swap (swaption), at a specified price. When an option is purchased or written, an amount equal to the premium paid or received is recorded as an asset or liability, respectively. Upon exercise of an option, the acquisition cost or sales proceeds of the underlying investment is adjusted by any premium received or paid. Upon expiration of an option, any premium received or paid is recorded as a realized gain or loss. Upon closing an option other than through expiration or exercise, the difference between the premium received or paid and the cost to close the position is recorded as a realized gain or loss.

See Note 8 regarding other derivative information.

e. Securities Sold Short

The Fund is engaged in selling securities short, which obligates the Fund to replace a borrowed security with the same security at current fair value. The Fund incurs a loss if the price of the security increases between the date of the short sale and the date on which the Fund replaces the borrowed security. The Fund realizes a gain if the price of the security declines between those dates. Gains are limited to the price at which the Fund sold the security short, while losses are potentially unlimited in size.

The Fund is required to establish a margin account with the broker lending the security sold short. While the short sale is outstanding, the broker retains the proceeds of the short sale to the extent necessary to meet margin requirements until the short position is closed out. A deposit must also be maintained with the Fund’s custodian/counterparty broker consisting of cash and/or securities having a value equal to a specified percentage of the value of the securities sold short. The Fund is obligated to pay fees for borrowing the securities sold short and is required to pay the counterparty any dividends and/or interest due on securities sold short. Such dividends and/or interest and any security borrowing fees are recorded as an expense to the Fund.

franklintempleton.com Semiannual Report 39

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

Franklin K2 Long Short Credit Fund (continued)

1. Organization and Significant Accounting Policies (continued)

f. Income and Deferred Taxes

It is the Fund’s policy to qualify as a regulated investment company under the Internal Revenue Code. The Fund intends to distribute to shareholders substantially all of its taxable income and net realized gains to relieve it from federal income and excise taxes. As a result, no provision for U.S. federal income taxes is required.

The Fund may be subject to foreign taxation related to income received, capital gains on the sale of securities and certain foreign currency transactions in the foreign jurisdictions in which it invests. Foreign taxes, if any, are recorded based on the tax regulations and rates that exist in the foreign markets in which the Fund invests. When a capital gain tax is determined to apply, the Fund records an estimated deferred tax liability in an amount that would be payable if the securities were disposed of on the valuation date.

The Fund may recognize an income tax liability related to its uncertain tax positions under U.S. GAAP when the uncertain tax position has a less than 50% probability that it will be sustained upon examination by the tax authorities based on its technical merits. As of November 30, 2018, the Fund has determined that no tax liability is required in its consolidated financial statements related to uncertain tax positions for any open tax years (or expected to be taken in future tax years). Open tax years are those that remain subject to examination and are based on the statute of limitations in each jurisdiction in which the Fund invests.

g. Security Transactions, Investment Income, Expenses and Distributions

Security transactions are accounted for on trade date. Realized gains and losses on security transactions are determined on a specific identification basis. Interest income and estimated expenses are accrued daily. Amortization of premium and accretion of discount on debt securities are included in interest income. Paydown gains and losses are recorded as an adjustment to interest income separately on the Statement of Operations. Dividend income and dividends declared on securities sold short are recorded on the ex-dividend date except for certain dividends from securities where the dividend rate is not available. In such cases, the dividend is recorded as soon as the information is received by the Fund. Distributions to shareholders are recorded on the ex-dividend date. Distributable earnings

are determined according to income tax regulations (tax basis) and may differ from earnings recorded in accordance with U.S. GAAP. These differences may be permanent or temporary. Permanent differences are reclassified among capital accounts to reflect their tax character. These reclassifications have no impact on net assets or the results of operations. Temporary differences are not reclassified, as they may reverse in subsequent periods.*

Common expenses incurred by the Trust are allocated among the Funds based on the ratio of net assets of each Fund to the combined net assets of the Trust or based on the ratio of number of shareholders of each Fund to the combined number of shareholders of the Trust. Fund specific expenses are charged directly to the Fund that incurred the expense.

Realized and unrealized gains and losses and net investment income, excluding class specific expenses, are allocated daily to each class of shares based upon the relative proportion of net assets of each class. Differences in per share distributions by class are generally due to differences in class specific expenses.

h. Accounting Estimates

The preparation of financial statements in accordance with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the amounts of income and expenses during the reporting period. Actual results could differ from those estimates.

i. Guarantees and Indemnifications

Under the Trust’s organizational documents, its officers and trustees are indemnified by the Trust against certain liabilities arising out of the performance of their duties to the Trust. Additionally, in the normal course of business, the Trust, on behalf of the Fund, enters into contracts with service providers that contain general indemnification clauses. The Trust’s maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Trust that have not yet occurred. Currently, the Trust expects the risk of loss to be remote.

*Effective during the current reporting period, it is no longer required to present certain line items as shown below on the Statements of Changes in Net Assets. Such disclosure changes are included in the Statements of Changes in Net Assets, therefore prior period amounts are presented below.

40 Semiannual Report franklintempleton.com

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

Franklin K2 Long Short Credit Fund (continued)

For the year ended May 31, 2018, distributions to shareholders were as follows:

Distributions from net investment income:
Class A	$	(798,159	)
Class C		(16,539	)
Class R		(2,505	)
Class R6		(229,423	)
Advisor Class		(581,543	)
Distributions from net realized gains:
Class A		(714,554	)
Class C		(27,644	)
Class R		(2,620	)
Class R6		(191,370	)
Advisor Class		(487,193	)

For the year ended May 31, 2018, undistributed net investment income included in net assets was $496,750.

2. Shares of Beneficial Interest

At November 30, 2018, there were an unlimited number of shares authorized (without par value). Transactions in the Fund’s shares were as follows:

	Six Months Ended November 30, 2018						Year Ended May 31, 2018
	Shares			Amount			Shares			Amount
Class A Shares:
Shares solda		345,531		$	3,656,971			1,068,222		$	11,330,973
Shares issued in reinvestment of distributions		—			—			48,302			502,336
Shares redeemed		(1,052,467	)		(11,135,487	)		(730,238	)		(7,696,288	)
Net increase (decrease)		(706,936	)	$	(7,478,516	)		386,286		$	4,137,021
Class C Shares:
Shares sold		95,085		$	988,343			156,509		$	1,621,784
Shares issued in reinvestment of distributions		—			—			4,283			44,033
Shares redeemeda		(70,986	)		(738,380	)		(64,430	)		(669,366	)
Net increase (decrease)		24,099		$	249,963			96,362		$	996,451
Class R Shares:
Shares sold		570		$	5,960			2,884		$	30,055
Shares issued in reinvestment of distributions		—			—			457			4,720
Shares redeemed		(570	)		(5,989	)		(13	)		(137	)
Net increase (decrease)		—		$	(29	)		3,328		$	34,638
Class R6 Shares:
Shares sold		15,212		$	160,688			90,935		$	964,819
Shares issued in reinvestment of distributions		—			—			40,378			420,337
Shares redeemed		—			—			(1,373,217	)		(14,431,550	)
Net increase (decrease)		15,212		$	160,688			(1,241,904	)	$	(13,046,394	)
Advisor Class Shares:
Shares sold		1,956,180		$	20,733,204			2,309,752		$	24,300,041
Shares issued in reinvestment of distributions		—			—			20,313			211,456
Shares redeemed		(428,550	)		(4,543,620	)		(392,942	)		(4,131,923	)
Net increase (decrease)		1,527,630		$	16,189,584			1,937,123		$	20,379,574

^aMay include a portion of Class C shares that were automatically converted to Class A.

franklintempleton.com Semiannual Report 41

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

Franklin K2 Long Short Credit Fund (continued)

3. Transactions with Affiliates

Franklin Resources, Inc. is the holding company for various subsidiaries that together are referred to as Franklin Templeton Investments. Certain officers and trustees of the Trust are also officers and/or directors of the following subsidiaries:

Subsidiary	Affiliation
K2/D&S Management Co., L.L.C. (K2 Advisors)	Investment manager
Franklin Templeton Services, LLC (FT Services)	Administrative manager
Franklin Templeton Distributors, Inc. (Distributors)	Principal underwriter
Franklin Templeton Investor Services, LLC (Investor Services)	Transfer agent

a. Management Fees

The Fund pays an investment management fee to K2 Advisors of 1.90% per year of the average daily net assets of the Fund.

Under each subadvisory agreement, the below entities provide subadvisory services to the Fund. The subadvisory fees are paid by K2 Advisors based on the Fund’s average daily net assets, and are not an additional expense of the Fund.

Subadvisors

Apollo Credit Management LLC

Chatham Asset Management, LLC

Ellington Global Asset Management, L.L.C.

Emso Asset Management Limited

Medalist Partners, L.P.

b. Administrative Fees

Under an agreement with K2 Advisors, FT Services provides administrative services to the Fund. The fee is paid by K2 Advisors based on the Fund’s average daily net assets, and is not an additional expense of the Fund.

c. Distribution Fees

The Board has adopted distribution plans for each share class, with the exception of Class R6 and Advisor Class shares, pursuant to Rule 12b-1 under the 1940 Act. Under the Fund’s Class A reimbursement distribution plan, the Fund reimburses Distributors for costs incurred in connection with the servicing, sale and distribution of the Fund’s shares up to the maximum annual plan rate. Under the Class A reimbursement distribution plan, costs exceeding the maximum for the current plan year cannot be reimbursed in subsequent periods. In addition, under the Fund’s Class C and R compensation distribution plans, the Fund pays Distributors for costs incurred in connection with the servicing, sale and distribution of the Fund’s shares up to the maximum annual plan rate for each class. The plan year, for purposes of monitoring compliance with the maximum annual plan rates, is February 1 through January 31.

The maximum annual plan rates, based on the average daily net assets, for each class, are as follows:

Class A	0.25%
Class C	1.00%
Class R	0.50%

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FRANKLIN ALTERNATIVE STRATEGIES FUNDS

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

Franklin K2 Long Short Credit Fund (continued)

d. Sales Charges/Underwriting Agreements

Front-end sales charges and contingent deferred sales charges (CDSC) do not represent expenses of the Fund. These charges are deducted from the proceeds of sales of Fund shares prior to investment or from redemption proceeds prior to remittance, as applicable. Distributors has advised the Fund of the following commission transactions related to the sales and redemptions of the Fund’s shares for the period:

Sales charges retained net of commissions paid to unaffiliated brokers/dealers	$	1,914
CDSC retained	$	1,530

Effective September 10, 2018, the Board approved changes to certain front-end sales charges and dealer commissions on Class A shares. Further details are disclosed in the Fund’s Prospectus.

e. Transfer Agent Fees

Each class of shares pays transfer agent fees to Investor Services for its performance of shareholder servicing obligations. The fees are based on an annualized asset based fee of 0.02% plus a transaction based fee. In addition, each class reimburses Investor Services for out of pocket expenses incurred and, except for Class R6, reimburses shareholder servicing fees paid to third parties. These fees are allocated daily based upon their relative proportion of such classes’ aggregate net assets. Class R6 pays Investor Services transfer agent fees specific to that class.

For the period ended November 30, 2018, the Fund paid transfer agent fees of $30,331, of which $16,830 was retained by Investor Services.

f. Waiver and Expense Reimbursements

K2 Advisors and Investor Services have contractually agreed in advance to waive or limit their respective fees and to assume as their own expense certain expenses otherwise payable by the Fund so that the expenses (excluding distribution fees, acquired fund fees and expenses, expenses related to securities sold short and certain non-routine expenses or costs, including those relating to litigation, indemnification, reorganizations, and liquidations) for each class of the Fund do not exceed 1.95%, and Class R6 does not exceed 1.93% based on the average net assets of each class until September 30, 2019. Total expenses waived or paid are not subject to recapture subsequent to the Fund’s fiscal year end.

Prior to October 1, 2018, expenses (excluding certain fees and expenses as previously disclosed) for Class R6 were limited to 1.94% based on the average net assets of the class.

g. Other Affiliated Transactions

At November 30, 2018, Franklin Resources, Inc. owned 46.5% of the Fund’s outstanding shares. Investment activities of this shareholder could have a material impact on the Fund.

4. Expense Offset Arrangement

The Fund has entered into an arrangement with its custodian whereby credits realized as a result of uninvested cash balances are used to reduce a portion of the Fund’s custodian expenses. During the period ended November 30, 2018, the custodian fees were reduced as noted in the Statement of Operations.

5. Income Taxes

At November 30, 2018, the cost of investments and net unrealized appreciation (depreciation) were as follows:

Cost of investments	$	91,225,089
Unrealized appreciation	$	3,079,806
Unrealized depreciation		(2,420,004	)
Net unrealized appreciation(depreciation)	$	659,802

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FRANKLIN ALTERNATIVE STRATEGIES FUNDS

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

Franklin K2 Long Short Credit Fund (continued)

5. Income Taxes (continued)

Differences between income and/or capital gains as determined on a book basis and a tax basis are primarily due to differing treatments of bond discounts and premiums, foreign currency transactions, paydown losses and wash sales.

6. Investment Transactions

Purchases and sales of investments and securities sold short (excluding short term securities) for the period ended November 30, 2018, aggregated $61,498,984 and $59,678,340, respectively.

7. Credit Risk and Defaulted Securities

At November 30, 2018, the Fund had 18.2% of its portfolio invested in high yield and other securities rated below investment grade and unrated securities, if any. These securities may be more sensitive to economic conditions causing greater price volatility and are potentially subject to a greater risk of loss due to default than higher rated securities.

The Fund may purchase the pre-default or defaulted debt of distressed companies. Distressed companies are financially troubled and could be or are already involved in financial restructuring or bankruptcy. Risks associated with purchasing these securities include the possibility that the bankruptcy or other restructuring process takes longer than expected, or that distributions in restructuring are less than anticipated, either or both of which may result in unfavorable consequences to the Fund. If it becomes probable that the income on debt securities, including those of distressed companies, will not be collected, the Fund discontinues accruing income and recognizes an adjustment for uncollectible interest.

At November 30, 2018, the aggregate long value of distressed company securities for which interest recognition has been discontinued was $13,968, representing less than 0.1% of the Fund’s net assets. For information as to specific securities, see the accompanying Statement of Investments.

8. Other Derivative Information

At November 30, 2018, the Fund’s investments in derivative contracts are reflected in the Statement of Assets and Liabilities as follows:

	Asset Derivatives				Liability Derivatives
Derivative Contracts Not Accounted for as Hedging Instruments	Statement of Assets and Liabilities Location	Fair Value			Statement of Assets and Liabilities Location	Fair Value
Interest rate contracts	Variation margin on futures contracts	$	603	a	Variation margin on futures contracts	$	4,823	a
	Variation margin on centrally cleared swap contracts		83,104	a	Variation margin on centrally cleared swap contracts		65,323	a
					Unrealized depreciation on OTC swap contracts		5,835
Foreign exchange contracts	Unrealized appreciation on OTC forward exchange contracts		140,468		Unrealized depreciation on OTC forward exchange contracts		229,812
Credit contracts	Variation margin centrally cleared swap contracts		78,330	a	Variation margin centrally cleared swap contracts		144,560	a
	OTC swap contracts (upfront payments)		456,336		OTC swap contracts (upfront receipts)		288,127
	Unrealized appreciation on OTC swap contracts		215,573		Unrealized depreciation on OTC swap contracts		84,299

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FRANKLIN ALTERNATIVE STRATEGIES FUNDS

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

Franklin K2 Long Short Credit Fund (continued)

	Asset Derivatives				Liability Derivatives
Derivative Contracts Not Accounted for as Hedging Instruments	Statement of Assets and Liabilities Location	Fair Value			Statement of Assets and Liabilities Location	Fair Value
Equity contracts	Investments in securities, at value	$	147,309	b	Options written, at value	$	42,360
	Unrealized appreciation on OTC swap contracts		13,720		Unrealized depreciation on OTC swap contracts		254,621
	Variation margin on futures contracts		7,600	a
Totals		$	1,143,043			$	1,119,760

^aThis amount reflects the cumulative appreciation (depreciation) of futures contracts and centrally cleared swap contracts as reported in the Statement of Investments. Only the variation margin receivable/payable at period end is separately reported within the Statement of Assets and Liabilities. Prior variation margin movements were recorded to cash upon receipt or payment.

^bPurchased option contracts are included in investments in securities, at value in the Statement of Assets and Liabilities.

For the period ended November 30, 2018, the effect of derivative contracts in the Fund’s Statement of Operations was as follows:

Derivative Contracts Not Accounted for as Hedging Instruments	Statement of Operations Location	Net Realized Gain (Loss) for the Period			Statement of Operations Location	Net Change in Unrealized Appreciation (Depreciation) for the Period
	Net realized gain (loss) from:				Net change in unrealized appreciation (depreciation) on:
Interest rate contracts	Futures contracts	$	(3,676	)	Futures contracts	$	2,549
	Swap contracts		41,399		Swap contracts		24,928
Foreign exchange contracts	Forward exchange contracts		492,252		Forward exchange contracts		(300,232	)
Credit contracts	Swap contracts		(210,358	)	Swap contracts		364,373
Equity contracts	Investments		(163,948	)a	Investments		31,310	a
	Written options		35,838		Written options		(10,454	)
	Futures contracts		(24,188	)	Futures contracts		12,976
	Swap contracts		62,059		Swap contracts		(187,344	)
Totals		$	229,378			$	(61,894	)

^aPurchased option contracts are included in net realized gain (loss) from investments and net change in unrealized appreciation (depreciation) on investments in the Statement of Operations.

For the period ended November 30, 2018, the average month end notional amount of futures contracts, options and swap contracts represented $652,334, 148,217 shares and $27,607,667, respectively. The average month end contract value of forward exchange contracts was $10,005,846.

franklintempleton.com Semiannual Report 45

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

Franklin K2 Long Short Credit Fund (continued)

8. Other Derivative Information (continued)

At November 30, 2018, the Fund’s OTC derivative assets and liabilities are as follows:

	Gross Amounts of Assets and Liabilities Presented in the Statement of Assets and Liabilities
	Assetsa		Liabilitiesa
Derivatives
Forward Exchange Contracts	$	140,468	$	229,812
Options Purchased		425		—
Swap Contracts		685,629		632,882
Total	$	826,522	$	862,694

^aAbsent an event of default or early termination, OTC derivative assets and liabilities are presented gross and not offset in the Statement of Assets and Liabilities.

At November 30, 2018, the Fund’s OTC derivative assets, which may be offset against the Fund’s OTC derivative liabilities, and collateral received from the counterparty, are as follows:

			Amounts Not Offset in the Statement of Assets and Liabilities
	Gross Amounts of Assets Presented in the Statement of Assets and Liabilities		Financial Instruments Available for Offset			Financial Instruments Collateral Received		Cash Collateral Receiveda			Net Amount (Not less than zero)
Counterparty
BOFA	$	9,405	$	(6,176	)	$	—	$	—		$	3,229
BZWS		69,467		(69,467	)		—		—			—
GSCO		331,818		(221,452	)		—		—			110,366
JPHQ		49,638		(16,439	)		—		(33,199	)		—
JPHQc		304,375		—			—		—			304,375
MSCS		61,819		(28,967	)		—		—			32,852
Total	$	826,522	$	(342,501	)	$	—	$	(33,199	)	$	450,822

At November 30, 2018, the Fund’s OTC derivative liabilities, which may be offset against the Fund’s OTC derivative assets, and collateral pledged to the counterparty, are as follows:

			Amounts Not Offset in the Statement of Assets and Liabilities
	Gross Amounts of Liabilities Presented in the Statement of Assets and Liabilities		Financial Instruments Available for Offset			Financial Instruments Collateral Pledgedb		Cash Collateral Pledgeda			Net Amount (Not less than zero)
Counterparty
BOFA	$	6,176	$	(6,176	)	$	—	$	—		$	—
BZWS		203,984		(69,467	)		—		(134,517	)		—
GSCO		221,452		(221,452	)		—		—			—
JPHQ		16,439		(16,439	)		—		—			—
JPHQc		385,676		—			—		—			385,676
MSCS		28,967		(28,967	)		—		—			—
Total	$	862,694	$	(342,501	)	$	—	$	(134,517	)	$	385,676

^aIn some instances, the collateral amounts disclosed in the table above were adjusted due to the requirement to limit the collateral amounts to avoid the effect of over collateralization. Actual collateral received and/or pledged may be more than the amounts disclosed herein.

^bSee the accompanying Statement of Investments for securities pledged as collateral for derivatives.

^cRepresents derivatives not subject to an ISDA master agreement.

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FRANKLIN ALTERNATIVE STRATEGIES FUNDS

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

Franklin K2 Long Short Credit Fund (continued)

See Note 1(d) regarding derivative financial instruments.

See Abbreviations on page 49.

9. Credit Facility

The Fund, together with other U.S. registered and foreign investment funds (collectively, Borrowers), managed by Franklin Templeton Investments, are borrowers in a joint syndicated senior unsecured credit facility totaling $2 billion (Global Credit Facility) which matures on February 8, 2019. This Global Credit Facility provides a source of funds to the Borrowers for temporary and emergency purposes, including the ability to meet future unanticipated or unusually large redemption requests.

Under the terms of the Global Credit Facility, the Fund shall, in addition to interest charged on any borrowings made by the Fund and other costs incurred by the Fund, pay its share of fees and expenses incurred in connection with the implementation and maintenance of the Global Credit Facility, based upon its relative share of the aggregate net assets of all of the Borrowers, including an annual commitment fee of 0.15% based upon the unused portion of the Global Credit Facility. These fees are reflected in other expenses in the Statement of Operations. During the period ended November 30, 2018, the Fund did not use the Global Credit Facility.

10. Fair Value Measurements

The Fund follows a fair value hierarchy that distinguishes between market data obtained from independent sources (observable inputs) and the Fund’s own market assumptions (unobservable inputs). These inputs are used in determining the value of the Fund’s financial instruments and are summarized in the following fair value hierarchy:

• Level 1 – quoted prices in active markets for identical financial instruments

• Level 2 – other significant observable inputs (including quoted prices for similar financial instruments, interest rates, prepayment speed, credit risk, etc.)

• Level 3 – significant unobservable inputs (including the Fund’s own assumptions in determining the fair value of financial instruments)

The input levels are not necessarily an indication of the risk or liquidity associated with financial instruments at that level.

A summary of inputs used as of November 30, 2018, in valuing the Fund’s assets and liabilities carried at fair value, is as follows:

	Level 1		Level 2		Level 3		Total
Assets:
Investments in Securities:a
Common Stocks and Other Equity Interests	$	1,330,134	$	—	$	—	$	1,330,134
Convertible Bonds		—		2,525,062		—		2,525,062
Corporate Bonds and Notes		—		33,998,116		—		33,998,116
Corporate Bonds and Notes in Reorganization		—		13,968		—		13,968
Foreign Government and Agency Securities		—		4,837,636		—		4,837,636
U.S. Government and Agency Securities		—		715,931		—		715,931
Asset-Backed Securities and Commercial Mortgage-Backed Securities		—		34,425,949		—		34,425,949
Options Purchased		146,894		425		—		147,309
Short Term Investments		15,520,815		3,713,585		—		19,234,400
Total Investments in Securities	$	16,997,833	$	80,230,672	$	—	$	97,228,505
Other Financial Instruments:
Futures Contracts	$	8,203	$	—	$	—	$	8,203
Forward Exchange Contracts		—		140,468		—		140,468
Swap Contracts		—		390,727		—		390,727
Total Other Financial Instruments	$	8,203	$	531,195	$	—	$	539,398

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FRANKLIN ALTERNATIVE STRATEGIES FUNDS

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

Franklin K2 Long Short Credit Fund (continued)

10. Fair Value Measurements (continued)

	Level 1		Level 2		Level 3		Total
Liabilities:
Other Financial Instruments:
Options Written	$	42,360	$	—	$	—	$	42,360
Securities Sold Shorta		260,606		5,092,487		—		5,353,093
Futures Contracts		4,823		—		—		4,823
Forward Exchange Contracts		—		229,812		—		229,812
Swap Contracts		—		554,638		—		554,638
Total Other Financial Instruments	$	307,789	$	5,876,937	$	—	$	6,184,726

^aFor detailed categories, see the accompanying Statement of Investments.

A reconciliation of assets in which Level 3 inputs are used in determining fair value is presented when there are significant Level 3 financial instruments at the beginning and/or end of the period. At November 30, 2018, the reconciliation of assets, is as follows:

	Balance at Beginning of Period		Purchases		Sales			Transfer Into (Out of) Level 3a			Cost Basis Adjustments		Net Realized Gain (Loss)			Net Unrealized Appreciation (Depreciation)			Balance at End of Period		Net Change in Unrealized Appreciation (Depreciation) on Assets Held at Period End
Assets:
Investments in Securities:
Common Stocks and Other Equity Interests	$	749,970	$	—	$	(380,651	)	$	(313,233	)	$	—	$	193,915		$	(250,001	)	$	—	$	—
Preferred Stocks		298,900		—		(298,850	)		—			—		(50	)		—			—		—
Asset-Backed Securities and Commercial Mortgage-Backed Securities		421,168		—		—			(389,536	)		—		(5,796	)		(25,836	)		—		—
Total Investments in Securities	$	1,470,038	$	—	$	(679,501	)	$	(702,769	)	$	—	$	188,069		$	(275,837	)	$	—	$	—

^aThe investments were transferred out of Level 3 as a result of the availability of other significant observable valuation inputs. May include amounts related to a corporate action.

Level 3 investments in securities include financial instruments with values derived using private transaction prices or non-public third party pricing information which is unobservable. They may also include fair value of immaterial financial instruments and/or other assets developed using various valuation techniques and unobservable inputs.

11. Subsequent Events

The Fund has evaluated subsequent events through the issuance of the financial statements and determined that no events have occurred that require disclosure.

48 Semiannual Report franklintempleton.com

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

Franklin K2 Long Short Credit Fund (continued)

Abbreviations

Counterparty		Currency		Selected Portfolio		Index
BOFA	Bank of America, N.A.	ARS	Argentine Peso	ADR	American Depositary Receipt	CDX.NA.HY	CDX North America High Yield
BZWS	Barclays Bank PLC	BRL	Brazilian Real	ARLLMONP	Argentina Blended Policy Rate
GSCO	Goldman Sachs International	CZK	Czech Koruna	ARM	Adjustable Rate Mortgage
JPHQ	JP Morgan Chase Bank, N.A.	EUR	Euro	BRLCDI	Brazil Cetip Di Interbank Deposit Rate
MSCS	Morgan Stanley Capital Services LLC	GBP	British Pound	BURBOR	Budapest Interbank Offered Rate
		HUF	Hungarian Forint	CLO	Collateralized Loan Obligation
		INR	Indian Rupee	CMT	1 year Constant Maturity Treasury Index
		JPY	Japanese Yen	ETF	Exchange Traded Fund
		MXN	Mexican Peso	EURIBOR	Euro Interbank Offered Rate
		MYR	Malaysian Ringgit	FHLMC	Federal Home Loan Mortgage Corp.
		USD	United States Dollar	FNMA	Federal National Mortgage Association
		ZAR	South African Rand	FRN	Floating Rate Note
				IO	Interest-Only
				KLIBOR	Kuala Lumpur InterBank Offered Rate
				LIBOR	London InterBank Offered Rate
				MIBOR	Mumbai InterBank Offered Rate
				PIK	Payment In-Kind
				PRIBOR	Prague InterBank Offered Rate
				REIT	Real Estate Investment Trust
				SPDR	Standard & Poor Depositary Receipt
				TIIE	Interbank Equilibrium Interest Rate

franklintempleton.com Semiannual Report 49

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

FRANKLIN K2 LONG SHORT CREDIT FUND

Shareholder Information

Proxy Voting Policies and Procedures

The Fund’s investment manager has established Proxy Voting Policies and Procedures (Policies) that the Fund uses to determine how to vote proxies relating to portfolio securities. Shareholders may view the Fund’s complete Policies online at franklintempleton.com. Alternatively, shareholders may request copies of the Policies free of charge by calling the Proxy Group collect at (954) 527-7678 or by sending a written request to: Franklin Templeton Companies, LLC, 300 S.E. 2nd Street, Fort Lauderdale, FL 33301, Attention: Proxy Group. Copies of the Fund’s proxy voting records are also made available online at franklintempleton.com and posted on the U.S. Securities and Exchange Commission’s website at sec.gov and reflect the most recent 12-month period ended June 30.

Quarterly Statement of Investments

The Trust, on behalf of the Fund, files a complete statement of investments with the U.S. Securities and Exchange Commission for the first and third quarters for each fiscal year on Form N-Q. Shareholders may view the filed Form N-Q by visiting the Commission’s website at sec.gov. The filed form may also be viewed and copied at the Commission’s Public Reference Room in Washington, DC. Information regarding the operations of the Public Reference Room may be obtained by calling (800) SEC-0330.

50 Semiannual Report franklintempleton.com

Semiannual Report and Shareholder Letter

Franklin K2 Long Short Credit Fund

Investment Manager

K2/D&S Management Co., L.L.C.

Distributor

Franklin Templeton Distributors, Inc.

(800) DIAL BEN^® / 342-5236

franklintempleton.com

Shareholder Services

(800) 632-2301

Authorized for distribution only when accompanied or preceded by a summary prospectus and/or prospectus. Investors should carefully consider a fund’s investment goals, risks, charges and expenses before investing. A prospectus contains this and other information; please read it carefully before investing.

To help ensure we provide you with quality service, all calls to and from our service areas are monitored and/or recorded.

© 2018-2019 Franklin Templeton Investments. All rights reserved. 948 S 01/19

Semiannual Report and Shareholder Letter November 30, 2018

Franklin K2 Global Macro Opportunities Fund

A SERIES OF FRANKLIN ALTERNATIVE STRATEGIES FUNDS

Sign up for electronic delivery at franklintempleton.com/edelivery

Franklin Templeton Investments

Successful investing begins with ambition. And achievement only comes when you reach for it. That’s why we continually strive to deliver better outcomes for investors. No matter what your goals are, our deep, global investment expertise allows us to offer solutions that can help.

During our more than 70 years of experience, we’ve managed through all kinds of markets—up, down and those in between. We’re always preparing for what may come next. It’s because of this, combined with our strength as one of the world’s largest asset managers that we’ve earned the trust of millions of investors around the world.

Dear Fellow Shareholder:

During the six months ended November 30, 2018, global markets benefited from crude oil price gains through the end of September, upbeat economic data in certain regions, generally healthy corporate earnings, and optimism near period-end that the U.S. Federal Reserve would raise interest rates at a slower pace than during the past two years. However, global markets also reflected investor concerns about stricter regulation of technology companies, U.S. and European Union political uncertainties, changing interest-rate policies of major central banks, and how the U.S.-China trade dispute could affect global growth and corporate earnings. In this environment, global developed stock markets, as measured by the MSCI World Index, had a -1.45% total return for the period.¹ Global emerging market stocks, as measured by the MSCI Emerging Markets Index, had a -9.68% total return.¹ Global government bonds, as measured by the FTSE World Government Bond Index, had a -2.51% total return.¹

We are committed to our long-term perspective and disciplined investment approach as we conduct a rigorous, 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.

On the following pages, the Fund’s portfolio management team reviews investment decisions that pertain to performance during the past six months in light of the economic environment and other factors. 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 continuing to serve your investment needs in the years ahead.

Sincerely,

Madison S. Gulley, CFA

President and Chief Executive Officer – Investment Management

Franklin Alternative Strategies Funds

This letter reflects our analysis and opinions as of November 30, 2018, 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.

CFA^® is a trademark owned by CFA Institute.

1. Source: Morningstar.

See www.franklintempletondatasources.com for additional data provider information.

Not FDIC Insured | May Lose Value | No Bank Guarantee

franklintempleton.com Not part of the semiannual report 1

Contents

Semiannual Report

Franklin K2 Global Macro Opportunities Fund	3
Performance Summary	7
Your Fund’s Expenses	9
Consolidated Financial Highlights and Consolidated Statement of Investments	10
Consolidated Financial Statements	22
Notes to Consolidated Financial Statements	26
Shareholder Information	37

Visit franklintempleton.com for fund updates, to access your account, or to find helpful financial planning tools.

2 Semiannual Report franklintempleton.com

Semiannual Report

Franklin K2 Global Macro Opportunities Fund

This semiannual report for Franklin K2 Global Macro Opportunities Fund covers the period ended November 30, 2018.

Your Fund’s Goal and Main Investments

The Fund seeks capital appreciation over a full business and economic cycle, which may include periods of rising and declining interest rates. The Fund seeks to achieve this goal by allocating its assets across global macro-focused investment strategies, which are non-traditional or alternative strategies that generally focus on macroeconomic opportunities across numerous markets and investments. Macroeconomic refers to economic factors such as changes in unemployment, national income, gross domestic product, and inflation and price levels. The Fund is structured as a multi-manager fund, meaning the Fund’s assets are managed by multiple subadvisors, and the Fund’s investment manager has overall responsibility for the Fund’s investments. The Fund’s principal investments include both U.S. and foreign (including emerging markets) securities and exchange-traded and over-the-counter (OTC) derivative instruments, and may include asset classes such as equities, fixed income, interest rates, currencies or commodities. The Fund invests primarily in a wide range of derivative instruments that provide the Fund with broad exposure, either long or short, to these various asset classes. Long positions benefit from an increase in the price of the underlying instrument or asset class, while short positions benefit from a decrease in that price.

Performance Overview

The Fund’s Class A shares posted a +1.00% cumulative total return for the six months under review. For comparison, the Fund’s primary benchmark, the HFRX Macro/CTA Index, which measures performance of global macro strategies with exposure to equity, fixed income, hard currency and commodity markets, had a -2.09% total return for the same period.¹ Also for comparison, the Fund’s secondary benchmark, the ICE BofA Merrill Lynch U.S. 3-Month Treasury Bill Index, which is an index of short-term U.S. government securities with a remaining term to final maturity of less than three months, posted a +1.04% total return for the same period.² You can find

Portfolio Composition*

Based on Total Investments as of 11/30/18

*Figures represent the net Fund exposure and include certain derivatives held in the portfolio (or their underlying reference assets) or unsettled trades and may not total 100% or may be negative due to rounding, use of any derivatives or other factors.

more of the Fund’s performance data in the Performance Summary beginning on page 7.

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) 342-5236.

Economic and Market Overview

The global economy expanded during the six months under review, despite weakness in certain regions. Global developed and emerging market stocks were aided by higher crude oil prices in the first four months of the period, encouraging corporate earnings reports, and indications from the U.S. Federal Reserve (Fed) near period-end that led to expectations of a slower pace of interest-rate increases. However, various factors weighed on global markets during the period, including concerns about tighter regulation of technology companies, political uncertainties in the U.S. and the European Union, major central banks’ interest-rate path and unwinding of monetary stimulus measures, and the impact of the U.S.-China trade dispute on global growth and corporate earnings. In this environment, global stocks, as measured by the MSCI All Country World Index, had a -2.44% total return for the six months ended November 30, 2018.²

1. Source: FactSet. Hedge Fund Research, Inc. – www.hedgefundresearch.com. The HFRX Macro/CTA Index is being used under license from Hedge Fund Research, Inc., which does not endorse or approve of any of the contents of this report.

2. 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. Unlike most asset class indexes, HFR Index returns reflect fees and expenses.

The dollar value, number of shares or principal amount, and names of all portfolio holdings are listed in the Fund’s Consolidated Statement of Investments (SOI). The Consolidated SOI begins on page 15.

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FRANKLIN K2 GLOBAL MACRO OPPORTUNITIES FUND

The U.S. economy grew during the six-month period. The economy grew faster in 2018’s second quarter, driven by consumer spending, business investment, exports and government spending, but moderated in the third quarter due to declines in exports and housing investment. The unemployment rate declined from 3.8% in May 2018 to a nearly 49-year low of 3.7% at period-end.³ Annual inflation, as measured by the Consumer Price Index, decreased from 2.8% in May 2018 to 2.2% at period-end.³ The Fed raised its target range for the federal funds rate in June and September 2018 and continued reducing its balance sheet as part of an ongoing plan to normalize monetary policy. Near period-end, Fed Chair Jerome Powell, in his speech at the Economic Club of New York, mentioned the Fed’s current policy rate was “just below” estimates of what it believed would be neutral for economic growth, suggesting it might slow its pace of rate increases.

In Europe, the U.K.’s quarterly economic growth accelerated in 2018’s second and third quarters, amid growth in the services sector. The Bank of England raised its key policy rate once during the review period. The eurozone’s quarterly growth moderated in the third quarter. The bloc’s annual inflation rate ended the period higher than in May 2018. The European Central Bank (ECB) kept its benchmark interest rate unchanged during the period. In October 2018, the ECB further reduced its monthly bond purchases and reiterated its plan to conclude the program at the end of 2018, while keeping interest rates unchanged through at least the summer of 2019.

In Asia, Japan’s quarterly gross domestic product (GDP) grew in 2018’s second quarter but contracted in the third quarter. The Bank of Japan left its benchmark interest rate unchanged during the period and continued its monetary stimulus measures.

In emerging markets, Brazil’s quarterly GDP growth accelerated in 2018’s third quarter. Russia’s annual GDP growth rate accelerated in 2018’s second quarter but moderated in the third quarter. The Bank of Russia raised its key interest rate once during the period. China’s annual GDP growth moderated in 2018’s second and third quarters. The People’s Bank of China left its benchmark interest rate unchanged during the period, but it took measures to improve financial liquidity to mitigate the negative effects of the U.S.-China trade dispute and support economic growth. Overall, emerging market stocks, as measured by the MSCI Emerging Markets Index, had a -9.68% total return during the period.²

Investment Strategy

We manage the Fund using a multi-manager approach. We have overall responsibility for the Fund’s investments and principally allocate assets among multiple subadvisors, each of whom independently manages a separate portion of the Fund’s portfolio in accordance with discretionary and systematic focused global macro strategies. We allocate the Fund’s assets among these strategies utilizing a top-down approach, generating the Fund’s strategy weightings by taking into account market conditions, risk factors, diversification, liquidity, and availability of various subadvisors and other investment options, among other things. We allocate the Fund’s assets to specific subadvisors utilizing a bottom-up approach, selecting subadvisors and their weighting within the Fund’s portfolio by taking into account their correlation to various markets and to each other, risk profiles and their return expectations.

Discretionary global macro strategies seek to profit by tactically investing across different asset classes, markets (including emerging markets) and investment opportunities through a combination of fundamental market analysis and quantitative modeling. Systematic global macro strategies seek to profit by utilizing quantitative models to identify investment opportunities across different asset classes and markets in order to construct a portfolio of investments. Quantitative trading models are proprietary systems that rely on mathematical computations to identify trading opportunities. Subadvisors may use strategies which include a combination of discretionary and systematic focused strategies.

The Fund may invest in equities and various debt instruments, such as securities of the U.S. government, its agencies and instrumentalities and sovereign, quasi-sovereign and corporate bonds. Such debt instruments may have variable or fixed interest rates, may be of any maturity, duration or credit rating and may include high yield (junk) bonds and distressed debt securities (securities of companies that are, or are about to be, involved in reorganizations, financial restructurings or bankruptcy). The Fund may use derivatives for both hedging and non-hedging (investment) purposes, although no subadvisor is required to hedge any of the Fund’s positions or to use derivatives. The subadvisors will use a variety of derivatives to implement their respective investment strategies, which may include futures contracts, swaps, currency forward contracts and options. As a result of the Fund’s use of derivatives, the Fund may have economic leverage, which means the sum of the Fund’s investment exposures through its use of derivatives

3. Source: U.S. Bureau of Labor Statistics.

See www.franklintempletondatasources.com for additional data provider information.

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may significantly exceed the amount of assets invested in the Fund, although these exposures may vary over time. The Fund may engage in active and frequent trading as part of its investment strategies.

What is a futures contract?

A futures contract is an agreement between the Fund and a counterparty made through a U.S. or foreign futures exchange to buy or sell an underlying instrument or asset at a specific price on a future date.

What are swap agreements?

Swap agreements, such as interest-rate, currency and credit default swaps, are contracts between the Fund and another party (the swap counterparty). In a basic swap transaction, the Fund agrees with the swap counterparty to exchange the returns (or differentials in rates of return) earned or realized on a particular “notional amount” of underlying instruments. The notional amount is the set amount selected by the parties as the basis on which to calculate the obligations that they have agreed to exchange. The parties typically do not actually exchange the notional amount. Instead, they agree to exchange the returns that would be earned or realized if the notional amount were invested in given instruments or at given interest rates.

What is a currency forward contract?

A currency forward contract is an agreement between the Fund and a counterparty to buy or sell a foreign currency in exchange for another currency at a specific exchange rate on a future date. Currency forward contracts are privately traded in the interbank market, not on a centralized exchange.

What is an option?

An option is a contract to buy or sell a specific financial product known as the option’s underlying instrument at a specific price. The buyer of an option has the right, but not the obligation, to buy or sell the underlying instrument at or until a specified expiration date. Conversely, the seller (“writer”) of an option who opens a transaction is obligated to buy or sell the underlying instrument should the option holder exercise that right.

Manager’s Discussion

The Fund’s subadvisors for the period were P/E GLOBAL, Aspect Capital, Graham Capital Management and Emso Asset Management. The Fund added a subadvisor to the approved list in July—RV Capital Management Private—but the Fund had not allocated assets to it as of November 30, 2018. These subadvisors are also listed in the Subadvisors table on this page. Graham switched its strategy from Graham Tactical Trend Capped Beta to Graham Quant Macro in August. We believe the new strategy is more robust across a wider range of market environments.

Subadvisors

11/30/18

Discretionary Macro

Emso Asset Management Limited

RV Capital Management Private Ltd

Systematic Macro

Aspect Capital Limited

Graham Capital Management, L.P.

P/E GLOBAL LLC

Positive performance for two underlying subadvisors, P/E GLOBAL and Graham, helped the Fund deliver gains for the review period. Emso also finished the period with modestly positive results, while Aspect’s performance was negative.

In terms of aggregate asset class attribution, currency, commodity and interest-rate positions drove positive performance for the Fund, while equity and credit positions detracted.

In terms of geographic exposures, contributions came from the U.S. (long positioning in natural gas and short positioning in West Texas Intermediate crude oil), Europe (short exposure to the euro versus the U.S. dollar), Australia (net short positioning in the Australian dollar versus the U.S. dollar), and Canada (net short positioning in the Canadian dollar versus the U.S. dollar). In contrast, various exposures to base metals, the U.K. (long positions in equities), Mexico (net short positioning in the Mexican peso versus the U.S. dollar) and Argentina (net long positioning in bonds) detracted.

Systematic subadvisors P/E GLOBAL and Graham generated gains for the Fund, primarily as the result of their long U.S. dollar positions against the euro and the Australian dollar. Graham also added gains from long natural gas and short crude oil exposures, which benefited from large price movements in both commodities in October and November. Discretionary manager Emso’s returns were supported by short positions in interest-rate derivatives, primarily in the Czech Republic.

In contrast, for systematic subadvisor Aspect, performance was hindered by long equity index exposure within Asia and Europe, and by long energy commodity positions during the October sell-off. Furthermore, Graham’s positioning in base metals detracted from Fund performance.

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FRANKLIN K2 GLOBAL MACRO OPPORTUNITIES FUND

Thank you for your participation in Franklin K2 Global Macro Opportunities Fund. We look forward to continuing to serve your investment needs.

Robert Christian

Brooks Ritchey

	Anthony Zanolla, CFA
	Portfolio Management Team

The foregoing information reflects our analysis, opinions and portfolio holdings as of November 30, 2018, 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.

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Performance Summary as of November 30, 2018

The performance table does 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 11/30/18¹

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 5.50% and the minimum is 0%. Class A: 5.50% maximum initial sales charge; Advisor Class: no sales charges. For other share classes, visit franklintempleton.com.

Share Class	Cumulative Total Return2		Average Annual Total Return3
A4
6-Month		+1.00%		-4.60%
1-Year		-1.19%		-6.65%
Since Inception (7/11/16)		-8.24%		-5.79%
Advisor
6-Month		+0.99%		+0.99%
1-Year		-0.97%		-0.97%
Since Inception (7/11/16)		-7.83%		-3.35%

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) 342-5236.

See page 8 for Performance Summary footnotes.

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FRANKLIN K2 GLOBAL MACRO OPPORTUNITIES FUND

PERFORMANCE SUMMARY

Total Annual Operating Expenses5
Share Class	With Waiver		Without Waiver
A		2.27%		4.31%
Advisor		2.02%		4.06%

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 actively managed and could experience losses if the investment manager’s or subadvisors’ judgment about particular investments made for the Fund prove to be incorrect. Investments in derivatives involve costs and create economic leverage, which may result in significant volatility and cause the Fund to participate in losses (as well as gains) that significantly exceed the Fund’s initial investment. The market values of securities owned by the Fund will go up or down, sometimes rapidly or unpredictably. Liquidity risk may exist when securities have become more difficult to sell, or are unable to be sold, at the price at which they have been valued. The subadvisors may not be successful in maintaining effective and operational trading models used to implement systematic strategies. An issuer of debt securities may fail to make interest payments or repay principal when due. Lower-rated or high-yield debt securities involve greater credit risk, including the possibility of default or bankruptcy. When interest rates rise, debt security prices tend to fall. Foreign investments are subject to greater investment risk such as political, economic, credit, information and currency fluctuation risks. Investments in emerging markets are subject to the risks of foreign investing and have additional heightened risks. Commodity and commodity-linked investments present unique risks, are speculative and can be extremely volatile. The Fund’s prospectus also includes a description of the main investment risks.

1. The Fund has an expense reduction contractually guaranteed through 9/30/19 and a fee waiver related to the management fee paid by a subsidiary. Fund investment results reflect the expense reduction and fee waiver; without these reductions, 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, if any, has not been annualized.

4. Prior to 9/10/18, these shares were offered at a higher initial sales charge of 5.75%, thus actual returns would have differed. Total returns with sales charges have been restated to reflect the current maximum initial sales charge of 5.50%.

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 Consolidated 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.

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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 × $7.50 =$64.50). In this illustration, the actual expenses paid this period are $64.50.

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.

			Actual (actual return after expenses)				Hypothetical (5% annual return before expenses)
Share Class	Beginning Account Value 6/1/18		Ending Account Value 11/30/18		Expenses Paid During Period 6/1/18–11/30/181,2		Ending Account Value 11/30/18		Expenses Paid During Period 6/1/18–11/30/181,2		Net Annualized Expense Ratio2
A	$	1,000	$	1,010.00	$	11.09	$	1,014.04	$	11.11		2.20	%
C	$	1,000	$	1,006.70	$	14.44	$	1,010.68	$	14.47		2.87	%
R	$	1,000	$	1,008.90	$	11.13	$	1,013.99	$	11.16		2.21	%
R6	$	1,000	$	1,011.00	$	9.83	$	1,015.29	$	9.85		1.95	%
Advisor	$	1,000	$	1,009.90	$	9.83	$	1,015.29	$	9.85		1.95	%

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 183/365 to reflect the one-half year period.

2. Reflects expenses after fee waivers and expense reimbursements. Does not include acquired fund fees and expenses.

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FRANKLIN ALTERNATIVE STRATEGIES FUNDS

Consolidated Financial Highlights

Franklin K2 Global Macro Opportunities Fund

	Six Months Ended November 30, 2018 (unaudited)		2018			2017a
Class A
Per share operating performance (for a share outstanding throughout the period)
Net asset value, beginning of period	$	9.03	$	9.19		$	10.00
Income from investment operationsb:
Net investment income (loss)c		0.01		0.01			(0.09	)
Net realized and unrealized gains (losses)		0.08		(0.17	)		(0.66	)
Total from investment operations		0.09		(0.16	)		(0.75	)
Less distributions from net investment income		—		—			(0.06	)
Net asset value, end of period	$	9.12	$	9.03			$9.19
Total returnd		1.00%		(1.74)%			(7.64)%
Ratios to average net assetse
Expenses before waiver and payments by affiliates		3.75%		3.84%			4.22%
Expenses net of waiver and payments by affiliatesf		2.20%		2.20%			2.16%
Net investment income (loss)		0.21%		0.14%			(1.04)%
Supplemental data
Net assets, end of period (000’s)		$157		$161			$90
Portfolio turnover rate		36.47%		240.21%			239.84%

^aFor the period July 11, 2016 (commencement of operations) to May 31, 2017.

^bThe amount shown for a share outstanding throughout the period may not correlate with the Consolidated 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.

^dTotal 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, except for non-recurring expenses, if any.

^fBenefit of expense reduction rounds to less than 0.01%.

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FRANKLIN ALTERNATIVE STRATEGIES FUNDS

CONSOLIDATED FINANCIAL HIGHLIGHTS

Franklin K2 Global Macro Opportunities Fund (continued)

	Six Months Ended November 30, 2018 (unaudited)			2018			2017a
Class C
Per share operating performance (for a share outstanding throughout the period)
Net asset value, beginning of period	$	8.90		$	9.13		$	10.00
Income from investment operationsb:
Net investment income (loss)c		(0.02	)		(0.06	)		(0.15	)
Net realized and unrealized gains (losses)		0.08			(0.17	)		(0.68	)
Total from investment operations		0.06			(0.23	)		(0.83	)
Less distributions from net investment income		—			—			(0.04	)
Net asset value, end of period	$	8.96		$	8.90			$9.13
Total returnd		0.67%			(2.52)%			(8.27)%
Ratios to average net assetse
Expenses before waiver and payments by affiliates		4.42%			4.59%			4.98%
Expenses net of waiver and payments by affiliatesf		2.87%			2.95%			2.92%
Net investment income (loss)		(0.46)%			(0.61)%			(1.80)%
Supplemental data
Net assets, end of period (000’s)		$151			$147			$188
Portfolio turnover rate		36.47%			240.21%			239.84%

^aFor the period July 11, 2016 (commencement of operations) to May 31, 2017.

^bThe amount shown for a share outstanding throughout the period may not correlate with the Consolidated 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.

^dTotal 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, except for non-recurring expenses, if any.

^fBenefit of expense reduction rounds to less than 0.01%.

franklintempleton.com The accompanying notes are an integral part of these consolidated financial statements.    |   Semiannual Report 11

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

CONSOLIDATED FINANCIAL HIGHLIGHTS

Franklin K2 Global Macro Opportunities Fund (continued)

	Six Months Ended November 30, 2018 (unaudited)		2018			2017a
Class R
Per share operating performance (for a share outstanding throughout the period)
Net asset value, beginning of period	$	9.02	$	9.18		$	10.00
Income from investment operationsb:
Net investment income (loss)c		0.01		0.01			(0.08	)
Net realized and unrealized gains (losses)		0.07		(0.17	)		(0.68	)
Total from investment operations		0.08		(0.16	)		(0.76	)
Less distributions from net investment income		—		—			(0.06	)
Net asset value, end of period	$	9.10	$	9.02			$9.18
Total returnd		0.89%		(1.74)%			(7.63)%
Ratios to average net assetse
Expenses before waiver and payments by affiliates		3.76%		3.86%			4.18%
Expenses net of waiver and payments by affiliatesf		2.21%		2.22%			2.12%
Net investment income (loss)		0.20%		0.12%			(1.00)%
Supplemental data
Net assets, end of period (000’s)		$9		$9			$9
Portfolio turnover rate		36.47%		240.21%			239.84%

^aFor the period July 11, 2016 (commencement of operations) to May 31, 2017.

^bThe amount shown for a share outstanding throughout the period may not correlate with the Consolidated 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.

^dTotal return is not annualized for periods less than one year.

^eRatios are annualized for periods less than one year, except for non-recurring expenses, if any.

^fBenefit of expense reduction rounds to less than 0.01%.

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FRANKLIN ALTERNATIVE STRATEGIES FUNDS

CONSOLIDATED FINANCIAL HIGHLIGHTS

Franklin K2 Global Macro Opportunities Fund (continued)

	Six Months Ended November 30, 2018 (unaudited)		2018			2017a
Class R6
Per share operating performance (for a share outstanding throughout the period)
Net asset value, beginning of period	$	9.05	$	9.19		$	10.00
Income from investment operationsb:
Net investment income (loss)c		0.01		0.03			(0.07	)
Net realized and unrealized gains (losses)		0.09		(0.17	)		(0.68	)
Total from investment operations		0.10		(0.14	)		(0.75	)
Less distributions from net investment income		—		—			(0.06	)
Net asset value, end of period	$	9.15	$	9.05			$9.19
Total returnd		1.10%		(1.52)%			(7.52)%
Ratios to average net assetse
Expenses before waiver and payments by affiliates		3.81%		4.84%			4.30%
Expenses net of waiver and payments by affiliatesf		1.95%		1.95%			1.94%
Net investment income (loss)		0.46%		0.39%			(0.82)%
Supplemental data
Net assets, end of period (000’s)		$9		$9			$9
Portfolio turnover rate		36.47%		240.21%			239.84%

^aFor the period July 11, 2016 (commencement of operations) to May 31, 2017.

^bThe amount shown for a share outstanding throughout the period may not correlate with the Consolidated 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.

^dTotal return is not annualized for periods less than one year.

^eRatios are annualized for periods less than one year, except for non-recurring expenses, if any.

^fBenefit of expense reduction rounds to less than 0.01%.

franklintempleton.com The accompanying notes are an integral part of these consolidated financial statements.    |   Semiannual Report 13

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

CONSOLIDATED FINANCIAL HIGHLIGHTS

Franklin K2 Global Macro Opportunities Fund (continued)

	Six Months Ended November 30, 2018 (unaudited)		2018			2017a
Advisor Class
Per share operating performance (for a share outstanding throughout the period)
Net asset value, beginning of period	$	9.06	$	9.19		$	10.00
Income from investment operationsb:
Net investment income (loss)c		0.02		0.04			(0.07	)
Net realized and unrealized gains (losses)		0.07		(0.17	)		(0.68	)
Total from investment operations		0.09		(0.13	)		(0.75	)
Less distributions from net investment income		—		—			(0.06	)
Net asset value, end of period	$	9.15	$	9.06			$9.19
Total returnd		0.99%		(1.41)%			(7.42)%
Ratios to average net assetse
Expenses before waiver and payments by affiliates		3.50%		3.59%			3.99%
Expenses net of waiver and payments by affiliatesf		1.95%		1.95%			1.93%
Net investment income (loss)		0.46%		0.39%			(0.81)%
Supplemental data
Net assets, end of period (000’s)		$22,994		$22,744			$22,975
Portfolio turnover rate		36.47%		240.21%			239.84%

^aFor the period July 11, 2016 (commencement of operations) to May 31, 2017.

^bThe amount shown for a share outstanding throughout the period may not correlate with the Consolidated 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.

^dTotal return is not annualized for periods less than one year.

^eRatios are annualized for periods less than one year, except for non-recurring expenses, if any.

^fBenefit of expense reduction rounds to less than 0.01%.

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FRANKLIN ALTERNATIVE STRATEGIES FUNDS

Consolidated Statement of Investments, November 30, 2018 (unaudited)

Franklin K2 Global Macro Opportunities Fund
		Country		Principal Amount*			Value
	Corporate Bonds and Notes 1.9%
	Oil, Gas & Consumable Fuels 1.9%
	Petrobras Global Finance BV, senior note,
	6.125%, 1/17/22		Brazil		64,000		$	65,806
	4.375%, 5/20/23		Brazil		44,000			42,187
	6.25%, 3/17/24		Brazil		93,000			94,372
	Petroleos Mexicanos,
	asenior bond, Reg S, 6.50%, 1/23/29		Mexico		44,000			40,597
	senior bond, 5.50%, 1/21/21		Mexico		39,000			38,922
	senior note, 4.875%, 1/24/22		Mexico		73,000			70,847
	senior note, 3.50%, 1/30/23		Mexico		55,000			49,687
	senior note, 4.625%, 9/21/23		Mexico		36,000			33,516
	Total Corporate Bonds and Notes (Cost $449,985)							435,934
	Corporate Bonds and Notes in Reorganization (Cost $5,704) 0.0%†
	Oil, Gas & Consumable Fuels 0.0%†
a,b	Petroleos de Venezuela SA, senior note, Reg S, 6.00%, 10/28/22		Venezuela		40,143			5,720
	Foreign Government and Agency Securities 6.6%
	Government of Argentina,
	3.75%, 2/08/19		Argentina		738,000	ARS		26,118
	2.26% to 3/31/19, 4.74% thereafter, 12/31/38		Argentina		141,585	EUR		88,516
	csenior note, FRN, 64.951%, (ARLLMONP), 6/21/20		Argentina		713,967	ARS		20,535
	asenior note, Reg S, 3.875%, 1/15/22		Argentina		100,000	EUR		100,396
	senior note, 5.625%, 1/26/22		Argentina		195,000			173,209
	senior note, 4.625%, 1/11/23		Argentina		66,000			55,283
	Government of Brazil, senior bond, 4.875%, 1/22/21		Brazil		100,000			102,150
a	Government of Hellenic Republic, senior bond, Reg S, 3.90%, 1/30/33		Greece		34,599	EUR		35,595
a	Government of Russia, senior bond, Reg S, 5.25%, 6/23/47		Russia		200,000			183,064
	Government of South Africa,
	5.50%, 3/09/20		South Africa		100,000			101,254
	8.75%, 2/28/48		South Africa		2,504,509	ZAR		161,832
	R186, 10.50%, 12/21/26		South Africa		4,723,662	ZAR		370,292
	Government of Turkey, senior bond, 7.00%, 6/05/20		Turkey		135,000			136,198
	Total Foreign Government and Agency Securities (Cost $1,700,150)							1,554,442
	Total Investments before Short Term Investments (Cost $2,155,839)							1,996,096
				Shares
	Short Term Investments 82.4%
	Money Market Funds 82.4%
d,e	Dreyfus Government Cash Management, Institutional, 2.09%		United States		5,237,946			5,237,946
d	Fidelity Investments Money Market Government Portfolio, Institutional, 2.10%		United States		13,973,730			13,973,730
	Total Money Market Funds (Cost $19,211,676)							19,211,676
	Total Investments (Cost $21,367,515) 90.9%							21,207,772
	Other Assets, less Liabilities 9.1%							2,112,515
	Net Assets 100.0%						$	23,320,287

franklintempleton.com Semiannual Report 15

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

CONSOLIDATED STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin K2 Global Macro Opportunities Fund (continued)

*The principal amount is stated in U.S. dollars unless otherwise indicated.

^†Rounds to less than 0.1% of net assets.

^aSecurity was purchased pursuant to Regulation S under the Securities Act of 1933, which exempts from registration securities offered and sold outside of the United States. Such a security cannot be sold in the United States without either an effective registration statement filed pursuant to the Securities Act of 1933, or pursuant to an exemption from registration. These securities have been deemed liquid under guidelines approved by the Trust’s Board of Trustees. At November 30, 2018, the aggregate value of these securities was $365,372, representing 1.6% of net assets.

^bSee Note 7 regarding defaulted securities.

^cThe coupon rate shown represents the rate at period end.

^dThe rate shown is the annualized seven-day yield at period end.

^eA portion or all of the security is owned by K2 GMOF Holdings Corp., a wholly-owned subsidiary of the Fund. See Note 1(d).

At November 30, 2018, the Fund had the following futures contracts outstanding. See Note 1(c).

Futures Contracts
Description	Type		Number of Contracts		Notional Amount*		Expiration Date		Value/Unrealized Appreciation (Depreciation)
Commodity Contractsa
Aluminum		Long		10	$	491,688		12/17/18	$	(34,913	)
Aluminum		Short		10		491,688		12/17/18		24,146
Aluminum		Short		5		245,532		3/18/19		1,805
Brent Crude Oil		Short		3		178,380		12/28/18		12,425
Coffee		Short		2		80,662		3/19/19		12,256
Coffee		Short		1		41,419		5/20/19		1,891
Coffee		Short		1		42,431		7/19/19		6,109
Copper		Long		5		778,375		12/17/18		2,241
Copper		Short		5		778,375		12/17/18		(16,737	)
Copper		Long		2		309,825		3/18/19		3,107
Copper		Short		1		69,687		3/27/19		(165	)
Corn		Short		4		75,549		3/14/19		514
Corn		Short		1		19,250		5/14/19		(165	)
Gasoline RBOB		Short		3		176,639		12/31/18		34,303
Gasoline RBOB		Short		1		59,018		1/31/19		(691	)
Gold 100 Oz		Short		4		490,400		2/26/19		451
Hard Red Winter Wheat		Short		5		125,063		3/14/19		3,760
Lean Hogs		Short		1		27,020		2/14/19		(2,193	)
Lean Hogs		Short		1		28,790		4/12/19		(713	)
Live Cattle		Short		1		48,200		2/28/19		(823	)
Low Sulphur Gas Oil		Short		3		163,500		1/10/19		7,995
Natural Gas		Long		5		230,600		12/27/18		45,958
Natural Gas		Long		1		44,190		1/29/19		208
Nickel		Long		1		66,891		12/17/18		(2,952	)
Nickel		Short		1		66,891		12/17/18		3,897
Nickel		Short		2		134,628		3/18/19		669
NY Harbor ULSD		Short		4		307,339		12/31/18		28,400
Silver		Short		3		213,255		3/27/19		4,729
Soybean		Short		2		89,475		1/14/19		(2,281	)
Soybean		Short		2		90,750		3/14/19		(2,280	)
Soybean Meal		Short		4		124,200		1/14/19		749
Soybean Meal		Short		1		31,320		3/14/19		77
Sugar		Long		1		14,381		2/28/19		300
Wheat		Short		4		103,150		3/14/19		714
Wheat		Short		1		26,063		5/14/19		585
WTI Crude Oil		Short		5		254,650		12/19/18		51,969
Zinc		Long		6		389,250		12/17/18		17,583
Zinc		Short		6		389,250		12/17/18		(13,906	)
Zinc		Long		2		126,750		3/18/19		3,033
										192,055

16 Semiannual Report franklintempleton.com

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

CONSOLIDATED STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin K2 Global Macro Opportunities Fund (continued)

Futures Contracts (continued)
Description	Type		Number of Contracts		Notional Amount*		Expiration Date		Value/Unrealized Appreciation (Depreciation)
Currency Contracts
AUD/USD		Short		24	$	1,753,200		12/17/18	$	(45,599	)
CAD/USD		Short		19		1,430,035		12/18/18		17,733
CHF/USD		Short		9		1,126,687		12/17/18		8,517
EUR/USD		Short		64		9,057,600		12/17/18		257,986
GBP/USD		Short		2		159,388		12/17/18		3,703
JPY/USD		Short		12		1,321,725		12/17/18		24,644
MXN/USD		Long		2		48,900		12/17/18		(2,125	)
MXN/USD		Short		1		24,450		12/17/18		1,137
NZD/USD		Short		2		137,420		12/17/18		(6,665	)
U.S. Dollar Index		Long		2		194,392		12/17/18		6,093
USD/NOK		Long		1		100,042		12/17/18		3,084
ZAR/USD		Short		4		143,750		12/17/18		(12,698	)
										255,810
Equity Contracts
Amsterdam Index		Long		1		117,553		12/21/18		(561	)
CAC 40 10 Euro Index		Long		2		112,984		12/21/18		(777	)
CME E-Mini Russell 2000 Index		Long		2		153,460		12/21/18		2,626
DJ EURO STOXX 50 Index		Long		2		71,617		12/21/18		(762	)
DJIA Mini E-CBOT Index		Long		2		255,390		12/21/18		1,176
FTSE 100 Index		Long		7		621,614		12/21/18		1,904
FTSE 100 Index		Short		1		88,802		12/21/18		693
FTSE/JSE Top 40 Index		Short		2		64,785		12/20/18		3,037
Hang Seng Index		Long		1		169,549		12/28/18		2,194
Nikkei 225 Index		Long		3		590,671		12/13/18		6,311
OMX Stockholm 30 Index		Short		3		49,826		12/21/18		(1,050	)
S&P 500 E-Mini Index		Long		2		275,830		12/21/18		8,164
S&P 500 E-Mini Index		Short		1		137,915		12/21/18		7,600
S&P/TSX 60 Index		Long		1		137,388		12/20/18		678
TOPIX Index		Long		2		293,882		12/13/18		8,803
										40,036
Interest Rate Contracts
3 Month EURIBOR		Long		1		282,559		3/15/21		183
10 Yr. Mini Japanese Government Bond		Long		12		1,598,696		12/12/18		3,791
90 Day Bank Bill		Long		1		727,151		3/12/20		33
90 Day Eurodollar		Short		4		970,850		6/17/19		4,867
90 Day Eurodollar		Short		7		1,698,025		9/16/19		4,836
90 Day Eurodollar		Short		6		1,454,625		12/16/19		4,125
90 Day Eurodollar		Short		5		1,212,313		3/16/20		4,377
90 Day Eurodollar		Short		6		1,455,000		6/15/20		3,863
90 Day Eurodollar		Short		4		970,150		9/14/20		192
90 Day Eurodollar		Short		3		727,500		12/14/20		(206	)
90 Day Eurodollar		Short		3		727,650		3/15/21		(243	)
90 Day Sterling		Short		2		315,279		6/19/19		168
90 Day Sterling		Short		5		787,800		9/18/19		(97	)
90 Day Sterling		Short		2		314,802		3/18/20		(178	)
90 Day Sterling		Short		3		472,011		6/17/20		(304	)
90 Day Sterling		Short		2		314,515		9/16/20		(288	)
90 Day Sterling		Short		3		471,629		12/16/20		(464	)
Australian 10 Yr. Bond		Long		6		569,687		12/17/18		3,609
Canadian 10 Yr. Bond		Long		11		1,103,519		3/20/19		6,629
Canadian 10 Yr. Bond		Short		1		100,320		3/20/19		(559	)
Euro-BOBL		Long		2		298,808		12/06/18		634
Euro-BOBL		Long		3		449,061		3/07/19		190
Euro-BTP		Short		2		282,030		12/06/18		(7,606	)
Euro-Bund		Long		2		365,760		12/06/18		5,590

franklintempleton.com Semiannual Report 17

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

CONSOLIDATED STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin K2 Global Macro Opportunities Fund (continued)

Futures Contracts (continued)
Description	Type		Number of Contracts		Notional Amount*		Expiration Date		Value/Unrealized Appreciation (Depreciation)
Interest Rate Contracts (continued)
Euro-Bund		Long		9	$	1,654,889		3/07/19	$	628
Euro-OAT		Long		3		519,942		12/06/18		5,659
Euro-OAT		Long		1		170,778		3/07/19		(80	)
Long Gilt		Long		9		1,406,458		3/27/19		4,833
U.S. Treasury 2 Yr. Note		Short		11		2,320,828		3/29/19		(1,015	)
U.S. Treasury 5 Yr. Note		Long		5		564,805		3/29/19		149
U.S. Treasury 5 Yr. Note		Short		16		1,807,375		3/29/19		(2,515	)
U.S. Treasury 10 Yr. Note		Long		8		955,625		3/20/19		2,551
U.S. Treasury 10 Yr. Note		Short		10		1,194,531		3/20/19		(3,165	)
U.S. Treasury Long Bond		Long		16		2,238,500		3/20/19		8,476
										48,663
Total Futures Contracts									$	536,564

*As of period end.

^aA portion or all of the contracts are owned by K2 GMOF Holdings Corp., a wholly-owned subsidiary of the Fund. See Note 1(d).

At November 30, 2018, the Fund had the following forward exchange contracts outstanding. See Note 1(c).

Forward Exchange Contracts
Currency	Counterpartya		Type		Quantity		Contract Amount*			Settlement Date		Unrealized Appreciation		Unrealized Depreciation
OTC Forward Exchange Contracts
Brazilian Real		JPHQ		Buy		810,363		217,235			12/04/18	$	—	$	(7,720	)
Brazilian Real		JPHQ		Sell		810,363		209,667			12/04/18		152		—
Brazilian Real		JPHQ		Buy		781,376		200,000			12/19/18		4,342		(2,478	)
Brazilian Real		JPHQ		Sell		818,133		200,000			12/19/18		1,387		(12,747	)
Chilean Peso		JPHQ		Buy		100,837,928		150,000			12/19/18		498		(347	)
Chilean Peso		JPHQ		Sell		101,366,150		150,000			12/19/18		224		(1,162	)
Chinese Yuan		JPHQ		Buy		697,849		100,000			12/19/18		341		—
Chinese Yuan		JPHQ		Sell		2,849,270		411,413			12/19/18		1,771		(45	)
Colombian Peso		JPHQ		Buy		1,362,670,258		426,040			12/19/18		67		(5,244	)
Colombian Peso		JPHQ		Sell		1,111,595,468		350,000			12/19/18		7,166		(484	)
Czech Koruna		JPHQ		Sell		5,186,926		200,000	EUR		12/19/18		4,016		(3,678	)
Euro		JPHQ		Buy		297,050		339,286			12/19/18		862		(3,162	)
Euro		JPHQ		Sell		297,050		346,111			12/19/18		9,124		—
Euro		JPHQ		Sell		150,000		3,857,708	CZK		12/19/18		4,395		(6,068	)
Euro		JPHQ		Sell		100,000		32,246,625	HUF		12/19/18		2,234		(2,649	)
Euro		JPHQ		Sell		1,050,000		10,002,980	NOK		12/19/18		30,368		(56,524	)
Euro		JPHQ		Sell		250,000		1,075,172	PLN		12/19/18		3,775		(3,624	)
Euro		JPHQ		Sell		800,000		8,262,050	SEK		12/19/18		13,945		(11,954	)
Hungarian Forint		JPHQ		Sell		32,513,656		100,000	EUR		12/19/18		2,847		(3,367	)
Indian Rupee		JPHQ		Buy		21,695,690		295,872			12/19/18		14,725		—
Indian Rupee		JPHQ		Sell		30,699,595		420,251			12/19/18		—		(19,246	)
Mexican Peso		JPHQ		Buy		2,676,613		136,492			12/19/18		—		(5,374	)
Mexican Peso		JPHQ		Sell		2,676,613		140,306			12/19/18		9,188		—
New Israeli Shekel		JPHQ		Buy		730,180		200,000			12/19/18		—		(3,363	)
New Israeli Shekel		JPHQ		Sell		1,436,583		400,000			12/19/18		13,131		—
Norwegian Krone		JPHQ		Sell		5,349,234		550,000	EUR		12/19/18		6,325		(5,383	)
Philippine Peso		JPHQ		Buy		2,660,050		50,000			12/19/18		684		—
Philippine Peso		JPHQ		Sell		2,660,050		50,811			12/19/18		127		—
Polish Zloty		JPHQ		Sell		645,639		150,000	EUR		12/19/18		1,033		(1,264	)
Russian Ruble		JPHQ		Buy		15,192,786		224,734			12/19/18		3,490		(2,060	)
Russian Ruble		JPHQ		Sell		13,119,005		190,093			12/19/18		68		(5,268	)
Singapore Dollar		JPHQ		Buy		205,834		150,000			12/19/18		258		(169	)
Singapore Dollar		JPHQ		Sell		343,777		250,000			12/19/18		—		(672	)

18 Semiannual Report franklintempleton.com

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

CONSOLIDATED STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin K2 Global Macro Opportunities Fund (continued)

Forward Exchange Contracts (continued)
Currency	Counterpartya		Type		Quantity		Contract Amount*			Settlement Date		Unrealized Appreciation		Unrealized Depreciation
OTC Forward Exchange Contracts (continued)
South African Rand		JPHQ		Buy		815,202		57,204			12/19/18	$	1,481	$	—
South African Rand		JPHQ		Sell		7,817,050		510,712			12/19/18		17		(52,037	)
South Korean Won		JPHQ		Buy		113,003,630		102,028			12/19/18		3		(1,148	)
South Korean Won		JPHQ		Sell		113,003,630		100,000			12/19/18		—		(882	)
Swedish Krona		JPHQ		Sell		14,691,193		1,400,000	EUR		12/19/18		11,014		(40,105	)
Taiwan Dollar		JPHQ		Buy		18,461,030		600,000			12/19/18		714		(369	)
Taiwan Dollar		JPHQ		Sell		18,461,030		603,527			12/19/18		3,623		(438	)
Thai Baht		JPHQ		Buy		1,614,339		50,000			12/19/18		—		(874	)
Thai Baht		JPHQ		Sell		4,934,362		150,000			12/19/18		303		(460	)
Turkish Lira		JPHQ		Buy		364,013		54,184			12/19/18		14,855		—
Turkish Lira		JPHQ		Sell		364,013		55,613			12/19/18		—		(13,426	)
Australian Dollar		MSCO		Buy		974,000		706,861			12/21/18		5,666		(365	)
Australian Dollar		MSCO		Sell		1,245,000		887,382			12/21/18		6		(22,933	)
British Pound		MSCO		Buy		1,162,000		1,512,911			12/21/18		—		(30,152	)
British Pound		MSCO		Sell		1,298,000		1,698,747			12/21/18		42,455		(11	)
Canadian Dollar		MSCO		Buy		256,000		195,906			12/21/18		27		(3,129	)
Canadian Dollar		MSCO		Sell		1,417,000		1,083,816			12/21/18		16,648		(26	)
Euro		MSCO		Buy		1,307,000		1,489,367			12/21/18		874		(7,205	)
Euro		MSCO		Sell		1,561,000		1,806,076			12/21/18		35,369		(544	)
Japanese Yen		MSCO		Buy		101,071,000		898,948			12/21/18		261		(6,762	)
Japanese Yen		MSCO		Sell		258,917,000		2,311,561			12/21/18		26,395		(1,051	)
Mexican Peso		MSCO		Buy		6,110,000		310,258			12/21/18		119		(11,161	)
Mexican Peso		MSCO		Sell		2,288,000		116,203			12/21/18		4,158		(2	)
New Zealand Dollar		MSCO		Buy		673,000		457,530			12/21/18		5,332		(83	)
New Zealand Dollar		MSCO		Sell		498,000		325,062			12/21/18		—		(17,382	)
Swiss Franc		MSCO		Buy		467,000		470,625			12/21/18		589		(2,534	)
Swiss Franc		MSCO		Sell		961,000		986,713			12/21/18		22,970		(716	)
Brazilian Real		JPHQ		Buy		810,363		209,337			1/03/19		—		(159	)
Brazilian Real		JPHQ		Sell		193,697		50,000			3/20/19		274		—
Chilean Peso		JPHQ		Sell		67,407,650		100,000			3/20/19		—		(453	)
Colombian Peso		JPHQ		Sell		649,630,700		200,000			3/20/19		171		(83	)
Euro		JPHQ		Sell		204,223		232,744			3/20/19		—		(780	)
Euro		JPHQ		Sell		100,000		431,763	PLN		3/20/19		—		(113	)
Euro		JPHQ		Sell		100,000		1,032,220	SEK		3/20/19		539		(366	)
Philippine Peso		JPHQ		Buy		2,631,300		50,000			3/20/19		—		(202	)
Swedish Krona		JPHQ		Sell		4,128,964		400,000	EUR		3/20/19		1,172		(1,872	)
Taiwan Dollar		JPHQ		Sell		9,153,687		300,000			3/20/19		251		(186	)
Total Forward Exchange Contracts												$	331,829	$	(382,061	)
Net unrealized appreciation (depreciation)														$	(50,232	)

*In U.S. dollars unless otherwise indicated.

^aMay be comprised of multiple contracts with the same counterparty, currency and settlement date.

franklintempleton.com Semiannual Report 19

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

CONSOLIDATED STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin K2 Global Macro Opportunities Fund (continued)

At November 30, 2018, the Fund had the following credit default swap contracts outstanding. See Note 1(c).    

Credit Default Swap Contracts
Description	Periodic Payment Rate Received (Paid)			Payment Frequency		Maturity Date		Notional Amounta		Value			Unamortized Upfront Payments (Receipts)			Unrealized Appreciation (Depreciation)			Ratingb
Centrally Cleared Swap Contracts
Contracts to Buy Protectionc
Single Name
Government of Mexico		(1.00	%)		Quarterly		6/20/23	$	166,000	$	2,600		$	315		$	2,285
Government of Mexico		(1.00	%)		Quarterly		12/20/23		56,000		1,144			957			187
Government of South Africa		(1.00	%)		Quarterly		12/20/21		275,000		6,770			18,823			(12,053	)
Government of South Africa		(1.00	%)		Quarterly		6/20/22		168,000		5,374			8,826			(3,452	)
Government of South Korea		(1.00	%)		Quarterly		12/20/21		207,885		(4,650	)		(5,982	)		1,332
Government of South Korea		(1.00	%)		Quarterly		12/20/22		7,673		(201	)		(183	)		(18	)
Government of Turkey		(1.00	%)		Quarterly		6/20/21		405,000		23,298			24,334			(1,036	)
Government of Turkey		(1.00	%)		Quarterly		12/20/21		43,000		2,986			2,630			356
Government of Turkey		(1.00	%)		Quarterly		6/20/23		11,000		1,191			1,605			(414	)
Contracts to Sell Protectionc,d
Single Name
Government of Russia		1.00	%		Quarterly		12/20/21		393,000		(3,778	)		(14,594	)		10,816			BB+
Government of South Africa		1.00	%		Quarterly		12/20/22		111,000		(4,347	)		(2,056	)		(2,291	)		BB+
Government of Turkey		1.00	%		Quarterly		12/20/22		105,000		(9,882	)		(4,748	)		(5,134	)		B+
Total Credit Default Swap Contracts										$	20,505		$	29,927		$	(9,422	)

^aFor contracts to sell protection, the notional amount is equal to the maximum potential amount of the future payments and no recourse provisions have been entered into in association with the contracts.

^bBased on Standard and Poor’s (S&P) Rating for single name swaps.

^cPerformance triggers for settlement of contract include default, bankruptcy or restructuring for single name swaps.

^dThe Fund enters contracts to sell protection to create a long credit position.

At November 30, 2018, the Fund had the following interest rate swap contracts outstanding. See Note 1(c).

Interest Rate Swap Contracts
Description	Payment Frequency		Maturity Date		Notional Amount			Value/Unrealized Appreciation (Depreciation)
Centrally Cleared Swap Contracts
Receive Fixed rate 8.35% Pay Floating rate BRL-BRLCDI		Annually		1/04/21		1,479,992	BRL	$	3,602
Receive Floating rate 6 Month CZK-PRIBOR Pay Fixed rate 1.67%		Annually		3/21/23		1,364,972	CZK		1,899
Receive Floating rate 6 Month CZK-PRIBOR Pay Fixed rate 1.74%		Annually		3/21/23		928,227	CZK		1,150
Receive Floating rate 6 Month CZK-PRIBOR Pay Fixed rate 1.86%		Annually		3/21/23		3,372,503	CZK		3,359
Receive Floating rate 6 Month CZK-PRIBOR Pay Fixed rate 1.88%		Annually		9/19/23		4,470,482	CZK		4,917
Receive Floating rate MIBOR Pay Fixed rate 6.67%		Annually		6/20/23		6,471,391	INR		682
Receive Fixed rate 7.87% Pay Floating rate 1 Month MXN TIIE		Monthly		9/13/23		1,876,889	MXN		(3,866	)
Receive Fixed rate 7.89% Pay Floating rate 1 Month MXN TIIE		Monthly		9/13/23		780,014	MXN		(1,574	)
Receive Fixed rate 7.91% Pay Floating rate 1 Month MXN TIIE		Monthly		9/13/23		1,524,379	MXN		(3,004	)
Receive Fixed rate 7.95% Pay Floating rate 1 Month MXN TIIE		Monthly		9/13/23		2,369,147	MXN		(4,501	)

20 Semiannual Report franklintempleton.com

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

CONSOLIDATED STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin K2 Global Macro Opportunities Fund (continued)

Interest Rate Swap Contracts (continued)

Description

Payment Frequency

Maturity Date

Notional Amount

Value/Unrealized Appreciation (Depreciation)

Centrally Cleared Swap Contracts (continued)

Receive Fixed rate 7.88% Pay Floating rate 1 Month MXN TIIE

Monthly

12/13/23

35,536

MXN

$

(77

)

Receive Fixed rate 8.07% Pay Floating rate 1 Month MXN TIIE

Monthly

12/13/23

22,976

MXN

(40

)

Receive Fixed rate 8.81% Pay Floating rate 1 Month MXN TIIE

Monthly

12/13/23

4,860,272

MXN

(1,161

)

Receive Floating rate 6 Month HUF-BURBOR Pay Fixed rate 3.43%

Annually

12/19/28

22,421,620

HUF

(5,038

)

Receive Floating rate 6 Month HUF-BURBOR Pay Fixed rate 3.43%

Annually

12/19/28

29,628,569

HUF

(6,706

)

Receive Floating rate 6 Month GBP-LIBOR Pay Fixed rate 1.41%

Semi-Annually

8/04/67

27,000

GBP

4,632

Receive Floating rate 6 Month GBP-LIBOR Pay Fixed rate 1.60%

Semi-Annually

12/19/68

124,595

GBP

9,361

Total Centrally Cleared Swap Contracts

3,635

Counterparty

OTC Swap Contracts

Receive Floating rate 3 Month KLIBOR Pay Fixed rate 4.14%

Quarterly

MSCS

5/18/23

219,367

MYR

(691

)

Receive Floating rate 3 Month KLIBOR Pay Fixed rate 4.14%

Quarterly

BOFA

5/21/23

222,359

MYR

(698

)

Receive Floating rate 3 Month KLIBOR Pay Fixed rate 4.02%

Quarterly

BOFA

6/08/23

484,902

MYR

(1,030

)

Total OTC Swap Contracts

(2,419

)

Total Interest Rate Swap Contracts

$

1,216

See Note 8 regarding other derivative information.

See Abbreviations on page 36.

franklintempleton.com The accompanying notes are an integral part of these consolidated financial statements.    |   Semiannual Report 21

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

Consolidated Financial Statements

Consolidated Statement of Assets and Liabilities

November 30, 2018 (unaudited)

Franklin K2 Global Macro Opportunities Fund

Assets:
Investments in securities:
Cost - Unaffiliated issuers	$	21,367,515
Value - Unaffiliated issuers	$	21,207,772
Foreign currency, at value (cost $1,997)		2,213
Receivables:
Investment securities sold		48,058
Capital shares sold		400
Dividends and interest		83,853
Affiliates		12,904
Deposits with brokers for:
OTC derivative contracts		590,000
Futures contracts		909,955
Centrally cleared swap contracts		441,378
Due from brokers		110,075
Variation margin on futures contracts		105,366
Unrealized appreciation on OTC forward exchange contracts		331,829
Total assets		23,843,803
Liabilities:
Payables:
Investment securities purchased		6,385
Distribution fees		138
Variation margin on centrally cleared swap contracts		128
Due to brokers		106,702
Unrealized depreciation on OTC forward exchange contracts		382,061
Unrealized depreciation on OTC swap contracts		2,419
Accrued expenses and other liabilities		25,683
Total liabilities		523,516
Net assets, at value	$	23,320,287
Net assets consist of:
Paid-in capital	$	24,626,027
Total distributable earnings (loss)		(1,305,740	)
Net assets, at value	$	23,320,287

22 Semiannual Report   |    The accompanying notes are an integral part of these consolidated financial statements. franklintempleton.com

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

CONSOLIDATED FINANCIAL STATEMENTS

Consolidated Statement of Assets and Liabilities (continued)

November 30, 2018 (unaudited)

Franklin K2 Global Macro Opportunities Fund

Class A:
Net assets, at value	$	157,434
Shares outstanding		17,268
Net asset value per sharea		$9.12
Maximum offering price per share (net asset value per share ÷ 94.50%)		$9.65
Class C:
Net assets, at value	$	150,679
Shares outstanding		16,820
Net asset value and maximum offering price per sharea		$8.96
Class R:
Net assets, at value	$	9,102
Shares outstanding		1,000
Net asset value and maximum offering price per share		$9.10
Class R6:
Net assets, at value	$	9,151
Shares outstanding		1,000
Net asset value and maximum offering price per share		$9.15
Advisor Class:
Net assets, at value	$	22,993,921
Shares outstanding		2,511,800
Net asset value and maximum offering price per share		$9.15

^aRedemption price is equal to net asset value less contingent deferred sales charges, if applicable.

franklintempleton.com The accompanying notes are an integral part of these consolidated financial statements.    |   Semiannual Report 23

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

CONSOLIDATED FINANCIAL STATEMENTS

Consolidated Statement of Operations

for the six months ended November 30, 2018 (unaudited)

Franklin K2 Global Macro Opportunities Fund

Investment income:
Dividends:
Unaffiliated issuers	$	178,879
Interest: (net of foreign taxes)~
Unaffiliated issuers		100,283
Total investment income		279,162
Expenses:
Management fees (Note 3a)		220,253
Distribution fees: (Note 3c)
Class A		197
Class C		681
Class R		12
Transfer agent fees: (Note 3e)
Class A		19
Class C		18
Class R		1
Class R6		15
Advisor Class		2,797
Custodian fees (Note 4) .		30,726
Reports to shareholders		10,194
Registration and filing fees		40,894
Professional fees		90,446
Other		10,633
Total expenses		406,886
Expense reductions (Note 4)		(242	)
Expenses waived/paid by affiliates (Note 3f)		(179,800	)
Net expenses		226,844
Net investment income		52,318
Realized and unrealized gains (losses):
Net realized gain (loss) from:
Investments:
Unaffiliated issuers		(165,457	)
Foreign currency transactions		(10,047	)
Forward exchange contracts		76,511
Futures contracts		(101,430	)
Swap contracts		(6,269	)
Net realized gain (loss)		(206,692	)
Net change in unrealized appreciation (depreciation) on:
Investments:
Unaffiliated issuers		(11,029	)
Translation of other assets and liabilities denominated in foreign currencies		2,529
Forward exchange contracts		36,023
Futures contracts		368,541
Swap contracts		9,755
Net change in unrealized appreciation (depreciation)		405,819
Net realized and unrealized gain (loss)		199,127
Net increase (decrease) in net assets resulting from operations	$	251,445
~Foreign taxes withheld on interest	$	100

24 Semiannual Report   |    The accompanying notes are an integral part of these consolidated financial statements. franklintempleton.com

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

CONSOLIDATED FINANCIAL STATEMENTS

Consolidated Statements of Changes in Net Assets

Franklin K2 Global Macro Opportunities Fund

	Six Months Ended November 30, 2018 (unaudited)			Year Ended May 31, 2018
Increase (decrease) in net assets:
Operations:
Net investment income	$	52,318		$	88,360
Net realized gain (loss)		(206,692	)		(628,111	)
Net change in unrealized appreciation (depreciation)		405,819			185,110
Net increase (decrease) in net assets resulting from operations		251,445			(354,641	)
Capital share transactions: (Note 2)
Class A		(4,981	)		73,777
Class C		2,326			(36,491	)
Advisor Class		1,377			116,163
Total capital share transactions		(1,278	)		153,449
Net increase (decrease) in net assets		250,167			(201,192	)
Net assets:
Beginning of period		23,070,120			23,271,312
End of period (Note 1f)	$	23,320,287		$	23,070,120

franklintempleton.com The accompanying notes are an integral part of these consolidated financial statements.    |   Semiannual Report 25

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

Notes to Consolidated Financial Statements (unaudited)

Franklin K2 Global Macro Opportunities Fund

1. Organization and Significant Accounting Policies

Franklin Alternative Strategies Funds (Trust) is registered under the Investment Company Act of 1940 (1940 Act) as an open-end management investment company, consisting of four separate funds and applies the specialized accounting and reporting guidance in U.S. Generally Accepted Accounting Principles (U.S. GAAP). Franklin K2 Global Macro Opportunities Fund (Fund) is included in this report. The Fund offers five classes of shares: Class A, Class C, Class R, Class R6 and Advisor Class. Beginning on October 19, 2018, Class C shares automatically convert to Class A shares after they have been held for 10 years. Each class of shares may differ by its initial sales load, contingent deferred sales charges, voting rights on matters affecting a single class, its exchange privilege and fees due to differing arrangements for distribution and transfer agent fees.

The following summarizes the Fund’s significant accounting policies.

a. Financial Instrument Valuation

The Fund’s investments in financial instruments are carried at fair value daily. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants on the measurement date. The Fund calculates the net asset value (NAV) per share each business day as of 4 p.m. Eastern time or the regularly scheduled close of the New York Stock Exchange (NYSE), whichever is earlier. Under compliance policies and procedures approved by the Trust’s Board of Trustees (the Board), the Fund’s administrator has responsibility for oversight of valuation, including leading the cross-functional Valuation Committee (VC). The Fund may utilize independent pricing services, quotations from securities and financial instrument dealers, and other market sources to determine fair value.

Debt securities generally trade in the over-the-counter (OTC) market rather than on a securities exchange. The Fund’s pricing services use multiple valuation techniques to determine fair value. In instances where sufficient market activity exists, the pricing services may utilize a market-based approach through which quotes from market makers are used to determine fair value. In instances where sufficient market activity may not exist or is limited, the pricing services also utilize proprietary valuation models which may consider market characteristics such as benchmark yield curves, credit spreads, estimated

default rates, anticipated market interest rate volatility, coupon rates, anticipated timing of principal repayments, underlying collateral, and other unique security features in order to estimate the relevant cash flows, which are then discounted to calculate the fair value. Securities denominated in a foreign currency are converted into their U.S. dollar equivalent at the foreign exchange rate in effect at 4 p.m. Eastern time on the date that the values of the foreign debt securities are determined.

Investments in open-end mutual funds are valued at the closing NAV.

Derivative financial instruments listed on an exchange are valued at the official closing price of the day. Certain derivative financial instruments are centrally cleared or trade in the OTC market. The Fund’s pricing services use various techniques including industry standard option pricing models and proprietary discounted cash flow models to determine the fair value of those instruments. The Fund’s net benefit or obligation under the derivative contract, as measured by the fair value of the contract, is included in net assets.

The Fund has procedures to determine the fair value of financial instruments for which market prices are not reliable or readily available. Under these procedures, the Fund primarily employs a market-based approach which may use related or comparable assets or liabilities, recent transactions, market multiples, book values, and other relevant information for the investment to determine the fair value of the investment. An income-based valuation approach may also be used in which the anticipated future cash flows of the investment are discounted to calculate fair value. Discounts may also be applied due to the nature or duration of any restrictions on the disposition of the investments. Due to the inherent uncertainty of valuations of such investments, the fair values may differ significantly from the values that would have been used had an active market existed.

b. Foreign Currency Translation

Portfolio securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollars based on the exchange rate of such currencies against U.S. dollars on the date of valuation. The Fund may enter into foreign currency exchange contracts to facilitate transactions denominated in a foreign currency. Purchases and sales of securities, income and expense items denominated in foreign currencies are translated into U.S. dollars at the exchange rate in effect on the transaction date. Portfolio securities and assets and liabilities denominated in foreign currencies contain risks that those currencies will

26 Semiannual Report franklintempleton.com

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Franklin K2 Global Macro Opportunities Fund (continued)

decline in value relative to the U.S. dollar. Occasionally, events may impact the availability or reliability of foreign exchange rates used to convert the U.S. dollar equivalent value. If such an event occurs, the foreign exchange rate will be valued at fair value using procedures established and approved by the Board.

The Fund does not separately report the effect of changes in foreign exchange rates from changes in market prices on securities held. Such changes are included in net realized and unrealized gain or loss from investments in the Consolidated Statement of Operations.

Realized foreign exchange gains or losses arise from sales of foreign currencies, currency gains or losses realized between the trade and settlement dates on securities transactions and the difference between the recorded amounts of dividends, interest, and foreign withholding taxes and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign exchange gains and losses arise from changes in foreign exchange rates on foreign denominated assets and liabilities other than investments in securities held at the end of the reporting period.

c. Derivative Financial Instruments

The Fund invested in derivative financial instruments in order to manage risk or gain exposure to various other investments or markets. Derivatives are financial contracts based on an underlying or notional amount, require no initial investment or an initial net investment that is smaller than would normally be required to have a similar response to changes in market factors, and require or permit net settlement. Derivatives contain various risks including the potential inability of the counterparty to fulfill their obligations under the terms of the contract, the potential for an illiquid secondary market, and/or the potential for market movements which expose the Fund to gains or losses in excess of the amounts shown in the Consolidated Statement of Assets and Liabilities. Realized gain and loss and unrealized appreciation and depreciation on these contracts for the period are included in the Consolidated Statement of Operations.

Derivative counterparty credit risk is managed through a formal evaluation of the creditworthiness of all potential counterparties. The Fund attempts to reduce its exposure to counterparty credit risk on OTC derivatives, whenever possible, by entering into International Swaps and Derivatives Association (ISDA) master agreements with certain counterparties. These agreements contain various provisions, including but not limited to collateral requirements, events of default, or early termination.

Termination events applicable to the counterparty include certain deteriorations in the credit quality of the counterparty. Termination events applicable to the Fund include failure of the Fund to maintain certain net asset levels and/or limit the decline in net assets over various periods of time. In the event of default or early termination, the ISDA master agreement gives the non-defaulting party the right to net and close-out all transactions traded, whether or not arising under the ISDA agreement, to one net amount payable by one counterparty to the other. However, absent an event of default or early termination, OTC derivative assets and liabilities are presented gross and not offset in the Consolidated Statement of Assets and Liabilities. Early termination by the counterparty may result in an immediate payment by the Fund of any net liability owed to that counterparty under the ISDA agreement.

Collateral requirements differ by type of derivative. Collateral or initial margin requirements are set by the broker or exchange clearing house for exchange traded and centrally cleared derivatives. Initial margin deposited is held at the exchange and can be in the form of cash and/or securities. For OTC derivatives traded under an ISDA master agreement, posting of collateral is required by either the Fund or the applicable counterparty if the total net exposure of all OTC derivatives with the applicable counterparty exceeds the minimum transfer amount, which typically ranges from $100,000 to $250,000, and can vary depending on the counterparty and the type of the agreement. Generally, collateral is determined at the close of Fund business each day and any additional collateral required due to changes in derivative values may be delivered by the Fund or the counterparty the next business day, or within a few business days. Collateral pledged and/or received by the Fund for OTC derivatives, if any, is held in segregated accounts with the Fund’s custodian/counterparty broker and can be in the form of cash and/or securities. Unrestricted cash may be invested according to the Fund’s investment objectives. To the extent that the amounts due to the Fund from its counterparties are not subject to collateralization or are not fully collateralized, the Fund bears the risk of loss from counterparty non-performance.

The Fund entered into exchange traded futures contracts primarily to manage and/or gain exposure to commodity price, interest rate, certain foreign currencies and equity price risk. A futures contract is an agreement between the Fund and a counterparty to buy or sell an asset at a specified price on a future date. Required initial margins are pledged by the Fund, and the daily change in fair value is accounted for as a variation

franklintempleton.com Semiannual Report 27

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Franklin K2 Global Macro Opportunities Fund (continued)

1. Organization and Significant Accounting Policies (continued)

c. Derivative Financial Instruments (continued)

margin payable or receivable in the Consolidated Statement of Assets and Liabilities.

The Fund entered into OTC forward exchange contracts primarily to manage and/or gain exposure to certain foreign currencies. A forward exchange contract is an agreement between the Fund and a counterparty to buy or sell a foreign currency at a specific exchange rate on a future date.

The Fund entered into credit default swap contracts primarily to manage and/or gain exposure to credit risk. A credit default swap is an agreement between the Fund and a counterparty whereby the buyer of the contract receives credit protection and the seller of the contract guarantees the credit worthiness of a referenced debt obligation. These agreements may be privately negotiated in the over-the-counter market (OTC credit default swaps) or may be executed in a multilateral trade facility platform, such as a registered exchange (centrally cleared credit default swaps). The underlying referenced debt obligation may be a single issuer of corporate or sovereign debt, a credit index, a basket of issuers or indices, or a tranche of a credit index or basket of issuers or indices. In the event of a default of the underlying referenced debt obligation, the buyer is entitled to receive the notional amount of the credit default swap contract from the seller in exchange for the referenced debt obligation, a net settlement amount equal to the notional amount of the credit default swap less the recovery value of the referenced debt obligation, or other agreed upon amount. For centrally cleared credit default swaps, required initial margins are pledged by the Fund, and the daily change in fair value is accounted for as a variation margin payable or receivable in the Consolidated Statement of Assets and Liabilities. Over the term of the contract, the buyer pays the seller a periodic stream of payments, provided that no event of default has occurred. Such periodic payments are accrued daily as an unrealized appreciation or depreciation until the payments are made, at which time they are realized. Upfront payments and receipts are reflected in the Consolidated Statement of Assets and Liabilities and represent compensating factors between stated terms of the credit default swap agreement and prevailing market conditions (credit spreads and other relevant factors). These upfront payments and receipts are amortized over the term of the contract as a realized gain or loss in the Consolidated Statement of Operations.

The Fund entered into interest rate swap contracts primarily to manage interest rate risk. An interest rate swap is an agreement between the Fund and a counterparty to exchange cash flows based on the difference between two interest rates, applied to a notional amount. These agreements may be privately negotiated in the over-the-counter market (OTC interest rate swaps) or may be executed on a registered exchange (centrally cleared interest rate swaps). For centrally cleared interest rate swaps, required initial margins are pledged by the Fund, and the daily change in fair value is accounted for as a variation margin payable or receivable in the Consolidated Statement of Assets and Liabilities. Over the term of the contract, contractually required payments to be paid and to be received are accrued daily and recorded as unrealized depreciation and appreciation until the payments are made, at which time they are realized.

See Note 8 regarding other derivative information.

d. Investments in K2 GMOF Holdings Corp. (K2 Subsidiary)

The Fund invests in certain financial instruments and commodity-linked derivative investments through its investment in the K2 Subsidiary. The K2 Subsidiary is a Cayman Islands exempted company with limited liability, is a wholly- owned subsidiary of the Fund, and is able to invest in certain financial instruments and commodity-linked derivative investments consistent with the investment objective of the Fund. At November 30, 2018, the K2 Subsidiary’s investments, as well as any other assets and liabilities of the K2 Subsidiary, are reflected in the Fund’s Consolidated Statement of Investments and Consolidated Statement of Assets and Liabilities. The financial statements have been consolidated and include the accounts of the Fund and the K2 Subsidiary. All intercompany transactions and balances have been eliminated. For tax purposes, the Fund is required to increase its taxable income by its share of the K2 Subsidiary’s income. Net losses incurred by the K2 Subsidiary cannot offset income earned by the Fund and cannot be carried back or forward by the K2 Subsidiary to offset income from prior or future years. At November 30, 2018, the net assets of the K2 Subsidiary were $5,536,212, representing 23.7% of the Fund’s consolidated net assets. The Fund’s investment in the K2 Subsidiary is limited to 25% of consolidated assets.

e. Income and Deferred Taxes

It is the Fund’s policy to qualify as a regulated investment company under the Internal Revenue Code. The Fund intends to

28 Semiannual Report franklintempleton.com

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Franklin K2 Global Macro Opportunities Fund (continued)

distribute to shareholders substantially all of its taxable income and net realized gains to relieve it from federal income and excise taxes. As a result, no provision for U.S. federal income taxes is required.

The Fund may be subject to foreign taxation related to income received, capital gains on the sale of securities and certain foreign currency transactions in the foreign jurisdictions in which it invests. Foreign taxes, if any, are recorded based on the tax regulations and rates that exist in the foreign markets in which the Fund invests. When a capital gain tax is determined to apply, the Fund records an estimated deferred tax liability in an amount that would be payable if the securities were disposed of on the valuation date.

The Fund may recognize an income tax liability related to its uncertain tax positions under U.S. GAAP when the uncertain tax position has a less than 50% probability that it will be sustained upon examination by the tax authorities based on its technical merits. As of November 30, 2018, the Fund has determined that no tax liability is required in its consolidated financial statements related to uncertain tax positions for any open tax years (or expected to be taken in future tax years). Open tax years are those that remain subject to examination and are based on the statute of limitations in each jurisdiction in which the Fund invests.

f. Security Transactions, Investment Income, Expenses and Distributions

Security transactions are accounted for on trade date. Realized gains and losses on security transactions are determined on a specific identification basis. Interest income and estimated expenses are accrued daily. Amortization of premium and accretion of discount on debt securities are included in interest income. Dividend income is recorded on the ex-dividend date. Distributions to shareholders are recorded on the ex-dividend date. Distributable earnings are determined according to income tax regulations (tax basis) and may differ from earnings recorded in accordance with U.S. GAAP. These differences may be permanent or temporary. Permanent differences are reclassified among capital accounts to reflect their tax character. These reclassifications have no impact on net assets or the results of operations. Temporary differences are not reclassified, as they may reverse in subsequent periods.*

Common expenses incurred by the Trust are allocated among the Funds based on the ratio of net assets of each Fund to the combined net assets of the Trust or based on the ratio of number

of shareholders of each Fund to the combined number of shareholders of the Trust. Fund specific expenses are charged directly to the Fund that incurred the expense.

Realized and unrealized gains and losses and net investment income, excluding class specific expenses, are allocated daily to each class of shares based upon the relative proportion of net assets of each class. Differences in per share distributions by class are generally due to differences in class specific expenses.

g. Accounting Estimates

The preparation of financial statements in accordance with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the amounts of income and expenses during the reporting period. Actual results could differ from those estimates.

h. Guarantees and Indemnifications

Under the Trust’s organizational documents, its officers and trustees are indemnified by the Trust against certain liabilities arising out of the performance of their duties to the Trust. Additionally, in the normal course of business, the Trust, on behalf of the Fund, enters into contracts with service providers that contain general indemnification clauses. The Trust’s maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Trust that have not yet occurred. Currently, the Trust expects the risk of loss to be remote.

*Effective during the current reporting period, it is no longer required to present certain line items as shown below on the Consolidated Statements of Changes in Net Assets. Such disclosure changes are included in the Consolidated Statements of Changes in Net Assets, therefore prior period amounts are presented below.

For the year ended May 31, 2018, there were no distributions to shareholders.

For the year ended May 31, 2018, accumulated net investment loss included in net assets was $(160,830).

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FRANKLIN ALTERNATIVE STRATEGIES FUNDS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Franklin K2 Global Macro Opportunities Fund (continued)

2. Shares of Beneficial Interest

At November 30, 2018, there were an unlimited number of shares authorized (without par value). Transactions in the Fund’s shares were as follows:

	Six Months Ended November 30, 2018						Year Ended May 31, 2018
	Shares			Amount			Shares			Amount
Class A Shares:
Shares solda		29		$	266			8,179		$	74,787
Shares redeemed		(581	)		(5,247	)		(111	)		(1,010	)
Net increase (decrease)		(552	)	$	(4,981	)		8,068		$	73,777
Class C Shares:
Shares sold		2,807		$	25,094			5,335		$	48,630
Shares redeemeda		(2,552	)		(22,768	)		(9,405	)		(85,121	)
Net increase (decrease)		255		$	2,326			(4,070	)	$	(36,491	)
Advisor Class Shares:
Shares sold		1,718		$	15,597			14,058		$	129,263
Shares redeemed		(1,571	)		(14,220	)		(1,424	)		(13,100	)
Net increase (decrease)		147		$	1,377			12,634		$	116,163

^aMay include a portion of Class C shares that were automatically converted to Class A.

3. Transactions with Affiliates

Franklin Resources, Inc. is the holding company for various subsidiaries that together are referred to as Franklin Templeton Investments. Certain officers and trustees of the Trust are also officers and/or directors of the following subsidiaries:

Subsidiary	Affiliation
K2/D&S Management Co., L.L.C. (K2 Advisors)	Investment manager
Franklin Templeton Services, LLC (FT Services)	Administrative manager
Franklin Templeton Distributors, Inc. (Distributors)	Principal underwriter
Franklin Templeton Investor Services, LLC (Investor Services)	Transfer agent

a. Management Fees

The Fund and K2 Subsidiary pay an investment management fee to K2 Advisors of 1.90% per year of the average daily net assets of the Fund and K2 Subsidiary. Management fees paid by the Fund are reduced on assets invested in the K2 Subsidiary, in an amount not to exceed the management fees paid by the K2 Subsidiary.

Under each subadvisory agreement, the below entities provide subadvisory services to the Fund or K2 Subsidiary. The subadvisory fees are paid by K2 Advisors based on the Fund and K2 Subsidiary average daily net assets, and are not an additional expense of the Fund or K2 Subsidiary.

Subadvisors

Aspect Capital Limited

Emso Asset Management Limited

Graham Capital Management L.P.

P/E GLOBAL LLC

RV Capital Management Private Ltd

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FRANKLIN ALTERNATIVE STRATEGIES FUNDS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Franklin K2 Global Macro Opportunities Fund (continued)

b. Administrative Fees

Under an agreement with K2 Advisors, FT Services provides administrative services to the Fund and K2 Subsidiary. The fee is paid by K2 Advisors based on the Fund and K2 Subsidiary average daily net assets, and is not an additional expense of the Fund or K2 Subsidiary.

c. Distribution Fees

The Board has adopted distribution plans for each share class, with the exception of Class R6 and Advisor Class shares, pursuant to Rule 12b-1 under the 1940 Act. Under the Fund’s Class A reimbursement distribution plan, the Fund reimburses Distributors for costs incurred in connection with the servicing, sale and distribution of the Fund’s shares up to the maximum annual plan rate. Under the Class A reimbursement distribution plan, costs exceeding the maximum for the current plan year cannot be reimbursed in subsequent periods. In addition, under the Fund’s Class C and R compensation distribution plans, the Fund pays Distributors for costs incurred in connection with the servicing, sale and distribution of the Fund’s shares up to the maximum annual plan rate for each class. The plan year, for purposes of monitoring compliance with the maximum annual plan rates, is February 1 through January 31.

The maximum annual plan rates, based on the average daily net assets, for each class, are as follows:

Class A	0.25%
Class C	1.00%
Class R	0.50%

d. Sales Charges/Underwriting Agreements

Front-end sales charges and contingent deferred sales charges (CDSC) do not represent expenses of the Fund. These charges are deducted from the proceeds of sales of Fund shares prior to investment or from redemption proceeds prior to remittance, as applicable. Distributors has advised the Fund of the following commission transactions related to the sales and redemptions of the Fund’s shares for the period:

Sales charges retained net of commissions paid to unaffiliated brokers/dealers	$	—
CDSC retained	$	—

Effective September 10, 2018, the Board approved changes to certain front-end sales charges and dealer commissions on Class A shares. Further details are disclosed in the Fund’s Prospectus.

e. Transfer Agent Fees

Each class of shares pays transfer agent fees to Investor Services for its performance of shareholder servicing obligations. The fees are based on an annualized asset based fee of 0.02% plus a transaction based fee. In addition, each class reimburses Investor Services for out of pocket expenses incurred and, except for Class R6, reimburses shareholder servicing fees paid to third parties. These fees are allocated daily based upon their relative proportion of such classes’ aggregate net assets. Class R6 pays Investor Services transfer agent fees specific to that class.

For the period ended November 30, 2018, the Fund paid transfer agent fees of $2,850, of which $2,502 was retained by Investor Services.

f. Waiver and Expense Reimbursements

K2 Advisors and Investor Services have contractually agreed in advance to waive or limit their respective fees and to assume as their own expense certain expenses otherwise payable by the Fund so that the expenses (excluding distribution fees, acquired fund fees and expenses, expenses related to securities sold short and certain non-routine expenses or costs, including those relating to litigation, indemnification, reorganizations, and liquidations) for each class of the Fund do not exceed 1.95% based on the average net assets of each class until September 30, 2019. Total expenses waived or paid are not subject to recapture subsequent to the Fund’s fiscal year end.

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FRANKLIN ALTERNATIVE STRATEGIES FUNDS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Franklin K2 Global Macro Opportunities Fund (continued)

3. Transactions with Affiliates (continued)

g. Other Affiliated Transactions

At November 30, 2018, Franklin Resources, Inc. owned 98.1% of the Fund’s outstanding shares. Investment activities of this shareholder could have a material impact on the Fund.

4. Expense Offset Arrangement

The Fund has entered into an arrangement with its custodian whereby credits realized as a result of uninvested cash balances are used to reduce a portion of the Fund’s custodian expenses. During the period ended November 30, 2018, the custodian fees were reduced as noted in the Consolidated Statement of Operations.

5. Income Taxes

For tax purposes, capital losses may be carried over to offset future capital gains, if any. At May 31, 2018, the capital loss carryforwards were as follows:

Capital loss carryforwards not subject to expiration:
Short term	$	232,824
Long term		781,378
Total capital loss carryforwards	$	1,014,202

At November 30, 2018, the cost of investments and net unrealized appreciation (depreciation) for income tax purposes were as follows:

Cost of investments	$	21,731,374
Unrealized appreciation	$	746,629
Unrealized depreciation		(761,377	)
Net unrealized appreciation (depreciation)	$	(14,748	)

Differences between income and/or capital gains as determined on a book basis and a tax basis are primarily due to differing treatments of foreign currency transactions and investments in the K2 Subsidiary.

6. Investment Transactions

Purchases and sales of investments (excluding short term securities) for the period ended November 30, 2018, aggregated $1,005,709 and $1,313,498, respectively.

7. Credit Risk and Defaulted Securities

The Fund may purchase the pre-default or defaulted debt of distressed companies. Distressed companies are financially troubled and could be or are already involved in financial restructuring or bankruptcy. Risks associated with purchasing these securities include the possibility that the bankruptcy or other restructuring process takes longer than expected, or that distributions in restructuring are less than anticipated, either or both of which may result in unfavorable consequences to the Fund. If it becomes probable that the income on debt securities, including those of distressed companies, will not be collected, the Fund discontinues accruing income and recognizes an adjustment for uncollectible interest.

At November 30, 2018, the aggregate long value of distressed company securities for which interest recognition has been discontinued was $5,720, representing less than 0.1% of the Fund’s net assets. For information as to specific securities, see the accompanying Consolidated Statement of Investments.

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Franklin K2 Global Macro Opportunities Fund (continued)

8. Other Derivative Information

At November 30, 2018, the Fund’s investments in derivative contracts are reflected in the Consolidated Statement of Assets and Liabilities as follows:

	Asset Derivatives				Liability Derivatives
Derivative Contracts Not Accounted for as Hedging Instruments	Consolidated Statement of Assets and Liabilities Location	Fair Value			Consolidated Statement of Assets and Liabilities Location	Fair Value
Interest rate contracts	Variation margin on futures contracts	$	65,383	a	Variation margin on futures contracts	$	16,720	a
	Variation margin on centrally cleared swap contracts		29,602	a	Variation margin on centrally cleared swap contracts		25,967	a
					Unrealized depreciation on OTC swap contracts		2,419
Foreign exchange contracts	Variation margin on futures contracts		322,897	a	Variation margin on futures contracts		67,087	a
	Unrealized appreciation on OTC forward exchange contracts		331,829		Unrealized depreciation on OTC forward exchange contracts		382,061
Credit contracts	Variation margin on centrally cleared swap contracts		14,976	a	Variation margin on centrally cleared swap contracts		24,398	a
Equity contracts	Variation margin on futures contracts		43,186	a	Variation margin on futures contracts		3,150	a
Commodity contracts	Variation margin on futures contracts		269,874	a	Variation margin on futures contracts		77,819	a
Totals		$	1,077,747			$	599,621

^aThis amount reflects the cumulative appreciation (depreciation) of futures contracts and centrally cleared swap contracts as reported in the Consolidated Statement of Investments. Only the variation margin receivable/payable at period end is separately reported within the Consolidated Statement of Assets and Liabilities. Prior variation margin movements were recorded to cash upon receipt or payment.

For the period ended November 30, 2018, the effect of derivative contracts in the Fund’s Consolidated Statement of Operations was as follows:

Derivative Contracts Not Accounted for as Hedging Instruments	Consolidated Statement of Operations Location	Net Realized Gain (Loss) for the Period			Consolidated Statement of Operations Location	Net Change in Unrealized Appreciation (Depreciation) for the Period
	Net realized gain (loss) from:				Net change in unrealized appreciation (depreciation) on:
Interest rate contracts	Futures contracts	$	(41,276	)	Futures contracts	$	114,545
	Swap contracts		23,011		Swap contracts		(56	)
Foreign exchange contracts	Forward exchange contracts		76,511		Forward exchange contracts		36,023
	Futures contracts		513,396		Futures contracts		(113,221	)
Credit contracts	Swap contracts		(29,280	)	Swap contracts		9,811
Equity contracts	Futures contracts		(283,333	)	Futures contracts		60,715
Commodity contracts	Futures contracts		(290,217	)	Futures contracts		306,502
Totals		$	(31,188	)		$	414,319

For the period ended November 30, 2018, the average month end notional amount of futures contracts and swap contracts represented $52,217,080 and $4,145,586, respectively. The average month end contract value of forward exchange contracts was $21,021,884.

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FRANKLIN ALTERNATIVE STRATEGIES FUNDS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Franklin K2 Global Macro Opportunities Fund (continued)

8. Other Derivative Information (continued)

At November 30, 2018, the Fund’s OTC derivative assets and liabilities are as follows:

	Gross Amounts of Assets and Liabilities Presented in the Consolidated Statement of Assets and Liabilities
	Assetsa		Liabilitiesa
Derivatives
Forward Exchange Contracts	$	331,829	$	382,061
Swap Contracts		—		2,419
Total	$	331,829	$	384,480

^aAbsent an event of default or early termination, OTC derivative assets and liabilities are presented gross and not offset in the Consolidated Statement of Assets and Liabilities.

At November 30, 2018, the Fund’s OTC derivative assets, which may be offset against the Fund’s OTC derivative liabilities and collateral received from the counterparty, are as follows:

			Amounts Not Offset in the Consolidated Statement of Assets and Liabilities
	Gross Amounts of Assets Presented in the Consolidated Statement of Assets and Liabilities		Financial Instruments Available for Offset			Financials Instruments Collateral Received		Cash Collateral Received		Net Amount (Not Less than Zero)
Counterparty
BOFA	$	—	$	—		$	—	$	—	$	—
JPHQb		170,960		—			—		—		170,960
MSCO		160,869		(104,056	)		—		—		56,813
MSCS		—		—			—		—		—
Total	$	331,829	$	(104,056	)	$	—	$	—	$	227,773

At November 30, 2018, the Fund’s OTC derivative liabilities, which may be offset against the Fund’s OTC derivative assets and collateral pledged to the counterparty, are as follows:

			Amounts Not Offset in the Consolidated Statement of Assets and Liabilities
	Gross Amounts of Liabilities Presented in the Consolidated Statement of Assets and Liabilities		Financial Instruments Available for Offset			Financials Instruments Collateral Pledged		Cash Collateral Pledgeda		Net Amount (Not Less than Zero)
Counterparty
BOFA	$	1,728	$	—		$	—	$	—	$	1,728
JPHQb		278,005		—			—		—		278,005
MSCO		104,056		(104,056	)		—		—		—
MSCS		691		—			—		—		691
Total	$	384,480	$	(104,056	)	$	—	$	—	$	280,424

^aIn some instances, the collateral amounts disclosed in the table above were adjusted due to the requirement to limit the collateral amounts to avoid the effect of overcollateralization. Actual collateral received and/or pledged may be more than the amounts disclosed herein.

^bRepresents derivatives not subject to an ISDA master agreement.

See Note 1(c) regarding derivative financial instruments.

See Abbreviations on page 36.

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FRANKLIN ALTERNATIVE STRATEGIES FUNDS

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Franklin K2 Global Macro Opportunities Fund (continued)

9. Credit Facility

The Fund, together with other U.S. registered and foreign investment funds (collectively, Borrowers), managed by Franklin Templeton Investments, are borrowers in a joint syndicated senior unsecured credit facility totaling $2 billion (Global Credit Facility) which matures on February 8, 2019. This Global Credit Facility provides a source of funds to the Borrowers for temporary and emergency purposes, including the ability to meet future unanticipated or unusually large redemption requests.

Under the terms of the Global Credit Facility, the Fund shall, in addition to interest charged on any borrowings made by the Fund and other costs incurred by the Fund, pay its share of fees and expenses incurred in connection with the implementation and maintenance of the Global Credit Facility, based upon its relative share of the aggregate net assets of all of the Borrowers, including an annual commitment fee of 0.15% based upon the unused portion of the Global Credit Facility. These fees are reflected in other expenses in the Consolidated Statement of Operations. During the period ended November 30, 2018, the Fund did not use the Global Credit Facility.

10. Fair Value Measurements

The Fund follows a fair value hierarchy that distinguishes between market data obtained from independent sources (observable inputs) and the Fund’s own market assumptions (unobservable inputs). These inputs are used in determining the value of the Fund’s financial instruments and are summarized in the following fair value hierarchy:

• Level 1 – quoted prices in active markets for identical financial instruments

• Level 2 – other significant observable inputs (including quoted prices for similar financial instruments, interest rates, prepayment speed, credit risk, etc.)

• Level 3 – significant unobservable inputs (including the Fund’s own assumptions in determining the fair value of financial instruments)

The input levels are not necessarily an indication of the risk or liquidity associated with financial instruments at that level.

A summary of inputs used as of November 30, 2018, in valuing the Fund’s assets and liabilities carried at fair value, is as follows:

	Level 1		Level 2		Level 3		Total
Assets:
Investments in Securities:a
Corporate Bonds and Notes	$	—	$	435,934	$	—	$	435,934
Corporate Bonds and Notes in Reorganization		—		5,720		—		5,720
Foreign Government and Agency Securities		—		1,554,442		—		1,554,442
Short Term Investments		19,211,676		—		—		19,211,676
Total Investments in Securities	$	19,211,676	$	1,996,096	$	—	$	21,207,772
Other Financial Instruments:
Futures Contracts	$	701,340	$	—	$	—	$	701,340
Forward Exchange Contracts		—		331,829		—		331,829
Swap Contracts		—		44,578		—		44,578
Total Other Financial Instruments	$	701,340	$	376,407	$	—	$	1,077,747
Liabilities:
Other Financial Instruments:
Futures Contracts	$	164,776	$	—	$	—	$	164,776
Forward Exchange Contracts		—		382,061		—		382,061
Swap Contracts		—		52,784		—		52,784
Total Other Financial Instruments	$	164,776	$	434,845	$	—	$	599,621

^aFor detailed categories, see the accompanying Consolidated Statement of Investments.

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FRANKLIN ALTERNATIVE STRATEGIES FUNDS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Franklin K2 Global Macro Opportunities Fund (continued)

11. Subsequent Events

The Fund has evaluated subsequent events through the issuance of the consolidated financial statements and determined that no events have occurred that require disclosure.

Abbreviations

Counterparty		Currency		Selected Portfolio
BOFA	Bank of America, N.A.	ARS	Argentine Peso	ARLLMONP	Argentina Blended Policy Rate
JPHQ	JP Morgan Chase Bank, N.A.	AUD	Australian Dollar	BRLCDI	Brazil Cetip Di Interbank Deposit Rate
MSCO	Morgan Stanley & Co., LLC	BRL	Brazilian Real	BURBOR	Budapest Interbank Offered Rate
MSCS	Morgan Stanley Capital Services LLC	CAD	Canadian Dollar	CAC	Cotation Assistée en Continu
		CHF	Swiss Franc	CBOT	Chicago Board of Trade
		CZK	Czech Koruna	CME	Chicago Mercantile Exchange
		EUR	Euro	DJIA	Dow Jones Industrial Average
		GBP	British Pound	EURIBOR	Euro Interbank Offered Rate
		HUF	Hungarian Forint	FRN	Floating Rate Note
		INR	Indian Rupee	FTSE	Financial Times Stock Exchange
		JPY	Japanese Yen	JSE	Johannesburg Stock Exchange Index
		MXN	Mexican Peso	KLIBOR	Kuala Lumpur Interbank Offered Rate
		MYR	Malaysian Ringgit	LIBOR	London InterBank Offered Rate
		NOK	Norwegian Krone	MIBOR	Mumbai Interbank Offered Rate
		NZD	New Zealand Dollar	OAT	Obligations Assimilables du Tresor
		PLN	Polish Zloty	OMX	Stockholm Stock Exchange
		SEK	Swedish Krona	PRIBOR	Prague Interbank Offered Rate
		USD	United States Dollar	TIIE	Interbank Equilibrium Interest Rate
		ZAR	South African Rand	TOPIX	Tokyo Price Index
				TSX	Toronto Stock Exchange
				ULSD	Ultra-Low Sulfur Diesel

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FRANKLIN K2 GLOBAL MACRO OPPORTUNITIES FUND

Shareholder Information

Board Approval of Sub-Advisory Agreement

FRANKLIN K2 GLOBAL MACRO OPPORTUNITIES FUND

(Fund)

The Board of Trustees (Board) of Franklin Alternative Strategies Funds (the Trust), including a majority of trustees that are not “interested persons” as such term is defined in section 2(a)(19) of the Investment Company Act of 1940 (hereinafter referred to as “independent trustees”), at an in-person meeting held on July 24, 2018, unanimously approved the sub-advisory agreement (the “New Sub-Advisory Agreement”) with RV Capital Management Private, Ltd. (“RV Capital”).

In approving the New Sub-Advisory Agreement, the Board, including the independent trustees, determined that fees to be paid under the New Sub-Advisory Agreement were fair and reasonable and that approval of the New Sub-Advisory Agreement was in the best interests of the Fund and its shareholders. As part of the approval process, the trustees considered the process undertaken and information provided during their consideration and approval on May 17, 2018 of the investment management agreement between K2/D&S Management Co., L.L.C., the Fund’s investment manager (“K2 Advisors”), and the Trust, on behalf of the Fund, and the sub-advisory agreements between K2 Advisors and each of the Fund’s existing sub-advisors.

At an independent trustees’ meeting held on July 24, 2018, the independent trustees met with representatives of RV Capital. In making the foregoing approvals, the independent trustees received assistance and advice from their independent counsel and, in addition to the materials provided at prior meetings, considered various materials related to the New Sub-Advisory Agreement including: (1) a copy of the proposed form of New Sub-Advisory Agreement for RV Capital; (2) information describing the nature, quality and extent of services that RV Capital would provide to the Fund, and the proposed sub-advisory fees payable to RV Capital; (3) a report from K2 Advisors on the diligence conducted on RV Capital and the reasons for recommending RV Capital as a sub-advisor for the Fund, including, but not limited to, RV Capital’s background, experience, personnel, operations, policies, procedures and compliance functions and plans for the integration of such operations, policies, procedures and compliance functions with those of K2 Advisors; and (4) a report from the Fund’s Chief Compliance Officer regarding RV Capital’s compliance program and capabilities, including RV Capital’s policies and procedures in place to address potential conflicts of interest, and

the diligence undertaken by the Fund’s Chief Compliance Officer with respect thereto. The Board noted that the terms of the New Sub-Advisory Agreement were substantially similar to the terms of the sub-advisory agreements with the Fund’s existing sub-advisors.

The Board’s consideration of whether to approve the New Sub-Advisory Agreement on behalf of the Fund took into account several factors including, but not limited to, the following: (1) the nature and quality of the services to be provided by RV Capital to the Fund under the New Sub-Advisory Agreement; (2) RV Capital’s experience as a manager of other accounts; (3) RV Capital’s strength and reputation within the industry; (4) the fairness of the compensation under the New Sub-Advisory Agreement; (5) the personnel, operations, financial condition, and investment management capabilities, methodologies and resources of RV Capital; (6) profitability matters; (7) reports from K2 Advisors on the diligence conducted on RV Capital and the reasons for recommending RV Capital as a sub-advisor for the Fund, including, but not limited to, RV Capital’s background, experience, personnel, operations, policies, procedures and compliance functions and plans for the integration of such operations, policies, procedures and compliance functions with those of K2 Advisors; and (8) a report from the Trust’s Chief Compliance Officer regarding RV Capital’s compliance program and capabilities, including RV Capital’s policies and procedures in place to address potential conflicts of interest, and the diligence undertaken by the Trust’s Chief Compliance Officer with respect thereto. Particular attention was given to the due diligence and risk management procedures of K2 Advisors with respect to selecting and overseeing sub-advisors of the Fund, as well as RV Capital’s risk management program and to derivatives and other complex instruments that are expected to be held by the Fund and how such instruments are expected to be used to pursue the Fund’s investment goals.

The following discussion relates to certain primary factors relevant to the Board’s decision to approve the New Sub-Advisory Agreement. This discussion of the information and factors considered by the Board (including the information and factors discussed above) is not intended to be exhaustive, but rather summarizes certain factors considered by the Board. In view of the wide variety of factors considered, the Board did not, unless otherwise noted, find it practicable to quantify or otherwise assign relative weights to the following factors. In addition, individual trustees may have assigned different weights to various factors.

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SHAREHOLDER INFORMATION

NATURE, EXTENT AND QUALITY OF SERVICES. The trustees reviewed the nature, extent and quality of the services to be provided by RV Capital. In this regard, they reviewed the Fund’s investment goal and RV Capital’s proposed investment strategy, and RV Capital’s ability to implement such investment goal and/or investment strategy, including, but not limited to, RV Capital’s trading practices and investment decision processes.

With respect to the sub-advisory services to be provided by RV Capital, the Board noted the responsibilities that RV Capital would have with respect to the Fund’s assets to be allocated to RV Capital by K2-Advisors (the “Sub-Advised Portion”), including, among others, implementing the investment strategies with respect to the Sub-Advised Portion and ensuring compliance with the investment strategies, policies, and limitations of the Sub-Advised Portion. The trustees considered the successful performance of RV Capital in managing other investment products with investment strategies similar to the investment strategies of the Sub-Advised Portion of the Fund.

The trustees reviewed the portfolio management team at RV Capital that would be responsible for managing the Sub-Advised Portion, including the team’s performance, staffing, skills and compensation program. The trustees considered various other products, portfolios and entities that are advised by RV Capital, their relative fees and reasons for differences with respect thereto and any potential conflicts. The Board also considered a report from the Trust’s Chief Compliance Officer regarding RV Capital’s compliance program as such policies relate to the operations of the Fund. The Board considered the selection and due diligence process employed by K2 Advisors in proposing RV Capital as a sub-advisor to the Fund, including the due diligence undertaken with respect to RV Capital’s compliance capabilities, and efforts to integrate RV Capital’s operations, policies, procedures and compliance functions with those of K2 Advisors.

Based on their review, the trustees were satisfied with the nature and quality of the overall services to be provided by RV Capital to the Fund and its shareholders and were confident in the abilities of RV Capital to implement its proposed investment strategy, and to provide quality services to the Fund and its shareholders.

INVESTMENT PERFORMANCE. The Board noted that, as RV Capital had not provided any services to the Fund, there was no investment performance of RV Capital with respect to the Fund. The Board considered the investment performance of

RV Capital in managing other investment products with similar investment strategies to the investment strategies of the Sub-Advised Portion. The Board also considered the performance benchmarks for the Fund and how such benchmarks would be utilized to measure the performance of RV Capital in managing the Sub-Advised Portion.

COMPARATIVE EXPENSES AND PROFITABILITY. The Board considered the cost of the services to be provided by RV Capital. The Board also noted that it could not evaluate RV Capital’s profitability with respect to the Fund since no assets had yet been allocated to RV Capital.

The Board noted that the sub-advisory fees would be paid by K2 Advisors to RV Capital and would not be additional fees to be borne by the Fund. The Board also noted that the sub-advisory fees to be paid by K2 Advisors to RV Capital were the product of arms-length negotiations between K2 Advisors and RV Capital and the Board considered the allocation of the investment management fee charged to the Fund between K2 Advisors and RV Capital in light of the nature, extent and quality of the investment management services expected to be provided by K2 Advisors and RV Capital. The trustees considered various other products, portfolios and entities that are advised by RV Capital and the allocation of assets and expenses among and within them, as well as their relative fees and reasons for differences with respect thereto and any potential conflicts. The Board considered the extent to which RV Capital may derive ancillary benefits from the Fund’s operations.

With respect to the impact on K2 Advisors’ and its affiliates’ profitability as a result of hiring RV Capital as a sub-advisor to the Fund, the Board considered the following: (1) the fee waiver and expense limitation arrangements in effect, and the amount of Fund expenses that were absorbed since the inception of the Fund by K2 Advisors through such arrangements, (2) the sub-advisory fees to be paid to RV Capital are the same as the fees charged by all of the Fund’s existing sub-advisors, and (3) K2 Advisors’ belief that the hiring of RV Capital as a sub-advisor will not have any demonstrable impact on K2 Advisors’ profitability.

Based upon its consideration of all these factors, the Board determined that the sub-advisory fee structure for RV Capital was fair and reasonable.

ECONOMIES OF SCALE. The Board considered economies of scale that may be realized by RV Capital as the Fund grows larger and the extent to which such economies of scale may be shared with Fund shareholders, as for example, in the level of

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SHAREHOLDER INFORMATION

the sub-advisory fees charged, in the quality and efficiency of services rendered and in increased capital commitments benefiting the Fund directly or indirectly. The Board concluded that economies of scale were deemed not to be a significant factor at that time in light of, among other matters, the fee waiver and expense limitation arrangement in effect

CONCLUSION. After consideration of the foregoing factors, and such other matters as were deemed relevant, and with no single factor being determinative to their decision, the trustees—including a majority of the independent trustees—with the assistance of independent counsel approved the New Sub-Advisory Agreement, including the fees payable thereunder, with RV Capital for the Fund.

Proxy Voting Policies and Procedures

The Fund’s investment manager has established Proxy Voting Policies and Procedures (Policies) that the Fund uses to determine how to vote proxies relating to portfolio securities. Shareholders may view the Fund’s complete Policies online at franklintempleton.com. Alternatively, shareholders may request copies of the Policies free of charge by calling the Proxy Group collect at (954) 527-7678 or by sending a written request to: Franklin Templeton Companies, LLC, 300 S.E. 2nd Street, Fort Lauderdale, FL 33301, Attention: Proxy Group. Copies of the Fund’s proxy voting records are also made available online at franklintempleton.com and posted on the U.S. Securities and Exchange Commission’s website at sec.gov and reflect the most recent 12-month period ended June 30.

Quarterly Consolidated Statement of Investments

The Trust, on behalf of the Fund, files a complete consolidated statement of investments with the U.S. Securities and Exchange Commission for the first and third quarters for each fiscal year on Form N-Q. Shareholders may view the filed Form N-Q by visiting the Commission’s website at sec.gov. The filed form may also be viewed and copied at the Commission’s Public Reference Room in Washington, DC. Information regarding the operations of the Public Reference Room may be obtained by calling (800) SEC-0330.

franklintempleton.com Semiannual Report 39

Semiannual Report and Shareholder Letter

Franklin K2 Global Macro Opportunities Fund

Investment Manager

K2/D&S Management Co., L.L.C.

Distributor

Franklin Templeton Distributors, Inc.

(800) DIAL BEN^® / 342-5236

franklintempleton.com

Shareholder Services

(800) 632-2301

Authorized for distribution only when accompanied or preceded by a summary prospectus and/or prospectus. Investors should carefully consider a fund’s investment goals, risks, charges and expenses before investing. A prospectus contains this and other information; please read it carefully before investing.

To help ensure we provide you with quality service, all calls to and from our service areas are monitored and/or recorded.

© 2018-2019 Franklin Templeton Investments. All rights reserved. 973 S 01/19

Item 2. Code of Ethics.

(a) The Registrant has adopted a code of ethics that applies to its principal executive officers and principal financial and accounting officer.

(c) N/A

(d) N/A

(f) Pursuant to Item 12(a)(1), the Registrant is attaching as an exhibit a copy of its code of ethics that applies to its principal executive officers and principal financial and accounting officer.

Item 3. Audit Committee Financial Expert.

(a)  (1) The Registrant has an audit committee financial expert serving on its audit committee.

(2) The audit committee financial expert is Ann Torre Bates and she is “independent” as defined under the relevant Securities and Exchange Commission Rules and Releases.

Item 4. Principal Accountant Fees and Services.                                                                       N/A

Item 5. Audit Committee of Listed Registrants.                                                                         N/A

Item 6. Schedule of Investments.                                                                                                  N/A

Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed–End Management Investment Companies.                                                                                                                                       N/A

Item 8. Portfolio Managers of Closed-End Management Investment Companies.                N/A

Item 9. Purchases of Equity Securities by Closed–End Management Investment Company and Affiliated Purchasers.                                                                                                                                        N/A

Item 10. Submission of Matters to a Vote of Security Holders.

There have been no changes to the procedures by which shareholders may recommend nominees to the Registrant’s Board of Trustees that would require disclosure herein.

Item 11. Controls and Procedures.

(a) Evaluation of Disclosure Controls and Procedures. The Registrant maintains disclosure controls and procedures that are designed to provide reasonable assurance that information required to be disclosed in the Registrant’s filings under the Securities Exchange Act of 1934, as amended, and the Investment Company Act of 1940 is recorded, processed, summarized and reported within the periods specified in the rules and forms of the Securities and Exchange Commission. Such information is accumulated and communicated to the Registrant’s management, including its principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure. The Registrant’s management, including the principal executive officer and the principal financial officer, recognizes that any set of controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives.

Within 90 days prior to the filing date of this Shareholder Report on Form N-CSR, the Registrant had carried out an evaluation, under the supervision and with the participation of the Registrant’s management, including the Registrant’s principal executive officer and the Registrant’s principal financial officer, of the effectiveness of the design and operation of the Registrant’s disclosure controls and procedures. Based on such evaluation, the Registrant’s principal executive officer and principal financial officer concluded that the Registrant’s disclosure controls and procedures are effective.

(b) Changes in Internal Controls. There have been no changes in the Registrant’s internal control over financial reporting that occurred during the period covered by this report that has materially affected, or is reasonably likely to materially affect the internal control over financial reporting.

Item 12.  Disclosure of Securities Lending Activities for Closed-End Management Investment Company.                N/A

Item 13.  Exhibits.

(a)  (1) Code of Ethics

(a) (2) Certifications pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 of Matthew T. Hinkle, Chief Executive Officer – Finance and Administration, and Robert G. Kubilis, Chief Financial Officer and Chief Accounting Officer

(b) Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 of Matthew T. Hinkle, Chief Executive Officer – Finance and Administration, and Robert G. Kubilis, Chief Financial Officer and Chief Accounting Officer

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

FRANKLIN ALTERATIVE STRATEGIES FUNDS

By  /s/ Matthew T. Hinkle

	Matthew T. Hinkle Chief Executive Officer –   Finance and Administration
Date	January 24, 2019

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

By  /s/ Matthew T. Hinkle

	Matthew T. Hinkle Chief Executive Officer –   Finance and Administration
Date	January 24, 2019

By  /s/ Robert G. Kubilis

	Robert G. Kubilis Chief Financial Officer and   Chief Accounting Officer
Date	January 24, 2019

EX-99.CODE

Exhibit 12(a)(1)

CODE OF ETHICS FOR PRINCIPAL EXECUTIVES & SENIOR FINANCIAL OFFICERS

PROCEDURES        Revised December 18, 2009

FRANKLIN TEMPLETON FUNDS

CODE OF ETHICS FOR PRINCIPAL EXECUTIVE AND

SENIOR FINANCIAL OFFICERS

I. Covered Officers and Purpose of the Code

This code of ethics (the “Code”) applies to the Principal Executive Officers, Principal Financial Officer and Principal Accounting Officer (the “Covered Officers,” each of whom is set forth in Exhibit A) of each investment company advised by a Franklin Resources subsidiary and that is registered with the United States Securities & Exchange Commission (“SEC”) (collectively, “FT Funds”) for the purpose of promoting:

^○  Honest and ethical conduct, including the ethical resolution of actual or apparent conflicts of interest between personal and professional relationships;

^○  Full, fair, accurate, timely and understandable disclosure in reports and documents that a registrant files with, or submits to, the SEC and in other public communications made by or on behalf of the FT Funds;

^○  Compliance with applicable laws and governmental rules and regulations;

^○  The prompt internal reporting of violations of the Code to an appropriate person or persons identified in the Code; and

^○  Accountability for adherence to the Code.

Each Covered Officer will be expected to adhere to a high standard of business ethics and must be sensitive to situations that may give rise to actual as well as apparent conflicts of interest.

II. Other Policies and Procedures

This Code shall be the sole code of ethics adopted by the Funds for purposes of Section 406 of the Sarbanes-Oxley Act and the rules and forms applicable to registered investment companies thereunder.

Franklin Resources, Inc. has separately adopted the CODE OF ETHICS AND BUSINESS CONDUCT (“Business Conduct”), which is applicable to all officers, directors and employees of Franklin Resources, Inc., including Covered Officers. It summarizes the values, principles and business practices that guide the employee’s business conduct and also provides a set of basic principles to guide officers, directors and employees regarding the minimum ethical requirements expected of them. It supplements the values, principles and business conduct identified in the Code and other existing employee policies.

Additionally, the Franklin Templeton Funds have separately adopted the CODE OF ETHICS AND POLICY STATEMENT ON INSIDER TRADING governing personal securities trading and other related matters. The Code for Insider Trading provides for separate requirements that apply to the Covered Officers and others, and therefore is not part of this Code.

Insofar as other policies or procedures of Franklin Resources, Inc., the Funds, the Funds’ adviser, principal underwriter, or other service providers govern or purport to govern the behavior or activities of the Covered Officers who are subject to this Code, they are superceded by this Code to the extent that they overlap or conflict with the provisions of this Code. Please review these other documents or consult with the Legal Department if have questions regarding the applicability of these policies to you.

III. Covered Officers Should Handle Ethically Actual and Apparent Conflicts of Interest

OVERVIEW. A “conflict of interest” occurs when a Covered Officer’s private interest interferes with the interests of, or his or her service to, the FT Funds. For example, a conflict of interest would arise if a Covered Officer, or a member of his family, receives improper personal benefits as a result of apposition with the FT Funds.

Certain conflicts of interest arise out of the relationships between Covered Officers and the FT Funds and already are subject to conflict of interest provisions in the Investment Company Act of 1940 (“Investment Company Act”) and the Investment Advisers Act of 1940 (“Investment Advisers Act”). For example, Covered Officers may not individually engage in certain transactions (such as the purchase or sale of securities or other property) with the FT Funds because of their status as “affiliated persons” of the FT Funds. The FT Funds’ and the investment advisers’ compliance programs and procedures are designed to prevent, or identify and correct, violations of these provisions. This Code does not, and is not intended to, repeat or replace these programs and procedures, and such conflicts fall outside of the parameters of this Code.

Although typically not presenting an opportunity for improper personal benefit, conflicts arise from, or as a result of, the contractual relationship between the FT Funds, the investment advisers and the fund administrator of which the Covered Officers are also officers or employees. As a result, this Code recognizes that the Covered Officers will, in the normal course of their duties (whether formally for the FT Funds, for the adviser, the administrator, or for all three), be involved in establishing policies and implementing decisions that will have different effects on the adviser, administrator and the FT Funds. The participation of the Covered Officers in such activities is inherent in the contractual relationship between the FT Funds, the adviser, and the administrator and is consistent with the performance by the Covered Officers of their duties as officers of the FT Funds. Thus, if performed in conformity with the provisions of the Investment Company Act and the Investment Advisers Act, such activities will be deemed to have been handled ethically. In addition, it is recognized by the FT Funds’ Boards of Directors (“Boards”) that the Covered Officers may also be officers or employees of one or more other investment companies covered by this or other codes.

Other conflicts of interest are covered by the Code, even if such conflicts of interest are not subject to provisions in the Investment Company Act and the Investment Advisers Act. The following list provides examples of conflicts of interest under the Code, but Covered Officers should keep in mind that these examples are not exhaustive. The overarching principle is that the personal interest of a Covered Officer should not be placed improperly before the interest of the FT Funds.

Each Covered Officer must:

^○  Not use his or her personal influence or personal relationships improperly to influence investment decisions orfinancial reporting by the FT Funds whereby the Covered Officer would benefit personally to the detriment of the FT Funds;

^○  Not cause the FT Funds to take action, or fail to take action, for the individual personal benefit of the Covered Officer rather than the benefit the FT Funds;

^○  Not retaliate against any other Covered Officer or any employee of the FT Funds or their affiliated persons for reports of potential violations that are made in good faith;

^○  Report at least annually the following affiliations or other relationships:/1

^○  all directorships for public companies and all companies that are required to file reports with the SEC;

^○  any direct or indirect business relationship with any independent directors of the FT Funds;

^○  any direct or indirect business relationship with any independent public accounting firm (which are not related to the routine issues related to the firm’s service as the Covered Persons accountant); and

^○  any direct or indirect interest in any transaction with any FT Fund that will benefit the officer (not including benefits derived from the advisory, sub-advisory, distribution or service agreements with affiliates of Franklin Resources).

These reports will be reviewed by the Legal Department for compliance with the Code.

There are some conflict of interest situations that should always be approved in writing by Franklin Resources General Counsel or Deputy General Counsel, if material. Examples of these include/2:

^○  Service as a director on the board of any public or private Company;

^○  The receipt of any gifts in excess of $100 from any person, from any corporation or association

^○  The receipt of any entertainment from any Company with which the FT Funds has current or prospective business dealings unless such entertainment is business related, reasonable in cost, appropriate as to time and place, and not so frequent as to raise any question of impropriety. Notwithstanding the foregoing, the Covered Officers must obtain prior approval from the Franklin Resources General Counsel for any entertainment with a value in excess of $1000.

^○  Any ownership interest in, or any consulting or employment relationship with, any of the FT Fund’s service providers, other than an investment adviser, principal underwriter, administrator or any affiliated person thereof;

^○  A direct or indirect financial interest in commissions, transaction charges or spreads paid by the FT Funds for effecting portfolio transactions or for selling or redeeming shares other than an interest arising from the Covered Officer’s employment, such as compensation or equity ownership.

Franklin Resources General Counsel or Deputy General Counsel will provide a report to the FT Funds Audit Committee of any approvals granted at the next regularly scheduled meeting.

IV. Disclosure and Compliance

^○  Each Covered Officer should familiarize himself with the disclosure requirements generally applicable to the FT Funds;

^○  Each Covered Officer should not knowingly misrepresent, or cause others to misrepresent, facts about the FT Funds to others, whether within or outside the FT Funds, including to the FT Funds’ directors and auditors, and to governmental regulators and self-regulatory organizations;

^○  Each Covered Officer should, to the extent appropriate within his or her area of responsibility, consult with other officers and employees of the FT Funds, the FT Fund’s adviser and the administrator with the goal of promoting full, fair, accurate, timely and understandable disclosure in the reports and documents the FT Funds file with, or submit to, the SEC and in other public communications made by the FT Funds; and

^○  It is the responsibility of each Covered Officer to promote compliance with the standards and restrictions imposed by applicable laws, rules and regulations.

V. Reporting and Accountability

Each Covered Officer must:

^○  Upon becoming a covered officer affirm in writing to the Board that he or she has received, read, and understands the Code (see Exhibit B);

^○  Annually thereafter affirm to the Board that he has complied with the requirements of the Code; and

^○  Notify Franklin Resources’ General Counsel or Deputy General Counsel promptly if he or she knows of any violation of this Code. Failure to do so is itself is a violation of this Code.

  Franklin Resources’ General Counsel and Deputy General Counsel are responsible for applying this Code to specific situations in which questions are presented under it and have the authority to interpret this Code in any particular situation./3 However, the Independent Directors of the respective FT Funds will consider any approvals or waivers/4 sought by any Chief Executive Officers of the Funds.

  The FT Funds will follow these procedures in investigating and enforcing this Code:

^○  Franklin Resources General Counsel or Deputy General Counsel will take all appropriate action to investigate any potential violations reported to the Legal Department;

^○  If, after such investigation, the General Counsel or Deputy General Counsel believes that no violation has occurred, The General Counsel is not required to take any further action;

^○  Any matter that the General Counsel or Deputy General Counsel believes is a violation will be reported to the Independent Directors of the appropriate FT Fund;

^○  If the Independent Directors concur that a violation has occurred, it will inform and make a recommendation to the Board of the appropriate FT Fund or Funds, which will consider appropriate action, which may include review of, and appropriate modifications to, applicable policies and procedures; notification to appropriate personnel of the investment adviser or its board; or a recommendation to dismiss the Covered Officer;

^○  The Independent Directors will be responsible for granting waivers, as appropriate; and

^○  Any changes to or waivers of this Code will, to the extent required, are disclosed as provided by SEC rules./5

VI. Other Policies and Procedures

This Code shall be the sole code of ethics adopted by the FT Funds for purposes of Section 406 of the Sarbanes-Oxley Act and the rules and forms applicable to registered investment companies thereunder. Insofar as other policies or procedures of the FT Funds, the FT Funds’ advisers, principal underwriter, or other service providers govern or purport to govern the behavior or activities of the Covered Officers who are subject to this Code, they are superseded by this Code to the extent that they overlap or conflict with the provisions of this Code. The FT Code of Ethics and Policy Statement On Insider Trading, adopted by the FT Funds, FT investment advisers and FT Fund’s principal underwriter pursuant to Rule 17j-1 under the Investment Company Act, the Code of Ethics and Business Conduct and more detailed policies and procedures set forth in FT’s Employee Handbook are separate requirements applying to the Covered Officers and others, and are not part of this Code.

VII. Amendments

Any amendments to this Code, other than amendments to Exhibit A, must be approved or ratified by a majority vote of the FT Funds’ Board including a majority of independent directors.

VIII. Confidentiality

All reports and records prepared or maintained pursuant to this Code will be considered confidential and shall be maintained and protected accordingly. Except as otherwise required by law or this Code, such matters shall not be disclosed to anyone other than the FT Funds’ Board and their counsel.

IX. Internal Use

The Code is intended solely for the internal use by the FT Funds and does not constitute an admission, by or on behalf of any FT Funds, as to any fact, circumstance, or legal conclusion.

X. Disclosure on Form N-CSR

Item 2 of Form N-CSR requires a registered management investment company to disclose annually whether, as of the end of the period covered by the report, it has adopted a code of ethics that applies to the registrant’s principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, regardless of whether these officers are employed by the registrant or a third party. If the registrant has not adopted such a code of ethics, it must explain why it has not done so.

The registrant must also: (1) file with the SEC a copy of the code as an exhibit to its annual report; (2) post the text of the code on its Internet website and disclose, in its most recent report on Form N-CSR, its Internet address and the fact that it has posted the code on its Internet website; or (3) undertake in its most recent report on Form N-CSR to provide to any person without charge, upon request, a copy of the code and explain the manner in which such request may be made. Disclosure is also required of amendments to, or waivers (including implicit waivers) from, a provision of the code in the registrant’s annual report on Form N-CSR or on its website. If the registrant intends to satisfy the requirement to disclose amendments and waivers by posting such information on its website, it will be required to disclose its Internet address and this intention.

The Legal Department shall be responsible for ensuring that:

^○  a copy of the Code is filed with the SEC as an exhibit to each Fund’s annual report; and

^○  any amendments to, or waivers (including implicit waivers) from, a provision of the Code is disclosed in the registrant’s annual report on Form N-CSR.

In the event that the foregoing disclosure is omitted or is determined to be incorrect, the Legal Department shall promptly file such information with the SEC as an amendment to Form N-CSR.

In such an event, the Fund Chief Compliance Officer shall review the Code and propose such changes to the Code as are necessary or appropriate to prevent reoccurrences.

EXHIBIT A

Persons Covered by the Franklin Templeton Funds

Code of Ethics

December 2013

FRANKLIN GROUP OF FUNDS
Edward B. Jamieson	President and Chief Executive Officer – Investment Management
Rupert H. Johnson, Jr.	President and Chief Executive Officer – Investment Management
William J. Lippman	President and Chief Executive Officer – Investment Management
Christopher Molumphy	President and Chief Executive Officer – Investment Management
Laura Fergerson	Chief Executive Officer – Finance and Administration
Gaston R. Gardey	Chief Financial Officer and Chief Accounting Officer
FRANKLIN MUTUAL SERIES FUNDS
Peter Langerman	Chief Executive Officer-Investment Management
Laura Fergerson	Chief Executive Officer – Finance and Administration
Robert G. Kubilis	Chief Financial Officer and Chief Accounting Officer
FRANKLIN ALTERNATIVE STRTEGIES FUNDS
William Yun	Chief Executive Officer-Investment Management
Laura Fergerson	Chief Executive Officer – Finance and Administration
Robert G. Kubilis	Chief Financial Officer and Chief Accounting Officer
TEMPLETON GROUP OF FUNDS
Mark Mobius	President and Chief Executive Officer – Investment Management
Christopher J. Molumphy	President and Chief Executive Officer – Investment Management
Norman Boersma	President and Chief Executive Officer – Investment Management
Donald F. Reed	President and Chief Executive Officer – Investment Management
Laura Fergerson	Chief Executive Officer – Finance and Administration
Mark H. Otani	Chief Financial Officer and Chief Accounting Officer

EXHIBIT B

ACKNOWLEDGMENT FORM

DECEMBER

FRANKLIN TEMPLETON FUNDS CODE OF ETHICS

FOR PRINCIPAL EXECUTIVE AND SENIOR FINANCIAL OFFICERS

INSTRUCTIONS:

1. Complete all sections of this form.

2. Print the completed form, sign, and date.

3. Submit completed form to FT’s General Counsel c/o Code of Ethics Administration within 10 days of becoming a Covered Officer and by February 15th of each subsequent year.

INTER-OFFICE MAIL:	Code of Ethics Administration, Global Compliance SM-920/2
Fax:	(650) 312-5646
E-MAIL:	Preclear-Code of Ethics (internal address); lpreclear@frk.com (external address)

COVERED OFFICER’S NAME:

TITLE:

DEPARTMENT:

LOCATION:

CERTIFICATION FOR YEAR ENDING:

TO: Franklin Resources General Counsel, Legal Department

I acknowledge receiving, reading and understanding the Franklin Templeton Fund’s Code of Ethics for Principal Executive Officers and Senior Financial Officers (the “Code”). I will comply fully with all provisions of the Code to the extent they apply to me during the period of my employment. I further understand and acknowledge that any violation of the Code may subject me to disciplinary action, including termination of employment.

Signature Date signed

1. Reporting of these affiliations or other relationships shall be made by completing the annual Directors and Officers Questionnaire and returning the questionnaire to Franklin Resources Inc, General Counsel or Deputy General Counsel.

2. Any activity or relationship that would present a conflict for a Covered Officer may also present a conflict for the Covered Officer if a member of the Covered Officer’s immediate family engages in such an activity or has such a relationship. The Cover Person should also obtain written approval by FT’s General Counsel in such situations.

3. Franklin Resources General Counsel and Deputy General Counsel are authorized to consult, as appropriate, with members of the Audit Committee, counsel to the FT Funds and counsel to the Independent Directors, and are encouraged to do so.

4. Item 2 of Form N-CSR defines “waiver” as “the approval by the registrant of a material departure from a provision of the code of ethics” and “implicit waiver,” which must also be disclosed, as “the registrant’s failure to take action within a reasonable period of time regarding a material departure from a provision of the code of ethics that has been made known to an executive officer” of the registrant. See Part X.

5. See Part X.

EX-99.CERT

Exhibit 13(a)(2)

I, Matthew T. Hinkle, certify that:

1. I have reviewed this report on Form N-CSR of Franklin Alternative Strategies Funds;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize, and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

1/24/2019

S\MATTHEW T. HINKLE

Matthew T. Hinkle

Chief Executive Officer - Finance and Administration

Exhibit 13(a)(2)

I, Robert G. Kubilis, certify that:

1. I have reviewed this report on Form N-CSR of Franklin Alternative Strategies Funds;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize, and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

1/24/2019

S\ROBERT G. KUBILIS

Robert G. Kubilis

Chief Financial Officer and Chief Accounting Officer

EX-99.906CERT

Exhibit 13(b)

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO SECTION 906

OF THE SARBANES-OXLEY ACT OF 2002

I, Matthew T. Hinkle, Chief Executive Officer of the Franklin Alternative Strategies Funds (the “Registrant”), certify, pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:

1. The periodic report on Form N-CSR of the Registrant for the period ended 11/30/2018 (the “Form N-CSR”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. The information contained in the Form N-CSR fairly presents, in all material respects, the financial condition and results of operations of the Registrant.

Dated: 1/24/2019

S\MATTHEW T. HINKLE

Matthew T. Hinkle

Chief Executive Officer - Finance and Administration

Exhibit 13(b)

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO SECTION 906

OF THE SARBANES-OXLEY ACT OF 2002

I, Robert G. Kubilis, Chief Financial Officer of the Franklin Alternative Strategies Funds (the “Registrant”), certify, pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:

1. The periodic report on Form N-CSR of the Registrant for the period ended 11/30/2018 (the “Form N-CSR”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. The information contained in the Form N-CSR fairly presents, in all material respects, the financial condition and results of operations of the Registrant.

Dated: 1/24/2019

S\ROBERT G. KUBILIS

Robert G. Kubilis

Chief Financial Officer and Chief Accounting Officer