Franklin K2 Alternative Strategies Fund (FABZX) N-CSRS Certified semi-annual shareholder report (management investment company)

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: 11/30/17

Item 1. Reports to Stockholders.

  Semiannual Report and Shareholder Letter November 30, 2017

Franklin Templeton Investments

Gain From Our Perspective^®

At Franklin Templeton Investments, we’re dedicated to one goal: delivering exceptional asset management for our clients. By bringing together multiple, world-class investment teams in a single firm, we’re able to offer specialized expertise across styles and asset classes, all supported by the strength and resources of one of the world’s largest asset managers. This has helped us to become a trusted partner to individual and institutional investors across the globe.

Dear Fellow Shareholder:

During the six months ended November 30, 2017, the global economy generally expanded amid improved commodity prices, generally upbeat economic data, encouraging corporate earnings and the European Central Bank’s (ECB’s) extension of its monetary easing time frame. The ECB kept its benchmark interest rate unchanged, while the US Federal Reserve (Fed) raised its target range for the federal funds rate 0.25% to 1.00%–1.25% amid signs of a growing US economy. In this environment, global developed stock markets, as measured by the MSCI World Index, posted a +9.81 total return for the period.¹ Global emerging market stocks, as measured by the MSCI Emerging Markets Index, generated a +13.27% total return.¹ Global government bonds, as measured by the Citigroup World Government Bond Index, posted a +2.57% total return.¹

A couple of weeks after the end of the reporting period, the Fed raised its target range a quarter point to 1.25%–1.50% amid ongoing labor market strength and rising economic activity in the US. The Fed’s inflation outlook remained essentially the same.

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 made 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.

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, 2017, unless otherwise indicated. The information is not a complete analysis of every aspect of any market, country, industry, security or fund. Statements of fact are from sources considered reliable.

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

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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	71
Notes to Consolidated Financial Statements	75
Shareholder Information	91

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, 2017.

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 relative value, long short equity, global macro and event driven. 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); and 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 delivered a +2.15% cumulative total return for the six months under review. For comparison, the Fund’s new primary and old secondary benchmark, the HFRX Global Hedge Fund Index, which is designed to be representative of the overall composition of the hedge fund universe, generated a +2.67% total return.¹ As the investment manager believes the composition of the HFRX Global Hedge Fund Index more accurately reflects the Fund’s holdings, it has replaced the ICE BofA Merrill Lynch 3-Month US Treasury Bill Index as the Fund’s primary benchmark. Also for comparison, the Fund’s new secondary and old primary benchmark, the ICE BofA Merrill Lynch 3-Month US Treasury Bill Index, which tracks the performance of short-term US government securities with a remaining term to final maturity of

less than three months, posted a +0.52% 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 generally expanded during the six-month period under review. In this environment, global developed and emerging market stocks, as measured by the MSCI All Country World Index, generated a +10.19% total return.² Global markets were aided by price gains in oil and other commodities, generally upbeat economic data across regions, the European Central Bank’s (ECB’s) extension of its monetary easing program, and encouraging corporate earnings reports. The US Senate’s approval of a budget plan in October and its subsequent vote near period-end to begin debate on a tax bill, which raised expectations for reforms, also aided global markets.

However, global markets reflected investor concerns about the terms of the UK’s exit from the European Union (also known as “Brexit”), geopolitical tensions in the Korean peninsula and other regions, comments from key central bankers around the world about potentially raising interest rates, and uncertainty about the US government’s ability to implement a tax reform plan.

The US economy strengthened in 2017’s third quarter compared to the second quarter largely due to growth in consumer spending across goods and services, business and inventory investment, as well as net exports due to lower imports. The unemployment rate declined from 4.3% in May 2017, as reported at the beginning of the six-month period, to 4.1% at period-end.³ Annual inflation, as measured by the Consumer Price Index, increased from 1.9% in May 2017, as reported at

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: US 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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the beginning of the period, to 2.2% at period-end.³ At its June meeting, the US Federal Reserve (Fed) raised its target range for the federal funds rate 0.25% to 1.00%–1.25%, amid signs of a growing US economy, strengthening labor market and improving business spending. At its subsequent meetings, the Fed kept its target range unchanged. However, minutes of its October 31–November 1 meeting indicated that the Fed continued to maintain a positive outlook for the US economy and signaled the possibility of a third rate hike in 2017, though concerns about the ongoing softness in inflation remained.

In Europe, the UK’s economic growth accelerated in 2017’s third quarter over the previous quarter, largely due to growth in the services sector. In November, the Bank of England raised its key policy rate 0.25%, its first increase in a decade. The euro-zone’s growth moderated in 2017’s third quarter over the previous quarter. The bloc’s annual inflation rate, while low, ended higher than it was at the start of the period. The ECB kept its benchmark interest rate unchanged during the period. However, at its October meeting, the ECB extended the time frame for its massive bond-buying program from December 2017 to at least September 2018, while reducing the amount of monthly bond purchases in half beginning in January 2018.

In Asia, Japan’s quarterly gross domestic product (GDP) grew for the seventh consecutive quarter, although third-quarter 2017 growth was lower than the previous quarter. At its October 2017 meeting, the Bank of Japan left its benchmark interest rate unchanged and continued its monetary stimulus measures, while reducing its fiscal 2017 inflation forecast.

In emerging markets, Brazil’s GDP grew for the third consecutive quarter, although third-quarter growth slowed from the previous quarter. The country’s central bank cut its benchmark interest rate several times during the period to spur economic growth. Russia’s GDP grew in 2017’s third quarter compared to the prior-year period, amid the Bank of Russia’s continued policy support. China’s GDP grew faster in 2017’s third quarter compared to the prior-year period. The People’s Bank of China left its benchmark interest rate unchanged during the period. Overall, emerging market stocks, as measured by the MSCI Emerging Markets Index, rose substantially during the period.

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. The allocations to specific subadvisors may change from time to time based upon our assessment of their correlations to various markets and to each other, their risk profiles and 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 ETFs). 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.

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 nonhedging (investment) purposes. Such derivative investments may include futures contracts, swaps, options and currency forward contracts. 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 US 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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FRANKLIN K2 ALTERNATIVE STRATEGIES FUND

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

Four underlying strategies benefited the Fund’s overall performance for the six-month review period. Long short equity led contributions to performance among strategies, followed by relative value, event driven and global macro. A conditional risk overlay (CRO) strategy, which helped the Fund maintain its conservative positioning, detracted from relative returns as global equity markets demonstrated continued strength. The CRO strategy was not 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 Company, Impala Asset Management, Jennison Associates, Portland Hill Asset Management Limited and Wellington Management Company. All subadvisors delivered positive performance for the review period. On a sector level, the top performance drivers for the strategy were information technology (IT), materials and industrials. In contrast, equity indexes, currencies and telecommunication services hindered returns.

The Fund’s relative value strategy subadvisors were Basso Capital Management, Chatham Asset Management, Lazard Asset Management and Loomis Sayles & Company. Three subadvisors contributed positively to performance for the period,

Strategy Allocation*

Based on Total Investments as of 11/30/17

	Strategy Total		Long Positions		Short Positions
Relative Value		35.7%		57.2%		-21.5%
Long Short Equity		34.4%		54.6%		-20.2%
Event Driven		16.5%		19.7%		-3.2%
Global Macro		13.4%		15.7%		-2.3%

*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

11/30/17

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

Basso Capital Management, L.P.

Chatham Asset Management, LLC

Lazard Asset Management, LLC

Loomis Sayles & Company, L.P.

Event Driven

Halcyon Arbitrage IC Management LP

P. Schoenfeld Asset Management L.P.

Global Macro

Emso Asset Management Limited

Graham Capital Management, L.P.

with Basso Capital Management the lone exception. In terms of aggregate sector performance, the top contributors were consumer discretionary, health care and IT. Conversely, exposure to equity index hedges and industrials detracted.

The Fund’s event driven strategy subadvisors were Halcyon Arbitrage IC Management and P. Schoenfeld Asset Management. Both subadvisors enjoyed positive results for the review period. In aggregate, the top performance drivers for the strategy by asset class were equities and credit. Currencies modestly detracted from performance over the period. In terms of sector gains, utilities, industrials and IT contributed the most to returns, while consumer discretionary and equity index hedges curbed results.

Emso Asset Management Limited and Graham Capital Management represented our global macro exposure, and both subadvisors delivered positive performance for the review period. Long exposure to equity and credit indexes benefited returns. In contrast, currencies and, to a small extent, interest-rate derivatives weighed on results. On a sector/industry level,

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FRANKLIN K2 ALTERNATIVE STRATEGIES FUND

the financials and energy sectors benefited returns, while the energy and environment industry had a small negative impact.

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

	David C. Saunders
	Brooks Ritchey
	Robert Christian
	Portfolio Management Team

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

David C. Saunders is the founding managing director of K2 Advisors, which he co-founded in 1994. He has worked at Tucker Anthony & R.L. Day as an equity trader; First Boston Corp. as vice president on the equity block trading desk; WaterStreet Capital, a hedge fund, as head trader; Tiger Management, as head trader; WorldSec Securities as president and ABN Amro Inc. as a senior managing director. Mr. Saunders graduated from the University of Maryland, College Park, with a B.S. degree in Business.

Brooks Ritchey is a senior managing director and head of portfolio construction for K2 Advisors. He is also a senior vice president and director of investment solutions for the Franklin Templeton Multi-Asset Solutions division. Since 1987 Mr. Ritchey has managed multi-asset mutual fund and hedge fund portfolios during his employment with organizations including Steinhardt Partners, Citibank, Finch Asset Management, Paribas, AIG and ING. Mr. Ritchey joined K2 Advisors in 2005. Mr. Ritchey graduated from Franklin & Marshall College in 1982.

Robert Christian is a senior managing director and head of investment research for K2 Advisors, which he joined in 2010. Mr. Christian worked at Graham Capital Management LP from 1998 to 2003 as a portfolio manager and researcher of quantitative-based trading strategies. At Julius Baer Investment Management from 2003 to 2005, he was the head of macro strategies. From 2005 to 2010, he worked at FRM Americas LLC where he was the global head of directional trading strategies and portfolio advisor to numerous funds. Mr. Christian holds a B.A.S. in biology and economics from Stanford University (1985) and an M.B.A. in finance from Leonard N. Stern School of Business –New York University (1990).

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FRANKLIN K2 ALTERNATIVE STRATEGIES FUND

Performance Summary as of November 30, 2017

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 11/30/17¹

Cumulative total return excludes sales charges. Average annual total return includes maximum sales charges. Sales charges will vary depending on the size of the investment and the class of share purchased. The maximum is 5.75% and the minimum is 0%. Class A: 5.75% maximum initial sales charge; Advisor Class: no sales charges. For other share classes, visit franklintempleton.com.

Share Class	Cumulative   Total Return2	Average Annual  Total Return3
A
6-Month	+2.15%	-3.72%
1-Year	+6.34%	+0.19%
3-Year	+7.08%	+0.30%
Since Inception (10/11/13)	+17.39%	+2.48%
Advisor
6-Month	+2.33%	+2.33%
1-Year	+6.65%	+6.65%
3-Year	+7.99%	+2.60%
Since Inception (10/11/13)	+18.72%	+4.23%

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 Expenses⁴

Share Class	With Waiver		Without Waiver
A		2.76%		3.01%
Advisor		2.51%		2.76%

Each class of shares is available to certain eligible investors and has different annual fees and expenses, as described in the prospectus.

All investments involve risks, including possible loss of principal. The 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 9/30/18 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. 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 K2 ALTERNATIVE STRATEGIES 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 × $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 6/1/17	Ending Account     Value 11/30/17	Expenses Paid During Period     6/1/17–11/30/171,2	Ending Account Value 11/30/17	Expenses Paid During Period 6/1/17–11/30/171,2	Net Annualized Expense Ratio2
A	$1,000	$1,022.40	$13.18	$1,012.03	$13.11	2.60%
C	$1,000	$1,018.20	$16.95	$1,008.27	$16.87	3.35%
R	$1,000	$1,020.60	$14.44	$1,010.78	$14.37	2.85%
R6	$1,000	$1,024.20	$11.47	$1,013.74	$11.41	2.26%
Advisor	$1,000	$1,023.30	$11.92	$1,013.29	$11.86	2.35%

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 Alternative Strategies Fund

	Six Months Ended November 30, 2017 (unaudited)		Year Ended May 31,
			2017			2016			2015			2014a
Class A
Per share operating performance
(for a share outstanding throughout the period)
Net asset value, beginning of period		$11.14		$10.55			$11.16			$10.64			$10.00
Income from investment operationsb:
Net investment income (loss)c		0.01		0.03			(0.05	)		(0.11	)		(0.02	)
Net realized and unrealized gains (losses)		0.24		0.61			(0.38	)		0.70			0.70
Total from investment operations		0.25		0.64			(0.43	)		0.59			0.68
Less distributions from:
Net investment income		—		(0.05	)		(0.14	)		(0.07	)		(0.04	)
Net realized gains		—		—			(0.04	)		—			—
Total distributions		—		(0.05	)		(0.18	)		(0.07	)		(0.04	)
Net asset value, end of period		$11.39		$11.14			$10.55			$11.16			$10.64
Total returnd		2.24%		6.07%			(3.89)%			5.53%			6.82%
Ratios to average net assetse
Expenses before waiver, payments by affiliates and expense reductionf		2.86%		3.07%			3.22%			3.40%			3.33%
Expenses net of waiver, payments by affiliates and expense reductionf		2.60%		2.73%			2.88%	g		2.99%	g		2.83%
Expenses incurred in connection with securities sold short		0.40%		0.53%			0.67%			0.65%			0.56%
Net investment income (loss)		0.06%		0.10%			(0.44)%			(0.95)%			(0.35)%
Supplemental data
Net assets, end of period (000’s)		$118,839		$119,385			$177,412			$148,991			$96,889
Portfolio turnover rate		104.19%		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 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(g).

^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

CONSOLIDATED FINANCIAL HIGHLIGHTS

Franklin K2 Alternative Strategies Fund (continued)

	Six Months Ended November 30, 2017 (unaudited)			Year Ended May 31,
				2017			2016			2015			2014a
Class C
Per share operating performance
(for a share outstanding throughout the period)
Net asset value, beginning of period		$11.00			$10.45			$11.09			$10.60			$10.00
Income from investment operationsb:
Net investment income (loss)c		(0.04	)		(0.04	)		(0.12	)		(0.17	)		(0.08	)
Net realized and unrealized gains (losses)		0.24			0.59			(0.39	)		0.69			0.72
Total from investment operations		0.20			0.55			(0.51	)		0.52			0.64
Less distributions from:
Net investment income		—			—			(0.09	)		(0.03	)		(0.04	)
Net realized gains		—			—			(0.04	)		—			—
Total distributions		—			—			(0.13	)		(0.03	)		(0.04	)
Net asset value, end of period		$11.20			$11.00			$10.45			$11.09			$10.60
Total returnd		1.82%			5.26%			(4.62)%			4.87%			6.42%
Ratios to average net assetse
Expenses before waiver, payments by affiliates and expense reductionf		3.61%			3.79%			3.96%			4.04%			4.03%
Expenses net of waiver, payments by affiliates and expense reductionf		3.35%			3.45%			3.62%	g		3.63%	g		3.53%
Expenses incurred in connection with securities sold short		0.40%			0.53%			0.67%			0.65%			0.56%
Net investment income (loss)		(0.69)%			(0.62)%			(1.18)%			(1.59)%			(1.05)%
Supplemental data
Net assets, end of period (000’s)		$52,524			$55,496			$71,154			$37,937			$16,618
Portfolio turnover rate		104.19%			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 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(g).

^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

CONSOLIDATED FINANCIAL HIGHLIGHTS

Franklin K2 Alternative Strategies Fund (continued)

	Six Months Ended November 30, 2017 (unaudited)			Year Ended May 31,
				2017			2016			2015			2014a
Class R
Per share operating performance
(for a share outstanding throughout the period)
Net asset value, beginning of period		$11.17			$10.61			$11.15			$10.62			$10.00
Income from investment operationsb:
Net investment income (loss)c		(0.01	)		(0.25	)		(0.10	)		(0.16	)		(0.05	)
Net realized and unrealized gains (losses)		0.24			0.86			(0.40	)		0.73			0.71
Total from investment operations		0.23			0.61			(0.50	)		0.57			0.66
Less distributions from:
Net investment income		—			(0.05	)		—			(0.04	)		(0.04	)
Net realized gains		—			—			(0.04	)		—			—
Total distributions		—			(0.05	)		(0.04	)		(0.04	)		(0.04	)
Net asset value, end of period		$11.40			$11.17			$10.61			$11.15			$10.62
Total returnd		2.06%			5.79%			(4.51)%			5.39%			6.62%
Ratios to average net assetse
Expenses before waiver, payments by affiliates and expense reductionf		3.11%			3.32%			3.46%			3.57%			3.63%
Expenses net of waiver, payments by affiliates and expense reductionf		2.85%			2.98%			3.12%	g		3.16%	g		3.13%
Expenses incurred in connection with securities sold short		0.40%			0.53%			0.67%			0.65%			0.56%
Net investment income (loss)		(0.19)%			(0.15)%			(0.68)%			(1.12)%			(0.65)%
Supplemental data
Net assets, end of period (000’s)		$553			$597			$341			$9,173			$11,660
Portfolio turnover rate		104.19%			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 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(g).

^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

CONSOLIDATED FINANCIAL HIGHLIGHTS

Franklin K2 Alternative Strategies Fund (continued)

	Six Months Ended November 30, 2017 (unaudited)		Year Ended May 31,
			2017			2016			2015			2014a
Class R6
Per share operating performance
(for a share outstanding throughout the period)
Net asset value, beginning of period		$11.17		$10.59			$11.18			$10.66			$10.00
Income from investment operationsb:
Net investment income (loss)c		0.02		0.02			(0.01	)		(0.08	)		(0.01	)
Net realized and unrealized gains (losses)		0.25		0.65			(0.37	)		0.70			0.71
Total from investment operations		0.27		0.67			(0.38	)		0.62			0.70
Less distributions from:
Net investment income		—		(0.09	)		(0.17	)		(0.10	)		(0.04	)
Net realized gains		—		—			(0.04	)		—			—
Total distributions		—		(0.09	)		(0.21	)		(0.10	)		(0.04	)
Net asset value, end of period		$11.44		$11.17			$10.59			$11.18			$10.66
Total returnd		2.42%		6.40%			(3.45)%			5.80%			7.02%
Ratios to average net assetse
Expenses before waiver, payments by affiliates and expense reductionf		2.52%		2.73%			2.87%			2.98%			3.19%
Expenses net of waiver, payments by affiliates and expense reductionf		2.26%		2.39%			2.53%	g		2.60%	g		2.69%
Expenses incurred in connection with securities sold short		0.40%		0.53%			0.67%			0.65%			0.56%
Net investment income (loss)		0.40%		0.44%			(0.09)%			(0.56)%			(0.21)%
Supplemental data
Net assets, end of period (000’s)		$153,282		$265,247			$265,517			$239,754			$215,526
Portfolio turnover rate		104.19%		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 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(g).

^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

CONSOLIDATED FINANCIAL HIGHLIGHTS

Franklin K2 Alternative Strategies Fund (continued)

	Six Months Ended November 30, 2017 (unaudited)		Year Ended May 31,
			2017			2016			2015			2014a
Advisor Class
Per share operating performance
(for a share outstanding throughout the period)
Net asset value, beginning of period		$11.16		$10.58			$11.18			$10.65			$10.00
Income from investment operationsb:
Net investment income (loss)c		0.02		0.04			(0.02	)		(0.02	)		(0.02	)
Net realized and unrealized gains (losses)		0.24		0.62			(0.38	)		0.64			0.71
Total from investment operations		0.26		0.66			(0.40	)		0.62			0.69
Less distributions from:
Net investment income		—		(0.08	)		(0.16	)		(0.09	)		(0.04	)
Net realized gains		—		—			(0.04	)		—			—
Total distributions		—		(0.08	)		(0.20	)		(0.09	)		(0.04	)
Net asset value, end of period		$11.42		$11.16			$10.58			$11.18			$10.65
Total returnd		2.33%		6.29%			(3.58)%			5.88%			6.92%
Ratios to average net assetse
Expenses before waiver, payments by affiliates and expense reductionf		2.61%		2.82%			2.96%			3.07%			3.21%
Expenses net of waiver, payments by affiliates and expense reductionf		2.35%		2.48%			2.62%	g		2.66%	g		2.71%
Expenses incurred in connection with securities sold short		0.40%		0.53%			0.67%			0.65%			0.56%
Net investment income (loss)		0.31%		0.35%			(0.18)%			(0.62)%			(0.23)%
Supplemental data
Net assets, end of period (000’s)		$757,695		$674,828			$722,216			$329,139			$54,593
Portfolio turnover rate		104.19%		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 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(g).

^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

Consolidated Statement of Investments, November 30, 2017 (unaudited)

Franklin K2 Alternative Strategies Fund

	Country		Shares/ Warrants/ Rights		Value
Common Stocks and Other Equity Interests 39.8%
Aerospace & Defense 1.0%
Airbus SE		France		18,500	$	1,922,092
aArconic Inc.		United States		9,942		244,673
The Boeing Co.		United States		433		119,854
Heico Corp.		United States		14,343		1,296,034
Lockheed Martin Corp.		United States		5,220		1,665,806
Rockwell Collins Inc.		United States		35,641		4,715,661
aSpirit Aerosystems Holdings Inc., A		United States		6,799		572,816
United Technologies Corp.		United States		1,169		141,975
						10,678,911
Air Freight & Logistics 0.3%
aFedEx Corp.		United States		14,988		3,469,123
Airlines 0.2%
Copa Holdings SA, A		Panama		4,478		600,903
Delta Air Lines Inc.		United States		701		37,097
aSouthwest Airlines Co.		United States		15,232		924,125
						1,562,125
Auto Components 0.2%
bAdient PLC		United States		27,908		2,184,080
Delphi Automotive PLC		United States		476		49,823
						2,233,903
Automobiles 0.5%
General Motors Co.		United States		1,544		66,531
aHarley-Davidson Inc.		United States		27,227		1,366,795
bTesla Inc.		United States		4,097		1,265,359
Thor Industries Inc.		United States		16,713		2,566,281
						5,264,966
Banks 0.4%
Barclays PLC, ADR		United Kingdom		108,406		283,685
BB&T Corp.		United States		2,448		120,980
aCitigroup Inc.		United States		47,864		3,613,732
JPMorgan Chase & Co.		United States		2,656		277,605
The PNC Financial Services Group Inc.		United States		794		111,605
US Bancorp		United States		1,019		56,198
Wells Fargo & Co.		United States		1,772		100,065
						4,563,870
Beverages 0.6%
aBrown-Forman Corp., B		United States		4,854		290,269
aConstellation Brands Inc., A		United States		5,860		1,275,078
Davide Campari-Milano SpA		Italy		346,586		2,697,906
bMonster Beverage Corp.		United States		37,108		2,325,558
PepsiCo Inc.		United States		1,516		176,644
						6,765,455
Biotechnology 2.3%
Abbvie Inc.		United States		10,966		1,062,825
bAdvanced Accelerator Applications SA, ADR		France		8,355		679,679
bAeglea BioTherapeutics Inc.		United States		13,603		54,412
bAgios Pharmaceuticals Inc.		United States		2,812		173,079

franklintempleton.com Semiannual Report         15

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

CONSOLIDATED STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin K2 Alternative Strategies Fund (continued)

	Country		Shares/ Warrants/ Rights		Value
Common Stocks and Other Equity Interests (continued)
Biotechnology (continued)
b Aileron Therapeutics Inc.		United States		4,724	$	53,003
b Alexion Pharmaceuticals Inc.		United States		7,834		860,252
b Alkermes PLC		United States		6,938		362,788
b Amicus Therapeutics Inc.		United States		78,369		1,090,896
b Apellis Pharmaceuticals Inc.		United States		11,304		156,221
b Argenx SE, ADR		Netherlands		2,302		73,710
b Audentes Therapeutics Inc.		United States		15,945		460,173
b Avexis Inc.		United States		3,290		311,925
b BioCryst Pharmaceuticals Inc.		United States		50,502		256,550
a,b BioMarin Pharmaceutical Inc.		United States		34,242		2,937,964
b Bluebird Bio Inc.		United States		10,753		1,858,118
b Blueprint Medicines Corp.		United States		3,259		244,621
b Celgene Corp.		United States		12,027		1,212,682
b Clovis Oncology Inc.		United States		10,771		677,173
b Corvus Pharmaceuticals Inc.		United States		11,363		127,379
b DBV Technologies SA, ADR		France		14,670		335,063
b Eiger Biopharmaceuticals Inc.		United States		7,007		81,632
b Epizyme Inc.		United States		31,940		383,280
b Exact Sciences Corp.		United States		6,802		404,583
b Exelixis Inc.		United States		44,143		1,195,392
b Fibrogen Inc.		United States		5,307		252,082
b GlycoMimetics Inc.		United States		25,260		356,419
b Ignyta Inc.		United States		7,395		121,278
b Immunomedics Inc.		United States		31,335		340,298
a,b Incyte Corp.		United States		10,117		1,001,482
b InflaRx NV		Germany		3,763		80,077
b Juno Therapeutics Inc.		United States		12,875		703,232
b La Jolla Pharmaceutical Co.		United States		13,614		454,027
b Mirati Therapeutics Inc.		United States		3,541		60,728
b Natera Inc.		United States		32,709		318,259
b Neurocrine Biosciences Inc.		United States		6,995		502,871
b OvaScience Inc.		United States		29,043		43,274
b Ovid Therapeutics Inc.		United States		8,897		109,522
b ProQR Therapeutics NV		Netherlands		39,735		131,126
b Proteostasis Therapeutics Inc.		United States		32,451		84,048
b Prothena Corp. PLC		Ireland		8,540		397,025
b Regeneron Pharmaceuticals Inc.		United States		1,429		517,098
b Retrophin Inc.		United States		12,231		275,687
b Sage Therapeutics Inc.		United States		12,662		1,170,095
b Sarepta Therapeutics Inc.		United States		20,450		1,138,451
b Savara Inc.		United States		9,414		121,911
b Savara Inc., wts., 6/14/18		United States		68,920		34
b Spark Therapeutics Inc.		United States		5,349		391,707
b Syndax Pharmaceuticals Inc.		United States		14,152		123,972
b Tesaro Inc.		United States		5,890		498,294
b TG Therapeutics Inc.		United States		21,451		184,479
b Vertex Pharmaceuticals Inc.		United States		5,798		836,593
						25,267,469
Building Products 0.3%
a AO Smith Corp.		United States		6,238		395,614

16         Semiannual Report franklintempleton.com

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

CONSOLIDATED STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin K2 Alternative Strategies Fund (continued)

	Country		Shares/ Warrants/ Rights		Value
Common Stocks and Other Equity Interests (continued)
Building Products (continued)
a,b Builders FirstSource Inc.		United States		24,481	$	499,412
a Fortune Brands Home & Security Inc.		United States		32,073		2,194,435
						3,089,461
Capital Markets 0.2%
a Moody’s Corp.		United States		10,929		1,659,241
Chemicals 2.2%
b Axalta Coating Systems Ltd.		United States		18,173		575,357
CF Industries Holdings Inc.		United States		7,651		286,683
Croda International PLC		United Kingdom		14,287		825,614
a DowDuPont Inc.		United States		50,448		3,630,238
Huntsman Corp.		United States		1,544		49,346
a,b Ingevity Corp.		United States		35,829		2,851,630
a Monsanto Co.		United States		49,881		5,902,917
The Mosaic Co.		United States		29,891		726,052
a Olin Corp.		United States		33,037		1,177,439
Praxair Inc.		United States		8,505		1,309,090
a Sherwin-Williams Co.		United States		15,925		6,360,764
						23,695,130
Commercial Services & Supplies 0.2%
b Atento SA		Spain		147,001		1,425,910
Edenred		France		39,306		1,124,686
						2,550,596
Communications Equipment 0.2%
b Arista Networks Inc.		United States		747		174,141
b Ciena Corp.		United States		13,763		299,345
b Finisar Corp.		United States		8,098		162,041
b Infinera Corp.		United States		50,823		367,958
b NETGEAR Inc.		United States		7,346		378,319
a,b,c Nortel Networks Capital Corp., Contingent Distribution		Canada		324,000		24,300
a,b,c Nortel Networks Ltd., Contingent Distribution		Canada		384,000		28,800
b,c Nortel Networks Ltd., Contingent Distribution		Canada		1,199,000		92,922
b,c Nortel Networks Ltd., Contingent Distribution		Canada		3,448,000		258,600
b Oclaro Inc.		United States		16,447		117,103
b Quantenna Communications Inc.		United States		37,056		453,195
						2,356,724
Construction & Engineering 0.1%
Eiffage SA		France		9,246		1,014,555
Construction Materials 0.7%
Buzzi Unicem SpA		Italy		20,710		550,929
HeidelbergCement AG		Germany		28,928		3,077,146
a Martin Marietta Materials Inc.		United States		15,605		3,251,926
a,b Summit Materials Inc., A		United States		34,876		1,072,786
						7,952,787
Consumer Finance 0.2%
b,d iPayment Inc.		United States		4,383,614		2,410,988

franklintempleton.com Semiannual Report         17

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

CONSOLIDATED STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin K2 Alternative Strategies Fund (continued)

	Country		Shares/ Warrants/ Rights		Value
Common Stocks and Other Equity Interests (continued)
Containers & Packaging 0.5%
Ball Corp.		United States		141,007		$      5,627,589
WestRock Co.		United States		744		46,433
						5,674,022
Diversified Financial Services 0.2%
b Berkshire Hathaway Inc., B		United States		11,114		2,145,113
Diversified Telecommunication Services 0.6%
AT&T Inc.		United States		2,053		74,688
e CenturyLink Inc.		United States		4,864		70,966
b China Unicom Hong Kong Ltd., ADR		China		32,819		477,845
a,b General Communication Inc., A		United States		37,727		1,505,685
b ORBCOMM Inc.		United States		59,418		639,338
b,e Straight Path Communications Inc., B		United States		11,834		2,151,894
b,e Telecom Italia SpA		Italy		200,409		167,691
Telecom Italia SpA, RSP		Italy		1,523,333		1,031,680
Verizon Communications Inc.		United States		15,568		792,255
						6,912,042
Electric Utilities 0.0%†
American Electric Power Co. Inc.		United States		349		27,093
Exelon Corp.		United States		2,768		115,453
NextEra Energy Inc.		United States		815		128,803
						271,349
Electronic Equipment, Instruments & Components 0.5%
b Flex Ltd.		Singapore		108,787		1,965,781
b Itron Inc.		United States		17,882		1,152,495
Sunny Optical Technology Group Co. Ltd.		China		22,500		374,513
b Zebra Technologies Corp., A		United States		13,022		1,436,587
						4,929,376
Energy Equipment & Services 0.2%
b Songa Offshore		Norway		232,385		1,668,981
Food & Staples Retailing 0.2%
Costco Wholesale Corp.		United States		13,878		2,559,520
Food Products 0.2%
Chocoladefabriken Lindt & Spruengli AG		Switzerland		28		1,961,921
Mondelez International Inc.		United States		2,237		96,057
						2,057,978
Health Care Equipment & Supplies 1.1%
Abbott Laboratories		United States		9,235		520,577
b Align Technology Inc.		United States		1,567		408,799
b Boston Scientific Corp.		United States		31,684		832,655
CR Bard Inc.		United States		14,371		4,827,794
b DexCom Inc.		United States		13,836		808,437
b Edwards Lifesciences Corp.		United States		2,963		347,264
b Haemonetics Corp.		United States		7,695		444,771
b IDEXX Laboratories Inc.		United States		9,227		1,443,195
b iRhythm Technologies Inc.		United States		1,460		81,030
Medtronic PLC		United States		1,282		105,291

18         Semiannual Report franklintempleton.com

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

CONSOLIDATED STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin K2 Alternative Strategies Fund (continued)

	Country		Shares/ Warrants/ Rights		Value
Common Stocks and Other Equity Interests (continued)
Health Care Equipment & Supplies (continued)
b Nevro Corp.		United States		9,858	$	737,576
Smith & Nephew PLC		United Kingdom		72,763		1,289,095
Straumann Holding AG		Switzerland		170		126,495
						11,972,979
Health Care Providers & Services 1.1%
Aetna Inc.		United States		13,909		2,506,123
b Centene Corp.		United States		11,196		1,143,000
Cigna Corp.		United States		8,731		1,848,615
Humana Inc.		United States		8,148		2,125,487
b Teladoc Inc.		United States		4,700		174,370
a UnitedHealth Group Inc.		United States		17,159		3,915,169
						11,712,764
Health Care Technology 0.0%†
b Evolent Health Inc., A		United States		7,989		102,659
b Tabula Rasa HealthCare Inc.		United States		4,783		165,922
						268,581
Hotels, Restaurants & Leisure 0.7%
a Carnival Corp.		United States		34,173		2,243,116
a Domino’s Pizza Inc.		United States		8,635		1,607,492
Hilton Worldwide Holdings Inc.		United States		1,490		115,564
a Marriott International Inc., A		United States		3,693		469,011
McDonald’s Corp.		United States		813		139,812
b Norwegian Cruise Line Holdings Ltd.		United States		57,258		3,101,093
b Seaworld Entertainment Inc.		United States		18,350		215,612
						7,891,700
Household Durables 0.6%
CalAtlantic Group Inc.		United States		37,454		2,098,922
a D.R. Horton Inc.		United States		33,558		1,711,458
b iRobot Corp.		United States		11,091		761,065
Whirlpool Corp.		United States		9,058		1,526,907
						6,098,352
Household Products 0.0%†
The Procter & Gamble Co.		United States		1,486		133,725
Independent Power & Renewable Electricity Producers 0.6%
a,b Calpine Corp.		United States		447,179		6,716,629
Industrial Conglomerates 0.1%
General Electric Co.		United States		41,854		765,510
Honeywell International Inc.		United States		1,020		159,079
Smiths Group PLC		United Kingdom		17,888		358,761
						1,283,350
Insurance 0.2%
b Chubb Ltd.		United States		742		112,866
MetLife Inc.		United States		1,617		86,800
RSA Insurance Group PLC		United Kingdom		44,331		364,814
b Trupanion Inc.		United States		14,826		441,518

franklintempleton.com Semiannual Report         19

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

CONSOLIDATED STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin K2 Alternative Strategies Fund (continued)

	Country		Shares/ Warrants/ Rights		Value
Common Stocks and Other Equity Interests (continued)
Insurance (continued)
W.R. Berkley Corp.		United States		15,311	$	1,058,296
						2,064,294
Internet & Direct Marketing Retail 0.9%
b Amazon.com Inc.		United States		1,907		2,244,062
Expedia Inc.		United States		11,074		1,356,565
a,b Liberty Interactive Corp. QVC Group, A		United States		112,963		2,756,297
a,b The Priceline Group Inc.		United States		956		1,663,163
Rakuten Inc.		Japan		30,391		309,864
a,b Wayfair Inc., A		United States		22,958		1,606,831
						9,936,782
Internet Software & Services 2.0%
b Alibaba Group Holding Ltd., ADR		China		12,322		2,181,980
b Alphabet Inc., A		United States		1,417		1,468,253
b Alphabet Inc., C		United States		1,510		1,542,329
b Benefitfocus Inc.		United States		3,800		102,980
b Cloudera Inc.		United States		46,587		737,472
b CoStar Group Inc.		United States		3,224		983,223
b eBay Inc.		United States		53,942		1,870,169
a,b Facebook Inc., A		United States		32,379		5,736,911
b GoDaddy Inc., A		United States		21,767		1,058,965
b Just Eat PLC		United Kingdom		97,537		1,053,288
b Nutanix Inc., A		United States		8,500		278,800
Tencent Holdings Ltd.		China		25,425		1,295,641
a,b VeriSign Inc.		United States		12,449		1,432,880
b Yandex NV, A		Russia		18,883		625,216
b Zillow Group Inc., A		United States		7,458		306,225
a,b Zillow Group Inc., C		United States		7,913		324,750
						20,999,082
IT Services 3.6%
Accenture PLC, A		United States		6,237		923,138
a Alliance Data Systems Corp.		United States		11,194		2,678,388
a Automatic Data Processing Inc.		United States		8,103		927,469
a,b Blackhawk Network Holdings Inc., A		United States		22,324		820,407
a Cognizant Technology Solutions Corp., A		United States		12,688		917,089
a,b Conduent Inc.		United States		59,251		904,170
b EPAM Systems Inc.		United States		13,488		1,368,223
b ExlService Holdings Inc.		United States		30,709		1,884,918
a,b FleetCor Technologies Inc.		United States		18,823		3,423,339
b Gartner Inc.		United States		8,306		1,004,112
Genpact Ltd.		United States		87,144		2,809,523
a Global Payments Inc.		United States		37,222		3,743,044
MasterCard Inc., A		United States		32,315		4,862,438
b PayPal Holdings Inc.		United States		63,677		4,822,260
Total System Services Inc.		United States		33,985		2,527,125
Visa Inc., A		United States		23,237		2,616,254
a,b WEX Inc.		United States		23,585		3,035,861
						39,267,758

20         Semiannual Report franklintempleton.com

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

CONSOLIDATED STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin K2 Alternative Strategies Fund (continued)

	Country		Shares/ Warrants/ Rights		Value
Common Stocks and Other Equity Interests (continued)
Life Sciences Tools & Services 0.7%
Gerresheimer AG		Germany		47,443	$	3,786,812
b Illumina Inc.		United States		7,449		1,713,493
a,b Mettler-Toledo International Inc.		United States		2,342		1,473,610
						6,973,915
Machinery 1.0%
Cummins Inc.		United States		244		40,846
a Deere & Co.		United States		6,766		1,013,953
Dover Corp.		United States		744		72,696
Fanuc Corp.		Japan		3,823		949,254
Kennametal Inc.		United States		3,693		172,168
a,b Navistar International Corp.		United States		51,416		2,093,145
Tadano Ltd.		Japan		7,521		114,006
a Trinity Industries Inc.		United States		116,562		4,155,435
Wabtec Corp.		United States		2,192		168,565
a Xylem Inc.		United States		35,475		2,459,836
						11,239,904
Marine 0.2%
Irish Continental Group PLC		Ireland		363,101		2,515,292
Media 2.9%
CBS Corp., B		United States		4,519		253,335
b Charter Communications Inc., A		United States		6,462		2,107,969
e Comcast Corp., A		United States		84,526		3,173,106
Entertainment One Ltd.		Canada		67,140		277,665
a Grupo Televisa SAB, ADR		Mexico		78,688		1,468,318
ITV PLC		United Kingdom		293,248		634,142
b Liberty Global PLC, C		United Kingdom		49,663		1,531,110
b Liberty Global PLC LiLAC, A		United Kingdom		30,581		636,085
a,b Liberty Media Corp., A		United States		11,243		254,317
b Postmedia Network Canada Corp.		Canada		666,338		1,032,962
Regal Entertainment Group, A		United States		33,109		669,133
Scripps Networks Interactive Inc.		United States		41,895		3,428,687
Stroeer SE & Co. KGaA		Germany		44,132		3,341,837
a Time Warner Inc.		United States		63,027		5,767,601
Tribune Media Co., A		United States		74,297		3,061,036
Vivendi SA		France		70,466		1,875,800
The Walt Disney Co.		United States		18,962		1,987,597
						31,500,700
Metals & Mining 0.9%
First Quantum Minerals Ltd.		Zambia		236,759		2,721,494
b Nexa Resources SA		Luxembourg		4,831		84,060
Teck Resources Ltd., B		Canada		242,514		5,572,972
Voestalpine AG		Austria		21,537		1,251,215
						9,629,741
Oil, Gas & Consumable Fuels 0.8%
Altagas Ltd.		Canada		18,615		420,592
Anadarko Petroleum Corp.		United States		8,839		425,067
Canadian Natural Resources Ltd.		Canada		4,487		152,196
Chevron Corp.		United States		594		70,680

franklintempleton.com Semiannual Report         21

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

CONSOLIDATED STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin K2 Alternative Strategies Fund (continued)

	Country		Shares/ Warrants/ Rights		Value
Common Stocks and Other Equity Interests (continued)
Oil, Gas & Consumable Fuels (continued)
EnCana Corp.		Canada		18,324	$	216,956
Equities Corp.		United States		406		24,198
b,d Etablissements Maurel Et Prom, Contingent Value, rts., 12/31/17		France		131,406		—
Exxon Mobil Corp.		United States		2,016		167,913
Golar LNG Ltd.		Bermuda		1,386		34,248
b Halcon Resources Corp., wts., 9/09/20		United States		2,159		1,230
Hess Corp.		United States		56,139		2,575,657
b Jagged Peak Energy Inc.		United States		35,009		531,437
a,b Laredo Petroleum Inc.		United States		91,180		974,714
b Oasis Petroleum Inc.		United States		16,979		173,695
b Parsley Energy Inc., A		United States		15,543		417,485
b PDC Energy Inc.		United States		9,743		447,691
Premier Oil PLC, wts., 5/31/22		United Kingdom		73,513		26,346
b Santos Ltd.		Australia		175,087		672,775
Valero Energy Corp.		United States		322		27,570
b Whiting Petroleum Corp.		United States		28,483		710,651
The Williams Cos. Inc.		United States		1,860		54,033
						8,125,134
Paper & Forest Products 0.4%
b Canfor Corp.		Canada		132,262		2,723,870
West Fraser Timber Co. Ltd.		Canada		25,920		1,638,195
						4,362,065
Personal Products 0.0%†
The Estee Lauder Cos. Inc., A		United States		314		39,197
Pharmaceuticals 1.1%
b Aerie Pharmaceuticals Inc.		United States		29,062		1,867,233
a,b Akorn Inc.		United States		41,746		1,358,832
Allergan PLC		United States		11,059		1,922,386
b Assembly Biosciences Inc.		United States		35,863		1,789,922
Bristol-Myers Squibb Co.		United States		23,138		1,462,090
b,f Cassiopea SpA, 144A		Italy		4,160		144,411
b Dermira Inc.		United States		8,523		218,189
Eli Lilly & Co.		United States		12,400		1,049,535
b GW Pharmaceuticals PLC, ADR		United Kingdom		6,231		775,697
Hikma Pharmaceuticals PLC		Jordan		10,168		141,637
b,d Impax Laboratories Inc., Escrow Account		United States		105,000		—
b Mylan NV		United States		6,911		252,459
b Nektar Therapeutics, A		United States		4,140		223,519
b Ocular Therapeutix Inc.		United States		32,927		135,659
Pfizer Inc.		United States		5,545		201,062
b Revance Therapeutics Inc.		United States		6,281		174,298
UCB SA		Belgium		5,400		403,252
						12,120,181
Professional Services 0.7%
Equifax Inc.		United States		8,718		994,898
Experian PLC		United Kingdom		64,491		1,341,400
a,b Huron Consulting Group Inc.		United States		17,656		722,130
b TransUnion		United States		28,088		1,559,446
b TriNet Group Inc.		United States		36,246		1,622,371

22         Semiannual Report franklintempleton.com

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

CONSOLIDATED STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin K2 Alternative Strategies Fund (continued)

	Country		Shares/ Warrants/ Rights		Value
Common Stocks and Other Equity Interests (continued)
Professional Services (continued)
a,b WageWorks Inc.		United States		24,045	$	1,542,487
						7,782,732
Road & Rail 0.7%
CSX Corp.		United States		44,791		2,497,099
a Kansas City Southern		United States		18,882		2,117,427
a Old Dominion Freight Line Inc.		United States		10,947		1,414,790
a Union Pacific Corp.		United States		8,596		1,087,394
						7,116,710
Semiconductors & Semiconductor Equipment 3.1%
b Advanced Micro Devices Inc.		United States		42,250		460,102
Applied Materials Inc.		United States		12,942		682,949
b Axcelis Technologies Inc.		United States		17,661		565,152
b Broadcom Ltd.		Singapore		3,108		863,838
b Cavium Inc.		United States		15,831		1,353,234
Cypress Semiconductor Corp.		United States		2,482		39,737
b Integrated Device Technology Inc.		United States		38,940		1,171,705
b IXYS Corp.		United States		41,575		1,010,272
KLA-Tencor Corp.		United States		7,959		813,728
Marvell Technology Group Ltd.		Bermuda		96,310		2,151,565
a Microchip Technology Inc.		United States		11,091		964,806
a,b Micron Technology Inc.		United States		49,830		2,112,294
b Microsemi Corp.		United States		16,778		886,717
a NVIDIA Corp.		United States		4,102		823,313
a,b,e NXP Semiconductors NV		Netherlands		95,565		10,836,115
e QUALCOMM Inc.		United States		87,035		5,773,902
Teradyne Inc.		United States		24,240		980,993
Texas Instruments Inc.		United States		3,482		338,764
b Tower Semiconductor Ltd.		Israel		43,795		1,542,022
						33,371,208
Software 1.7%
Activision Blizzard Inc.		United States		2,671		166,670
a,b Adobe Systems Inc.		United States		4,777		866,882
b Atlassian Corp. PLC		Australia		19,820		925,396
Blackbaud Inc.		United States		6,317		621,909
a,b Dell Technologies Inc., V		United States		28,388		2,221,077
b Globant SA		Argentina		7,370		294,800
a,b Guidewire Software Inc.		United States		12,239		910,459
b HubSpot Inc.		United States		12,677		1,026,203
a Intuit Inc.		United States		4,026		632,968
a,e Microsoft Corp.		United States		74,049		6,232,705
b Nexon Co. Ltd.		Japan		18,030		515,852
a Nintendo Co. Ltd., ADR		Japan		12,140		1,306,847
Oracle Corp.		United States		3,127		153,411
b Proofpoint Inc.		United States		2,860		257,543
a,b Salesforce.com Inc.		United States		13,311		1,388,603
a,b ServiceNow Inc.		United States		6,817		838,491
b Workday Inc., A		United States		3,642		375,126
						18,734,942

franklintempleton.com Semiannual Report          23

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

CONSOLIDATED STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin K2 Alternative Strategies Fund (continued)

	Country		Shares/ Warrants/ Rights		Value
Common Stocks and Other Equity Interests (continued)
Specialty Retail 0.8%
The Home Depot Inc.		United States		32,209	$	5,791,822
a,b MarineMax Inc.		United States		74,921		1,599,563
b Sports Direct International PLC		United Kingdom		155,760		797,306
						8,188,691
Technology Hardware, Storage & Peripherals 0.4%
e Apple Inc.		United States		5,345		918,538
Netapp Inc.		United States		37,843		2,138,508
Samsung Electronics Co. Ltd.		South Korea		424		989,626
						4,046,672
Textiles, Apparel & Luxury Goods 0.6%
a Hanesbrands Inc.		United States		13,194		275,623
b Michael Kors Holdings Ltd.		United States		39,532		2,310,250
Moncler SpA		Italy		14,204		389,352
Nike Inc., B		United States		26,874		1,623,727
The Swatch Group AG		Switzerland		972		354,416
Tapestry Inc.		United States		36,793		1,533,900
						6,487,268
Tobacco 0.1%
Altria Group Inc.		United States		2,034		137,966
a Philip Morris International Inc.		United States		10,686		1,097,987
						1,235,953
Trading Companies & Distributors 0.5%
Brenntag AG		Germany		78,092		4,861,230
Ferguson PLC		Switzerland		5,739		413,682
						5,274,912
Transportation Infrastructure 0.3%
Abertis Infraestructuras SA		Spain		144,081		3,217,196
Wireless Telecommunication Services 0.0%†
b T-Mobile U.S. Inc.		United States		5,804		354,450
Total Common Stocks and Other Equity Interests     (Cost $343,846,788)						431,416,544
Exchange Traded Funds 0.0%†
Financial Select Sector SPDR Fund		United States		10,235		281,667
PowerShares QQQ Series 1 Trust		United States		2,440		378,566
Total Exchange Traded Funds (Cost $621,981)						660,233
Convertible Preferred Stocks 0.3%
Capital Markets 0.1%
Virtus Investment Partners Inc., 7.25%, cvt. pfd.		United States		5,250		553,403
Internet Software & Services 0.1%
a,f Mandatory Exchangeable Trust, 5.75%, cvt. pfd., 144A		China		7,532		1,505,458
Oil, Gas & Consumable Fuels 0.1%
Chesapeake Energy Corp., 5.75%, cvt. pfd.		United States		139		81,315
WPX Energy Inc., 6.25%, cvt. pfd.		United States		12,008		682,295
						763,610
Total Convertible Preferred Stocks (Cost $1,994,815)						2,822,471

24         Semiannual Report franklintempleton.com

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

CONSOLIDATED STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin K2 Alternative Strategies Fund (continued)
	Country		Shares		Value
Preferred Stocks 0.4%
Consumer Finance 0.3%
b,d iPayment Inc., pfd.		United States		28,073	$	2,807,300
Diversified Financial Services 0.0%†
b,d Aergen Structured Investments Cayman Blocker LLC, pfd.		Ireland		4,480		454,510
Diversified Telecommunication Services 0.1%
Iridium Communications Inc., 7.00%, pfd.		United States		3,596		492,202
Food Products 0.0%†
Bunge Ltd., 4.875%, pfd.		United States		2,376		247,033
Total Preferred Stocks (Cost $3,888,318)						4,001,045
			Principal Amount*
Convertible Bonds 9.4%
Aerospace & Defense 0.1%
f Aerojet Rocketdyne Holdings Inc., senior note, 144A, 2.25%, 12/15/23		United States		468,000		648,472
Air Freight & Logistics 0.1%
f Air Transport Services Group Inc., senior note, 144A, 1.125%, 10/15/24		United States		429,000		447,233
Atlas Air Worldwide Holdings Inc., senior note, 1.875%, 6/01/24		United States		525,000		617,531
Echo Global Logistics Inc., senior note, 2.50%, 5/01/20		United States		45,000		45,759
						1,110,523
Auto Components 0.1%
Horizon Global Corp., senior note, 2.75%, 7/01/22		United States		569,000		543,751
Automobiles 0.4%
Tesla Inc., senior note,
0.25%, 3/01/19		United States		626,000		663,169
a 2.375%, 3/15/22		United States		2,945,000		3,423,562
						4,086,731
Biotechnology 0.7%
a,f Amicus Therapeutics Inc., senior note, 144A, 3.00%, 12/15/23		United States		963,000		2,320,228
BioMarin Pharmaceutical Inc., senior sub. note,
1.50%, 10/15/20		United States		160,000		185,600
0.599%, 8/01/24		United States		996,000		972,345
f Flexion Therapeutics Inc., senior note, 144A, 3.375%, 5/01/24		United States		289,000		360,346
a Intercept Pharmaceuticals Inc., senior note, 3.25%, 7/01/23		United States		271,000		217,816
f Neurocrine Biosciences Inc., senior note, 144A, 2.25%, 5/15/24		United States		871,000		1,070,241
a PDL BioPharma Inc., senior note, 2.75%, 12/01/21		United States		525,000		525,656
a Radius Health Inc., senior note, 3.00%, 9/01/24		United States		815,000		716,691
f Sarepta Therapeutics Inc., senior note, 144A, 1.50%, 11/15/24		United States		571,000		609,899
						6,978,822
Capital Markets 0.4%
a Ares Capital Corp., senior note,
4.75%, 1/15/18		United States		1,613,000		1,625,097
f 144A, 3.75%, 2/01/22		United States		920,000		942,425
a Cowen Inc., senior note, 3.00%, 3/15/19		United States		699,000		711,233
Global Brokerage Inc., senior note, 2.25%, 6/15/18		United States		373,000		154,795
f Hercules Capital Inc., senior note, 144A, 4.375%, 2/01/22		United States		358,000		366,950
TCP Capital Corp., senior note, 4.625%, 3/01/22		United States		502,000		520,825
						4,321,325

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)
Chemicals 0.1%
g Kansai Paint Co. Ltd., senior note, Reg S, zero cpn., 6/17/22		Japan		30,000,000	JPY	$	296,215
g Mitsubishi Chemical Holdings Corp., senior note, Reg S,
zero cpn., 3/30/22		Japan		30,000,000	JPY		298,547
zero cpn., 3/29/24		Japan		30,000,000	JPY		305,545
							900,307
Commercial Services & Supplies 0.1%
a RWT Holdings Inc., senior note, 5.625%, 11/15/19		United States		824,000			841,510
Communications Equipment 0.1%
Calamp Corp., senior note, 1.625%, 5/15/20		United States		631,000			675,959
f Finisar Corp., senior bond, 144A, 0.50%, 12/15/36		United States		255,000			235,875
a InterDigital Inc., senior note, 1.50%, 3/01/20		United States		263,000			313,627
f Viavi Solutions Inc., senior note, 144A, 1.00%, 3/01/24		United States		265,000			268,313
							1,493,774
Construction & Engineering 0.0%†
Dycom Industries Inc., senior note, 0.75%, 9/15/21		United States		27,000			34,931
g Mirait Holdings Corp., senior note, Reg S, zero cpn., 12/30/21		Japan		30,000,000	JPY		318,206
Tutor Perini Corp., senior note, 2.875%, 6/15/21		United States		50,000			54,938
							408,075
Construction Materials 0.1%
a Cemex SAB de CV, sub. note, 3.72%, 3/15/20		Mexico		773,000			805,853
Consumer Finance 0.3%
a,f Encore Capital Group Inc., senior note, 144A, 3.25%, 3/15/22		United States		1,075,000			1,272,531
a,f Ezcorp Inc., senior note, 144A, 2.875%, 7/01/24		United States		794,000			1,093,735
PRA Group Inc., senior note,
a 3.00%, 8/01/20		United States		286,000			275,811
f 144A, 3.50%, 6/01/23		United States		671,000			684,840
							3,326,917
Diversified Consumer Services 0.1%
a Carriage Services Inc., sub. note, 2.75%, 3/15/21		United States		504,000			631,890
Diversified Financial Services 0.2%
f Element Fleet Management Corp., sub. note, 144A,
5.125%, 6/30/19		Canada		1,110,000	CAD		881,874
4.25%, 6/30/20		Canada		967,000	CAD		741,955
							1,623,829
Electric Utilities 0.1%
g Kyushu Electric Power Co. Inc., senior note, Reg S, zero cpn.,
3/31/20		Japan		40,000,000	JPY		373,184
3/31/22		Japan		40,000,000	JPY		376,294
							749,478
Electronic Equipment, Instruments & Components 0.7%
f II-VI Inc., senior note, 144A, 0.25%, 9/01/22		United States		725,000			872,265
a Knowles Corp., senior note, 3.25%, 11/01/21		United States		823,000			946,450
f OSI Systems Inc., senior note, 144A, 1.25%, 9/01/22		United States		223,000			235,683

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)
Electronic Equipment, Instruments & Components (continued)
aVishay Intertechnology Inc., senior bond,
2.25%, 11/15/40		United States		2,892,000		$	4,948,935
2.25%, 5/15/41		United States		428,000			550,783
							7,554,116
Energy Equipment & Services 0.0%†
f Nabors Industries Inc., senior note, 144A, 0.75%, 1/15/24		United States		135,000			100,575
Equity Real Estate Investment Trusts (REITs) 0.9%
a,f American Residential Properties OP LP, senior note, 144A, 3.25%, 11/15/18		United States		1,009,000			1,245,484
Colony Capital Inc., senior note, 3.875%, 1/15/21		United States		497,000			499,485
f Empire State Realty OP LP, senior note, 144A, 2.625%, 8/15/19		United States		1,709,000			1,882,036
aForest City Enterprises Inc., senior note, 3.625%, 8/15/20		United States		1,453,000			1,627,360
Forest City Realty Trust Inc., senior note, 4.25%, 8/15/18		United States		693,000			808,211
f iStar Inc., senior note, 144A, 3.125%, 9/15/22		United States		795,000			799,472
aStarwood Waypoint Homes, senior note, 3.00%, 7/01/19		United States		1,188,000			1,532,520
f 144A, 3.50%, 1/15/22		United States		857,000			986,086
							9,380,654
Health Care Equipment & Supplies 0.5%
a,f DexCom Inc., senior note, 144A, 0.75%, 5/15/22		United States		264,000			251,460
Insulet Corp., senior note, 1.25%, 9/15/21		United States		138,000			184,920
f 144A, 1.375%, 11/15/24		United States		446,000			457,986
aInvacare Corp., senior note, 5.00%, 2/15/21		United States		765,000			965,812
gNipro Corp., senior note, Reg S, zero cpn., 1/29/21		Japan		40,000,000	JPY		426,496
Quidel Corp., senior note, 3.25%, 12/15/20		United States		1,150,000			1,593,469
aWright Medical Group Inc., senior note, 2.00%, 2/15/20		United States		829,000			875,631
Wright Medical Group NV, senior note, 2.25%, 11/15/21		United States		814,000			1,053,113
							5,808,887
Health Care Providers & Services 0.0%†
f Teladoc Inc., senior note, 144A, 3.00%, 12/15/22		United States		358,000			411,700
Health Care Technology 0.1%
aAllscripts Healthcare Solutions Inc., senior note, 1.25%, 7/01/20		United States		498,000			528,502
f Evolent Health Inc., senior note, 144A, 2.00%, 12/01/21		United States		50,000			47,969
							576,471
Hotels, Restaurants & Leisure 0.1%
fMarriott Vacations Worldwide Corp., senior note, 144A, 1.50%, 9/15/22		United States		685,000			757,353
Independent Power & Renewable Electricity Producers 0.0%†
Pattern Energy Group Inc., senior note, 4.00%, 7/15/20		United States		313,000			321,412
Insurance 0.0%†
aAmTrust Financial Services Inc., senior bond, 2.75%, 12/15/44		United States		379,000			274,538
f HCI Group Inc., senior bond, 144A, 4.25%, 3/01/37		United States		161,000			134,938
							409,476
Internet & Direct Marketing Retail 0.1%
The Priceline Group Inc., senior note, 0.35%, 6/15/20		United States		551,000			761,757

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)
Internet & Direct Marketing Retail (continued)
f Wayfair Inc., senior note, 144A, 0.375%, 9/01/22		United States		548,000	$	532,930
						1,294,687
Internet Software & Services 0.9%
Altaba Inc., senior note, zero cpn., 12/01/18		United States		3,604,000		4,890,177
f Carbonite Inc., senior note, 144A, 2.50%, 4/01/22		United States		612,000		731,723
f IAC Financeco Inc., senior note, 144A, 0.875%, 10/01/22		United States		936,000		1,004,445
f Quotient Technology Inc., senior note, 144A, 1.75%, 12/01/22		United States		699,000		689,825
a Twitter Inc., senior note, 1.00%, 9/15/21		United States		1,675,000		1,552,516
f Weibo Corp., senior note, 144A, 1.25%, 11/15/22		China		448,000		500,640
f Zillow Group Inc., senior note, 144A, 2.00%, 12/01/21		United States		429,000		468,951
						9,838,277
IT Services 0.0%†
a,f Square Inc., senior note, 144A, 0.375%, 3/01/22		United States		143,000		257,668
Life Sciences Tools & Services 0.1%
Fluidigm Corp., senior bond, 2.75%, 2/01/34		United States		759,000		611,469
Machinery 0.2%
f Chart Industries Inc., senior sub. note, 144A, 1.00%, 11/15/24		United States		288,000		306,900
f The Greenbrier Cos. Inc., senior note, 144A, 2.875%, 2/01/24		United States		544,000		630,700
Navistar International Corp., senior sub. note,
4.50%, 10/15/18		United States		214,000		222,560
a 4.75%, 4/15/19		United States		552,000		598,575
Trinity Industries Inc., sub. bond, 3.875%, 6/01/36		United States		525,000		789,797
						2,548,532
Media 0.5%
a,f DISH Network Corp., senior note, 144A, 2.375%, 3/15/24		United States		489,000		478,303
Liberty Interactive LLC, senior bond,
4.00%, 11/15/29		United States		1,122,000		802,230
3.75%, 2/15/30		United States		263,000		185,415
Liberty Media Corp., senior bond, 2.25%, 9/30/46		United States		50,000		52,344
f Liberty Media Corp.-Liberty Formula One, senior note, 144A, 1.00%, 1/30/23		United States		1,735,000		2,016,937
f World Wrestling Entertainment Inc., senior note, 144A, 3.375%, 12/15/23		United States		1,707,000		2,210,565
						5,745,794
Metals & Mining 0.1%
a AK Steel Corp., senior note, 5.00%, 11/15/19		United States		780,000		961,837
RTI International Metals Inc., senior note, 1.625%, 10/15/19		United States		276,000		304,808
						1,266,645
Mortgage Real Estate Investment Trusts (REITs) 0.6%
Apollo Commercial Real Estate Finance Inc., senior note,
5.50%, 3/15/19		United States		539,000		584,481
4.75%, 8/23/22		United States		1,548,000		1,566,382
Arbor Realty Trust Inc., senior note, 5.375%, 11/15/20		United States		538,000		540,690
Blackstone Mortgage Trust Inc., senior note, 4.375%, 5/05/22		United States		580,000		591,600
Hannon Armstrong Sustainable Infrastructure Capital Inc., senior note, 4.125%, 9/01/22		United States		107,000		109,408
a Redwood Trust Inc., senior note, 4.75%, 8/15/23		United States		1,791,000		1,737,270
Starwood Property Trust Inc., senior note, 4.375%, 4/01/23		United States		588,000		601,230

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)
Mortgage Real Estate Investment Trusts (REITs) (continued)
Two Harbors Investment Corp., senior note, 6.25%, 1/15/22		United States		772,000	$	805,775
						6,536,836
Oil, Gas & Consumable Fuels 0.4%
f Aegean Marine Petroleum Network Inc., senior note, 144A, 4.25%, 12/15/21		Greece		824,000		557,230
f Chesapeake Energy Corp., senior note, 144A, 5.50%, 9/15/26		United States		95,000		87,578
DHT Holdings Inc., senior note, 4.50%, 10/01/19		United States		625,000		616,016
aGreen Plains Inc., senior note,
3.25%, 10/01/18		United States		1,251,000		1,369,063
4.125%, 9/01/22		United States		811,000		764,874
gPremier Oil Finance Jersey Ltd., senior note, Reg S, 2.50%, 5/31/22		United Kingdom		965,000		989,125
Ship Finance International Ltd., senior note, 3.25%, 2/01/18		Norway		125,000		143,360
SM Energy Co., senior note, 1.50%, 7/01/21		United States		30,000		28,350
Whiting Petroleum Corp., senior note, 1.25%, 4/01/20		United States		45,000		40,725
						4,596,321
Personal Products 0.0%†
Herbalife Ltd., senior note, 2.00%, 8/15/19		United States		291,000		296,093
Pharmaceuticals 0.3%
f Dermira Inc., senior note, 144A, 3.00%, 5/15/22		United States		575,000		608,781
Impax Laboratories Inc., senior note, 2.00%, 6/15/22		United States		105,000		103,228
Innoviva Inc.,
f senior note, 144A, 2.50%, 8/15/25		United States		269,000		272,531
a sub. note, 2.125%, 1/15/23		United States		1,540,000		1,473,588
a The Medicines Co., senior note, 2.75%, 7/15/23		United States		262,000		246,280
f Pacira Pharmaceuticals Inc., senior note, 144A, 2.375%, 4/01/22		United States		264,000		277,365
f Sucampo Pharmaceuticals Inc., senior note, 144A, 3.25%, 12/15/21		United States		702,000		755,966
						3,737,739
Professional Services 0.1%
51job Inc., senior note, 3.25%, 4/15/19		China		742,000		1,046,220
Semiconductors & Semiconductor Equipment 0.4%
Cypress Semiconductor Corp., senior note,
a 4.50%, 1/15/22		United States		587,000		794,284
f 144A, 2.00%, 2/01/23		United States		278,000		289,120
Inphi Corp., senior note, 1.125%, 12/01/20		United States		341,000		424,545
f Microchip Technology Inc., 144A,
junior sub. bond, 2.25%, 2/15/37		United States		925,000		1,080,516
a senior sub. bond, 1.625%, 2/15/27		United States		600,000		701,625
Micron Technology Inc., senior bond, 3.00%, 11/15/43		United States		114,000		169,646
f ON Semiconductor Corp., senior note, 144A, 1.625%, 10/15/23		United States		57,000		68,756
f Rambus Inc., senior note, 144A, 1.375%, 2/01/23		United States		572,000		580,938
f Silicon Laboratories Inc., senior note, 144A, 1.375%, 3/01/22		United States		80,000		93,850
f Teradyne Inc., senior note, 144A, 1.25%, 12/15/23		United States		132,000		183,728
						4,387,008
Software 0.4%
Bottomline Technologies de Inc., senior note, 1.50%, 12/04/17		United States		627,000		692,835
Everbridge Inc., senior note, 1.50%, 11/01/22		United States		470,000		488,212
a FireEye Inc., senior bond, 1.625%, 6/01/35		United States		590,000		549,069
f HubSpot Inc., senior note, 144A, 0.25%, 6/01/22		United States		274,000		300,201
f Nuance Communications Inc., senior note, 144A, 1.25%, 4/01/25		United States		143,000		140,498

franklintempleton.com Semiannual Report         29

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

CONSOLIDATED STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin K2 Alternative Strategies Fund (continued)
	Country		Principal  Amount*			Value
Convertible Bonds (continued)
Software (continued)
Rovi Corp., senior note, 0.50%, 3/01/20		United States		166,000		$	161,747
f ServiceNow Inc., senior note, 144A, zero cpn., 6/01/22		United States		1,461,000			1,623,536
Verint Systems Inc., senior note, 1.50%, 6/01/21		United States		110,000			108,969
a,f Workday Inc., senior note, 144A, 0.25%, 10/01/22		United States		571,000			564,576
							4,629,643
Trading Companies & Distributors 0.1%
a,f Kaman Corp., senior note, 144A, 3.25%, 5/01/24		United States		1,038,000			1,165,804
Transportation Infrastructure 0.0%†
Macquarie Infrastructure Corp., senior note, 2.00%, 10/01/23		United States		240,000			231,600
Total Convertible Bonds (Cost $93,487,668)							101,982,237
Convertible Bonds in Reorganization 0.0%†
Chemicals 0.0%†
a,d,h TerraVia Holdings Inc., senior sub. note, 5.00%, 10/01/19		United States		1,117,000			134,040
Semiconductors & Semiconductor Equipment 0.0%†
h SunEdison Inc., senior note,
f 144A, 0.25%, 1/15/20		United States		161,000			3,623
2.375%, 4/15/22		United States		247,000			5,557
							9,180
Total Convertible Bonds in Reorganization (Cost $1,273,316)							143,220
Corporate Bonds and Notes 14.8%
Aerospace & Defense 0.1%
Embraer Netherlands Finance BV, senior bond,
5.05%, 6/15/25		Brazil		95,000			99,631
5.40%, 2/01/27		Brazil		130,000			137,638
f Embraer Overseas Ltd., senior bond, 144A, 5.696%, 9/16/23		Brazil		90,000			97,848
f Leonardo US Holdings Inc., senior bond, 144A, 6.25%, 1/15/40		Italy		555,000			652,125
							987,242
Automobiles 0.0%†
i Toyota Motor Credit Corp., senior note, FRN, 1.743%, (3-Month USD LIBOR + 0.39%),     1/17/19		United States		40,000			40,136
Banks 0.1%
f Banco Macro SA, senior note, 144A, 17.50%, 5/08/22		Argentina		1,740,000	ARS		95,773
i Bank of America Corp., senior note, FRN, 2.399%, (3-Month USD LIBOR + 1.04%),     1/15/19		United States		20,000			20,182
g Bano do Brasil SA, senior note, Reg S, 4.625%, 1/15/25		Brazil		200,000			197,200
i Citibank NA, senior note, FRN, 1.584%, (3-Month USD LIBOR + 0.26%), 9/18/19		United States		430,000			430,127
i JPMorgan Chase & Co., senior note, FRN, 2.161%, (3-Month USD LIBOR + 0.68%),     6/01/21		United States		480,000			482,604
Qwest Capital Funding Inc., senior bond, 6.875%, 7/15/28		United States		260,000			228,808
							1,454,694
Biotechnology 0.1%
iGilead Sciences Inc., senior note, FRN,
1.546%, (3-Month USD LIBOR + 0.22%), 3/20/19		United States		430,000			430,846
1.576%, (3-Month USD LIBOR + 0.25%), 9/20/19		United States		430,000			430,638

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)
Biotechnology (continued)
f Grifols SA, senior note, 144A, 3.20%, 5/01/25		Spain		225,000	EUR	$	274,050
							1,135,534
Capital Markets 0.2%
Deutsche Bank AG, zero cpn., 2/15/18		Egypt		29,900,000	EGP		1,633,677
Chemicals 0.0%†
f Braskem Netherlands Finance BV, senior note, 144A, 3.50%, 1/10/23		Brazil		215,000			213,656
f Mexichem SAB de CV, senior bond, 144A, 4.00%, 10/04/27		Mexico		220,000			219,450
							433,106
Commercial Services & Supplies 1.4%
f Harland Clarke Holdings Corp., senior note, 144A, 9.25%, 3/01/21		United States		9,176,000			9,348,050
R.R. Donnelley & Sons Co.,
a senior bond, 6.50%, 11/15/23		United States		2,694,000			2,599,710
a senior bond, 6.00%, 4/01/24		United States		1,910,000			1,790,625
senior bond, 6.625%, 4/15/29		United States		25,000			23,000
senior note, 7.00%, 2/15/22		United States		1,375,000			1,431,719
							15,193,104
Construction & Engineering 0.1%
a Engility Corp., senior note, 8.875%, 9/01/24		United States		634,000			683,927
Great Lakes Dredge & Dock Corp., senior note, 8.00%, 5/15/22		United States		160,000			169,200
							853,127
Construction Materials 0.0%†
f Cemex SAB de CV, senior bond, first lien, 144A, 6.125%, 5/05/25		Mexico		365,000			387,812
Consumer Finance 0.9%
f,k Everi Payments Inc., senior note, 144A, 7.50%, 12/15/25		United States		5,729,000			5,741,604
a,f iPayment Inc., second lien, 144A, 10.75%, 4/15/24		United States		3,214,000			3,651,907
							9,393,511
Containers & Packaging 0.4%
a,f Coveris Holdings SA, senior note, 144A, 7.875%, 11/01/19		Luxembourg		3,836,000			3,864,770
Diversified Financial Services 1.5%
f,i Banco Supervielle SA, senior note, 144A, FRN, 26.50%,
(ARS Badlar + 4.50%), 8/09/20		Argentina		3,800,000	ARS		222,670
Citigroup Global Markets Holdings Inc., zero cpn., 12/21/17		Egypt		5,000,000	EGP		280,237
g Reg S, 3/01/18		Egypt		5,000,000	EGP		271,175
g senior note, Reg S, 3/15/18		Egypt		50,247,958	EGP		2,709,696
a,f Exela Intermediate LLC / Exela Finance Inc., senior secured note, first lien, 144A, 10.00%, 7/15/23		United States		1,612,000			1,521,325
f Financiera de Desarrollo Territorial SA Findeter, senior bond, 144A, 7.875%, 8/12/24		Colombia		795,000,000	COP		270,439
f Opal Acquisition Inc., 144A,     second lien, 10.00%, 10/01/24		United States		6,248,000			5,404,520
senior secured note, first lien, 7.50%, 7/01/24		United States		5,104,000			4,925,360
f,l Polaris Intermediate Corp., senior note, 144A, PIK, 8.50%, 12/01/22		United States		210,000			219,009
Rumo Luxembourg Sarl, senior note, 7.375%, 2/09/24		Brazil		200,000			216,500
							16,040,931

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)
Diversified Telecommunication Services 0.2%
a Intelsat Jackson Holdings SA,
senior bond, 7.25%, 10/15/20		Luxembourg		1,424,000		$	1,352,800
fsenior note, 144A, 9.75%, 7/15/25		Luxembourg		968,000			936,540
f,k Telenet Finance Luxembourg Notes Sarl, senior secured bond, 144A, 5.50%, 3/01/28		Belgium		400,000			399,704
							2,689,044
Electric Utilities 0.3%
g 1MDB Energy Ltd., senior note, Reg S, 5.99%, 5/11/22		Malaysia		1,300,000			1,413,945
a Bruce Mansfield Unit 1 2007 Pass-Through Trust, secured bond, 6.85%, 6/01/34		United States		1,941,801			847,111
f Empresas Publicas de Medellin Esp, senior bond, 144A, 8.375%, 11/08/27		Colombia		665,000,000	COP		226,726
f Enel SpA, sub. bond, 144A, 8.75% to 9/24/23, FRN thereafter, 9/24/73		Italy		745,000			922,869
							3,410,651
Food & Staples Retailing 0.1%
f BRF GmbH, senior bond, 144A, 4.35%, 9/29/26		Brazil		530,000			518,075
f Cencosud SA, senior bond, 144A, 4.375%, 7/17/27		Chile		215,000			213,962
							732,037
Food Products 0.1%
f Grupo Bimbo SAB de CV, senior bond, 144A, 4.70%, 11/10/47		Mexico		470,000			471,763
f JBS USA LLC / JBS USA Finance Inc., senior bond, 144A,
7.25%, 6/01/21		United States		190,000			195,107
5.75%, 6/15/25		United States		180,000			176,625
							843,495
Gas Utilities 0.2%
NGL Energy Partners LP / NGL Energy Finance Corp., senior note,
5.125%, 7/15/19		United States		230,000			232,875
6.875%, 10/15/21		United States		15,000			15,300
7.50%, 11/01/23		United States		885,000			913,762
6.125%, 3/01/25		United States		255,000			248,625
i Transcanada Trust, junior sub. bond, FRN, 5.30%, (3-Month USD LIBOR + 3.21%), 3/15/77		Canada		980,000			1,016,138
							2,426,700
Health Care Providers & Services 0.2%
Kindred Healthcare Inc., senior note, 8.75%, 1/15/23		United States		2,068,000			2,078,340
Health Care Technology 0.0%†
f Quintiles IMS Inc., senior note, 144A, 3.25%, 3/15/25		United States		230,000	EUR		283,408
Hotels, Restaurants & Leisure 1.3%
f Constellation Merger Sub Inc., senior note, 144A, 8.50%, 9/15/25		United States		110,000			108,350
a,f Golden Nugget Inc., senior note, 144A, 8.75%, 10/01/25		United States		3,061,000			3,191,092
a,f Jack Ohio Finance LLC / Jack Ohio Finance 1 Corp., senior secured note, second lien, 144A, 10.25%, 11/15/22		United States		5,148,000			5,669,235
f Mohegan Gaming & Entertainment, senior note, 144A, 7.875%, 10/15/24		United States		4,521,000			4,780,958
							13,749,635

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)
Insurance 0.1%
f Ardonagh Midco 3 PLC, senior secured note, 144A, 8.375%, 7/15/23		United Kingdom		475,000	GBP	$	664,870
Machinery 0.2%
i Caterpillar Financial Services Corp., senior note, FRN, 1.777%, (3-Month USD
LIBOR + 0.29%), 9/04/20		United States		450,000			450,888
f Navistar International Corp., senior note, 144A, 6.625%, 11/01/25		United States		1,384,000			1,436,772
f Titan International Inc., senior secured note, 144A, 6.50%, 11/30/23		United States		483,000			481,647
							2,369,307
Media 3.6%
f American Media Inc., sub. note, 144A, zero cpn., 3/01/22		United States		19,207,513			17,286,762
Clear Channel Worldwide Holdings Inc., B, senior note, 7.625%, 3/15/20		United States		1,095,000			1,088,156
f COX Communications Inc., senior bond, 144A,
4.70%, 12/15/42		United States		120,000			115,895
4.50%, 6/30/43		United States		220,000			205,196
DISH DBS Corp., senior note,
5.875%, 11/15/24		United States		405,000			408,463
7.75%, 7/01/26		United States		250,000			270,625
f Lee Enterprises Inc., senior secured note, first lien, 144A, 9.50%, 3/15/22		United States		4,091,000			4,234,185
The McClatchy Co., senior bond,
7.15%, 11/01/27		United States		632,000			662,020
6.875%, 3/15/29		United States		4,767,000			4,397,558
f,l Postmedia Network Inc., secured note, second lien, 144A, PIK, 10.25%, 7/15/23		Canada		4,495,729			5,141,990
f Time Inc., senior note, 144A,
a5.75%, 4/15/22		United States		3,948,000			4,140,465
7.50%, 10/15/25		United States		697,000			818,975
Time Warner Cable LLC, senior bond, 4.50%, 9/15/42		United States		240,000			222,792
							38,993,082
Metals & Mining 0.1%
f Gerdau Trade Inc., senior bond, 144A, 4.875%, 10/24/27		Brazil		220,000			221,155
f Stillwater Mining Co., senior note, 144A, 6.125%, 6/27/22		South Africa		235,000			240,922
Vale Overseas Ltd., senior bond, 6.25%, 8/10/26		Brazil		155,000			180,170
							642,247
Mortgage Real Estate Investment Trusts (REITs) 0.3%
g JP Morgan Structured Products BV, senior note, Reg S, zero cpn., 1/18/18		Egypt		55,885,000	EGP		3,091,830
Oil, Gas & Consumable Fuels 1.6%
f Bellatrix Exploration Ltd., senior note, 144A, 8.50%, 5/15/20		Canada		625,000			604,687
i BP Capital Markets PLC, senior note, FRN, 1.838%, (3-Month USD LIBOR + 0.43%), 2/13/18		United Kingdom		105,000			105,063
California Resources Corp.,
f secured note, second lien, 144A, 8.00%, 12/15/22		United States		280,000			208,250
senior note, 5.50%, 9/15/21		United States		9,000			6,660
senior note, 6.00%, 11/15/24		United States		112,000			70,000
Calumet Specialty Products Partners LP / Calumet Finance Corp., senior note, 7.625%, 1/15/22		United States		786,000			791,895
f Cenovus Energy Inc., senior bond, 144A, 5.40%, 6/15/47		Canada		245,000			250,532

franklintempleton.com Semiannual Report         33

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)
a,f Cheniere Corpus Christi Holdings LLC, secured bond, 144A,   5.125%, 6/30/27		United States		1,060,000		$	1,098,425
Eclipse Resources Corp., senior note, 8.875%, 7/15/23		United States		545,000			559,987
f Endeavor Energy Resources LP / EER Finance Inc., senior note, 144A,   5.50%, 1/30/26		United States		279,000			282,836
m Enlink Midstream Partners LP, junior sub. note, 6.00% to 12/15/22,   FRN thereafter, Perpetual		United States		390,000			379,538
g,i EP PetroEcuador via Noble Sovereign Funding I Ltd., FRN, Reg S, 6.961%,   (3-Month USD LIBOR + 5.63%), 9/24/19		Ecuador		339,789			348,284
f Halcon Resources Corp., senior note, 144A, 6.75%, 2/15/25		United States		221,000			225,420
f MEG Energy Corp., senior bond, 144A,
6.375%, 1/30/23		Canada		180,000			165,825
7.00%, 3/31/24		Canada		665,000			601,825
f NGPL PipeCo LLC, 144A,
senior bond, 4.875%, 8/15/27		United States		65,000			67,725
senior bond, 7.768%, 12/15/37		United States		80,000			99,200
senior note, 4.375%, 8/15/22		United States		40,000			41,150
Petrobras Global Finance BV
f senior bond, 144A, 5.999%, 1/27/28		Brazil		570,000			574,161
senior bond, 5.625%, 5/20/43		Brazil		380,000			342,000
senior bond, 7.25%, 3/17/44		Brazil		165,000			172,631
senior note, 5.375%, 1/27/21		Brazil		672,000			700,560
senior note, 8.375%, 5/23/21		Brazil		2,060,000			2,345,310
senior note, 6.125%, 1/17/22		Brazil		915,000			976,763
senior note, 6.25%, 3/17/24		Brazil		822,000			876,129
f senior note, 144A, 5.299%, 1/27/25		Brazil		223,000			223,223
Petroleos Mexicanos, senior note,
6.375%, 2/04/21		Mexico		770,000			843,150
4.25%, 1/15/25		Mexico		247,000			246,580
6.875%, 8/04/26		Mexico		317,000			361,919
g,i FRN, Reg S, 4.967%, (3-Month USD LIBOR + 3.65%), 3/11/22		Mexico		402,000			441,798
g Reg S, 5.375%, 3/13/22		Mexico		442,000			473,603
g Reg S, 1.875%, 4/21/22		Mexico		869,000	EUR		1,063,347
g Reg S, 3.75%, 2/21/24		Mexico		290,000	EUR		371,970
Southwestern Energy Co., senior bond, 6.70%, 1/23/25		United States		215,000			224,138
f SRC Energy Inc., senior note, 144A, 6.25%, 12/01/25		United States		470,000			484,100
f Vine Oil & Gas LP / Vine Oil & Gas Finance Corp., senior note, 144A, 8.75%, 4/15/23		United States		220,000			217,250
f YPF Sociedad Anonima,
senior bond, 144A, 6.95%, 7/21/27		Argentina		185,000			198,181
isenior note, 144A, FRN, 25.458%, (ARS Badlar + 4.00%), 7/07/20		Argentina		245,000			231,827
							17,275,942
Paper & Forest Products 1.4%
Fibria Overseas Finance Ltd., senior note, 4.00%, 1/14/25		Brazil		200,000			198,815
Resolute Forest Products Inc., senior note, 5.875%, 5/15/23		United States		14,550,000			15,095,625
							15,294,440
Personal Products 0.1%
a,f Avon International Operations Inc., senior secured note, first lien, 144A, 7.875%, 8/15/22		United Kingdom		1,397,000			1,421,014

34         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)
Pharmaceuticals 0.0%†
Teva Pharmaceutical Finance Netherlands III BV, senior bond, 4.10%, 10/01/46		Israel		120,000		$	91,276
f Valeant Pharmaceuticals International Inc., senior note, 144A, 5.875%, 5/15/23		United States		240,000			210,300
							301,576
Real Estate Management & Development 0.0%†
f Rialto Holdings LLC / Rialto Corp., senior note, 144A, 7.00%, 12/01/18		United States		178,000			179,335
Specialty Retail 0.1%
a,f Guitar Center Inc., senior secured note, first lien, 144A, 6.50%, 4/15/19		United States		783,000			744,829
i Lowe’s Cos. Inc., senior note, FRN, 1.919%, (3-Month USD LIBOR + 0.60%), 9/14/18		United States		255,000			256,169
							1,000,998
Technology Hardware, Storage & Peripherals 0.1%
f Dell International LLC / EMC Corp., senior secured bond, first lien, 144A, 6.02%, 6/15/26		United States		1,170,000			1,287,366
Wireless Telecommunication Services 0.0%†
g GTH Finance BV, senior note, Reg S, 6.25%, 4/26/20		Netherlands		249,000			264,108
Total Corporate Bonds and Notes (Cost $142,454,876)							160,417,069
Corporate Bonds and Notes in Reorganization 0.4%
Diversified Telecommunication Services 0.0%†
f,h Oi SA, senior note, 144A, 9.75%, 9/15/16		Brazil		300,000	BRL		27,608
Independent Power & Renewable Electricity Producers 0.4%
a,h GenOn Energy Inc.,
senior bond, 7.875%, 6/15/17		United States		569,000			409,680
senior note, 9.50%, 10/15/18		United States		2,481,000			1,773,915
senior note, 9.875%, 10/15/20		United States		2,625,000			1,863,750
							4,047,345
Total Corporate Bonds and Notes in Reorganization (Cost $3,965,402)							4,074,953
i,n Senior Floating Rate Interests 0.8%
Aerospace & Defense 0.1%
Avolon, Term Loan B, 3.533%, (LIBOR + 2.25%), 3/21/22		United States		159,600			159,800
TransDigm Group Inc.,
4.333%, (LIBOR + 3.00%), 5/14/22		United States		28,958			29,061
4.239%, (LIBOR + 3.00%), 6/09/23		United States		204,386			204,787
4.333%, (LIBOR + 3.00%), 8/22/24		United States		5,498			5,530
TransDigm Inc., Term Loan G, 4.235%, (LIBOR + 3.00%), 8/22/24		United States		19,440			19,553
							418,731
Auto Components 0.0%†
Tectum Holdings/Truck Hero, Term Loan, 5.326%, (LIBOR + 4.00%), 4/22/24		United States		217,456			217,660
USS Ultimate Holdings Inc., Term Loan B, 4.992%, (LIBOR + 3.75%), 8/25/24		United States		15,000			15,159
							232,819

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,n Senior Floating Rate Interests (continued)
Building Products 0.0%†
Ply Gem Holdings Inc., Term Loan, first lien, 4.333%, (LIBOR + 3.00%), 2/01/21		United States		22,769	$	22,990
Quickrete Holdings Inc., Term Loan B, 3.992%, (LIBOR + 2.75%), 11/15/23		United States		283,049		284,189
					307,179
Capital Markets 0.0%†
BCP Raptor LLC, Term Loan B, 5.522%, (LIBOR + 4.25%), 6/24/24		United States		129,675		130,891
Donnelley Financial Solutions Inc., Term Loan B, 4.246%, (LIBOR + 3.00%), 9/29/23		United States		65,714		66,125
					197,016
Chemicals 0.0%†
Ashland LLC, Term Loan B,
3.264%, (LIBOR + 2.00%), 5/17/24		United States		9,925		9,981
3.319%, (LIBOR + 2.00%), 5/17/24		United States		20,000		20,113
Axalta Coating Systems Dutch Holding BV, Term Loan B, 3.333%, (LIBOR + 2.00%), 6/01/24		United States		59,117		59,400
					89,494
Commercial Services & Supplies 0.0%†
Camelot Finance LP, Term Loan B, 4.60%, (LIBOR + 3.25%), 10/03/23		United States		130,104		130,592
GFL Environmental, Term Loan B, 4.083%, (LIBOR + 2.75%), 9/29/23		Canada		69,300		69,647
					200,239
Construction & Engineering 0.0%†
Engility Corp., Term Loan B, 4.492%, (PRIME + 2.25%), 8/14/23		United States		89,295		89,998
Diversified Financial Services 0.1%
B.C. Unlimited Liability Co., Term Loan B-3,
3.485%, (LIBOR + 2.25%), 2/16/24		United States		169,853		170,065
3.583%, (LIBOR + 2.25%), 2/16/24		United States		108,744		108,880
Cequel/SuddenLink, Term Loan, 3.49%, (LIBOR + 2.25%), 7/28/25		United States		24,238		23,996
Harbor Freight Tools USA Inc., Term Loan B, 4.492%, (LIBOR + 3.25%), 8/18/23		United States		117,083		117,998
Klockner Pentaplast, Term Loan B, 5.583%, (LIBOR + 4.25%), 6/30/22		United States		240,000		242,250
Serta Simmons Holdings LLC, Term Loan, second lien, 9.244%, (LIBOR + 8.00%), 11/08/24		United States		189,608		174,202
Ziggo BV, Term Loan E, 3.75%, (LIBOR + 2.50%), 4/15/25		United States		236,200		237,530
					1,074,921
Diversified Telecommunication Services 0.1%
Consolidated Communications Inc., Term Loan B, 4.25%, (LIBOR + 3.00%), 10/05/23		United States		94,883		93,618
Sprint Communications Inc., Term Loan B, 3.75%, (LIBOR + 2.50%), 2/02/24		United States		223,875		224,183
Zayo Group LLC, Term Loan B-2, 3.563%, (LIBOR + 2.25%), 1/19/24		United States		95,449		95,774
					413,575
Electric Utilities 0.0%†
The AES Corp., Term Loan B, 3.454%, (LIBOR + 2.00%), 5/24/22		United States		291,886		293,163
Electronic Equipment, Instruments & Components 0.1%
Dell International LLC, Term Loan A-2, 3.00%, (LIBOR + 1.75%), 9/07/21		United States		220,000		220,320
Veritas U.S. Inc., Term Loan B, 5.833%, (LIBOR + 4.50%), 1/27/23		United States		604,551		605,609
					825,929

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,n Senior Floating Rate Interests (continued)
Food & Staples Retailing 0.0%†
Utz Quality Foods LLC, Term Loan B, 4.787%, (LIBOR + 3.50%), 11/21/24		United States		105,000	$	105,591
Food Products 0.0%†
Post Holdings Inc., Term Loan B, 3.49%, (LIBOR + 2.25%), 5/24/24		United States		114,713		115,277
Health Care Providers & Services 0.1%
Envision Healthcare Corp., Term Loan B, 4.25%, (LIBOR + 3.00%), 12/01/23		United States		74,438		74,694
Surgery Center Holdings Inc., Term Loan B, 4.50%, (LIBOR + 3.25%), 9/02/24		United States		200,000		196,333
Team Health Inc., Term Loan B, 3.992%, (LIBOR + 2.75%), 2/06/24		United States		298,596		292,064
						563,091
Health Care Technology 0.0%†
Quintiles IMS Inc., Term Loan B-2, 3.321%, (LIBOR + 2.00%), 1/17/25		United States		80,000		80,525
Hotels, Restaurants & Leisure 0.0%†
Boyd Gaming Corp., Term Loan, 3.701%, (LIBOR + 2.50%), 9/15/23		United States		62,838		63,216
ClubCorp Holdings Inc., Term Loan B, 4.588%, (LIBOR + 3.25%), 9/18/24		United States		85,000		85,265
						148,481
Industrial Conglomerates 0.0%†
Duravant LLC, Term Loan B, 4.56%, (LIBOR + 3.25%), 7/19/24		United States		67,612		67,739
o Duravant LLC, Term Loan, 4.583%, (LIBOR + 3.25%), 7/19/24		United States		6,762		6,774
Plastipak Holdings Inc., Term Loan B, 4.02%, (LIBOR + 2.75%), 10/14/24		United States		35,000		35,226
						109,739
Insurance 0.0%†
Hyperion Insurance Group Ltd., Term Loan B, 5.25%, (LIBOR + 4.00%), 4/29/22		United States		41,501		41,976
U.S.I. Inc., Term Loan B, 4.314%, (LIBOR + 3.00%), 5/16/24		United States		245,701		245,445
						287,421
Internet & Direct Marketing Retail 0.0%†
BWay, Term Loan,
4.522%, (LIBOR + 3.25%), 4/03/24		United States		600		603
4.599%, (LIBOR + 3.25%), 4/03/24		United States		238,800		240,193
						240,796
Internet Software & Services 0.1%
GTT Communications, Term Loan B, 4.50%, (LIBOR + 3.25%), 1/09/24		United States		52,603		53,112
McAfee LLC, Term Loan B, 5.833%, (LIBOR + 4.50%), 9/30/24		United States		210,000		211,199
Rackspace Hosting Inc., Term Loan B,
4.322%, (LIBOR + 3.00%), 11/03/23		United States		212		212
4.385%, (LIBOR + 3.00%), 11/03/23		United States		84,364		84,469
Uber Technologies Inc., Term Loan, 5.328%, (LIBOR + 4.00%), 7/13/23		United States		297,299		300,087
						649,079
IT Services 0.1%
First Data Club Corp., Term Loan B, 3.563%, (LIBOR + 2.25%), 7/08/22		United States		36,496		36,554
Gartner Inc., Term Loan B, 3.24%, (LIBOR + 2.00%), 4/05/24		United States		29,850		30,130
Micro Focus, Term Loan B, 4.063%, (LIBOR + 2.75%), 6/21/24		United States		61,071		61,202
NeuStar Inc., Term Loan B, 5.147%, (LIBOR + 3.75%), 8/08/24		United States		110,000		111,289
Presidio Inc., Term Loan B,
4.492%, (LIBOR + 3.25%), 2/02/22		United States		3,843		3,877
4.585%, (LIBOR + 3.25%), 2/02/22		United States		150,294		151,636
						394,688

franklintempleton.com Semiannual Report         37

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

CONSOLIDATED STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin K2 Alternative Strategies Fund (continued)

	Country		Principal   Amount*			Value
i,n Senior Floating Rate Interests (continued)
Machinery 0.0%†
North American Lifting Holdings Inc., Initial Term Loan, 5.833%, (LIBOR + 4.50%), 11/27/20		United States		15,417		$	14,559
Media 0.0%†
AMC Entertainment Holdings Inc., Term Loan B, 3.50%, (LIBOR + 2.25%), 12/15/23		United States		24,813			24,839
Cablevision SA, Term Loan B, 3.514%, (LIBOR + 2.25%), 7/17/25		United States		34,738			34,564
CBS Radio Inc., Term Loan B, 4.172%, (LIBOR + 2.75%), 11/18/24		United States		80,194			80,558
UPC Financing Partnership, Term Loan, 3.75%, (LIBOR + 2.50%), 1/15/26		United States		115,789			116,099
							256,060
Metals & Mining 0.0%†
Signode Industrial Group,
Initial Term Loan B, 3.992%, (LIBOR + 2.75%), 5/01/21		United States		7,917			7,976
Initial Term Loan B, 4.083%, (LIBOR + 2.75%), 5/01/21		United States		10,417			10,495
Term Loan B, 3.992%, (LIBOR + 2.75%), 5/01/21		United States		3,333			3,358
							21,829
Oil, Gas & Consumable Fuels 0.0%†
Southcross Energy Partners LP, senior secured, Term Loan B, first lien guaranteed, 5.583%, (LIBOR + 4.25%), 8/04/21		United States		29,110			28,709
Semiconductors & Semiconductor Equipment 0.0%†
Cavium Inc., Term Loan B, 3.597%, (LIBOR + 2.25%), 8/16/22		United States		65,434			65,473
Software 0.0%†
Change Healthcare Holdings LLC, Term Loan, 3.992%, (LIBOR + 2.75%), 3/01/24		United States		159,019			159,603
Misys PLC, Term Loan, 4.817%, (LIBOR + 3.50%), 6/13/24		United States		150,000			150,035
							309,638
Specialty Retail 0.0%†
Bass Pro Group LLC, Term Loan B, 6.242%, (LIBOR + 5.00%), 9/25/24		United States		245,000			238,951
Belron Finance US LLC, Term Loan B, 3.892%, (LIBOR + 2.50%), 11/07/24		United States		50,000			50,469
							289,420
Trading Companies & Distributors 0.0%†
HD Supply Inc., Term Loan B, 3.833%, (LIBOR + 2.50%), 10/17/23		United States		143,913			145,202
Wireless Telecommunication Services 0.1%
Unitymedia Hessen GmbH & Co. KG, Term Loan, 3.50%, (LIBOR + 2.25%), 9/30/25		United States		301,134			301,510
Virgin Media, Term Loan I, 3.75%, (LIBOR + 2.50%), 1/15/26		United States		210,000			210,150
							511,660
Total Senior Floating Rate Interests (Cost $8,458,465)							8,480,302
Foreign Government and Agency Securities 2.0%
g Africa Finance Corp., senior note, Reg S, 3.875%, 4/13/24		Supranational		869,000			877,936
Banco Central de la República Argentina SA, zero cpn., 6/13/18		Argentina		32,682,105	ARS		1,622,755
g Eastern and Southern African Trade and Development Bank, senior note, Reg S, 5.375%, 3/14/22		Supranational		692,000			728,542
Government of Argentina,
7.82%, 12/31/33		Argentina		1,011,436	EUR		1,380,421
2.26% to 3/31/19, 4.74% thereafter, 12/31/38		Argentina		2,313,071	EUR		1,966,659

38         Semiannual Report franklintempleton.com

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, (continued)
i senior note, FRN, 27.493%, (ARPP7DRR), 6/21/20		Argentina		9,574,985	ARS	$	593,388
g senior note, Reg S, 3.875%, 1/15/22		Argentina		1,046,000	EUR		1,301,860
senior note, 5.625%, 1/26/22		Argentina		527,000			554,404
g Government of Ecuador, senior note, Reg S, 10.75%, 3/28/22		Ecuador		316,000			365,770
g Government of Iraq, senior note, Reg S, 6.752%, 3/09/23		Iraq		418,000			423,369
Government of Malaysia, senior note, 3.441%, 2/15/21		Malaysia		3,665,000	MYR		897,139
Government of Mexico, senior bond, 5.75%, 3/05/26		Mexico		10,000,000p	MXN		488,121
g Government of Pakistan, senior note, Reg S, 6.75%, 12/03/19		Pakistan		648,000			671,629
g Government of Paraguay, Reg S,
senior note, 4.625%, 1/25/23		Paraguay		945,000			999,101
senior bond, 4.70%, 3/27/27		Paraguay		200,000			211,500
Government of Poland, senior bond, 2.50%, 7/25/27		Poland		10,292,000	PLN		2,716,210
Government of Russia, 7.40%, 12/07/22		Russia		47,297,000	RUB		821,994
Government of South Africa,senior bond,
8.75%, 1/31/44		South Africa		19,480,000	ZAR		1,214,818
8.75%, 2/28/48		South Africa		7,720,000	ZAR		481,803
g National Highways Authority of India, senior note, Reg S, 7.30%, 5/18/22		India		110,000,000	INR		1,738,490
Provincia de Buenos Aires,
i FRN, 24.50%, (ARS Badlar + 3.83%), 5/31/22		Argentina		15,505,000	ARS		913,302
f senior bond, 144A, 7.875%, 6/15/27		Argentina		240,000			268,536
f senior note, 144A, 5.75%, 6/15/19		Argentina		250,000			260,375
f senior note, 144A, 6.50%, 2/15/23		Argentina		185,000			197,103
Total Foreign Government and Agency Securities (Cost $20,278,730)							21,695,225
Asset-Backed Securities and Commercial Mortgage-Backed Securities 2.2%
Airlines 0.1%
f Air Canada 2015-2 Class B Pass-Through Trust, third lien note, 144A, 5.00%, 6/15/25		Canada		457,865			480,186
Latam Airlines 2015-1 Class B Pass Through Trust, secured note, 4.50%, 8/15/25		Chile		661,451			658,558
							1,138,744
Banks 0.0%†
f Banco Hipotecario SA, 144A, FRN,
j 25.938%, 11/07/22		Argentina		3,160,000	ARS		184,057
q senior note, 23.708%, (ARS Badlar + 2.50%), 1/12/20		Argentina		3,890,000	ARS		219,904
							403,961
Consumer Finance 0.1%
j American Express Credit Account Master 2017-8 Trust, FRN, 1.358%, 5/16/22		United States		210,000			210,149
q Bank of America Credit Card 2014-A1 Trust, FRN, 1.63%, (1-Month USD LIBOR + 0.38%), 6/15/21		United States		100,000			100,318
Chase Issuance Trust,
q 2014-A5, A5, FRN, 1.62%, (1-Month USD LIBOR + 0.37%), 4/15/21		United States		120,000			120,512
2015-A2, A2, 1.59%, 2/18/20		United States		135,000			135,038
Citibank Credit Card Issuance 2017-A8 Trust, A8, 1.86%, 8/08/22		United States		425,000			422,243
q World Financial Network Credit Card Master 2015-A Trust, A, FRN, 1.73%, (1-Month USD LIBOR + 0.48%), 2/15/22		United States		120,000			120,131
							1,108,391

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 0.9%
f AIM Aviation Finance Ltd. 2015-1A, B1, 144A, 5.072%, 2/15/40		Cayman Islands		278,935	$	273,875
Ally Auto Receivables 2016-3 Trust, A3, 1.44%, 8/17/20		United States		180,000		179,605
f Ascentium Equipment Receivables 2017-2A Trust, C, 144A, 2.87%, 8/10/22		United States		25,000		24,888
f Bayview Opportunity Master Fund IIIA 2017-RN7 Trust, A1, 144A, 3.105%, 9/28/32		United States		106,899		107,118
f,j Bayview Opportunity Master Fund IIIB 2017-RN2 Trust, A1, 144A, FRN, 3.475%, 4/28/32		United States		53,937		54,277
f Bayview Opportunity Master Fund IVB Trust, 144A,
2017-NPL1, A1, 3.598%, 1/28/32		United States		59,262		59,550
2017-NPL2, A1, 2.981%, 10/28/32		United States		129,994		130,284
f Blackbird Capital Aircraft Lease Securitization Ltd 2016-1A, 144A, 4.213%, 12/16/41		United States		241,719		251,203
j CarMax Auto Owner Trust, 2017-4, A2B, FRN, 1.38%, 4/15/21		United States		250,000		250,073
f,j Chesapeake Funding II LLC 2017-4A, A2, 144A, FRN, 1.81%, 11/15/29		United States		185,000		185,000
f Cig Auto Receivables 2017-1A Trust, A, 144A, 2.71%, 5/15/23		United States		45,000		44,986
f CLI Funding V LLC 2014-2A, A, 144A, 3.38%, 10/18/29		United States		68,091		67,916
f Club Credit 2017-P1 Trust, A, 144A, 2.42%, 9/15/23		United States		93,379		93,422
f Coinstar Funding LLC 2017-1A, A2, 144A, 5.216%, 4/25/47		United States		243,775		253,904
f CPS Auto Receivables Trust, 144A,
2014-B, D, 4.62%, 5/15/20		United States		110,000		111,233
2016-B, E, 8.14%, 5/15/23		United States		500,000		538,362
f DT Auto Owner Trust, 144A,
2014-3A, D, 4.47%, 11/15/21		United States		50,000		50,797
2016-1A, D, 4.66%, 12/15/22		United States		180,000		183,721
2016-2A, D, 5.43%, 11/15/22		United States		240,000		247,521
j Fifth Third Auto 2017-1 Trust, A2B, FRN, 1.40%, 4/15/20		United States		125,000		125,049
f First Investors Auto Owner 2016-1A Trust, D, 144A, 4.70%, 4/18/22		United States		110,000		112,931
f Five Guys Funding LLC 2017-1A, A2, 144A, 4.60%, 7/25/47		United States		74,813		76,521
Ford Credit Auto Owner Trust,
f 2014-2, A, 144A, 2.31%, 4/15/26		United States		100,000		100,478
2014-C, A3, 1.06%, 5/15/19		United States		6,508		6,504
2015-A, A3, 1.28%, 9/15/19		United States		23,373		23,357
j 2017-C, A2B, FRN, 1.365%, 9/15/20		United States		480,000		480,300
f GCAT LLC, 144A,
2017-2, A1, 3.50%, 4/25/47		United States		111,821		112,519
2017-3, A1, 3.352%, 4/25/47		United States		73,664		73,924
2017-5, A1, 3.228%, 7/25/47		United States		72,033		72,397
f Hertz Vehicle Financing II LP 2017-2A, A, 144A, 3.29%, 10/25/23		United States		100,000		100,085
Honda Auto Receivables Owner Trust,
2014-3, A4, 1.31%, 10/15/20		United States		20,693		20,691
2015-1, A3, 1.05%, 10/15/18		United States		5,902		5,900
2015-3, A3, 1.27%, 4/18/19		United States		48,724		48,690
2017-3, A3, 1.79%, 9/20/21		United States		115,000		114,407
Hyundai Auto Receivables Owner 2015-A Trust, A3, 1.05%, 4/15/19		United States		6,416		6,413
f Merlin Aviation Holdings DAC 2016-1, A, 144A, 4.50%, 12/15/32		United States		181,250		182,154
f,q NextGear Floorplan Master Owner 2017-1A Trust, A1, 144A, FRN,
2.084%, (1-Month USD LIBOR + 0.85%), 4/18/22		United States		240,000		241,752
j Nissan Auto Lease Trust, 2017-B, A2B, FRN, 1.46%, 12/16/19		United States		310,000		310,160
Nissan Auto Receivables Owner 2016-C Trust, A3, 1.18%, 1/15/21		United States		85,000		84,291

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)
f OneMain Financial Issuance Trust, 144A,
2015-1A, A, 3.19%, 3/18/26		United States		150,000	$	151,198
2015-2A, D, 5.64%, 7/18/25		United States		285,000		285,015
2015-3A, B, 4.16%, 11/20/28		United States		155,000		157,431
2016-2A, B, 5.94%, 3/20/28		United States		335,000		344,586
f,j Santander Retail Auto Lease 2017-A Trust, A2B, 144A, FRN, 1.513%, 3/20/20		United States		470,000		470,127
f Shenton Aircraft Investment I Ltd. 2015-1A, 144A, 4.75%, 10/15/42		Cayman Islands		267,830		278,350
f Sierra Timeshare Receivables Funding LLC 2013-3A, A, 144A, 2.20%, 10/20/30		United States		26,779		26,749
q SLM Private Credit Student Loan Trust, FRN,
2003-A, A3, 3.78%, (28-Day T-Bill), 6/15/32		United States		65,000		65,005
2003-B, A3, 3.79%, (28-Day T-Bill), 3/15/33		United States		300,000		297,783
f,j SMB Private Education Loan Trust, 2017-B, A2B, 144A, FRN, 1.966%, 10/15/35		United States		100,000		100,506
f Sofi Professional Loan Program LLC 2016-A, B, 144A, 3.57%, 1/26/38		United States		155,166		154,992
f Sprite Cayman 2017-1, B, 144A, 5.75%, 12/15/37		Cayman Islands		250,000		245,609
f TAL Advantage V LLC 2013-2A, A, 144A, 3.55%, 11/20/38		United States		60,000		60,039
Toyota Auto Receivables Owner Trust
2016-C, A3, 1.14%, 8/17/20		United States		70,000		69,534
j 2017-D, A2B, FRN, 1.249%, 8/17/20		United States		430,000		430,021
USAA Auto Owner 2015-1 Trust, A3, 1.20%, 6/17/19		United States		22,846		22,838
f,j Verizon Owner 2017-3 2017-3A Trust, A1B, 144A, FRN, 1.489%, 4/20/22		United States		165,000		165,403
f Veros Automobile Receivables 2017-1 Trust, A, 144A, 2.84%, 4/17/23		United States		105,000		104,941
f VOLT LIV LLC
2017-NPL1, A1, 144A, 3.50%, 2/25/47		United States		60,972		61,336
2017-NPL1, A2, 144A, 6.00%, 2/25/47		United States		100,000		100,802
f VOLT LV LLC 2017-NPL2, A1, 144A, 3.50%, 3/25/47		United States		76,795		77,322
f VOLT LVI LLC 2017-NPL3, A2, 144A, 5.875%, 3/25/47		United States		220,000		221,625
f VOLT LXI LLC 2017-NPL8, A1, 144A, 3.125%, 6/25/47		United States		74,368		74,687
f VOLT LXIII LLC 2017-NP10, A1, 144A, 3.00%, 10/25/47		United States		100,000		100,151
f VOLT XL LLC 2015-NP14, A2, 144A, 4.875%, 11/27/45		United States		140,000		140,181
						9,612,489
Equity Real Estate Investment Trusts (REITs) 0.2%
f American Homes 4 Rent, 144A,
2014-SFR2, E, 6.231%, 10/17/36		United States		250,000		280,006
2014-SFR3, E, 6.418%, 12/17/36		United States		100,000		113,022
2015-SFR1, E, 5.639%, 4/17/52		United States		210,000		229,117
f Colony American Finance Ltd. 2015-1, D, 144A, 5.649%, 10/15/47		Cayman Islands		115,000		121,509
f Colony American Homes, 144A, FRN,
q 2014-1A, E, 4.066%, (1-Month USD LIBOR + 2.80%), 5/17/31		United States		215,000		216,506
q 2014-2A, E, 4.44%, (1-Month USD LIBOR + 3.20%), 7/17/31		United States		72,166		72,680
q 2015-1A, D, 3.416%, (1-Month USD LIBOR + 2.15%), 7/17/32		United States		245,000		245,691
j 2015-1A, E, 4.266%, 7/17/32		United States		100,000		101,022
j 2015-1A, F, 4.916%, 7/17/32		United States		100,000		101,715
f Diamond Resorts Owner 2017-1A Trust, C, 144A, 6.07%, 10/22/29		United States		97,427		97,068
f Invitation Homes Trust, 144A, FRN,
q 2015-SFR1, E, 5.451%, (1-Month USD LIBOR + 4.20%), 3/17/32		United States		205,000		208,327
j 2015-SFR3, E, 5.001%, 8/17/32		United States		110,000		112,234

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)
f Oak Hill Advisors Residential Loan Trust, 144A,
2017-NPL2, A1, 3.00%, 7/25/57		United States		162,897	$	163,346
2017-NPL2, A2, 4.875%, 7/25/57		United States		235,000		234,772
						2,297,015
Mortgage Real Estate Investment Trusts (REITs) 0.9%
j Adjustable Rate Mortgage 2005-1 Trust, 3A1, FRN, 3.281%, 5/25/35		United States		97,797		98,903
f Ajax Mortgage Loan Trust, 144A,
2016-B, A, 4.00%, 9/25/65		United States		150,377		150,541
2016-C, A, 4.00%, 10/25/57		United States		134,889		136,289
q American Home Mortgage Investment 2006-1 Trust, 11A1, FRN, 1.518%, (1-Month USD LIBOR + 0.28%), 3/25/46		United States		303,010		292,756
Banc of America Alternative Loan 2003-8 Trust, 1CB1, 5.50%, 10/25/33		United States		8,952		9,162
Banc of America Funding Trust,
2005-5, 1A1, 5.50%, 9/25/35		United States		13,457		14,181
2007-4, 5A1, 5.50%, 11/25/34		United States		155,108		159,065
j Banc of America Mortgage Trust, FRN,
2005-A, 2A1, 3.472%, 2/25/35		United States		9,178		9,155
2005-I, 4A1, 3.42%, 10/25/35		United States		109,987		108,382
BCAP LLC 2007-AA2 Trust, 22A1, 6.00%, 3/25/22		United States		148,528		147,781
f CAM Mortgage Trust, 144A,
2016-1, A, 4.00%, 1/15/56		United States		3,002		3,012
j 2016-1, M, FRN, 5.00%, 1/15/56		United States		150,000		147,988
f,j CCRESG Commercial Mortgage Trust, 2016-HEAT, D, 144A, FRN, 5.671%, 4/10/29		United States		100,000		100,902
j Citigroup Mortgage Loan Trust, FRN,
2005-3, 2A3, 3.469%, 8/25/35		United States		82,159		82,292
f 2009-10, 6A2, 144A, 3.75%, 9/25/34		United States		63,295		61,382
f,q Communication Mortgage Trust, 2016-SAVA, C, 144A, FRN, 4.251%, (1-Month USD LIBOR + 3.00%), 10/15/34		United States		155,000		155,985
Countrywide Alternative Loan Trust,
2003-22CB, 1A1, 5.75%, 12/25/33		United States		61,304		63,133
2003-9T1, A7, 5.50%, 7/25/33		United States		18,603		18,988
2004-16CB, 1A1, 5.50%, 7/25/34		United States		41,719		43,022
2004-16CB, 3A1, 5.50%, 8/25/34		United States		44,472		45,779
2004-28CB, 5A1, 5.75%, 1/25/35		United States		7,855		7,881
2004-J10, 2CB1, 6.00%, 9/25/34		United States		102,010		106,165
2004-J3, 1A1, 5.50%, 4/25/34		United States		40,128		40,843
q 2005-14, 2A1, FRN, 1.448%, (1-Month USD LIBOR + 0.21%), 5/25/35		United States		45,785		43,792
2005-J1, 2A1, 5.50%, 2/25/25		United States		8,500		8,665
Countrywide Home Loans Mortgage Pass-Through Trust,
j 2004-12, 8A1, FRN, 3.713%, 8/25/34		United States		10,682		10,545
j 2004-HYB4, 2A1, FRN, 3.512%, 9/20/34		United States		97,610		95,301
2005-21, A17, 5.50%, 10/25/35		United States		12,751		12,220
Credit Suisse First Boston Mortgage Securities Corp.,
2003-27, 4A4, 5.75%, 11/25/33		United States		24,945		25,842
j 2003-AR26, 7A1, FRN, 3.534%, 11/25/33		United States		7,533		7,610
j 2003-AR28, 4A1, FRN, 3.541%, 12/25/33		United States		4,723		4,757
2005-10, 2A1, 5.25%, 11/25/20		United States		37,714		35,584

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)
f,q Credit Suisse Mortgage Trust, 2015-TOWN, A, 144A, FRN, 2.50%, (1-Month USD LIBOR + 1.25%), 3/15/28		United States		110,000		$	110,090
f CSMC OA LLC 2014-USA, E, 144A, 4.373%, 9/15/37		United States		300,000			267,581
q Deutsche Mortgage Securities Inc. Mortgage Loan 2004-4 Trust, 7AR1, FRN, 1.582%, (1-Month USD LIBOR + 0.35%), 6/25/34		United States		85,197			80,775
q DSLA Mortgage Loan 2005-AR5 Trust, 2A1A, FRN, 1.613%, (1-Month USD LIBOR + 0.33%), 9/19/45		United States		56,326			46,922
g,q Dukinfield PLC, 2016-2, A, FRN, Reg S, 1.537%, (3-Month GBP LIBOR + 1.25%), 12/20/52		United Kingdom		213,424	GBP		292,371
g,q Eurosail-UK PLC 2007-2X, A3C, FRN, Reg S, 0.44%, (3-Month GBP LIBOR + 0.15%), 3/13/45		United Kingdom		61,682	GBP		81,766
q FHLMC Structural Agency Credit Risk Debt Notes, 2015-DNA1, M2, FRN, 3.088%, (1-Month USD LIBOR + 1.85%), 10/25/27		United States		250,000			255,808
q FHLMC Structural Agency Credit Risk Debt Notes, 2015-DNA1, M3, FRN, 4.538%, (1-Month USD LIBOR + 3.30%), 10/25/27		United States		250,000			279,682
j GMACM Mortgage Loan Trust, FRN,
2005-AR1, 3A, 3.906%, 3/18/35		United States		113,471			114,828
2005-AR4, 3A1, 4.002%, 7/19/35		United States		160,267			156,028
f,q GP Portfolio Trust, 2014-GPP, A, 144A, FRN, 2.45%, (1-Month USD LIBOR + 1.20%), 2/15/27		United States		35,155			35,170
j GS Mortgage Securities 2007-GG10 Trust, AM, FRN, 5.78%, 8/10/45		United States		94,906			97,039
GSR Mortgage Loan Trust,
2005-4F, 6A1, 6.50%, 2/25/35		United States		11,174			11,200
j 2005-AR6, 4A5, FRN, 3.514%, 9/25/35		United States		128,809			130,204
q Harborview Mortgage Loan Trust, FRN,
2003-2, 1A, 2.023%, (1-Month USD LIBOR + 0.74%), 10/19/33		United States		82,381			80,473
2004-11, 2A2A, 1.923%, (1-Month USD LIBOR + 0.64%), 1/19/35		United States		128,420			119,110
2004-2, 1A1, 1.803%, (1-Month USD LIBOR + 0.52%), 6/19/34		United States		130,479			128,628
IndyMac Index Mortgage Loan Trust, FRN,
q 2004-AR12, A1, 2.018%, (1-Month USD LIBOR + 0.78%), 12/25/34		United States		209,509			194,337
j 2004-AR6, 4A, 3.667%, 10/25/34		United States		246,215			251,519
q 2004-AR7, A5, 2.458%, (1-Month USD LIBOR + 1.22%), 9/25/34		United States		68,411			62,766
j 2005-AR11, A3, 3.29%, 8/25/35		United States		75,588			68,942
q 2006-AR2, 2A1, 1.448%, (1-Month USD LIBOR + 0.21%), 2/25/46		United States		322,373			282,045
JP Morgan Chase Commercial Mortgage Securities Trust, FRN, j 2007-LDPX, AM, 5.464%, 1/15/49		United States		24,480			24,588
f,q 2015-SGP, D, 144A, 5.751%, (1-Month USD LIBOR + 4.50%), 7/15/36		United States		180,000			182,378
JP Morgan Mortgage Trust,
j 2003-A2, 3A1, FRN, 3.046%, 11/25/33		United States		10,845			10,486
2004-S1, 2A1, 6.00%, 9/25/34		United States		138,099			139,820
j 2005-A1, 6T1, FRN, 3.684%, 2/25/35		United States		19,253			19,129
j 2005-A3, 4A1, FRN, 3.598%, 6/25/35		United States		7,996			8,099
j 2006-A1, 1A2, FRN, 3.573%, 2/25/36		United States		81,580			76,463
j 2007-A1, 4A2, FRN, 3.729%, 7/25/35		United States		6,642			6,858
q Lehman XS Trust, 2006-2N,1A1, FRN,
1.498%, (1-Month USD LIBOR + 0.26%), 2/25/46		United States		63,154			56,242
g,q Ludgate Funding PLC, FRN, Reg S,
2007-1, A2B, 1.209%, (3-Month EURIBOR + 0.16%), 1/01/61		United Kingdom		35,701	EUR		41,379
2008-W1X, A1, 0.941%, (3-Month GBP LIBOR + 0.60%), 1/01/61		United Kingdom		163,308	GBP		216,849

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)
j MASTR Adjustable Rate Mortgages 2004-7 Trust, 3A1, FRN, 3.31%, 7/25/34		United States		43,149		$	42,359
MASTR Alternative Loan Trust,
2004-2, 8A4, 5.50%, 3/25/34		United States		213,173			217,713
2004-8, 2A1, 6.00%, 9/25/34		United States		80,033			85,657
j Merrill Lynch Mortgage Investors MLCC 2006-2, 2A, FRN, 3.155%, 5/25/36		United States		9,534			9,647
f,j Morgan Stanley Capital I 2011-C2 Trust, E, 144A, FRN, 5.666%, 6/15/44		United States		150,000			142,749
j New York Mortgage Trust Inc. 2006-1, 2A2, FRN, 3.623%, 5/25/36		United States		27,263			26,643
g,q Newgate Funding PLC 2007-3X, A2B, FRN, Reg S, 0.271%, (3-Month EURIBOR + 0.60%), 12/15/50		United Kingdom		75,416	EUR		89,465
f PRPM 2017-2 LLC, 144A,
2017-2A, A1, 3.50%, 9/25/22		United States		302,878			302,474
2017-2A, A2, 5.00%, 9/25/22		United States		100,000			96,664
f,j PRPM 2017-3 LLC 2017-3A, A1, 144A, FRN, 3.47%, 11/25/22		United States		115,000			114,989
q Rali Trust, 2006-QO4, 2A1, FRN, 1.428%, (1-Month USD LIBOR + 0.19%), 4/25/46		United States		85,734			81,149
f RCO Mortgage LLC 2017-1, A1, 144A, 3.375%, 8/25/22		United States		203,249			204,328
Residential Asset Securitization 2003-A9 Trust, A2, 4.00%, 8/25/33		United States		115,211			115,648
j RFMSI Trust, FRN,
2005-SA1, 1A1, 4.255%, 3/25/35		United States		137,856			112,236
2006-SA2, 3A1, 4.594%, 8/25/36		United States		187,747			176,863
g RMAC Securities PLC, Reg S,
q 2005-NS3X, A2C, FRN, 0.029%, (3-Month EURIBOR + 0.36%), 6/12/43		United Kingdom		20,910	EUR		24,461
zero cpn., 6/12/44		United Kingdom		49,371	EUR		57,511
f,q SCG Trust, 144A, FRN,
2013-SRP1, A, 2.889%, (1-Month USD LIBOR + 1.65%), 11/15/26		United States		100,000			99,774
2013-SRP1, B, 4.001%, (1-Month USD LIBOR + 2.50%), 11/15/26		United States		100,000			97,133
2013-SRP1, C, 4.489%, (1-Month USD LIBOR + 3.25%), 11/15/26		United States		100,000			95,571
2013-SRP1, D, 4.594%, (1-Month USD LIBOR + 3.34%), 11/15/26		United States		245,000			225,800
Structured ARM Loan Trust, FRN,
j 2004-12, 7A3, 3.73%, 9/25/34		United States		24,271			24,694
j 2004-6, 1A, 3.358%, 6/25/34		United States		14,692			14,539
q 2005-14, A1, 1.542%, (1-Month USD LIBOR + 0.31%), 7/25/35		United States		314,192			254,393
Structured Asset Securities Corp. 2005-1 Trust, 7A7, 5.50%, 2/25/35		United States		15,232			15,499
g,q Towd Point Mortgage Funding, 2016-GR1X PLC, B, FRN, Reg S, 1.791%, (3-Month GBP LIBOR + 1.40%), 7/20/46		United Kingdom		100,000	GBP		136,628
j Wells Fargo Bank, N.A., Adjustable Rate Mortgage 2004-4 Trust, 3A1, FRN, 3.462%, 3/25/35		United States		40,268			39,648
Wells Fargo Mortgage Backed Securities Trust,
j 2003-M, A1, FRN, 3.463%, 12/25/33		United States		23,640			23,897
j 2004-I, 2A1, FRN, 3.443%, 7/25/34		United States		148,006			150,495
j 2004-O, A1, FRN, 3.528%, 8/25/34		United States		9,779			10,060
2005-16, A18, 6.00%, 1/25/36		United States		4,673			4,715
j 2005-AR10, 2A4, FRN, 3.369%, 6/25/35		United States		14,482			14,898
j 2005-AR12, 2A5, FRN, 3.29%, 6/25/35		United States		42,968			43,618
f,j WF-RBS Commercial Mortgage 2012-C6 Trust, D, 144A, FRN, 5.58%, 4/15/45		United States		150,000			148,406
							9,477,802
Total Asset-Backed Securities and Commercial Mortgage-Backed Securities (Cost $23,408,485)							24,038,402

44         Semiannual Report franklintempleton.com

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

CONSOLIDATED STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin K2 Alternative Strategies Fund (continued)

	Country		Number of Contracts		Notional  Amount*		Value
Options Purchased 0.2%
Calls – Exchange-Traded 0.1%
Adient PLC, January Strike Price $85.00, Expires 1/19/18		United States		216		21,600	$	12,744
AK Steel Holding Corp., January Strike Price $7.00, Expires 1/19/18		United States		265		26,500		1,060
Akzo Nobel NV, December Strike Price 80.00 EUR, Expires 12/15/17		Netherlands		29		2,900		898
American International Group Inc., January Strike Price $65.00, Expires 1/19/18		United States		50		5,000		600
American International Group Inc., January Strike Price $67.50, Expires 1/19/18		United States		50		5,000		350
AT&T Inc., December Strike Price $41.00, Expires 12/15/17		United States		148		14,800		296
AT&T Inc., January Strike Price $34.00, Expires 1/19/18		United States		74		7,400		20,350
AT&T Inc., January Strike Price $38.00, Expires 1/19/18		United States		215		21,500		8,600
Bunge Ltd., April Strike Price $75.00, Expires 4/20/18		United States		52		5,200		11,700
CenturyLink Inc., January Strike Price $15.00, Expires 1/19/18		United States		114		11,400		8,550
Charter Communications Inc., A, January Strike Price $440.00, Expires 1/19/18		United States		94		9,400		4,230
Comcast Corp., A, January Strike Price $36.25, Expires 1/19/18		United States		113		11,300		23,956
Cypress Semiconductor Corp., December Strike Price $16.00, Expires 12/15/17		United States		27		2,700		1,134
DISH Network Corp., December Strike Price $55.00, Expires 12/15/17		United States		16		1,600		960
DISH Network Corp., January Strike Price $52.50, Expires 1/19/18		United States		376		37,600		37,600
DISH Network Corp., March Strike Price $55.00, Expires 3/16/18		United States		1,232		123,200		338,800
DowDuPont Inc., January Strike Price $70.00, Expires 1/19/18		United States		130		13,000		44,200
DowDuPont Inc., March Strike Price $80.00, Expires 3/16/18		United States		131		13,100		7,467
GGP Inc., January Strike Price $22.00, Expires 1/19/18		United States		27		2,700		4,644
Johnson Controls International PLC, April Strike Price $41.00, Expires 4/20/18		Ireland		256		25,600		19,840
Nabors Industries Ltd., December Strike Price $9.00, Expires 12/15/17		United States		59		5,900		59
Navistar International Corp., January Strike Price $42.00, Expires 1/19/18		United States		14		1,400		2,870
Neurocrine Biosciences Inc., December Strike Price $80.00, Expires 12/15/17		United States		9		900		315
Nuance Communications Inc., January Strike Price $15.00, Expires 1/19/18		United States		61		6,100		6,893
NXP Semiconductors NV, January Strike Price $105.00, Expires 1/19/18		Netherlands		31		3,100		29,760
NXP Semiconductors NV, January Strike Price $110.00, Expires 1/19/18		Netherlands		147		14,700		76,440
QUALCOMM Inc., December Strike Price $62.50, Expires 12/15/17		United States		9		900		3,870
QUALCOMM Inc., January Strike Price $70.00, Expires 1/19/18		United States		188		18,800		24,064
QUALCOMM Inc., June Strike Price $70.00, Expires 6/15/18		United States		27		2,700		8,100
Radius Health Inc., January Strike Price $30.00, Expires 1/19/18		United States		15		1,500		3,188

franklintempleton.com Semiannual Report         45

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

CONSOLIDATED STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin K2 Alternative Strategies Fund (continued)

	Country		Number of Contracts		Notional  Amount*		Value
Options Purchased (continued)
Calls – Exchange-Traded (continued)
S&P 500 Index, December Strike Price $2,650.00, Expires 12/29/17		United States		83		8,300	$	186,501
S&P 500 Index, January Strike Price $2,650.00, Expires 1/19/18		United States		82		8,200		261,580
S&P 500 Index, March Strike Price $2,800.00, Expires 3/16/18		United States		267		26,700		128,160
Silver Spring Networks Inc., February Strike Price $17.50, Expires 2/16/18		United States		42		4,200		210
Straight Path Communications Inc., January Strike Price $150.00, Expires 1/19/18		United States		110		11,000		352,550
Straight Path Communications Inc., February Strike Price $150.00, Expires 2/16/18		United States		51		5,100		162,435
Telecom Italia SpA, December Strike Price 0.90 EUR, Expires 12/15/17		Italy		1,015		1,015,000		725
Telecom Italia SpA, June Strike Price 0.70 EUR, Expires 6/15/18		Italy		472		472,000		35,730
Telecom Italia SpA, June Strike Price 0.76 EUR, Expires 6/15/18		Italy		534		534,000		25,233
thyssenkrupp AG, March Strike Price 24.00 EUR, Expires 3/16/18		Germany		169		16,900		16,092
thyssenkrupp AG, March Strike Price 25.00 EUR, Expires 3/16/18		Germany		179		17,900		10,866
thyssenkrupp AG, March Strike Price 27.00 EUR, Expires 3/16/18		Germany		172		17,200		4,299
Trinity Industries Inc., January Strike Price $37.00, Expires 1/19/18		United States		16		1,600		1,040
Trinity Industries Inc., April Strike Price $38.00, Expires 4/20/18		United States		297		29,700		43,659
TTM Technologies Inc., December Strike Price $17.50, Expires 12/15/17		United States		68		6,800		680
Vivendi SA, December Strike Price 21.00 EUR, Expires 12/15/17		France		110		11,000		18,592
Vivendi SA, December Strike Price 22.00 EUR, Expires 12/15/17		France		215		21,500		14,842
Vodafone Group PLC, ADR, January Strike Price $32.00, Expires 1/19/18		United Kingdom		535		53,500		10,165
Vodafone Group PLC, ADR, January Strike Price $40.00, Expires 1/19/18		United Kingdom		36		3,600		108
								1,977,005
Calls – Over-the-Counter 0.0%†
Currency Options 0.0%†
USD/PHP, May Strike Price 50.95 PHP, Counterparty BOFA, Expires 5/18/18		United States		1		2,950,000		45,077
Puts – Exchange-Traded 0.1%
Aegean Marine Petroleum Network Inc., December Strike Price $2.50, Expires 12/15/17		Greece		124		12,400		620
Apollo Commercial Real Estate Finance Inc., February Strike Price $17.50, Expires 2/16/18		United States		53		5,300		1,060
CAC 40 Index, December Strike Price 5,200.00 EUR, Expires 12/15/17		France		72		720		8,724

46         Semiannual Report franklintempleton.com

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

CONSOLIDATED STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin K2 Alternative Strategies Fund (continued)

	Country		Number of Contracts		Notional  Amount*		Value
Options Purchased (continued)
Puts – Exchange-Traded (continued)
Chicago Board Options Exchange SPX Volatility Index, December Strike Price $12.00, Expires 12/20/17		United States		105		10,500	$	13,125
Deutsche Boerse AG German Stock Index DAX, December Strike Price 12,350.00 EUR, Expires 12/15/17		Germany		87		435		8,129
DISH Network Corp., March Strike Price $40.00, Expires 3/16/18		United States		422		42,200		35,870
EURO STOXX 50 Price EUR, January Strike Price 3,500.00 EUR, Expires 1/19/18		Germany		103		1,030		47,199
Financial Select Sector SPDR Fund, January Strike Price $27.00, Expires 1/19/18		United States		175		17,500		7,700
Golar LNG Ltd., December Strike Price $17.50, Expires 12/15/17		Bermuda		60		6,000		600
Golar LNG Ltd., January Strike Price $17.50, Expires 1/19/18		Bermuda		14		1,400		140
Hannon Armstrong Sustainable Infrastructure Capital Inc., December Strike Price $20.00, Expires 12/15/17		United States		15		1,500		75
Innoviva Inc., December Strike Price $10.00, Expires 12/15/17		United States		56		5,600		1,120
iShares iBoxx High Yield Corporate Bond ETF, January Strike Price $86.00, Expires 1/19/18		United States		136		13,600		6,120
iShares iBoxx High Yield Corporate Bond ETF, March Strike Price $85.00, Expires 3/16/18		United States		153		15,300		13,770
iShares MSCI Emerging Markets ETF, January Strike Price $47.00, Expires 1/19/18		United States		182		18,200		33,124
iShares Russell 2000 ETF, December Strike Price $145.00, Expires 12/15/17		United States		116		11,600		2,552
iShares Russell 2000 ETF, January Strike Price $151.00, Expires 1/19/18		United States		75		7,500		18,000
iStar Inc., January Strike Price $11.00, Expires 1/19/18		United States		88		8,800		1,320
Pattern Energy Group Inc., December Strike Price $20.00, Expires 12/15/17		United States		46		4,600		690
PowerShares QQQ Series 1 Trust, December Strike Price $150.00, Expires 12/15/17		United States		116		11,600		6,032
PowerShares QQQ Series 1 Trust, December Strike Price $153.00, Expires 12/15/17		United States		24		2,400		2,640
Redwood Trust Inc., January Strike Price $15.00, Expires 1/19/18		United States		60		6,000		2,850
S&P 500 Index, December Strike Price $2,450.00, Expires 12/15/17		United States		129		12,900		15,480
S&P 500 Index, December Strike Price $2,455.00, Expires 12/15/17		United States		7		700		840
S&P 500 Index, December Strike Price $2,500.00, Expires 12/15/17		United States		27		2,700		4,860
S&P 500 Index, December Strike Price $2,500.00, Expires 12/29/17		United States		589		58,900		259,160
S&P 500 Index, January Strike Price $2,475.00, Expires 1/19/18		United States		55		5,500		40,700
S&P 500 Index, February Strike Price $2,525.00, Expires 2/16/18		United States		29		2,900		57,420
SPDR S&P 500 ETF Trust, December Strike Price $250.00, Expires 12/15/17		United States		124		12,400		2,728
SPDR S&P Retail ETF, January Strike Price $42.00, Expires 1/19/18		United States		231		23,100		15,939

franklintempleton.com Semiannual Report         47

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

CONSOLIDATED STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin K2 Alternative Strategies Fund (continued)

	Country		Number of Contracts		Notional  Amount*		Value
Options Purchased (continued)
Puts – Exchange-Traded (continued)
Texas Instruments Inc., December Strike Price $82.50, Expires 12/15/17		United States		218		21,800	$	1,635
Texas Instruments Inc., December Strike Price $85.00, Expires 12/15/17		United States		75		7,500		525
Texas Instruments Inc., January Strike Price $92.50, Expires 1/19/18		United States		36		3,600		3,384
Texas Instruments Inc., January Strike Price $95.00, Expires 1/19/18		United States		36		3,600		6,228
Vishay Intertechnology Inc., January Strike Price $20.00, Expires 1/19/18		United States		46		4,600		1,380
WPX Energy Inc., December Strike Price $11.00, Expires 12/15/17		United States		120		12,000		600
								622,339
Total Options Purchased (Cost $3,270,552)								2,644,421
Total Investments before Short Term Investments (Cost $646,949,396)								762,376,122
			Country		Shares
Short Term Investments 21.9%
Money Market Funds 16.6%
r,s Dreyfus Government Cash Management, Institutional Shares, 0.95%				United States		22,983,302		22,983,302
r Fidelity Investments Money Market Funds, 0.97%				United States		156,890,921		156,890,921
Total Money Market Funds (Cost $179,874,223)								179,874,223
					Principal  Amount*
Repurchase Agreements (Cost $19,665,720) 1.8%
t Joint Repurchase Agreement, 1.029%, 12/01/17 (Maturity Value $19,666,282)				United States		19,665,720		19,665,720
BNP Paribas Securities Corp. (Maturity Value $16,627,645)
Deutsche Bank Securities Inc. (Maturity Value $876,920)
HSBC Securities (USA) Inc. (Maturity Value $2,078,529)
Merrill Lynch, Pierce, Fenner & Smith Inc. (Maturity Value $83,188)
Collateralized by U.S. Government Agency Securities, 1.875%, 9/18/18; uU.S. Treasury Bill, 4/19/18 - 5/31/18; and U.S. Treasury Note, 1.50% - 2.00%, 6/15/20 - 10/31/22 (valued at $20,061,685)
U.S. Government and Agency Securities 3.5%
t U.S. Treasury Bill,
1/11/18				United States		1,750,000		1,747,783
2/01/18				United States		865,000		863,320
a3/01/18				United States		27,100,000		27,015,736
3/22/18				United States		1,400,000		1,394,556
3/29/18				United States		1,750,000		1,742,672
4/12/18				United States		1,400,000		1,393,352
7/19/18				United States		1,315,000		1,302,849
8/16/18				United States		1,750,000		1,731,313
Total U.S. Government and Agency Securities   (Cost $37,200,014)								37,191,581
Total Investments (Cost $883,689,353) 92.2%								999,107,646

48         Semiannual Report franklintempleton.com

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

CONSOLIDATED STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin K2 Alternative Strategies Fund (continued)

					Principal  Amount*		Value
Short Term Investments (continued)
Options Written (0.0)%†							$	(507,956)
Securities Sold Short (20.4)%								(220,393,416)
Other Assets, less Liabilities 28.2%								304,687,304
Net Assets 100.0%							$	1,082,893,578
	Country		Number of Contracts		Notional  Amount*
v Options Written (0.0)%†
Calls – Exchange-Traded (0.0)%†
Apple Inc., January Strike Price $180.00, Expires 1/19/18		United States		11		1,100		(2,178)
CenturyLink Inc., January Strike Price $17.00, Expires 1/19/18		United States		114		11,400		(2,508)
Charter Communications Inc., A, January Strike Price $500.00, Expires 1/19/18		United States		94		9,400		(8,930)
Comcast Corp., A, January Strike Price $41.25, Expires 1/19/18		United States		113		11,300		(2,938)
Microsoft Corp., December Strike Price $87.50, Expires 12/15/17		United States		16		1,600		(240)
NXP Semiconductors NV, January Strike Price $115.00, Expires 1/19/18		Netherlands		31		3,100		(7,130)
QUALCOMM Inc., December Strike Price $67.50, Expires 12/15/17		United States		10		1,000		(870)
S&P 500 Index, December Strike Price $2,675.00, Expires 12/29/17		United States		83		8,300		(97,110)
S&P 500 Index, January Strike Price $2,680.00, Expires 1/19/18		United States		41		4,100		(82,779)
S&P 500 Index, January Strike Price $2,690.00, Expires 1/19/18		United States		41		4,100		(55,883)
S&P 500 Index, March Strike Price $2,900.00, Expires 3/16/18		United States		53		5,300		(7,950)
Straight Path Communications Inc., January Strike Price $185.00, Expires 1/19/18		United States		110		11,000		(6,875)
Straight Path Communications Inc., February Strike Price $185.00, Expires 2/16/18		United States		51		5,100		(8,670)
Telecom Italia SpA, December Strike Price 1.20 EUR, Expires 12/15/17		Italy		1,015		1,015,000		(242)
								(284,303	)
Puts – Exchange-Traded (0.0)%†
AK Steel Holding Corp., January Strike Price $5.50, Expires 1/19/18		United States		133		13,300		(10,174)
Bunge Ltd., April Strike Price $60.00, Expires 4/20/18		United States		52		5,200		(9,100)
CAC 40 Index, December Strike Price 4,700.00 EUR, Expires 12/15/17		France		72		720		(574)
Chicago Board Options Exchange SPX Volatility Index, December Strike Price $10.50, Expires 12/20/17		United States		105		10,500		(3,150)
Deutsche Boerse AG German Stock Index DAX, December Strike Price 11,500.00 EUR, Expires 12/15/17		Germany		89		445		(1,642)
DISH Network Corp., January Strike Price $47.50, Expires 1/19/18		United States		27		2,700		(3,645)
DISH Network Corp., March Strike Price $45.00, Expires 3/16/18		United States		523		52,300		(101,985)

franklintempleton.com Semiannual Report         49

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

CONSOLIDATED STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin K2 Alternative Strategies Fund (continued)

	Country		Number of Contracts		Notional  Amount*		Value
v Options Written (continued)†
Puts – Exchange-Traded (continued)†
EURO STOXX 50 Price EUR, January Strike Price 3,150.00 EUR, Expires 1/19/18		Germany		104		1,040	$	(5,818)
iShares iBoxx High Yield Corporate Bond ETF, January Strike Price $81.00, Expires 1/19/18		United States		136		13,600		(1,088)
iShares iBoxx High Yield Corporate Bond ETF, March Strike Price $80.00, Expires 3/16/18		United States		153		15,300		(4,590)
iShares MSCI Emerging Markets ETF, January Strike Price $45.00, Expires 1/19/18		United States		182		18,200		(16,016)
iShares Russell 2000 ETF, January Strike Price $144.00, Expires 1/19/18		United States		75		7,500		(6,675)
Navistar International Corp., January Strike Price $35.00, Expires 1/19/18		United States		14		1,400		(938)
Neurocrine Biosciences Inc., December Strike Price $70.00, Expires 12/15/17		United States		9		900		(1,440)
Radius Health Inc., April Strike Price $25.00, Expires 4/20/18		United States		15		1,500		(4,800)
S&P 500 Index, January Strike Price $2,300.00, Expires 1/19/18		United States		55		5,500		(13,640)
S&P 500 Index, February Strike Price $2,425.00, Expires 2/16/18		United States		29		2,900		(32,625)
SPDR S&P 500 ETF Trust, December Strike Price $240.00, Expires 12/15/17		United States		124		12,400		(1,364)
SPDR S&P Retail ETF, January Strike Price $39.00, Expires 1/19/18		United States		231		23,100		(4,389)
								(223,653	)
Total Options Written (Premiums Received $546,001)								(507,956)

	Country		Shares
w Securities Sold Short (20.4)%
Common Stocks (7.8)%
Aerospace & Defense (0.1)%
Aerojet Rocketdyne Holdings Inc.		United States		9,530	(300,100	)
Arconic Inc.		United States		4,369	(107,521	)
United Technologies Corp.		United States		6,772	(822,459	)
					(1,230,080	)
Air Freight & Logistics (0.1)%
Air Transport Services Group Inc.		United States		7,980	(193,515	)
Atlas Air Worldwide Holdings Inc.		United States		5,329	(307,750	)
United Parcel Service Inc., B		United States		3,016	(366,293	)
					(867,558	)
Airlines (0.0)%†
Norwegian Air Shuttle ASA		Norway		7,569	(165,583	)
SAS AB		Sweden		102,930	(317,239	)
					(482,822	)
Auto Components (0.0)%†
Horizon Global Corp.		United States		14,624	(206,198	)

50         Semiannual Report franklintempleton.com

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

CONSOLIDATED STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin K2 Alternative Strategies Fund (continued)

	Country		Shares		Value
w Securities Sold Short (continued)
Common Stocks (continued)
Automobiles (0.2)%
Ford Motor Co.		United States		20,319	$	(254,394	)
Tesla Inc.		United States		7,467		(2,306,183	)
						(2,560,577	)
Beverages (0.0)%†
The Boston Beer Co. Inc., A		United States		993		(178,591	)
Biotechnology (0.4)%
Amicus Therapeutics Inc.		United States		147,886		(2,058,573	)
BioMarin Pharmaceutical Inc.		United States		3,654		(313,513	)
Flexion Therapeutics Inc.		United States		5,467		(141,650	)
Intercept Pharmaceuticals Inc.		United States		396		(24,318	)
Neurocrine Biosciences Inc.		United States		5,094		(366,208	)
PDL BioPharma Inc.		United States		102,662		(298,746	)
Radius Health Inc.		United States		10,353		(293,094	)
Sarepta Therapeutics Inc.		United States		5,038		(280,466	)
						(3,776,568	)
Capital Markets (0.1)%
Ares Capital Corp.		United States		9,082		(147,310	)
Cowen Inc., A		United States		11,294		(168,280	)
Hercules Capital Inc.		United States		3,162		(42,466	)
TCP Capital Corp.		United States		4,102		(65,017	)
Virtus Investment Partners Inc.		United States		3,573		(428,939	)
						(852,012	)
Chemicals (0.2)%
Eastman Chemical Co.		United States		3,350		(309,439	)
HB Fuller Co.		United States		5,077		(287,206	)
Kansai Paint Co. Ltd.		Japan		4,200		(110,052	)
LyondellBasell Industries NV, A		United States		4,537		(475,024	)
Methanex Corp.		Canada		8,902		(474,032	)
Mitsubishi Chemical Holdings Corp.		Japan		13,000		(140,459	)
Yara International ASA		Norway		7,363		(327,374	)
						(2,123,586	)
Commercial Services & Supplies (0.0)%†
Ritchie Bros Auctioneers Inc.		Canada		5,894		(156,191	)
Communications Equipment (0.1)%
Calamp Corp.		United States		9,608		(219,543	)
InterDigital Inc.		United States		2,038		(155,092	)
Viavi Solutions Inc.		United States		13,285		(124,480	)
						(499,115	)
Construction & Engineering (0.1)%
Dycom Industries Inc.		United States		183		(19,648	)
Mirait Holdings Corp.		Japan		9,400		(125,534	)
Valmont Industries Inc.		United States		3,936		(680,141	)
						(825,323	)
Construction Materials (0.0)%†
Cemex SAB de CV, ADR		Mexico		28,806		(218,638	)

franklintempleton.com Semiannual Report         51

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

CONSOLIDATED STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin K2 Alternative Strategies Fund (continued)

	Country		Shares		Value
w Securities Sold Short (continued)
Common Stocks (continued)
Consumer Finance (0.2)%
Encore Capital Group Inc.		United States		17,930	$	(821,194	)
Ezcorp Inc., A		United States		59,473		(716,650	)
PRA Group Inc.		United States		10,831		(376,919	)
						(1,914,763	)
Diversified Consumer Services (0.0)%†
Carriage Services Inc., A		United States		16,253		(416,402	)
Diversified Financial Services (0.0)%†
Element Fleet Management Corp., Common Subscription Receipt		Canada		16,759		(126,392	)
Diversified Telecommunication Services (0.3)%
AT&T Inc.		United States		72,331		(2,631,402	)
Iridium Communications Inc.		United States		34,298		(423,580	)
						(3,054,982	)
Electric Utilities (0.0)%†
Kyushu Electric Power Co. Inc.		Japan		25,500		(290,697	)
Electrical Equipment (0.1)%
Eaton Corp. PLC		United States		5,495		(427,401	)
Regal Beloit Corp.		United States		13,511		(1,039,672	)
						(1,467,073	)
Electronic Equipment, Instruments & Components (0.6)%
II-VI Inc.		United States		10,971		(520,026	)
Knowles Corp.		United States		28,263		(446,273	)
Littelfuse Inc.		United States		2,626		(532,815	)
OSI Systems Inc.		United States		2,117		(183,459	)
Vishay Intertechnology Inc.		United States		232,240		(5,086,056	)
						(6,768,629	)
Energy Equipment & Services (0.1)%
Transocean Ltd.		United States		87,934		(891,651	)
Equity Real Estate Investment Trusts (REITs) (0.6)%
American Homes 4 Rent, A		United States		41,677		(895,222	)
Colony Northstar Inc., A		United States		8,728		(106,394	)
Empire State Realty Trust Inc., A		United States		53,709		(1,090,293	)
Forest City Realty Trust Inc., A		United States		61,326		(1,468,758	)
Host Hotels & Resorts Inc.		United States		22,598		(447,214	)
Invitation Homes Inc.		United States		67,190		(1,582,332	)
iStar Inc.		United States		21,712		(249,688	)
Ryman Hospitality Properties Inc.		United States		5,870		(407,847	)
						(6,247,748	)
Food & Staples Retailing (0.1)%
Casey’s General Stores Inc.		United States		4,841		(584,551	)
CVS Health Corp.		United States		2,895		(221,757	)
SUPERVALU Inc.		United States		11,643		(212,834	)
						(1,019,142	)
Health Care Equipment & Supplies (0.5)%
Becton Dickinson and Co.		United States		7,296		(1,665,020	)
DexCom Inc.		United States		1,066		(62,287	)

52         Semiannual Report franklintempleton.com

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

CONSOLIDATED STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin K2 Alternative Strategies Fund (continued)

	Country		Shares		Value
w Securities Sold Short (continued)
Common Stocks (continued)
Health Care Equipment & Supplies (continued)
Insulet Corp.		United States		3,984	$	(285,772	)
Invacare Corp.		United States		37,566		(659,283	)
Nipro Corp.		Japan		14,600		(210,675	)
Quidel Corp.		United States		26,791		(1,017,790	)
Wright Medical Group NV		United States		43,227		(1,050,848	)
						(4,951,675	)
Health Care Providers & Services (0.0)%†
Teladoc Inc.		United States		4,206		(156,043	)
Health Care Technology (0.0)%†
Allscripts Healthcare Solutions Inc.		United States		16,288		(232,918	)
Hotels, Restaurants & Leisure (0.2)%
The Cheesecake Factory Inc.		United States		8,866		(434,789	)
Marriott Vacations Worldwide Corp.		United States		2,730		(366,503	)
Wyndham Worldwide Corp.		United States		11,527		(1,295,519	)
						(2,096,811	)
Household Durables (0.3)%
Lennar Corp., A		United States		33,147		(2,080,969	)
Lennar Corp., B		United States		663		(34,025	)
Meritage Homes Corp.		United States		11,602		(637,530	)
Newell Brands Inc.		United States		5,302		(164,203	)
PulteGroup Inc.		United States		13,833		(472,120	)
Whirlpool Corp.		United States		993		(167,390	)
						(3,556,237	)
Independent Power & Renewable Electricity Producers (0.0)%†
Pattern Energy Group Inc., A		United States		3,049		(68,724	)
Insurance (0.0)%†
AmTrust Financial Services Inc.		United States		4,040		(38,946	)
HCI Group Inc.		United States		1,565		(47,059	)
						(86,005	)
Internet & Direct Marketing Retail (0.2)%
Liberty Ventures, A		United States		23,768		(1,326,492	)
The Priceline Group Inc.		United States		340		(591,501	)
Wayfair Inc., A		United States		3,123		(218,579	)
						(2,136,572	)
Internet Software & Services (0.7)%
Alibaba Group Holding Ltd., ADR		China		8,842		(1,565,741	)
Altaba Inc.		United States		58,661		(4,109,790	)
Carbonite Inc.		United States		16,441		(395,406	)
IAC/InterActiveCorp.		United States		3,677		(467,972	)
Quotient Technology Inc.		United States		16,887		(200,955	)
Weibo Corp., ADR		China		1,826		(198,230	)
Zillow Group Inc., C		United States		3,991		(163,791	)
						(7,101,885	)

franklintempleton.com Semiannual Report         53

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

CONSOLIDATED STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin K2 Alternative Strategies Fund (continued)

	Country		Shares		Value
w Securities Sold Short (continued)
Common Stocks (continued)
IT Services (0.0)%†
Euronet Worldwide Inc.		United States		1,037	$	(94,730	)
Square Inc., A		United States		5,451		(213,788	)
						(308,518	)
Leisure Products (0.1)%
Polaris Industries Inc.		United States		4,425		(562,019	)
Life Sciences Tools & Services (0.0)%†
Fluidigm Corp.		United States		3,755		(22,342	)
Machinery (0.3)%
Chart Industries Inc.		United States		2,765		(134,600	)
CNH Industrial NV		United Kingdom		19,729		(256,477	)
Flowserve Corp.		United States		14,487		(616,856	)
The Greenbrier Cos. Inc.		United States		3,479		(173,950	)
Navistar International Corp.		United States		4,685		(190,726	)
SKF AB, B		Sweden		6,664		(150,620	)
The Timken Co.		United States		8,715		(434,878	)
Trinity Industries Inc.		United States		19,138		(682,270	)
Volvo AB, B		Sweden		8,405		(159,848	)
						(2,800,225	)
Marine (0.0)%†
Kirby Corp.		United States		5,912		(397,878	)
Media (0.4)%
AMC Networks Inc., A		United States		6,100		(314,394	)
Discovery Communications Inc., C		United States		47,341		(855,925	)
DISH Network Corp., A		United States		3,147		(159,396	)
Liberty Media Corp., C		United States		34,673		(1,262,097	)
Sinclair Broadcast Group Inc., A		United States		17,088		(581,846	)
World Wrestling Entertainment Inc., A		United States		50,832		(1,448,204	)
						(4,621,862	)
Metals & Mining (0.1)%
AK Steel Holding Corp.		United States		115,377		(561,886	)
Kaiser Aluminum Corp.		United States		1,814		(175,704	)
						(737,590	)
Mortgage Real Estate Investment Trusts (REITs) (0.2)%
Apollo Commercial Real Estate Finance Inc.		United States		33,181		(618,826	)
Arbor Realty Trust Inc.		United States		15,471		(132,741	)
Blackstone Mortgage Trust Inc., A		United States		3,245		(106,176	)
Hannon Armstrong Sustainable Infrastructure Capital Inc.		United States		1,913		(45,472	)
Redwood Trust Inc.		United States		29,988		(450,420	)
Starwood Property Trust Inc.		United States		4,860		(105,365	)
Two Harbors Investment Corp.		United States		21,835		(349,360	)
						(1,808,360	)
Oil, Gas & Consumable Fuels (0.2)%
Aegean Marine Petroleum Network Inc.		Greece		30,536		(122,144	)
Green Plains Inc.		United States		54,941		(925,756	)
WPX Energy Inc.		United States		42,025		(532,457	)
						(1,580,357	)

54         Semiannual Report franklintempleton.com

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

CONSOLIDATED STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin K2 Alternative Strategies Fund (continued)

	Country		Shares		Value
w Securities Sold Short (continued)
Common Stocks (continued)
Paper & Forest Products (0.1)%
Domtar Corp.		United States		9,371	$	(451,870	)
Louisiana-Pacific Corp.		United States		17,245		(476,134	)
						(928,004	)
Personal Products (0.0)%†
Herbalife Ltd.		United States		1,445		(101,352	)
Pharmaceuticals (0.1)%
Dermira Inc.		United States		9,732		(249,139	)
Impax Laboratories Inc.		United States		184		(3,064	)
Innoviva Inc.		United States		59,259		(777,478	)
The Medicines Co.		United States		3,124		(90,596	)
Pacira Pharmaceuticals Inc.		United States		2,246		(103,765	)
Sucampo Pharmaceuticals Inc., A		United States		26,261		(333,515	)
						(1,557,557	)
Professional Services (0.1)%
51job Inc., ADR		China		16,156		(928,970	)
Road & Rail (0.0)%†
Canadian National Railway Co.		Canada		2,199		(171,478	)
Schneider National Inc., B		United States		6,162		(161,629	)
						(333,107	)
Semiconductors & Semiconductor Equipment (0.3)%
Cypress Semiconductor Corp.		United States		35,835		(573,718	)
Inphi Corp.		United States		5,774		(237,138	)
Marvell Technology Group Ltd.		Bermuda		17,845		(398,657	)
Microchip Technology Inc.		United States		18,258		(1,588,264	)
Micron Technology Inc.		United States		3,831		(162,396	)
ON Semiconductor Corp.		United States		1,842		(36,988	)
Rambus Inc.		United States		12,085		(178,858	)
Silicon Laboratories Inc.		United States		552		(50,287	)
Teradyne Inc.		United States		2,488		(100,689	)
						(3,326,995	)
Software (0.4)%
Bottomline Technologies de Inc.		United States		1,841		(61,361	)
Everbridge Inc.		United States		6,777		(179,590	)
HubSpot Inc.		United States		1,770		(143,282	)
Intuit Inc.		United States		1,242		(195,267	)
Nuance Communications Inc.		United States		3,876		(60,233	)
ServiceNow Inc.		United States		6,888		(847,224	)
Silver Spring Networks Inc.		United States		4,133		(66,417	)
TiVo Corp.		United States		1,477		(26,291	)
VMware Inc., A		United States		22,180		(2,664,040	)
Workday Inc., A		United States		1,798		(185,194	)
						(4,428,899	)
Specialty Retail (0.1)%
Asbury Automotive Group Inc.		United States		7,536		(495,869	)
Monro Inc.		United States		3,936		(198,571	)
Penske Automotive Group Inc.		United States		10,863		(525,335	)
						(1,219,775	)

franklintempleton.com Semiannual Report         55

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

CONSOLIDATED STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin K2 Alternative Strategies Fund (continued)

		Country	Shares		Value
wSecurities Sold Short (continued)
	Common Stocks (continued)
	Textiles, Apparel & Luxury Goods (0.1)%
	Ralph Lauren Corp., A	United States		4,877	$	(464,047	)
	Under Armour Inc., A	United States		8,490		(112,832	)
						(576,879	)
	Tobacco (0.1)%
	Japan Tobacco Inc.	Japan		15,998		(528,789	)
	Trading Companies & Distributors (0.0)%†
	Kaman Corp.	United States		8,075		(481,755	)
	Total Common Stocks (Proceeds $79,438,675)					83,812,841
	Exchange Traded Funds (10.2)%
	Consumer Discretionary Select Sector SPDR Fund	United States		21,503		(2,078,265	)
	ETFMG Prime Cyber Security ETF	United States		97,826		(3,072,715	)
	Health Care Select Sector SPDR Fund	United States		19,200		(1,602,624	)
	iShares Core S&P Small-Cap ETF	United States		43,594		(3,377,663	)
	iShares Edge MSCI USA Momentum Factor ETF	United States		29,951		(3,094,238	)
	iShares Global Consumer Discretionary ETF	United States		9,816		(1,056,496	)
	iShares MSCI South Korea Capped ETF	South Korea		32,141		(2,415,396	)
	iShares NASDAQ Biotechnology ETF	United States		4,972		(1,569,959	)
	iShares North American Tech ETF	United States		37,749		(6,375,806	)
	iShares North American Tech-Multimedia Networking ETF	United States		52,864		(2,581,878	)
	iShares North American Tech-Software ETF	United States		24,899		(3,879,264	)
	iShares PHLX Semiconductor ETF	United States		37,585		(6,485,667	)
	iShares Russell 2000 Growth ETF	United States		23,642		(4,415,616	)
	iShares Russell Mid-Cap Growth ETF	United States		12,019		(1,445,045	)
	iShares S&P Small-Cap 600 Growth ETF	United States		10,237		(1,759,740	)
	iShares STOXX Europe 600 UCITS ETF	Germany		21,225		(962,522	)
	iShares US Technology ETF	United States		24,690		(4,024,470	)
	PowerShares NASDAQ Internet Portfolio	United States		21,508		(2,444,599	)
	PowerShares QQQ Series 1 Trust	United States		26,238		(4,070,826	)
	SPDR S&P 500 ETF Trust	United States		178,684		(47,353,046	)
	SPDR S&P MidCap 400 ETF Trust	United States		5,972		(2,065,775	)
	Vanguard Small-Cap Growth ETF	United States		28,565		(4,598,394	)
	Total Exchange Traded Funds (Proceeds $101,335,985)					(110,730,004	)
			Principal  Amount*
	Convertible Bonds and Notes (0.1)%
	Communications Equipment (0.1)%
f Finisar Corp., senior bond, 144A, 0.50%, 12/15/36		United States		590,000		(545,750	)
	Internet & Direct Marketing Retail (0.0)%†
	The Priceline Group Inc., senior note, 0.90%, 9/15/21	United States		467,000		(530,337	)
	Software (0.0)%†
	Proofpoint Inc., senior note, 0.75%, 6/15/20	United States		400,000		(506,750	)
	Total Convertible Bonds and Notes (Proceeds $1,549,302)					(1,582,837)
	Corporate Bonds and Notes (2.0)%
	Automobiles (0.0)%†
f Tesla Inc., senior note, 144A, 5.30%, 8/15/25		United States		441,000		(422,677	)

56         Semiannual Report franklintempleton.com

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

CONSOLIDATED STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin K2 Alternative Strategies Fund (continued)

		Country	Principal  Amount*			Value
	Securities Sold Short (continued)
	Corporate Bonds and Notes (continued)
	Chemicals (0.2)%
f CVR Partners LP / CVR Nitrogen Finance Corp., senior note, 144A, 9.25%, 6/15/23		United States		2,001,000	��	$	(2,128,564	)
	Commercial Services & Supplies (0.3)%
f Olympus Merger Sub Inc., senior note, 144A, 8.50%, 10/15/25		United States		3,207,000			(3,138,851	)
	Energy Equipment & Services (0.1)%
f Precision Drilling Corp., senior note, 144A, 7.125%, 1/15/26		Canada		797,000			(804,978	)
	Equity Real Estate Investment Trusts (REITs) (0.0)%†
f Rayonier AM Products Inc., senior bond, 144A, 5.50%, 6/01/24		United States		176,000			(174,523	)
	Food & Staples Retailing (0.2)%
f Rite Aid Corp., senior note, 144A, 6.125%, 4/01/23		United States		2,569,000			(2,385,959	)
	Health Care Providers & Services (0.1)%
f West Street Merger Sub Inc., senior note, 144A, 6.375%, 9/01/25		United States		797,000			(808,955	)
	Hotels, Restaurants & Leisure (0.3)%
f CRC Escrow Issuer LLC / CRC Finco Inc., senior note, 144A, 5.25%, 10/15/25		United States		3,770,000			(3,779,425	)
	Independent Power & Renewable Electricity Producers (0.1)%
	Dynegy Inc., senior note, 7.625%, 11/01/24	United States		491,000			(537,031	)
	Internet Software & Services (0.2)%
f Rackspace Hosting Inc., senior note, 144A, 8.625%, 11/15/24		United States		2,240,000			(2,408,000	)
	Oil, Gas & Consumable Fuels (0.2)%
f California Resources Corp., secured note, second lien, 144A, 8.00%, 12/15/22		United States		2,306,000			(1,715,088	)
	Pharmaceuticals (0.3)%
	Mylan NV, senior note, 3.95%, 6/15/26	United States		1,063,000			(1,061,675	)
f Valeant Pharmaceuticals International Inc., senior bond, 144A, 6.125%, 4/15/25		United States		2,401,000			(2,067,861	)
							(3,129,536	)
	Tobacco (0.0)%†
	Alliance One International Inc., senior note, 9.875%, 7/15/21	United States		87,000			(80,366	)
	Total Corporate Bonds and Notes (Proceeds $21,239,149)						(21,513,953	)
	U.S. Government and Agency Securities (0.3)%
	U.S. Treasury Note,
	2.125%, 12/31/22	United States		523,000			(522,203	)
	2.25%, 8/15/27	United States		2,267,000			(2,231,578	)
	Total U.S. Government and Agency Securities   (Proceeds $2,802,081)						(2,753,781)
	Total Securities Sold Short (Proceeds $206,365,192)						$    (220,393,416)

franklintempleton.com Semiannual Report         57

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

CONSOLIDATED STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin K2 Alternative Strategies Fund (continued)

See Abbreviations on page 90.

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

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

^a A 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, 2017, the aggregate value of these securities and/or cash pledged amounted to $448,689,871, representing 41.4% of net assets.

^b Non-income producing.

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

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

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

^f Security 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, 2017, the net value of these securities was $134,079,903, representing 12.4% of net assets.

^g Security 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, 2017, the aggregate value of these securities was $22,289,195, representing 2.1% of net assets.

^h Defaulted security or security for which income has been deemed uncollectible.

ⁱ The coupon rate shown represents the rate at period end.

^j Adjustable 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.

^k A portion or all of the security purchased on a delayed delivery basis. See Note 1(d).

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

^m Perpetual security with no stated maturity date.

ⁿ See Note 1(i) regarding senior floating rate interests.

^o See Note 8 regarding unfunded loan commitments.

^p Principal amount is stated in 100 Mexican Peso Units.

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

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

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

^t See Note 1(c) regarding joint repurchase agreement.

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

^v See Note 1(e) regarding written options.

^w See Note 1(g) regarding securities sold short.

58         Semiannual Report franklintempleton.com

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

CONSOLIDATED STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin K2 Alternative Strategies Fund (continued)

At November 30, 2017, the Fund had the following futures contracts outstanding. See Note 1(e).

Futures Contracts

Description	Type	Number of Contracts		Notional  Amount*	Expiration Date	Value/Unrealized Appreciation (Depreciation)
Commodity Contractsa
Aluminum	Long	63	$	3,201,975	12/18/17		$    (108,489	)
Aluminum	Short	63		3,201,975	12/18/17		48,236
Aluminum	Long	52		2,669,550	3/19/18		(18,310	)
Brent Crude Oil	Long	110		6,889,300	12/28/17		71,263
Cocoa	Short	33		667,203	3/14/18		47,216
Coffee	Short	24		1,156,500	3/19/18		(11,261	)
Copper	Long	34		5,728,575	12/18/17		(62,280	)
Copper	Short	34		5,728,575	12/18/17		(34,044	)
Copper	Long	22		3,724,325	3/19/18		(9,386	)
Corn	Short	54		960,525	3/14/18		12,691
Cotton	Long	1		36,405	3/07/18		502
Gold 100 Oz	Long	50		6,383,500	2/26/18		(49,931	)
Low Sulphur Gas Oil	Long	60		3,348,000	1/11/18		(34,066	)
Natural Gas	Short	56		1,694,000	12/27/17		115,593
Natural Gas	Short	3		90,960	1/29/18		943
NY Harbor ULSD	Long	39		3,108,269	12/29/17		(43,375	)
RBOB Gasoline	Long	36		2,615,760	12/29/17		(73,064	)
RBOB Gasoline	Long	1		73,131	1/31/18		(137	)
Silver	Long	2		164,740	3/27/18		(4,639	)
Soybean Meal	Short	25		824,500	3/14/18		2,672
Soybean Oil	Long	11		224,796	3/14/18		(3,869	)
Sugar	Short	15		253,344	2/28/18		(3,693	)
Wheat	Short	53		1,147,450	3/14/18		24,731
WTI Crude Oil	Long	9		516,600	12/19/17		13,990
Zinc	Long	45		3,563,156	12/18/17		18,645
Zinc	Short	45		3,563,156	12/18/17		707
Zinc	Long	33		2,603,081	3/19/18		(2,678	)
				64,139,351			(102,033	)
Equity Contracts
Amsterdam Index	Short	4		514,283	12/15/17		8,432
CAC 40 10 Euro Indexa	Short	10		638,866	12/15/17		(10,287	)
DAX Indexa	Long	14		5,437,506	12/15/17		159,223
DJIA Mini E-CBOT Indexa	Long	5		606,850	12/15/17		62,565
E-Mini Russell 2000 Indexa	Long	102		7,881,540	12/15/17		60,457
EURO STOXX 50 Indexa	Long	146		6,209,032	12/15/17		53,946
EURO STOXX 50 Index	Short	284		12,077,842	12/15/17		(182,867	)
FTSE 100 Indexa	Long	52		5,154,078	12/15/17		(22,071	)
FTSE 100 Index	Short	105		10,407,273	12/15/17		36,030
Hang Seng Indexa	Long	33		6,194,036	12/28/17		(120,261	)
Nasdaq 100 E-Mini Indexa	Long	17		2,165,460	12/15/17		93,582
Nikkei 225 Indexa	Long	9		1,820,072	12/07/17		281,692
S&P 500 E-Mini Indexa	Long	114		15,093,030	12/15/17		898,499
S&P 500 E-Mini Index	Short	61		8,076,095	12/15/17		(472,121	)
STOXX 600 Bank Index	Short	165		1,793,051	12/15/17		30
TOPIX Indexa	Long	40		6,386,779	12/07/17		781,660
				90,455,793			1,628,509
Interest Rate Contracts
3 Month Euribora	Long	375		111,876,012	12/17/18		26,031
3 Month Euribora	Long	8		2,383,594	6/17/19		(216	)
90 Day Eurodollara	Short	751		183,854,187	12/17/18		255,191
90 Day Eurodollara	Short	16		3,912,800	6/17/19		2,694
90 Day Sterlinga	Long	105		17,590,407	12/19/18		(24,362	)

franklintempleton.com Semiannual Report         59

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)
Interest Rate Contracts (continued)
Australian 10 Yr. Bonda		Short		2	$	197,766		12/15/17	$	(1,869	)
Canada 10 Yr. Bonda		Short		47		4,979,964		3/20/18		450
Euro BOBL		Short		16		2,504,475		12/07/17		3,019
Euro-BOBL		Short		12		1,887,212		3/08/18		4,095
Euro-Bund		Short		30		5,810,321		12/07/17		(17,423	)
Euro-Buxl 30 Yr. Bond		Short		9		1,790,445		12/07/17		570
Long Gilt		Short		15		2,507,337		3/27/18		15,831
U.S. Treasury 2 Yr. Note		Long		108		23,155,875		3/29/18		(5,006	)
U.S. Treasury 5 Yr. Note		Short		21		2,448,141		12/29/17		45,757
U.S. Treasury 5 Yr. Note		Short		53		6,166,219		3/29/18		24,206
U.S. Treasury 10 Yr. Note		Long		3		372,141		3/20/18		(2,189	)
U.S. Treasury 10 Yr. Note		Short		77		9,551,609		3/20/18		58,277
U.S. Treasury Ultra 10 Yr. Note		Short		80		10,653,750		3/20/18		23,487
U.S. Treasury Ultra Bond		Short		16		2,638,000		3/20/18		11,655
						394,280,255				420,198
Total Futures Contracts									$	1,946,674

*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, 2017, the Fund had the following forward exchange contracts outstanding. See Note 1(e).

Forward Exchange Contracts

Currency	Counterpartya		Type		Quantity		Contract  Amount*			Settlement Date		Unrealized Appreciation		Unrealized Depreciation
OTC Forward Exchange Contracts
Brazilian Real		JPHQ		Buy		3,623,261		1,108,234			12/04/17	$	—	$	(1,863	)
Brazilian Real		JPHQ		Sell		3,623,261		1,102,080			12/04/17		—		(4,291	)
Brazilian Real		MSCS		Buy		3,125,000		970,859			12/04/17		—		(16,633	)
Brazilian Real		MSCS		Sell		3,125,000		957,444			12/04/17		3,218		—
Euro		MSCO		Sell		7,301		8,678			12/04/17		—		(15	)
Norwegian Krone		MSCO		Sell		36,165		4,351			12/04/17		3		—
Swedish Krona		MSCO		Sell		47,634		5,685			12/04/17		—		(8	)
Euro		MSCS		Buy		777,480		917,249			12/05/17		8,495		—
Euro		MSCS		Sell		730,000		870,715			12/05/17		1,505		—
Euro		UBSW		Sell		730,000		669,381	GBP		12/05/17		36,262		—
Euro		UBSW		Sell		709,414		2,975,000	TRY		12/05/17		669		(86,865	)
Russian Ruble		MSCS		Buy		50,065,000		854,060			12/05/17		1,529		—
Russian Ruble		MSCS		Sell		50,065,000		829,083			12/05/17		—		(26,506	)
Turkish Lira		UBSW		Sell		2,975,000		661,935	EUR		12/05/17		29,662		—
Euro		DBAB		Sell		730,000		15,722,813	MXN		12/06/17		1,083		(27,564	)
Mexican Peso		MSCS		Buy		19,205,000		1,004,708			12/06/17		24,744		—
Polish Zloty		MSCS		Buy		3,040,000		861,967			12/06/17		—		(592	)
Polish Zloty		MSCS		Sell		12,715,000		3,506,029			12/06/17		—		(96,730	)
British Pound		BOFA		Sell		450,000		590,031			12/11/17		—		(18,851	)
Euro		MSCS		Sell		725,000		875,999			12/12/17		12,286		—
Euro		BOFA		Sell		225,000		261,581			12/13/17		—		(6,488	)
British Pound		BNYM		Sell		3,547,591		4,686,898			12/15/17		—		(114,121	)
Euro		BNYM		Sell		12,230,408		14,420,020			12/15/17		—		(153,714	)
Euro		JPHQ		Buy		32,094		27,738			12/15/17		148		—
Euro		JPHQ		Sell		3,977,368		103,676,190	CZK		12/15/17		329,761		(224,526	)
Czech Koruna		JPHQ		Sell		103,676,190		3,949,631	EUR		12/15/17		240,250		(378,535	)
Swiss Franc		BNYM		Sell		127,093		128,379			12/15/17		—		(1,005	)
British Pound		MSCS		Sell		100,000		131,086			12/18/17		—		(4,264	)

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)
Indian Rupee		JPHQ		Sell		89,522,129		1,359,589		12/18/17	$	—		$    (25,917)
Australian Dollar		DBAB		Buy		20,000		15,164		12/20/17		—		(38	)
Australian Dollar		DBAB		Sell		909,000		692,188		12/20/17		4,685		—
Brazilian Real		BOFA		Sell		275,000		83,371		12/20/17		—		(452	)
British Pound		BNYM		Buy		217,841		290,617		12/20/17		4,258		—
British Pound		BNYM		Sell		447,993		605,848		12/20/17		176		(743	)
British Pound		DBAB		Buy		983,000		1,298,466		12/20/17		32,186		(34	)
British Pound		DBAB		Sell		1,585,000		2,119,470		12/20/17		1		(26,036	)
Canadian Dollar		BNYM		Sell		2,415,000		1,983,801		12/20/17		111,238		—
Canadian Dollar		DBAB		Buy		4,000		3,196		12/20/17		—		(95	)
Canadian Dollar		DBAB		Sell		4,000		3,160		12/20/17		58		—
Chinese Yuan		JPHQ		Sell		9,749,006		1,474,999		12/20/17		2,612		—
Euro		BNYM		Buy		8,000		9,619		12/20/17		—		(83	)
Euro		BNYM		Sell		5,099,655		6,064,111		12/20/17		18,622		(33,544	)
Euro		DBAB		Buy		3,056,000		3,567,098		12/20/17		75,799		—
Euro		DBAB		Sell		5,785,000		6,855,486		12/20/17		4,346		(44,852	)
Euro		JPHQ		Buy		5,041,985		5,994,780		12/20/17		33,790		(18,281	)
Euro		JPHQ		Sell		8,786,415		10,542,999		12/20/17		76,812		(7,643	)
Indian Rupee		JPHQ		Buy		50,591,630		776,183		12/20/17		6,628		—
Indian Rupee		JPHQ		Sell		50,591,630		782,002		12/20/17		—		(809	)
Japanese Yen		BNYM		Sell		256,966,000		2,317,164		12/20/17		31,037		—
Mexican Peso		JPHQ		Buy		88,185,731		4,630,792		12/20/17		92,303		(8,127	)
Mexican Peso		JPHQ		Sell		100,601,023		5,509,937		12/20/17		154,649		(23,480	)
Russian Ruble		JPHQ		Buy		469,340,023		8,029,408		12/20/17		10,138		(41,464	)
Russian Ruble		JPHQ		Sell		518,118,365		8,850,886		12/20/17		34,691		(13,125	)
South African Rand		JPHQ		Buy		61,440,070		4,382,197		12/20/17		83,163		(585	)
South African Rand		JPHQ		Sell		73,035,715		5,320,504		12/20/17		60,707		(47,619	)
South Korean Won		JPHQ		Sell		2,830,115,162		2,513,467		12/20/17		2,731		(90,276	)
Swiss Franc		BNYM		Sell		1,942,902		2,019,207		12/20/17		43,076		(2,771	)
Turkish Lira		JPHQ		Buy		19,396,436		5,127,495		12/20/17		10,804		(216,877	)
Turkish Lira		JPHQ		Sell		19,396,436		5,110,895		12/20/17		190,738		(1,266	)
Indonesian Rupiah		JPHQ		Buy		11,139,997,223		822,747		12/21/17		—		(715	)
Australian Dollar		BNYM		Sell		60,000		46,428		12/22/17		1,049		—
Australian Dollarb		MSCO		Buy		18,382,000		14,628,487		12/22/17		—		(725,787	)
Australian Dollarb		MSCO		Sell		28,750,000		21,944,837		12/22/17		204,786		(4,182	)
British Poundb		MSCO		Buy		14,711,000		19,699,994		12/22/17		239,596		(24,580	)
British Poundb		MSCO		Sell		5,566,000		7,328,526		12/22/17		366		(206,810	)
Canadian Dollar		BNYM		Sell		555,100		449,328		12/22/17		18,894		—
Canadian Dollarb		MSCO		Buy		21,671,000		17,670,088		12/22/17		—		(866,034	)
Canadian Dollarb		MSCO		Sell		6,120,000		4,819,659		12/22/17		74,108		—
Euro		BNYM		Sell		3,008,096		3,548,036		12/22/17		—		(38,300	)��
Eurob		MSCO		Buy		16,071,000		19,127,667		12/22/17		93,680		(61,051	)
Eurob		MSCO		Sell		3,156,000		3,743,579		12/22/17		2,159		(21,250	)
Hong Kong Dollar		BNYM		Sell		165,555		21,239		12/22/17		36		—
Japanese Yenb		MSCO		Buy		2,275,148,000		20,495,158		12/22/17		18,368		(269,846	)
Japanese Yenb		MSCO		Sell		3,640,292,000		32,414,991		12/22/17		158,390		(133,781	)
Mexican Pesob		MSCO		Buy		88,053,000		4,829,401		12/22/17		16,819		(140,072	)
Mexican Pesob		MSCO		Sell		42,669,000		2,279,156		12/22/17		17,422		(18,786	)
New Zealand Dollarb		MSCO		Buy		8,464,000		6,114,116		12/22/17		6		(330,842	)
New Zealand Dollarb		MSCO		Sell		17,314,000		12,002,408		12/22/17		174,451		(2,352	)
Singapore Dollar		BNYM		Sell		345,237		254,204		12/22/17		—		(1,815	)
Swiss Franc		BNYM		Sell		391,000		393,875		12/22/17		—		(4,448	)
Swiss Francb		MSCO		Buy		10,372,000		10,770,577		12/22/17		9,330		(213,640	)
Swiss Francb		MSCO		Sell		20,459,000		20,851,761		12/22/17		118,906		(109,344	)
Euro		DBAB		Sell		183,000		215,171		12/27/17		—		(3,089	)
South African Rand		MSCS		Sell		25,755,000		1,829,515		12/27/17		—		(39,869	)
Swedish Krona		MSCS		Buy		13,525,000		1,604,974		12/27/17		14,821		—

franklintempleton.com Semiannual Report         61

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		MSCO		Buy		213,270		281,785			12/28/17	$	7,008	$	—
British Pound		MSCO		Sell		546,624		720,926			12/28/17		—		(19,268	)
Canadian Dollar		MSCO		Buy		1,335,587		1,044,572			12/28/17		—		(8,823	)
Canadian Dollar		MSCO		Sell		10,474,441		8,295,093			12/28/17		172,330		(186	)
Euro		DBAB		Sell		230,000		271,736			12/28/17		—		(2,601	)
Euro		MSCO		Buy		271,140		318,043			12/28/17		5,364		—
Euro		MSCO		Sell		1,591,895		1,883,271			12/28/17		—		(15,490	)
Japanese Yen		MSCO		Sell		45,423,541		403,092			12/28/17		790		(2,019	)
Norwegian Krone		MSCO		Buy		4,371,726		538,804			12/28/17		—		(12,741	)
Swedish Krona		MSCO		Buy		7,440,364		903,459			12/28/17		130		(12,425	)
Swedish Krona		MSCO		Sell		2,439,491		291,957			12/28/17		27		(258	)
Swiss Franc		MSCO		Buy		182,770		185,123			12/28/17		1,181		—
Swiss Franc		MSCO		Sell		533,380		541,362			12/28/17		607		(2,937	)
Euro		BOFA		Sell		3,360,000		3,999,206			12/29/17		—		(8,795	)
Norwegian Krone		MSCS		Buy		12,480,000		1,519,378			12/29/17		—		(17,563	)
Brazilian Real		MSCS		Sell		3,125,000		967,717			1/02/18		16,602		—
Brazilian Real		JPHQ		Buy		2,751,149		840,302			1/03/18		—		(3,074	)
Czech Koruna		JPHQ		Sell		18,995,258		718,701	EUR		1/10/18		81,515		(113,772	)
Euro		JPHQ		Sell		714,860		18,995,258	CZK		1/10/18		97,514		(60,672	)
Euro		JPHQ		Sell		3,841		4,257			1/10/18		—		(328	)
Colombian Peso		MSCS		Sell		780,000,000		259,007			1/30/18		1,831		—
Mexican Peso		MSCO		Buy		8,931,000		458,565			2/28/18		13,162		—
Mexican Peso		MSCO		Sell		20,000,000		1,057,548			2/28/18		1,166		—
Philippine Peso		BOFA		Buy		145,790,000		2,861,433			5/21/18		11,936		—
Total Forward Exchange Contracts												$	3,349,213	$	(5,264,233	)
Net unrealized appreciation (depreciation)														$	(1,915,020	)

*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).

At November 30, 2017, the Fund had the following credit default swap contracts outstanding. See Note 1(e).

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		12/20/21		1,810,000	$	(16,560	)		$    51,249			$   (67,809	)
Government of South Africa		(1.00	%)		Quarterly		12/20/21		2,644,000		45,088			181,272			(136,184	)
Government of South Africa		(1.00	%)		Quarterly		6/20/22		1,495,000		40,679			77,628			(36,949	)
Government of South Korea		(1.00	%)		Quarterly		12/20/21		1,947,567		(37,767	)		(56,447	)		18,680
Government of South Korea		(1.00	%)		Quarterly		12/20/22		262,074		(5,205	)		(6,260	)		1,055
Government of Turkey		(1.00	%)		Quarterly		9/20/20		1,976,000		13,687			157,717			(144,030	)
Government of Turkey		(1.00	%)		Quarterly		12/20/20		1,723,000		15,784			104,521			(88,737	)
Government of Turkey		(1.00	%)		Quarterly		12/20/21		429,000		10,436			26,236			(15,800	)
Traded Index
CDX.NA.HY.29		(5.00	%)		Quarterly		12/20/22		2,350,000		(185,847	)		(191,231	)		5,384
CDX.NA.IG.29		(1.00	%)		Quarterly		12/20/22		850,000		(19,298	)		(18,147	)		(1,151	)

62         Semiannual Report franklintempleton.com

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

CONSOLIDATED STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin K2 Alternative Strategies Fund (continued)

Credit Default Swap Contracts (continued)

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 (continued)
Contracts to Sell Protectionc,d
Single Name
Government of Russia		1.00	%		Quarterly					9/20/20		2,800,131			$  25,244			$(339,144	)		$364,388			BB+
Government of Russia		1.00	%		Quarterly					6/20/21		413,000			1,835			(30,563	)		32,398			BB+
Government of Russia		1.00	%		Quarterly					12/20/21		374,000			116			(13,889	)		14,005			BB+
Government of Turkey		1.00	%		Quarterly					12/20/22		952,000			(43,123	)		(43,050	)		(73	)		BB+
Total Centrally Cleared Swap Contracts															$(154,931	)		$(100,108	)		$ (54,823	)
OTC Swap Contracts
Contracts to Buy Protectionc							Counterparty
Single Name
Enel SpA		(1.00	%)		Quarterly			BZWS		12/20/22		900,000	EUR		(24,100	)		(15,337	)		(8,763	)
Government of China		(1.00	%)		Quarterly			MSCS		12/20/22		500,000			(11,267	)		(9,185	)		(2,082	)
Government of South Korea		(1.00	%)		Quarterly			MSCS		12/20/22		440,000			(9,618	)		(5,569	)		(4,049	)
Government of Turkey		(1.00	%)		Quarterly			MSCS		12/20/22		65,605			2,841			3,245			(404	)
Government of Turkey		(1.00	%)		Quarterly			MSCS		12/20/22		460,000			19,917			16,841			3,076
Government of Turkey		(1.00	%)		Quarterly			BOFA		12/20/22		409,395			17,726			20,248			(2,522	)
Intesa Sanpaolo SpA		(1.00	%)		Quarterly			BZWS		12/20/22		300,000	EUR		(7,319	)		(2,990	)		(4,329	)
iTraxx Asia Ex Japan		(1.00	%)		Quarterly			MSCS		12/20/22		945,000			(13,536	)		(9,131	)		(4,405	)
Traded Index
CDX.EM.28		(1.00	%)		Quarterly			BOFA		12/20/22		1,140,000			40,204			48,301			(8,097	)
CMBX.NA.BBB-.S6		(3.00	%)		Monthly			MSCS		5/11/63		51,000			8,075			5,430			2,645
CMBX.NA.BBB-.S6		(3.00	%)		Monthly			MSCS		5/11/63		104,000			16,466			15,051			1,415
CMBX.NA.BBB-.S6		(3.00	%)		Monthly	��		MSCS		5/11/63		154,000			24,383			16,065			8,318
Total OTC Swap Contracts															$   63,772			$   82,969			$ (19,197	)
Total Credit Default Swap Contracts															$  (91,159	)		$  (17,139	)		$ (74,020	)

^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, 2017, the Fund had the following cross-currency swap contracts outstanding. See Note 1(e).

Cross-Currency Swap Contracts

Description	Payment Frequency		Counterparty		Maturity Date		Notional Amount			Value/Unrealized Appreciation (Depreciation)
OTC Swap Contracts
Receive Fixed 10.33%		Quarterly		BOFA		12/20/22		3,781,032	TRY		$ (66,042)
Pay Floating 3 Month USD-LIBOR								1,081,840	USD
Receive Fixed 10.92%		Quarterly		BOFA		12/20/22		1,803,687	TRY		(21,453)
Pay Floating 3 Month USD-LIBOR								493,350	USD
Receive Fixed 10.32%		Quarterly		DBAB		12/20/22		6,448,505	TRY		(113,415)
Pay Floating 3 Month USD-LIBOR								1,861,578	USD
Total Cross-Currency Swap Contracts											$(200,910)

franklintempleton.com Semiannual Report         63

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

CONSOLIDATED STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin K2 Alternative Strategies Fund (continued)

At November 30, 2017, the Fund had the following interest rate swap contracts outstanding. See Note 1(e).

Interest Rate Swap Contracts

Description	Payment Frequency		Maturity Date		Notional          Amount*		Value/Unrealized Appreciation (Depreciation)
Centrally Cleared Swap Contracts
Receive Fixed rate 2.07%
Pay Floating rate 3 Month CABA		Semi-Annually		9/20/21		5,360,000 CAD		$25,500
Receive Fixed rate 2.10%
Pay Floating rate 3 Month CABA		Semi-Annually		9/14/21		2,900,000 CAD		16,262
Receive Fixed rate 2.11%
Pay Floating rate 3 Month CABA		Semi-Annually		9/15/21		7,000,000 CAD		42,455
Receive Fixed rate 2.12%
Pay Floating rate 3 Month CABA		Semi-Annually		9/15/21		7,000,000 CAD		43,562
Receive Fixed rate 2.12%
Pay Floating rate 3 Month CABA		Semi-Annually		9/20/21		7,000,000 CAD		44,359
Receive Fixed rate 8.37%
Pay Floating rate BRL-BRLCDI		Annually		1/02/20		5,607,583 BRL		—
Receive Fixed rate 8.38%
Pay Floating rate BRL-BRLCDI		Annually		1/02/20		5,607,583 BRL		—
Receive Fixed rate 8.79%
Pay Floating rate BRL-BRLCDI		Annually		1/04/21		4,073,299 BRL		(13,141	)
Receive Fixed rate 9.38%
Pay Floating rate BRL-BRLCDI		Annually		1/04/21		6,883,499 BRL		15,411
Receive Fixed rate 9.94%
Pay Floating rate BRL-BRLCDI		Annually		1/04/21		7,428,212 BRL		47,938
Receive Floating rate 3 Month CABA
Pay Fixed rate 2.35%		Semi-Annually		9/14/27		1,200,000 CAD		(12,422	)
Receive Floating rate 3 Month CABA
Pay Fixed rate 2.37%		Semi-Annually		9/15/27		2,800,000 CAD		(31,824	)
Receive Floating rate 3 Month CABA
Pay Fixed rate 2.37%		Semi-Annually		9/15/27		2,800,000 CAD		(30,762	)
Receive Floating rate 3 Month CABA
Pay Fixed rate 2.39%		Semi-Annually		9/20/27		2,800,000 CAD		(35,961	)
Receive Floating rate 3 Month CABA
Pay Fixed rate 2.36%		Semi-Annually		9/20/27		2,290,000 CAD		(25,380	)
Receive Floating rate 3 Month USD-LIBOR
Pay Fixed rate 1.41%		Semi-Annually		7/18/26		1,663,200		118,083
Receive Floating rate 6 Month GBP-LIBOR
Pay Fixed rate 1.41%		Semi-Annually		8/04/67		133,000 GBP		3,430
Receive Floating rate 6 Month GBP-LIBOR
Pay Fixed rate 1.60%		Semi-Annually		12/03/46		399,138 GBP		721
Receive Floating rate 6 Month GBP-LIBOR
Pay Fixed rate 1.56%		Semi-Annually		11/29/46		761,018 GBP		10,367
Receive Floating rate 6 Month GBP-LIBOR
Pay Fixed rate 1.37%		Semi-Annually		1/05/67		800,000 GBP		38,675
Receive Floating rate 6 Month GBP-LIBOR
Pay Fixed rate 1.44%		Semi-Annually		1/07/47		688,548 GBP		32,920
Total Interest Rate Swap Contracts								$290,193

*In U.S. dollars unless otherwise indicated.

64         Semiannual Report franklintempleton.com

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

CONSOLIDATED STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin K2 Alternative Strategies Fund (continued)

At November 30, 2017, the Fund had the following total return swap contracts outstanding. See Note 1(e).

Total Return Swap Contracts

Underlying Instrument

Financing Rate

Payment Frequency

Counter- party

Maturity Date

Notional         Value*

Value/Unrealized Appreciation (Depreciation)

OTC Swap Contracts

Equity Contracts - Longa

Abertis Infraestructuras SA

1-Day EONIA + 0.65%

Monthly

MSCS

9/04/19

3,290,894 EUR

$     254,609

Accor SA

1-Month EURIBOR + 0.50%

Monthly

MSCS

1/10/18

832,564 EUR

112,355

Air China Ltd.

1-Day HONIX + 0.95%

Monthly

MSCS

7/09/19

3,887,922 HKD

103,417

Air France-KLM

1-Month EURIBOR + 0.50%

Monthly

MSCS

1/10/18

507,428 EUR

(29,676

)

Akzo Nobel NV

1-Day EONIA + 0.65%

Monthly

MSCS

9/04/19

1,480,320 EUR

(28,968

)

Aldermore Group PLC

1-Month LIBOR + 0.45%

Monthly

DBAB

7/03/18

374,189 GBP

1,449

Alphabet Inc.

1-Month LIBOR + 0.50%

Monthly

MSCS

9/20/18

1,434,043

359,738

Altaba Inc.

1-Day FEDEF + 0.40%

Monthly

MSCS

12/20/18

2,684,157

2,147,875

Anima Holding SpA

1-Month LIBOR + 0.50%

Monthly

MSCS

4/12/18

50,563 EUR

(3,328

)

Antofagasta PLC

1-Month LIBOR + 0.50%

Monthly

MSCS

1/18/18

367,607 GBP

165,877

Barclays PLC

1-Month LIBOR + 0.50%

Monthly

MSCS

4/12/18

795,949 GBP

85,724

BNP Paribas SA

1-Month LIBOR + 0.50%

Monthly

MSCS

4/12/18

2,144,333 EUR

(46,628

)

Booker Group PLC

1-Month LIBOR + 0.45%

Monthly

DBAB

7/03/18

2,735,179 GBP

199,497

Booker Group PLC

1-Day SONIA + 0.65%

Monthly

MSCS

9/04/19

1,635,529 GBP

205,726

CalAtlantic Group Inc.

1-Day FEDEF + 0.40%

Monthly

MSCS

12/21/17

1,061,880

89,098

Caterpillar Inc.

1-Month LIBOR + 0.50%

Monthly

MSCS

9/20/18

1,698,492

724,641

CECONOMY AG

1-Day EONIA + 0.65%

Monthly

MSCS

11/02/18

733,714 EUR

167,816

Celesio AG

1-Day EONIA + 0.65%

Monthly

MSCS

11/02/18

2,349,449 EUR

16,645

Christian Dior SE

1-Day EONIA + 0.65%

Monthly

MSCS

9/04/19

570,753 EUR

98,426

Clariant AG

1-Day TOIS + 0.65%

Monthly

MSCS

9/24/19

2,179,290 CHF

203,944

CR Bard Inc.

1-Day FEDEF + 0.40%

Monthly

MSCS

12/21/17

337,492

15,494

Croda International PLC

1-Month LIBOR + 0.50%

Monthly

MSCS

4/12/18

318,543 GBP

9,174

Danone SA

1-Month LIBOR + 0.50%

Monthly

MSCS

4/12/18

3,073,133 EUR

103,787

Delta Air Lines Inc.

1-Month LIBOR + 0.50%

Monthly

MSCS

9/20/18

1,663,191

106,665

easyJet PLC

1-Month LIBOR + 0.50%

Monthly

MSCS

1/18/18

131,085 GBP

19,269

EDP Renovaveis SA

1-Day EONIA + 0.65%

Monthly

MSCS

9/04/19

620,900 EUR

(3,369

)

Euler Hermes Group

1-Month LIBOR + 0.45%

Monthly

DBAB

12/03/18

572,805 EUR

1,617

FirstEnergy Corp.

1-Day FEDEF + 0.40%

Monthly

MSCS

12/20/18

2,554,312

5,411

Frontier Communications Corp.

1-Month LIBOR + 0.75%

Monthly

DBAB

6/15/19

178,305

36,427

GKN PLC

1-Day SONIA + 0.65%

Monthly

MSCS

2/06/18

830,467 GBP

(48,428

)

Global Logistic Properties Ltd.

1-Month SIBOR + 0.65%

Monthly

MSCS

1/15/19

5,792,198 SGD

102,332

Hikma Pharmaceuticals PLC

1-Month LIBOR + 0.50%

Monthly

MSCS

4/12/18

413,386 GBP

21,156

Iliad SA

1-Month LIBOR + 0.50%

Monthly

MSCS

4/12/18

3,998,301 EUR

(254,620

)

International Consolidated Airlines Group SA

1-Month LIBOR + 0.50%

Monthly

MSCS

1/18/18

408,382 GBP

138,675

ITV PLC

1-Month LIBOR + 0.50%

Monthly

MSCS

4/12/18

1,884,515 GBP

49,205

Kering

1-Month EURIBOR + 0.50%

Monthly

MSCS

1/10/18

197,219 EUR

121,058

Knight-Swift Transportation Holdings Inc.

1-Month LIBOR + 0.50%

Monthly

MSCS

9/20/18

1,274,283

509,259

Ladbrokes Coral Group PLC

1-Day SONIA + 0.65%

Monthly

MSCS

2/06/18

221,035 GBP

6,351

LafargeHolcim Ltd.

1-Month LIBOR + 0.50%

Monthly

MSCS

7/26/18

3,498,761 CHF

(178,446

)

Las Vegas Sands Corp.

1-Month LIBOR + 0.50%

Monthly

MSCS

9/20/18

1,697,803

246,019

Monster Beverage Corp.

1-Month LIBOR + 0.50%

Monthly

MSCS

9/20/18

960,224

264,391

Nestle SA

1-Month LIBOR + 0.50%

Monthly

MSCS

7/26/18

3,696,418 CHF

36,529

Nets A/S

1-Week CIBOR + 0.65%

Monthly

MSCS

9/23/19

7,728,730 DKK

5,506

NVR Inc.

1-Month LIBOR + 0.50%

Monthly

MSCS

9/20/18

2,876,948

3,322,130

Paysafe Group PLC

1-Day SONIA + 0.65%

Monthly

MSCS

2/06/18

1,442,127 GBP

6,740

Paysafe Group PLC

1-Month LIBOR + 0.45%

Monthly

DBAB

7/03/18

517,469 GBP

(254

)

Plastic Omnium SA

1-Month EURIBOR + 0.50%

Monthly

MSCS

1/10/18

668,566 EUR

186,282

Premier Oil PLC

1-Month LIBOR + 0.40%

Monthly

DBAB

1/17/18

22,287 GBP

(15,329

)

Premier Oil PLC

1-Month LIBOR + 0.40%

Monthly

DBAB

1/17/18

63,747 GBP

(43,844

)

Remy Cointreau SA

1-Month LIBOR + 0.50%

Monthly

MSCS

4/12/18

382,478 EUR

2,229

Rio Tinto PLC

1-Month LIBOR + 0.50%

Monthly

MSCS

1/18/18

612,455 GBP

44,718

Rio Tinto PLC

1-Month LIBOR + 0.50%

Monthly

MSCS

9/20/18

2,955,965

479,377

Rockwell Collins Inc.

1-Day FEDEF + 0.40%

Monthly

MSCS

12/21/17

1,167,138

15,771

franklintempleton.com Semiannual Report         65

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

Counter- party

Maturity Date

Notional Value*

Value/Unrealized Appreciation (Depreciation)

OTC Swap Contracts (continued)

Equity Contracts - Longa (continued)

RSA Insurance Group PLC

1-Month LIBOR + 0.50%

Monthly

MSCS

4/12/18

1,108,279

GBP

$

(4,380

)

Sky PLC

1-Day SONIA + 0.65%

Monthly

MSCS

2/06/18

2,267,040

GBP

65,359

Smith & Nephew PLC

1-Month LIBOR + 0.50%

Monthly

MSCS

4/12/18

1,080,814

GBP

(32,335

)

Smiths Group PLC

1-Month LIBOR + 0.50%

Monthly

MSCS

4/12/18

1,112,876

GBP

(35,399

)

Smurfit Kappa Group PLC

1-Month LIBOR + 0.50%

Monthly

MSCS

1/18/18

742,179

GBP

65,428

Societe Generale SA

1-Month LIBOR + 0.50%

Monthly

MSCS

4/12/18

1,937,461

EUR

(75,248

)

Sports Direct International PLC

1-Month LIBOR + 0.50%

Monthly

MSCS

4/12/18

890,398

GBP

(8,774

)

Suzuki Motor Corp.

1-Month LIBOR + 0.75%

Monthly

DBAB

11/16/18

73,775,400

JPY

4,496

Take-Two Interactive Software Inc.

1-Month LIBOR + 0.50%

Monthly

MSCS

9/20/18

2,174,144

2,458,146

Tatts Group Ltd.

1-Day RBACR + 0.50%

Monthly

MSCS

9/04/19

1,436,445

AUD

51,431

Tencent Holdings Ltd.

1-Day HONIX + 0.95%

Monthly

MSCS

7/09/19

2,797,440

HKD

49,199

Thyssenkrupp AG

1-Day EONIA + 0.65%

Monthly

MSCS

11/02/18

892,703

EUR

(54,931

)

Toshiba Corp.

1-Month LIBOR + 0.55%

Monthly

MSCS

9/26/19

32,037,727

JPY

(38,928

)

Tribune Media Co.

1-Day FEDEF + 0.40%

Monthly

MSCS

12/21/17

346,709

13,329

Unilever PLC

1-Day SONIA + 0.65%

Monthly

MSCS

2/06/18

154,918

GBP

(3,883

)

Vivendi SA

1-Day EONIA + 0.65%

Monthly

MSCS

10/30/18

1,063,769

EUR

173,464

Vodafone Group PLC

1-Day SONIA + 0.65%

Monthly

MSCS

2/06/18

1,139,583

GBP

46,940

Welltower Inc.

1-Month LIBOR + 0.75%

Monthly

DBAB

6/15/19

370,313

2,408

Worldpay Group PLC

1-Day SONIA + 0.65%

Monthly

MSCS

9/04/19

1,427,866

GBP

65,647

Zodiac Aerospace

1-Month LIBOR + 0.45%

Monthly

DBAB

12/03/18

1,773,268

EUR

6,243

12,887,731

Equity Contracts - Shortb

Ablynx NV

1-Month EURIBOR - 3.00%

Monthly

BNPP

11/28/18

254,679

EUR

(6,085

)

Adidas AG

1-Day EONIA - 0.35%

Monthly

MSCS

4/12/18

1,569,270

EUR

59,182

Akorn Inc.

1-Day FEDEF - 0.35%

Monthly

MSCS

5/21/19

304,976

5,214

Alibaba Group Holding Ltd.

1-Day FEDEF - 0.35%

Monthly

MSCS

12/20/18

2,257,352

(1,074,870

)

Alstria Office REIT-AG

1-Month LIBOR - 0.40%

Monthly

DBAB

7/19/18

3,046,207

EUR

(100,685

)

AMAG Pharmaceuticals Inc.

1-Month LIBOR - 0.35%

Monthly

DBAB

6/15/19

449,018

8,061

Apollo Commercial Real Estate Finance Inc.

1-Month LIBOR - 0.35%

Monthly

DBAB

6/15/19

15,560

(362

)

ASM Pacific Technology Ltd.

1-Month HIBOR - 0.75%

Monthly

BNPP

4/27/18

14,427,790

HKD

55,912

ASM Pacific Technology Ltd.

1-Month LIBOR - 0.43%

Monthly

DBAB

7/19/18

10,320,420

HKD

139,093

Ayala Land Inc.

1-Month LIBOR - 4.00%

Monthly

BNPP

12/28/17

780,557

20,493

Ayala Land Inc.

1-Month LIBOR - 2.20%

Monthly

DBAB

7/20/18

438,867

(13,271

)

BASF SE

1-Day EONIA - 0.40%

Monthly

MSCS

9/04/19

139,364

EUR

(8,291

)

BE Semiconductor Industries NV

1-Month EURIBOR - 0.35%

Monthly

BNPP

12/04/18

406,636

EUR

2,860

Becton Dickinson and Co.

1-Day FEDEF - 0.35%

Monthly

MSCS

2/06/19

106,501

(15,293

)

Celanese Corp., A

1-Day FEDEF - 0.35%

Monthly

MSCS

2/06/19

169,544

(5,812

)

Chugoku Electric Power Co. Inc.

1-Month LIBOR - 0.40%

Monthly

BNPP

8/29/18

5,054,410

JPY

(1,421

)

Consumer Discretionary Select Sector SPDR ETF

1-Day FEDEF

Monthly

MSCS

11/08/19

1,993,630

(85,443

)

Consumer Staples Select Sector SPDR ETF

1-Day FEDEF - 0.15%

Monthly

MSCS

11/08/19

1,962,791

(108,544

)

CP All PCL

1-Month LIBOR - 1.00%

Monthly

DBAB

2/06/18

262,568

(5,627

)

Croda International PLC

1-Day SONIA - 0.35%

Monthly

MSCS

2/06/18

143,072

GBP

(17,888

)

Ctrip.com International Ltd.

1-Month LIBOR - 0.35%

Monthly

DBAB

6/15/19

2,987,880

(12,738

)

DCM Holdings Co. Ltd.

1-Month LIBOR - 0.40%

Monthly

DBAB

11/16/18

138,345,500

JPY

(77,208

)

DHT Holdings Inc.

1-Month LIBOR - 0.35%

Monthly

DBAB

6/15/19

368,143

(10,913

)

DISH Network Corp.

1-Month LIBOR - 0.35%

Monthly

DBAB

6/15/19

1,157,856

(547

)

Eastman Chemical Co.

1-Day FEDEF - 0.35%

Monthly

MSCS

2/06/19

165,699

(8,517

)

EDION Corp.

1-Month LIBOR - 3.50%

Monthly

DBAB

11/16/18

106,814,615

JPY

(32,618

)

EI Group PLC

1-Month LIBOR - 0.40%

Monthly

DBAB

1/17/18

267,913

GBP

(41,767

)

Emergent BioSolutions Inc.

1-Month LIBOR - 0.35%

Monthly

DBAB

6/15/19

3,123,372

(444,494

)

ENN Energy Holdings Ltd.

1-Month LIBOR - 0.43%

Monthly

DBAB

7/19/18

280,775

HKD

(478

)

ENN Energy Holdings Ltd.

1-Month HIBOR - 0.40%

Monthly

BNPP

8/29/18

1,709,400

HKD

3,039

Envestnet Inc.

1-Month LIBOR - 0.35%

Monthly

DBAB

6/15/19

273,461

14,576

Euronet Worldwide Inc.

1-Month LIBOR - 0.35%

Monthly

DBAB

6/15/19

1,238,277

(69,167

)

66         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	Counter- party	Maturity Date		Notional  Value*			Value/Unrealized Appreciation (Depreciation)
OTC Swap Contracts (continued)
Equity Contracts - Shortb (continued)
Evonik Industries AG	1-Day EONIA - 0.40%	Monthly	MSCS		9/04/19		141,569	EUR	$	(5,444	)
Fresenius SE & Co. KGaA	1-Month LIBOR - 0.40%	Monthly	DBAB		7/19/18		572,584	EUR		57,430
Fresenius SE & Co. KGaA	1-Month LIBOR - 0.35%	Monthly	BNPP		10/29/18		534,968	EUR		8,372
Frontier Communications Corp.	1-Month LIBOR - 17.00%	Monthly	DBAB		6/15/19		123,103			(34,769	)
Golar LNG Ltd.	1-Month LIBOR - 0.35%	Monthly	DBAB		6/15/19		1,132,551			(91,412	)
Great Portland Estates PLC	1-Month LIBOR - 0.40%	Monthly	DBAB		1/17/18		339,669	GBP		1,119
Haitian International Holdings Ltd.	1-Month LIBOR - 0.40%	Monthly	DBAB		7/19/18		6,525,000	HKD		71,974
Haitian International Holdings Ltd.	1-Month HIBOR - 0.40%	Monthly	BNPP		9/28/18		1,106,300	HKD		7,073
Hannon Armstrong Sustainable Infrastructure Capital Inc.	1-Month LIBOR - 0.35%	Monthly	DBAB		6/15/19		208,733			(2,873	)
Hazama Ando Corp.	1-Month LIBOR - 0.40%	Monthly	BNPP		12/27/18		135,408,800	JPY		(13,747	)
HubSpot Inc.	1-Month LIBOR - 0.35%	Monthly	DBAB		6/15/19		411,525			(18,171	)
Hurricane Energy PLC	1-Month LIBOR - 0.55%	Monthly	BNPP		11/28/18		143,664			(3,482	)
Iberdrola SA	1-Month LIBOR - 0.40%	Monthly	DBAB		7/19/18		2,064,058	EUR		(51,499	)
IHH Healthcare Bhd	1-Month LIBOR - 3.11%	Monthly	DBAB		9/20/18		366,014	SGD		(4,305	)
Inmarsat PLC	1-Month LIBOR - 0.40%	Monthly	DBAB		4/03/18		80,385			32
Insulet Corp.	1-Month LIBOR - 0.35%	Monthly	DBAB		6/15/19		1,246,456			(61,099	)
InterDigital Inc.	1-Month LIBOR - 0.35%	Monthly	DBAB		6/15/19		1,464,554			(103,634	)
Invacare Corp.	1-Month LIBOR - 0.35%	Monthly	DBAB		6/15/19		499,815			(4,152	)
iShares STOXX Europe 600 UCITS ETF DE	1-Day EONIA - 0.63%	Monthly	MSCS		1/10/18		16,928	EUR		(184	)
J Sainsbury PLC	1-Month LIBOR - 0.40%	Monthly	BNPP		12/29/17		304,288	GBP		(15,602	)
J Sainsbury PLC	1-Month LIBOR - 0.50%	Monthly	DBAB		1/17/18		14,993	GBP		(741	)
j2 Global Inc.	1-Month LIBOR - 0.35%	Monthly	DBAB		6/15/19		1,539,142			(64,545	)
Japan Tobacco Inc.	1-Day MUTSCALM - 0.40%	Monthly	MSCS		11/28/19		228,724	JPY		(50	)
JD Sports Fashion PLC	1-Day SONIA - 0.30%	Monthly	MSCS		4/12/18		170,493	GBP		12,086
K’s Holdings Corp.	1-Month LIBOR - 0.40%	Monthly	DBAB		11/16/18		306,209,700	JPY		(248,688	)
Larsen & Toubro Ltd.	1-Month LIBOR - 2.50%	Monthly	DBAB		3/17/18		174,160			(2,445	)
LendingTree Inc.	1-Month LIBOR - 0.35%	Monthly	DBAB		6/15/19		800,700			(88,895	)
Lennar Corp., A	1-Day FEDEF - 0.35%	Monthly	MSCS		12/20/18		943,560			(75,291	)
Lennar Corp., B	1-Day FEDEF - 0.35%	Monthly	MSCS		12/20/18		15,786			(886	)
Liberty Braves Group	1-Month LIBOR - 0.35%	Monthly	DBAB		6/15/19		62,734			(2,821	)
Liberty Media Corp.	1-Month LIBOR - 0.35%	Monthly	DBAB		6/15/19		226,351			(1,766	)
Liberty Media Corp.-Liberty SiriusXM	1-Month LIBOR - 0.35%	Monthly	DBAB		6/15/19		1,078,649			1,397
Ligand Pharmaceuticals Inc.	1-Month LIBOR - 0.35%	Monthly	DBAB		6/15/19		1,508,602			131,144
Live Nation Entertainment Inc.	1-Month LIBOR - 0.35%	Monthly	DBAB		6/15/19		404,300			(408	)
LVMH Moet Hennessy Louis Vuitton SE	1-Day EONIA - 0.40%	Monthly	MSCS		4/12/18		1,729,809	EUR		32,402
LVMH Moet Hennessy Louis Vuitton SE	1-Day EONIA - 0.40%	Monthly	MSCS		10/30/18		559,773	EUR		(63,124	)
Marine Harvest ASA	1-Month EURIBOR - 0.65%	Monthly	BNPP		12/31/18		832,386	EUR		11,446
Molina Healthcare Inc.	1-Month LIBOR - 0.35%	Monthly	DBAB		6/15/19		1,818,530			(47,205	)
Nagoya Railroad Co. Ltd.	1-Month LIBOR - 0.40%	Monthly	BNPP		12/27/18		180,272,100	JPY		(100,654	)
NASDAQ-100 Total Return Index	1-Day FEDEF - 0.15%	Monthly	MSCS		11/08/19		1,979,046			(22,581	)
National Grid PLC	1-Month LIBOR - 0.40%	Monthly	BNPP		3/28/18		94,047	GBP		(3,287	)
National Health Investors Inc.	1-Month LIBOR - 0.35%	Monthly	DBAB		6/15/19		467,728			(3,351	)
Nice Ltd.	1-Month LIBOR - 0.35%	Monthly	DBAB		6/15/19		504,049			(17,649	)
Nuance Communications Inc.	1-Month LIBOR - 0.35%	Monthly	DBAB		6/15/19		712,089			(48,523	)
Nyrstar NV	1-Month LIBOR - 7.50%	Monthly	DBAB		1/15/18		135,024	EUR		7,617
Nyrstar NV	1-Month EURIBOR - 11.00%	Monthly	BNPP		4/27/18		140,220	EUR		5,976
OCI NV	1-Month LIBOR - 2.00%	Monthly	DBAB		7/19/18		94,326	EUR		(3,330	)
Oita Bank Ltd.	1-Month LIBOR - 0.40%	Monthly	DBAB		11/16/18		1,002,960			(16,894	)
Pacific Basin Shipping Ltd.	1-Month LIBOR - 1.30%	Monthly	DBAB		7/19/18		1,192,633	HKD		(1,837	)
Palo Alto Networks Inc.	1-Month LIBOR - 0.35%	Monthly	DBAB		6/15/19		1,767,109			(81,151	)
Pattern Energy Group Inc.	1-Month LIBOR - 0.35%	Monthly	DBAB		6/15/19		74,418			(3,794	)
Playtech PLC	1-Month LIBOR - 0.40%	Monthly	DBAB		7/19/18		329,433	EUR		(26,951	)
Playtech PLC	1-Month LIBOR - 0.40%	Monthly	BNPP		12/31/18		154,648	EUR		(3,582	)
Premier Oil PLC	1-Month LIBOR - 11.50%	Monthly	DBAB		1/17/18		47,785	GBP		647
Premier Oil PLC	1-Month LIBOR - 11.50%	Monthly	DBAB		4/03/18		479,422			(7,877	)

franklintempleton.com Semiannual Report         67

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	Counter- party	Maturity Date		Notional Value*			Value/Unrealized Appreciation (Depreciation)
OTC Swap Contracts (continued)
Equity Contracts - Shortb (continued)
Primary Health Properties PLC	1-Month LIBOR - 4.50%	Monthly	DBAB		1/17/18		254,548	GBP		$        (8,981	)
Primary Health Properties PLC	1-Month LIBOR - 2.75%	Monthly	BNPP		1/29/18		17,035	GBP		(359	)
QIAGEN NV	1-Month LIBOR - 0.35%	Monthly	BNPP		10/29/18		1,366,569			8,563
Red Hat Inc.	1-Month LIBOR - 0.35%	Monthly	DBAB		6/15/19		2,829,039			(66,281	)
Richter Gideon Nyrt	1-Month LIBOR - 0.50%	Monthly	BNPP		12/29/17		1,012,419	EUR		40,633
Richter Gideon Nyrt	1-Month LIBOR - 0.40%	Monthly	DBAB		1/17/18		2,187,853	EUR		56,258
S&P 500 Total Return Index	1-Day FEDEF - 0.20%	Monthly	MSCS		11/08/19		1,978,596			(49,417	)
Sankyo Co. Ltd.	1-Month LIBOR - 0.40%	Monthly	DBAB		11/16/18		8,388,000	JPY		(5,116	)
SAS AB	1-Month LIBOR - 3.50%	Monthly	DBAB		11/05/18		1,179,435	SEK		(9,531	)
SAS AB	1-Week STIBOR - 3.25%	Monthly	BNPP		1/02/19		526,856	SEK		(1,511	)
Seino Holdings Co. Ltd.	1-Month LIBOR - 0.40%	Monthly	DBAB		11/16/18		25,616,000	JPY		(24,481	)
Shionogi & Co. Ltd.	1-Month LIBOR - 0.40%	Monthly	DBAB		11/16/18		86,788,200	JPY		(335	)
Ship Finance International Ltd.	1-Month LIBOR - 0.57%	Monthly	DBAB		6/15/19		2,300,201			(87,822	)
Sibanye Gold Ltd.	1-Month LIBOR - 1.00%	Monthly	DBAB		12/10/18		714,041			(11,796	)
Siliconware Precision Industries Co. Ltd.	1-Month LIBOR - 0.35%	Monthly	DBAB		6/15/19		97,194			(4,790	)
Sinclair Broadcast Group Inc.	1-Day FEDEF - 0.35%	Monthly	MSCS		5/21/19		60,254			(8,791	)
SKF AB	1-Week STIBOR - 0.50%	Monthly	MSCS		8/20/19		45,806	SEK		(1,041	)
Sogefi SpA	1-Month LIBOR - 3.00%	Monthly	DBAB		6/11/18		59,260	EUR		(11,515	)
Solvay SA	1-Day EONIA - 0.50%	Monthly	MSCS		11/02/18		135,993	EUR		6,318
St. Modwen Properties PLC	1-Month LIBOR - 0.40%	Monthly	DBAB		1/17/18		8,649	GBP		80
Starwood Property Trust Inc.	1-Month LIBOR - 0.35%	Monthly	DBAB		6/15/19		107,477			(696	)
STMicroelectronics NV	1-Month LIBOR - 0.35%	Monthly	BNPP		12/31/18		174,590			10,298
Suzuki Motor Corp.	1-Month LIBOR - 0.40%	Monthly	BNPP		1/29/18		88,156,800	JPY		10,473
Tabcorp Holdings Ltd.	1-Day RBACR - 0.64%	Monthly	MSCS		12/05/17		170,538	AUD		(22,993	)
Teijin Ltd.	1-Month LIBOR - 0.40%	Monthly	DBAB		11/16/18		37,916,258	JPY		(10,460	)
Tesco PLC	1-Day SONIA - 0.35%	Monthly	MSCS		2/06/18		1,276,145	GBP		(122,307	)
Tesco PLC	1-Month LIBOR - 0.40%	Monthly	DBAB		7/03/18		2,083,555	GBP		(157,350	)
The Medicines Co.	1-Month LIBOR - 0.35%	Monthly	DBAB		6/15/19		795,118			39,186
Toho Holdings Co. Ltd.	1-Month LIBOR - 0.40%	Monthly	DBAB		11/16/18		53,907,000	JPY		(16,905	)
Tohoku Electric Power Co. Inc.	1-Month LIBOR - 0.40%	Monthly	DBAB		11/16/18		4,981,000	JPY		(4,198	)
Unilever NV.	1-Day EONIA - 0.35%	Monthly	MSCS		4/12/18		1,422,714	EUR		1,950
Unilever NV.	1-Day SONIA - 0.40%	Monthly	MSCS		9/04/19		158,174	GBP		3,539
United Technologies Corp.	1-Day FEDEF - 0.35%	Monthly	MSCS		2/06/19		252,112			(20,484	)
Utilities Select Sector SPDR Fund	1-Day FEDEF - 0.41%	Monthly	MSCS		2/06/19		2,021,659			(39,487	)
Utilities Select Sector SPDR Fund	1-Day FEDEF - 0.15%	Monthly	MSCS		11/08/19		1,974,536			(48,689	)
Vantiv Inc., Class A	1-Day SONIA - 0.35%	Monthly	MSCS		8/20/19		1,254,879	GBP		(66,554	)
Volvo AB	1-Week STIBOR - 0.50%	Monthly	MSCS		8/20/19		50,382	SEK		(890	)
Welltower Inc.	1-Month LIBOR - 0.35%	Monthly	DBAB		6/15/19		265,609			1,181
Workday Inc.	1-Month LIBOR - 0.30%	Monthly	BNPP		11/28/18		73,217			7,612
Workday Inc.	1-Month LIBOR - 0.35%	Monthly	DBAB		6/15/19		1,480,573			56,751
Yamada Denki Co. Ltd.	1-Month LIBOR - 0.40%	Monthly	DBAB		11/16/18		196,798,840	JPY		(79,770	)
Yamagata Bank Ltd.	1-Month LIBOR - 1.50%	Monthly	DBAB		11/16/18		858,623			4,051
Yamaguchi Financial Group Inc.	1-Month LIBOR - 0.40%	Monthly	DBAB		11/16/18		2,542,439			(66,296	)
Yuexiu Transport Infrastructure Ltd.	1-Month LIBOR - 1.88%	Monthly	DBAB		7/19/18		4,298,795	HKD		2,674
										(3,532,872	)
Fixed Income Contracts - Longa
Ablynx NV	1-Month EURIBOR + 0.80%	Monthly	BNPP		11/28/18		308,602	EUR		2,931
ACS Actividades Finance BV	1-Month LIBOR + 0.90%	Monthly	DBAB		2/09/18		2,287,075	EUR		56,866
Alstria Office REIT-AG	1-Month LIBOR + 0.90%	Monthly	DBAB		6/14/18		3,091,734	EUR		99,644
AMAG Pharmaceuticals Inc.	1-Month LIBOR + 0.75%	Monthly	DBAB		6/15/19		1,338,882			1,276
Apollo Commercial Real Estate Finance Inc.	1-Month LIBOR + 0.75%	Monthly	DBAB		3/15/19		67,041			857
Asia View Ltd.	1-Month LIBOR + 0.90%	Monthly	DBAB		8/20/18		1,100,375			(2,344	)
ASM Pacific Technology Ltd.	1-Month HIBOR + 0.90%	Monthly	BNPP		4/27/18		15,229,775	HKD		(31,928	)
ASM Pacific Technology Ltd.	1-Month LIBOR + 0.90%	Monthly	DBAB		5/18/18		16,034,667	HKD		(136,115	)

68         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	Counter- party	Maturity Date		Notional Value*			Value/Unrealized Appreciation (Depreciation)
OTC Swap Contracts (continued)
Fixed Income Contracts - Longa (continued)
AYC Finance Ltd.	1-Month LIBOR + 0.90%	Monthly	DBAB		5/12/18		645,125			$        12,324
AYC Finance Ltd.	1-Month LIBOR + 1.00%	Monthly	BNPP		11/29/18		1,173,000			(15,087	)
Banco Central de la Republica Argentina SA	3-Month LIBOR + 1.25%	Annually	JPHQ		5/16/18		585,290			20,104
Banco Central de la Republica Argentina SA	3-Month LIBOR + 1.25%	Monthly	JPHQ		6/21/18		387,610			8,379
BE Semiconductor Industries NV	1-Month EURIBOR + 0.80%	Monthly	BNPP		12/04/18		525,102	EUR		(2,621	)
Carillion Finance White 2015 Ltd.	1-Month LIBOR + 0.90%	Monthly	DBAB		7/19/18		1,276,611	GBP		(950,115	)
Chugoku Electric Power Co. Inc.	1-Month LIBOR + 0.75%	Monthly	BNPP		3/23/18		39,998,800	JPY		(4	)
Chugoku Electric Power Co. Inc.	1-Month LIBOR + 0.75%	Monthly	BNPP		5/29/18		119,263,680	JPY		(431	)
CP Foods Holdings Ltd.	1-Month LIBOR + 0.75%	Monthly	BNPP		1/29/18		219,236			(1,320	)
CP Foods Holdings Ltd.	1-Month LIBOR + 0.90%	Monthly	DBAB		8/20/18		645,458			7,823
Ctrip.com International Ltd.	1-Month LIBOR + 0.75%	Monthly	DBAB		5/18/18		2,547,756			9,299
Ctrip.com International Ltd.	1-Month LIBOR + 0.75%	Monthly	DBAB		6/15/19		2,483,325			7,211
Dana Gas Sukuk Ltd.	1-Month LIBOR + 0.90%	Monthly	DBAB		1/17/18		127,715			9,117
DCM Holdings Co. Ltd.	1-Month LIBOR + 0.90%	Monthly	DBAB		11/16/18		255,360,000	JPY		92,931
DHT Holdings Inc.	1-Month LIBOR + 0.75%	Monthly	DBAB		6/15/19		2,157,110			6,211
DISH Network Corp.	1-Month LIBOR + 0.75%	Monthly	DBAB		6/15/19		2,419,292			57,632
EDION Corp.	1-Month LIBOR + 0.90%	Monthly	DBAB		11/16/18		110,800,000	JPY		26,324
Emergent BioSolutions Inc.	1-Month LIBOR + 0.75%	Monthly	DBAB		6/15/19		3,144,024			387,366
ENN Energy Holdings Ltd.	1-Month LIBOR + 0.90%	Monthly	DBAB		2/26/18		299,308			(1,303	)
Enterprise Funding Ltd.	1-Month LIBOR + 0.90%	Monthly	DBAB		2/17/18		905,435	GBP		47,227
Envestnet Inc.	1-Month LIBOR + 0.75%	Monthly	DBAB		6/15/19		593,497			(8,815	)
Euronet Worldwide Inc.	1-Month LIBOR + 0.75%	Monthly	DBAB		6/15/19		1,697,957			75,834
Fresenius SE & Co. KGaA	1-Month LIBOR + 0.90%	Monthly	DBAB		7/19/18		682,500	EUR		(51,214	)
Fresenius SE & Co. KGaA	1-Month EURIBOR + 0.80%	Monthly	BNPP		10/29/18		644,230	EUR		(5,523	)
Golar LNG Ltd.	1-Month LIBOR + 0.75%	Monthly	DBAB		6/15/19		3,147,730			103,996
Golden Ocean Group Ltd.	1-Month LIBOR + 0.90%	Monthly	DBAB		10/12/18		964,252			2,866
Great Portland Estates Capital Jersey Ltd.	1-Month LIBOR + 0.90%	Monthly	DBAB		7/19/18		1,510,130	GBP		12,625
Green Plains Inc.	1-Month LIBOR + 1.00%	Monthly	DBAB		10/01/18		290,973			(11,056	)
Gulf Keystone Petroleum Ltd.	1-Month LIBOR + 0.90%	Monthly	DBAB		7/19/18		198,577			895
Haitian International Holdings Ltd.	1-Month LIBOR + 0.90%	Monthly	DBAB		5/12/18		2,105,639			(147,851	)
Hannon Armstrong Sustainable Infrastructure Capital Inc.	1-Month LIBOR + 0.40%	Monthly	DBAB		6/15/19		746,486			9,804
Hazama Ando Corp.	1-Month LIBOR + 0.75%	Monthly	BNPP		12/27/18		152,331,070	JPY		18,218
HubSpot Inc.	1-Month LIBOR + 0.75%	Monthly	DBAB		6/15/19		777,570			20,358
Hurricane Energy PLC	1-Month LIBOR + 0.80%	Monthly	BNPP		11/28/18		409,845			1,190
Indah Capital Ltd.	1-Month LIBOR + 1.00%	Monthly	DBAB		9/19/18		1,537,500	SGD		7,947
Inmarsat PLC	1-Month LIBOR + 1.00%	Monthly	DBAB		7/02/18		807,856			3,494
Insulet Corp.	1-Month LIBOR + 0.75%	Monthly	DBAB		6/15/19		1,802,903			79,474
InterDigital Inc./PA	1-Month LIBOR + 0.75%	Monthly	DBAB		6/15/19		2,794,742			117,132
Invacare Corp.	1-Month LIBOR + 0.75%	Monthly	DBAB		6/15/19		872,352			8,247
J Sainsbury PLC	1-Month LIBOR + 0.80%	Monthly	BNPP		12/29/17		1,913,312	GBP		2,714
J Sainsbury PLC	1-Month LIBOR + 0.90%	Monthly	DBAB		1/15/18		302,882	GBP		(818	)
j2 Global Inc.	1-Month LIBOR + 0.75%	Monthly	DBAB		6/15/19		2,514,881			70,529
K’s Holdings Corp.	1-Month LIBOR + 0.90%	Monthly	DBAB		11/16/18		310,445,940	JPY		221,462
Larsen & Toubro Ltd.	1-Month LIBOR + 1.50%	Monthly	DBAB		2/20/18		659,088			4,919
LendingTree Inc.	1-Month LIBOR + 0.75%	Monthly	DBAB		6/15/19		1,128,035			103,330
Liberty Media Corp.	1-Month LIBOR + 0.75%	Monthly	DBAB		6/15/19		1,806,274			19,000
Ligand Pharmaceuticals Inc.	1-Month LIBOR + 0.75%	Monthly	DBAB		6/15/19		1,582,674			(130,315	)
Live Nation Entertainment Inc.	1-Month LIBOR + 0.75%	Monthly	DBAB		5/15/19		523,971			2,454
Magyar Nemzeti Vagyonkezelo ZRT	1-Month EURIBOR + 0.80%	Monthly	BNPP		12/29/17		1,356,222	EUR		(21,661	)
Magyar Nemzeti Vagyonkezelo ZRT	1-Month LIBOR + 0.90%	Monthly	DBAB		1/17/18		3,418,724	EUR		(15,987	)
Marine Harvest ASA	1-Month EURIBOR + 0.80%	Monthly	BNPP		12/31/18		1,412,742	EUR		(9,125	)
Molina Healthcare Inc.	1-Month LIBOR + 0.75%	Monthly	DBAB		6/15/19		1,981,926			50,124
Nagoya Railroad Co. Ltd.	1-Month LIBOR + 0.75%	Monthly	BNPP		12/27/18		196,252,800	JPY		147,068
National Grid North America Inc.	1-Month LIBOR + 0.80%	Monthly	BNPP		3/28/18		1,490,072	GBP		6,429
National Health Investors Inc.	1-Month LIBOR + 0.75%	Monthly	DBAB		6/15/19		814,988			5,272

franklintempleton.com Semiannual Report     69

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	Counter- party	Maturity Date		Notional Value*		Value/Unrealized Appreciation (Depreciation)
OTC Swap Contracts (continued)
Fixed Income Contracts - Longa (continued)
Nice Systems Inc.	1-Month LIBOR + 0.75%	Monthly	DBAB		6/15/19		770,893			$    22,220
Nuance Communications Inc.	1-Month LIBOR + 0.75%	Monthly	DBAB		6/15/19		1,568,197			102,395
Nyrstar NV	1-Month LIBOR + 0.90%	Monthly	DBAB		1/15/18		446,386 EUR			(13,046	)
Nyrstar NV	1-Month EURIBOR + 0.80%	Monthly	BNPP		4/27/18		872,462 EUR			(1,737	)
OCI NV	1-Month LIBOR + 0.90%	Monthly	DBAB		2/09/18		2,386,050 EUR			5,607
Oita Bank Ltd.	1-Month LIBOR + 0.90%	Monthly	DBAB		12/19/17		2,463,875			(65,325	)
Palo Alto Networks Inc.	1-Month LIBOR + 0.75%	Monthly	DBAB		6/15/19		2,214,075			98,387
Pattern Energy Group Inc.	1-Month LIBOR + 0.75%	Monthly	DBAB		6/15/19		302,972			4,177
PB Issuer No. 4 Ltd.	1-Month LIBOR + 0.90%	Monthly	DBAB		8/20/18		1,012,097			(5,089	)
PHP Finance Jersey Ltd.	1-Month LIBOR + 0.90%	Monthly	DBAB		7/19/18		470,438 GBP			3,826
PT Jersey Ltd.	1-Month LIBOR + 0.90%	Monthly	DBAB		2/19/18		685,927 EUR			19,090
PT Jersey Ltd.	1-Month EURIBOR + 0.80%	Monthly	BNPP		12/31/18		231,897 EUR			2,536
QIAGEN NV	1-Month LIBOR + 0.80%	Monthly	BNPP		10/29/18		1,985,298			(12,334	)
Red Hat Inc.	1-Month LIBOR + 0.75%	Monthly	DBAB		6/15/19		2,997,785			69,026
Sacyr SA	1-Month LIBOR + 0.90%	Monthly	DBAB		4/12/18		99,764 EUR			705
Sacyr SA	1-Month EURIBOR + 0.80%	Monthly	BNPP		11/29/18		200,767 EUR			(30	)
Sankyo Co. Ltd.	1-Month LIBOR + 0.90%	Monthly	DBAB		11/16/18		110,110,000 JPY			8,222
SAS AB	1-Month LIBOR + 0.90%	Monthly	DBAB		11/05/18		1,137,132 SEK			5,817
SAS AB	1-Week STIBOR + 0.80%	Monthly	BNPP		1/02/19		2,350,481 SEK			2,576
Seino Holdings Co. Ltd.	1-Month LIBOR + 0.90%	Monthly	DBAB		10/01/18		33,450,000 JPY			31,220
Shionogi & Co. Ltd.	1-Month LIBOR + 0.90%	Monthly	DBAB		11/16/18		90,905,580 JPY			(1,655	)
Ship Finance International Ltd.	1-Month LIBOR + 0.75%	Monthly	DBAB		2/01/18		1,371,031			31,535
Ship Finance International Ltd.	1-Month LIBOR + 0.75%	Monthly	DBAB		6/15/19		1,825,287			33,835
Sibanye Gold Ltd.	1-Month LIBOR + 1.00%	Monthly	DBAB		12/10/18		1,454,250			12,548
Sogefi SpA	1-Month LIBOR + 0.90%	Monthly	DBAB		6/11/18		204,023 EUR			9,281
St. Modwen Properties Securities Jersey Ltd.	1-Month LIBOR + 0.90%	Monthly	DBAB		7/19/18		301,585 GBP			3,959
Starwood Property Trust Inc.	1-Month LIBOR + 0.75%	Monthly	DBAB		6/15/19		795,405			7,237
STMicroelectronics NV	1-Month LIBOR + 0.80%	Monthly	BNPP		12/28/18		259,955			(9,580	)
Suzuki Motor Corp.	1-Month LIBOR + 0.75%	Monthly	BNPP		1/29/18		15,113,080 JPY			(1,565	)
Teijin Ltd.	1-Month LIBOR + 0.90%	Monthly	DBAB		11/16/18		62,205,000 JPY			7,813
The Medicines Co.	1-Month LIBOR + 0.75%	Monthly	DBAB		6/15/19		1,511,860			(20,389	)
Toho Holdings Co. Ltd.	1-Month LIBOR + 0.90%	Monthly	DBAB		11/16/18		124,850,000 JPY			13,065
Tohoku Electric Power Co. Inc.	1-Month LIBOR + 0.90%	Monthly	DBAB		11/16/18		50,537,500 JPY			(485	)
Tohoku Electric Power Co. Inc.	1-Month LIBOR + 0.90%	Monthly	DBAB		11/16/18		209,265,000 JPY			(3,425	)
Workday Inc.	1-Month LIBOR + 0.75%	Monthly	BNPP		11/28/18		179,834			(6,743	)
Workday Inc.	1-Month LIBOR + 0.75%	Monthly	DBAB		6/15/19		1,940,327			(49,464	)
Yamada Denki Co. Ltd.	1-Month LIBOR + 0.90%	Monthly	DBAB		11/16/18		269,636,400 JPY			94,387
Yamagata Bank Ltd.	1-Month LIBOR + 0.90%	Monthly	DBAB		12/19/17		2,803,500			15,139
Yamaguchi Financial Group Inc.	1-Month LIBOR + 0.90%	Monthly	DBAB		12/19/17		3,827,550			107,276
										926,282
Fixed Income Contracts - Shortb
iBoxx USD Liquid High Yield Index	1-Month LIBOR	Quarterly	JPHQ		12/20/17		3,920,000			(24,293	)
iBoxx USD Liquid High Yield Index	1-Month LIBOR	Quarterly	JPHQ		12/20/17		2,815,000			(7,066	)
iBoxx USD Liquid High Yield Index	1-Month LIBOR	Quarterly	JPHQ		12/20/17		7,850,000			(51,623	)
iBoxx USD Liquid High Yield Index	1-Month LIBOR	Quarterly	JPHQ		12/20/17		3,920,000			(25,036	)
										(108,018	)
Total Return Swap Contracts									$	10,173,123

^*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 Abbreviations on page 90.

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FRANKLIN ALTERNATIVE STRATEGIES FUNDS

Consolidated Financial Statements

Consolidated Statement of Assets and Liabilities

November 30, 2017 (unaudited)

Franklin K2 Alternative Strategies Fund

Assets:
Investments in securities:
Cost - Unaffiliated issuers	$	864,023,633
Cost - Unaffiliated repurchase agreements		19,665,720
Value - Unaffiliated issuers	$	979,441,926
Value - Unaffiliated repurchase agreements		19,665,720
Cash		38,718,917
Foreign currency, at value (cost $425,656)		459,097
Receivables:
Investment securities sold		17,957,327
Capital shares sold		2,256,348
Dividends and interest		3,437,002
Deposits with brokers for:
Securities sold short		208,114,915
Exchange traded options written		117,441
OTC derivative contracts		36,626,844
Futures contracts		7,478,366
Centrally cleared swap contracts		4,574,440
Due from brokers		1,013,562
Variation margin on futures contracts		246,812
Variation margin on centrally cleared swap contracts		4,679
OTC swap contracts (upfront payments $128,357)		125,181
Unrealized appreciation on OTC forward exchange contracts		3,349,213
Unrealized appreciation on OTC swap contracts		17,377,447
Unrealized appreciation on unfunded loan commitments (Note 8)		2,270
Total assets		1,340,967,507
Liabilities:
Payables:
Investment securities purchased		18,211,582
Capital shares redeemed		2,092,090
Management fees		1,511,744
Distribution fees		68,109
Transfer agent fees		112,889
OTC swap contracts (upfront receipts $43,770)		42,212
Options written, at value (premiums received $546,001)		507,956
Securities sold short, at value (proceeds $ 206,365,192)		220,393,416
Due to brokers		2,018,548
Unrealized depreciation on OTC forward exchange contracts		5,264,233
Unrealized depreciation on OTC swap contracts		7,424,431
Accrued expenses and other liabilities		426,719
Total liabilities		258,073,929
Net assets, at value	$	1,082,893,578
Net assets consist of:
Paid-in capital	$	1,007,491,210
Undistributed net investment income		7,383,698
Net unrealized appreciation (depreciation)		111,694,423
Accumulated net realized gain (loss)		(43,675,753	)
Net assets, at value	$	1,082,893,578

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FRANKLIN ALTERNATIVE STRATEGIES FUNDS

CONSOLIDATED FINANCIAL STATEMENTS

Consolidated Statement of Assets and Liabilities (continued)

November 30, 2017 (unaudited)

Franklin K2 Alternative Strategies Fund

Class A:
Net assets, at value	$	118,839,430
Shares outstanding		10,437,763
Net asset value per sharea	$	11.39
Maximum offering price per share (net asset value per share ÷ 94.25%)	$	12.07
Class C:
Net assets, at value	$	52,524,412
Shares outstanding		4,687,850
Net asset value and maximum offering price per sharea	$	11.20
Class R:
Net assets, at value	$	553,009
Shares outstanding		48,501
Net asset value and maximum offering price per share	$	11.40
Class R6:
Net assets, at value	$	153,281,516
Shares outstanding		13,401,799
Net asset value and maximum offering price per share	$	11.44
Advisor Class:
Net assets, at value	$	757,695,211
Shares outstanding		66,346,640
Net asset value and maximum offering price per share	$	11.42

^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, 2017 (unaudited)

Franklin K2 Alternative Strategies Fund

Investment income:
Dividends:
Unaffiliated issuers	$	2,631,459
Interest:
Unaffiliated issuers		11,409,430
Total investment income		14,040,889
Expenses:
Management fees (Note 3a)		10,557,257
Distribution fees: (Note 3c)
Class A		149,788
Class C		267,871
Class R		1,476
Transfer agent fees: (Note 3e)
Class A		55,928
Class C		24,989
Class R		275
Class R6		2,495
Advisor Class		330,299
Custodian fees (Note 4)		55,175
Reports to shareholders		33,222
Registration and filing fees		100,632
Professional fees		208,718
Trustees fees and expenses		177,592
Dividends and interest on securities sold short		2,095,493
Other		98,234
Total expenses		14,159,444
Expense reductions (Note 4)		(124,384	)
Expenses waived/paid by affiliates (Note 3f)		(1,304,915	)
Net expenses		12,730,145
Net investment income		1,310,744
Realized and unrealized gains (losses):
Net realized gain (loss) from:
Investments:
Unaffiliated issuers		27,175,377
Written options		568,678
Foreign currency transactions		312,604
Forward exchange contracts		(5,799,686	)
Futures contracts		(11,110,343	)
Securities sold short		(14,869,933	)
Swap contracts		305,733
Net realized gain (loss)		(3,417,570	)
Net change in unrealized appreciation (depreciation) on:
Investments:
Unaffiliated issuers		23,020,752
Translation of other assets and liabilities denominated in foreign currencies		(83,377	)
Forward exchange contracts		1,916,940
Written options		(66,351	)
Futures contracts		4,613,845
Securities sold short		(7,527,774	)
Swap contracts		4,309,067
Net change in unrealized appreciation (depreciation)		26,183,102
Net realized and unrealized gain (loss)		22,765,532
Net increase (decrease) in net assets resulting from operations	$	24,076,276

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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, 2017			Year Ended
	(unaudited)			May 31, 2017
Increase (decrease) in net assets:
Operations:
Net investment income		$       1,310,744			$       3,232,356
Net realized gain (loss)		(3,417,570	)		26,907,437
Net change in unrealized appreciation (depreciation)		26,183,102			39,080,717
Net increase (decrease) in net assets resulting from operations		24,076,276			69,220,510
Distributions to shareholders from:
Net investment income:
Class A		—			(630,342	)
Class R		—			(2,647	)
Class R6		—			(2,240,746	)
Advisor Class		—			(4,861,190	)
Total distributions to shareholders		—			(7,734,925	)
Capital share transactions: (Note 2)
Class A		(3,147,091	)		(65,872,266	)
Class C		(3,932,520	)		(18,888,454	)
Class R		(56,218	)		231,379
Class R6		(115,951,550	)		(14,356,196	)
Advisor Class		66,351,554			(83,686,963	)
Total capital share transactions		(56,735,825	)		(182,572,500	)
Net increase (decrease) in net assets		(32,659,549	)		(121,086,915	)
Net assets:
Beginning of period		1,115,553,127			1,236,640,042
End of period		$1,082,893,578			$1,115,553,127
Undistributed net investment income included in net assets:
End of period		$       7,383,698			$       6,072,954

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FRANKLIN ALTERNATIVE STRATEGIES FUNDS

Notes to Consolidated Financial Statements

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. 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 as of 4 p.m. Eastern time each day the New York Stock Exchange (NYSE) is open for trading. 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 VC provides administration and oversight of the Fund’s valuation policies and procedures, which are approved annually by the Board. Among other things, these procedures allow the Fund to utilize independent pricing services, quotations from securities and financial instrument dealers, and other market sources to determine fair value.

Equity securities, exchange traded funds, exchange traded notes and derivative financial instruments (derivatives) 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 derivatives 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 VC convenes on a regular basis to review such financial instruments and considers a number of factors, including significant unobservable valuation inputs, when arriving at fair value. The VC 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

franklintempleton.com Semiannual Report         75

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Franklin K2 Alternative Strategies Fund (continued)

1. Organization and Significant Accounting Policies (continued)

a. Financial Instrument Valuation (continued)

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. The VC employs various methods for calibrating these valuation approaches including a regular review of key inputs and assumptions, transactional back-testing or disposition analysis, and reviews of any related market activity.

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. In order to minimize the potential for these differences, the VC monitors price movements 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

76         Semiannual Report franklintempleton.com

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Franklin K2 Alternative Strategies Fund (continued)

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 by the Fund at period end, as indicated in the Consolidated Statement of Investments, had been entered into on November 30, 2017.

d. Securities Purchased on a Delayed Delivery Basis

The Fund purchases securities on a delayed delivery basis, with payment and delivery scheduled for a future date. These transactions are subject to market fluctuations and are subject to the risk that the value at delivery may be more or less than the trade date purchase price. Although the Fund will generally purchase these securities with the intention of holding the securities, it may sell the securities before the settlement date. Sufficient assets have been segregated for these securities.

e. Derivative Financial Instruments

The Fund invested in derivatives 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,

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Franklin K2 Alternative Strategies Fund (continued)

1. Organization and Significant Accounting Policies (continued)

e. Derivative Financial Instruments (continued)

interest rate, certain foreign currencies and equity price risk. A futures contract is an agreement between the Fund and a coun-terparty 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 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 OTC cross currency swap contracts primarily to manage and/or gain exposure to certain foreign currencies. A cross currency swap is an agreement between the Fund and a counterparty to exchange cash flows (determined using either a fixed or floating rate) based on the notional amounts of two different currencies. The notional amounts are typically determined based on the spot exchange rates at the opening of the contract. Cross currency swaps may require the exchange of notional amounts at the opening and/or closing of the contract. 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. Upfront payments and receipts, if any, are reflected in the Consolidated Statement of Assets and Liabilities and represent compensating factors between stated terms of the cross currency swap contract and prevailing market conditions (interest rate 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 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

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Franklin K2 Alternative Strategies Fund (continued)

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 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.

f. Exchange Traded Notes

The Fund purchases exchange traded notes. Exchange traded notes are senior, unsecured, unsubordinated debt securities issued by an underwriting bank. Exchange traded notes are designed to provide investors access to the returns of various market benchmarks and intended to replicate the economic effects that would apply had the Fund directly purchased the underlying referenced asset or basket of assets. The risks of exchange traded notes include the credit risk of the issuer, counterparty risk, and the potential inability of the Fund to dispose of the exchange traded note in the normal course of business.

g. 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.

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, 2017, 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 inter-company 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, 2017, the net assets of the K2 Subsidiary were $20,063,004, representing 1.9% 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

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FRANKLIN ALTERNATIVE STRATEGIES FUNDS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Franklin K2 Alternative Strategies Fund (continued)

1. Organization and Significant Accounting Policies (continued)

i. Senior Floating Rate Interests (continued)

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.

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, 2017, 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. 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.

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FRANKLIN ALTERNATIVE STRATEGIES FUNDS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Franklin K2 Alternative Strategies Fund (continued)

2. Shares of Beneficial Interest

At November 30, 2017, 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, 2017						Year Ended May 31, 2017
	Shares			Amount			Shares			Amount
Class A Shares:
Shares sold		1,531,387		$	17,217,662			2,844,434		$	30,795,994
Shares issued in reinvestment of distributions		—			—			55,946			603,102
Shares redeemed		(1,810,263	)		(20,364,753	)		(8,995,275	)		(97,271,362	)
Net increase (decrease)		(278,876	)	$	(3,147,091	)		(6,094,895	)	$	(65,872,266	)
Class C Shares:
Shares sold		488,782		$	5,421,736			930,313		$	9,991,199
Shares redeemed		(844,162	)		(9,354,256	)		(2,694,807	)		(28,879,653	)
Net increase (decrease)		(355,380	)	$	(3,932,520	)		(1,764,494	)	$	(18,888,454	)
Class R Shares:
Shares sold		6,075		$	68,192			23,673		$	256,901
Shares issued in reinvestment of distributions		—			—			245			2,647
Shares redeemed		(11,024	)		(124,410	)		(2,617	)		(28,169	)
Net increase (decrease)		(4,949	)	$	(56,218	)		21,301		$	231,379
Class R6 Shares:
Shares sold		430,798		$	4,863,363			819,703		$	8,933,673
Shares issued in reinvestment of distributions		—			—			207,304			2,236,814
Shares redeemed		(10,780,782	)		(120,814,913	)		(2,353,888	)		(25,526,683	)
Net increase (decrease)		(10,349,984	)	$	(115,951,550	)		(1,326,881	)	$	(14,356,196	)
Advisor Class Shares:
Shares sold		12,897,585		$	145,365,285			20,997,587		$	228,852,167
Shares issued in reinvestment of distributions		—			—			340,700			3,676,152
Shares redeemed		(7,019,537	)		(79,013,731	)		(29,140,039	)		(316,215,282	)
Net increase (decrease)		5,878,048		$	66,351,554			(7,801,752	)	$	(83,686,963	)

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.

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FRANKLIN ALTERNATIVE STRATEGIES FUNDS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Franklin K2 Alternative Strategies Fund (continued)

3. Transactions with Affiliates (continued)

a. Management Fees (continued)

Prior to October 1, 2017, the Fund and K2 Subsidiary paid fees to K2 Advisors of 2.05% per year of the average daily net assets of the Fund and 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’s and K2 Subsidiary’s average daily net assets, and is not an additional expense of the Fund or K2 Subsidiary.

Subadvisors

Basso Capital Management, L.P.

Chatham Asset Management, LLC

Chilton Investment Company, LLC

Emso Asset Management Limited

Graham Capital Management, L.P.

Halcyon Arbitrage IC Management LP

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 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%

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FRANKLIN ALTERNATIVE STRATEGIES FUNDS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Franklin K2 Alternative Strategies Fund (continued)

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  broker/dealers	$21,316
CDSC retained	$  2,718

e. Transfer Agent Fees

Each class of shares pays transfer agent fees to Investor Services for its performance of shareholder servicing obligations. Effective November 1, 2017, the fees are based on an annualized asset based fee of 0.02% plus a transaction based fee. Prior to November 1, 2017, the fees were account based fees that varied based on fund or account type. 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, 2017, the Fund paid transfer agent fees of $413,986, of which $113,015 was retained by Investor Services.

f. Waiver and Expense Reimbursements

K2 Advisors has contractually agreed in advance to waive or limit its fees and to assume as its own expense certain expenses otherwise payable by the Fund so that the expenses (excluding distribution fees, acquired fund fees and expenses, and expenses related to securities sold short) for each class of the Fund do not exceed 1.95%, and Class R6 does not exceed 1.85% based on the average net assets of each class (other than certain non-routine expenses or costs, including those relating to litigation, indemnification, reorganizations, and liquidations) until September 30, 2018. Total expenses waived or paid are not subject to recapture subsequent to the Fund’s fiscal year end. Prior to October 1, 2017, expenses for Class R6 were limited to 1.86%.

g. Other Affiliated Transactions

At November 30, 2017, the shares of the Fund were owned by the following entities:

			Percentage of    Outstanding
	Shares		Sharesa
Franklin Moderate Allocation Fund		4,757,795	5.0%
Franklin Conservative Allocation Fund		3,022,216	3.2%
Franklin Growth Allocation Fund		2,920,915	3.1%
Franklin NextStep Moderate Fund		27,295	—%b
Franklin NextStep Growth Fund		13,226	—%b
		10,741,447	11.3%

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

^bRounds to less than 0.1%.

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FRANKLIN ALTERNATIVE STRATEGIES FUNDS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Franklin K2 Alternative Strategies 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, 2017, 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, 2017, the capital loss carryforwards were as follows:

Capital loss carryforwards:
Short term	$15,442,373
Long term	4,135,682
Total capital loss carryforwards	$19,578,055

At November 30, 2017, the cost of investments and net unrealized appreciation (depreciation) for income tax purposes were as follows:

Cost of investments	$701,965,610
Unrealized appreciation	$128,624,804
Unrealized depreciation	(41,786,552)
Net unrealized appreciation (depreciation)	$  86,838,252

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, swaps, 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, 2017, aggregated $1,021,297,819 and $1,099,993,318, 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, 2017, the aggregate long value of distressed company securities for which interest recognition has been discontinued was $4,218,173, representing 0.4% 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 enters 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 Statements of Investments.

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FRANKLIN ALTERNATIVE STRATEGIES FUNDS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Franklin K2 Alternative Strategies Fund (continued)

At November 30, 2017, unfunded commitments were as follows:

	Unfunded
Borrower	Commitment
Altice Financing SA, Term Loan B, 3.75%, (LIBOR + 2.75%), 1/06/26		$	115,000
California Resources Corp., Term Loan L, (LIBOR + 4.75%), 5.75%, 1/03/23			123,000
Duravant LLC, Term Loan, 4.583%, (LIBOR + 3.25%), 7/19/24			2,029
Radiate Holdco LLC, Term Loan B, 4.00%, (LIBOR + 3.00%), 2/01/24			238,387
Weight Watchers International Inc., Term Loan B, 5.75%, (LIBOR + 4.75%), 11/20/24			450,000
		$	928,416

9. Other Derivative Information

At November 30, 2017, 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	$	471,263	a	Variation margin on futures contracts	$	51,065	a
	Variation margin on centrally cleared swap contracts		439,683	a	Variation margin on centrally cleared swap contracts		149,490	a
	Unrealized appreciation on OTC swap contracts		2,660,782		Unrealized depreciation on OTC swap contracts		1,734,500
Foreign exchange contracts	Investments in securities, at value		45,077	b
	Unrealized appreciation on OTC forward exchange contracts		3,349,213		Unrealized depreciation on OTC forward exchange contracts		5,264,233
					Unrealized depreciation on OTC swap contracts		200,910
Credit contracts	Variation margin on centrally cleared swap contracts		435,910	a	Variation margin on centrally cleared swap contracts		490,733	a
	OTC swap contracts (upfront payments)		125,181		OTC swap contracts (upfront receipts)		42,212
	Unrealized appreciation on OTC swap contracts		15,454		Unrealized depreciation on OTC swap contracts		142,669
Equity contracts	Investments in securities, at value		2,599,344	b	Options written, at value		507,956
	Variation margin on futures contracts		2,436,116	a	Variation margin on futures contracts		807,607	a
	Unrealized appreciation on OTC swap contracts		14,701,211		Unrealized depreciation on OTC swap contracts		5,346,352
Commodity contracts	Variation margin on futures contracts		357,189	a	Variation margin on futures contracts		459,222	a
Totals		$	27,636,423			$	15,196,949

^a This 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.

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

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FRANKLIN ALTERNATIVE STRATEGIES FUNDS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Franklin K2 Alternative Strategies Fund (continued)

9. Other Derivative Information (continued)

For the period ended November 30, 2017, 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		$  (1,997,957	)	Futures contracts		$       59,097
	Swap contracts		3,289,908		Swap contracts		1,778,885
Foreign exchange contracts	Investments		(91,838	)a	Investments		55,105	a
	Forward exchange contracts		(5,799,686	)	Forward exchange contracts		1,916,940
	Swap contracts		(16,839	)	Swap contracts		(246,852	)
Credit contracts	Swap contracts		(893,938	)	Swap contracts		361,633
Equity contracts	Investments		(4,337,077	)a	Investments		(22,388	)a
	Written options		568,678		Written options		(66,351	)
	Futures contracts		(9,472,175	)	Futures contracts		4,832,216
	Swap contracts		(2,073,398	)	Swap contracts		2,415,401
Commodity contracts	Futures contracts		359,789		Futures contracts		(277,468	)
Totals			$(20,464,533	)			$10,806,218

^a Purchased 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, 2017, the average month end notional amount of futures contracts, options and swap contracts represented $652,690,998, $7,731,156 and $449,821,019, respectively. The average month end contract value of forward exchange contracts was $327,057,855.

At November 30, 2017, 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	$	3,349,213	$	5,264,233
Options Purchased		45,077		—
Swap Contracts		17,502,628		7,466,643
Total	$	20,896,918	$	12,730,876

^a 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.

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FRANKLIN ALTERNATIVE STRATEGIES FUNDS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Franklin K2 Alternative Strategies Fund (continued)

At November 30, 2017, 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 Receiveda		Net Amount (Not less than zero)
Counterparty
BNPP		$     376,412		$   (269,419)		$ —		$ —		$     106,993
BNYM		228,386		(228,386)		—		—		—
BOFA		125,562		(125,562)		—		—		—
BZWS		—		—		—		—		—
DBAB		3,412,203		(3,412,203)		—		—		—
JPHQ		1,537,437		(1,391,263)		—		—		146,174
MSCO		201,768		(74,170)		—		—		127,598
MSCOC		1,128,387		(1,128,387)		—		—		—
MSCS		13,820,170		(2,957,194)		—		—		10,862,976
UBSW		66,593		(66,593)		—		—		—
Total		$20,896,918		$(9,653,177)		$ —		$ —		$11,243,741

At November 30, 2017, 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 Pledgedb		Cash Collateral Pledgeda		Net Amount (Not less than zero)
Counterparty
BNPP		$     269,419		$   (269,419)		$ —		$             —		$          —
BNYM		350,544		(228,386)		—		—		122,158
BOFA		132,700		(125,562)		—		(7,138)		—
BZWS		31,419		—		—		—		31,419
DBAB		4,308,945		(3,412,203)		—		(896,742)		—
JPHQ		1,391,263		(1,391,263)		—		—		—
MSCO		74,170		(74,170)		—		—		—
MSCOC		3,128,357		(1,128,387)		—		(1,999,970)		—
MSCS		2,957,194		(2,957,194)		—		—		—
UBSW		86,865		(66,593)		—		—		20,272
Total		$12,730,876		$(9,653,177)		$ —		$(2,903,850)		$173,849

^a In 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.

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

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

See Note 1(e) regarding derivative financial instruments.

See Abbreviations on page 90.

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FRANKLIN ALTERNATIVE STRATEGIES FUNDS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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 9, 2018. 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, 2017, 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.

For movements between the levels within the fair value hierarchy, the Fund has adopted a policy of recognizing the transfers as of the date of the underlying event which caused the movement.

A summary of inputs used as of November 30, 2017, 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		$428,600,900		$      404,656		$2,410,988	b		$431,416,544
Exchange Traded Funds		660,233		—		—			660,233
Convertible Preferred Stocks		1,317,013		1,505,458		—			2,822,471
Preferred Stocks		739,235		—		3,261,810			4,001,045
Convertible Bonds		—		101,982,237		—			101,982,237
Convertible Bonds in Reorganization		—		9,180		134,040			143,220
Corporate Bonds and Notes		—		160,417,069		—			160,417,069
Corporate Bonds and Notes in Reorganization		—		4,074,953		—			4,074,953
Senior Floating Rate Interests		—		8,480,302		—			8,480,302
Foreign Government and Agency Securities		—		21,695,225		—			21,695,225
Asset-Backed Securities and Commercial Mortgage-Backed Securities		—		24,038,402		—			24,038,402
Options Purchased		2,599,344		45,077		—			2,644,421
Short Term Investments		217,065,804		19,665,720		—			236,731,524
Total Investments in Securities		$650,982,529		$342,318,279		$5,806,838			$999,107,646

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FRANKLIN ALTERNATIVE STRATEGIES FUNDS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Franklin K2 Alternative Strategies Fund (continued)

	Level 1		Level 2		Level 3		Total
Assets: (continued)
Other Financial Instruments:
Futures Contracts	$	3,264,568	$	—		$ —	$	3,264,568
Forward Exchange Contracts		—		3,349,213		—		3,349,213
Swap Contracts		—		18,134,957		—		18,134,957
Unfunded Loan Commitments		—		2,270		—		2,270
Total Other Financial Instruments	$	3,264,568	$	21,486,440		$ —	$	24,751,008
Liabilities:
Other Financial Instruments:
Options Written	$	507,956	$	—		$ —	$	507,956
Securities Sold Short		194,542,845		25,850,571		—		220,393,416
Futures Contracts		1,317,894		—		—		1,317,894
Forward Exchange Contracts		—		5,264,233		—		5,264,233
Swap Contracts		—		7,946,571		—		7,946,571
Total Other Financial Instruments	$	196,368,695	$	39,061,375		$ —	$	235,430,070

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

^b Includes securities determined to have no value at November 30, 2017.

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.

12. New Accounting Pronouncements

In March 2017, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2017-08, Receivables — Nonrefundable Fees and Other Costs (Subtopic 310-20): Premium Amortization on Purchased Callable Debt Securities. The amendments in the ASU shorten the amortization period for certain callable debt securities acquired at a premium, to be amortized to the earliest call date. The ASU does not require an accounting change for securities acquired at a discount; which continues to be amortized to maturity. The ASU is effective for fiscal years and interim periods within those fiscal years beginning after December 15, 2018. Management is currently evaluating the impact, if any, of applying this provision.

13. 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.

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FRANKLIN ALTERNATIVE STRATEGIES FUNDS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Franklin K2 Alternative Strategies Fund (continued)

Abbreviations

Counterparty		Currency		Selected Portfolio
BNPP	BNP Paribas	ARS	Argentine Peso	ADR	American Depositary Receipt
BNYM	The Bank of New York Mellon Corp.	AUD	Australian Dollar	ARM	Adjustable Rate Mortgage
BOFA	Bank of America, N.A.	BRL	Brazilian Real	ARPP7DRR	Argentina Central Bank 7 Day Repo
					Rate
BZWS	Barclays Bank PLC	CAD	Canadian Dollar	BADLAR	Argentina Deposit Rates Badlar Private
					Banks ARS
DBAB	Deutsche Bank A.G.	CHF	Swiss Franc	BRLCDI	Brazil Cetip Di Interbank Deposit Rate
JPHQ	JP Morgan Chase Bank, N.A.	COP	Colombian Peso	CABA	Canada Banker’s Acceptance
MSCO	Morgan Stanley & Co., LLC	CZK	Czech Koruna	CAC	Cotation Assistée en Continu
MSCS	Morgan Stanley Capital Services LLC	DKK	Danish Krone	CIBOR	Copenhagen Interbank Offered Rate
UBSW	UBS AG	EGP	Egyptian Pound	EONIA	Euro OverNight Index Average
		EUR	Euro	ETF	Exchange Traded Fund
Index		GBP	British Pound	EURIBOR	Euro Interbank Offered Rate
CDX.EM	CDX Emerging Markets Index	HKD	Hong Kong Dollar	FEDEF	Federal Funds Effective Rate
CDX.NA.HY	CDX North America High Yield Index	INR	Indian Rupee	FRN	Floating Rate Note
CDX.NA.IG	CDX North America Investment	JPY	Japanese Yen	FTSE	Financial Times Stock Exchange
	Grade Index
CMBX.NA	Commercial Mortgage Backed North	MXN	Mexican Peso	HIBOR	Hong Kong Interbank Offer Rate
	America Index
		MYR	Malaysian Ringgit	HONIX	Hong Kong Overnight Index Rate
		PHP	Philippine Peso	LIBOR	London InterBank Offered Rate
		PLN	Polish Zloty	MSCI	Morgan Stanley Capital International PLC
		RUB	Russian Ruble	MUTSCALM	Bank of Japan Estimate Unsecured
					Overnight Call Rate
		SEK	Swedish Krona	PIK	Payment In-Kind
		SGD	Singapore Dollar	PRIME	United States prime rate
		TRY	Turkish Lira	RBACR	Reserve Bank of Australia Cash Rate
		USD	United States Dollar	REIT	Real Estate Investment Trust
		ZAR	South African Rand	SIBOR	Singapore Interbank Offered Rate
				SONIA	Sterling Overnight Index Average
				SPDR	Standard & Poor’s Depositary Receipt
				STIBOR	Stockholm Interbank Offered Rate
				TOIS	Swiss Tomorrow-Overnight Index Swap
					Rate
				TOPIX	Tokyo Price Index
				ULSD	Ultra-Low Sulfur Diesel

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FRANKLIN ALTERNATIVE STRATEGIES FUNDS

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 US 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 US 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.

^© 2017-2018 Franklin Templeton Investments. All rights reserved. 068 S 01/18

  Semiannual Report and Shareholder Letter November 30, 2017

Franklin Templeton Investments

Gain From Our Perspective^®

At Franklin Templeton Investments, we’re dedicated to one goal: delivering exceptional asset management for our clients. By bringing together multiple, world-class investment teams in a single firm, we’re able to offer specialized expertise across styles and asset classes, all supported by the strength and resources of one of the world’s largest asset managers. This has helped us to become a trusted partner to individual and institutional investors across the globe.

Dear Fellow Shareholder:

During the six months ended November 30, 2017, generally upbeat economic data, encouraging corporate earnings and a supportive monetary policy were positives for US securities markets. At its June meeting, the US Federal Reserve (Fed) raised its target range for the federal funds rate 0.25% to 1.00%–1.25% amid signs of a growing US economy. The

10-year US Treasury yield began the period at 2.21% and ended the period at 2.42%. Commodities, as measured by the Bloomberg Commodity Index, posted a +4.04% total return during the six-month period, aided by a weak US dollar and strong global growth.¹

A couple of weeks after the end of the reporting period, the Fed raised its target range a quarter point to 1.25%–1.50% amid ongoing labor market strength and rising economic activity in the US. The Fed’s inflation outlook remained essentially the same.

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 made 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.

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, 2017, unless otherwise indicated. The information is not a complete analysis of every aspect of any market, country, industry, security or fund. Statements of fact are from sources considered reliable.

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 Pelagos Commodities Strategy Fund	3
Performance Summary	7
Your Fund’s Expenses	9
Consolidated Financial Highlights and Consolidated Statement of Investments	10
Consolidated Financial Statements	18
Notes to Consolidated Financial Statements	22
Shareholder Information	32

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

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Semiannual Report

Franklin Pelagos Commodities Strategy Fund

We are pleased to bring you Franklin Pelagos Commodities Strategy Fund’s semiannual report for the period ended November 30, 2017.

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 US government, its agencies and instrumentalities and other fixed income securities.

Performance Overview

The Fund’s Class A shares delivered a +4.58% 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, posted a +4.04% total return for the same period.¹ 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.

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 US economy grew during the six months under review. The economy strengthened in 2017’s third quarter compared to the second quarter largely due to growth in consumer spending across goods and services, business and inventory investment,

as well as net exports due to lower imports. The manufacturing and services sectors expanded during the period. The unemployment rate declined from 4.3% in May 2017, as reported at the beginning of the six-month period, to 4.1% at period-end.² Monthly retail sales were volatile but positive on average during the period. Annual inflation, as measured by the Consumer Price Index, increased from 1.9% in May 2017, as reported at the beginning of the period, to 2.2% at period-end.²

At its June meeting, the US Federal Reserve (Fed) raised its target range for the federal funds rate 0.25% to 1.00%–1.25%, amid signs of a growing US economy, strengthening labor market and improving business spending. At its subsequent meetings, the Fed kept its target range unchanged. However, minutes of its October 31–November 1 meeting indicated that the Fed continued to maintain a positive outlook for the US economy and signaled the possibility of a third rate hike in 2017, though concerns about the ongoing softness in inflation remained.

US equity markets rose during the period, benefiting from mostly upbeat economic data and better US corporate earnings. The markets were also supported by investor optimism arising from the US Fed chair’s comments indicating optimism about the US economy and the likelihood of gradual rate hikes. Furthermore, the Senate’s approval of a budget plan in October and its subsequent vote near period-end to begin debate on a tax reform bill raised expectations for reforms and aided equity markets. However, tensions between the US and North Korea and uncertainty surrounding US health care and tax reform plans curbed market sentiment at times. Nevertheless, the broad US stock market, as measured by the Standard & Poor’s^® 500 Index, generated a +10.89% total return for the period.¹

Commodity prices, as measured by the Bloomberg Commodity Index, delivered a positive return during the period, aided by a weak US dollar and strong global growth. Despite some volatility, oil prices rose, helped by positive global demand trends and geopolitical tensions surrounding the Middle East.

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 15.

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FRANKLIN PELAGOS COMMODITIES STRATEGY FUND

Oil prices were also aided by the extension of previously agreed-upon supply curtailments through the end of 2018 by the Organization of the Petroleum Exporting Countries (OPEC) and its partners, including Russia. Gold prices rose marginally as concerns surrounding North Korea’s missile program were partially offset by growing expectations for a Fed rate hike in December 2017. Metal prices generally rose, buoyed by favorable global economic conditions. Among agricultural commodities, prices of soybeans and sugar rose, while those of corn and wheat declined.

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 its semiannual period, the Fund obtained its commodities exposure through swaps on commodity indexes and through commodities futures and options on commodities futures. The asset coverage for this exposure was met by the

Portfolio Composition*

11/30/17

	% of Consolidated Net Assets
U.S. Treasury Bill	83.5%
FFCB	9.0%
FHLMC	7.7%
Institutional Fiduciary Trust Money Market Portfolio	4.4%
Other Assets, less Liabilities**	-4.6%

See Abbreviations on page 31.

*Portfolio composition 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.

**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 5 for additional information related to the Fund’s economic exposure to commodities.

Fund’s investments in US Treasury bills and other fixed income securities.

During the period, the Fund had positive contributions to performance from oil and oil products, industrial metals, and soybean products. Performance benefited from the returns of these economically sensitive commodities. Crude oil and oil products such as gasoline and diesel traded higher as OPEC and non-OPEC producers kept some production off the market. Industrial metals were stronger as a group due to Chinese and global demand growth expectations as well as anticipation for slower supply growth. The soybean complex (soybeans, soybean meal and soybean oil) was stronger due to improved processing margins in China and strong US exports of soybeans. Additionally, the US dollar moved lower against most foreign currencies over the period. The Fund outperformed its benchmark, the Bloomberg Commodity Index, during the period primarily due to active management in energy, agriculture and livestock.

In the energy sector, crude oil prices moved higher over the period as compliance to the supply reduction pact among OPEC and non-OPEC countries remained strong. US inventories of crude oil declined more than their expected seasonal pace, even with withdrawals from the Strategic Petroleum Reserve. Oil products traded stronger, helped by US refinery disruptions due to a powerful Atlantic hurricane season. US inventory levels of gasoline and distillate fuels declined at a strong pace. Returns from US natural gas were negative despite inventories moving from a surplus to their historical seasonal average to a deficit. US production of natural gas increased, as the Appalachian region continued to be dominant and other shale natural gas sources demonstrated strong production growth. Demand for natural gas slipped due to cooler summer weather and hurricane disruption, and heating

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FRANKLIN PELAGOS COMMODITIES STRATEGY FUND

demand had a slower-than-average start. Relative to its benchmark, the Fund’s returns from crude oil and natural gas fueled energy outperformance.

In metals, returns of industrial metals were positive, while returns from precious metals were negative over the period. Nickel returns were highest among the industrial metals in the Fund’s benchmark, followed by zinc, copper and aluminum. Strong stainless steel prices helped nickel returns, as stainless steel represents a major share of nickel demand, and the supply/demand balance of zinc continued to be in a global deficit due to production curtailments. Industrial metals were buffeted by strong Chinese growth expectations as well as strong industrial production growth in the eurozone and the US. Additionally, global purchasing manager indexes continued to signal expansionary conditions. However, inflation indicators underwhelmed market consensus over most of the period, which created a headwind to precious metals returns. Gold holdings of exchanged-traded funds increased modestly, whereas silver holdings decreased modestly, underscoring the lower returns of silver. Relative to its benchmark, the Fund’s returns from metals lagged due to positioning in industrial metals.

In agriculture and livestock, positive returns came from the soybean complex. Other agricultural and livestock commodities generated negative returns over the period. China soybean processing margins rose to seasonal levels and above, which encouraged imports of soybeans. Strong exports were the primary reason for the US Department of Agriculture’s (USDA’s) tighter projected US supply of soybeans than was projected in May 2017. The USDA’s US corn yield estimates increased almost five percentage points since May and the resulting higher production forecast was the primary reason for a higher supply forecast for the 2017–2018 US corn crop. Wheat prices struggled against the backdrop of strong Russian production and exports. Relative to its benchmark, the Fund’s agriculture and livestock holdings outperformed, driven by positioning in corn and live cattle.

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, 2017, the Fund’s exposure based on notional value represented 80.6% of consolidated net assets.

Commodity-Linked Total Return Swap Exposure*

	% of Consolidated Net Assets Long
Gold	11.8%
Corn	9.7%
Copper	8.8%
Soybeans	5.6%
Aluminum	5.3%
Natural Gas	5.2%
Live Cattle	5.0%
Unleaded Gasoline	3.8%
Nickel	3.7%
WTI Crude Oil	3.2%
Zinc	3.1%
Soybean Meal	2.9%
Soybean Oil	2.6%
Sugar	2.3%
Heating Oil	2.2%
Coffee	2.0%
Silver	2.0%
Cotton	1.4%

*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. 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, 2017, the Fund’s exposure based on notional value represented 19.7% of consolidated net assets.

Commodity Futures Exposure*

	% of Consolidated Net Assets Long
Brent Crude Oil	8.2%
Corn	2.5%
Natural Gas	1.9%
RBOB Gasoline	1.9%
Gold 100 Oz	1.9%
Live Cattle	1.3%
Cotton	1.0%
Sugar	1.0%

*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.

franklintempleton.com Semiannual Report         5

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
	Wayne D. Ryan, CAIA
	Portfolio Management Team

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

Stephen P. Burke is an executive vice president and co-founder of Franklin Alternative Strategies Advisers, LLC., formerly known as Pelagos Capital Management, LLC (“Pelagos”). Mr. Burke has over 30 years of investment experience across multiple asset classes and has been managing multi-alternative and commodity strategies since 2008. Prior to founding Pelagos, Mr. Burke worked at State Street Global Advisors for 10 years during which time he was the senior global strategist, head of global strategic asset allocation, and head of taxable fixed income. Mr. Burke earned a B.S. from the Carroll School of Management at Boston College.

John C. Pickart is an executive vice president, chief financial officer and co-founder of Franklin Alternative Strategies Advisers, LLC., formerly known as Pelagos Capital Management, LLC. Mr. Pickart has over 29 years of investment experience across multiple alternative and commodity strategies since 2008. Prior to founding Pelagos, Mr. Pickart worked at State Street Global Advisors for six years during which time he managed small-cap and mid-cap equity portfolios. Mr. Pickart earned an M.B.A. from the University of Chicago Booth School of Business and a B.S. from the University of Tampa. He is a Chartered Financial Analyst (CFA) charterholder.

Wayne D. Ryan is a research analyst and portfolio manager of Franklin Alternative Strategies Advisers, LLC, formerly known as Pelagos Capital Management, LLC (“Pelagos”). Mr. Ryan has over 15 years of investment and trading experience across multiple asset classes and has been managing multi-alternative and commodity strategies since 2008. He has been a member of the Pelagos team since January 2006. Prior to joining Pelagos, Mr. Ryan’s experience was highlighted by eight years of proprietary equity trading. Mr. Ryan earned an M.B.A. from the Carroll School of Management at Boston College and an A.B. from Harvard College. Mr. Ryan holds the Chartered Alternative Investment Analyst designation. He is a Chartered Financial Analyst (CFA) charterholder.

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FRANKLIN PELAGOS COMMODITIES STRATEGY FUND

Performance Summary as of November 30, 2017

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 11/30/17¹

Cumulative total return excludes sales charges. Average annual total return includes maximum sales charges. Sales charges will vary depending on the size of the investment and the class of share purchased. The maximum is 5.75% and the minimum is 0%. Class A: 5.75% maximum initial sales charge; Advisor Class: no sales charges. For other share classes, visit franklintempleton.com.

Share Class	Cumulative Total Return2	Average Annual Total Return3
A
6-Month	+4.58%	-1.39%
1-Year	-0.31%	-6.02%
3-Year	-20.10%	-9.03%
Since Inception (1/10/14)	-27.93%	-9.46%
Advisor
6-Month	+4.63%	+4.63%
1-Year	0.00%	0.00%
5-Year	-36.28%	-8.62%
Since Inception (12/7/11)	-34.50%	-6.83%

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.

franklintempleton.com Semiannual Report         7

FRANKLIN PELAGOS COMMODITIES STRATEGY FUND

PERFORMANCE SUMMARY

Total Annual Operating Expenses⁴

Share Class	With Waiver	Without Waiver
A	1.20%	1.91%
Advisor	0.95%	1.66%

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 9/30/18 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. 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 6/1/17	Ending Account Value 11/30/17	Expenses Paid During Period 6/1/17–11/30/171,2	Ending Account Value 11/30/17	Expenses Paid During Period 6/1/17–11/30/171,2	Net Annualized Expense Ratio2
A	$1,000	$1,045.80	$6.15	$1,019.05	$6.07	1.20%
C	$1,000	$1,040.20	$9.97	$1,015.29	$9.85	1.95%
R	$1,000	$1,044.40	$7.23	$1,018.00	$7.13	1.41%
R6	$1,000	$1,048.30	$3.39	$1,021.76	$3.35	0.66%
Advisor	$1,000	$1,046.30	$4.87	$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, 2017 (unaudited)		Year Ended May 31,
			2017		2016		2015		2014a
Class A
Per share operating performance
(for a share outstanding throughout the period)
Net asset value, beginning of period		$6.12		$6.47		$7.12		$9.44		$8.88
Income from investment operationsb:
Net investment income (loss)c		(0.01)		(0.04)		(0.08)		(0.09)		(0.08)
Net realized and unrealized gains (losses)		0.29		(0.31)		(0.57)		(2.23)		0.64
Total from investment operations		0.28		(0.35)		(0.65)		(2.32)		0.56
Net asset value, end of period		$6.40		$6.12		$6.47		$7.12		$9.44
Total returnd		4.58%		(5.41)%		(9.13)%		(24.58)%		6.31%
Ratios to average net assetse
Expenses before waiver and payments by affiliates and expense reduction		1.72%		1.71%		2.14%		2.05%		3.38%
Expenses net of waiver and payments by affiliates and expense reductionf		1.20%		1.20%		1.21%		1.25%		1.25%
Net investment income (loss)		(0.31)%		(0.61)%		(0.79)%		(0.94)%		(0.94)%
Supplemental data
Net assets, end of period (000’s)		$5,191		$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.

^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.

^fBenefit 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 HIGHLIGHTS

Franklin Pelagos Commodities Strategy Fund (continued)

	Six Months Ended November 30, 2017 (unaudited)		Year Ended May 31,
			2017			2016		2015		2014a
Class C					��
Per share operating performance
(for a share outstanding throughout the period)
Net asset value, beginning of period		$5.97		$6.36			$7.05		$9.41		$8.88
Income from investment operationsb:
Net investment income (loss)c		(0.03)		(0.10)			(0.16)		(0.15)		(0.09)
Net realized and unrealized gains (losses)		0.27		(0.29)			(0.53)		(2.21)		0.62
Total from investment operations		0.24		(0.39)			(0.69)		(2.36)		0.53
Net asset value, end of period		$6.21		$5.97			$6.36		$7.05		$9.41
Total returnd		4.02%		(6.13)%			(9.79)%		(25.08)%		5.97%
Ratios to average net assetse
Expenses before waiver and payments by affiliates and expense reduction		2.47%		2.46%			2.88%		2.75%		4.08%
Expenses net of waiver and payments by affiliates and expense reductionf		1.95%		1.95%			1.95%		1.95%		1.95%
Net investment income (loss)		(1.06)%		(1.36)%			(1.53)%		(1.64)%		(1.64)%
Supplemental data
Net assets, end of period (000’s)		$981		$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.

^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.

^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 Pelagos Commodities Strategy Fund (continued)

	Six Months Ended November 30, 2017 (unaudited)		Year Ended May 31,
			2017		2016		2015		2014a
Class R
Per share operating performance
(for a share outstanding throughout the period)
Net asset value, beginning of period		$  6.08		$  6.44		$  7.10		$  9.44		$  8.88
Income from investment operationsb:
Net investment income (loss)c		(0.02)		(0.05)		(0.06)		(0.10)		(0.06)
Net realized and unrealized gains (losses)		0.29		(0.31)		(0.60)		(2.24)		0.62
Total from investment operations		0.27		(0.36)		(0.66)		(2.34)		0.56
Net asset value, end of period		$  6.35		$  6.08		$  6.44		$  7.10		$  9.44
Total returnd		4.44%		(5.59)%		(9.30)%		(24.79)%		6.31%
Ratios to average net assetse
Expenses before waiver and payments by affiliates and expense reduction		1.93%		1.85%		2.34%		2.27%		3.58%
Expenses net of waiver and payments by affiliates and expense reductionf		1.41%		1.34%		1.41%		1.47%		1.45%
Net investment income (loss)		(0.52)%		(0.75)%		(0.99)%		(1.16)%		(1.14)%
Supplemental data
Net assets, end of period (000’s)		$24		$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%.

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, 2017 (unaudited)		Year Ended May 31,
			2017		2016		2015		2014a
Class R6
Per share operating performance
(for a share outstanding throughout the period)
Net asset value, beginning of period		$6.21		$6.53		$7.16		$9.46		$8.88
Income from investment operationsb:
Net investment income (loss)c		0.01		(0.01)		(0.02)		(0.04)		(0.03)
Net realized and unrealized gains (losses)		0.29		(0.31)		(0.61)		(2.26)		0.61
Total from investment operations		0.30		(0.32)		(0.63)		(2.30)		0.58
Net asset value, end of period		$6.51		$6.21		$6.53		$7.16		$9.46
Total returnd		4.83%		(4.90)%		(8.80)%		(24.31)%		6.53%
Ratios to average net assetse
Expenses before waiver and payments by affiliates and expense reduction		1.03%		1.02%		1.10%		1.53%		1.58%
Expenses net of waiver and payments by affiliates and expense reductionf		0.66%		0.70%		0.76%		0.86%		0.86%
Net investment income (loss)		0.23%		(0.11)%		(0.34)%		(0.55)%		(0.55)%
Supplemental data
Net assets, end of period (000’s)		$122,163		$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%.

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, 2017 (unaudited)			Year Ended May 31,
				2017			2016			2015			2014			2013
Advisor Class
Per share operating performance
(for a share outstanding throughout the period)
Net asset value, beginning of period		$  6.26			$  6.60			$  7.25			$  9.58			$  9.43			$  9.15
Income from investment operationsa:
Net investment income (loss)b		(0.01)			(0.03)			(0.09)			(0.07)			(0.05)			(0.08)
Net realized and unrealized gains (losses)		0.30			(0.31)			(0.56)			(2.26)			0.20			0.36
Total from investment operations		0.29			(0.34)			(0.65)			(2.33)			0.15			0.28
Less distributions from net investment income.		—			—			—			—			—			(—)	c
Net asset value, end of period		$  6.55			$  6.26			$  6.60			$  7.25			$  9.58			$  9.43
Total returnd		4.63%			(5.15)%			(8.97)%			(24.32)%			1.59%			3.06%
Ratios to average net assetse
Expenses before waiver and payments by affiliates and expense reduction		1.47%			1.46%			1.88%			1.75%			1.88%			1.14%
Expenses net of waiver and payments by affiliates and expense reduction		0.95%	f		0.95%	f		0.95%	f		0.95%	f		1.04%	f		1.10%
Net investment income (loss)		(0.06)%			(0.36)%			(0.53)%			(0.64)%			(0.70)%			(0.76)%
Supplemental data
Net assets, end of period (000’s)		$881			$2,062			$675			$248			$126			$107,853
Portfolio turnover rate		—%			42.22%			28.03%			62.10%			34.28%			21.47%

^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%.

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, 2017 (unaudited)

Franklin Pelagos Commodities Strategy Fund

	Principal Amount		Value
U.S. Government and Agency Securities 15.4%
FFCB, 0.96%, 7/27/18	$	10,000,000	$	9,961,440
FHLMC, 1.25%, 7/26/19		10,000,000		9,905,960
Total U.S. Government and Agency Securities (Cost $20,000,000)				19,867,400
Short Term Investments 89.2%
U.S. Government and Agency Securities 84.8%
a,b FFCB, 12/01/17		1,675,000		1,675,000
b U.S. Treasury Bill,
a,c 1/04/18		13,000,000		12,986,525
a4/12/18		13,000,000		12,927,369
5/24/18		11,100,000		11,025,024
7/19/18		19,900,000		19,716,126
8/16/18		9,500,000		9,398,556
10/11/18		42,500,000		41,922,180
Total U.S. Government and Agency Securities (Cost $109,783,571)				109,650,780
Total Investments before Money Market Funds (Cost $129,783,571)				129,518,180

	Shares
Money Market Funds (Cost $5,615,709) 4.4%
d,e Institutional Fiduciary Trust Money Market Portfolio, 0.75%		5,615,709	5,615,709
Total Investments (Cost $135,399,280) 104.6%			135,133,889
f Other Assets, less Liabilities (4.6)%			(5,893,576	)
Net Assets 100.0%			$129,240,313

^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 contracts. At November 30, 2017, the value of this security and/or cash pledged amounted to $1,548,393, representing 1.2% of net assets.

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

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

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

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FRANKLIN ALTERNATIVE STRATEGIES FUNDS

CONSOLIDATED STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin Pelagos Commodities Strategy Fund (continued)

At November 30, 2017, 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		169		$10,584,470		12/28/17		$(62,951)
Corn		Long		182		3,237,325		3/14/18		19,838
Cotton		Long		36		1,310,580		3/07/18		(11,468)
Gold 100 Oz		Long		19		2,425,730		2/26/18		(18,109)
Live Cattle		Long		34		1,699,660		2/28/18		(22,219)
Natural Gas		Long		82		2,480,500		12/27/17		(126,538)
RBOB Gasoline		Long		34		2,470,440		12/29/17		(5,676)
Sugar		Long		75		1,266,720		2/28/18		574
Total Futures Contracts										$(226,549)

*As of period end.

At November 30, 2017, 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

1/05/18

$

104,172,595

$(927,405)

^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		Percentage of Notional Valuee			Value/ Unrealized Appreciation (Depreciation)
Bloomberg Commodity Aluminum Subindex		$   6,875,391		6.6	%		$  (70,731)
Bloomberg Commodity Coffee Subindex		2,604,315		2.5	%		(73,547)
Bloomberg Commodity Copper Subindex		11,354,813		10.9	%		(16,868)
Bloomberg Commodity Corn Subindex		12,604,884		12.1	%		80,833
Bloomberg Commodity Cotton Subindex		1,770,934		1.7	%		(15,097)
Bloomberg Commodity Gold Subindex		15,209,199		14.6	%		(113,422)
Bloomberg Commodity Heating Oil Subindex		2,812,660		2.7	%		(38,661)
Bloomberg Commodity Live Cattle Subindex		6,458,701		6.2	%		(83,675)
Bloomberg Commodity Natural Gas Subindex		6,771,219		6.5	%		(330,771)
Bloomberg Commodity Nickel Subindex		4,791,939		4.6	%		(172,961)

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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		Percentage of Notional Valuee			Value/ Unrealized Appreciation (Depreciation)
Bloomberg Commodity Silver Subindex		$    2,604,315		2.5	%		$  (13,818)
Bloomberg Commodity Soybean Meal Subindex 3 Month Forward		3,750,213		3.6	%		(7,973)
Bloomberg Commodity Soybean Oil Subindex 3 Month Forward		3,333,523		3.2	%		(23,415)
Bloomberg Commodity Soybeans Subindex 3 Month Forward		7,187,909		6.9	%		(42,929)
Bloomberg Commodity Sugar Subindex		3,021,005		2.9	%		2,005
Bloomberg Commodity Unleaded Gasoline Subindex		4,896,112		4.7	%		(11,139)
Bloomberg Commodity WTI Crude Oil Subindex		4,166,904		4.0	%		7,316
Bloomberg Commodity Zinc Subindex		3,958,559		3.8	%		(2,552)
Total		$104,172,595		100.0	%		$(927,405)

^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 $105,100,000, allocated to each underlying instrument on a pro-rata basis).

^eRepresents the weighting of the component in the custom index.

See Abbreviations on page 31.

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FRANKLIN ALTERNATIVE STRATEGIES FUNDS

Consolidated Financial Statements

Consolidated Statement of Assets and Liabilities

November 30, 2017 (unaudited)

Franklin Pelagos Commodities Strategy Fund

Assets:
Investments in securities:
Cost - Unaffiliated issuers	$	129,783,571
Cost - Non-controlled affiliates (Note 3f)		5,615,709
Value - Unaffiliated issuers	$	129,518,180
Value - Non-controlled affiliates (Note 3f)		5,615,709
Receivables:
Capital shares sold		8,741
Interest.		75,856
Affiliates		2,212
Other assets		22
Total assets		135,220,720
Liabilities:
Payables:
Capital shares redeemed		6,121
Management fees		46,261
Distribution fees		1,918
Variation margin on futures contracts		144,944
Due to brokers		675,347
Funds advanced by custodian.		4,122,955
Unrealized depreciation on OTC swap contracts		927,405
Accrued expenses and other liabilities		55,456
Total liabilities		5,980,407
Net assets, at value	$	129,240,313
Net assets consist of:
Paid-in capital	$	124,507,305
Undistributed net investment income		23,770
Net unrealized appreciation (depreciation)		(1,419,345	)
Accumulated net realized gain (loss)		6,128,583
Net assets, at value	$	129,240,313

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FRANKLIN ALTERNATIVE STRATEGIES FUNDS

CONSOLIDATED FINANCIAL STATEMENTS

Consolidated Statement of Assets and Liabilities (continued)

November 30, 2017 (unaudited)

Franklin Pelagos Commodities Strategy Fund

Class A:
Net assets, at value	$	5,191,476
Shares outstanding		811,740
Net asset value per sharea		$6.40
Maximum offering price per share (net asset value per share ÷ 94.25%)		$6.79
Class C:
Net assets, at value	$	980,915
Shares outstanding		157,865
Net asset value and maximum offering price per sharea		$6.21
Class R:
Net assets, at value	$	24,159
Shares outstanding		3,806
Net asset value and maximum offering price per share		$6.35
Class R6:
Net assets, at value	$	122,163,232
Shares outstanding		18,770,181
Net asset value and maximum offering price per share		$6.51
Advisor Class:
Net assets, at value	$	880,531
Shares outstanding		134,498
Net asset value and maximum offering price per share		$6.55

^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         19

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

CONSOLIDATED FINANCIAL STATEMENTS

Consolidated Statement of Operations

for the six months ended November 30, 2017 (unaudited)

Franklin Pelagos Commodities Strategy Fund

Investment income:
Dividends:
Non-controlled affiliates (Note 3f)	$	2,271
Interest:
Unaffiliated issuers		573,381
Total investment income		575,652
Expenses:
Management fees (Note 3a)		548,211
Distribution fees: (Note 3c)
Class A		6,240
Class C		4,856
Class R		54
Transfer agent fees: (Note 3e)
Class A		10,922
Class C		2,122
Class R		51
Class R6		2,112
Advisor Class		4,583
Custodian fees (Note 4)		492
Reports to shareholders		11,802
Registration and filing fees		44,332
Professional fees		29,527
Trustees’ fees and expenses		21,669
Other		8,255
Total expenses		695,228
Expense reductions (Note 4)		(551	)
Expenses waived/paid by affiliates (Note 3f and 3g)		(244,283	)
Net expenses		450,394
Net investment income		125,258
Realized and unrealized gains (losses):
Net realized gain (loss) from:
Investments:
Unaffiliated issuers		189,284
Written options		317,682
Futures contracts		2,901,516
Swap contracts		2,894,319
Net realized gain (loss)		6,302,801
Net change in unrealized appreciation (depreciation) on:
Investments:
Unaffiliated issuers		15,625
Written options		(140,832	)
Futures contracts		616,369
Swap contracts		(927,405	)
Net change in unrealized appreciation (depreciation)		(436,243	)
Net realized and unrealized gain (loss)		5,866,558
Net increase (decrease) in net assets resulting from operations	$	5,991,816

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FRANKLIN ALTERNATIVE STRATEGIES FUNDS

CONSOLIDATED FINANCIAL STATEMENTS

Consolidated Statements of Changes in Net Assets

Franklin Pelagos Commodities Strategy Fund

	Six Months Ended November 30, 2017 (unaudited)			Year Ended May 31, 2017
Increase (decrease) in net assets:
Operations:
Net investment income (loss)	$	125,258		$	(179,958	)
Net realized gain (loss)		6,302,801			(5,709,788	)
Net change in unrealized appreciation (depreciation)		(436,243	)		(785,460	)
Net increase (decrease) in net assets resulting from operations		5,991,816			(6,675,206	)
Capital share transactions: (Note 2)
Class A		129,514			1,308,813
Class C		(20,876	)		170,718
Class R		106			15,801
Class R6		(2,265,177	)		(6,433,256	)
Advisor Class		(1,327,188	)		1,486,143
Total capital share transactions		(3,483,621	)		(3,451,781	)
Net increase (decrease) in net assets		2,508,195			(10,126,987	)
Net assets:
Beginning of period		126,732,118			136,859,105
End of period	$	129,240,313		$	126,732,118
Undistributed net investment income included in net assets:
End of period	$	23,770		$	—
Accumulated net investment loss included in net assets:
End of period	$	—		$	(101,488	)

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

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. 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 as of 4 p.m. Eastern time each day the New York Stock Exchange (NYSE) is open for trading. 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 VC provides administration and oversight of the Fund’s valuation policies and procedures, which are approved annually by the Board. Among other things, these procedures allow the Fund to 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 VC convenes on a regular basis to review such financial instruments and considers a number of factors, including significant unobservable valuation inputs, when arriving at fair value. The VC 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. The VC employs various methods for calibrating these valuation approaches including a regular review of key inputs and assumptions, transactional back-testing or disposition analysis, and reviews of any related market activity.

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

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FRANKLIN ALTERNATIVE STRATEGIES FUNDS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Franklin Pelagos Commodities Strategy Fund (continued)

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 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. At November 30, 2017, the Fund had OTC derivatives in a net liability position of $927,405.

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.

The Fund purchased or wrote exchange traded option contracts primarily to manage and/or gain exposure to commodity 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.

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FRANKLIN ALTERNATIVE STRATEGIES FUNDS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Franklin Pelagos Commodities Strategy Fund (continued)

1.    Organization and Significant Accounting Policies (continued)

b.    Derivative Financial Instruments (continued)

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 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, 2017, 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 the Fund and cannot be carried back or forward by the FP Subsidiary to offset income from prior or future years. At November 30, 2017, the net assets of the FP Subsidiary were $26,648,146, representing 20.6% 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, 2017, 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. 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.

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FRANKLIN ALTERNATIVE STRATEGIES FUNDS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Franklin Pelagos Commodities Strategy Fund (continued)

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.

2.    Shares of Beneficial Interest

At November 30, 2017, 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, 2017						Year Ended May 31, 2017
	Shares			Amount			Shares			Amount
Class A Shares:
Shares sold		114,991		$	718,751			468,367		$	3,019,447
Shares redeemed		(94,540	)		(589,237	)		(266,214	)		(1,710,634	)
Net increase (decrease)		20,451		$	129,514			202,153		$	1,308,813
Class C Shares:
Shares sold		18,947		$	114,732			86,217		$	545,742
Shares redeemed		(22,386	)		(135,608	)		(60,610	)		(375,024	)
Net increase (decrease)		(3,439	)	$	(20,876	)		25,607		$	170,718
Class R Shares:
Shares sold		17		$	109			3,232		$	20,979
Shares redeemed		—			(3	)		(798	)		(5,178	)
Net increase (decrease)		17		$	106			2,434		$	15,801
Class R6 Shares:
Shares sold		635,300		$	4,115,449			282,587		$	1,822,567
Shares redeemed		(992,044	)		(6,380,626	)		(1,279,804	)		(8,255,823	)
Net increase (decrease)		(356,744	)	$	(2,265,177	)		(997,217	)	$	(6,433,256	)
Advisor Class Shares:
Shares sold		96,450		$	607,351			286,725		$	1,872,420
Shares redeemed		(291,282	)		(1,934,539	)		(59,539	)		(386,277	)
Net increase (decrease)		(194,832	)	$	(1,327,188	)		227,186		$	1,486,143

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
FT AlphaParity, LLC (FTAP)
(formerly Franklin Alternative Strategies Advisers, LLC)		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

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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 FTAP 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 FTAP, FT Services provides administrative services to the Fund and FP Subsidiary. The fee is paid by FTAP 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	$	2,203
CDSC retained	$	83

e.    Transfer Agent Fees

Each class of shares pays transfer agent fees to Investor Services for its performance of shareholder servicing obligations. Effective November 1, 2017, the fees are based on an annualized asset based fee of 0.02% plus a transaction based fee. Prior to November 1, 2017, the fees were account based fees that varied based on fund or account type. 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, 2017, the Fund paid transfer agent fees of $19,790, of which $9,595 was retained by Investor Services.

26         Semiannual Report franklintempleton.com

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Franklin Pelagos Commodities Strategy Fund (continued)

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. Prior to June 1, 2013, the waiver was accounted for as a reduction to management fees. During the period ended November 30, 2017, 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, 0.75%		—		29,597,802		(23,982,093	)		5,615,709	$	5,615,709		$2,271		$    —		$    —

g.    Waiver and Expense Reimbursements

FTAP has contractually agreed in advance to waive or limit its fees and to assume as its own expense certain expenses otherwise payable by the Fund so that the expenses (excluding distribution fees, acquired fund fees and expenses) for each class of the Fund do not exceed 0.95% and Class R6 does not exceed 0.63% based on the average net assets of each class (other than certain non-routine expenses or costs, including those relating to litigation, indemnification, reorganizations, and liquidations) until September 30, 2018. Total expenses waived or paid are not subject to recapture subsequent to the Fund’s fiscal year end. Prior to October 1, 2017, expenses for Class R6 were limited to 0.68%.

h.    Other Affiliated Transactions

At November 30, 2017, the shares of the Fund were owned by the following entities:

	Shares		Percentage of Outstanding Sharesa
Franklin Moderate Allocation Fund		7,511,606		37.8%
Franklin Conservative Allocation Fund		4,767,023		24.0%
Franklin Growth Allocation Fund		4,616,319		23.2%
Franklin LifeSmart 2025 Retirement Target Fund		440,343		2.2%
Franklin LifeSmart 2035 Retirement Target Fund		392,187		2.0%
Franklin LifeSmart 2045 Retirement Target Fund		270,463		1.4%
Franklin LifeSmart 2030 Retirement Target Fund		155,309		0.8%
Franklin LifeSmart 2020 Retirement Target Fund		124,325		0.6%
Franklin LifeSmart 2040 Retirement Target Fund		124,002		0.6%
Franklin LifeSmart 2050 Retirement Target Fund		105,034		0.5%
Franklin LifeSmart 2055 Retirement Target Fund		31,039		0.2%
Franklin Resources, Inc.		563		—%b
		18,538,213		93.3%

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

^bRounds to less than 0.01%.

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, 2017, the custodian fees were reduced as noted in the Consolidated Statement of Operations.

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FRANKLIN ALTERNATIVE STRATEGIES FUNDS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Franklin Pelagos Commodities Strategy Fund (continued)

5.    Income Taxes

For tax purposes, capital losses may be carried over to offset future capital gains, if any. At May 31, 2017, the Fund had long-term capital loss carryforwards of $174,215.

At November 30, 2017, the cost of investments and net unrealized appreciation (depreciation) for income tax purposes were as follows:

Cost of investments	$	135,401,275
Unrealized appreciation	$	21,074
Unrealized depreciation		(1,440,419	)
Net unrealized appreciation (depreciation)	$	(1,419,345	)

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

Purchases of investments (excluding short term securities) for the period ended November 30, 2017, totaled $22,999,981. There were no sales of investments (other than short term securities).

7.    Other Derivative Information

At November 30, 2017, 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	$	20,412	a	Variation margin on futures contracts	$	246,961	a
	Unrealized appreciation on OTC swap contracts		—		Unrealized depreciation on OTC swap contracts		927,405
Totals		$	20,412			$	1,174,366

^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.

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FRANKLIN ALTERNATIVE STRATEGIES FUNDS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Franklin Pelagos Commodities Strategy Fund (continued)

For the period ended November 30, 2017, 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	Investments	$ 149,719a	Investments		$96,279a
	Written options	317,682	Written options		(140,832)
	Futures contracts	2,901,516	Futures contracts		616,369
	Swap contracts	2,894,319	Swap contracts		(927,405)
Totals		$6,263,236			$(355,589)

a Purchased 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, 2017, the average month end notional amount of futures contracts, options and swap contracts represented $25,568,697, $131,000 and $102,642,857, respectively.

See Note 1(b) regarding derivative financial instruments.

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 9, 2018. 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, 2017, 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.

franklintempleton.com Semiannual Report         29

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Franklin Pelagos Commodities Strategy Fund (continued)

9. Fair Value Measurements (continued)

For movements between the levels within the fair value hierarchy, the Fund has adopted a policy of recognizing the transfers as of the date of the underlying event which caused the movement.

A summary of inputs used as of November 30, 2017, 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:
U.S. Government and Agency Securities	$	—	$	19,867,400	$	—	$	19,867,400
Short Term Investments		113,591,489		1,675,000		—		115,266,489
Total Investments in Securities	$	113,591,489	$	21,542,400	$	—	$	135,133,889
Other Financial Instruments:
Futures Contracts	$	20,412	$	—	$	—	$	20,412
Liabilities:
Other Financial Instruments:
Futures Contracts	$	246,961	$	—	$	—	$	246,961
Swap Contracts		—		927,405		—		927,405
Total Other Financial Instruments	$	246,961	$	927,405	$	—	$	1,174,366

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.

30         Semiannual Report franklintempleton.com

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Franklin Pelagos Commodities Strategy Fund (continued)

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 US 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 US 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.

32         Semiannual Report franklintempleton.com

	Semiannual Report and Shareholder Letter Franklin Pelagos Commodities Strategy Fund
	Investment Manager FT AlphaParity, 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.

^© 2017-2018 Franklin Templeton Investments. All rights reserved. 995 S 01/18

                Semiannual Report                 and Shareholder Letter                     November 30, 2017

Franklin Templeton Investments

Gain From Our Perspective^®

At Franklin Templeton Investments, we’re dedicated to one goal: delivering exceptional asset management for our clients. By bringing together multiple, world-class investment teams in a single firm, we’re able to offer specialized expertise across styles and asset classes, all supported by the strength and resources of one of the world’s largest asset managers. This has helped us to become a trusted partner to individual and institutional investors across the globe.

Dear Fellow Shareholder:

During the six months ended November 30, 2017, the global economy generally expanded amid improved commodity prices, generally upbeat economic data, encouraging corporate earnings and the European Central Bank’s (ECB’s) extension of its monetary easing time frame. The ECB kept its benchmark interest rate unchanged, while the US Federal Reserve (Fed) raised its target range for the federal funds rate 0.25% to 1.00%–1.25% amid signs of a growing US economy. In this environment, global developed stock markets, as measured by the MSCI World Index, posted a +9.81% total return for the period.¹ Global emerging market stocks, as measured by the MSCI Emerging Markets Index, generated a +13.27% total return.¹ Global government bonds, as measured by the Citigroup World Government Bond Index, posted a +2.57% total return.¹

A couple of weeks after the end of the reporting period, the Fed raised its target range a quarter point to 1.25%–1.50% amid ongoing labor market strength and rising economic activity in the US. The Fed’s inflation outlook remained essentially the same.

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 made 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.

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, 2017, unless otherwise indicated. The information is not a complete analysis of every aspect of any market, country, industry, security or fund. Statements of fact are from sources considered reliable.

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

We are pleased to bring you Franklin K2 Long Short Credit Fund’s semiannual report for the period ended November 30, 2017.

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” 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), US 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 delivered a +2.57% cumulative total return for the six months under review. For comparison, the Fund’s new primary and old secondary benchmark, the HFRX Fixed Income-Credit Index, which measures performance of strategies with exposure to credit across a broad continuum of credit substrategies, generated a +1.34% total return for the same period.² As the investment manager believes the composition of the HFRX Fixed Income-Credit Index more accurately reflects the Fund’s holdings, it has replaced the ICE BofA Merrill Lynch 3-Month US Treasury Bill Index as the Fund’s

Portfolio Composition*

Based on Total Investments as of 11/30/17

*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.

primary benchmark. Also for comparison, the Fund’s new secondary and old primary benchmark, the ICE BofA Merrill Lynch 3-Month US Treasury Bill Index, which is an index of short-term US government securities with a remaining term to final maturity of less than three months, posted a +0.52% total return for the same period.¹ 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 generally expanded during the six-month period under review. In this environment, global developed and emerging market stocks, as measured by the MSCI All Country World Index, generated a +10.19% total return. Global government bonds, as measured by the Citigroup World Government Bond Index, posted a +2.57% total return. Global markets were aided by price gains in oil and other commodities, generally upbeat economic data across regions, the European Central

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.

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

Bank’s (ECB’s) extension of its monetary easing program, and encouraging corporate earnings reports. The US Senate’s approval of a budget plan in October and its subsequent vote near period-end to begin debate on a tax bill, which raised expectations for reforms, also aided global markets.

However, global markets reflected investor concerns about the terms of the UK’s exit from the European Union (also known as “Brexit”), geopolitical tensions in the Korean peninsula and other regions, comments from key central bankers around the world about potentially raising interest rates and uncertainty about the US government’s ability to implement a tax reform plan.

The US economy strengthened in 2017’s third quarter compared to the second quarter largely due to growth in consumer spending across goods and services, business and inventory investment, as well as net exports due to lower imports. The unemployment rate declined from 4.3% in May 2017, as reported at the beginning of the six-month period, to 4.1% at period-end.³ Annual inflation, as measured by the Consumer Price Index, increased from 1.9% in May 2017, as reported at the beginning of the six-month period, to 2.2% at period-end.³ At its June meeting, the US Federal Reserve (Fed) raised its target range for the federal funds rate 0.25% to 1.00%–1.25%, amid signs of a growing US economy, strengthening labor market and improving business spending. At its subsequent meetings, the Fed kept its target range unchanged. However, minutes of its October 31–November 1 meeting indicated that the Fed continued to maintain a positive outlook for the US economy and signaled the possibility of a third rate hike in 2017, though concerns about the ongoing softness in inflation remained.

In Europe, the UK’s economic growth accelerated in 2017’s third quarter over the previous quarter, largely due to growth in the services sector. In November, the Bank of England raised its key policy rate 0.25%, its first increase in a decade. The euro-zone’s growth, however, moderated in 2017’s third quarter over the previous quarter. The bloc’s annual inflation rate, while low, ended higher than it was at the start of the period. The ECB kept its benchmark interest rate unchanged during the period. However, at its October meeting, the ECB extended the time frame for its massive bond-buying program from December 2017 to at least September 2018, while reducing the amount of monthly bond purchases in half beginning in January 2018.

In Asia, Japan’s quarterly gross domestic product (GDP) grew for the seventh consecutive quarter, although third-quarter 2017

growth was lower than the previous quarter. At its October 2017 meeting, the Bank of Japan left its benchmark interest rate unchanged and continued its monetary stimulus measures, while reducing its fiscal 2017 inflation forecast.

In emerging markets, Brazil’s GDP grew for the third consecutive quarter, although third-quarter growth slowed from the previous quarter. The country’s central bank cut its benchmark interest rate several times during the period to spur economic growth. Russia’s GDP grew in 2017’s third quarter compared to the prior-year period, amid the Bank of Russia’s continued policy support. China’s GDP grew faster in 2017’s third quarter compared to the prior-year period. The People’s Bank of China left its benchmark interest rate unchanged during the period. Overall, emerging market stocks, as measured by the MSCI Emerging Markets Index, rose substantially during the period.

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: 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.

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 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)

3. Source: US Bureau of Labor Statistics

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

4         Semiannual Report franklintempleton.com

FRANKLIN K2 LONG SHORT CREDIT FUND

purposes. 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.

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 US 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.

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.

Manager’s Discussion

The Fund’s subadvisors for the review period were Apollo Credit Management, Candlewood Investment Group, Chatham Asset Management, Ellington Global Asset Management and Emso Asset Management Limited. All subadvisors contributed to the Fund’s positive performance. Ellington was the top performer in terms of contribution to aggregate gains, followed by Chatham, Apollo, Emso and Candlewood, respectively.

Subadvisors

11/30/17

Credit Long Short

Apollo Credit Management LLC

Chatham Asset Management, LLC

Structured Credit

Candlewood Investment Group, L.P.

Ellington Global Asset Management, L.L.C.

Emerging Markets Fixed Income

Emso Asset Management Limited

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. No strategy weighed on results.

By asset class, the top contributors to the Fund’s aggregate performance were credit and interest rates, while equity detracted.

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

Credit long short subadvisors benefited from credit selection and generated gains in both long and short positions. The Fund’s allocations of long and short positions are listed in the Portfolio Composition table on page 3. Toward period-end, credit market volatility picked up with several sectors underperforming (e.g., telecommunication services and health care), amid strong performance from other industries (e.g., financials, energy and utilities). Investors appeared more sensitive to weaker fundamentals, and a number of issuers traded lower meaningfully in late October and early November in response to disappointing earnings.

Structured credit subadvisors benefited from strong fundamentals during the review period. From our perspective, fundamentals were particularly healthy in mortgage-related securities and consumer ABS, with increased certainty surrounding cash flows.

Turning to emerging markets fixed income, positive developments in countries such as Argentina and Greece supported the manager’s long positioning in sovereign government debt. Conversely, equity indexes used as hedges detracted from results in all three of the Fund’s strategies. Global equity markets were boosted by continued signs of synchronized global economic growth.

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
	Jeff Schmidt
	Robert Christian
	David C. Saunders
	Portfolio Management Team

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

David C. Saunders is the founding managing director of K2 Advisors, which he co-founded in 1994. He has worked at Tucker Anthony & R.L. Day as an equity trader; First Boston Corp. as vice president on the equity block trading desk; WaterStreet Capital, a hedge fund, as head trader; Tiger Management, as head trader; WorldSec Securities as president and ABN Amro Inc. as a senior managing director. Mr. Saunders graduated from the University of Maryland, College Park, with a B.S. degree in Business.

Jeff Schmidt joined K2 Advisors in July 2013 and is managing director of portfolio construction. Prior to joining K2, Mr. Schmidt was the head of client solutions, North America for InfraHedge Limited, a subsidiary of State Street Corporation. Other previous positions he held include senior vice president and head of business development for WR Platform Advisors, LP; director of Merrill Lynch’s hedge fund development and management group; and managing director and chief operations officer of Marathon Capital Growth Partners, LLC. Mr. Schmidt graduated from Tulane University in 1980 with a B.A. in economics as well as an M.B.A. in economics and finance in 1982.

Robert Christian is a senior managing director and head of investment research for K2 Advisors, which he joined in 2010. Mr. Christian worked at Graham Capital Management LP from 1998 to 2003 as a portfolio manager and researcher of quantitative-based trading strategies. At Julius Baer Investment Management from 2003 to 2005, he was the head of macro strategies. From 2005 to 2010, he worked at FRM Americas LLC where he was the global head of directional trading strategies and portfolio advisor to numerous funds. Mr. Christian holds a B.A.S. in biology and economics from Stanford University (1985) and an M.B.A. in finance from Leonard N. Stern School of Business — New York University (1990).

Charmaine Chin is a managing director at K2 Advisors, which she joined in March 2008. She heads K2’s credit, relative value and event driven manager research team and leads the evaluation and selection of hedge fund subadvisors in these strategies. She also oversees manager selection and monitoring for K2’s Asian hedge fund exposure. Before joining K2, Ms. Chin worked at Goldman, Sachs & Co. in the special situations group and in the financial institutions group. Ms. Chin received a B.A. in Economics at Harvard University where she graduated magna cum laude and Phi Beta Kappa.

6         Semiannual Report franklintempleton.com

FRANKLIN K2 LONG SHORT CREDIT FUND

Performance Summary as of November 30, 2017

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 11/30/17¹

Cumulative total return excludes sales charges. Average annual total return includes maximum sales charges. Sales charges will vary depending on the size of the investment and the class of share purchased. The maximum is 5.75% and the minimum is 0%. Class A: 5.75% maximum initial sales charge; Advisor Class: no sales charges. For other share classes, visit franklintempleton.com.

	Cumulative		Average Annual
Share Class	Total Return2		Total Return3
A
6-Month		+2.57%		-3.32%
1-Year		+5.77%		-0.34%
Since Inception (9/8/15)		+13.76%		+3.18%
Advisor
6-Month		+2.67%		+2.67%
1-Year		+5.78%		+5.78%
Since Inception (9/8/15)		+13.87%		+6.01%

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.

franklintempleton.com Semiannual Report         7

FRANKLIN K2 LONG SHORT CREDIT FUND

PERFORMANCE SUMMARY

Total Annual Operating Expenses⁴

Share Class	With Waiver		Without Waiver
A		2.99%		3.57%
Advisor		2.74%		3.32%

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 9/30/18. 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. 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.

8         Semiannual Report franklintempleton.com

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 × $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		Hypothetical
		(actual return after expenses)		(5% annual return before expenses)
			Expenses Paid During Period 6/1/17–11/30/171,2		Expenses Paid During Period 6/1/17–11/30/171,2	Net Annualized Expense Ratio2
	Beginning Account Value 6/1/17	Ending Account Value 11/30/17		Ending Account Value 11/30/17
Share Class
A	$1,000	$1,025.70	$14.27	$1,010.98	$14.17	2.81%
C	$1,000	$1,020.30	$18.49	$1,006.77	$18.36	3.65%
R	$1,000	$1,024.00	$15.68	$1,009.58	$15.57	3.09%
R6	$1,000	$1,026.70	$13.41	$1,011.83	$13.31	2.64%
Advisor	$1,000	$1,026.70	$13.46	$1,011.78	$13.36	2.65%

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		Year Ended May 31,
		November 30, 2017 (unaudited)		2017		2016a
Class A
Per share operating performance
(for a share outstanding throughout the period)
Net asset value, beginning of period		$10.49		$10.15		$10.00
Income from investment operationsb:
Net investment incomec		0.14		0.23		0.21
Net realized and unrealized gains (losses)		0.13		0.53		0.08
Total from investment operations		0.27		0.76		0.29
Less distributions from:
Net investment income		—		(0.32	)	(0.08	)
Net realized gains		—		(0.10)		(0.06)
Total distributions		—		(0.42)		(0.14)
Net asset value, end of period		$10.76		$10.49		$10.15
Total returnd		2.57%		7.58%		2.99%
Ratios to average net assetse
Expenses before waiver, payments by affiliates and expense reductionf		3.28%		3.50%		3.37%
Expenses net of waiver, payments by affiliates and expense reductionf		2.81%g		2.75%		2.30%g
Expenses incurred in connection with securities sold short		0.70%		0.76%		0.40%
Net investment income		2.62%		2.24%		2.85%
Supplemental data
Net assets, end of period (000’s)		$42,271		$41,001		$28,198
Portfolio turnover rate		135.94%		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 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%.

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		Year Ended May 31,
	November 30, 2017 (unaudited)		2017			2016a
Class C
Per share operating performance
(for a share outstanding throughout the period)
Net asset value, beginning of period		$10.35		$10.07			$10.00
Income from investment operationsb:
Net investment incomec		0.09		0.14			0.09
Net realized and unrealized gains (losses)		0.12		0.52			0.12
Total from investment operations		0.21		0.66			0.21
Less distributions from:
Net investment income		—		(0.28	)		(0.08	)
Net realized gains		—		(0.10)			(0.06)
Total distributions		—		(0.38)			(0.14)
Net asset value, end of period		$10.56		$10.35			$10.07
Total returnd		2.03%		6.56%			2.20%
Ratios to average net assetse
Expenses before waiver, payments by affiliates and expense reductionf		4.12%		4.44%			3.62%
Expenses net of waiver, payments by affiliates and expense reductionf		3.65%g		3.69%			2.55%	g
Expenses incurred in connection with securities sold short		0.70%		0.76%			0.40%
Net investment income		1.78%		1.30%			2.60%
Supplemental data
Net assets, end of period (000’s)		$1,687		$1,507			$270
Portfolio turnover rate		135.94%		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 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 financial statements.    |    Semiannual Report         11

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

FINANCIAL HIGHLIGHTS

Franklin K2 Long Short Credit Fund(continued)

	Six Months Ended		Year Ended May 31,
	November 30, 2017 (unaudited)		2017			2016a
Class R
Per share operating performance
(for a share outstanding throughout the period)
Net asset value, beginning of period		$10.41		$10.10			$10.00
Income from investment operationsb:
Net investment incomec		0.12		0.20			0.08
Net realized and unrealized gains (losses)		0.13		0.53			0.16
Total from investment operations		0.25		0.73			0.24
Less distributions from:
Net investment income		—		(0.32	)		(0.08	)
Net realized gains		—		(0.10	)		(0.06	)
Total distributions		—		(0.42	)		(0.14	)
Net asset value, end of period		$10.66		$10.41			$10.10
Total returnd		2.40%		7.29%			2.48%
Ratios to average net assetse
Expenses before waiver, payments by affiliates and expense reductionf		3.56%		3.83%			3.37%
Expenses net of waiver, payments by affiliates and expense reductionf		3.09%g		3.08%			2.30%g
Expenses incurred in connection with securities sold short		0.70%		0.76%			0.40%
Net investment income		2.34%		1.91%			2.85%
Supplemental data
Net assets, end of period (000’s)		$161		$127			$12
Portfolio turnover rate		135.94%		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 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 financial statements. franklintempleton.com

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

FINANCIAL HIGHLIGHTS

Franklin K2 Long Short Credit Fund(continued)

	Six Months Ended		Year Ended May 31,
	November 30, 2017 (unaudited)		2017			2016a
Class R6
Per share operating performance
(for a share outstanding throughout the period)
Net asset value, beginning of period		$10.50		$10.15			$10.00
Income from investment operationsb:
Net investment incomec		0.15		0.24			0.23
Net realized and unrealized gains (losses)		0.13		0.53			0.06
Total from investment operations		0.28		0.77			0.29
Less distributions from:
Net investment income		—		(0.32	)		(0.08	)
Net realized gains		—		(0.10	)		(0.06	)
Total distributions		—		(0.42	)		(0.14	)
Net asset value, end of period		$10.78		$10.50	��		$10.15
Total returnd		2.67%		7.71%			3.01%
Ratios to average net assetse
Expenses before waiver, payments by affiliates and expense reductionf		3.11%		3.43%			3.35%
Expenses net of waiver, payments by affiliates and expense reductionf		2.64%g		2.68%			2.28%g
Expenses incurred in connection with securities sold short		0.70%		0.76%			0.40%
Net investment income		2.79%		2.31%			2.87%
Supplemental data
Net assets, end of period (000’s)		$11,838		$13,052			$12,384
Portfolio turnover rate		135.94%		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 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 financial statements.    |    Semiannual Report         13

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

FINANCIAL HIGHLIGHTS

Franklin K2 Long Short Credit Fund(continued)

	Six Months Ended		Year Ended May 31,
	November 30, 2017 (unaudited)		2017			2016a
Advisor Class
Per share operating performance
(for a share outstanding throughout the period)
Net asset value, beginning of period		$10.50		$10.15			$10.00
Income from investment operationsb:
Net investment incomec		0.15		0.24			0.20
Net realized and unrealized gains (losses)		0.13		0.53			0.09
Total from investment operations		0.28		0.77			0.29
Less distributions from:
Net investment income		—		(0.32	)		(0.08	)
Net realized gains		—		(0.10	)		(0.06	)
Total distributions		—		(0.42	)		(0.14	)
Net asset value, end of period		$10.78		$10.50			$10.15
Total returnd		2.67%		7.70%			2.99%
Ratios to average net assetse
Expenses before waiver, payments by affiliates and expense reductionf		3.12%		3.44%			3.36%
Expenses net of waiver, payments by affiliates and expense reductionf		2.65%g		2.69%			2.29%g
Expenses incurred in connection with securities sold short		0.70%		0.76%			0.40%
Net investment income		2.78%		2.30%			2.86%
Supplemental data
Net assets, end of period (000’s)		$29,408		$25,125			$23,058
Portfolio turnover rate		135.94%		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 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 financial statements. franklintempleton.com

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

Statement of Investments, November 30, 2017 (unaudited)

Franklin K2 Long Short Credit Fund

	Country		Shares/Rights		Value
Common Stocks and Other Equity Interests 1.9%
Consumer Finance 0.3%
a,b iPayment Inc.		United States		466,839	$	256,761
Equity Real Estate Investment Trusts (REITs) 0.2%
a iStar Inc.		United States		3,186		36,639
c The Macerich Co.		United States		1,142		73,945
Uniti Group Inc.		United States		3,750		60,375
						170,959
Independent Power & Renewable Electricity Producers 1.2%
NRG Yield Inc., A		United States		33,948		638,562
c NRG Yield Inc., C		United States		20,086		382,638
						1,021,200
Media 0.1%
a,d Postmedia Network Canada Corp.		Canada		56,068		86,917
Multiline Retail 0.1%
Hudson’s Bay Co.		Canada		3,685		32,304
Pharmaceuticals 0.0%†
a Sanofi, Contingent Value, rts., 12/31/20		France		26,594		9,840
Road & Rail 0.0%†
a Hertz Global Holdings Inc.		United States		1,356		25,696
Total Common Stocks and Other Equity Interests
(Cost $1,386,220)						1,603,677
Convertible Preferred Stocks (Cost $158,563) 0.2%
Independent Power & Renewable Electricity Producers 0.2%
a,d Dynegy Inc., 7.00%, cvt. pfd		United States		2,582		212,628
Preferred Stocks 0.4%
Consumer Finance 0.3%
a,b iPayment Inc., pfd		United States		2,989		298,900
Thrifts & Mortgage Finance 0.1%
a FHLMC, 8.375%, pfd., Z		United States		7,884		52,429
a FNMA, 8.25%, pfd., S		United States		4,600		30,774
						83,203
Total Preferred Stocks (Cost $384,709)						382,103
			Principal Amount*
Convertible Bonds 1.9%
Energy Equipment & Services 0.5%
d Weatherford International Ltd., senior note, 5.875%, 7/01/21		United States		405,000		406,772
Equity Real Estate Investment Trusts (REITs) 0.5%
e iStar Inc., senior note, 144A, 3.125%, 9/15/22		United States		456,000		458,565
Independent Power & Renewable Electricity Producers 0.5%
e NRG Yield Inc., senior note, 144A, 3.50%, 2/01/19		United States		217,000		220,933
d Pattern Energy Group Inc., senior note, 4.00%, 7/15/20		United States		204,000		209,482
						430,415
Pharmaceuticals 0.2%
Teva Pharmaceutical Finance Co. LLC, senior bond, 0.25%, 2/01/26		Israel		202,000		175,109

franklintempleton.com Semiannual Report         15

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin K2 Long Short Credit Fund (continued)

	Country		Principal Amount*			Value
Convertible Bonds (continued)
Semiconductors & Semiconductor Equipment 0.2%
Sunpower Corp., senior note, 4.00%, 1/15/23		United States		156,000		$	134,355
Total Convertible Bonds (Cost $1,625,352)							1,605,216
Corporate Bonds and Notes 34.5%
Banks 0.3%
d JPMorgan Chase & Co., senior bond, 3.782% to 2/01/27, FRN thereafter, 2/01/28		United States		276,000			284,319
Capital Markets 0.3%
Deutsche Bank AG, zero cpn., 2/15/18		Egypt		3,950,000	EGP		215,820
Commercial Services & Supplies 2.5%
e Harland Clarke Holdings Corp., senior note, 144A, 9.25%, 3/01/21		United States		1,346,000			1,371,238
R.R. Donnelley & Sons Co.,
senior bond, 6.50%, 11/15/23		United States		346,000			333,890
d senior bond, 6.00%, 4/01/24		United States		221,000			207,187
senior bond, 6.625%, 4/15/29		United States		20,000			18,400
d senior note, 7.00%, 2/15/22		United States		231,000			240,529
							2,171,244
Communications Equipment 0.2%
e Riverbed Technology Inc., senior note, 144A, 8.875%, 3/01/23		United States		184,000			173,880
Construction & Engineering 0.1%
Engility Corp., senior note, 8.875%, 9/01/24		United States		91,000			98,166
Great Lakes Dredge & Dock Corp., senior note, 8.00%, 5/15/22		United States		21,000			22,208
							120,374
Construction Materials 0.4%
d,e Standard Industries Inc., senior note, 144A, 5.50%, 2/15/23		United States		313,000			329,433
Consumer Finance 1.5%
e,f Everi Payments Inc., senior note, 144A, 7.50%, 12/15/25		United States		716,000			717,575
e iPayment Inc., second lien, 144A, 10.75%, 4/15/24		United States		470,000			534,038
							1,251,613
Containers & Packaging 1.3%
e Coveris Holdings SA, senior note, 144A, 7.875%, 11/01/19		Luxembourg		574,000			578,305
d Reynolds Group Issuer Inc. / Reynolds Group Issuer LLC / Reynolds Group Issuer
Luxembourg SA, senior secured note, first lien, 6.875%, 2/15/21		United States		486,102			496,735
							1,075,040
Diversified Financial Services 2.3%
g Citigroup Global Markets Holdings Inc., senior note, Reg S, zero cpn., 3/15/18		Egypt		9,342,693	EGP		503,819
g Garfunkelux Holdco 3 SA, senior secured note, first lien, Reg S, 8.50%, 11/01/22		Luxembourg		100,000	GBP		143,973
e Opal Acquisition Inc., 144A,
second lien, 10.00%, 10/01/24		United States		676,000			584,740
senior secured note, first lien, 7.50%, 7/01/24		United States		788,000			760,420
							1,992,952
Diversified Telecommunication Services 2.1%
Frontier Communications Corp., senior note, 11.00%, 9/15/25		United States		226,000			174,585
d,e Intelsat Jackson Holdings SA, senior secured note, first lien, 144A,
9.50%, 9/30/22		Luxembourg		709,000			820,668
8.00%, 2/15/24		Luxembourg		113,000			119,780
e,f Telenet Finance Luxembourg Notes Sarl, senior secured bond, 144A, 5.50%, 3/01/28		Belgium		111,000			110,918

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)
Diversified Telecommunication Services (continued) e Windstream Corp., senior note, 144A, 8.625%, 10/31/25		United States		610,000	$	596,287
						1,822,238
Electric Utilities 0.3%
e Talen Energy Supply LLC, senior note, 144A, 10.50%, 1/15/26		United States		207,000		209,070
Energy Equipment & Services 1.3%
e,h FTS International Inc., senior secured note, first lien, 144A, FRN, 8.82%,
(3-Month USD LIBOR + 7.50%), 6/15/20		United States		199,000		202,980
e Transocean Inc., senior note, 144A,
d 9.00%, 7/15/23		United States		107,000		115,961
7.50%, 1/15/26		United States		563,000		579,890
Weatherford International Ltd.,  senior bond, 9.625%, 3/01/19		United States		88,000		94,160
senior note, 5.125%, 9/15/20		United States		147,000		147,000
						1,139,991
Equity Real Estate Investment Trusts (REITs) 0.4%
Communications Sales & Leasing Inc., senior note, 8.25%, 10/15/23		United States		150,000		144,375
e Uniti Group LP / Uniti Fiber Holdings Inc. / CSL Capital LLC, senior note, 144A, 7.125%, 12/15/24		United States		173,000		157,862
						302,237
Food & Staples Retailing 0.2%
g ESAL GmbH, senior note, Reg S, 6.25%, 2/05/23		Brazil		111,000		106,665
g JBS Investments GmbH, senior note, Reg S, 7.25%, 4/03/24		Brazil		46,000		45,814
						152,479
Health Care Providers & Services 0.5%
d HCA Inc., senior secured bond, first lien, 5.25%, 4/15/25		United States		153,000		163,327
Kindred Healthcare Inc., senior note, 8.75%, 1/15/23		United States		282,000		283,410
						446,737
Hotels, Restaurants & Leisure 2.1%
e Golden Nugget Inc., senior note, 144A, 8.75%, 10/01/25		United States		417,000		434,722
d,e Jack Ohio Finance LLC / Jack Ohio Finance 1 Corp., senior secured note, second lien, 144A,         10.25%, 11/15/22		United States		634,000		698,193
e Mohegan Gaming & Entertainment, senior note, 144A, 7.875%, 10/15/24		United States		590,000		623,925
						1,756,840
Household Durables 1.3%
e K Hovnanian Enterprises Inc., 144A,  secured note, 10.00%, 7/15/22		United States		273,000		298,935
secured note, second lien, 10.50%, 7/15/24		United States		693,000		770,962
senior note, 8.00%, 11/01/19		United States		48,000		51,240
						1,121,137
Household Products 0.3%
e Kronos Acquisition Holdings Inc., senior note, 144A, 9.00%, 8/15/23		Canada		224,000		211,120
Independent Power & Renewable Electricity Producers 0.4%
d,e Atlantica Yield PLC, senior note, 144A, 7.00%, 11/15/19		Spain		351,000		377,325

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)
Machinery 0.3%
e Navistar International Corp., senior note, 144A, 6.625%, 11/01/25		United States		189,000		$	196,207
e Titan International Inc., senior secured note, 144A, 6.50%, 11/30/23		United States		66,000			65,815
							262,022
Media 5.8%
e American Media Inc., 144A, secured note, second lien, 5.50%, 9/01/21		United States		205,232			232,682
sub. note, zero cpn., 3/01/22		United States		2,417,010			2,175,309
e Lee Enterprises Inc., senior secured note, first lien, 144A, 9.50%, 3/15/22		United States		470,000			486,450
The McClatchy Co., senior bond, 7.15%, 11/01/27		United States		124,000			129,890
senior bond, 6.875%, 3/15/29		United States		524,000			483,390
senior secured note, first lien, 9.00%, 12/15/22		United States		97,000			101,426
d,e,i Postmedia Network Inc., secured note, second lien, 144A, PIK, 10.25%, 7/15/23		Canada		482,711			552,101
e Time Inc., senior note, 144A, d 5.75%, 4/15/22		United States		658,000			690,077
7.50%, 10/15/25		United States		95,000			111,625
							4,962,950
Mortgage Real Estate Investment Trusts (REITs) 0.9%
g JP Morgan Structured Products BV, senior note, Reg S, zero cpn., 1/18/18		Egypt		13,837,000	EGP		765,530
Oil, Gas & Consumable Fuels 5.1%
Calumet Specialty Products Partners LP / Calumet Finance Corp., senior note, 7.625%, 1/15/22		United States		107,000			107,802
e Cheniere Corpus Christi Holdings LLC, secured bond, 144A, 5.125%, 6/30/27		United States		153,000			158,546
e CONSOL Mining Corp., secured note, second lien, 144A, 11.00%, 11/15/25		United States		140,000			141,050
e Endeavor Energy Resources LP / EER Finance Inc., senior note, 144A, 5.50%, 1/30/26		United States		38,000			38,522
g,h EP PetroEcuador via Noble Sovereign Funding I Ltd., FRN, Reg S, 6.961%, (3-Month USD LIBOR + 5.63%), 9/24/19		Ecuador		105,263			107,895
Petrobras Global Finance BV, senior note, 5.375%, 1/27/21		Brazil		102,000			106,335
8.375%, 5/23/21		Brazil		298,000			339,273
6.125%, 1/17/22		Brazil		377,000			402,447
6.25%, 3/17/24		Brazil		168,000			179,063
Petroleos Mexicanos, senior note, 6.375%, 2/04/21		Mexico		108,000			118,260
6.875%, 8/04/26		Mexico		59,000			67,360
g,h FRN, Reg S, 4.967%, (3-Month USD LIBOR + 3.65%), 3/11/22		Mexico		66,000			72,534
g Reg S, 5.375%, 3/13/22		Mexico		75,000			80,363
g Reg S, 1.875%, 4/21/22		Mexico		200,000	EUR		244,729
g Reg S, 3.75%, 2/21/24		Mexico		100,000	EUR		128,266
d,e Sable Permian Resources Land LLC, senior secured note, first lien, 144A,
13.00%, 11/30/20		United States		1,255,000			1,471,488
d Whiting Petroleum Corp., senior note, 5.00%, 3/15/19		United States		542,000			548,775
							4,312,708
Paper & Forest Products 2.4%
d Resolute Forest Products Inc., senior note, 5.875%, 5/15/23		United States		1,965,000			2,038,687
Personal Products 0.2%
e Avon International Operations Inc., senior secured note, first lien, 144A, 7.875%, 8/15/22		United Kingdom		189,000			192,249

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)
Semiconductors & Semiconductor Equipment 0.4%
e Broadcom Corp. / Broadcom Cayman Finance Ltd., senior bond, 144A, 3.50%, 1/15/28		United States		355,000	$	337,214
Specialty Retail 1.3%
e PetSmart Inc., 144A,
senior note, 7.125%, 3/15/23		United States		17,000		12,452
senior note, 8.875%, 6/02/25		United States		420,000		317,100
d senior secured note, first lien, 5.875%, 6/01/25		United States		890,000		769,850
						1,099,402
Trading Companies & Distributors 0.0%†
g Noble Group Ltd., senior note, Reg S,
3.625%, 3/20/18		Hong Kong		17,000		8,585
8.75%, 3/09/22		Hong Kong		34,000		14,010
						22,595
Wireless Telecommunication Services 0.3%
Digicel Group Ltd.,
g Reg S, 8.25%, 9/30/20		Bermuda		150,000		144,902
e senior note, 144A, 8.25%, 9/30/20		Bermuda		132,000		127,513
						272,415
Total Corporate Bonds and Notes (Cost $27,137,860)						29,419,621
Foreign Government and Agency Securities 3.3%
g Africa Finance Corp., senior note, Reg S, 3.875%, 4/13/24		Supranational		200,000		202,057
Banco Central de la República Argentina SA, zero cpn., 6/13/18		Argentina		7,282,561 ARS		361,599
g Eastern and Southern African Trade and Development Bank, senior note, Reg S, 5.375%, 3/14/22		Supranational		200,000		210,561
Government of Argentina, 7.82%, 12/31/33		Argentina		276,597 EUR		377,503
2.26% to 3/31/19, 4.74% thereafter, 12/31/38		Argentina		328,282 EUR		279,117
h senior note, FRN, 27.493%, (ARPP7DRR), 6/21/20		Argentina		862,341 ARS		53,442
g senior note, Reg S, 3.875%, 1/15/22		Argentina		200,000 EUR		248,922
senior note, 5.625%, 1/26/22		Argentina		131,000		137,812
g Government of Ecuador, senior note, Reg S, 10.75%, 3/28/22		Ecuador		200,000		231,500
g Government of Paraguay, senior note, Reg S, 4.625%, 1/25/23		Paraguay		200,000		211,450
Government of Russia, 7.40%, 12/07/22		Russia		9,315,000 RUB		161,889
g National Highways Authority of India, senior note, Reg S, 7.30%, 5/18/22		India		20,000,000 INR		316,089
Total Foreign Government and Agency Securities
(Cost $2,555,967)						2,791,941
Asset-Backed Securities and Commercial Mortgage-Backed Securities 34.1%
Diversified Financial Services 8.0%
e Club Credit 2017-NP1 Trust, B, 144A, 3.17%, 4/17/23		United States		250,000		250,530
k Equity One Mortgage Pass-Through 2002-2 Trust, AV1, FRN, 1.798%, (1-Month
USD LIBOR + 0.28%), 10/25/32		United States		370,263		332,767
k GSAMP 2004-HE2 Trust, M2, FRN, 2.979%, (1-Month USD LIBOR + 1.65%), 9/25/34		United States		151,063		147,036
e,k Katonah Ltd 2008-IA Trust, B1L, 144A, FRN, 4.363%, (3-Month USD LIBOR + 3.00%), 4/23/22		United States		1,000,000		1,002,655
k National Collegiate Student Loan 2007-4 Trust, A3A2, FRN, 4.828%, (28 Day T-Bill), 3/25/38		United States		1,000,000		953,602
e,k Palmer Square CLO Ltd. 2017-1A, 144A, FRN, 4.816%, (3-Month USD LIBOR + 3.50%), 5/21/29		United States		1,000,000		1,021,169

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 (continued)
Diversified Financial Services (continued)
e Prosper Marketplace Issuance 2017-2A Trust, B, 144A, 3.48%, 9/15/23		United States		200,000	$	201,143
k RAAC Series Trust, FRN,
2005-SP3, M3, 3.829%, (1-Month USD LIBOR + 2.50%), 12/25/35		United States		800,000		808,002
2007-SP1, M1, 1.808%, (1-Month USD LIBOR + 0.57%), 3/25/37		United States		100,000		98,857
e S-Jets Ltd. 2017-1, A, 144A, 3.967%, 8/15/42		Bermuda		983,333		989,654
e VOLT LVII LLC 2017-NPL4, A1, 144A, 3.375%, 4/25/47		United States		407,116		410,425
e,k Westchester CLO Ltd. 2007-1A, E, 144A, FRN, 5.677%, (3-Month USD LIBOR + 4.30%), 8/01/22		United States		595,616		597,386
						6,813,226
Mortgage Real Estate Investment Trusts (REITs) 26.1%
j American Home Mortgage Assets 2005-1 Trust, 1A1, FRN, 3.647%, 11/25/35		United States		229,432		205,089
e,k BAMLL Commercial Mortgage Securities 2015-ASHF Trust, E, 144A, FRN, 5.25%, (1-Month USD LIBOR + 4.00%), 1/15/28		United States		1,000,000		1,005,259
j Banc of America Mortgage 2005-L Trust, 3A1, FRN, 3.429%, 1/25/36		United States		544,597		510,666
e,j BCAP LLC Trust, 144A, FRN,
2009-RR6, 3A1, 3.523%, 12/26/37		United States		568,807		569,742
2010-RR1, 1A4, 3.466%, 3/26/37		United States		495,867		430,440
j Bear Stearns ARM 2006-2 Trust, 4A1, FRN, 3.512%, 7/25/36		United States		88,779		83,966
e,k BX 2017-APPL Trust, E, 144A, FRN, 4.40%, (1-Month USD LIBOR + 3.15%), 7/15/34		United States		1,750,000		1,761,801
j Chase Mortgage Finance Series 2007-A2 Trust, 2A2, FRN, 3.577%, 7/25/37		United States		424,254		427,297
Citigroup Mortgage Loan Trust,
j 2006-AR7, 2A4A, FRN, 3.355%, 11/25/36		United States		630,398		540,292
e,k 2008-RR1, A1A1, 144A, FRN, 1.398%, (1-Month USD LIBOR + 0.07%), 1/25/37		United States		929,262		742,739
e 2009-8, 2A2, 144A, 6.10%, 4/25/37		United States		437,178		332,246
COMM Mortgage 2006-C8 Trust, AJ, 5.377%, 12/10/46		United States		1,590,825		1,602,904
Countrywide Alternative Loan Trust,
2005-73CB, 1A2, 6.25%, 1/25/36		United States		251,158		255,585
k 2005-IM1, A1, FRN, 1.629%, (1-Month USD LIBOR + 0.30%), 1/25/36		United States		216,209		207,587
2006-4CB, 2A3, 5.50%, 4/25/36		United States		114,803		109,833
Credit Suisse First Boston Mortgage Securities Corp. 2002-9, 1A2, 7.50%, 3/25/32		United States		565,658		642,595
CSMC Mortgage-Backed 2006-4 Trust, 9A1, 6.50%, 5/25/36		United States		884,666		557,514
k DSLA Mortgage Loan 2006-AR1 Trust, 2A1A, FRN, 1.884%, (12-Month Treasury
Average + 0.94%), 4/19/47		United States		1,160,880		1,125,741
e,j FHLM Seasoned Credit Risk Transfer 2017-2 Trust, M1, 144A, FRN, 4.00%, 8/25/56		United States		400,000		392,250
j GSAA Home Equity 2006-18 Trust, AF2A, FRN, 5.629%, 11/25/36		United States		370,417		205,602
Home Equity Mortgage 2004-6 Trust, M2, 5.821%, 4/25/35		United States		233,323		235,941
e,k Hyatt Hotel Portfolio 2017-HYT2 Trust, F, 144A, FRN, 4.302%, (1-Month USD LIBOR + 3.05%), 8/09/32		United States		475,000		476,314
k Impac CMB Trust, FRN,
2004-8, 3B, 3.863%, (1-Month USD LIBOR + 2.63%), 8/25/34		United States		186,641		180,200
2004-9, 1A2, 2.112%, (1-Month USD LIBOR + 0.88%), 1/25/35		United States		890,191		839,803
2005-2, 2B, 3.707%, (1-Month USD LIBOR + 2.48%), 4/25/35		United States		216,392		206,575
2005-4, 2B1, 3.713%, (1-Month USD LIBOR + 2.48%), 5/25/35		United States		202,782		194,842
k IndyMac Home Equity Loan Asset-Backed 2001-A Trust, AV, FRN, 1.849%, (1-Month USD LIBOR + 0.52%), 3/25/31		United States		754,344		731,041
IndyMac INDX Mortgage Loan Trust, FRN,
k 2004-AR14, 2A1A, 2.049%, (1-Month USD LIBOR + 0.72%), 1/25/35		United States		795,005		659,203
k 2005-16IP, A1, 1.969%, (1-Month USD LIBOR + 0.64%), 7/25/45		United States		326,244		316,049
k 2006-AR29, A2, 1.409%, (1-Month USD LIBOR + 0.08%), 11/25/36		United States		233,342		218,027
j 2007-AR15, 2A1, 3.537%, 8/25/37		United States		496,480		436,696

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) (continued)
JPMorgan Chase Commercial Mortgage Securities Trust,
2006-LDP9, AM, 5.372%, 5/15/47		United States		247,202	$	248,900
j 2007-LD11, AM, FRN, 5.99%, 6/15/49		United States		241,354		245,855
j JPMorgan Mortgage Trust, FRN,
2006-A5, 6A1, 3.221%, 8/25/36		United States		528,222		452,033
2007-A2, 2A1, 3.575%, 4/25/37		United States		353,949		347,055
j MASTR Seasoned Securitization 2004-1 Trust, 4A1, FRN, 3.573%, 10/25/32		United States		83,563		84,705
j Merrill Lynch Mortgage Investors MLMI Series 2003-A2 Trust, 1M1, FRN, 3.107%, 3/25/33		United States		309,827		219,127
e,k Motel 6 2017-MTL6 Trust, E, 144A, FRN, 4.496%, (1-Month USD LIBOR + 3.25%), 8/15/34		United States		398,488		401,506
j Provident Funding Mortgage Loan 2003-1 Trust, B1, FRN, 3.288%, 8/25/33		United States		96,644		91,107
k Securitized Asset Backed Receivables LLC 2004-OP2 Trust, A2, FRN, 2.029%, (1-Month USD LIBOR + 0.70%), 8/25/34		United States		199,024		182,517
k Sequoia Mortgage 2004-5 Trust, B1, FRN, 2.003%, (1-Month USD LIBOR + 0.72%), 6/20/34		United States		348,116		320,378
j Structured Adjustable Rate Mortgage Loan Series 2004-4 Trust, B1, FRN, 3.509%, 4/25/34		United States		472,758		396,595
j Wachovia Bank Commercial Mortgage Series 2007-C31 Trust, AJ, FRN, 5.66%, 4/15/47		United States		1,656,407		1,683,804
k WAMU Asset-Backed Certificates 2007-HE2 Trust, 2A4, FRN, 1.689%, (1-Month USD LIBOR + 0.36%), 4/25/37		United States		362,823		208,542
k WaMu Mortgage Pass-Through Certificates 2007-OA3 Trust, 2A1A, FRN, 1.761%, (1 Year CMT + 0.76%), 4/25/47		United States		83,583		83,284
k Washington Mutual Mortgage Pass-Through Certificates 2006-4, 3A2B, FRN, 1.317%, (1-Month USD LIBOR + 0.08%), 5/25/36		United States		425,471		299,042
j Washington Mutual MSC Mortgage Pass-Through Certificates Series Trust, FRN,
2003-AR2, M, 2.847%, 5/25/33		United States		182,308		159,481
2003-AR3, B1, 3.354%, 6/25/33		United States		416,352		370,888
j Wells Fargo Mortgage Backed Securities 2004-G Trust, B1, FRN, 3.355%, 6/25/34		United States		282,633		261,173
						22,259,831
Total Asset-Backed Securities and Commercial Mortgage-Backed Securities (Cost $28,195,864)						29,073,057

	Country		Number of Contracts		Notional Amount*
Options Purchased 0.1%
Calls – Exchange-Traded 0.0%†
AMC Entertainment Holdings Inc., December Strike Price $17.00, Expires 12/15/17		United States		19		1,900	437
Frontier Communications Corp., January Strike Price $12.00, Expires 1/19/18		United States		37		3,700	370
The Macerich Co., December Strike Price $70.00, Expires 12/15/17		United States		32		3,200	1,472
The Macerich Co., March Strike Price $65.00, Expires 3/16/18		United States		16		1,600	6,400
Sinclair Broadcast Group Inc., December Strike Price $35.00, Expires 12/15/17		United States		179		17,900	10,919
SunPower Corp., January Strike Price $9.00, Expires 1/19/18		United States		75		7,500	2,850
							22,448

franklintempleton.com Semiannual Report         21

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin K2 Long Short Credit Fund(continued)

	Country		Number of Contracts		Notional Amount*		Value
Options Purchased (continued)
Calls – Over-the-Counter 0.0%†
Interest Rate Swaptions 0.0%†
Receive fixed 2.05%, Counterparty GSCO, pay float 3-month USD LIBOR, Expires 4/13/18		United States		1	1,188,000		$	2,500
Puts – Exchange-Traded 0.1%
American Axle & Manufacturing Holdings Inc., January Strike Price $15.00, Expires 1/18/19		United States		29	2,900			4,857
Express Scripts Holding Co., May Strike Price $50.00, Expires 5/18/18		United States		59	5,900			5,251
GameStop Corp., January Strike Price $10.00, Expires 1/18/19		United States		93	9,300			7,347
Hertz Global Holdings Inc., January Strike Price $20.00, Expires 1/18/19		United States		27	2,700			14,040
Horizon Pharma PLC, February Strike Price $10.00, Expires 2/16/18		United States		101	10,100			1,263
iShares Russell 2000 ETF, December Strike Price $145.00, Expires 12/01/17		United States		57	5,700			57
Mallinckrodt PLC, January Strike Price $20.00, Expires 1/18/19		United States		38	3,800			14,402
PG&E Corp., December Strike Price $45.00, Expires 12/15/17		United States		19	1,900			133
S&P 500 Index, December Strike Price $2,450.00, Expires 12/15/17		United States		18	1,800			2,160
S&P 500 Index, December Strike Price $2,500.00, Expires 12/29/17		United States		79	7,900			34,760
SPDR S&P 500 ETF Trust, December Strike Price $255.00, Expires 12/22/17		United States		94	9,400			5,170
Tesla Inc., January Strike Price $250.00, Expires 1/19/18		United States		1	100			215
								89,655
Puts – Over-the-Counter 0.0%†
Currency Options 0.0%†
SAR/USD, January Strike Price 3.78 SAR, Counterparty GSCO, Expires 1/23/18		Saudi Arabia		1	2,390,525	SAR		588
Total Options Purchased (Cost $198,352)								115,191
			Country		Principal Amount*
U.S. Government and Agency Securities 1.3%
U.S. Treasury Bond, 3.00%, 5/15/47				United States	295,800			305,223
U.S. Treasury Note, 1.875%, 9/30/22				United States	690,000			681,671
2.25%, 8/15/27				United States	106,000			104,344
Total U.S. Government and Agency Securities (Cost $1,093,583)								1,091,238
Total Investments before Short Term Investments (Cost $62,736,470)								66,294,672
Short Term Investments 18.8%
Foreign Government and Agency Securities (Cost $135,152) 0.1%
l Egypt Treasury Bills, 3/06/18				Egypt	2,500,000	EGP		135,412

22         Semiannual Report franklintempleton.com

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin K2 Long Short Credit Fund(continued)

			Country		Shares	Value
Short-Tem Investments (continued)
Money Market Funds (Cost $13,328,844) 15.6%
m Fidelity Investments Money Market Funds, 0.97%				United States	13,328,844	$	13,328,844
					Principal  Amount*
Repurchase Agreements (Cost $2,609,960) 3.1%
n Joint Repurchase Agreement, 1.029%, 12/01/17
(Maturity Value $2,610,035)				United States	2,609,960		2,609,960
BNP Paribas Securities Corp. (Maturity Value $2,206,759)
Deutsche Bank Securities Inc. (Maturity Value $116,381)
HSBC Securities (USA) Inc. (Maturity Value $275,855)
Merrill Lynch, Pierce, Fenner & Smith Inc. (Maturity Value $11,040)
Collateralized by U.S. Government Agency Securities, 1.875%, 9/18/18; iU.S. Treasury Bill, 4/19/18 - 5/31/18; and U.S. Treasury Note, 1.50% - 2.00%, 6/15/20 - 10/31/22 (valued at $2,662,511)
Total Investments (Cost $78,810,426) 96.5%							82,368,888
Options Written (0.1)%							(37,521	)
Securities Sold Short (11.7)%							(10,019,865	)
Other Assets, less Liabilities 15.3%							13,053,021
Net Assets 100.0%						$	85,364,523
	Country		Number of Contracts		Notional  Amount*
o Options Written (0.1)%
Calls – Exchange-Traded (0.1)%
The Macerich Co., March Strike Price $75.00, Expires 3/16/18		United States		16	1,600		(1,600	)
NRG Yield Inc., C, February Strike Price $17.50, Expires 2/16/18		United States		71	7,100		(14,378	)
NRG Yield Inc., C, February Strike Price $20.00, Expires 2/16/18		United States		71	7,100		(3,408	)
							(19,386	)
Puts – Exchange-Traded (0.0)%†
NRG Yield Inc., C, June Strike Price $20.00, Expires 6/15/18		United States		78	7,800		(18,135	)
Total Options Written (Premiums Received $30,593)							(37,521	)
			Country		Shares
p Securities Sold Short (11.7)%
Common Stocks (0.7)%
Energy Equipment & Services (0.1)%
Weatherford International PLC				United States	15,052		(49,671	)
Equity Real Estate Investment Trusts (REITs) (0.3)%
Seritage Growth Properties, A				United States	6,061		(246,683	)
Independent Power & Renewable Electricity Producers (0.3)%
NRG Yield Inc., C				United States	14,000		(266,700	)
Internet Software & Services (0.0)%†
CoStar Group Inc.				United States	107		(32,632	)
Oil, Gas & Consumable Fuels (0.0)%†
CONSOL Mining Corp.				United States	2,000		(44,000	)
Total Common Stocks (Proceeds $667,380)							(639,686	)

franklintempleton.com Semiannual Report         23

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin K2 Long Short Credit Fund(continued)

	Country		Principal  Amount*			Value
p Securities Sold Short (continued)
Corporate Bonds and Notes (11.0)%
Air Freight & Logistics (0.2)%
g Autostrade per l’italia SpA E, senior bond, Reg S, 1.75%, 2/01/27		Italy		137,000	EUR	$	(169,838	)
Auto Components (0.1)%
e American Axle & Manufacturing Inc., 144A, senior bond, 6.50%, 4/01/27		United States		40,000			(41,400	)
senior note, 6.25%, 4/01/25		United States		68,000			(70,040	)
							(111,440	)
Automobiles (0.3)%
Ford Motor Co., senior bond, 4.346%, 12/08/26		United States		210,000			(218,980	)
Chemicals (0.7)%
e CVR Partners LP / CVR Nitrogen Finance Corp., senior note, 144A, 9.25%, 6/15/23		United States		273,000			(290,404	)
g K+S AG, Reg S,
senior bond, 3.00%, 6/20/22		Germany		83,000	EUR		(105,946	)
senior note, 2.625%, 4/06/23		Germany		134,000	EUR		(168,272	)
							(564,622	)
Commercial Services & Supplies (0.6)%
e Olympus Merger Sub Inc., senior note, 144A, 8.50%, 10/15/25		United States		433,000			(423,799	)
Quad/Graphics Inc., senior note, 7.00%, 5/01/22		United States		108,000			(111,240	)
							(535,039	)
Construction & Engineering (0.0)%†
g Astaldi SpA, senior note, Reg S, 7.125%, 12/01/20		Italy		26,000	EUR		(21,271	)
Diversified Financial Services (0.2)%
g Garfunkelux Holdco 2 SA, second lien, Reg S, 11.00%, 11/01/23		Luxembourg		100,000	GBP		(147,911	)
Diversified Telecommunication Services (0.3)%
g Telefonica Emisiones SAU G, senior bond, Reg S, 3.987%, 1/23/23		Spain		200,000	EUR		(279,739	)
Electric Utilities (0.5)%
g Enel Finance International NV, senior bond, Reg S, 1.375%, 6/01/26		Italy		148,000	EUR		(180,980	)
e Talen Energy Supply LLC, senior note, 144A, 9.50%, 7/15/22		United States		210,000			(219,450	)
							(400,430	)
Energy Equipment & Services (0.1)%
e Precision Drilling Corp., senior note, 144A, 7.125%, 1/15/26		Canada		109,000			(110,091	)
Equity Real Estate Investment Trusts (REITs) (0.0)%†
e Rayonier AM Products Inc., senior bond, 144A, 5.50%, 6/01/24		United States		22,000			(21,815	)
Food & Staples Retailing (0.4)%
e Rite Aid Corp., senior note, 144A, 6.125%, 4/01/23		United States		350,000			(325,062	)
Health Care Providers & Services (0.8)%
e Mallinckrodt International Finance SA / Mallinckrodt CB LLC, senior note, 144A, 5.75%, 8/01/22		United States		615,000			(570,412	)
5.625%, 10/15/23		United States		41,000			(36,183	)
e West Street Merger Sub Inc., senior note, 144A, 6.375%, 9/01/25		United States		109,000			(110,635	)
							(717,230	)
Hotels, Restaurants & Leisure (0.6)%
e CRC Escrow Issuer LLC / CRC Finco Inc., senior note, 144A, 5.25%, 10/15/25		United States		514,000			(515,285	)

24         Semiannual Report franklintempleton.com

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin K2 Long Short Credit Fund(continued)

	Country		Principal  Amount*			Value
pSecurities Sold Short (continued)
Corporate Bonds and Notes (continued)
Independent Power and Renewable Electricity Producers (0.2)%
Calpine Corp., senior bond, 5.75%, 1/15/25		United States		152,000		$	(147,060	)
Internet Software & Services (0.4)%
e Rackspace Hosting Inc., senior note, 144A, 8.625%, 11/15/24		United States		305,000			(327,875	)
Machinery (0.4)%
g Galapagos Holding SA, senior secured note, first lien, Reg S, 7.00%, 6/15/22		Luxembourg		117,000	EUR		(122,661	)
John Deere Capital Corp., senior note, 2.80%, 3/06/23		United States		179,000			(180,479	)
							(303,140	)
Media (0.5)%
e Altice Financing SA, senior secured note, first lien, 144A, 6.50%, 1/15/22		Luxembourg		47,000			(48,645	)
AMC Entertainment Holdings Inc., senior note, 5.75%, 6/15/25		United States		200,000			(195,750	)
DISH DBS Corp., senior note, 7.75%, 7/01/26		United States		194,000			(210,005	)
							(454,400	)
Multiline Retail (0.5)%
Kohl’s Corp., senior bond, 4.25%, 7/17/25		United States		89,000			(90,281	)
Target Corp., senior bond, 3.625%, 4/15/46		United States		322,000			(304,299	)
							(394,580	)
Oil, Gas & Consumable Fuels (0.9)%
e California Resources Corp., secured note, second lien, 144A, 8.00%, 12/15/22		United States		308,000			(229,075	)
e Denbury Resources Inc., secured note, 144A, 9.00%, 5/15/21		United States		151,000			(146,470	)
Whiting Petroleum Corp., senior note,     5.75%, 3/15/21		United States		310,000			(312,325	)
6.25%, 4/01/23		United States		99,000			(99,495	)
							(787,365	)
Pharmaceuticals (1.3)%
Actavis Funding SCS, senior bond, 3.80%, 3/15/25		United States		403,000			(406,195	)
e Horizon Pharma Inc. / Horizon Pharma USA Inc., senior note, 144A, 8.75%, 11/01/24		United States		101,000			(107,313	)
Mylan NV, senior note, 3.95%, 6/15/26		United States		145,000			(144,819	)
Teva Pharmaceutical Finance Netherlands III BV, senior note, 2.20%, 7/21/21		Israel		202,000			(185,779	)
e Valeant Pharmaceuticals International Inc., senior bond, 144A, 6.125%, 4/15/25		United States		344,000			(296,270	)
							(1,140,376	)
Road & Rail (0.1)%
The Hertz Corp., senior note, 7.375%, 1/15/21		United States		67,000			(67,503	)
Semiconductors & Semiconductor Equipment (0.2)%
QUALCOMM Inc., senior bond, 3.45%, 5/20/25		United States		206,000			(205,009	)
Specialty Retail (0.1)%
e Gamestop Corp., senior note, 144A, 6.75%, 3/15/21		United States		95,000			(99,512	)
Technology Hardware, Storage & Peripherals (0.4)%
e Dell International LLC / EMC Corp., senior note, 144A, 7.125%, 6/15/24		United States		270,000			(293,064	)
Tobacco (0.0)%†
Alliance One International Inc., senior note, 9.875%, 7/15/21		United States		12,000			(11,085	)

franklintempleton.com Semiannual Report         25

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin K2 Long Short Credit Fund(continued)

	Country		Principal  Amount*		Value
p Securities Sold Short (continued)
Corporate Bonds and Notes (continued)
Trading Companies & Distributors (0.9)%
GATX Corp., senior bond, 4.85%, 6/01/21		United States		576,000	$	(618,126	)
g Noble Group Ltd., senior bond, Reg S, 6.75%, 1/29/20		Hong Kong		327,000		(136,523	)
						(754,649	)
Wireless Telecommunication Services (0.3)%
g Digicel Group Ltd., senior note, Reg S, 7.125%, 4/01/22		Bermuda		282,000		(255,808	)
Total Corporate Bonds and Notes (Proceeds $9,196,187)						(9,380,179	)
Total Securities Sold Short (Proceeds $9,863,567)					$	(10,019,865	)

See Abbreviations on page 49.

†Rounds to less than 0.1% of net assets.

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

^aNon-income producing.

^bFair valued using significant unobservable inputs. See Note 10 regarding fair value measurements.

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

^dA 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, 2017, the aggregate value of these securities and/or cash pledged amounted to $19,148,108, representing 22.4% of net assets.

^eSecurity 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, 2017, the net value of these securities was $26,487,674, representing 31.0% of net assets.

^fA portion or all of the security purchased on a delayed delivery basis. See Note 1(d).

^gSecurity 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, 2017, the net value of these securities was $2,197,815, representing 2.6% of net assets.

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

ⁱIncome may be received in additional securities and/or cash.

^jAdjustable 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.

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

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

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

ⁿSee Note 1(c) regarding joint repurchase agreement.

^oSee Note 1(e) regarding written options.

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

26         Semiannual Report franklintempleton.com

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin K2 Long Short Credit Fund (continued)

At November 30, 2017, the Fund had the following futures contracts outstanding. See Note 1(e).

Futures Contracts

Description	Type		Number of Contracts		Notional  Amount*		Expiration Date		Value/Unrealized Appreciation (Depreciation)
Equity Contracts
S&P 500 E-Mini Index		Short		2		$264,790		12/15/17		$(16,213	)
Interest Rate Contracts
Euro BOBL		Short		4		626,119		12/07/17		754
Euro-Bund		Short		3		581,032		12/07/17		(759	)
Euro-Buxl 30 Yr. Bond		Short		2		397,877		12/07/17		127
						1,605,028				122
Total Futures Contracts										$(16,091	)

*As of period end.

At November 30, 2017, the Fund had the following forward exchange contracts outstanding. See Note 1(e).

Forward Exchange Contracts

Currency	Counterpartya		Type		Quantity		Contract  Amount*			Settlement Date		Unrealized Appreciation		Unrealized Depreciation
OTC Forward Exchange Contracts
Brazilian Real		JPHQ		Buy		742,376		227,068			12/04/17	$	—	$	(382	)
Brazilian Real		JPHQ		Sell		742,376		225,815			12/04/17		—		(871	)
Czech Koruna		JPHQ		Sell		16,176,151		619,100	EUR		12/15/17		32,154		(50,328	)
Euro		JPHQ		Buy		676		802			12/15/17		3		—
Euro		JPHQ		Sell		619,775		16,176,151	CZK		12/15/17		54,052		(36,683	)
Indian Rupee		JPHQ		Sell		17,633,512		267,803			12/18/17		—		(5,105	)
Chinese Yuan		JPHQ		Sell		2,034,377		307,796			12/20/17		545		—
Euro		JPHQ		Buy		1,006,254		1,196,646			12/20/17		5,946		(3,089	)
Euro		JPHQ		Sell		1,823,436		2,188,206			12/20/17		16,068		(1,485	)
Indian Rupee		JPHQ		Buy		10,118,326		155,237			12/20/17		1,325		—
Indian Rupee		JPHQ		Sell		10,118,326		156,400			12/20/17		—		(162	)
Mexican Peso		JPHQ		Buy		17,614,088		925,130			12/20/17		18,291		(1,661	)
Mexican Peso		JPHQ		Sell		20,150,807		1,103,237			12/20/17		30,659		(4,812	)
Russian Ruble		JPHQ		Buy		89,469,567		1,530,686			12/20/17		1,927		(7,951	)
Russian Ruble		JPHQ		Sell		99,076,313		1,692,300			12/20/17		6,513		(2,585	)
South African Rand		JPHQ		Buy		12,596,605		898,780			12/20/17		16,823		(222	)
South African Rand		JPHQ		Sell		14,821,389		1,080,071			12/20/17		12,663		(9,645	)
South Korean Won		JPHQ		Sell		543,417,301		480,478			12/20/17		78		(19,027	)
Turkish Lira		JPHQ		Buy		3,918,335		1,036,470			12/20/17		2,135		(44,412	)
Turkish Lira		JPHQ		Sell		3,918,335		1,032,923			12/20/17		38,981		(249	)
Indonesian Rupiah		JPHQ		Buy		2,193,969,742		162,036			12/21/17		—		(141	)
Brazilian Real		JPHQ		Buy		527,934		161,250			1/03/18		—		(589	)
Czech Koruna		JPHQ		Sell		3,530,738		133,588	EUR		1/10/18		15,151		(21,147	)
Euro		JPHQ		Sell		132,874		3,530,738	CZK		1/10/18		18,125		(11,277	)
Euro		JPHQ		Sell		714		791			1/10/18		—		(61	)
British Pound		JPHQ		Sell		990,000		1,343,541			1/31/18		1,440		—
Euro		JPHQ		Sell		730,000		866,336			1/31/18		—		(6,245	)
Total Forward Exchange Contracts													$272,879	$	(228,129	)
Net unrealized appreciation (depreciation)													$  44,750

*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         27

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin K2 Long Short Credit Fund (continued)

At November 30, 2017, the Fund had the following credit default swap contracts outstanding. See Note 1(e).

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			12/20/21		301,000		$	(2,754)	$	8,522	$	(11,276)
Government of Mexico		(1.00%)		Quarterly			12/20/22		23,000			21		166		(145)
Government of South Africa		(1.00%)		Quarterly			12/20/21		394,000			6,719		26,965		(20,246)
Government of South Africa		(1.00%)		Quarterly			6/20/22		376,000			10,231		19,788		(9,557)
Government of South Africa		(1.00%)		Quarterly			12/20/22		60,000			2,224		2,064		160
Government of South Korea		(1.00%)		Quarterly			12/20/21		355,184			(6,888)		(10,020)		3,132
Government of South Korea		(1.00%)		Quarterly			12/20/22		50,290			(999)		(1,201)		202
Government of Turkey		(1.00%)		Quarterly			12/20/20		503,000			4,608		41,382		(36,774)
Government of Turkey		(1.00%)		Quarterly			6/20/21		159,000			2,677		10,950		(8,273)
Government of Turkey		(1.00%)		Quarterly			12/20/21		98,000			2,384		5,993		(3,609)
Government of Turkey		(1.00%)		Quarterly			6/20/22		6,000			210		316		(106)
Traded Index
CDX.NA.HY.25		(5.00%)		Quarterly			12/20/20		1,416,200			(95,100)		14,162		(109,262)
CDX.NA.HY.28		(5.00%)		Quarterly			6/20/22		891,000			(75,492)		(65,793)		(9,699)
Contracts to Sell Protectionc,d
Single Name
Government of Russia		1.00%		Quarterly			6/20/21		457,000			2,031		(33,432)		35,463		BB+
Government of Russia		1.00%		Quarterly			12/20/21		189,000			58		(7,019)		7,077		BB+
Government of Turkey		1.00%		Quarterly			12/20/22		136,000			(6,160)		(6,150)		(10)		BB+
Total Centrally Cleared Swap Contracts											$	(156,230)		$  6,693		$  (162,923)
OTC Swap Contracts
Contracts to Buy Protectionc
Single Name					Counterparty
American Axle & Manufacturing Holdings Inc.		(5.00%)		Quarterly	JPHQ		12/20/21		226,000			(30,529)		(18,927)		(11,602)
American Axle & Manufacturing Holdings Inc.		(5.00%)		Quarterly	BZWS		6/20/22		(30,000)			(3,953)		(1,621)		(2,332)
American Axle & Manufacturing Holdings Inc.		(5.00%)		Quarterly	JPHQ		6/20/22		76,000			(10,015)		(3,592)		(6,423)
Astaldi SpA		(5.00%)		Quarterly	BZWS		6/20/18		54,000	EUR		15,680		(72)		15,752
Boparan Finance PLC		(5.00%)		Quarterly	JPHQ		12/20/19		100,000	EUR		(2,092)		(4,368)		2,276
Caterpillar Financial Services Corp.		(1.00%)		Quarterly	JPHQ		6/20/21		618,000			(17,394)		1,861		(19,255)
Ford Motor Co.		(5.00%)		Quarterly	GSCO		12/20/21		182,000			(33,477)		(24,937)		(8,540)
Ford Motor Co.		(5.00%)		Quarterly	GSCO		12/20/21		189,000			(34,765)		(24,504)		(10,261)
Ford Motor Credit Company LLC		(5.00%)		Quarterly	GSCO		12/20/21		189,000			(34,628)		(25,066)		(9,562)
Frontier Communications Corp.		(5.00%)		Quarterly	GSCO		12/20/19		115,000			13,670		10,613		3,057
Galapagos Holding SA		(5.00%)		Quarterly	BZWS		6/20/18		71,000	EUR		(1,995)		(821)		(1,174)
Galapagos Holding SA		(5.00%)		Quarterly	GSCO		12/20/19		20,000	EUR		(108)		1,400		(1,508)
Galapagos Holding SA		(5.00%)		Quarterly	BZWS		12/20/19		33,000	EUR		(177)		2,692		(2,869)
Glencore International AG		(5.00%)		Quarterly	JPHQ		12/20/22		196,000	EUR		(45,418)		(43,016)		(2,402)
Glencore International AG		(5.00%)		Quarterly	JPHQ		12/20/22		196,000	EUR		(45,418)		(42,655)		(2,763)
Honeywell International Inc.		(1.00%)		Quarterly	MSCO		12/20/22		403,000			(14,908)		(14,156)		(752)
Itochu Corp.		(1.00%)		Quarterly	GSCO		6/20/22		17,300,000	JPY		(5,158)		(4,691)		(467)
Itochu Corp.		(1.00%)		Quarterly	JPHQ		6/20/22		4,307,000	JPY		(1,284)		(1,205)		(79)
JFE Holdings, Inc.		(1.00%)		Quarterly	GSCO		6/20/22		5,746,000	JPY		(1,539)		(1,607)		68
JFE Holdings, Inc.		(1.00%)		Quarterly	JPHQ		6/20/22		3,802,000	JPY		(1,019)		(1,080)		61

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)
K. Hovnanian Enterprises Inc.		(5.00	%)		Quarterly		GSCO		12/20/22		30,000		$	9,995		$	5,482		$	4,513
K. Hovnanian Enterprises Inc.		(5.00	%)		Quarterly		GSCO		12/20/22		101,000			33,651			25,019			8,632
K. Hovnanian Enterprises Inc.		(5.00	%)		Quarterly		GSCO		12/20/22		104,000			34,650			26,278			8,372
K. Hovnanian Enterprises Inc.		(5.00	%)		Quarterly		BZWS		12/20/22		190,000			63,304			48,008			15,296
K. Hovnanian Enterprises Inc.		(5.00	%)		Quarterly		GSCO		12/20/22		213,000			70,967			66,590			4,377
K. Hovnanian Enterprises Inc.		(5.00	%)		Quarterly		GSCO		12/20/22		227,000			75,631			73,259			2,372
Lloyds Bank PLC		(1.00	%)		Quarterly		JPHQ		12/20/22		196,000	EUR		(4,121	)		(2,656	)		(1,465	)
Lloyds Bank PLC		(1.00	%)		Quarterly		BOFA		12/20/22		196,000	EUR		(4,121	)		(2,435	)		(1,686	)
Macy’s Retail Holdings Inc.		(1.00	%)		Quarterly		JPHQ		12/20/21		86,000			2,982			4,791			(1,809	)
Macy’s Retail Holdings Inc.		(1.00	%)		Quarterly		JPHQ		12/20/21		172,000			5,963			10,218			(4,255	)
Marubeni Corp.		(1.00	%)		Quarterly		GSCO		6/20/22		27,269,000	JPY		(7,034	)		(6,117	)		(917	)
Marubeni Corp.		(1.00	%)		Quarterly		JPHQ		6/20/22		6,291,000	JPY		(1,623	)		(1,491	)		(132	)
MBIA Inc.		(5.00	%)		Quarterly		GSCO		12/20/20		28,000			3,729			1,991			1,738
MBIA Inc.		(5.00	%)		Quarterly		GSCO		12/20/20		99,000			13,186			4,010			9,176
Mitsui O.S.K. Lines Ltd.		(1.00	%)		Quarterly		JPHQ		6/20/22		9,678,000	JPY		(790	)		(674	)		(116	)
Mitsui O.S.K. Lines Ltd.		(1.00	%)		Quarterly		JPHQ		6/20/22		3,618,000	JPY		(295	)		(252	)		(43	)
Pitney Bowes Inc.		(1.00	%)		Quarterly		JPHQ		12/20/21		159,500			12,769			6,345			6,424
R. R. Donnelley & Sons Co.		(5.00	%)		Quarterly		GSCO		12/20/22		13,000			616			277			339
R. R. Donnelley & Sons Co.		(5.00	%)		Quarterly		JPHQ		12/20/22		40,000			1,895			624			1,271
R. R. Donnelley & Sons Co.		(5.00	%)		Quarterly		JPHQ		12/20/22		40,000			1,895			1,172			723
R. R. Donnelley & Sons Co.		(5.00	%)		Quarterly		GSCO		12/20/22		26,000			1,231			2,575			(1,344	)
R. R. Donnelley & Sons Co.		(5.00	%)		Quarterly		GSCO		12/20/22		34,000			1,610			2,686			(1,076	)
Rallye SA		(5.00	%)		Quarterly		BZWS		6/20/19		71,000	EUR		(4,255	)		4,009			(8,264	)
Rallye SA		(5.00	%)		Quarterly		JPHQ		6/20/19		175,000	EUR		(10.488	)		10,551			(21,039	)
Rallye SA		(5.00	%)		Quarterly		GSCO		12/20/19		10,000	EUR		(634	)		480			(1,114	)
Rallye SA		(5.00	%)		Quarterly		GSCO		12/20/21		27,000	EUR		(83	)		1,072			(1,155	)
Rallye SA		(5.00	%)		Quarterly		GSCO		12/20/22		49,000	EUR		1,832			614			1,218
Sharp Corp.		(1.00	%)		Quarterly		JPHQ		12/20/18		4,914,000	JPY		(167	)		392			(559	)
The Hertz Corp.		(5.00	%)		Quarterly		MSCO		6/20/22		22,000			1,939			3,927			(1,988	)
The Hertz Corp.		(5.00	%)		Quarterly		GSCO		6/20/22		69,000			6,080			5,440			640
The Hertz Corp.		(5.00	%)		Quarterly		GSCO		6/20/22		42,000			3,701			5,636			(1,935	)
The Hertz Corp.		(5.00	%)		Quarterly		BZWS		6/20/22		102,000			8,989			13,694			(4,705	)
Transocean Inc.		(5.00	%)		Quarterly		BZWS		6/20/22		2,000			(131	)		71			(202	)
Transocean Inc.		(5.00	%)		Quarterly		GSCO		6/20/22		43,000			(2,818	)		1,920			(4,738	)
Windstream Services LLC		(5.00	%)		Quarterly		BZWS		12/20/22		25,000			8,367			7,211			1,156
Windstream Services LLC		(5.00	%)		Quarterly		GSCO		12/20/22		84,000			28,113			25,637			2,476
Windstream Services LLC		(5.00	%)		Quarterly		GSCO		12/20/22		84,000			28,113			27,323			790
Windstream Services LLC		(5.00	%)		Quarterly		GSCO		12/20/22		126,000			42,169			38,191			3,978
Windstream Services LLC		(5.00	%)		Quarterly		GSCO		12/20/22		120,000			40,161			42,668			(2,507	)
Contracts to Sell Protectionc,d
Single Name
Boparan Finance PLC		5.00	%		Quarterly		JPHQ		12/20/22		100,000	EUR		(5,070	)		(5,719	)		649		B-
Centurylink Inc.		1.00	%		Quarterly		BZWS		12/20/22		93,000			(17,610	)		(18,335	)		725		B+
Centurylink Inc.		1.00	%		Quarterly		BZWS		12/20/22		56,000			(10,604	)		(10,870	)		266		B+
Centurylink Inc.		1.00	%		Quarterly		GSCO		12/20/22		37,000			(7,006	)		(7,120	)		114		B+
Frontier Communications Corp.		5.00	%		Quarterly		BZWS		12/20/22		14,000			(4,075	)		(4,010	)		(65	)	B
Galapagos Holding SA		5.00	%		Quarterly		JPHQ		12/20/22		50,000	EUR		(5,961	)		(10,619	)		4,658		CCC+
Galapagos Holding SA		5.00	%		Quarterly		BZWS		12/20/22		33,000	EUR		(3,724	)		(6,806	)		3,082		CCC+
Galapagos Holding SA		5.00	%		Quarterly		GSCO		12/20/22		20,000	EUR		(2,384	)		(4,106	)		1,722		CCC+
Galapagos Holding SA		5.00	%		Quarterly		GSCO		12/20/22		20,000	EUR		(2,257	)		(2,191	)		(66	)	CCC+

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 (continued)
Single Name (continued)
K. Hovnanian Enterprises Inc.		5.00	%		Quarterly		GSCO		12/20/18		97,000		$  (23,158)			$(22,217)			$      (941)		BB
K. Hovnanian Enterprises Inc.		5.00	%		Quarterly		GSCO		6/20/19		389,000		(97,530	)		(91,739	)		(5,791	)	BB
K. Hovnanian Enterprises Inc.		5.00	%		Quarterly		BZWS		12/20/19		177,000		(46,355	)		(20,557	)		(25,798	)	BB
K. Hovnanian Enterprises Inc.		5.00	%		Quarterly		GSCO		12/20/19		96,000		(25,142	)		(10,621	)		(14,521	)	BB
Windstream Services LLC		5.00	%		Quarterly		BZWS		12/20/18		84,000		(6,351	)		(8,832	)		2,481		BB
Windstream Services LLC		5.00	%		Quarterly		GSCO		12/20/18		84,000		(6,351	)		(8,728	)		2,377		BB
Windstream Services LLC		5.00	%		Quarterly		BZWS		12/20/18		126,000		(9,527	)		(8,661	)		(866	)	BB
Windstream Services LLC		5.00	%		Quarterly		GSCO		12/20/18		84,000		(6,351	)		(6,428	)		77		BB
Windstream Services LLC		5.00	%		Quarterly		BZWS		12/20/18		28,000		(1,137	)		(2,944	)		1,807		BB
Windstream Services LLC		5.00	%		Quarterly		JPHQ		12/20/18		33,000		(2,495	)		(1,841	)		(654	)	BB
Windstream Services LLC		5.00	%		Quarterly		BZWS		12/20/18		13,000		(983	)		(904	)		(79	)	BB
Windstream Services LLC		5.00	%		Quarterly		JPHQ		12/20/18		5,000		(378	)		(549	)		171		BB
Total OTC Swap Contracts													$  (71,998	)		$   4,987			$  (76,985	)
Total Credit Default Swap Contracts													$(228,228	)		$ 11,680			$(239,908	)

^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, 2017, the Fund had the following cross-currency swap contracts outstanding. See Note 1(e).

Cross-Currency Swap Contracts

Description

Payment Frequency

Counterparty

Maturity Date

Notional Amount

Value/Unrealized Appreciation (Depreciation)

OTC Swap Contracts

Receive Fixed 10.33%

BOFA

12/20/22

702,632

TRY

$(12,273

)

Pay Floating 3 Month USD-LIBOR

Quarterly

201,039

USD

Receive Fixed 10.92%

BOFA

12/20/22

582,237

TRY

(6,924

)

Pay Floating 3 Month USD-LIBOR

Quarterly

159,255

USD

Receive Fixed 10.32%

DBAB

12/20/22

1,196,946

TRY

(21,052

)

Pay Floating 3 Month USD-LIBOR

Quarterly

345,539

USD

Total Cross-Currency Swap Contracts

$(40,249)

At November 30, 2017, the Fund had the following interest rate swap contracts outstanding. See Note 1(e).

Interest Rate Swap Contracts

Description	Payment Frequency		Maturity Date		Notional  Amount*			Value/Unrealized Appreciation (Depreciation)
Centrally Cleared Swap Contracts
Receive Fixed rate 8.37%
Pay Floating rate BRL-BRLCDI		Annually		1/02/20		1,076,072	BRL		$—
Receive Fixed rate 8.38%
Pay Floating rate BRL-BRLCDI		Annually		1/02/20		1,076,072	BRL		—

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 8.79%
Pay Floating rate BRL-BRLCDI		Annually		1/04/21		847,095 BRL		$ (2,733)
Receive Fixed rate 9.38%
Pay Floating rate BRL-BRLCDI		Annually		1/04/21		1,719,770 BRL		3,850
Receive Fixed rate 9.94%
Pay Floating rate BRL-BRLCDI		Annually		1/04/21		1,203,978 BRL		7,770
Receive Floating rate 3 Month USD-LIBOR
Pay Fixed rate 2.00%		Semi-Annually		12/20/19		1,000,000		2,612
Receive Floating rate 6 Month GBP-LIBOR
Pay Fixed rate 1.29%		Semi-Annually		2/28/67		21,000 GBP		1,797
Receive Floating rate 6 Month GBP-LIBOR
Pay Fixed rate 1.41%		Semi-Annually		8/04/67		108,000 GBP		2,785
Receive Floating rate 6 Month GBP-LIBOR
Pay Fixed rate 1.60%		Semi-Annually		12/03/46		82,713 GBP		149
Receive Floating rate 6 Month GBP-LIBOR
Pay Fixed rate 1.56%		Semi-Annually		11/29/46		112,459 GBP		1,532
Receive Floating rate 6 Month GBP-LIBOR
Pay Fixed rate 1.37%		Semi-Annually		1/05/67		100,000 GBP		4,851
Receive Floating rate 6 Month GBP-LIBOR
Pay Fixed rate 1.44%		Semi-Annually		1/07/47		156,995 GBP		7,506
Total Interest Rate Swap Contracts								$30,119

*In U.S. dollars unless otherwise indicated.

At November 30, 2017, the Fund had the following total return swap contracts outstanding. See Note 1(e).

Total Return Swap Contracts

Underlying Instrument

Financing Rate

Payment Frequency

Counter- party

Maturity Date

Notional  Value*

Value/ Unrealized Appreciation (Depreciation)

OTC Swap Contracts

Equity Contracts - Longa

JBS SA

1-Day BRLCDI + 0.75

%

Quarterly

GSCO

8/02/18

618,883 BRL

$

8,763

Equity Contracts - Shortb

NRG Yield Inc., A

1-Month LIBOR - 0.40

%

Quarterly

GSCO

7/25/18

14,703

(865

)

Fixed Income Contracts - Longa

Banco Central de la Republica Argentina SA

3-Month LIBOR + 1.25

%

Annually

JPHQ

5/16/18

107,120

3,680

Banco Central de la Republica Argentina SA

3-Month LIBOR + 1.25

%

Monthly

JPHQ

6/21/18

79,191

1,712

5,392

Fixed Income Contracts - Shortb

iBoxx USD Liquid High Yield Index

1-Month LIBOR

Quarterly

JPHQ

12/20/17

280,000

(1,735

)

iBoxx USD Liquid High Yield Index

1-Month LIBOR

Quarterly

JPHQ

12/20/17

405,000

(1,017

)

iBoxx USD Liquid High Yield Index

1-Month LIBOR

Quarterly

JPHQ

12/20/17

280,000

(1,789

)

iBoxx USD Liquid High Yield Index

1-Month LIBOR

Quarterly

JPHQ

12/20/17

1,219,000

(7,785

)

iBoxx USD Liquid High Yield Index

1-Month LIBOR

Quarterly

JPHQ

12/20/17

570,000

(3,748

)

(16,074

)

Total Return Swap Contracts

$

(2,784

)

*In U.S. dollars unless otherwise indicated.

^a The 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 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, 2017 (unaudited)

Franklin K2 Long Short Credit Fund

Assets:
Investments in securities:
Cost - Unaffiliated issuers	$	76,200,466
Cost - Unaffiliated repurchase agreements		2,609,960
Value - Unaffiliated issuers	$	79,758,928
Value - Unaffiliated repurchase agreements		2,609,960
Cash		761,768
Foreign currency, at value (cost $1,804,996)		2,069,623
Receivables:
Investment securities sold		2,602,403
Capital shares sold		1,736
Dividends and interest		396,989
Affiliates		5,489
Deposits with brokers for:
Securities sold short		9,698,698
OTC derivative contracts		390,000
Futures contracts		9,000
Centrally cleared swap contracts		843,192
Due from brokers		74,636
Variation margin on centrally cleared swap contracts		2,495
OTC swap contracts (upfront payments $511,844)		484,727
Unrealized appreciation on OTC forward exchange contracts		272,879
Unrealized appreciation on OTC swap contracts		126,989
Other assets		208
Total assets		100,109,720
Liabilities:
Payables:
Investment securities purchased		3,528,002
Capital shares redeemed		5,343
Management fees		109,954
Distribution fees		5,815
Variation margin on futures contracts		5,041
OTC swap contracts (upfront receipts $517,153)		479,740
Options written, at value (premiums received $30,593)		37,521
Securities sold short, at value (proceeds $9,863,567)		10,019,865
Due to brokers		63,587
Unrealized depreciation on OTC forward exchange contracts		228,129
Unrealized depreciation on OTC swap contracts		247,007
Accrued expenses and other liabilities		15,193
Total liabilities		14,745,197
Net assets, at value	$	85,364,523
Net assets consist of:
Paid-in capital	$	79,417,667
Undistributed net investment income		1,394,041
Net unrealized appreciation (depreciation)		3,435,466
Accumulated net realized gain (loss)		1,117,349
Net assets, at value	$	85,364,523

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, 2017 (unaudited)

Franklin K2 Long Short Credit Fund

Class A:
Net assets, at value	$	42,271,383
Shares outstanding		3,927,488
Net asset value per sharea	$	10.76
Maximum offering price per share (net asset value per share ÷ 94.25%)	$	11.42
Class C:
Net assets, at value	$	1,686,749
Shares outstanding		159,696
Net asset value and maximum offering price per sharea	$	10.56
Class R:
Net assets, at value	$	161,021
Shares outstanding		15,103
Net asset value and maximum offering price per share	$	10.66
Class R6:
Net assets, at value	$	11,837,513
Shares outstanding		1,098,237
Net asset value and maximum offering price per share	$	10.78
Advisor Class:
Net assets, at value	$	29,407,857
Shares outstanding		2,727,823
Net asset value and maximum offering price per share	$	10.78

^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, 2017 (unaudited)

Franklin K2 Long Short Credit Fund

Investment income:
Dividends:
Unaffiliated issuers	$	108,203
Interest:
Unaffiliated issuers:
Paydown gain (loss)		219,901
Paid in cash		1,924,828
Total investment income		2,252,932
Expenses:
Management fees (Note 3a)		829,195
Distribution fees: (Note 3c)
Class A		33,266
Class C		8,321
Class R		342
Transfer agent fees: (Note 3e)
Class A		2,695
Class C		112
Class R		10
Class R6		207
Advisor Class		1,850
Custodian fees (Note 4)		42,403
Reports to shareholders		4,738
Registration and filing fees		41,631
Professional fees		55,351
Trustees fees and expenses		14,115
Dividends and interest on securities sold short		238,207
Security borrowing fees		51,747
Other		13,201
Total expenses		1,337,391
Expense reductions (Note 4)		(2,903	)
Expenses waived/paid by affiliates (Note 3f)		(193,745	)
Net expenses		1,140,743
Net investment income		1,112,189
Realized and unrealized gains (losses):
Net realized gain (loss) from:
Investments:
Unaffiliated issuers		151,180
Written options		21,519
Foreign currency transactions		45,223
Forward exchange contracts		(280,555	)
Futures contracts		(32,863	)
Securities sold short		(33,480	)
Swap contracts		99,995
Net realized gain (loss)		(28,981	)
Net change in unrealized appreciation (depreciation) on:
Investments:
Unaffiliated issuers		552,500
Translation of other assets and liabilities denominated in foreign currencies		95,110
Forward exchange contracts		191,152
Written options		(4,891	)
Futures contracts		(7,318	)
Securities sold short		166,088
Swap contracts		56,242
Net change in unrealized appreciation (depreciation)		1,048,883
Net realized and unrealized gain (loss)		1,019,902
Net increase (decrease) in net assets resulting from operations	$	2,132,091

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, 2017 (unaudited)			Year Ended May 31, 2017
Increase (decrease) in net assets:
Operations:
Net investment income	$	1,112,189		$	1,655,358
Net realized gain (loss)		(28,981	)		2,240,829
Net change in unrealized appreciation (depreciation)		1,048,883			1,375,722
Net increase (decrease) in net assets resulting from operations		2,132,091			5,271,909
Distributions to shareholders from:
Net investment income:
Class A		—			(1,140,497	)
Class C		—			(31,012	)
Class R		—			(2,328	)
Class R6		—			(380,096	)
Advisor Class		—			(755,488	)
Net realized gains:
Class A		—			(368,226	)
Class C		—			(11,313	)
Class R		—			(758	)
Class R6		—			(121,801	)
Advisor Class		—			(242,776	)
Total distributions to shareholders		—			(3,054,295	)
Capital share transactions: (Note 2)
Class A		248,639			11,826,722
Class C		145,268			1,228,788
Class R		30,030			115,130
Class R6		(1,561,322	)		231,683
Advisor Class		3,556,600			1,271,511
Total capital share transactions		2,419,215			14,673,834
Net increase (decrease) in net assets		4,551,306			16,891,448
Net assets:
Beginning of period		80,813,217			63,921,769
End of period	$	85,364,523		$	80,813,217
Undistributed net investment income included in net assets:
End of period	$	1,394,041		$	281,852

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

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

Notes to Financial Statements

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. 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 as of 4 p.m. Eastern time each day the New York Stock Exchange (NYSE) is open for trading. 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 VC provides administration and oversight of the Fund’s valuation policies and procedures, which are approved annually by the Board. Among other things, these procedures allow the Fund to 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 (derivatives) 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 derivatives 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 VC convenes on a regular basis to review such financial instruments and considers a number of factors, including significant unobservable valuation inputs, when arriving at fair value. The VC 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

36         Semiannual Report franklintempleton.com

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

NOTES TO FINANCIAL STATEMENTS

Franklin K2 Long Short Credit Fund (continued)

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. The VC employs various methods for calibrating these valuation approaches including a regular review of key inputs and assumptions, transactional back-testing or disposition analysis, and reviews of any related market activity.

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. In order to minimize the potential for these differences, the VC monitors price movements 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

franklintempleton.com Semiannual Report         37

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

NOTES TO FINANCIAL STATEMENTS

Franklin K2 Long Short Credit Fund (continued)

1. Organization and Significant Accounting Policies (continued)

c. Joint Repurchase Agreement (continued)

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 by the Fund at period end, as indicated in the Statement of Investments, had been entered into on November 30, 2017.

d. Securities Purchased on a Delayed Delivery Basis

The Fund purchases securities on a delayed delivery basis, with payment and delivery scheduled for a future date. These transactions are subject to market fluctuations and are subject to the risk that the value at delivery may be more or less than the trade date purchase price. Although the Fund will generally purchase these securities with the intention of holding the securities, it may sell the securities before the settlement date. Sufficient assets have been segregated for these securities.

e. Derivative Financial Instruments

The Fund invested in derivatives 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

38         Semiannual Report franklintempleton.com

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

NOTES TO FINANCIAL STATEMENTS

Franklin K2 Long Short Credit Fund (continued)

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 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 OTC cross currency swap contracts primarily to manage and/or gain exposure to certain foreign currencies. A cross currency swap is an agreement between the

Fund and a counterparty to exchange cash flows (determined using either a fixed or floating rate) based on the notional amounts of two different currencies. The notional amounts are typically determined based on the spot exchange rates at the opening of the contract. Cross currency swaps may require the exchange of notional amounts at the opening and/or closing of the contract. 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. Upfront payments and receipts, if any, are reflected in the Statement of Assets and Liabilities and represent compensating factors between stated terms of the cross currency swap contract and prevailing market conditions (interest rate 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

franklintempleton.com Semiannual Report         39

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

NOTES TO FINANCIAL STATEMENTS

Franklin K2 Long Short Credit Fund (continued)

1. Organization and Significant Accounting Policies (continued)

e. Derivative Financial Instruments (continued)

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 8 regarding other derivative information.

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. 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, 2017, the Fund has determined that no tax liability is required in its 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.

h. 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 in 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.

40         Semiannual Report franklintempleton.com

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

NOTES TO FINANCIAL STATEMENTS

Franklin K2 Long Short Credit Fund (continued)

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. 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.

i. 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.

j. 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.

2. Shares of Beneficial Interest

At November 30, 2017, 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, 2017						Year Ended May 31, 2017
	Shares			Amount			Shares			Amount
Class A Shares:
Shares sold		421,355		$	4,481,288			1,264,686		$	13,252,348
Shares issued in reinvestment of distributions		—			—			34,170			351,266
Shares redeemed		(401,070	)		(4,232,649	)		(169,475	)		(1,776,892	)
Net increase (decrease)		20,285		$	248,639			1,129,381		$	11,826,722
Class C Shares:
Shares sold		45,397		$	472,290			188,527		$	1,949,434
Shares issued in reinvestment of distributions		—			—			4,162			42,325
Shares redeemed		(31,354	)		(327,022	)		(73,843	)		(762,971	)
Net increase (decrease)		14,043		$	145,268			118,846		$	1,228,788
Class R Shares:
Shares sold		2,882		$	30,030			10,774		$	112,554
Shares issued in reinvestment of distributions		—			—			253			2,586
Shares redeemed		—			—			(1	)		(10	)
Net increase (decrease)		2,882		$	30,030			11,026		$	115,130
Class R6 Shares:
Shares sold		86,073		$	910,612			111,147		$	1,158,073
Shares issued in reinvestment of distributions		—			—			48,773			501,391
Shares redeemed		(230,935	)		(2,471,934	)		(136,747	)		(1,427,781	)
Net increase (decrease)		(144,862	)	$	(1,561,322	)		23,173		$	231,683
Advisor Class Shares:
Shares sold		368,459		$	3,907,832			150,611		$	1,573,709
Shares issued in reinvestment of distributions		—			—			4,635			47,694
Shares redeemed		(33,055	)		(351,232	)		(33,736	)		(349,892	)
Net increase (decrease)		335,404		$	3,556,600			121,510		$	1,271,511

franklintempleton.com Semiannual Report         41

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

NOTES TO FINANCIAL STATEMENTS

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.

Prior to October 1, 2017, the Fund paid fees to K2 Advisors of 2.05% 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 is not an additional expense of the Fund.

Subadvisors

Apollo Credit Management LLC

Candlewood Investment Group, L.P.

Chatham Asset Management, LLC

Ellington Global Asset Management, L.L.C.

Emso Asset Management Limited

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

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 broker/dealers	$	1,794
CDSC retained	$	185

e. Transfer Agent Fees

Each class of shares pays transfer agent fees to Investor Services for its performance of shareholder servicing obligations. Effective November 1, 2017, the fees are based on an annualized asset based fee of 0.02% plus a transaction based fee. Prior to November 1, 2017, the fees were account based fees that varied based on fund or account type. 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, 2017, the Fund paid transfer agent fees of $4,874, of which $4,772 was retained by Investor Services.

f. Waiver and Expense Reimbursements

K2 Advisors has contractually agreed in advance to waive or limit its fees and to assume as its own expense certain expenses otherwise payable by the Fund so that the expenses (excluding distribution fees, acquired fund fees and expenses, and expenses related to securities sold short) for each class of the Fund do not exceed 1.95%, and Class R6 does not exceed 1.94% based on the average net assets of each class (other than certain non-routine expenses or costs, including those relating to litigation, indemnification, reorganizations, and liquidations) until September 30, 2018. Total expenses waived or paid are not subject to recapture subsequent to the Fund’s fiscal year end.

g. Other Affiliated Transactions

At November 30, 2017, the shares of the Fund were owned by the following entities:

	Shares		Percentage of     Outstanding     Sharesa
Franklin Resources, Inc.		4,999,195	63.1%
Franklin LifeSmart 2025 Retirement Target Fund		294,144	3.7%
Franklin LifeSmart 2035 Retirement Target Fund		261,652	3.3%
Franklin LifeSmart 2045 Retirement Target Fund		180,311	2.3%
Franklin LifeSmart 2030 Retirement Target Fund		104,309	1.3%
Franklin LifeSmart 2020 Retirement Target Fund		83,109	1.0%
Franklin LifeSmart 2040 Retirement Target Fund		82,756	1.0%
Franklin LifeSmart 2050 Retirement Target Fund		70,043	0.9%
Franklin LifeSmart 2055 Retirement Target Fund		20,718	0.3%
		6,096,237	76.9%

^aInvestment activities of significant shareholders 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, 2017, the custodian fees were reduced as noted in the Statement of Operations.

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FRANKLIN ALTERNATIVE STRATEGIES FUNDS

NOTES TO FINANCIAL STATEMENTS

Franklin K2 Long Short Credit Fund (continued)

5. Income Taxes

At November 30, 2017, the cost of investments and net unrealized appreciation (depreciation) for income tax purposes were as follows:

Cost of investments	$	69,234,625
Unrealized appreciation	$	4,269,828
Unrealized depreciation		(1,382,559)
Net unrealized appreciation (depreciation)	$	2,887,269

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, swaps, offering costs 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, 2017, aggregated $98,573,182 and $94,710,698, respectively.

7. Credit Risk

At November 30, 2017, the Fund had 21.9% of its portfolio invested in high yield and other securities rated below investment grade. 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.

8. Other Derivative Information

At November 30, 2017, 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	$	881	a	Variation margin on futures contracts	$	759	a
	Variation margin on centrally cleared swap contracts		32,852	a	Variation margin on centrally cleared swap contracts		2,733	a
	Investments in securities, at value		2,500	b
	Unrealized appreciation on OTC swap contracts		5,392
Foreign exchange contracts	Investments in securities, at value		588	b	Unrealized depreciation on OTC swap contracts		40,249
	Unrealized appreciation on OTC forward exchange contracts		272,879		Unrealized depreciation on OTC forward exchange contracts		228,129
Credit contracts	Variation margin on centrally cleared swap contracts		46,034	a	Variation margin on centrally cleared swap contracts		208,957	a
	OTC swap contracts (upfront payments)		484,727		OTC swap contracts (upfront receipts)		479,740
	Unrealized appreciation on OTC swap contracts		112,834		Unrealized depreciation on OTC swap contracts		205,893

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FRANKLIN ALTERNATIVE STRATEGIES FUNDS

NOTES TO FINANCIAL STATEMENTS

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	$	112,103	b	Options written, at value	$	37,521
	Unrealized appreciation on OTC swap contracts		8,763		Unrealized depreciation on OTC swap contracts		865
					Variation margin on futures contracts		16,213	a
Totals		$	1,079,553			$	1,221,059

^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, 2017, 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	$	(20,407	)	Investments	$	(6,410	)a
	Swap contracts		29,105		Futures contracts		4,392
					Swap contracts		53,799
Foreign exchange contracts	Forward exchange contracts		(280,555	)	Investments		(2,007	)a
	Swap contracts		(4,515	)	Forward exchange contracts		191,152
					Swap contracts		(48,783	)
Credit contracts	Swap contracts		67,996		Swap contracts		43,328
Equity contracts	Investments		(431,641	)a	Investments		(2,778	)a
	Written options		21,519		Written options		(4,891	)
	Futures contracts		(12,456	)	Futures contracts		(11,710	)
	Swap contracts		7,409		Swap contracts		7,898
Totals		$	(623,545	)		$	223,990

^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, 2017, the average month end notional amount of futures contracts, options and swap contracts represented $2,152,011, $1,158,950 and $19,025,590, respectively. The average month end contract value of forward exchange contracts was $11,757,046.

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FRANKLIN ALTERNATIVE STRATEGIES FUNDS

NOTES TO FINANCIAL STATEMENTS

Franklin K2 Long Short Credit Fund (continued)

8. Other Derivative Information (continued)

At November 30, 2017, 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		$272,879		$228,129
Options Purchased		3,088		—
Swap Contracts		611,716		726,747
Total		$887,683		$954,876

^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, 2017, 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 Received		Net Amount (Not less than zero)
Counterparty
BOFA		$         —		$          —			$ —		$ —		$         —
BZWS		116,250		(116,250	)		—		—		—
DBAB		—		—			—		—		—
GSCO		437,048		(307,380	)		—		—		129,668
JPHQ		330,458		(330,458	)		—		—		—
MSCO		3,927		(3,927	)		—		—		—
Total		$887,683		$(758,015	)		$ —		$ —		$129,668

At November 30, 2017, 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 Pledgeda		Cash Collateral Pledgedb			Net Amount (Not less than zero)
Counterparty
BOFA		$  20,883		$          —			$ —		$          —			$20,883
BZWS		129,166		(116,250	)		—		—			12,916
DBAB		21,052		—			—		—			21,052
GSCO		307,380		(307,380	)		—		—			—
JPHQ		459,499		(330,458	)		—		(110,000	)		19,041
MSCO		16,896		(3,927	)		—		—			12,969
Total		$954,876		$(758,015	)		$ —		$(110,000	)		$86,861

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

^bIn 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.

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FRANKLIN ALTERNATIVE STRATEGIES FUNDS

NOTES TO FINANCIAL STATEMENTS

Franklin K2 Long Short Credit Fund (continued)

See Note 1(e) 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 9, 2018. 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, 2017, 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.

For movements between the levels within the fair value hierarchy, the Fund has adopted a policy of recognizing the transfers as of the date of the underlying event which caused the movement.

A summary of inputs used as of November 30, 2017, 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	$	1,346,916	$	—	$	256,761	$	1,603,677
Convertible Preferred Stocks		212,628		—		—		212,628
Preferred Stocks		83,203		—		298,900		382,103
Convertible Bonds		—		1,605,216		—		1,605,216
Corporate Bonds and Notes		—		29,419,621		—		29,419,621
Foreign Government and Agency Securities		—		2,791,941		—		2,791,941
Asset-Backed Securities and Commercial Mortgage-Backed
Securities		—		29,073,057		—		29,073,057
Options Purchased		112,103		3,088		—		115,191
U.S. Government and Agency Securities		—		1,091,238		—		1,091,238
Short Term Investments		13,328,844		2,745,372		—		16,074,216
Total Investments in Securities	$	15,083,694	$	66,729,533	$	555,661	$	82,368,888

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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
Assets: (continued)
Other Financial Instruments:
Futures Contracts	$	881	$	—	$	—	$	881
Forward Exchange Contracts		—		272,879		—		272,879
Swap Contracts		—		205,875		—		205,875
Total Other Financial Instruments	$	881	$	478,754	$	—	$	479,635
Liabilities:
Other Financial Instruments:
Options Written	$	37,521	$	—	$	—	$	37,521
Securities Sold Shorta		639,686		9,380,179		—		10,019,865
Futures Contracts		16,972		—		—		16,972
Forward Exchange Contracts		—		228,129		—		228,129
Swap Contracts		—		458,697		—		458,697
Total Other Financial Instruments	$	694,179	$	10,067,005	$	—	$	10,761,184

^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.

11. New Accounting Pronouncements

In March 2017, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2017-08, Receivables — Nonrefundable Fees and Other Costs (Subtopic 310-20): Premium Amortization on Purchased Callable Debt Securities. The amendments in the ASU shorten the amortization period for certain callable debt securities acquired at a premium, to be amortized to the earliest call date. The ASU does not require an accounting change for securities acquired at a discount; which continues to be amortized to maturity. The ASU is effective for fiscal years and interim periods within those fiscal years beginning after December 15, 2018. Management is currently evaluating the impact, if any, of applying this provision.

12. 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.

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FRANKLIN ALTERNATIVE STRATEGIES FUNDS

NOTES TO FINANCIAL STATEMENTS

Franklin K2 Long Short Credit Fund (continued)

Abbreviations Counterparty		Currency		Selected Portfolio		Index
BOFA	Bank of America, N.A.	ARS	Argentine Peso	ARM	Adjustable Rate Mortgage	CDX.NA.HY	CDX North America High Yield
BZWS	Barclays Bank PLC	BRL	Brazilian Real	ARPP7DRR	Argentina Central Bank 7 Day Repo Rate
DBAB	Deutsche Bank, A.G.	CZK	Czech Koruna	BRLCDI	Brazil Cetip Di Interbank Deposit Rate
GSCO	Goldman Sachs International	EGP	Egyptian Pound	CLO	Collateralized Loan Obligation
				CMT	Constant Maturity Treasury Index
JPHQ	JP Morgan Chase Bank, N.A.	EUR	Euro	ETF	Exchange Traded Fund
MSCO	Morgan Stanley & Co., LLC	GBP	British Pound	FHLMC	Federal Home Loan Mortgage Corp.
		INR	Indian Rupee	FNMA	Federal National
					Mortgage Association
		JPY	Japanese Yen	FRN	Floating Rate Note
		RUB	Russian Ruble	LIBOR	London InterBank Offered Rate
		SAR	Saudi Riyal	PIK	Payment In-Kind
		TRY	Turkish Lira	REIT	Real Estate Investment Trust
		USD	United States Dollar	SPDR	Standard & Poor Depositary Receipt

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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 US 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 US 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 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.

^© 2017-2018 Franklin Templeton Investments. All rights reserved. 948 S 01/18

	Semiannual Report and Shareholder Letter
	November 30, 2017

Franklin Templeton Investments

Gain From Our Perspective^®

At Franklin Templeton Investments, we’re dedicated to one goal: delivering exceptional asset management for our clients. By bringing together multiple, world-class investment teams in a single firm, we’re able to offer specialized expertise across styles and asset classes, all supported by the strength and resources of one of the world’s largest asset managers. This has helped us to become a trusted partner to individual and institutional investors across the globe.

Dear Fellow Shareholder:

During the six months ended November 30, 2017, the global economy generally expanded amid improved commodity prices, generally upbeat economic data, encouraging corporate earnings and the European Central Bank’s (ECB’s) extension of its monetary easing time frame. The ECB kept its benchmark interest rate unchanged, while the US Federal Reserve (Fed) raised its target range for the federal funds rate 0.25% to 1.00%–1.25% amid signs of a growing US economy. In this environment, global developed stock markets, as measured by the MSCI World Index, posted a +9.81% total return for the period.¹ Global emerging market stocks, as measured by the MSCI Emerging Markets Index, generated a +13.27% total return.¹ Global government bonds, as measured by the Citigroup World Government Bond Index, posted a +2.57% total return.¹

A couple of weeks after the end of the reporting period, the Fed raised its target range a quarter point to 1.25%–1.50% amid ongoing labor market strength and rising economic activity in the US. The Fed’s inflation outlook remained essentially the same.

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 made 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.

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, 2017, unless otherwise indicated. The information is not a complete analysis of every aspect of any market, country, industry, security or fund. Statements of fact are from sources considered reliable.

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	38

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, 2017.

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 US 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 delivered a +0.44% cumulative total return for the six-month period under review. For comparison, the Fund’s new primary and old secondary benchmark, the HFRX Macro/CTA Index, which measures performance of global macro strategies with exposure to equity, fixed income, hard currency and commodity markets, produced a +2.02% total return for the same period.¹ As the investment manager believes the composition of the HFRX Macro/CTA Index more accurately reflects the Fund’s holdings, it has replaced the ICE BofA Merrill Lynch 3-Month US Treasury Bill Index as the Fund’s primary benchmark. Also for comparison, the ICE BofA Merrill Lynch

Portfolio Composition*

Based on Total Investments as of 11/30/17

*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.

3-Month US Treasury Bill Index, the Fund’s new secondary and old primary benchmark, which is an index of short-term US government securities with a remaining term to final maturity of less than three months, posted a +0.52% 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 generally expanded during the six-month period under review. In this environment, global developed and emerging market stocks, as measured by the MSCI All Country World Index, generated a +10.19% total return. Global markets were aided by price gains in oil and other commodities, generally upbeat economic data across regions, the European Central Bank’s (ECB’s) extension of its monetary easing program, and encouraging corporate earnings reports. The US Senate’s approval of a budget plan in October and its subsequent vote near period-end to begin debate on a tax bill, which raised expectations for reforms, also aided global markets.

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

However, global markets reflected investor concerns about the terms of the UK’s exit from the European Union (also known as “Brexit”), geopolitical tensions in the Korean peninsula and other regions, comments from key central bankers around the world about potentially raising interest rates, and uncertainty about the US government’s ability to implement a tax reform plan.

The US economy strengthened in 2017’s third quarter compared to the second quarter largely due to growth in consumer spending across goods and services, business and inventory investment, as well as net exports due to lower imports. The unemployment rate declined from 4.3% in May 2017, as reported at the beginning of the six-month period, to 4.1% at period-end.³ Annual inflation, as measured by the Consumer Price Index, increased from 1.9% in May 2017, as reported at the beginning of the period, to 2.2% at period-end.³ At its June meeting, the US Federal Reserve (Fed) raised its target range for the federal funds rate 0.25% to 1.00%–1.25%, amid signs of a growing US economy, strengthening labor market and improving business spending. At its subsequent meetings, the Fed kept its target range unchanged. However, minutes of its October 31–November 1 meeting indicated that the Fed continued to maintain a positive outlook for the US economy and signaled the possibility of a third rate hike in 2017, though concerns about the ongoing softness in inflation remained.

In Europe, the UK’s economic growth accelerated in 2017’s third quarter over the previous quarter, largely due to growth in the services sector. In November, the Bank of England raised its key policy rate 0.25%, its first increase in a decade. The euro-zone’s growth, however, moderated in 2017’s third quarter over the previous quarter. The bloc’s annual inflation rate, while low, ended higher than it was at the start of the period. The ECB kept its benchmark interest rate unchanged during the period. However, at its October meeting, the ECB extended the time frame for its massive bond-buying program from December 2017 to at least September 2018, while reducing the amount of monthly bond purchases in half beginning in January 2018.

In Asia, Japan’s quarterly gross domestic product (GDP) grew for the seventh consecutive quarter, although third-quarter 2017 growth was lower than the previous quarter. At its October 2017 meeting, the Bank of Japan left its benchmark interest rate unchanged and continued its monetary stimulus measures, while reducing its fiscal 2017 inflation forecast.

In emerging markets, Brazil’s GDP grew for the third consecutive quarter, although third-quarter growth slowed from the

previous quarter. The country’s central bank cut its benchmark interest rate several times during the period to spur economic growth. Russia’s GDP grew in 2017’s third quarter compared to the prior-year period, amid the Bank of Russia’s continued policy support. China’s GDP grew faster in 2017’s third quarter compared to the prior-year period. The People’s Bank of China left its benchmark interest rate unchanged during the period. Overall, emerging market stocks, as measured by the MSCI Emerging Markets Index, rose substantially during the period.

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.

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 US 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 will use a variety of derivatives to implement its investment strategies, which may include futures contracts, swaps, currency forward contracts and options. The Fund may engage in active and frequent trading as part of its investment strategies.

3. Source: US Bureau of Labor Statistics.

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

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FRANKLIN K2 GLOBAL MACRO OPPORTUNITIES FUND

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.

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 under review were P/E GLOBAL, Aspect Capital Limited, Graham Capital Management and Emso Asset Management Limited. Positive

Subadvisors

11/30/17

Discretionary Macro

Emso Asset Management Limited

Systematic Macro

Aspect Capital Limited

Graham Capital Management, L.P.

P/E GLOBAL LLC

performance for two underlying subadvisors, Aspect Capital and Emso Asset Management, helped the Fund deliver gains for the review period. In contrast, declines for two subadvisors, Graham Capital Management and P/E GLOBAL, weakened returns.

In terms of the Fund’s aggregate asset class exposure, leading contributors to positive performance included equity, credit and commodity exposures, while currencies and interest-rate exposures were the leading detractors.

With regard to aggregate sector/industry and security exposure, the top contributors to performance were equity indexes, particularly in Asia; financials; base metals; and energy. Conversely, government bonds were the top detractors, as interest rates generally increased over the period.

In terms of geographic exposures, Hong Kong, Japan and Argentina contributed the most to performance. In contrast, exposures to the US, Canada and Germany detracted.

Broadly speaking, systematic subadvisors benefited from a rebound phase that began in July, driven by stronger trends in a number of markets, lower cross-asset correlations and periods of modestly higher volatility across a number of markets, including currencies. The emerging-markets focused discretionary subadvisor’s results were supported by positive capital flows as well as what we viewed as attractive relative value opportunities across a number of markets.

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

Robert Christian is a senior managing director and head of investment research for K2 Advisors, which he joined in 2010. Mr. Christian worked at Graham Capital Management, L.P., from 1998 to 2003 as a portfolio manager and researcher of quantitative-based trading strategies. At Julius Baer Investment Management from 2003 to 2005, he was the head of macro strategies. From 2005 to 2010, he worked at FRM Americas LLC where he was the global head of directional trading strategies and portfolio advisor to numerous funds. Mr. Christian holds a B.A.S. in biology and economics from Stanford University (1985) and an M.B.A. in finance from Leonard N. Stern School of Business -New York University (1990).

Brooks Ritchey is a senior managing director and head of portfolio construction for K2 Advisors. He is also a senior vice president and director of investment solutions for the Franklin Templeton Multi-Asset Solutions division. Since 1987, Mr. Ritchey has managed multi-asset mutual fund and hedge fund portfolios during his employment with organizations including Steinhardt Partners, Citibank, Finch Asset Management, Paribas, AIG and ING. Mr. Ritchey joined K2 Advisors in 2005. Mr. Ritchey graduated from Franklin & Marshall College in 1982.

Anthony Zanolla joined K2 Advisors in October 2014 and serves as senior vice president and portfolio manager. Mr. Zanolla began his investment career in 1994 at Bankers Trust and worked on the business risk team for senior management. Mr. Zanolla joined Citibank in 1996 as portfolio manager of global equity and balanced investment mandates. In 2000, he joined Scudder Kemper Investments as vice president of venture capital. In 2001, Mr. Zanolla joined former Citigroup colleagues as a founding partner and equity analyst at Norquest Capital, a hedge fund. He joined Allianz Hedge Fund Partners in 2002 as an investment committee member and strategy head responsible for global long-short equity, event driven, distressed and commodity trading advisors. After joining the Hedge Fund group of Northern Trust in October 2005 as co-portfolio manager, in 2007 Mr. Zanolla was promoted to senior vice president and portfolio manager responsible for fund of funds and custom portfolios. Mr. Zanola graduated from Bernard M. Baruch College in January 1994 with a B.B.A. in Accounting. He earned the CFA designation in 1999 and holds an NFA Series 3 license.

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FRANKLIN K2 GLOBAL MACRO OPPORTUNITIES FUND

Performance Summary as of November 30, 2017

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 11/30/17¹

Cumulative total return excludes sales charges. Average annual total return includes maximum sales charges. Sales charges will vary depending on the size of the investment and the class of share purchased. The maximum is 5.75% and the minimum is 0%. Class A: 5.75% maximum initial sales charge; Advisor Class: no sales charges. For other share classes, visit franklintempleton.com.

Share Class	Cumulative  Total Return2	Average Annual  Total Return3
A
6-Month	+0.44%	-5.33%
1-Year	-2.96%	-8.51%
Since Inception (7/11/16)	-7.13%	-9.15%
Advisor
6-Month	+0.65%	+0.65%
1-Year	-2.74%	-2.74%
Since Inception (7/11/16)	-6.92%	-5.03%

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 Expenses⁴

Share Class	With Waiver		Without Waiver
A		2.26%		4.58%
Advisor		2.01%		4.33%

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 9/30/18 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. 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 K2 GLOBAL MACRO OPPORTUNITIES 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 6/1/17	Ending Account Value 11/30/17	Expenses Paid During Period 6/1/17–11/30/171,2	Ending Account Value 11/30/17	Expenses Paid During Period 6/1/17–11/30/171,2	Net Annualized Expense Ratio2
A	$1,000	$1,004.40	$11.10	$1,013.99	$11.16	2.21%
C	$1,000	$1,001.10	$14.80	$1,010.28	$14.87	2.95%
R	$1,000	$1,004.40	$11.15	$1,013.94	$11.21	2.22%
R6	$1,000	$1,005.40	$  9.75	$1,015.34	$  9.80	1.94%
Advisor	$1,000	$1,006.50	$  9.81	$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, 2017 (unaudited)			Year Ended May 31, 2017a
Class A
Per share operating performance
(for a share outstanding throughout the period)
Net asset value, beginning of period		$9.19			$10.00
Income from investment operationsb:
Net investment income (loss)c		(—	)d		(0.09	)
Net realized and unrealized gains (losses)		0.04			(0.66	)
Total from investment operations		0.04			(0.75	)
Less distributions from net investment income		—			(0.06	)
Net asset value, end of period		$9.23			$  9.19
Total returne		0.44%			(7.64)%
Ratios to average net assetsf
Expenses before waiver, payments by affiliates and expense reduction		3.52%			4.22%
Expenses net of waiver, payments by affiliates and expense reductiong		2.21%			2.16%
Net investment income (loss)		(0.05)%			(1.04)%
Supplemental data
Net assets, end of period (000’s)		$122			$90
Portfolio turnover rate		69.75%			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 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, except for non-recurring expenses, if any.

^gBenefit 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, 2017 (unaudited)			Year Ended May 31, 2017a
Class C
Per share operating performance
(for a share outstanding throughout the period)
Net asset value, beginning of period		$9.13			$10.00
Income from investment operationsb:
Net investment income (loss)c		(0.04	)		(0.15	)
Net realized and unrealized gains (losses)		0.05			(0.68	)
Total from investment operations		0.01			(0.83	)
Less distributions from net investment income		—			(0.04	)
Net asset value, end of period		$9.14			$  9.13
Total returnd		0.11%			(8.27)%
Ratios to average net assetse
Expenses before waiver, payments by affiliates and expense reduction		4.26%			4.98%
Expenses net of waiver, payments by affiliates and expense reductionf		2.95%			2.92%
Net investment income (loss)		(0.79)%			(1.80)%
Supplemental data
Net assets, end of period (000’s)		$143			$188
Portfolio turnover rate		69.75%			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 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, 2017 (unaudited)			Year Ended May 31, 2017a
Class R
Per share operating performance
(for a share outstanding throughout the period)
Net asset value, beginning of period		$9.18			$10.00
Income from investment operationsb:
Net investment income (loss)c		(—	)d		(0.08	)
Net realized and unrealized gains (losses)		0.04			(0.68	)
Total from investment operations		0.04			(0.76	)
Less distributions from net investment income		—			(0.06	)
Net asset value, end of period		$9.22			$  9.18
Total returne		0.44%			(7.63)%
Ratios to average net assetsf
Expenses before waiver, payments by affiliates and expense reduction		3.53%			4.18%
Expenses net of waiver, payments by affiliates and expense reductiong		2.22%			2.12%
Net investment income (loss)		(0.06)%			(1.00)%
Supplemental data
Net assets, end of period (000’s)		$9			$9
Portfolio turnover rate		69.75%			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 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 is not annualized for periods less than one year.

^fRatios are annualized for periods less than one year, except for non-recurring expenses, if any.

^gBenefit 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, 2017 (unaudited)		Year Ended May 31, 2017a
Class R6
Per share operating performance
(for a share outstanding throughout the period)
Net asset value, beginning of period		$9.19		$10.00
Income from investment operationsb:
Net investment income (loss)c		0.01		(0.07	)
Net realized and unrealized gains (losses)		0.04		(0.68	)
Total from investment operations		0.05		(0.75	)
Less distributions from net investment income		—		(0.06	)
Net asset value, end of period		$9.24		$  9.19
Total returnd		0.54%		(7.52)%
Ratios to average net assetse
Expenses before waiver, payments by affiliates and expense reduction		3.25%		4.30%
Expenses net of waiver, payments by affiliates and expense reductionf		1.94%		1.94%
Net investment income (loss)		0.23%		(0.82)%
Supplemental data
Net assets, end of period (000’s)		$9		$9
Portfolio turnover rate		69.75%		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 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, 2017 (unaudited)		Year Ended May 31, 2017a
Advisor Class
Per share operating performance
(for a share outstanding throughout the period)
Net asset value, beginning of period		$9.19		$10.00
Income from investment operationsb:
Net investment income (loss)c		0.01		(0.07	)
Net realized and unrealized gains (losses)		0.05		(0.68	)
Total from investment operations		0.06		(0.75	)
Less distributions from net investment income		—		(0.06	)
Net asset value, end of period		$9.25		$  9.19
Total returnd		0.65%		(7.42)%
Ratios to average net assetse
Expenses before waiver, payments by affiliates and expense reduction		3.26%		3.99%
Expenses net of waiver, payments by affiliates and expense reductionf		1.95%		1.93%
Net investment income (loss)		0.21%		(0.81)%
Supplemental data
Net assets, end of period (000’s)		$23,155		$22,975
Portfolio turnover rate		69.75%		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 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, 2017 (unaudited)

Franklin K2 Global Macro Opportunities Fund

	Country		Principal   Amount*			Value
Corporate Bonds and Notes 6.5%
Mortgage Real Estate Investment Trusts (REITs) 2.4%
a JP Morgan Structured Products BV, senior note, Reg S, zero cpn., 1/18/18		Egypt		10,265,000 EGP		$	567,909
Oil, Gas & Consumable Fuels 4.1%
Petrobras Global Finance BV, senior note, 5.375%, 1/27/21		Brazil		156,000			162,630
8.375%, 5/23/21		Brazil		109,000			124,097
6.125%, 1/17/22		Brazil		186,000			198,555
6.25%, 3/17/24		Brazil		93,000			99,124
Petroleos Mexicanos, senior note, 6.00%, 3/05/20		Mexico		139,000			148,417
6.375%, 2/04/21		Mexico		126,000			137,970
a,bFRN, Reg S, 4.967%, (3-Month USD LIBOR + 3.65%), 3/11/22		Mexico		42,000			46,158
aReg S, 5.375%, 3/13/22		Mexico		40,000			42,860
							959,811
					��
Total Corporate Bonds and Notes (Cost $1,487,531)							1,527,720
Foreign Government and Agency Securities 4.5%
Banco Central de la República Argentina SA, zero cpn., 6/13/18		Argentina		4,013,070 ARS			199,260
Government of Argentina, 7.82%, 12/31/33		Argentina		119,721 EUR			163,397
2.26% to 3/31/19, 4.74% thereafter, 12/31/38		Argentina		228,585 EUR			194,350
bsenior note, FRN, 27.493%, (ARPP7DRR), 6/21/20		Argentina		538,849 ARS			33,394
asenior note, Reg S, 3.875%, 1/15/22		Argentina		100,000 EUR			124,461
senior note, 5.625%, 1/26/22		Argentina		92,000			96,784
Government of Russia, 7.40%, 12/07/22		Russia		5,054,000 RUB			87,836
a National Highways Authority of India, senior note, Reg S, 7.30%, 5/18/22		India		10,000,000 INR			158,044
Total Foreign Government and Agency Securities (Cost $968,922)							1,057,526
Total Investments before Short Term Investments (Cost $2,456,453)							2,585,246
Short Term Investments 81.5%
Foreign Government and Agency Securities (Cost $520,332) 2.3%
e Egypt Treasury Bills, 3/06/18		Egypt		9,625,000 EGP			521,333
			Shares
Money Market Funds 77.0%
c,d Dreyfus Government Cash Management, Institutional Shares, 0.96%		United States		4,730,172			4,730,172
cFidelity Investments Money Market Funds, 0.97%		United States		13,325,385			13,325,385
Total Money Market Funds (Cost $18,055,557)							18,055,557

franklintempleton.com Semiannual Report         15

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

CONSOLIDATED STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin K2 Global Macro Opportunities Fund (continued)

	Country		Principal   Amount*		Value
Repurchase Agreements (Cost $522,655) 2.2%
f Joint Repurchase Agreement, 1.029%, 12/01/17
(Maturity Value $522,670)		United States		522,655	$	522,655
BNP Paribas Securities Corp. (Maturity Value $441,912)
Deutsche Bank Securities Inc. (Maturity Value $23,306)
HSBC Securities (USA) Inc. (Maturity Value $55,241)
Merrill Lynch, Pierce, Fenner & Smith Inc. (Maturity Value $2,211)
Collateralized by U.S. Government Agency Securities, 1.875%, 9/18/18; eU.S. Treasury Bill, 4/19/18 - 5/31/18; and
U.S. Treasury Note, 1.50% - 2.00%, 6/15/20 - 10/31/22
(valued at $533,178)
Total Investments (Cost $21,554,997) 92.5%						21,684,791
Other Assets, less Liabilities 7.5%						1,753,634
Net Assets 100.0%					$	23,438,425

See abbreviations on page 37.

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

^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, 2017, the aggregate value of these securities was $939,432, representing 4.0% of net assets.

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

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

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

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

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

At November 30, 2017, 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		7		$355,775		12/18/17		$(12,705	)
Aluminum		Short		7		355,775		12/18/17		5,164
Aluminum		Long		5		256,687		3/19/18		(1,623	)
Brent Crude Oil		Long		10		626,300		12/28/17		11,874
Brent Crude Oil		Long		1		62,340		1/31/18		(592	)
Cocoa		Short		4		80,873		3/14/18		5,822
Coffee		Short		2		96,375		3/19/18		(981	)
Copper		Long		5		842,438		12/18/17		(11,277	)
Copper		Short		5		842,438		12/18/17		(6,114	)
Copper		Long		5		846,438		3/19/18		(5,143	)
Copper		Long		1		76,600		3/27/18		(1,503	)
Corn		Short		12		213,450		3/14/18		2,480
Gold 100 Oz		Long		6		766,020		2/26/18		(6,233	)
Kansas City Wheat		Short		5		107,875		3/14/18		3,772
Low Sulphur Gas Oil		Long		7		390,600		1/11/18		(736	)
Low Sulphur Gas Oil		Long		1		55,975		2/12/18		(477	)
Natural Gas		Short		8		242,000		12/27/17		15,762
Nickel		Long		1		66,342		12/18/17		(4,532	)
Nickel		Short		1		66,342		12/18/17		3,555
Nickel		Long		1		66,762		3/19/18		(3,563	)
NY Harbor ULSD		Long		8		637,593		12/29/17		(8,271	)

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)
Commodity Contractsa (continued)
RBOB Gasoline		Long		6		$	435,960		12/29/17		$	(7,292	)
Soybean Meal		Short		1			32,650		1/12/18			(873	)
Soybean Meal		Short		3			98,940		3/14/18			(3,008	)
Sugar		Short		6			101,338		2/28/18			(476	)
Wheat		Short		13			281,450		3/14/18			6,988
WTI Crude Oil		Long		4			229,600		12/19/17			4,721
WTI Crude Oil		Long		3			172,350		1/22/18			893
WTI Crude Oil		Long		1			57,400		2/20/18			(892	)
Zinc		Long		4			316,725		12/18/17			338
Zinc		Short		4			316,725		12/18/17			57
Zinc		Long		2			157,762		3/19/18			(162	)
							9,255,898					(15,027	)
Currency Contracts
AUD/USD		Short		13			983,450		12/18/17			40,562
CAD/USD		Short		2			155,040		12/19/17			2,625
CHF/USD		Short		8			1,017,100		12/18/17			20,988
EUR/USD		Long		9			1,339,650		12/18/17			(1,084	)
EUR/USD		Short		26			3,870,100		12/18/17			36,028
GBP/USD		Long		1			84,562		12/18/17			404
GBP/USD		Short		1			84,563		12/18/17			(1,361	)
JPY/USD		Short		6			666,900		12/18/17			14,067
MXN/USD		Long		2			53,490		12/18/17			(225	)
NZD/USD		Short		10			683,300		12/18/17			12,136
							8,938,155					124,140
Equity Contracts
Amsterdam Index		Long		1			128,571		12/15/17			1,188
CAC 40 10 Euro Index		Long		1			63,887		12/15/17			840
DAX Index		Long		1			388,393		12/15/17			1,121
DJIA Mini E-CBOT Index		Long		2			242,740		12/15/17			24,996
DJIA Mini E-CBOT Index		Short		4			485,480		12/15/17			(17,588	)
E-Mini Russell 2000 Index		Long		1			77,270		12/15/17			6,063
EURO STOXX 50 Index		Long		5			212,638		12/15/17			468
FTSE 100 Index		Long		6			594,701		12/15/17			(3,040	)
FTSE/JSE Top 40 Index		Long		5			195,060		12/21/17			8,100
Hang Seng China Enterprises Index		Long		1			73,757		12/28/17			(1,373	)
Hang Seng Index		Long		4			750,792		12/28/17			(12,237	)
Mini MSCI EAFE Index		Long		1			100,960		12/15/17			3,358
Mini MSCI Emerging Market Index		Long		3			168,000		12/15/17			5,269
Nasdaq 100 E-Mini Index		Long		1			127,380		12/15/17			8,450
Nasdaq 100 E-Mini Index		Short		6			764,280		12/15/17			(14,261	)
Nikkei 225 Index		Long		3			417,634		12/07/17			50,309
OMX Stockholm 30 Index		Long		3			57,700		12/15/17			(206	)
S&P 500 E-Mini Index		Long		1			132,395		12/15/17			9,496
S&P 500 E-Mini Index		Short		1			132,395		12/15/17			(8,107	)
S&P Midcap 400 E-Mini Index		Long		1			190,000		12/15/17			15,038
S&P/TSX 60 Index		Long		1			147,456		12/14/17			11,789
SPI 200 Index		Long		2			226,391		12/21/17			3,718
TOPIX Index		Long		1			159,669		12/07/17			17,179
							5,837,549					110,570
Interest Rate Contracts
3 Month Euribor		Long		1			297,503		12/16/19			247
3 Month Euribor		Long		1			297,294		3/16/20			(80	)
10 Yr. Mini Japan Government Bond		Long		6			804,318		12/12/17			211

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)
90 Day Bank Bill		Long		5		$	3,765,386		6/07/18			$    1,001
90 Day Bank Bill		Long		4			3,011,939		9/13/18			893
90 Day Bank Bill		Long		3			2,258,566		12/13/18			425
90 Day Eurodollar		Short		1			245,637		3/19/18			373
90 Day Eurodollar		Short		4			981,050		6/18/18			1,855
90 Day Eurodollar		Short		6			1,470,150		9/17/18			2,313
90 Day Eurodollar		Short		20			4,896,250		12/17/18			4,561
90 Day Eurodollar		Short		4			978,700		3/18/19			1,317
90 Day Eurodollar		Short		8			1,956,400		6/17/19			1,721
90 Day Eurodollar		Short		1			244,450		9/16/19			573
90 Day Eurodollar		Short		1			244,337		12/16/19			136
90 Day Eurodollar		Short		1			244,287		3/16/20			148
90 Day Sterling		Long		1			167,646		9/19/18			(51	)
90 Day Sterling		Long		1			167,528		12/19/18			(68	)
90 Day Sterling		Long		1			167,426		3/20/19			(86	)
90 Day Sterling		Long		1			167,325		6/19/19			(85	)
90 Day Sterling		Long		1			167,240		9/18/19			(102	)
90 Day Sterling		Long		1			167,156		12/18/19			(102	)
Australian 3 Yr. Bond		Long		7			592,312		12/15/17			317
Australian 10 Yr. Bond		Long		3			296,649		12/15/17			1,552
Canada 10 Yr. Bond		Long		5			529,784		3/20/18			272
Canada 10 Yr. Bond		Short		1			105,957		3/20/18			99
Euro BOBL		Long		4			626,119		12/07/17			199
Euro BOBL		Short		1			156,530		12/07/17			189
Euro BOBL		Long		1			157,268		3/08/18			130
Euro OAT		Long		2			377,618		12/07/17			5,975
Euro Schatz		Long		2			267,068		12/07/17			42
Euro-BTP Italian Government Bond		Long		5			838,352		12/07/17			25,334
Euro-Bund		Long		4			774,710		12/07/17			1,146
Euro-Bund		Short		2			387,355		12/07/17			(506	)
Euro-Buxl 30 Yr. Bond		Long		1			198,938		12/07/17			74
Euro-Buxl 30 Yr. Bond		Short		1			198,938		12/07/17			64
Long Gilt		Long		5			835,779		3/27/18			(3,862	)
U.S. Treasury 2 Yr. Note		Short		16			3,430,500		3/29/18			1,916
U.S. Treasury 5 Yr. Note		Short		17			1,977,844		3/29/18			5,226
U.S. Treasury Long Bond		Long		1			151,719		3/20/18			(1,314	)
U.S. Treasury Ultra Bond		Long		1			164,875		3/20/18			(752	)
							34,768,903					51,301
Total Futures Contracts											$	270,984

*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(e).

At November 30, 2017, 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		402,958		123,251			12/04/17		$        —		$        (207	)
Brazilian Real		JPHQ		Sell		402,958		122,571			12/04/17		—		(473	)
Czech Koruna		JPHQ		Sell		10,725,397		408,927	EUR		12/15/17		24,230		(38,137	)
Euro		JPHQ		Sell		2,497		2,963			12/15/17		13		—
Euro		JPHQ		Sell		411,425		10,725,397	CZK		12/15/17		34,237		(23,305	)

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)
Indian Rupee	JPHQ	Sell		9,570,448		145,348			12/18/17		$	—		$	(2,771	)
Brazilian Real	JPHQ	Buy		946,719		300,000			12/20/17			—			(11,432	)
Brazilian Real	JPHQ	Sell		488,908		150,000			12/20/17			1,451			(474	)
Chilean Peso	JPHQ	Buy		248,004,090		400,000			12/20/17			—			(16,868	)
Chilean Peso	JPHQ	Sell		95,398,865		150,000			12/20/17			2,622			—
Chinese Yuan	JPHQ	Buy		1,650,118		250,000			12/20/17			232			(1,016	)
Chinese Yuan	JPHQ	Sell		2,491,643		375,607			12/20/17			365			(1,068	)
Euro	JPHQ	Buy		593,811		704,943			12/20/17			4,781			(1,873	)
Euro	JPHQ	Sell		855,825		1,026,696			12/20/17			7,369			(856	)
Euro	JPHQ	Sell		300,000		92,199,476	HUF		12/20/17			1,838			(8,374	)
Euro	JPHQ	Sell		550,000		5,280,662	NOK		12/20/17			2,662			(23,051	)
Euro	JPHQ	Sell		200,000		850,119	PLN		12/20/17			5,295			(2,776	)
Euro	JPHQ	Sell		500,000		4,920,923	SEK		12/20/17			442			(7,507	)
Hungarian Forint	JPHQ	Sell		93,360,982		300,000	EUR		12/20/17			5,910			(3,796	)
Indian Rupee	JPHQ	Buy		36,031,310		555,237			12/20/17			2,280			—
Indian Rupee	JPHQ	Sell		26,428,890		406,400			12/20/17			125			(2,662	)
Mexican Peso	JPHQ	Buy		9,775,244		513,321			12/20/17			10,240			(914	)
Mexican Peso	JPHQ	Sell		11,171,660		611,859			12/20/17			17,162			(2,611	)
New Israeli Shekel	JPHQ	Buy		1,402,423		400,000			12/20/17			1,575			(24	)
New Israeli Shekel	JPHQ	Sell		704,188		200,000			12/20/17			—			(1,628	)
Norwegian Krone	JPHQ	Sell		5,240,612		550,000	EUR		12/20/17			26,675			(1,468	)
Philippine Peso	JPHQ	Buy		2,540,250		50,000			12/20/17			481			—
Polish Zloty	JPHQ	Sell		841,453		200,000	EUR		12/20/17			478			(541	)
Russian Ruble	JPHQ	Buy		65,443,186		1,117,753			12/20/17			2,499			(5,027	)
Russian Ruble	JPHQ	Sell		61,838,070		1,055,387			12/20/17			3,881			(2,283	)
Singapore Dollar	JPHQ	Buy		134,288		100,000			12/20/17			—			(416	)
Singapore Dollar	JPHQ	Sell		68,241		50,000			12/20/17			—			(605	)
South African Rand	JPHQ	Buy		9,698,917		699,349			12/20/17			10,406			(4,949	)
South African Rand	JPHQ	Sell		11,018,879		798,030			12/20/17			8,086			(10,785	)
South Korean Won	JPHQ	Buy		169,012,641		150,000			12/20/17			5,331			—
South Korean Won	JPHQ	Sell		464,410,294		411,760			12/20/17			8			(15,063	)
Swedish Krona	JPHQ	Sell		7,824,792		800,000	EUR		12/20/17			19,916			(2,785	)
Taiwan Dollar	JPHQ	Buy		4,514,377		150,000			12/20/17			667			—
Taiwan Dollar	JPHQ	Sell		7,527,108		250,000			12/20/17			336			(1,552	)
Thai Baht	JPHQ	Buy		11,570,078		350,000			12/20/17			4,421			—
Thai Baht	JPHQ	Sell		6,581,467		200,000			12/20/17			119			(1,726	)
Turkish Lira	JPHQ	Buy		2,844,912		765,868			12/20/17			1,159			(45,193	)
Turkish Lira	JPHQ	Sell		2,878,135		763,753			12/20/17			33,624			(135	)
Indonesian Rupiah	JPHQ	Buy		1,190,522,914		87,926			12/21/17			—			(76	)
Australian Dollar	MSCO	Buy		1,552,000		1,234,698			12/22/17			—			(60,886	)
Australian Dollar	MSCO	Sell		2,239,000		1,714,162			12/22/17			20,922			(162	)
British Pound	MSCO	Buy		1,174,000		1,572,490			12/22/17			19,328			(2,515	)
British Pound	MSCO	Sell		569,000		750,007			12/22/17			—			(20,276	)
Canadian Dollar	MSCO	Buy		1,835,000		1,489,481			12/22/17			—			(66,593	)
Canadian Dollar	MSCO	Sell		1,034,000		811,309			12/22/17			9,528			—
Euro	MSCO	Buy		1,302,000		1,552,989			12/22/17			5,420			(6,130	)
Euro	MSCO	Sell		708,000		835,637			12/22/17			43			(8,502	)
Japanese Yen	MSCO	Buy		186,186,000		1,670,508			12/22/17			2,674			(16,547	)
Japanese Yen	MSCO	Sell		203,746,000		1,815,713			12/22/17			11,560			(8,725	)
Mexican Peso	MSCO	Buy		9,031,000		496,337			12/22/17			1,635			(15,295	)
Mexican Peso	MSCO	Sell		5,449,000		295,650			12/22/17			6,260			(1,840	)
New Zealand Dollar	MSCO	Buy		863,000		616,769			12/22/17			—			(27,098	)
New Zealand Dollar	MSCO	Sell		1,465,000		1,018,691			12/22/17			17,802			(118	)
Swiss Franc	MSCO	Buy		842,000		873,745			12/22/17			755			(16,730	)
Swiss Franc	MSCO	Sell		1,069,000		1,096,374			12/22/17			13,306			(5,953	)
Brazilian Real	JPHQ	Buy		286,363		87,466			1/03/18			—			(320	)
Euro	JPHQ	Sell		76,449		2,031,397	CZK		1/10/18			10,429			(6,488	)

franklintempleton.com Semiannual Report         19

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

CONSOLIDATED STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin K2 Global Macro Opportunities Fund (continued)

Forward Exchange Contracts (continued)

					Contract			Settlement		Unrealized		Unrealized
Currency	Counterpartya	Type	Quantity		Amount*			Date		Appreciation		Depreciation
OTC Forward Exchange Contracts (continued)
Czech Koruna	JPHQ	Sell		2,031,397		76,860	EUR		1/10/18		$     8,718		$ (12,167)
Euro	JPHQ	Sell		411		455			1/10/18		—		(35	)
Euro	JPHQ	Sell		200,000		845,695	PLN		3/21/18		624		(589	)
Euro	JPHQ	Sell		100,000		990,968	SEK		3/21/18		—		(562	)
Norwegian Krone	JPHQ	Sell		2,938,776		300,000	EUR		3/21/18		5,193		—
Polish Zloty	JPHQ	Sell		211,357		50,000	EUR		3/21/18		245		(235	)
South Korean Won	JPHQ	Buy		54,367,714		50,000			3/21/18		—		(3	)
Swedish Krona	JPHQ	Sell		2,973,223		300,000	EUR		3/21/18		1,645		—
South African Rand	JPHQ	Sell		697,985		50,000			3/22/18		23		—
Total Forward Exchange Contracts											$377,026		$(522,196	)
Net unrealized appreciation (depreciation)													$(145,170	)

*In U.S. dollars unless otherwise indicated.

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

At November 30, 2017, 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		12/20/21	$	191,000		$  (1,747	)		$  5,408			$  (7,155)
Government of South Africa		(1.00	%)		Quarterly		12/20/21		275,000		4,690			18,824			(14,134	)
Government of South Africa		(1.00	%)		Quarterly		6/20/22		168,000		4,571			8,826			(4,255	)
Government of South Africa		(1.00	%)		Quarterly		12/20/22		7,000		259			241			18
Government of South Korea		(1.00	%)		Quarterly		12/20/21		207,885		(4,031	)		(5,982	)		1,951
Government of South Korea		(1.00	%)		Quarterly		12/20/22		27,280		(542	)		(652	)		110
Government of Turkey		(1.00	%)		Quarterly		6/20/21		405,000		6,819			24,334			(17,515	)
Government of Turkey		(1.00	%)		Quarterly		12/20/21		43,000		1,046			2,630			(1,584	)
Contracts to Sell Protectionc,d
Single Name
Government of Russia		1.00	%		Quarterly		12/20/21		393,000		122			(14,594	)		14,716			BB+
Government of Turkey		1.00	%		Quarterly		12/20/22		105,000		(4,756	)		(4,748	)		(8	)		BB+
Total Credit Default Swap Contracts											$  6,431			$34,287			$  (27,856	)

^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.

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FRANKLIN ALTERNATIVE STRATEGIES FUNDS

CONSOLIDATED STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin K2 Global Macro Opportunities Fund (continued)

At November 30, 2017, the Fund had the following cross-currency swap contracts outstanding. See Note 1(d).

Cross-Currency Swap Contracts

Description	Payment Frequency		Counterparty		Maturity Date		Notional Amount			Value/Unrealized Appreciation (Depreciation)
OTC Swap Contracts
Receive Fixed 10.33%		Quarterly		BOFA		12/20/22		1,010,032	TRY		$(17,642)
Pay Floating 3 Month USD-LIBOR								288,993	USD
Receive Fixed 10.92%		Quarterly		BOFA		12/20/22		338,285	TRY		(4,023)
Pay Floating 3 Month USD-LIBOR								92,529	USD
Total Cross-Currency Swap Contracts											$(21,665)

At November 30, 2017, 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 8.37%
Pay Floating rate BRL-BRLCDI		Annually		1/02/20		583,685	BRL		$—
Receive Fixed rate 8.38%
Pay Floating rate BRL-BRLCDI		Annually		1/02/20		583,686	BRL		—
Receive Fixed rate 8.79%
Pay Floating rate BRL-BRLCDI		Annually		1/04/21		436,229	BRL		(1,407)
Receive Fixed rate 9.38%
Pay Floating rate BRL-BRLCDI		Annually		1/04/21		971,485	BRL		2,174
Receive Fixed rate 9.94%
Pay Floating rate BRL-BRLCDI		Annually		1/04/21		639,696	BRL		4,129
Receive Floating rate 6 Month GBP-LIBOR
Pay Fixed rate 1.29%		Semi-Annually		2/28/67		71,000	GBP		6,076
Receive Floating rate 6 Month GBP-LIBOR
Pay Fixed rate 1.41%		Semi-Annually		8/04/67		60,000	GBP		1,547
Receive Floating rate 6 Month GBP-LIBOR
Pay Fixed rate 1.60%		Semi-Annually		12/03/46		38,267	GBP		69
Receive Floating rate 6 Month GBP-LIBOR
Pay Fixed rate 1.56%		Semi-Annually		11/29/46		78,445	GBP		1,069
Receive Floating rate 6 Month GBP-LIBOR
Pay Fixed rate 1.44%		Semi-Annually		1/07/47		85,166	GBP		4,072
Total Interest Rate Swap Contracts									$17,729

At November 30, 2017, 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

Fixed Income Contracts - Longa

Banco Central de la Republica

Argentina SA

3-Month LIBOR + 1.25

%

Annually

JPHQ

5/16/18

$

50,190

$1,724

Banco Central de la Republica

Argentina SA

3-Month LIBOR + 1.25

%

Monthly

JPHQ

6/21/18

43,660

944

Total Return Swap Contracts

$2,668

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

See Abbreviations on page 37.

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

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

Consolidated Financial Statements

Consolidated Statement of Assets and Liabilities

November 30, 2017 (unaudited)

Franklin K2 Global Macro Opportunities Fund

Assets:
Investments in securities:
Cost - Unaffiliated issuers	$21,032,342
Cost - Unaffiliated repurchase agreements	522,655
Value - Unaffiliated issuers	$21,162,136
Value - Unaffiliated repurchase agreements	522,655
Foreign currency, at value (cost $1,327)	1,370
Receivables:
Investment securities sold	170,638
Interest	42,291
Affiliates	47,664
Deposits with brokers for:
OTC derivative contracts	380,000
Futures contracts	857,452
Centrally cleared swap contracts	464,673
Due from brokers	57,065
Unrealized appreciation on OTC forward exchange contracts	377,026
Unrealized appreciation on OTC swap contracts	2,668
Other assets	4
Total assets	24,085,642
Liabilities:
Payables:
Investment securities purchased	24,215
Distribution fees	143
Transfer agent fees	1,401
Trustees fees and expenses	5
Variation margin on futures contracts	11,987
Variation margin on centrally cleared swap contracts	234
Due to brokers	61,356
Unrealized depreciation on OTC forward exchange contracts	522,196
Unrealized depreciation on OTC swap contracts	21,665
Accrued expenses and other liabilities	4,015
Total liabilities	647,217
Net assets, at value	$23,438,425
Net assets consist of:
Paid-in capital	$24,160,401
Undistributed net investment income	180,587
Net unrealized appreciation (depreciation)	226,912
Accumulated net realized gain (loss)	(1,129,475	)
Net assets, at value	$23,438,425

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FRANKLIN ALTERNATIVE STRATEGIES FUNDS

CONSOLIDATED FINANCIAL STATEMENTS

Consolidated Statement of Assets and Liabilities (continued)

November 30, 2017 (unaudited)

Franklin K2 Global Macro Opportunities Fund

Class A:
Net assets, at value	$	121,736
Shares outstanding		13,190
Net asset value per sharea		$9.23
Maximum offering price per share (net asset value per share ÷ 94.25%)		$9.79
Class C:
Net assets, at value	$	143,371
Shares outstanding		15,694
Net asset value and maximum offering price per sharea		$9.14
Class R:
Net assets, at value	$	9,219
Shares outstanding		1,000
Net asset value and maximum offering price per share		$9.22
Class R6:
Net assets, at value	$	9,243
Shares outstanding		1,000
Net asset value and maximum offering price per share		$9.24
Advisor Class:
Net assets, at value	$	23,154,856
Shares outstanding		2,504,436
Net asset value and maximum offering price per share		$9.25

^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         23

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

CONSOLIDATED FINANCIAL STATEMENTS

Consolidated Statement of Operations

for the six months ended November 30, 2017 (unaudited)

Franklin K2 Global Macro Opportunities Fund

Investment income:
Dividends:
Unaffiliated issuers	$	72,998
Interest:
Unaffiliated issuers		179,164
Total investment income		252,162
Expenses:
Management fees (Note 3a)		233,429
Distribution fees: (Note 3c)
Class A		132
Class C		787
Class R		12
Transfer agent fees: (Note 3e)
Class A		9
Class C		13
Class R		1
Advisor Class		1,916
Custodian fees (Note 4)		32,455
Reports to shareholders		5,844
Registration and filing fees		34,574
Professional fees		48,215
Amortization of offering costs		38,861
Other		3,993
Total expenses		400,241
Expense reductions (Note 4)		(12	)
Expenses waived/paid by affiliates (Note 3f)		(171,679	)
Net expenses		228,550
Net investment income		23,612
Realized and unrealized gains (losses):
Net realized gain (loss) from:
Investments:
Unaffiliated issuers		(14,633	)
Foreign currency transactions		(1,037	)
Forward exchange contracts		(190,310	)
Futures contracts		(179,098	)
Swap contracts		(8,385	)
Net realized gain (loss)		(393,463	)
Net change in unrealized appreciation (depreciation) on:
Investments:
Unaffiliated issuers		73,838
Translation of other assets and liabilities denominated in foreign currencies		56
Forward exchange contracts		135,271
Futures contracts		288,205
Swap contracts		2,592
Net change in unrealized appreciation (depreciation)		499,962
Net realized and unrealized gain (loss)		106,499
Net increase (decrease) in net assets resulting from operations	$	130,111

24         Semiannual Report    |    The accompanying notes are an integral part of these 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, 2017 (unaudited)			Year Ended  May 31, 2017a
Increase (decrease) in net assets:
Operations:
Net investment income (loss)		$       23,612			$    (175,068	)
Net realized gain (loss)		(393,463	)		(1,433,043	)
Net change in unrealized appreciation (depreciation)		499,962			(273,050	)
Net increase (decrease) in net assets resulting from operations		130,111			(1,881,161	)
Distributions to shareholders from:
Net investment income:
Class A		—			(183	)
Class C		—			(661	)
Class R		—			(60	)
Class R6		—			(60	)
Advisor Class		—			(148,675	)
Total distributions to shareholders		—			(149,639	)
Capital share transactions: (Note 2)
Class A		31,643			91,676
Class C		(44,741	)		200,616
Class R		—			10,000
Class R6		—			10,000
Advisor Class		50,100			24,989,820
Total capital share transactions		37,002			25,302,112
Net increase (decrease) in net assets		167,113			23,271,312
Net assets:
Beginning of period		23,271,312			—
End of period		$23,438,425			$23,271,312
Undistributed net investment income included in net assets:
End of period		$     180,587			$     156,975

^aFor the period July 11, 2016 (commencement of operations) to May 31, 2017.

franklintempleton.com The accompanying notes are an integral part of these financial statements.    |    Semiannual Report         25

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

Notes to Consolidated Financial Statements

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. 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 as of 4 p.m. Eastern time each day the New York Stock Exchange (NYSE) is open for trading. 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 VC provides administration and oversight of the Fund’s valuation policies and procedures, which are approved annually by the Board. Among other things, these procedures allow the Fund to 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. Investments in repurchase agreements are valued at cost, which approximates fair value.

Derivative financial instruments (derivatives) listed on an exchange are valued at the official closing price of the day. Certain derivatives 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 VC convenes on a regular basis to review such financial instruments and considers a number of factors, including significant unobservable valuation inputs, when arriving at fair value. The VC 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. The VC employs various methods for calibrating these valuation approaches including a regular review of key inputs and assumptions, transactional back-testing or disposition analysis, and reviews of any related market activity.

b. Foreign Currency Translation

Portfolio securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollars based on

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FRANKLIN ALTERNATIVE STRATEGIES FUNDS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Franklin K2 Global Macro Opportunities Fund (continued)

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 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, 2017.

d. Derivative Financial Instruments

The Fund invested in derivatives 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

franklintempleton.com Semiannual Report         27

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Franklin K2 Global Macro Opportunities Fund (continued)

1. Organization and Significant Accounting

Policies (continued)

d. Derivative Financial Instruments (continued)

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 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 OTC cross currency swap contracts primarily to manage and/or gain exposure to certain foreign currencies. A cross currency swap is an agreement between the Fund and a counterparty to exchange cash flows (determined using either a fixed or floating rate) based on the notional amounts of two different currencies. The notional amounts are typically determined based on the spot exchange rates at the

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FRANKLIN ALTERNATIVE STRATEGIES FUNDS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Franklin K2 Global Macro Opportunities Fund (continued)

opening of the contract. Cross currency swaps may require the exchange of notional amounts at the opening and/or closing of the contract. 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. Upfront payments and receipts, if any, are reflected in the Consolidated Statement of Assets and Liabilities and represent compensating factors between stated terms of the cross currency swap contract and prevailing market conditions (interest rate 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 risk. 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.

e. 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, 2017, 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 inter-company 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, 2017, the net assets of the K2 Subsidiary were $5,041,857, representing 21.5% of the Fund’s consolidated net assets. The Fund’s investment in the K2 Subsidiary is limited to 25% of consolidated assets.

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, 2017, 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.

franklintempleton.com Semiannual Report         29

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Franklin K2 Global Macro Opportunities Fund (continued)

1. Organization and Significant Accounting

Policies (continued)

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. 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. 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. Offering Costs

Offering costs are amortized on a straight line basis over the first twelve months of operations.

i. 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.

j. 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.

2. Shares of Beneficial Interest

At November 30, 2017, 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, 2017						Year Ended May 31, 2017a
	Shares			Amount			Shares			Amount
Class A Shares:
Shares sold		3,548		$	32,643			9,921		$	93,309
Shares issued in reinvestment of distributions		—			—			13			125
Shares redeemed		(110	)		(1,000	)		(182	)		(1,758	)
Net increase (decrease)		3,438		$	31,643			9,752		$	91,676
Class C Shares:
Shares sold		2,352		$	21,404			20,588		$	200,170
Shares issued in reinvestment of distributions		—			—			65			617
Shares redeemed		(7,293	)		(66,145	)		(18	)		(171	)
Net increase (decrease)		(4,941	)	$	(44,741	)		20,635		$	200,616

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FRANKLIN ALTERNATIVE STRATEGIES FUNDS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Franklin K2 Global Macro Opportunities Fund (continued)

	Six Months Ended November 30, 2017						Year Ended May 31, 2017a
	Shares			Amount			Shares			Amount
Class R Shares:
Shares sold		—		$	—			1,001		$	10,010
Shares redeemed		—			—			(1	)		(10	)
Net increase (decrease)		—		$	—			1,000		$	10,000
Class R6 Shares:
Shares sold		—		$	—			1,001		$	10,010
Shares redeemed		—			—			(1	)		(10	)
Net increase (decrease)		—		$	—			1,000		$	10,000
Advisor Class Shares:
Shares sold		5,971		$	55,200			2,499,776		$	24,996,798
Shares issued in reinvestment of distributions		—			—			17			163
Shares redeemed		(554	)		(5,100	)		(774	)		(7,141	)
Net increase (decrease)		5,417		$	50,100			2,499,019		$	24,989,820

^aFor the period July 11, 2016 (commencement of operations) to May 31, 2017.

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.

Prior to October 1, 2017, the Fund and K2 Subsidiary paid fees to K2 Advisors of 2.05% per year of the average daily net assets of the Fund and 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’s and K2 Subsidiary’s average daily net assets, and is 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

franklintempleton.com Semiannual Report         31

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Franklin K2 Global Macro Opportunities Fund (continued)

3. Transactions with Affiliates (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’s and K2 Subsidiary’s 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 broker/dealers	$	100
CDSC retained	$	41

e. Transfer Agent Fees

Each class of shares pays transfer agent fees to Investor Services for its performance of shareholder servicing obligations. Effective November 1, 2017, the fees are based on an annualized asset based fee of 0.02% plus a transaction based fee. Prior to November 1, 2017, the fees were account based fees that varied based on fund or account type. 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, 2017, the Fund paid transfer agent fees of $1,939, of which $403 was retained by Investor Services.

f. Waiver and Expense Reimbursements

K2 Advisors has contractually agreed in advance to waive or limit its fees and to assume as its own expense certain expenses otherwise payable by the Fund so that the expenses (excluding distribution fees, acquired fund fees and expenses, and expenses related to securities sold short) for each class of the Fund do not exceed 1.95% based on the average net assets of each class (other than certain non-routine expenses or costs, including those relating to litigation, indemnification, reorganizations, and liquidations) until September 30, 2018. Total expenses waived or paid are not subject to recapture subsequent to the Fund’s fiscal year end. Prior to October 1, 2017, expenses for Class R6 were limited to 1.94%.

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FRANKLIN ALTERNATIVE STRATEGIES FUNDS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Franklin K2 Global Macro Opportunities Fund (continued)

g. Other Affiliated Transactions

At November 30, 2017, Franklin Resources, Inc. owned 98.6% 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, 2017, 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, 2017, the capital loss carryforwards were as follows:

Capital loss carryforwards:
Short term	$	297,021
Long term		503,314
Total capital loss carryforwards	$	800,335

At November 30, 2017, the cost of investments and net unrealized appreciation (depreciation) for income tax purposes were as follows:

Cost of investments	$	21,598,451
Unrealized appreciation	$	953,187
Unrealized depreciation		(735,224)
Net unrealized appreciation (depreciation)	$	217,963

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, investments in the K2 Subsidiary and offering costs.

6. Investment Transactions

Purchases and sales of investments (excluding short term securities) for the period ended November 30, 2017, aggregated $1,948,813 and $2,868,559, respectively.

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FRANKLIN ALTERNATIVE STRATEGIES FUNDS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Franklin K2 Global Macro Opportunities Fund (continued)

7. Other Derivative Information

At November 30, 2017, 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 contract	$	58,309	a	Variation margin on futures contract	$	7,008	a
	Variation margin on centrally cleared swap contracts		19,136	a	Variation margin on centrally cleared swap contracts		1,407	a
	Unrealized appreciation on OTC swap contracts		2,668
Foreign exchange contracts	Variation margin on futures contracts		126,810	a	Variation margin on futures contracts		2,670	a
					Unrealized depreciation on OTC swap contracts		21,665
	Unrealized appreciation on OTC forward exchange contracts		377,026		Unrealized depreciation on OTC forward exchange contracts		522,196
Credit contracts	Variation margin on centrally		16,795	a	Variation margin on centrally		44,651	a
	cleared swap contracts				cleared swap contracts
Equity contracts	Variation margin on futures contracts		167,382	a	Variation margin on futures contracts		56,812	a
Commodity contracts	Variation margin on futures contracts		61,426	a	Variation margin on futures contracts		76,453	a
Totals			$829,552				$732,862

^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, 2017, 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		$(202,252	)	Futures contracts	$  (2,608)
	Swap contracts		14,727		Swap contracts	28,463
Foreign exchange contracts	Forward exchange contracts		(190,310	)	Forward exchange contracts	135,271
	Futures contracts		(353,783	)	Futures contracts	305,374
	Swap contracts		(8,029	)	Swap contracts	(21,665)
Credit contracts	Swap contracts		(15,083	)	Swap contracts	(4,206)
Equity contracts	Futures contracts		292,681		Futures contracts	7,971
Commodity contracts	Futures contracts		84,256		Futures contracts	(22,532)
Totals			$(377,793	)		$426,068

34         Semiannual Report franklintempleton.com

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Franklin K2 Global Macro Opportunities Fund (continued)

For the period ended November 30, 2017, the average month end notional amount of futures contracts and swap contracts represented $46,417,239 and $4,008,136, respectively. The average month end contract value of forward exchange contracts was $25,805,155.

At November 30, 2017, 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		$377,026		$522,196
Swap Contracts		2,668		21,665
Total		$379,694		$543,861

^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, 2017, 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		$         —		$          —			$ —		$ —		$     —
JPHQ		270,461		(264,826	)		—		—		5,635
MSCO		109,233		(109,233	)		—		—		—
Total		$379,694		$(374,059	)		$ —		$ —		$5,635

At November 30, 2017, 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		$  21,665		$           —			$ —		$           —			$21,665
JPHQ		264,826		(264,826	)		—		—			—
MSCO		257,370		(109,233	)		—		(148,137	)		—
Total		$543,861		$(374,059	)		$ —		$(148,137	)		$21,665

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

See Note 1(d) regarding derivative financial instruments.

See Abbreviations on page 37.

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FRANKLIN ALTERNATIVE STRATEGIES FUNDS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Franklin K2 Global Macro Opportunities 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 9, 2018. 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, 2017, 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.

For movements between the levels within the fair value hierarchy, the Fund has adopted a policy of recognizing the transfers as of the date of the underlying event which caused the movement.

A summary of inputs used as of November 30, 2017, 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	$	—	$	1,527,720	$	—	$	1,527,720
Foreign Government and Agency Securities		—		1,057,526		—		1,057,526
Short Term Investments		18,055,557		1,043,988		—		19,099,545
Total Investments in Securities	$	18,055,557	$	3,629,234	$	—	$	21,684,791
Other Financial Instruments:
Futures Contracts	$	413,927	$	—	$	—	$	413,927
Forward Exchange Contracts		—		377,026		—		377,026
Swap Contracts		—		38,599		—		38,599
Total Other Financial Instruments	$	413,927	$	415,625	$	—	$	829,552

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FRANKLIN ALTERNATIVE STRATEGIES FUNDS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Franklin K2 Global Macro Opportunities Fund (continued)

	Level 1		Level 2		Level 3		Total
Liabilities:
Other Financial Instruments:
Futures Contracts	$	142,943	$	—	$	—	$	142,943
Forward Exchange Contracts		—		522,196		—		522,196
Swap Contracts		—		67,723		—		67,723
Total Other Financial Instruments	$	142,943	$	589,919	$	—	$	732,862

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

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		Currency		Selected Portfolio
BOFA	Bank of America, N.A.	ARS	Argentine Peso	ARPP7DRR	Argentina Central Bank 7 Day Repo 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	EAFE	Europe, Australasia & Far East
		CAD	Canadian Dollar	FRN	Floating Rate Note
		CHF	Swiss Franc	FTSE	Financial Times Stock Exchange
		CZK	Czech Koruna	JSE	Johannesburg Stock Exchange Index
		EGP	Egyptian Pound	LIBOR	London InterBank Offered Rate
		EUR	Euro	MSCI	Morgan Stanley Capital International PLC
		GBP	British Pound	OAT	Obligations Assimilables du Tresor
		HUF	Hungarian Forint	OMX	Stockholm Stock Exchange
		INR	Indian Rupee	REIT	Real Estate Investment Trust
		JPY	Japanese Yen	TOPIX	Tokyo Price Index
		MXN	Mexican Peso	TSX	Toronto Stock Exchange
		NOK	Norwegian Krone	ULSD	Ultra-Low Sulfur Diesel
		NZD	New Zealand Dollar
		PLN	Polish Zloty
		RUB	Russian Ruble
		SEK	Swedish Krona
		USD	United States Dollar

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FRANKLIN ALTERNATIVE STRATEGIES FUNDS

FRANKLIN K2 GLOBAL MACRO OPPORTUNITIES 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 US 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 US 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 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.

^© 2017-2018 Franklin Templeton Investments. All rights reserved. 973 S 01/18

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 ensure that information required to be disclosed in the Registrant’s filings under the Securities Exchange Act of 1934 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 controls or in other factors that could materially affect the internal controls over financial reporting

subsequent to the date of their evaluation in connection with the preparation of this Shareholder Report on Form N-CSR.

Item 12. 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 25, 2018

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 25, 2018

By	/s/ ROBERT G. KUBILIS
	Robert G. Kubilis      Chief Financial Officer and Chief Accounting Officer
Date    January 25, 2018