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

FORMN-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:650312-2000

Date of fiscal year end:5/31

Date of reporting period:11/30/19

Item 1.    Reports to Stockholders.

SEMIANNUAL REPORT AND SHAREHOLDER LETTER

FRANKLIN K2 ALTERNATIVE STRATEGIES FUND

A Series of Franklin Alternative Strategies Funds

November 30, 2019

Sign up for electronic delivery at franklintempleton.com/edelivery

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

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

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

FRANKLIN TEMPLETON

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

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

Dear Fellow Shareholder:

During the six months ended November 30, 2019, global markets benefited from upbeat economic data in certain regions, encouraging corporate earnings reports, generally accommodative monetary policies by major central banks and periods of optimism about a potential U.S.-China trade agreement. However, global markets also reflected investor concerns about ongoing U.S. trade disputes with China and other trading partners, political uncertainties in the U.S. and the European Union, and slower global economic growth. In this environment, global developed market stocks, as measured by the MSCI World Index, posted a +13.21% total return for the period.¹ Global emerging market stocks, as measured by the MSCI Emerging Markets Index, posted a +6.13% total return.¹ Global government bonds, as measured by the FTSE World Government Bond Index, posted a +2.55% total return.¹

We are committed to our long-term perspective and disciplined investment approach as we conduct a rigorous analysis of Fund subadvisors and markets with a strong 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.

CFA^® is a trademark owned by CFA Institute.

1. Source: Morningstar.

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

On the following pages, the Fund’s portfolio management team reviews investment decisions that pertain to performance during the past six months in light of the economic environment and other factors. Please remember all securities markets fluctuate, as do mutual fund share prices.

We thank you for investing with Franklin Templeton, welcome your questions and comments, and look forward to continuing to serve your investment needs in the future.

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, 2019, 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.

Not FDIC Insured | May Lose Value | No Bank Guarantee

franklintempleton.com Not part of the semiannual report 1

Contents
Semiannual Report
Franklin K2 Alternative Strategies Fund	3
Performance Summary	7
Your Fund’s Expenses	9
Consolidated Financial Highlights and Consolidated Statement of Investments	10
Consolidated Financial Statements	61
Notes to Consolidated Financial Statements	65
Shareholder Information	82

2 Semiannual Report franklintempleton.com

Visitfranklintempleton.comfor fund updates, to access your account, or to find helpful financial planning tools.

SEMIANNUAL REPORT

Franklin K2 Alternative Strategies Fund

This semiannual report for Franklin K2 Alternative Strategies Fund covers the period ended November 30, 2019.

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

Performance Overview

The Fund’s Class A shares posted a +1.95% cumulative total return for the six months under review. For comparison, the Fund’s primary benchmark, the HFRX Global Hedge Fund Index, which is designed to be representative of the overall composition of the hedge fund universe, posted a +4.63% total return for the same period.¹ Also for comparison, the Fund’s secondary benchmark, the ICE BofAML U.S.3-Month Treasury Bill Index, which tracks the performance of short-term U.S. government securities with a remaining term to final maturity of less than three months, posted a +1.10% total return for the same period.²You 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 recentmonth-end performance, go tofranklintempleton.comorcall(800)342-5236.

Economic and Market Overview

The global economy expanded during the six months ended November 30, 2019, despite weakness in Europe and Asia. Global stocks were aided by upbeat economic data in some regions, encouraging corporate earnings reports, periods of optimism about a potential U.S.-China trade deal and monetary policy easing by major central banks.

However, markets also reflected concerns about political uncertainties in the U.S. (including the impeachment inquiry into President Donald Trump), geopolitical tensions in certain regions, and the impact of U.S. trade disputes with China and other trading partners on global growth and corporate earnings. Overall, global developed and emerging market stocks, as measured by the MSCI All Country World Index, posted a +12.37% total return, slightly lower than the +13.21% total return for global developed market stocks, as measured by the MSCI World Index, for the six months under review.²

The U.S. economy expanded during the six months ended November 30, 2019. After moderating in 2019’s second quarter, the economy grew faster in the third quarter, aided by consumer spending, housing investment, government spending and exports. The manufacturing sector expanded at the start of the period, but contracted during the last four months, while the services sector expanded throughout the period. The unemployment rate decreased slightly from 3.6% in May 2019 to 3.5% atperiod-end.³ The annual inflation rate, as measured by the Consumer Price Index, increased from 1.8% in May 2019 to 2.1% atperiod-end.³

At its July 2019 meeting, the U.S. Federal Reserve (Fed) lowered its target range for the federal funds rate for the first time since December 2008, to 2.00%–2.25%, citing muted inflation pressures and the potential effects of global trade

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

2. Source: Morningstar.

The indexes are unmanaged and include reinvestment of any income or distributions. They do not reflect any fees, expenses or sales charges. One cannot invest directly in an index, and an index is not representative of the Fund’s portfolio. Unlike most asset class indexes, HFR Index returns reflect fees and expenses.

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

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

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

franklintempleton.com Semiannual Report 3

FRANKLIN K2 ALTERNATIVE STRATEGIES FUND

tensions on economic growth. Furthermore, the Fed ended its balance sheet normalization program earlier than previously indicated. The Fed further lowered the federal funds target rate range by 0.25% at its September and October meetings, to 1.50%–1.75%, reiterating the rationale cited at the July meeting.

In Europe, the U.K.’s quarter-on-quarter gross domestic product (GDP) growth contracted in 2019’s second quarter but recovered in the third quarter. The Bank of England kept its key policy rate unchanged during thesix-month period and lowered its GDP forecasts for 2019 and 2020, amid Brexit uncertainties. The eurozone’s quarter-on-quarter GDP growth moderated in 2019’s second quarter and remained stable in the third quarter. The bloc’s annual inflation rate ended the period lower. The European Central Bank (ECB) kept its benchmark interest rate unchanged during the period. In November, the ECB resumed its asset purchase program in an effort to boost the economy.

In developed Asia, Japan’s quarter-on-quarter GDP growth moderated in 2019’s second and third quarters. The Bank of Japan left its benchmark interest rate unchanged and continued its stimulus measures during the review period.

In larger emerging markets, Brazil’s quarter-on-quarter GDP growth accelerated in 2019’s second and third quarters. The Central Bank of Brazil lowered its benchmark interest rate three times during the period. Russia’s annual GDP growth accelerated in 2019’s second and third quarters. The Bank of Russia cut its key interest rate four times during the period. China’s annual GDP growth moderated in 2019’s second and third quarters. The People’s Bank of China implemented an interest-rate reform in August, designating the loan prime rate as the new benchmark for household and business loans, effectively lowering interest rates several times during the period. Overall, global emerging market stocks, as measured by the MSCI Emerging Markets Index, posted a +6.13% total return for the six months under review.²

Investment Strategy

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

options, among other things. We allocate the Fund’s assets to specific subadvisors utilizing abottom-up approach, selecting subadvisors and their weighting within the Fund’s portfolio by taking into account their correlations to various markets and to each other, their risk profiles and their return expectations. Long short equity strategies generally seek to produce returns from investments in the equity markets by taking long and short positions in stocks and stock indexes (through the use of derivatives or through a position in an ETF). Relative value strategies encompass a wide range of investment techniques that are intended to profit from pricing inefficiencies. Event driven strategies generally invest in securities of companies undergoing significant corporate events. Global macro strategies generally focus on broad-based economic opportunities across numerous markets and investments. In addition, the debt securities in which the Fund may invest may have variable or fixed interest rates, may be of any maturity or credit rating, and may include sovereign debt, high yield (“junk”) bonds and distressed debt securities (securities of companies that are, or are about to be, involved in reorganizations, financial restructurings, or

bankruptcy) and securities that are in default.

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

What is a futures contract?

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

4 Semiannual Report franklintempleton.com

FRANKLIN K2 ALTERNATIVE STRATEGIES FUND

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 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.

Strategy Allocation*
Based on Total Net Assets as of 11/30/19
Strategy	Long Positions		Short Positions
Long Short Equity		34.36%		-18.29%
Relative Value		24.18%		-5.14%
Event Driven		20.39%		-7.97%
Global Macro		136.50%		-37.46%
Risk Overlay		0.00%		-13.74%
Total		215.43%		-82.60%

*Figures include the effect of gross notional exposure of derivatives.

Subadvisors

11/30/19

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

Apollo Credit Management LLC

Chatham Asset Management, LLC

Ellington Global Asset Management, LLC

Lazard Asset Management, LLC

Loomis Sayles & Company, L.P.

Event Driven

Bardin Hill Arbitrage IC Management LP

P. Schoenfeld Asset Management L.P.

Global Macro

Emso Asset Management Limited

Graham Capital Management, L.P.

Grantham, Mayo, Van Otterloo & Co. LLC

H2O AM LLP

Manager’s Discussion

During the six months under review, all of the four underlying strategies in which we allocated assets, long short equity, relative value, event driven and global macro, contributed to the Fund’s positive performance. The allocation percentages for each strategy are listed in the Strategy Allocation table on this page. A conditional risk overlay (CRO), implemented for part of the review period to help mitigate downside risk, detracted from Fund results for thesix-month period. The CRO was active atperiod-end.

What is the conditional risk overlay (CRO) strategy?

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

The Fund’s long short equity strategy subadvisors were Chilton Investment, Impala Asset Management, Jennison Associates, Portland Hill Asset Management and Wellington Management. All five subadvisors contributed to gains for the period, led by Portland Hill and Chilton. All asset classes represented in the strategy made positive contributions, led by equity exposures. In terms of sector exposures, industrials,

franklintempleton.com Semiannual Report 5

FRANKLIN K2 ALTERNATIVE STRATEGIES FUND

consumer discretionary, health care and information technology (IT) contributed to returns. In contrast, equity index hedges had a negative impact on performance.

The Fund allocated assets to two new relative value strategy subadvisors—Ellington Global Asset Management, which invests in structured and corporate credit markets, and Apollo Credit Management, which seeks to take advantage of market volatility, inefficiencies and liquidity premiums. Both subadvisors have managed similar fixed income-focused sleeves of Franklin K2 Long Short Credit Fund since 2015. The Fund’s other relative value strategy subadvisors were Chatham Asset Management, Lazard Asset Management and Loomis Sayles & Company. Lazard was the key contributor to the strategy’s positive performance, and four of the five subadvisors lifted returns. Loomis’ slight decline was the only exception. On a sector level, IT, consumer discretionary and industrials benefited returns. In contrast, health care and energy detracted from strategy performance.

The Fund’s event driven strategy subadvisors were Bardin Hill Arbitrage IC Management and P. Schoenfeld Asset Management. Both subadvisors benefited performance. One of the positions that contributed to positive returns was a German utilities provider, which traded higher as the company continued to sell businesses that do not fit into its new renewable energy-focused business plan. In contrast, a global pharmaceutical company traded lower, although there were no significant company news, dampening performance.

The Fund’s global macro strategy subadvisors were Emso Asset Management; Graham Capital Management; Grantham, Mayo, Van Otterloo & Co. (GMO); and H2O AM. Three of the four subadvisors posted gains for thesix-month period, led by Graham and H2O. In contrast, GMO experienced a slight decline and was the only detractor from strategy performance. By asset class,interest-rate derivatives, equity and credit contributed to positive performance, while commodities and currency exposures weakened returns. In terms of sector exposure, contributors included long exposures to European interest-rate derivatives and long exposures to European equity indexes. Conversely, long exposures to emerging market sovereign debt (particularly in Argentina) hindered performance.

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

Brooks Ritchey Co-Lead Portfolio Manager

Robert Christian Co-Lead Portfolio Manager

Anthony Zanolla, CFA Portfolio Manager

The foregoing information reflects our analysis, opinions and portfolio holdings as of November 30, 2019, 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.

6 Semiannual Report franklintempleton.com

FRANKLIN K2 ALTERNATIVE STRATEGIES FUND

Performance Summary as of November 30, 2019

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 11/30/19¹

Cumulative total return excludes sales charges. Average annual total return includes maximum sales charges. Sales charges will vary depending on the size of the investment and the class of share purchased. The maximum is 5.50% and the minimum is 0%.Class A: 5.50% maximum initial sales charge;Advisor Class: no sales charges. For other share classes, visit franklintempleton.com.

Share Class	Cumulative Total Return2		Average Annual Total Return3
A4
6-Month		+1.95%		-3.69%
1-Year		+4.33%		-1.43%
5-Year		+12.28%		+1.18%
Since Inception (10/11/13)		+23.09%		+2.50%
Advisor
6-Month		+2.13%		+2.13%
1-Year		+4.50%		+4.50%
5-Year		+13.71%		+2.60%
Since Inception (10/11/13)		+25.00%		+3.70%

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 recentmonth-end performance, go tofranklintempleton.comor call(800)342-5236.

See page 8 for Performance Summary footnotes.

franklintempleton.com Semiannual Report 7

FRANKLIN K2 ALTERNATIVE STRATEGIES FUND

PERFORMANCE SUMMARY

Total Annual Operating Expenses⁵

Share Class	With Fee Waiver		Without Fee Waiver
A		2.59%		2.79%
Advisor		2.34%		2.54%

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 9/30/20 and a fee waiver related to the management fee paid by a subsidiary. Fund investment results reflect the expense reduction and fee waiver; without these reductions, the results would have been lower.

2. Cumulative total return represents the change in value of an investment over the periods indicated.

3. Average annual total return represents the average annual change in value of an investment over the periods indicated. Return for less than one year, if any, has not been annualized.

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

5. Figures are as stated in the Fund’s current prospectus and may differ from the expense ratios disclosed in the Your Fund’s Expenses and Consolidated Financial Highlights sections in this report. In periods of market volatility, assets may decline significantly, causing total annual Fund operating expenses to become higher than the figures shown.

8 Semiannual Report franklintempleton.com

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 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 6/1/19		Ending Account Value 11/30/19		Expenses Paid During Period 6/1/19–11/30/191,2		Ending Account Value 11/30/19		Expenses Paid During Period 6/1/19–11/30/191,2		Net Annualized Expense Ratio2
A	$	1,000	$	1,020.40	$	11.82	$	1,013.30	$	11.78		2.34	%
C	$	1,000	$	1,016.30	$	15.58	$	1,009.55	$	15.52		3.09	%
R	$	1,000	$	1,018.60	$	13.07	$	1,012.05	$	13.03		2.59	%
R6	$	1,000	$	1,022.00	$	10.16	$	1,014.95	$	10.13		2.01	%
Advisor	$	1,000	$	1,022.10	$	10.57	$	1,014.55	$	10.53		2.09	%

1. Expenses are equal to the annualized expense ratio for thesix-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 183/366 to reflect theone-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

Consolidated Financial Highlights

Franklin K2 Alternative Strategies Fund

	Six Months Ended November 30, 2019 (unaudited)			Year Ended May 31,
				2019			2018			2017			2016			2015
Class A
Per share operating performance (for a share outstanding throughout the period)
Net asset value, beginning of period	$	11.28		$	11.38		$	11.14		$	10.55		$	11.16		$	10.64
Income from investment operationsa:
Net investment income (loss)b		(—	)c		0.04			0.01			0.03			(0.05	)		(0.11	)
Net realized and unrealized gains (losses)		0.22			0.11			0.38			0.61			(0.38	)		0.70
Total from investment operations		0.22			0.15			0.39			0.64			(0.43	)		0.59
Less distributions from:
Net investment income		—			—			(0.15	)		(0.05	)		(0.14	)		(0.07	)
Net realized gains		—			(0.25	)		—			—			(0.04	)		—
Total distributions		—			(0.25	)		(0.15	)		(0.05	)		(0.18	)		(0.07	)
Net asset value, end of period	$	11.50		$	11.28		$	11.38		$	11.14		$	10.55		$	11.16
Total returnd		1.95%			1.35%			3.57%			6.07%			(3.89)%			5.53%
Ratios to average net assetse
Expenses before waiver, payments by affiliates and expense reductionf		2.50%			2.73%			2.81%			3.07%			3.22%			3.40%
Expenses net of waiver, payments by affiliates and expense reductionf		2.34%	9		2.56%			2.59%			2.73%			2.88%	g		2.99%	g
Expenses incurred in connection with securities sold short		0.14%			0.36%			0.39%			0.53%			0.67%			0.65%
Net investment income (loss)		(0.07)%			0.36%			0.06%			0.10%			(0.44)%			(0.95)%
Supplemental data
Net assets, end of period (000’s)		$105,112			$104,452			$119,214			$119,385			$177,412			$148,991
Portfolio turnover rate		126.17%			235.47%			234.77%			209.45%			229.90%			295.81%

^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 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(i).

^gBenefit 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 K2 Alternative Strategies Fund(continued)

	Six Months Ended November 30, 2019 (unaudited)			Year Ended May 31,
				2019			2018			2017			2016			2015
Class C
Per share operating performance (for a share outstanding throughout the period)
Net asset value, beginning of period	$	11.05		$	11.25		$	11.00		$	10.45		$	11.09		$	10.60
Income from investment operationsa:
Net investment income (loss)b		(0.05	)		(0.05	)		(0.08	)		(0.04	)		(0.12	)		(0.17	)
Net realized and unrealized gains (losses)		0.23			0.10			0.39			0.59			(0.39	)		0.69
Total from investment operations		0.18			0.05			0.31			0.55			(0.51	)		0.52
Less distributions from:
Net investment income		—			—			(0.06	)��		—			(0.09	)		(0.03	)
Net realized gains		—			(0.25	)		—			—			(0.04	)		—
Total distributions		—			(0.25	)		(0.06	)		—			(0.13	)		(0.03	)
Net asset value, end of period	$	11.23		$	11.05		$	11.25		$	11.00		$	10.45		$	11.09
Total returnc		1.63%			0.56%			2.82%			5.26%			(4.62)%			4.87%
Ratios to average net assetsd
Expenses before waiver, payments by affiliates and expense reductione		3.25%			3.48%			3.56%			3.79%			3.96%			4.04%
Expenses net of waiver, payments by affiliates and expense reductione		3.09%	f		3.31%			3.34%			3.45%			3.62%	f		3.63%	f
Expenses incurred in connection with securities sold short		0.14%			0.36%			0.39%			0.53%			0.67%			0.65%
Net investment income (loss)		(0.82)%			(0.39)%			(0.69)%			(0.62)%			(1.18)%			(1.59)%
Supplemental data
Net assets, end of period (000’s)		$41,576			$44,897			$53,196			$55,496			$71,154			$37,937
Portfolio turnover rate		126.17%			235.47%			234.77%			209.45%			229.90%			295.81%

^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.

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

^dRatios are annualized for periods less than one year.

^eIncludes 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(i).

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

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

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

CONSOLIDATED FINANCIAL HIGHLIGHTS

Franklin K2 Alternative Strategies Fund(continued)

	Six Months Ended November 30, 2019 (unaudited)			Year Ended May 31,
				2019			2018			2017			2016			2015
Class R
Per share operating performance (for a share outstanding throughout the period)
Net asset value, beginning of period	$	11.28		$	11.42		$	11.17		$	10.61		$	11.15		$	10.62
Income from investment operationsa:
Net investment income (loss)b		(0.02	)		0.02			(0.02	)		(0.25	)		(0.10	)		(0.16	)
Net realized and unrealized gains (losses)		0.23			0.09			0.39			0.86			(0.40	)		0.73
Total from investment operations		0.21			0.11			0.37			0.61			(0.50	)		0.57
Less distributions from:
Net investment income		—			—			(0.12	)		(0.05	)		—			(0.04	)
Net realized gains		—			(0.25	)		—			—			(0.04	)		—
Total distributions		—			(0.25	)		(0.12	)		(0.05	)		(0.04	)		(0.04	)
Net asset value, end of period	$	11.49		$	11.28		$	11.42		$	11.17		$	10.61		$	11.15
Total returnc		1.86%			1.08%			3.28%			5.79%			(4.51)%			5.39%
Ratios to average net assetsd
Expenses before waiver, payments by affiliates and expense reductione		2.75%			2.98%			3.06%			3.32%			3.46%			3.57%
Expenses net of waiver, payments by affiliates and expense reductione		2.59%	f		2.81%			2.84%			2.98%			3.12%	f		3.16%	f
Expenses incurred in connection with securities sold short		0.14%			0.36%			0.39%			0.53%			0.67%			0.65%
Net investment income (loss)		(0.32)%			0.11%			(0.19)%			(0.15)%			(0.68)%			(1.12)%
Supplemental data
Net assets, end of period (000’s)		$956			$844			$648			$597			$341			$9,173
Portfolio turnover rate		126.17%			235.47%			234.77%			209.45%			229.90%			295.81%

^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.

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

^dRatios are annualized for periods less than one year.

^eIncludes 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(i).

^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 K2 Alternative Strategies Fund(continued)

	Six Months Ended November 30, 2019 (unaudited)			Year Ended May 31,
				2019			2018			2017			2016			2015
Class R6
Per share operating performance (for a share outstanding throughout the period)
Net asset value, beginning of period	$	11.34		$	11.41		$	11.17		$	10.59		$	11.18		$	10.66
Income from investment operationsa:
Net investment income (loss)b		0.02			0.08			0.03			0.02			(0.01	)		(0.08	)
Net realized and unrealized gains (losses)		0.23			0.10			0.40			0.65			(0.37	)		0.70
Total from investment operations		0.25			0.18			0.43			0.67			(0.38	)		0.62
Less distributions from:
Net investment income		—			—			(0.19	)		(0.09	)		(0.17	)		(0.10	)
Net realized gains		—			(0.25	)		—			—			(0.04	)		—
Total distributions		—			(0.25	)		(0.19	)		(0.09	)		(0.21	)		(0.10	)
Net asset value, end of period	$	11.59		$	11.34		$	11.41		$	11.17		$	10.59		$	11.18
Total returnc		2.20%			1.70%			3.83%			6.40%			(3.45)%			5.80%
Ratios to average net assetsd
Expenses before waiver, payments by affiliates and expense reductione		2.17%			2.41%			2.46%			2.73%			2.87%			2.98%
Expenses net of waiver, payments by affiliates and expense reductione		2.01%	f		2.23%			2.24%			2.39%			2.53%	f		2.60%	f
Expenses incurred in connection with securities sold short		0.14%			0.36%			0.39%			0.53%			0.67%			0.65%
Net investment income (loss)		0.26%			0.69%			0.41%			0.44%			(0.09)%			(0.56)%
Supplemental data
Net assets, end of period (000’s)		$41,930			$42,842			$31,805			$265,247			$265,517			$239,754
Portfolio turnover rate		126.17%			235.47%			234.77%			209.45%			229.90%			295.81%

^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.

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

^dRatios are annualized for periods less than one year.

^eIncludes 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(i).

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

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

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

CONSOLIDATED FINANCIAL HIGHLIGHTS

Franklin K2 Alternative Strategies Fund(continued)

	Six Months Ended November 30, 2019 (unaudited)			Year Ended May 31,
				2019			2018				2017			2016			2015
Advisor Class
Per share operating performance (for a share outstanding throughout the period)
Net asset value, beginning of period	$	11.33		$	11.40		$	11.16			$	10.58		$	11.18		$	10.65
Income from investment operationsa:
Net investment income (loss)b		0.01			0.07			0.04				0.04			(0.02	)		(0.02	)
Net realized and unrealized gains (losses)		0.23			0.11			0.38				0.62			(0.38	)		0.64
Total from investment operations		0.24			0.18			0.42				0.66			(0.40	)		0.62
Less distributions from:
Net investment income		—			—			(0.18	)			(0.08	)		(0.16	)		(0.09	)
Net realized gains		—			(0.25	)		—				—			(0.04	)		—
Total distributions		—			(0.25	)		(0.18	)			(0.08	)		(0.20	)		(0.09	)
Net asset value, end of period	$	11.57		$	11.33		$	11.40			$	11.16		$	10.58		$	11.18
Total returnc		2.13%			1.61%			3.75%				6.29%			(3.58)%			5.88%
Ratios to average net assetsd
Expenses before waiver, payments by affiliates and expense reductione		2.25%			2.48%			2.56%				2.82%			2.96%			3.07%
Expenses net of waiver, payments by affiliates and expense reductione		2.09%	f		2.31%			2.34%				2.48%			2.62%	f		2.66%	f
Expenses incurred in connection with securities sold short		0.14%			0.36%			0.39%				0.53%			0.67%			0.65%
Net investment income (loss)		0.18%			0.61%			0.31%				0.35%			(0.18)%			(0.62)%
Supplemental data										��
Net assets, end of period (000’s)		$1,091,953			$1,046,252			$896,278				$674,828			$722,216			$329,139
Portfolio turnover rate		126.17%			235.47%			234.77%				209.45%			229.90%			295.81%

^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.

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

^dRatios are annualized for periods less than one year.

^eIncludes 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(i).

^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, 2019 (unaudited)

Franklin K2 Alternative Strategies Fund

		Country		Shares/ Rights		Value
	Common Stocks and Other Equity Interests 39.5%
	Aerospace & Defense 1.1%
a	The Boeing Co.		United States		7,043	$	2,579,006
a	General Dynamics Corp.		United States		23,244		4,224,364
a	Heico Corp.		United States		23,807		3,092,291
	L3harris Technologies Inc.		United States		5,063		1,018,119
	Lockheed Martin Corp.		United States		32		12,513
	United Technologies Corp.		United States		19,505		2,893,372
							13,819,665
	Air Freight & Logistics 0.5%
	DSV Panalpina A/S		Denmark		47,688		5,192,521
	United Parcel Service Inc., B		United States		6,806		814,882
							6,007,403
	Airlines 0.7%
	Delta Air Lines Inc.		United States		25,039		1,434,985
	WestJet Airlines Ltd.		Canada		328,199		7,506,351
							8,941,336
	Auto Components 0.2%
	Freni Brembo SpA		Italy		87,092		1,078,563
	Lear Corp.		United States		13,068		1,572,211
							2,650,774
	Banks 0.8%
a	Bank of America Corp.		United States		115,746		3,856,657
	Barclays PLC		United Kingdom		108,406		240,500
	Citigroup Inc.		United States		177		13,296
a	JPMorgan Chase & Co.		United States		26,522		3,494,539
	SunTrust Banks Inc.		United States		39,931		2,828,712
							10,433,704
	Beverages 0.3%
	Davide Campari-Milano SpA		Italy		320,814		2,928,509
	Remy Cointreau SA		France		7,857		1,011,980
							3,940,489
	Biotechnology 2.4%
b	AbbVie Inc.		United States		165		14,475
c	Acadia Pharmaceuticals Inc.		United States		4,333		196,242
c	Agios Pharmaceuticals Inc.		United States		13,547		526,978
c,d,e	Alder Biopharmaceuticals Inc., rts., 2/20/49		United States		50,624		44,549
c	Alexion Pharmaceuticals Inc.		United States		8,965		1,021,472
	Amgen Inc.		United States		60		14,083
c	Amicus Therapeutics Inc.		United States		103,605		1,085,780
c	Apellis Pharmaceuticals Inc.		United States		27,790		746,995
c,e	Argenx SE, ADR		Netherlands		5,586		827,007
c	Assembly Biosciences Inc.		United States		54,198		879,092
c	BioMarin Pharmaceutical Inc.		United States		36,574		2,951,888
c	Cytokinetics Inc.		United States		14,108		136,424
c	DBV Technologies SA, ADR		France		13,159		102,640
c	Exact Sciences Corp.		United States		19,058		1,543,889
c	Fate Therapeutics Inc.		United States		30,784		480,846
	Gilead Sciences Inc.		United States		188		12,641
c	Gossamer Bio Inc.		United States		16,762		427,431
c	Immunomedics Inc.		United States		66,092		1,241,208
c,f	Innovent Biologics Inc., 144A		China		50,260		175,918
c,e	Intercept Pharmaceuticals Inc.		United States		3,125		338,656
c	Invitae Corp.		United States		8,635		171,836

franklintempleton.com Semiannual Report 15

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

CONSOLIDATED STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin K2 Alternative Strategies Fund(continued)

		Country		Shares/ Rights		Value
	Common Stocks and Other Equity Interests (continued)
	Biotechnology (continued)
c	Madrigal Pharmaceuticals Inc.		United States		4,719	$	522,346
c	The Medicines Co.		United States		14,779		1,244,392
c	Mirati Therapeutics Inc.		United States		9,129		919,929
c	Natera Inc.		United States		45,411		1,657,047
c	Neurocrine Biosciences Inc.		United States		6,407		747,120
c	Precision Biosciences Inc.		United States		15,877		282,134
c	Principia Biopharma Inc.		United States		5,914		211,899
c	ProQR Therapeutics NV		Netherlands		46,914		400,646
c	Ra Pharmaceuticals Inc.		United States		38,948		1,820,040
a,c	Sage Therapeutics Inc.		United States		18,506		2,864,174
c	Sangamo Therapeutics Inc.		United States		11,500		124,200
c	Sarepta Therapeutics Inc.		United States		27,356		3,077,276
c,f	Shanghai Junshi Biosciences Co. Ltd., H, 144A		China		10,287		33,707
c	Spark Therapeutics Inc.		United States		10,099		1,122,403
c,e	SpringWorks Therapeutics Inc.		United States		6,838		155,975
c	Sutro Biopharma Inc.		United States		3,932		43,567
c	Turning Point Therapeutics Inc.		United States		7,921		445,319
c	Vertex Pharmaceuticals Inc.		United States		9,306		2,063,606
c	Zai Lab Ltd., ADR		China		5,100		202,980
							30,878,810
	Building Products 0.1%
	Advanced Drainage Systems Inc.		United States		22,028		840,588
	Capital Markets 0.7%
f	Amundi SA, 144A		France		29,038		2,197,982
f	Anima Holding SpA, 144A		Italy		102,616		525,964
	The Blackstone Group Inc., A		United States		70,000		3,795,400
	Bolsas y Mercados Espanoles Shmsf SA		Spain		13,107		512,952
	LPL Financial Holdings Inc.		United States		132		12,190
	Moody’s Corp.		United States		10,197		2,311,354
							9,355,842
	Chemicals 0.8%
	CF Industries Holdings Inc.		United States		251		11,599
	Ecolab Inc.		United States		1,875		350,006
c	Ingevity Corp.		United States		10,721		968,214
c	Livent Corp.		United States		44,076		343,793
	LyondellBasell Industries NV, A		United States		21		1,943
	The Sherwin-Williams Co.		United States		15,603		9,098,577
c,d,g	TerraVia Holdings Inc., Contingent Distribution		United States		1,117,000		—
							10,774,132
	Commercial Services & Supplies 1.0%
c	Advanced Disposal Services Inc.		United States		149,080		4,912,186
	Cintas Corp.		United States		15,123		3,887,518
	Edenred		France		14,783		733,767
	Republic Services Inc., A		United States		32,764		2,904,529
	Waste Management Inc.		United States		14		1,581
							12,439,581
	Communications Equipment 0.1%
b	Cisco Systems Inc.		United States		263		11,916
c	Lumentum Holdings Inc.		United States		12,009		884,583
							896,499
	Construction Materials 0.4%
	Buzzi Unicem SpA		Italy		28,945		716,920

16 Semiannual Report franklintempleton.com

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

CONSOLIDATED STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin K2 Alternative Strategies Fund(continued)

		Country		Shares/ Rights		Value
	Common Stocks and Other Equity Interests (continued)
	Construction Materials (continued)
	Cemex SAB de CV, ADR		Mexico		72,599	$	270,794
	LafargeHolcim Ltd., B		Switzerland		70,300		3,625,574
							4,613,288
	Consumer Finance 0.0%†
b	Synchrony Financial		United States		361		13,505
	Containers & Packaging 0.5%
a	Ball Corp.		United States		103,438		6,833,114
	Distributors 0.1%
	Pool Corp.		United States		7,884		1,627,652
	Diversified Consumer Services 0.1%
c	Frontdoor Inc.		United States		37,341		1,690,054
	Diversified Financial Services 0.1%
c	ARYA Sciences Acquisition Corp.		United States		20,099		225,310
c,d,aa	One Call Corp.		United States		4,970		596,214
							821,524
	Diversified Telecommunication Services 1.0%
	AT&T Inc.		United States		323		12,074
c	Bandwidth Inc., A		United States		5,415		302,861
f	China Tower Corp. Ltd., H, 144A		China		1,300,000		265,706
c	ORBCOMM Inc.		United States		50,623		202,998
c	Telecom Italia SpA		Italy		97,946		61,318
b	Verizon Communications Inc.		United States		204		12,289
a,c	Zayo Group Holdings Inc.		United States		356,070		12,191,837
							13,049,083
	Electric Utilities 0.7%
	Duke Energy Corp.		United States		129		11,374
	Edp - Energias de Portugal SA		Portugal		627,796		2,538,548
	El Paso Electric Co.		United States		101,793		6,903,601
b	FirstEnergy Corp.		United States		155		7,392
							9,460,915
	Electrical Equipment 0.1%
	AMETEK Inc.		United States		6,075		601,486
b	Eaton Corp. PLC		United States		146		13,505
	Osram Licht AG		Germany		27,012		1,164,872
							1,779,863
	Electronic Equipment, Instruments & Components 0.3%
c	Anixter International Inc.		United States		26,038		2,235,101
a,c	Coherent Inc.		United States		1,865		281,354
c	Flex Ltd.		United States		96,960		1,150,915
c	Itron Inc.		United States		3,972		318,078
c	Zebra Technologies Corp., A		United States		1,407		353,073
							4,338,521
	Entertainment 0.5%
	Entertainment One Ltd.		Canada		281,646		2,025,234
c	Spotify Technology SA		United States		2,461		350,816
c	Take-Two Interactive Software Inc.		United States		9,500		1,152,825
	The Walt Disney Co.		United States		20,483		3,104,813
							6,633,688

franklintempleton.com Semiannual Report 17

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

CONSOLIDATED STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin K2 Alternative Strategies Fund(continued)

		Country		Shares/ Rights		Value
	Common Stocks and Other Equity Interests (continued)
	Equity Real Estate Investment Trusts (REITs) 0.1%
b	Iron Mountain Inc.		United States		374	$	12,013
	VICI Properties Inc.		United States		32,376		800,658
							812,671
	Food & Staples Retailing 0.3%
	Costco Wholesale Corp.		United States		12,902		3,868,149
	Food Products 0.0%†
	Chocoladefabriken Lindt & Spruengli AG		Switzerland		7		597,249
	General Mills Inc.		United States		213		11,357
							608,606
	Gas Utilities 0.2%
	AltaGas Canada Inc.		Canada		97,519		2,455,778
	Health Care Equipment & Supplies 1.6%
	Abbott Laboratories		United States		19,906		1,700,968
c	Align Technology Inc.		United States		1,240		343,902
c	Boston Scientific Corp.		United States		44,647		1,930,983
	Danaher Corp., W		United States		5,988		874,128
c	DexCom Inc.		United States		9,786		2,224,456
c	Edwards Lifesciences Corp.		United States		7,446		1,823,823
c	Glaukos Corp.		United States		2,250		144,292
c	IDEXX Laboratories Inc.		United States		8,767		2,205,602
c	Intuitive Surgical Inc.		United States		4,497		2,666,271
c	iRhythm Technologies Inc.		United States		3,743		269,833
	Medtronic PLC		United States		58		6,461
c,e	Shockwave Medical Inc.		United States		13,067		511,704
c	Silk Road Medical Inc.		United States		15,000		540,300
c	Tandem Diabetes Care Inc.		United States		7,645		527,734
	Teleflex Inc.		United States		1,812		640,252
c	Wright Medical Group NV		United States		154,827		4,609,199
							21,019,908
	Health Care Providers & Services 1.6%
b	AmerisourceBergen Corp., A		United States		138		12,132
	Anthem Inc.		United States		3,815		1,101,238
c	Centene Corp.		United States		6,570		397,288
	Cigna Corp.		United States		6,309		1,261,295
c	Guardant Health Inc.		United States		10,655		827,574
	Humana Inc.		United States		5,035		1,718,093
c,f	Jinxin Fertility Group Ltd., 144A		China		117,677		178,886
	McKesson Corp.		United States		75		10,848
	UnitedHealth Group Inc.		United States		8,325		2,329,918
c	WellCare Health Plans Inc.		United States		40,321		12,986,184
							20,823,456
	Health Care Technology 0.1%
c,e	Tabula Rasa HealthCare Inc.		United States		8,547		381,282
c	Teladoc Health Inc.		United States		4,810		402,789
							784,071
	Hotels, Restaurants & Leisure 0.9%
c	Caesars Entertainment Corp.		United States		310,863		4,053,654
	Domino’s Pizza Inc.		United States		8,297		2,441,807
	McDonald’s Corp.		United States		54		10,502
	SIX Flags Entertainment Corp.		United States		1,523		66,220
b	Starbucks Corp.		United States		142		12,131

18 Semiannual Report franklintempleton.com

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

CONSOLIDATED STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin K2 Alternative Strategies Fund(continued)

		Country		Shares/ Rights			Value
	Common Stocks and Other Equity Interests (continued)
	Hotels, Restaurants & Leisure (continued)
c	The Stars Group Inc.		Canada		147,421		$	3,580,856
	Yum! Brands Inc.		United States		8,546			860,326
								11,025,496
	Household Durables 0.5%
a	D.R. Horton Inc.		United States		40,918			2,264,811
b	Garmin Ltd.		United States		143			13,970
a	KB Home		United States		67,596			2,337,470
a,c	NVR Inc.		United States		500			1,895,945
	Sony Corp.		Japan		2,493			157,299
								6,669,495
	Household Products 0.0%†
	The Procter & Gamble Co.		United States		105			12,816
	Independent Power & Renewable Electricity Producers 0.1%
	Clearway Energy Inc., C		United States		59,714			1,184,129
	Pattern Energy Group Inc., A		United States		3,820			105,126
								1,289,255
	Industrial Conglomerates 0.1%
	General Electric Co.		United States		64,289			724,537
	Honeywell International Inc.		United States		72			12,855
	Smiths Group PLC		United Kingdom		17,888			384,263
								1,121,655
	Insurance 0.2%
	Aflac Inc.		United States		209			11,462
b	MetLife Inc.		United States		264			13,176
	The Progressive Corp.		United States		173			12,638
	Prudential Financial Inc.		United States		117			10,953
	RSA Insurance Group PLC		United Kingdom		44,331			316,134
c,e	Trupanion Inc.		United States		45,942			1,565,703
								1,930,066
	Interactive Media & Services 1.2%
a,c	Alphabet Inc., A		United States		3,753			4,894,250
c	Alphabet Inc., C		United States		994			1,297,130
a,c	Facebook Inc., A		United States		21,843			4,404,422
	Tencent Holdings Ltd.		China		98,368			4,169,350
c	Yandex NV, A		Russia		23,092			969,171
								15,734,323
	Internet & Direct Marketing Retail 0.7%
a,c	Alibaba Group Holding Ltd., ADR		China		27,479			5,495,800
c	Amazon.com Inc.		United States		1,234			2,222,187
a	eBay Inc.		United States		36,698			1,303,513
	Expedia Group Inc.		United States		89	��		9,048
c,f	Takeaway.com NV, 144A		Netherlands		3,708			333,373
								9,363,921
	IT Services 3.4%
	Accenture PLC, A		United States		2,701			543,333
	Automatic Data Processing Inc.		United States		3,110			531,126
	Booz Allen Hamilton Holding Corp., A		United States		116			8,440
b,c	Carbonite Inc.		United States		105,534			2,427,282
c	EPAM Systems Inc.		United States		5,201			1,101,832
c	ExlService Holdings Inc.		United States		26,594			1,856,527

franklintempleton.com Semiannual Report 19

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

CONSOLIDATED STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin K2 Alternative Strategies Fund(continued)

		Country		Shares/ Rights		Value
	Common Stocks and Other Equity Interests (continued)
	IT Services (continued)
	Fidelity National Information Services Inc.		United States		94	$	12,986
c	FleetCor Technologies Inc.		United States		11,447		3,513,313
	Genpact Ltd.		United States		69,946		2,846,802
a	Global Payments Inc.		United States		37,219		6,740,361
c	GoDaddy Inc., A		United States		17,418		1,156,207
c	InterXion Holding NV		Netherlands		13,620		1,158,245
b	Leidos Holdings Inc.		United States		141		12,808
a	MasterCard Inc., A		United States		26,527		7,751,985
	Paychex Inc.		United States		146		12,574
a,c	PayPal Holdings Inc.		United States		46,432		5,015,120
c	StoneCo. Ltd.		Brazil		16,174		662,811
a,c	VeriSign Inc.		United States		6,917		1,319,349
	Visa Inc., A		United States		13,000		2,398,630
c	WEX Inc.		United States		14,410		2,898,283
	Wirecard AG		Germany		14,941		1,972,138
							43,940,152
	Leisure Products 0.1%
a	Polaris Inc.		United States		8,170		798,209
	Life Sciences Tools & Services 1.7%
c	Avantor Inc.		United States		30,265		518,439
	Eurofins Scientific SE		Luxembourg		4,408		2,314,709
	Gerresheimer AG		Germany		61,603		4,530,581
a,c	Illumina Inc.		United States		8,835		2,833,915
c	IQVIA Holdings Inc.		United States		7,725		1,127,695
c	Mettler-Toledo International Inc.		United States		3,700		2,661,817
c	QIAGEN NV		United States		87,187		3,731,604
c	Repligen Corp.		United States		5,221		463,364
	Thermo Fisher Scientific Inc.		United States		8,674		2,723,202
c,f	Wuxi Biologics Cayman Inc., 144A		China		50,031		565,295
							21,470,621
	Machinery 1.9%
	Caterpillar Inc.		United States		11,734		1,698,261
	Cummins Inc.		United States		73		13,349
	Deere & Co.		United States		9,592		1,611,936
a	The Greenbrier Cos. Inc.		United States		36,493		1,026,913
	Illinois Tool Works Inc.		United States		78		13,598
a	ITT Inc.		United States		16,106		1,123,877
	Kion Group AG		Germany		28,132		1,866,561
	PACCAR Inc.		United States		28,250		2,298,702
	Sandvik AB		Sweden		32,786		596,227
	The Toro Co.		United States		18,736		1,464,780
a	Trinity Industries Inc.		United States		56,142		1,181,228
	Volvo AB, B		Sweden		37,966		586,953
a,c	Wabco Holdings Inc.		United States		78,729		10,608,733
							24,091,118
	Marine 0.2%
a,c	Kirby Corp.		United States		12,889		1,087,445
	Star Bulk Carriers Corp.		Greece		145,002		1,593,572
							2,681,017
	Media 0.4%
a,b	CBS Corp., B		United States		32,035		1,293,573
b	Comcast Corp., A		United States		263		11,612

20 Semiannual Report franklintempleton.com

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

CONSOLIDATED STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin K2 Alternative Strategies Fund(continued)

		Country		Shares/ Rights		Value
	Common Stocks and Other Equity Interests (continued)
	Media (continued)
c	DISH Network Corp., rts., 12/12/19		United States		453	$	308
a	Fox Corp.		United States		52,049		1,861,272
	ITV PLC		United Kingdom		293,248		550,300
	Omnicom Group Inc.		United States		158		12,558
c	Postmedia Network Canada Corp., B		Canada		666,338		777,553
	Stroeer SE & Co. KGaA		Germany		998		78,016
							4,585,192
	Metals & Mining 0.3%
	Teck Resources Ltd., B		Canada		235,874		3,703,222
	Multiline Retail 0.0%†
	Target Corp.		United States		110		13,751
	Oil, Gas & Consumable Fuels 0.3%
c,d	Bellatrix Exploration Ltd.		Canada		56,646		—
c	Carrizo Oil & Gas Inc.		United States		22,898		146,776
	Continental Resources, Inc.		United States		7,142		220,545
	CVR Energy Inc.		United States		280		12,149
b	Enterprise Products Partners LP		United States		440		11,581
c,d	Halcon Resources Corp.		United States		3,790		75,312
	Magellan Midstream Partners LP		United States		132		7,718
a,b	Occidental Petroleum Corp.		United States		42,636		1,644,471
	Phillips 66		United States		114		13,078
b	Plains GP Holdings LP, A		United States		628		10,971
b	Tallgrass Energy LP, A		United States		74,589		1,335,889
c	Whiting Petroleum Corp.		United States		4,509		20,651
							3,499,141
	Paper & Forest Products 0.3%
c	Canfor Corp.		Canada		45,714		546,173
a	Louisiana-Pacific Corp.		United States		73,304		2,174,197
	West Fraser Timber Co. Ltd.		Canada		20,219		879,358
							3,599,728
	Pharmaceuticals 1.3%
	Allergan PLC		United States		43,207		7,990,703
	AstraZeneca PLC, ADR		United Kingdom		41,505		2,012,162
c	Axsome Therapeutics Inc.		United States		3,868		152,283
	Bristol-Myers Squibb Co.		United States		237		13,495
	Eli Lilly & Co., W		United States		14,499		1,701,457
	Hikma Pharmaceuticals PLC		Jordan		17,997		445,724
	Johnson & Johnson		United States		87		11,962
b	Merck & Co. Inc.		United States		7,609		663,353
	Novartis AG, ADR		Switzerland		16,193		1,494,614
	Novo Nordisk AS, ADR		Denmark		28,364		1,592,639
	Zoetis Inc., A		United States		9,820		1,183,506
							17,261,898
	Professional Services 1.1%
c	CoStar Group Inc.		United States		1,475		903,968
	Equifax Inc.		United States		12,739		1,778,874
	Experian PLC		United Kingdom		34,144		1,131,775
c	Huron Consulting Group Inc.		United States		16,926		1,134,888
	Insperity Inc.		United States		118		9,177
f	Intertrust NV, 144A		Netherlands		258,818		4,864,904
a	TransUnion		United States		17,979		1,551,767

franklintempleton.com Semiannual Report 21

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

CONSOLIDATED STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin K2 Alternative Strategies Fund(continued)

		Country		Shares/ Rights		Value
	Common Stocks and Other Equity Interests (continued)
	Professional Services (continued)
c	TriNet Group Inc.		United States		43,147	$	2,362,298
							13,737,651
	Real Estate Management & Development 0.1%
	Savills PLC		United Kingdom		94,600		1,211,221
	Road & Rail 2.4%
	Canadian Pacific Railway Ltd.		Canada		5,599		1,333,906
a	CSX Corp.		United States		65,511		4,686,657
a,c	Genesee & Wyoming Inc., A		United States		133,418		14,869,436
a	Kansas City Southern		United States		18,074		2,754,839
a	Norfolk Southern Corp.		United States		10,110		1,956,285
c	Uber Technologies Inc.		United States		6,337		187,575
	Union Pacific Corp.		United States		24,445		4,302,076
							30,090,774
	Semiconductors & Semiconductor Equipment 1.1%
c	Advanced Micro Devices Inc.		United States		40,383		1,580,994
	ASM International NV		Netherlands		3,136		348,805
	ASM Pacific Technology Ltd.		Hong Kong		44,600		582,269
	BE Semiconductor Industries NV		Netherlands		19,410		716,212
	Broadcom Inc.		United States		43		13,597
c	FormFactor Inc.		United States		21,861		505,864
c	Inphi Corp.		United States		5,008		348,707
	Intel Corp.		United States		234		13,584
	KLA Corp.		United States		6,648		1,089,341
	LAM Research Corp.		United States		15		4,002
c	Lattice Semiconductor Corp.		United States		51,085		964,996
	Marvell Technology Group Ltd.		Bermuda		35,030		923,741
	Mediatek Inc.		Taiwan		108,635		1,500,783
c	Micron Technology Inc.		United States		12,815		608,841
	QUALCOMM Inc.		United States		29,641		2,476,506
	Realtek Semiconductor Corp.		Taiwan		38,000		287,082
c	Renesas Electronics Corp.		Japan		201,500		1,313,010
	SK Hynix Inc., QUICS		South Korea		9,224		631,775
	Skyworks Solutions Inc.		United States		6,283		617,619
c,f,g	SunEdison Inc., Contingent Distribution, 144A		United States		35,000		787
	Texas Instruments Inc.		United States		94		11,300
							14,539,815
	Software 2.6%
c	Adobe Inc.		United States		3,035		939,423
c	Atlassian Corp. PLC, A		United States		8,305		1,055,648
	Blackbaud Inc.		United States		8,041		666,438
c	Ceridian Hcm Holding Inc.		United States		23,416		1,413,390
c	Guidewire Software Inc.		United States		13,716		1,671,020
c	HubSpot Inc.		United States		3,952		596,752
	Intuit Inc.		United States		12,082		3,127,909
a	Microsoft Corp.		United States		55,397		8,385,998
	NortonLifeLock Inc.		United States		120,790		3,007,671
b	Oracle Corp.		United States		220		12,351
c	Pivotal Software Inc., A		United States		402,841		6,050,672
a,c	Salesforce.com Inc.		United States		8,640		1,407,370
a,c	ServiceNow Inc.		United States		5,549		1,570,589
c,e	Slack Technologies Inc., A		United States		19,600		447,272
c	Splunk Inc.		United States		7,243		1,080,800
c	SVMK Inc.		United States		25,100		428,457

22 Semiannual Report franklintempleton.com

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

CONSOLIDATED STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin K2 Alternative Strategies Fund(continued)

		Country		Shares/ Rights		Value
	Common Stocks and Other Equity Interests (continued)
	Software (continued)
c	Workday Inc., A		United States		7,255	$	1,299,516
c	Zscaler Inc.		United States		6,175		321,903
							33,483,179
	Specialty Retail 1.1%
b	Best Buy Co. Inc.		United States		180		14,515
	The Home Depot Inc.		United States		29,827		6,577,152
	Pets at Home Group PLC		United Kingdom		166,908		543,970
c	Sports Direct International PLC		United Kingdom		180,900		788,902
b	Tiffany & Co.		United States		37,723		5,047,337
c	Ulta Beauty Inc.		United States		4,257		995,542
							13,967,418
	Technology Hardware, Storage & Peripherals 0.2%
	Apple Inc.		United States		14		3,741
b	Hewlett Packard Enterprise Co.		United States		340		5,382
	HP Inc.		United States		206		4,136
c	Pure Storage Inc., A		United States		34,351		552,021
	Western Digital Corp.		United States		35,623		1,792,906
							2,358,186
	Textiles, Apparel & Luxury Goods 0.3%
c	Capri Holdings Ltd.		United States		44,997		1,671,188
	LVMH Moet Hennessy Louis Vuitton SE		France		1,981		888,996
a	Tapestry Inc.		United States		41,882		1,126,207
							3,686,391
	Tobacco 0.0%†
b	Altria Group Inc.		United States		282		14,016
	Philip Morris International Inc.		United States		155		12,854
							26,870
	Trading Companies & Distributors 0.5%
	Brenntag AG		Germany		100,901		5,381,846
	Imcd NV		Netherlands		15,786		1,313,167
							6,695,013
	Wireless Telecommunication Services 0.1%
c	T-Mobile U.S. Inc.		United States		7,569		594,545
a,b	Vodafone Group PLC, ADR		United Kingdom		36,378		721,012
							1,315,557
	Total Common Stocks and Other Equity Interests (Cost $384,734,549)						506,115,820
	Exchange Traded Funds (Cost $38,682) 0.0%†
	ETFMG Alternative Harvest ETF		United States		2,203		38,024
	Convertible Preferred Stocks 0.3%
	Diversified Financial Services 0.3%
c,d,aa	One Call Corp., cvt. pfd.		United States		33,337		3,999,100
	Food Products 0.0%†
	Bunge Ltd., 4.875%, cvt. pfd.		United States		3,947		396,673
	Gas Utilities 0.0%†
	El Paso Energy Capital Trust I, 4.75%, cvt. pfd.		United States		114		5,633
	Oil, Gas & Consumable Fuels 0.0%†
	Chesapeake Energy Corp., 5.75%, cvt. pfd.		United States		139		20,694
	Total Convertible Preferred Stocks (Cost $2,037,108)						4,422,100

franklintempleton.com Semiannual Report 23

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

CONSOLIDATED STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin K2 Alternative Strategies Fund(continued)

		Country		Shares/ Rights		Value
	Preferred Stocks 0.0%†
	Electric Utilities 0.0%†
	SCE Trust II, 5.10%, pfd.		United States		10,072	$	245,052
	SCE Trust VI, 5.00%, pfd.		United States		4,317		100,154
	Total Preferred Stocks (Cost $340,098)						345,206
				Principal Amount*
	Convertible Bonds 9.2%
	Air Freight & Logistics 0.2%
a	Air Transport Services Group Inc., senior note, 1.125%, 10/15/24		United States		1,498,000		1,491,220
a	Atlas Air Worldwide Holdings Inc., senior note, 1.875%, 6/01/24		United States		1,533,000		1,262,007
							2,753,227
	Automobiles 0.1%
f	Winnebago Industries Inc., senior note, 144A, 1.50%, 4/01/25		United States		987,000		991,338
	Banks 0.1%
	Hope Bancorp Inc., senior bond, 2.00%, 5/15/38		United States		1,622,000		1,523,996
	Biotechnology 1.0%
	BioMarin Pharmaceutical Inc., senior sub. note, 0.599%, 8/01/24		United States		415,000		427,937
	Cytokinetics Inc., senior note, 4.00%, 11/15/26		United States		404,000		452,580
	Flexion Therapeutics Inc., senior note, 3.375%, 5/01/24		United States		25,000		24,391
f	Halozyme Therapeutics Inc., senior note, 144A, 1.25%, 12/01/24		United States		731,000		759,353
	Insmed Inc., senior note, 1.75%, 1/15/25		United States		1,498,000		1,413,863
	Intercept Pharmaceuticals Inc., senior note, 2.00%, 5/15/26		United States		1,498,000		1,795,017
	Ionis Pharmaceuticals Inc., senior note, 1.00%, 11/15/21		United States		384,000		448,560
	Ironwood Pharmaceuticals Inc., senior note,
	2.25%, 6/15/22		United States		1,007,000		1,127,421
	f 144A, 1.50%, 6/15/26		United States		1,203,000		1,362,072
	Karyopharm Therapeutics Inc., senior note, 3.00%, 10/15/25		United States		374,000		496,373
a	Ligand Pharmaceuticals Inc., senior note, 0.75%, 5/15/23		United States		1,247,000		1,089,005
	Neurocrine Biosciences Inc., senior note, 2.25%, 5/15/24		United States		1,086,000		1,772,154
	PDL BioPharma Inc., senior note, 2.75%, 12/01/24		United States		846,000		907,335
							12,076,061
	Building Products 0.1%
	Patrick Industries Inc., senior note, 1.00%, 2/01/23		United States		1,371,000		1,297,309
	Commercial Services & Supplies 0.1%
a	Team Inc., senior note, 5.00%, 8/01/23		United States		1,255,000		1,315,464
	Communications Equipment 0.0%†
	CalAmp Corp., senior note, 2.00%, 8/01/25		United States		260,000		215,063
	Construction Materials 0.2%
	Cemex SAB de CV, sub. note, 3.72%, 3/15/20		Mexico		2,140,000		2,152,227
	Consumer Finance 0.4%
	Encore Capital Group Inc., senior note, 3.25%, 3/15/22		United States		1,415,000		1,483,048
	f 144A, 3.25%, 10/01/25		United States		536,000		588,260
	EZCORP Inc., senior note, 2.375%, 5/01/25		United States		855,000		636,558
	PRA Group Inc., senior note, a 3.00%, 8/01/20		United States		1,226,000		1,226,826
	3.50%, 6/01/23		United States		1,497,000		1,567,146
							5,501,838
	Diversified Consumer Services 0.1%
f	Chegg Inc., senior note, 144A, 0.125%, 3/15/25		United States		624,000		645,016

24 Semiannual Report franklintempleton.com

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

CONSOLIDATED STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin K2 Alternative Strategies Fund(continued)

		Country		Principal Amount*			Value
	Convertible Bonds (continued)
	Diversified Financial Services 0.2%
	Element Fleet Management Corp., sub. note, 4.25%, 6/30/20		Canada		468,000	CAD	$	354,229
	4.25%, 6/30/24		Canada		811,000	CAD		712,847
	Horizon Pharma Investment Ltd., senior note, 2.50%, 3/15/22		United States		1,496,000			1,897,610
								2,964,686
	Electronic Equipment, Instruments & Components 0.5%
	II-VI Inc., senior note, 0.25%, 9/01/22		United States		1,497,000			1,461,446
a	Knowles Corp., senior note, 3.25%, 11/01/21		United States		1,175,000			1,570,386
	OSI Systems Inc., senior note, 1.25%, 9/01/22		United States		835,000			911,809
	TTM Technologies Inc., senior note, 1.75%, 12/15/20		United States		1,010,000			1,440,939
a	Vishay Intertechnology Inc., senior note, 2.25%, 6/15/25		United States		1,440,000			1,410,162
								6,794,742
	Energy Equipment & Services 0.0%†
	Nabors Industries Inc., senior note, 0.75%, 1/15/24		United States		25,000			16,373
	Entertainment 0.4%
f	Liberty Media Corp., senior bond, 144A, 2.25%, 12/01/48		United States		1,751,000			2,047,576
	2.75%, 12/01/49		United States		1,825,000			1,872,450
f	Sea Ltd., senior note, 144A, 1.00%, 12/01/24		Taiwan		713,000			735,826
f	Zynga Inc., senior note, 144A, 0.25%, 6/01/24		United States		691,000			709,903
								5,365,755
	Equity Real Estate Investment Trusts (REITs) 0.1%
f	IIP Operating Partnership LP, senior note, 144A, 3.75%, 2/21/24		United States		1,352,000			1,717,885
	Food & Staples Retailing 0.1%
f	The Chefs’ Warehouse Inc., senior note, 144A, 1.875%, 12/01/24		United States		585,000			608,731
	Health Care Equipment & Supplies 0.4%
f	DexCom Inc., senior note, 144A, 0.75%, 12/01/23		United States		1,247,000			1,895,674
	Wright Medical Group Inc., senior note, 1.625%, 6/15/23		United States		805,000			834,817
	Wright Medical Group NV, senior note, 2.25%, 11/15/21		United States		1,309,000			1,863,339
								4,593,830
	Health Care Technology 0.3%
	Allscripts Healthcare Solutions Inc., senior note, 1.25%, 7/01/20		United States		2,628,000			2,616,480
	Evolent Health Inc., senior note, 1.50%, 10/15/25		United States		192,000			123,932
f	Tabula Rasa Healthcare Inc., senior sub. note, 144A, 1.75%, 2/15/26		United States		807,000			773,682
								3,514,094
	Hotels, Restaurants & Leisure 0.1%
	Marriott Vacations Worldwide Corp., senior note, 1.50%, 9/15/22		United States		1,623,000			1,703,424
	Independent Power & Renewable Electricity Producers 0.0%†
a	NRG Energy Inc., senior bond, 2.75%, 6/01/48		United States		374,000			422,276
	Interactive Media & Services 0.3%
	Zillow Group Inc., senior note, 2.00%, 12/01/21		United States		1,248,000			1,325,862
	1.50%, 7/01/23		United States		1,497,000			1,377,623
	f 144A, 0.75%, 9/01/24		United States		772,000			855,596
								3,559,081
	Internet & Direct Marketing Retail 0.1%
f	Pinduoduo Inc., senior note, 144A, zero cpn., 10/01/24		China		109,000			120,391
	Wayfair Inc., senior note, 0.375%, 9/01/22		United States		998,000			1,052,266
								1,172,657

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)
	IT Services 0.6%
	Cardtronics Inc., senior note, 1.00%, 12/01/20		United States		1,997,000		$	2,089,358
	CSG Systems International Inc., senior bond, 4.25%, 3/15/36		United States		1,497,000			1,766,726
f	KBR Inc., senior note, 144A, 2.50%, 11/01/23		United States		1,123,000			1,462,390
f	Okta Inc., senior note, 144A, 0.125%, 9/01/25		United States		1,498,000			1,517,661
	Perficient Inc., senior note, 2.375%, 9/15/23		United States		572,000			731,421
								7,567,556
	Machinery 0.0%†
	The Greenbrier Cos. Inc., senior note, 2.875%, 2/01/24		United States		45,000			42,725
	Media 0.2%
	DISH Network Corp., senior bond, 3.375%, 8/15/26		United States		325,000			307,328
	senior note, 2.375%, 3/15/24		United States		280,000			253,838
	Liberty Interactive LLC, senior bond, 4.00%, 11/15/29		United States		1,249,000			885,229
	senior note, 3.75%, 2/15/30		United States		407,000			281,339
f	Liberty Latin America Ltd., senior note, 144A, 2.00%, 7/15/24		Chile		998,000			1,019,786
								2,747,520
	Metals & Mining 0.1%
	First Majestic Silver Corp., senior note, 1.875%, 3/01/23		Canada		1,267,000			1,662,937
	Mortgage Real Estate Investment Trusts (REITs) 0.3%
f	Arbor Realty Trust Inc., senior note, 144A, 4.75%, 11/01/22		United States		624,000			624,213
f	PennyMac Corp., senior note, 144A, 5.50%, 11/01/24		United States		1,248,000			1,257,413
	Redwood Trust Inc., senior note, 4.75%, 8/15/23		United States		1,422,000			1,436,139
								3,317,765
	Oil, Gas & Consumable Fuels 0.1%
	Chesapeake Energy Corp., senior note, 5.50%, 9/15/26		United States		95,000			42,002
a	Ship Finance International Ltd., senior note, 5.75%, 10/15/21		Norway		1,430,000			1,503,385
								1,545,387
	Personal Products 0.1%
	Herbalife Nutrition Ltd., senior note, 2.625%, 3/15/24		United States		1,325,000			1,343,066
	Pharmaceuticals 0.7%
f	Aerie Pharmaceuticals Inc., senior note, 144A, 1.50%, 10/01/24		United States		1,246,000			1,270,417
f	Aphria Inc., senior note, 144A, 5.25%, 6/01/24		Canada		1,132,000			733,423
a,f	Aurora Cannabis Inc., senior note, 144A, 5.50%, 2/28/24		Canada		1,802,000			1,206,214
f	Canopy Growth Corp., senior note, 144A, 4.25%, 7/15/23		Canada		2,031,000	CAD		1,337,894
a	Innoviva Inc., sub. note, 2.125%, 1/15/23		United States		1,496,000			1,493,195
	Pacira Biosciences Inc., senior note, 2.375%, 4/01/22		United States		1,241,000			1,301,499
	Tilray Inc., senior note, 5.00%, 10/01/23		Canada		2,060,000			1,138,150
								8,480,792
	Real Estate Management & Development 0.1%
	Redfin Corp., senior note, 1.75%, 7/15/23		United States		1,879,000			1,795,155
	Semiconductors & Semiconductor Equipment 0.6%
	Cree Inc., senior note, 0.875%, 9/01/23		United States		734,000			766,571
f	Enphase Energy Inc., senior note, 144A, 1.00%, 6/01/24		United States		504,000			681,975
	Inphi Corp., senior note, 0.75%, 9/01/21		United States		1,496,000			2,026,834
a	Microchip Technology Inc., senior sub. bond, 1.625%, 2/15/27		United States		1,496,000			1,957,496
	Silicon Laboratories Inc., senior note, 1.375%, 3/01/22		United States		365,000			458,185
	Synaptics Inc., senior note, 0.50%, 6/15/22		United States		998,000			1,039,305
								6,930,366

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)
	Software 1.3%
f	8x8 Inc., senior note, 144A, 0.50%, 2/01/24		United States		1,247,000	$	1,309,435
	Altair Engineering Inc., senior note, 0.25%, 6/01/24		United States		1,247,000		1,228,122
f	Benefitfocus Inc., senior note, 144A, 1.25%, 12/15/23		United States		1,248,000		1,098,969
f	Blackline Inc., senior note, 144A, 0.125%, 8/01/24		United States		292,000		297,920
f	Coupa Software Inc., senior note, 144A, 0.125%, 6/15/25		United States		1,496,000		1,808,511
f	J2 Global Inc., senior note, 144A, 1.75%, 11/01/26		United States		183,000		186,923
f	LivePerson Inc., senior note, 144A, 0.75%, 3/01/24		United States		367,000		459,430
a	Nuance Communications Inc., senior bond, 1.00%, 12/15/35		United States		2,905,000		2,898,555
	Nutanix Inc., senior note, zero cpn., 1/15/23		United States		1,870,000		1,983,895
	Palo Alto Networks Inc., senior note, 0.75%, 7/01/23		United States		374,000		410,975
f	Pluralsight Inc., senior note, 144A, 0.375%, 3/01/24		United States		1,870,000		1,618,200
f	PROS Holdings Inc., senior note, 144A, 1.00%, 5/15/24		United States		394,000		461,405
	Rapid7 Inc., senior note, 1.25%, 8/01/23		United States		930,000		1,386,804
f	SailPoint Technologies Holding Inc., senior note, 144A, 0.125%, 9/15/24		United States		998,000		1,103,604
	Splunk Inc., senior note, 0.50%, 9/15/23		United States		365,000		439,714
	1.125%, 9/15/25		United States		183,000		226,184
	Verint Systems Inc., senior note, 1.50%, 6/01/21		United States		146,000		150,459
							17,069,105
	Specialty Retail 0.1%
f	RH, senior note, 144A, zero cpn., 9/15/24		United States		1,496,000		1,717,595
	Technology Hardware, Storage & Peripherals 0.1%
	Pure Storage Inc., senior note, 0.125%, 4/15/23		United States		1,124,000		1,102,807
	Tobacco 0.1%
f	Turning Point Brands Inc., senior note, 144A, 2.50%, 7/15/24		United States		1,268,000		1,114,984
	Trading Companies & Distributors 0.0%†
	Kaman Corp., senior note, 3.25%, 5/01/24		United States		398,000		470,436
	Total Convertible Bonds (Cost $113,693,922)						117,813,269
	Corporate Bonds and Notes 7.1%
	Aerospace & Defense 0.1%
	The Boeing Co., senior note, 2.70%, 5/01/22		United States		375,000		381,470
f	Leonardo US Holdings Inc., senior bond, 144A, 6.25%, 1/15/40		Italy		236,000		259,718
f	Rolls-Royce PLC, senior note, 144A, 2.375%, 10/14/20		United Kingdom		400,000		400,802
	Triumph Group Inc., senior note, 5.25%, 6/01/22		United States		365,000		366,026
							1,408,016
	Air Freight & Logistics 0.0%†
	FedEx Corp., senior note, 3.40%, 1/14/22		United States		170,000		174,637
	Airlines 0.0%†
	United Airlines Pass-Through Trust,2019-2, B, 3.50%, 5/01/28		United States		410,000		416,412
	Automobiles 0.3%
	American Honda Finance Corp., senior note, 1.95%, 5/20/22		United States		325,000		324,869
f,h	BMW US Capital LLC, senior note, 144A, FRN, 2.411%,(3-Month USD LIBOR + 0.41%), 4/12/21		Germany		465,000		465,863
f	Daimler Finance North America LLC, senior note, 144A, 3.40%, 2/22/22		Germany		385,000		394,435
	h FRN, 2.81%,(3-Month USD LIBOR + 0.90%), 2/15/22		Germany		400,000		402,837
	General Motors Financial Co. Inc., senior note, 3.70%, 11/24/20		United States		155,000		156,867
	h FRN, 2.862%,(3-Month USD LIBOR + 0.85%), 4/09/21		United States		275,000		275,226
f	Hyundai Capital America, senior note, 144A, 3.95%, 2/01/22		United States		375,000		385,442
f	Nissan Motor Acceptance Corp., senior note, 144A, 3.65%, 9/21/21		United States		375,000		383,185
f	Tesla Inc., senior note, 144A, 5.30%, 8/15/25		United States		928,000		892,031

franklintempleton.com Semiannual Report 27

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

CONSOLIDATED STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin K2 Alternative Strategies Fund(continued)

		Country		Principal Amount*			Value
	Corporate Bonds and Notes (continued)
	Automobiles (continued)
	Toyota Motor Credit Corp., senior note, 3.05%, 1/08/21		United States		325,000		$	329,223
	h FRN, 2.333%,(3-Month USD LIBOR + 0.29%), 10/07/21		United States		415,000			416,007
f,h	Volkswagen Group of America Finance LLC, senior note, 144A, FRN, 2.972%,(3-Month USD LIBOR + 0.86%), 9/24/21		Germany		410,000			412,716
								4,838,701
	Banks 0.5%
f	Banco Macro SA, senior note, 144A, 17.50%, 5/08/22		Argentina		1,740,000	ARS		10,939
	Capital One NA, senior note, 2.15%, 9/06/22		United States		440,000			439,131
	Citibank NA, senior note, 3.05%, 5/01/20		United States		435,000			436,613
	h FRN, 3.165%,(3-Month USD LIBOR + 0.53%), 2/19/22		United States		250,000			252,741
h	Citigroup Inc., senior note, FRN, 2.428%, (SOFR + 0.87%), 11/04/22		United States		205,000			205,945
h	HSBC Holdings PLC, senior note, FRN, 2.782%,(3-Month USD LIBOR + 0.65%), 9/11/21		United Kingdom		375,000			376,103
h	JPMorgan Chase & Co., senior note, FRN, 2.587%,(3-Month USD LIBOR + 0.68%), 6/01/21		United States		140,000			140,301
	Keybank NA, senior note, 3.30%, 2/01/22		United States		250,000			256,819
h	Mitsubishi UFJ Financial Group Inc., senior note, FRN, 2.586%,(3-Month USD LIBOR + 0.65%), 7/26/21		Japan		380,000			381,944
h	PNC Bank NA, senior note, FRN, 2.403%,(3-Month USD LIBOR + 0.45%), 7/22/22		United States		835,000			836,507
f,h	Standard Chartered PLC, senior note, 144A, FRN, 3.334%,(3-Month USD LIBOR + 1.20%), 9/10/22		United Kingdom		410,000			413,192
	3.116%,(3-Month USD LIBOR + 1.15%), 1/20/23		United Kingdom		200,000			201,274
	4.247%,(3-Month USD LIBOR + 1.15%), 1/20/23		United Kingdom		200,000			206,781
h	Sumitomo Mitsui Financial Group Inc., senior note, FRN, 2.954%,(3-Month USD LIBOR + 0.97%), 1/11/22		Japan		115,000			116,163
	US Bank NA, senior note, 3.00%, 2/04/21		United States		375,000			379,488
i,j	VTB Bank OJSC Via VTB Capital SA, loan participation, sub. senior note, Reg S, 6.95%, 10/17/22		Russia		486,000			526,275
h	Wells Fargo & Co., senior note, FRN, 3.473%,(3-Month USD LIBOR + 1.34%), 3/04/21		United States		230,000			233,153
	2.831%,(3-Month USD LIBOR + 0.93%), 2/11/22		United States		495,000			498,603
	Wells Fargo Bank NA, senior note, 3.625%, 10/22/21		United States		250,000			257,481
								6,169,453
	Biotechnology 0.0%†
f,h	AbbVie Inc., senior note, 144A, FRN, 2.545%,(3-Month USD LIBOR + 0.65%), 11/21/22		United States		415,000			416,689
	Capital Markets 0.1%
h	The Bank of New York Mellon, senior note, FRN, 2.433%,(3-Month USD LIBOR + 0.30%), 12/04/20		United States		385,000			385,002
f	eG Global Finance PLC, senior secured note, 144A, 4.375%, 2/07/25		United Kingdom		100,000	EUR		109,491
	6.25%, 10/30/25		United Kingdom		144,000	EUR		166,861
	8.50%, 10/30/25		United Kingdom		284,000			298,200
f	MSCI Inc., senior bond, 144A, 4.00%, 11/15/29		United States		80,000			80,600
								1,040,154
	Chemicals 0.1%
	Methanex Corp., senior bond, 5.25%, 12/15/29		Canada		455,000			463,223
f	TPC Group Inc., senior secured note, 144A, 10.50%, 8/01/24		United States		259,000			260,940
								724,163

28 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)
	Commercial Services & Supplies 1.4%
f	Harland Clarke Holdings Corp., 144A, a senior note, 9.25%, 3/01/21		United States		12,338,500		$	11,479,740
	senior secured note, 8.375%, 8/15/22		United States		3,207,000			2,414,268
	R.R. Donnelley & Sons Co., senior bond, 6.50%, 11/15/23		United States		1,728,000			1,784,877
	6.00%, 4/01/24		United States		2,630,000			2,720,959
								18,399,844
	Communications Equipment 0.0%†
f	CommScope Technologies LLC, senior bond, 144A, 6.00%, 6/15/25		United States		25,000			24,188
	5.00%, 3/15/27		United States		430,000			378,419
								402,607
	Construction & Engineering 0.0%†
j	GMR Hyderabad International Airport Ltd., senior secured note, Reg S, 5.375%, 4/10/24		India		200,000			206,605
	Consumer Finance 0.1%
	American Express Co., senior note, 3.00%, 2/22/21		United States		165,000			167,089
	h FRN, 2.491%,(3-Month USD LIBOR + 0.60%), 11/05/21		United States		260,000			261,582
	PACCAR Financial Corp., senior note, 2.65%, 5/10/22		United States		420,000			427,378
								856,049
	Containers & Packaging 0.0%†
j	Lecta SA, senior secured note, Reg S, 6.50%, 8/01/23		Spain		288,000	EUR		152,504
	Distributors 0.1%
f,k	American News Co. LLC, senior note, 144A, PIK, 8.50%, 9/01/26		United States		1,499,545			1,593,075
	Diversified Financial Services 0.5%
f,h	Banco Supervielle SA, senior note, 144A, FRN, 52.771%, (ARS Badlar + 4.50%), 8/09/20		Argentina		3,800,000	ARS		50,465
	Citizens Bank NA, senior note, 3.25%, 2/14/22		United States		390,000			399,235
f	Financiera de Desarrollo Territorial SA Findeter, senior bond, 144A, 7.875%, 8/12/24		Colombia		795,000,000	COP		241,797
j	MDC-GMTN BV, senior bond, Reg S, 4.50%, 11/07/28		United Arab Emirates		261,000			295,380
f	Mitsubishi UFJ Lease & Finance Co. Ltd., senior note, 144A, 3.406%, 2/28/22		Japan		320,000			326,611
f	One Call Corp., senior secured note, first lien, 144A, 7.50%, 7/01/24		United States		4,092,583			4,031,194
f	Refinitiv U.S. Holdings Inc., senior note, 144A, 8.25%, 11/15/26		United States		215,000			241,074
f	USAA Capital Corp., senior note, 144A, 2.625%, 6/01/21		United States		180,000			182,006
								5,767,762
	Diversified Telecommunication Services 0.3%
	AT&T Inc., senior note, 3.80%, 3/15/22		United States		530,000			550,039
	h FRN, 2.657%,(3-Month USD LIBOR + 0.75%), 6/01/21		United States		155,000			156,030
f	Cincinnati Bell Inc., senior note, 144A,
	7.00%, 7/15/24		United States		176,000			165,218
	8.00%, 10/15/25		United States		360,000			329,549
	Frontier Communications Corp.,
	senior bond, 7.125%, 1/15/23		United States		132,000			60,885
	senior bond, 7.625%, 4/15/24		United States		84,000			39,480
	senior bond, 6.875%, 1/15/25		United States		33,000			15,111

franklintempleton.com Semiannual Report 29

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

CONSOLIDATED STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin K2 Alternative Strategies Fund(continued)

		Country		Principal Amount*			Value
	Corporate Bonds and Notes (continued)
	Diversified Telecommunication Services (continued)
	senior bond, 9.00%, 8/15/31		United States		271,000		$	123,992
	f senior secured note, 144A, 8.00%, 4/01/27		United States		791,000			818,545
f	Intelsat Jackson Holdings SA, senior secured note, 144A,
	9.50%, 9/30/22		Luxembourg		1,244,000			1,393,668
	8.00%, 2/15/24		Luxembourg		214,000			218,813
f	Kenbourne Invest SA, senior note, 144A, 6.875%, 11/26/24		Chile		200,000			203,250
								4,074,580
	Electric Utilities 0.2%
f	Enel SpA, sub. bond, 144A, 8.75% to 9/24/23, FRN thereafter, 9/24/73		Italy		545,000			639,067
j	Eskom Holdings SOC Ltd., senior bond, Reg S,
	5.75%, 1/26/21		South Africa		214,000			214,076
	8.45%, 8/10/28		South Africa		692,000			738,011
h	Florida Power & Light Co., senior note, FRN, 2.308%,(3-Month USD LIBOR + 0.40%), 5/06/22		United States		415,000			415,013
f	Vistra Operations Co. LLC, senior secured note, 144A, 3.70%, 1/30/27		United States		590,000			584,095
								2,590,262
	Energy Equipment & Services 0.1%
f	Transocean Inc., senior note, 144A, 7.50%, 1/15/26		United States		434,000			390,677
f	Vantage Drilling International, senior secured note, 144A, 9.25%, 11/15/23		United States		330,000			310,063
								700,740
	Entertainment 0.1%
h	The Walt Disney Co., senior note, FRN, 2.297%,(3-Month USD LIBOR + 0.39%), 9/01/22		United States		800,000			804,926
	Equity Real Estate Investment Trusts (REITs) 0.0%†
f	Neiman Marcus Group Ltd. LLC / Neiman Marcus Group LLC / Mariposa Borrower, secured note, 144A, 8.00%, 10/25/24		United States		718,000			201,040
	Food & Staples Retailing 0.1%
f	Albertsons Cos. Inc. / Safeway Inc. / New Albertsons LP / Albertsons LLC, senior note, 144A, 4.625%, 1/15/27		United States		825,000			816,832
j	Casino Guichard Perrachon SA, Reg S,
	h,l junior sub. bond, E, FRN, 3.992%, (EUR 5 Year Swap + 3.82%), Perpetual		France		200,000	EUR		131,939
	senior bond, E, 4.048%, 8/05/26		France		100,000	EUR		93,659
f	NBM US Holdings Inc., senior note, 144A, 7.00%, 5/14/26		Brazil		325,000			345,843
	Unilever Capital Corp., senior note, 3.00%, 3/07/22		United Kingdom		380,000			389,284
								1,777,557
	Food Products 0.1%
f	BRF SA, senior bond, 144A, 4.875%, 1/24/30		Brazil		265,000			264,337
h	Campbell Soup Co., senior note, FRN, 2.619%,(3-Month USD LIBOR + 0.50%), 3/16/20		United States		235,000			235,120
f	JBS USA LUX SA / JBS USA Food Co. / JBS USA Finance Inc., senior bond, 144A, 5.50%, 1/15/30		United States		160,000			171,056
								670,513
	Health Care Providers & Services 0.1%
f,m	Aveanna Healthcare LLC, senior secured note, 144A, 9.75%, 12/15/26		United States		415,000			433,675
	Cigna Corp., senior note, 3.40%, 9/17/21		United States		380,000			388,460

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)
	Health Care Providers & Services (continued)
	CVS Health Corp., senior note, 2.80%, 7/20/20		United States		390,000	$	391,841
	2.125%, 6/01/21		United States		400,000		400,220
							1,614,196
	Hotels, Restaurants & Leisure 0.6%
f	1011778 Bc Ulc / New Red Finance Inc., secured note, 144A, 4.375%, 1/15/28		Canada		310,000		311,937
f,m	Boyd Gaming Corp., senior note, 144A, 4.75%, 12/01/27		United States		235,000		237,968
	Marriott International Inc./Md, senior note, 2.125%, 10/03/22		United States		200,000		199,969
f	Mohegan Gaming & Entertainment, senior note, 144A, 7.875%, 10/15/24		United States		7,728,000		7,518,687
							8,268,561
	Household Durables 0.0%†
f	K Hovnanian Enterprises Inc., secured note, 144A, 10.50%, 7/15/24		United States		359,000		252,198
	Industrial Conglomerates 0.1%
	Honeywell International Inc., senior note, 2.15%, 8/08/22		United States		415,000		417,935
	h FRN, 2.274%,(3-Month USD LIBOR + 0.37%), 8/08/22		United States		415,000		416,828
							834,763
	Insurance 0.3%
	AEGON Funding Co. LLC, senior bond, 5.75%, 12/15/20		Netherlands		220,000		228,468
f,h	AIA Group Ltd., senior note, 144A, FRN, 2.676%,(3-Month USD LIBOR + 0.52%), 9/20/21		Hong Kong		200,000		200,294
f	AIG Global Funding, secured note, 144A, 2.30%, 7/01/22		United States		220,000		221,000
e,h	Genworth Holdings Inc., senior bond, FRN, 3.912%,(3-Month USD LIBOR + 2.00%), 11/15/36		United States		1,623,000		946,915
f	Jackson National Life Global Funding, secured note, 144A, 3.30%, 2/01/22		United States		375,000		385,272
	Marsh & McLennan Cos. Inc., senior note, 3.50%, 12/29/20		United States		185,000		188,109
f	Metropolitan Life Global Funding I, secured note, 144A, 3.375%, 1/11/22		United States		210,000		216,034
	2.40%, 6/17/22		United States		290,000		293,512
f	New York Life Global Funding, 144A, secured note, 2.95%, 1/28/21		United States		230,000		232,774
	h secured note, FRN, 2.228%,(3-Month USD LIBOR + 0.32%), 8/06/21		United States		380,000		381,180
	h senior secured note, FRN, 2.233%,(3-Month USD LIBOR + 0.28%), 1/21/22		United States		155,000		155,305
							3,448,863
	IT Services 0.1%
	International Business Machines Corp., senior note, 2.50%, 1/27/22		United States		785,000		793,666
	Leisure Products 0.0%†
	Hasbro Inc., senior bond, 3.90%, 11/19/29		United States		415,000		417,547
	Machinery 0.1%
	Caterpillar Financial Services Corp., senior note, 3.15%, 9/07/21		United States		265,000		270,667
	John Deere Capital Corp., senior note, 3.125%, 9/10/21		United States		750,000		765,902
							1,036,569
	Media 0.5%
f	Fox Corp., senior note, 144A, 3.666%, 1/25/22		United States		230,000		237,465
f	iHeartCommunications Inc., senior secured note, 144A, 4.75%, 1/15/28		United States		175,000		176,540
	The McClatchy Co., f senior secured bond, 144A, 6.875%, 7/15/31		United States		4,095,000		3,286,237
	senior secured note, 9.00%, 7/15/26		United States		3,521,000		3,168,451

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)
	Media (continued)
f	Outfront Media Capital LLC / Outfront Media Capital Corp., senior bond, 144A, 4.625%, 3/15/30		United States		65,000		$	65,772
								6,934,465
	Metals & Mining 0.1%
f	Minera Mexico SA de CV, senior bond, 144A, 4.50%, 1/26/50		Mexico		220,000			216,906
f	POSCO, senior note, 144A, 2.375%, 11/12/22		South Korea		415,000			413,208
								630,114
	Oil, Gas & Consumable Fuels 0.4%
f	Bruin E&P Partners LLC, senior note, 144A, 8.875%, 8/01/23		United States		590,000			379,320
e,f	California Resources Corp., secured note, second lien, 144A, 8.00%, 12/15/22		United States		785,000			198,212
f	Cheniere Corpus Christi Holdings LLC, senior secured bond, 144A, 3.70%, 11/15/29		United States		335,000			338,643
e,h	Exxon Mobil Corp., senior note, FRN, 2.234%,(3-Month USD LIBOR + 0.33%), 8/16/22		United States		405,000			407,123
	Gulfport Energy Corp., senior note, 6.00%, 10/15/24		United States		505,000			347,036
f	Lonestar Resources America Inc., senior note, 144A, 11.25%, 1/01/23		United States		95,000			66,975
	Montage Resources Corp., senior note, 8.875%, 7/15/23		United States		195,000			159,411
f	Moss Creek Resources Holdings Inc., senior note, 144A, 7.50%, 1/15/26		United States		19,000			12,689
	10.50%, 5/15/27		United States		460,000			339,410
	Petrobras Global Finance BV, senior bond, 5.75%, 2/01/29		Brazil		270,000			297,149
	senior bond, 6.90%, 3/19/49		Brazil		545,000			624,407
	senior note, 8.75%, 5/23/26		Brazil		509,000			648,313
f	Saudi Arabian Oil Co., senior bond, 144A, 3.50%, 4/16/29		Saudi Arabia		200,000			208,616
f	Sinopec Group Overseas Development 2018 Ltd., senior note, 144A, 2.50%, 11/12/24		China		415,000			414,389
f	Vine Oil & Gas LP / Vine Oil & Gas Finance Corp., senior note, 144A, 8.75%, 4/15/23		United States		415,000			171,499
	9.75%, 4/15/23		United States		190,000			80,275
f	YPF Sociedad Anonima, 144A, senior bond, 6.95%, 7/21/27		Argentina		105,000			80,361
	h senior note, FRN, 63.354%, (ARS Badlar + 4.00%), 7/07/20		Argentina		245,000			29,040
								4,802,868
	Pharmaceuticals 0.2%
f	Bristol-Myers Squibb Co., senior note, 144A, 2.60%, 5/16/22		United States		410,000			417,047
	Mylan Inc., senior bond,
	5.40%, 11/29/43		United States		85,000			93,437
	5.20%, 4/15/48		United States		45,000			48,951
	Mylan NV, senior bond, 5.25%, 6/15/46		United States		245,000			269,976
	Pfizer Inc., senior note, 3.00%, 9/15/21		United States		755,000			770,595
f	Teva Pharmaceutical Finance Netherlands II BV, senior note, 144A, 6.00%, 1/31/25		Israel		155,000	EUR		178,527
	Teva Pharmaceutical Finance Netherlands III BV,
	senior bond, 3.15%, 10/01/26		Israel		220,000			180,955
	senior bond, 4.10%, 10/01/46		Israel		1,145,000			835,965
	f senior note, 144A, 7.125%, 1/31/25		Israel		200,000			204,000
								2,999,453
	Real Estate Management & Development 0.1%
j	Easy Tactic Ltd., senior secured note, Reg S, 8.125%, 2/27/23		China		200,000			199,737
f	Kaisa Group Holdings Ltd., senior secured note, 144A, 11.95%, 10/22/22		China		345,000			354,056

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)
	Real Estate Management & Development (continued)
j	Sunac China Holdings Ltd., senior secured note, Reg S, 7.25%, 6/14/22		China		200,000	$	203,043
							756,836
	Road & Rail 0.1%
f	Penske Truck Leasing Co. LP / PTL Finance Corp., senior note, 144A, 3.65%, 7/29/21		United States		285,000		291,387
f	Uber Technologies Inc., senior note, 144A, 8.00%, 11/01/26		United States		240,000		244,157
	7.50%, 9/15/27		United States		365,000		362,728
	Union Pacific Corp., senior note, 2.95%, 3/01/22		United States		230,000		235,084
							1,133,356
	Semiconductors & Semiconductor Equipment 0.1%
f	Broadcom Inc., senior bond, 144A, 4.75%, 4/15/29		United States		635,000		679,650
	Specialty Retail 0.1%
f	Carvana Co., senior note, 144A, 8.875%, 10/01/23		United States		936,000		972,261
h	The Home Depot Inc., senior note, FRN, 2.217%,(3-Month USD LIBOR + 0.31%), 3/01/22		United States		310,000		310,930
f	Staples Inc., senior secured note, 144A, 7.50%, 4/15/26		United States		430,000		450,693
							1,733,884
	Technology Hardware, Storage & Peripherals 0.1%
	Apple Inc., senior note, 1.70%, 9/11/22		United States		530,000		528,442
h	Hewlett Packard Enterprise Co., senior note, FRN, 2.807%,(3-Month USD LIBOR + 0.68%), 3/12/21		United States		415,000		416,773
	Western Digital Corp., senior note, 4.75%, 2/15/26		United States		209,000		215,662
							1,160,877
	Tobacco 0.0%†
	Pyxus International Inc., senior note, 9.875%, 7/15/21		United States		170,000		99,407
	Trading Companies & Distributors 0.0%†
	Aircastle Ltd., senior note, 4.25%, 6/15/26		United States		310,000		325,805
	Wireless Telecommunication Services 0.0%†
j	Bharti Airtel Ltd., senior note, Reg S, 4.375%, 6/10/25		India		200,000		201,530
	Total Corporate Bonds and Notes (Cost $93,208,932)						91,510,897
	Corporate Bonds and Notes in Reorganization 0.8%
	Electric Utilities 0.8%
n	Bruce Mansfield Unit 1 2007 Pass-Through Trust, secured bond, 6.85%, 6/01/34		United States		2,762,968		2,299,599
n	Pacific Gas & Electric Co., senior bond, 5.80%, 3/01/37		United States		1,875,000		1,954,875
	senior bond, 5.40%, 1/15/40		United States		575,000		596,620
	senior bond, 4.45%, 4/15/42		United States		1,164,000		1,156,358
	e senior bond, 4.75%, 2/15/44		United States		2,611,000		2,637,371
	senior note, 3.75%, 2/15/24		United States		809,000		803,268
	senior note, 3.30%, 12/01/27		United States		359,000		349,137
							9,797,228
	Oil, Gas & Consumable Fuels 0.0%†
d,n	Bellatrix Exploration Ltd., secured note, 8.50%, 9/11/23		Canada		141,000		84,600
	12.50%, 12/15/23		Canada		154,000		—

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 in Reorganization (continued)
	Oil, Gas & Consumable Fuels (continued)
j,n	Petroleos de Venezuela SA, senior note, Reg S, 6.00%, 10/28/22		Venezuela		506,036		$	30,362
								114,962
	Total Corporate Bonds and Notes in Reorganization (Cost $8,955,065)							9,912,190
h,o	Senior Floating Rate Interests 0.2%
	Automobiles 0.0%†
	SAIC Motor Corp. Ltd., Term Loan, 3.452%,(1-Month USD LIBOR + 1.75%), 10/31/25		United States		17,628			17,663
	Building Products 0.0%†
	Jeld-Wen Inc., Term Loan B, 4.104%,(3-Month USD LIBOR + 2.00%), 12/14/24		United States		188,082			188,432
	Chemicals 0.0%†
	Axalta Coating Systems Dutch Holding BV, Term Loan B, 3.854%,(3-Month USD LIBOR + 1.75%), 6/01/24		United States		146,461			146,723
	Construction Materials 0.0%†
	ABC Supply, Term Loan B, 3.702%,(1-Month USD LIBOR + 2.00%), 1/15/27		United States		110,000			109,991
	Diversified Financial Services 0.1%
	The AES Corp., Term Loan B, 3.659%,(3-Month USD LIBOR + 1.75%), 5/31/22		United States		10,591			10,607
	Ziggo BV, 4.265%,(1-Month USD LIBOR + 2.50%), 4/15/25		United States		200,522			201,170
	3.00%,(3-Month EURIBOR + 3.00%), 1/31/29		United States		115,000			126,304
								338,081
	Equity Real Estate Investment Trusts (REITs) 0.0%†
	Iron Mountain Inc., Term Loan B, 3.452%,(1-Month USD LIBOR + 1.75%), 1/02/26		United States		216,700			214,714
	Life Sciences Tools & Services 0.0%†
	IQVIA Holdings Inc., Term Loan B, 3.854%,(3-Month USD LIBOR + 1.75%), 6/11/25		United States		202,438			203,155
	Media 0.0%†
	ALTICE USA, Term LoanB-5, 4.327%,(2-Month USD LIBOR + 2.50%), 4/15/27		United States		55,324			55,508
	Oil, Gas & Consumable Fuels 0.1%
	California Resources Corp., Initial Term Loan, 6.452%,(1-Month USD LIBOR + 4.75%), 12/31/22		United States		873,000			739,867
	Gavilan Resources LLC, Initial Term Loan, second lien, 7.702%,(1-Month USD LIBOR + 6.00%), 3/01/24		United States		200,000			75,000
								814,867
	Road & Rail 0.0%†
	Uber Technologies Inc., Term Loan, 5.202%,(1-Month USD LIBOR + 3.50%), 7/13/23		United States		170,966			167,760
	Total Senior Floating Rate Interests (Cost $2,478,521)							2,256,894
p	Credit-Linked Notes 0.2%
d,f	ICBC Standard Bank PLC, (Ukraine), 144A, 15.36%, 10/01/21		Ukraine		21,939,000	UAH		964,474
f	JPMorgan Chase Bank NA, senior note, (Egypt Treasury Bill), 144A, 16.00%, 6/13/22		Egypt		7,267,000	EGP		466,936

34 Semiannual Report franklintempleton.com

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

CONSOLIDATED STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin K2 Alternative Strategies Fund(continued)

		Country		Principal Amount*			Value
p	Credit-Linked Notes (continued)
f	JPMorgan Chase Bank NA, senior note, (Egypt Treasury Bill), 144A, 14.35%, 9/12/24		Egypt		14,270,000	EGP	$	887,723
	Total Credit-Linked Notes (Cost $2,255,602)							2,319,133
	Foreign Government and Agency Securities 1.5%
h	The Export-Import Bank of Korea, senior note, FRN, 2.631%,(3-Month USD LIBOR + 0.53%), 6/25/22		South Korea		215,000			215,616
f	Government of Angola, senior bond, 144A, 8.00%, 11/26/29		Angola		328,000			327,395
	Government of Argentina,
	senior bond, 3.38%, 12/31/38		Argentina		151,632	EUR		64,321
	h senior note, FRN, 70.941%, (ARLLMONP), 6/21/20		Argentina		2,275,000	ARS		9,463
j	Government of Bahrain, senior bond, Reg S, 7.00%, 1/26/26		Bahrain		467,000			539,721
	Government of Brazil, senior bond, 4.75%, 1/14/50		Brazil		412,000			398,523
	Government of Ecuador, senior note,
	f 144A, 7.875%, 3/27/25		Ecuador		301,000			237,263
	j Reg S, 10.75%, 3/28/22		Ecuador		316,000			278,969
f	Government of Egypt, senior bond, 144A,
	7.053%, 1/15/32		Egypt		293,000			297,835
	8.15%, 11/20/59		Egypt		215,000			220,079
	Government of Italy, senior note, 2.375%, 10/17/24		Italy		350,000			343,109
j	Government of Nigeria, senior note, Reg S, 7.625%, 11/21/25		Nigeria		363,000			395,934
j	Government of Paraguay, senior bond, Reg S, 4.625%, 1/25/23		Paraguay		945,000			998,312
	Government of Poland, senior bond, 2.75%, 10/25/29		Poland		2,828,000	PLN		770,869
	Government of Russia,
	senior bond, 7.25%, 5/10/34		Russia		363,838,000	RUB		6,014,791
	senior note, 7.40%, 7/17/24		Russia		102,212,000	RUB		1,670,018
	Government of South Africa, senior bond,
	8.75%, 1/31/44		South Africa		19,160,000	ZAR		1,133,408
	R186, 10.50%, 12/21/26		South Africa		36,324,317	ZAR		2,745,678
	Government of Turkey,
	senior bond, 5.75%, 5/11/47		Turkey		677,000			580,760
	senior note, 6.35%, 8/10/24		Turkey		788,000			818,199
	Provincia de Buenos Aires,
	h FRN, 48.839%, (ARS Badlar + 3.83%), 5/31/22		Argentina		18,295,000	ARS		35,728
	h,j FRN, Reg S, 53.398%, (ARS Badlar + 3.75%), 4/12/25		Argentina		3,670,000	ARS		14,128
	f senior note, 144A, 6.50%, 2/15/23		Argentina		185,000			65,675
j	ZAR Sovereign Capital Fund Property Ltd., senior note, Reg S, 3.903%, 6/24/20		South Africa		573,000			576,779
	Total Foreign Government and Agency Securities (Cost $19,613,034)							18,752,573
	Asset-Backed Securities and Commercial Mortgage-Backed Securities 5.5%
	Airlines 0.0%†
	Latam Airlines Pass Through Trust,2015-1, B, secured note, 4.50%, 8/15/25		Chile		495,602			498,080
	Banks 0.0%†
f,q	Banco Hipotecario SA, senior note, 144A, FRN,
	50.667%, (ARS Badlar + 2.50%), 1/12/20		Argentina		1,299,260	ARS		4,883
	48.563%, (ARS Badlar + 4.00%), 11/07/22		Argentina		3,160,000	ARS		37,474
								42,357
	Consumer Finance 0.1%
	American Express Credit Account Master Trust,2019-1, A, 2.87%, 10/15/24		United States		115,000			117,912
	Capital One Multi-Asset Execution Trust,2019-A1, A1, 2.84%, 12/15/24		United States		165,000			168,652

franklintempleton.com Semiannual Report 35

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

CONSOLIDATED STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin K2 Alternative Strategies Fund(continued)

		Country		Principal Amount*		Value
	Asset-Backed Securities and Commercial Mortgage-Backed Securities (continued)
	Consumer Finance (continued)
	Citibank Credit Card Issuance Trust,2017-A8, A8, 1.86%, 8/08/22		United States		425,000	$	424,947
	Discover Card Execution Note Trust,
	q 2018-A3, A3, FRN, 1.995%,(1-Month USD LIBOR + 0.23%), 12/15/23		United States		345,000		345,539
	2019-A1, A1, 3.04%, 7/15/24		United States		155,000		159,040
	World Financial Network Credit Card Master Trust,2019-C, M, 2.71%, 7/15/26		United States		415,000		415,432
							1,631,522
	Diversified Financial Services 3.8%
f	Accelerated Assets LLC,2018-1, B, 144A, 4.51%, 12/02/33		United States		74,517		76,536
f,q	Acis CLO Ltd.,2014-3A, D, 144A, FRN, 5.029%,(3-Month USD LIBOR + 3.12%), 2/01/26		United States		1,140,000		1,109,665
f	Adams Outdoor Advertising LP,2018-1, A, 144A, 4.81%, 11/15/48		United States		187,280		195,923
f	AIM Aviation Finance Ltd.,2015-1A, B1, 144A, 5.072%, 2/15/40		Cayman Islands		184,835		184,848
	AmeriCredit Automobile Receivables Trust,
	2018-2, D, 4.01%, 7/18/24		United States		155,000		161,928
	q 2018-3, A2B, FRN, 2.013%,(1-Month USD LIBOR + 0.25%), 1/18/22		United States		100,460		100,451
	2018-3, D, 4.04%, 11/18/24		United States		205,000		215,049
f,q	Anchorage Capital CLO 7 Ltd.,2017-7A, DR, 144A, FRN, 4.701%,(3-Month USD LIBOR + 2.70%), 10/15/27		United States		2,000,000		1,977,716
q	Argent Securities Inc.,2004-W3, M4, FRN, 4.018%,(1-Month USD LIBOR + 4.58%), 2/25/34		United States		258,604		260,072
f	Ascentium Equipment Receivables Trust,2017-2A, C, 144A, 2.87%, 8/10/22		United States		25,000		25,229
f,m,r	BANK, 2019-BN23, XF, 144A, FRN, 0.876%, 12/15/52		United States		7,900,000		520,871
f	Bayview Opportunity Master Fund IVA Trust,2019-RN2, A1, 144A, 3.967%, 3/28/34		United States		81,710		82,364
f	Bayview Opportunity Master Fund IVB Trust,2019-RN1, A1, 144A, 4.09%, 2/28/34		United States		65,446		66,340
f	Blackbird Capital Aircraft Lease Securitization Ltd.,2016-1A, A, 144A, 4.213%, 12/16/41		United States		209,844		215,843
	California Republic Auto Receivables Trust,2018-1, D, 4.33%, 4/15/25		United States		115,000		119,421
f,q	Carlyle Global Market Strategies CLO Ltd.,2018-2A, A1R, 144A, FRN, 2.716%,(3-Month USD LIBOR + 0.78%), 4/27/27		United States		224,307		224,322
	Carmax Auto Owner Trust,
	2018-2, D, 3.99%, 4/15/25		United States		100,000		103,294
	2018-4, D, 4.15%, 4/15/25		United States		60,000		62,437
	2019-1, A3, 3.05%, 3/15/24		United States		355,000		361,416
f	Chesapeake Funding II LLC, 144A,
	q 2017-4A, A2, FRN, 2.105%,(1-Month USD LIBOR + 0.34%), 11/15/29		Canada		93,809		93,856
	2018-1A, D, 3.92%, 4/15/30		Canada		115,000		117,878
	CHL Mortgage Pass-Through Trust,
	q 2003-15, 1A1, FRN, 2.208%,(1-Month USD LIBOR + 0.50%), 6/25/42		United States		103,065		100,090
	2004-4, M, 5.50%, 5/25/34		United States		1,729,721		1,235,866
	r 2006-HYB4, 3B, FRN, 4.366%, 6/20/36		United States		2,399,775		2,198,907
f	CIG Auto Receivables Trust,2017-1A, A, 144A, 2.71%, 5/15/23		United States		7,276		7,287
f	Coinstar Funding LLC,2017-1A, A2, 144A, 5.216%, 4/25/47		United States		238,875		245,842
f	CoreVest American Finance Trust,2019-2, B, 144A, 3.424%, 6/15/52		United States		100,000		103,535
f	CPS Auto Receivables Trust, 144A,
	2018-D, C, 3.83%, 9/15/23		United States		100,000		102,044
	2019-D, D, 2.72%, 9/15/25		United States		105,000		104,904

36 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	CSMC Trust, 2018-RPL2, A1, 144A, 4.03%, 8/25/62		United States		202,027		$	203,438
f,q	CVP Cascade Ltd.,2017-2A, A1R, 144A, FRN, 3.203%,(3-Month USD LIBOR + 1.20%), 7/18/26		United States		148,872			148,873
f,r	DBUBS Mortgage Trust, 2017-BRBK, D, 144A, FRN, 3.648%, 10/10/34		United States		100,000			102,063
f	Domino’s Pizza Master Issuer LLC, 144A,
	2018-1A, A2II, 4.328%, 7/25/48		United States		79,000			83,223
	2019-1A, A2, 3.668%, 10/25/49		United States		120,000			120,211
	Drive Auto Receivables Trust,
	2018-1, D, 3.81%, 5/15/24		United States		220,000			223,523
	2018-3, D, 4.30%, 9/16/24		United States		25,000			25,700
	2018-5, D, 4.30%, 4/15/26		United States		125,000			129,495
f	Driven Brands Funding LLC,2018-1A, A2, 144A, 4.739%, 4/20/48		United States		59,100			61,738
f	DT Auto Owner Trust, 144A,
	2016-1A, D, 4.66%, 12/15/22		United States		88,987			89,120
	2018-2A, D, 4.15%, 3/15/24		United States		90,000			92,519
	2018-3A, C, 3.79%, 7/15/24		United States		120,000			122,267
f,q	Elevation CLO Ltd.,2019-4A, AR, 144A, FRN, 2.993%,(3-Month USD LIBOR + 0.99%), 4/18/27		United States		251,052			251,042
f	Fairstone Financial Issuance Trust I,2019-1A, A, 144A, 3.948%, 3/21/33		Canada		150,000	CAD		113,739
f	First Investors Auto Owner Trust,2019-2A, D, 144A, 2.80%, 12/15/25		United States		40,000			40,046
f	Five Guys Funding LLC,2017-1A, A2, 144A, 4.60%, 7/25/47		United States		129,025			134,486
f	Flagship Credit Auto Trust, 144A,
	2019-2, D, 3.53%, 5/15/25		United States		165,000			168,459
	2019-4, D, 3.12%, 1/15/26		United States		90,000			90,343
f,q	FS Rialto,2019-FL1, C, 144A, FRN, 4.274%,(1-Month USD LIBOR + 2.50%), 12/16/36		United States		2,300,000			2,322,091
f,r	GCAT Trust, 2019-RPL1, A1, 144A, FRN, 2.65%, 10/25/68		United States		179,556			179,921
f	GLS Auto Receivables Trust, 144A,
	2018-3A, B, 3.78%, 8/15/23		United States		70,000			71,113
	2019-2A, C, 3.54%, 2/18/25		United States		255,000			260,700
f,q	Gosforth Funding PLC,2018-1A, A1, 144A, FRN, 2.36%, (3-Month USD LIBOR + 0.45%), 8/25/60		United Kingdom		132,231			132,231
f,q	GPMT Ltd., 144A, FRN,
	2018-FL1, C, 3.872%,(1-Month USD LIBOR + 2.15%), 11/19/35		United States		1,250,000			1,253,075
	2019-FL2, D, 4.715%,(1-Month USD LIBOR + 2.95%), 2/22/36		United States		1,000,000			1,000,500
j,q	Great Hall Mortgages No 1 PLC,2006-1, DA, FRN, Reg S, 1.596%,(3-Month GBP LIBOR + 0.82%), 6/18/38		United Kingdom		1,330,000	GBP		1,529,872
f,q	GSRPM Mortgage Loan Trust,2002-1A, M1, 144A, FRN, 3.658%,(1-Month USD LIBOR + 1.95%), 11/25/31		United States		1,109,505			1,111,917
f,q	Halcyon Loan Advisors Funding Ltd., 144A, FRN,
	2014-1A, D, 5.503%,(3-Month USD LIBOR + 3.50%), 4/18/26		United States		2,190,000			2,185,482
	2017-2A, A1BR, 3.116%,(3-Month USD LIBOR + 1.18%), 4/28/25		United States		95,684			95,729
f	Hertz Vehicle Financing II LP,2017-2A, A, 144A, 3.29%, 10/25/23		United States		100,000			102,526
	Honda Auto Receivables Owner Trust,
	2017-3, A3, 1.79%, 9/20/21		United States		65,659			65,619
	2019-1, A3, 2.83%, 3/20/23		United States		150,000			152,431
f	Horizon Aircraft Finance I Ltd.,2018-1, A, 144A, 4.458%, 12/15/38		United States		243,585			252,174
f,q	HPLY Trust,2019-HIT, C, 144A, FRN, 3.365%, (1-Month USD LIBOR + 1.60%), 11/15/36		United States		98,705			98,778
f,q	Jamestown CLO VII Ltd.,2017-7A, A1R, 144A, FRN, 2.77%,(3-Month USD LIBOR + 0.83%), 7/25/27		United States		233,910			233,283

franklintempleton.com Semiannual Report 37

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	Kestrel Aircraft Funding Ltd.,2018-1A, A, 144A, 4.25%, 12/15/38		United States		232,176	$	236,863
f	Legacy Mortgage Asset Trust,2019-GS3, A1, 144A, 3.75%, 4/25/59		United States		120,519		121,929
f,q	LoanCore Issuer Ltd., 2018-CRE1, D, 144A, FRN, 4.715%,(1-Month USD LIBOR + 2.95%), 5/15/28		United States		1,600,000		1,600,800
f	Marlette Funding Trust,2019-3A, A, 144A, 2.69%, 9/17/29		United States		163,329		164,015
q	Merrill Lynch Mortgage Investors Trust Series, 2007-MLN1, A2D, FRN, 2.028%,(1-Month USD LIBOR + 0.32%), 3/25/37		United States		1,173,557		1,114,728
r	Morgan Stanley Mortgage Loan Trust, 2004-11AR, 2A, FRN, 3.323%, 1/25/35		United States		457,660		445,728
f	Navient Private Education Refi Loan Trust,2019-FA, B, 144A, 3.12%, 8/15/68		United States		210,000		208,526
f,q	Navistar Financial Dealer Note Master Owner Trust II,2018-1, A, 144A, FRN, 2.338%,(1-Month USD LIBOR + 0.63%), 9/25/23		United States		60,000		60,082
f,r	New Residential Mortgage Loan Trust,2015-2A, B5, 144A, FRN, 5.531%, 8/25/55		United States		1,565,057		1,639,921
f,q	NextGear Floorplan Master Owner Trust, 144A, FRN,
	2017-1A, A1, 2.615%,(1-Month USD LIBOR + 0.85%), 4/18/22		United States		240,000		240,440
	2017-2A, A1, 2.445%,(1-Month USD LIBOR + 0.68%), 10/17/22		United States		220,000		220,537
	2018-1A, A1, 2.405%,(1-Month USD LIBOR + 0.64%), 2/15/23		United States		500,000		501,368
	Nissan Auto Receivables Owner Trust,
	2016-C, A3, 1.18%, 1/15/21		United States		8,320		8,313
	2018-A, A3, 2.65%, 5/16/22		United States		250,000		251,117
	q 2018-C, A2B, FRN, 1.935%,(1-Month USD LIBOR + 0.17%), 10/15/21		United States		233,393		233,428
q	Nomura Home Equity Loan Inc. Home Equity Loan Trust Series,2006-WF1, M4, FRN, 2.078%,(1-Month USD LIBOR + 0.37%), 3/25/36		United States		1,293,940		1,238,466
f,r	OBX Trust, 2019-EXP3, 1A8, 144A, FRN, 3.50%, 10/25/59		United States		142,718		144,217
f,q	OFSI Fund VII Ltd.,2017-7A, AR, 144A, FRN, 2.903%,(3-Month USD LIBOR + 0.90%), 10/18/26		United States		75,322		75,323
f	OneMain Financial Issuance Trust,2015-3A, B, 144A, 4.16%, 11/20/28		United States		155,000		155,872
f	Oxford Finance Funding LLC,2019-1A, A2, 144A, 4.459%, 2/15/27		United States		50,000		51,202
f	Planet Fitness Master Issuer LLC, 144A,
	2018-1A, A2I, 4.262%, 9/05/48		United States		168,300		172,009
	2019-1A, A2, 3.858%, 12/05/49		United States		150,000		150,759
f	Progress Residential Trust, 2019-SFR1, E, 144A, 4.466%, 8/17/35		United States		115,000		117,983
	RALI Series Trust,2007-QS2, AP, zero cpn., 1/25/37		United States		228,680		168,442
f,r	RBSSP Resecuritization Trust,2009-12, 17A2, 144A, FRN, 3.846%, 10/25/35		United States		2,424,758		2,433,655
f	RCO V Mortgage LLC,2019-1, A1, 144A, 3.721%, 5/24/24		United States		174,267		175,048
f	Republic Finance Issuance Trust,2019-A, A, 144A, 3.43%, 11/22/27		United States		240,000		240,175
	Santander Drive Auto Receivables Trust,
	2018-2, D, 3.88%, 2/15/24		United States		275,000		281,627
	2018-3, D, 4.07%, 8/15/24		United States		210,000		216,112
	2018-5, C, 3.81%, 12/16/24		United States		150,000		152,315
	2019-2, D, 3.22%, 7/15/25		United States		210,000		214,999
f	SCF Equipment Leasing LLC,2018-1A, C, 144A, 4.21%, 4/20/27		United States		255,000		257,169
f,r	Security National Mortgage Loan Trust,2004-1A, AF3, 144A, FRN, 6.42%, 6/25/32		United States		2,063,472		1,794,578
f,r	Sequoia Mortgage Trust, 144A, FRN,
	2018-CH1, A1, 4.00%, 2/25/48		United States		66,621		68,255
	2019-CH1, A1, 4.50%, 3/25/49		United States		252,790		258,106
f	S-Jets Ltd.,2017-1, A, 144A, 3.967%, 8/15/42		Bermuda		232,899		235,097
q	SLM Private Credit Student Loan Trust, FRN,
	2003-B, A3, 5.233%,(28-DayT-Bill + 1.00%), 3/15/33		United States		300,000		298,927
	2003-B, A4, 5.04%,(28-DayT-Bill + 1.00%), 3/15/33		United States		50,000		49,821

38 Semiannual Report franklintempleton.com

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

CONSOLIDATED STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin K2 Alternative Strategies Fund(continued)

		Country		Principal Amount*		Value
	Asset-Backed Securities and Commercial Mortgage-Backed Securities (continued)
	Diversified Financial Services (continued)
f,q	SMB Private Education Loan Trust,2017-B, A2B, 144A, FRN, 2.515%,(1-Month USD LIBOR + 0.75%), 10/15/35		United States		91,448	$	91,473
f	SoFi Consumer Loan Program Trust, 144A,
	2018-1, B, 3.65%, 2/25/27		United States		100,000		102,240
	2018-2, A2, 3.35%, 4/26/27		United States		155,000		156,150
	2019-4, C, 2.84%, 8/25/28		United States		130,000		130,258
f	SoFi Professional Loan Program LLC,2016-A, B, 144A, 3.57%, 1/26/38		United States		69,206		70,397
q	Soundview Home Loan Trust,2006-WF2, M3, FRN, 2.158%, (1-Month USD LIBOR + 0.45%), 12/25/36		United States		1,750,925		1,883,324
f	Sprite Ltd.,2017-1, B, 144A, 5.75%, 12/15/37		Cayman Islands		173,838		181,254
f	Stack Infrastructure Issuer LLC,2019-1A, A2, 144A, 4.54%, 2/25/44		United States		124,063		130,775
f,q	Staniford Street CLO Ltd.,2017-1A, AR, 144A, FRN, 3.299%,(3-Month USD LIBOR + 1.18%), 6/15/25		United States		108,968		108,969
f,q	Starwood Retail Property Trust, 2014-STAR, E, 144A, FRN, 5.915%,(1-Month USD LIBOR + 4.15%), 11/15/27		United States		200,000		157,764
f	TAL Advantage V LLC,2013-2A, A, 144A, 3.55%, 11/20/38		United States		40,000		40,016
f,r	Towd Point Mortgage Trust,2015-2, 1A13, 144A, FRN, 2.50%, 11/25/60		United States		92,354		92,651
f	Tricon American Homes Trust, 2019-SFR1, A, 144A, 2.75%, 3/17/38		United States		100,000		100,786
f,q	TRTX Issuer Ltd., 144A, FRN,
	2019-FL3, B, 3.573%,(1-Month USD LIBOR + 1.75%), 9/15/34		United States		1,300,000		1,300,390
	2019-FL3, C, 3.923%,(1-Month USD LIBOR + 2.10%), 9/15/34		United States		1,160,000		1,164,060
f	United Auto Credit Securitization Trust,2019-1, C, 144A, 3.16%, 8/12/24		United States		155,000		156,393
f,q	Venture XII CLO Ltd.,2018-12A, ARR, 144A, FRN, 2.714%,(3-Month USD LIBOR + 0.80%), 2/28/26		United States		202,047		201,678
f	Vericrest Opportunity Loan Trust, 2019-NPL3, A1, 144A, 3.967%, 3/25/49		United States		108,527		109,427
f,q	Verizon Owner Trust, 144A, FRN,
	2017-3A, A1B, 1.994%,(1-Month USD LIBOR + 0.27%), 4/20/22		United States		261,767		262,120
	2018-1A, A1B, 1.984%,(1-Month USD LIBOR + 0.26%), 9/20/22		United States		175,000		175,064
f,q	VMC Finance LLC, 144A, FRN,
	2018-FL1, C, 4.013%,(1-Month USD LIBOR + 2.25%), 3/15/35		United States		1,100,000		1,100,687
	2019-FL3, C, 3.813%,(1-Month USD LIBOR + 2.05%), 9/15/36		United States		591,229		593,312
f	VOLT LXXII LLC, 2018-NPL8, A1A, 144A, 4.213%, 10/26/48		United States		399,408		400,632
f	VOLT LXXV LLC, 2019-NPL1, A1A, 144A, 4.336%, 1/25/49		United States		152,840		154,364
f	VOLT LXXXIII LLC, 2019-NPL9, A1A, 144A, 3.327%, 11/26/49		United States		109,512		109,703
f,q	West CLO Ltd.,2017-1A, A1R, 144A, FRN, 2.923%,(3-Month USD LIBOR + 0.92%), 7/18/26		United States		171,083		171,060
f	Westlake Automobile Receivables Trust, 144A, 2018-1A, D, 3.41%, 5/15/23		United States		60,000		60,697
	2018-2A, D, 4.00%, 1/16/24		United States		50,000		51,260
	q 2018-3A, A2B, FRN, 2.115%,(1-Month USD LIBOR + 0.35%), 1/18/22		United States		137,993		138,022
							49,014,539
	Equity Real Estate Investment Trusts (REITs) 0.1%
f	American Homes 4 Rent, 144A, 2014-SFR2, E, 6.231%, 10/17/36		United States		250,000		276,751
	2014-SFR3, E, 6.418%, 12/17/36		United States		100,000		111,650
	2015-SFR1, E, 5.639%, 4/17/52		United States		210,000		228,032
f	Colony American Finance Ltd.,2015-1, D, 144A, 5.649%, 10/15/47		United States		115,000		116,366
f	Diamond Resorts Owner Trust, 144A,
	2017-1A, C, 6.07%, 10/22/29		United States		34,395		35,315
	2018-1, C, 4.53%, 1/21/31		United States		91,256		93,306

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)
	Equity Real Estate Investment Trusts (REITs) (continued)
f	Diamond Resorts Owner Trust, 144A, (continued)
	2019-1A, B, 3.53%, 2/20/32		United States		96,733		$	96,974
								958,394
	Mortgage Real Estate Investment Trusts (REITs) 1.2%
f,r	Ajax Mortgage Loan Trust,2017-B, A, 144A, FRN, 3.163%, 9/25/56		United States		103,135			103,691
q	American Home Mortgage Investment Trust,2006-1, 11A1, FRN, 1.988%,(1-Month USD LIBOR + 0.28%), 3/25/46		United States		230,675			220,516
	Banc of America Alternative Loan Trust,2003-8, 1CB1, 5.50%, 10/25/33		United States		6,428			6,808
	Banc of America Funding Trust, 2003-1, B2, 6.00%, 5/20/33		United States		313,735			229,213
	2007-4, 5A1, 5.50%, 11/25/34		United States		99,722			100,309
r	Banc of America Mortgage Trust,2005-A, 2A1, FRN, 4.458%, 2/25/35		United States		5,255			5,341
r	Bear Stearns ARM Trust,2007-4, 12A1, FRN, 4.832%, 5/25/37		United States		2,190,255			2,162,876
f,r	CCRESG Commercial Mortgage Trust, 2016-HEAT, D, 144A, FRN, 5.671%, 4/10/29		United States		100,000			102,084
f	Citigroup Mortgage Loan Trust, 144A, r 2009-10, 6A2, FRN, 4.606%, 9/25/34		United States		28,947			30,041
	r 2018-A, A1, FRN, 4.00%, 1/25/68		United States		94,615			95,153
	2018-C, A1, 4.125%, 3/25/59		United States		155,529			156,724
	r 2019-B, A1, FRN, 3.258%, 4/25/66		United States		111,436			112,158
	2019-E, A1, 3.228%, 11/25/70		United States		248,817			249,446
	Countrywide Alternative Loan Trust, 2003-22CB, 1A1, 5.75%, 12/25/33		United States		44,074			46,005
	2004-16CB, 1A1, 5.50%, 7/25/34		United States		27,864			29,245
	2004-16CB, 3A1, 5.50%, 8/25/34		United States		29,344			30,731
	2004-J10, 2CB1, 6.00%, 9/25/34		United States		80,649			86,531
	2005-J1, 2A1, 5.50%, 2/25/25		United States		4,348			4,473
	2005-J14, A3, 5.50%, 12/25/35		United States		416,019			355,764
q	Countrywide Asset-Backed Certificates, 2005-15, M3, FRN, 2.228% (1-Month USD LIBOR + 0.52%), 4/25/36		United States		2,340,000			2,106,467
r	Countrywide Home Loans Mortgage Pass-Through Trust,2004-HYB4, 2A1, FRN, 4.224%, 9/20/34		United States		64,281			63,932
	Credit Suisse First Boston Mortgage Securities Corp., 2002-10, 1B, 7.00%, 5/25/32		United States		155,681			134,276
	2003-27, 4A4, 5.75%, 11/25/33		United States		18,906			19,866
f	CSMC OA LLC,2014-USA, E, 144A, 4.373%, 9/15/37		United States		400,000			380,620
q	DSLA Mortgage Loan Trust,2005-AR5, 2A1A, FRN, 2.063%,(1-Month USD LIBOR + 0.33%), 9/19/45		United States		41,758			34,525
j,q	Dukinfield II PLC,2016-2, A, FRN, Reg S, 2.026%,(3-Month GBP LIBOR + 1.25%), 12/20/52		United Kingdom		162,150	GBP		211,462
j,q	Eurosail-UK PLC,2007-2X, A3C, FRN, Reg S, 0.935%,(3-Month GBP LIBOR + 0.15%), 3/13/45		United Kingdom		44,126	GBP		55,859
q	FHLMC Structured Agency Credit Risk Debt Notes, FRN,
	2015-DNA1, M2, 3.558%,(1-Month USD LIBOR + 1.85%), 10/25/27		United States		122,069			122,777
	2015-DNA1, M3, 5.008%,(1-Month USD LIBOR + 3.30%), 10/25/27		United States		250,000			266,921
f,r	GS Mortgage Securities Trust,2011-GC5, D, 144A, FRN, 5.556%, 8/10/44		United States		195,000			194,441
	GSR Mortgage Loan Trust,
	2005-4F, 6A1, 6.50%, 2/25/35		United States		9,079			9,154
	r 2005-AR6, 4A5, FRN, 4.541%, 9/25/35		United States		58,022			59,604

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)
	Mortgage Real Estate Investment Trusts (REITs) (continued)
q	Harborview Mortgage Loan Trust,2004-11, 2A2A, FRN, 2.373%,(1-Month USD LIBOR + 0.64%), 1/19/35		United States		94,849		$	92,203
	IndyMac Index Mortgage Loan Trust, FRN,
	q 2004-AR12, A1, 2.488%,(1-Month USD LIBOR + 0.78%), 12/25/34		United States		2,031,598			1,800,382
	q 2004-AR7, A5, 2.928%,(1-Month USD LIBOR + 1.22%), 9/25/34		United States		49,406			46,944
	r 2005-AR11, A3, 3.859%, 8/25/35		United States		53,159			48,428
	q 2006-AR2, 2A1, 1.918%,(1-Month USD LIBOR + 0.21%), 2/25/46		United States		244,183			209,320
f,q	Invitation Homes Trust, 144A, FRN,
	2018-SFR1, E, 3.763%,(1-Month USD LIBOR + 2.00%), 3/17/37		United States		99,986			100,384
	2018-SFR2, E, 3.765%,(1-Month USD LIBOR + 2.00%), 6/17/37		United States		200,000			200,948
	JP Morgan Mortgage Trust,
	2004-S1, 2A1, 6.00%, 9/25/34		United States		98,660			105,506
	r 2007-A1, 4A2, FRN, 4.658%, 7/25/35		United States		3,750			3,911
q	Lehman XS Trust Series,2006-2N, 1A1, FRN, 1.968%, (1-Month USD LIBOR + 0.26%), 2/25/46		United States		44,375			41,474
j,q	Ludgate Funding PLC, FRN, Reg S,
	2007-1, A2B, 0.665%,(3-Month EURIBOR + 0.16%), 1/01/61		United Kingdom		29,291	EUR		30,656
	2008-W1X, A1, 1.36%,(3-Month GBP LIBOR + 0.60%), 1/01/61		United Kingdom		133,043	GBP		167,065
	MASTR Alternative Loan Trust,
	2004-2, 8A4, 5.50%, 3/25/34		United States		167,159			170,812
	2004-8, 2A1, 6.00%, 9/25/34		United States		51,420			55,413
r	Merrill Lynch Mortgage Investors MLCC,2006-2, 2A, FRN, 3.962%, 5/25/36		United States		5,002			5,140
f,r	Morgan Stanley Capital I Trust,2011-C2, E, 144A, FRN, 5.671%, 6/15/44		United States		150,000			146,029
j,q	Newgate Funding PLC,2007-3X, A2B, FRN, Reg S, 0.167%,(3-Month EURIBOR + 0.60%), 12/15/50		United Kingdom		62,107	EUR		66,511
f	PRPM LLC, 144A,
	r 2017-3A, A1, FRN, 3.47%, 11/25/22		United States		64,692			64,930
	2019-4A, A1, 3.351%, 11/25/24		United States		115,000			114,999
r	RFMSI Trust,2005-SA1, 1A1, FRN, 4.528%, 3/25/35		United States		106,038			78,425
j,q	RMAC Securities PLC, 2006-NS1X, A2C, FRN, Reg S, 0.229%,(3-Month EURIBOR + 0.15%), 6/12/44		United Kingdom		40,904	EUR		43,385
q	Structured ARM Loan Trust,2005-14, A1, FRN, 2.018%,(1-Month USD LIBOR + 0.31%), 7/25/35		United States		259,760			208,505
r	Wachovia Mortgage Loan Trust LLC Series Trust, 2007-A, 2A1, FRN, 4.668%, 3/20/37		United States		2,205,966			2,155,283
f	Wells Fargo Commercial Mortgage Trust, 2019-JWDR, C, 144A, 3.139%, 9/15/31		United States		290,000			288,205
r	WF-RBS Commercial Mortgage Trust, FRN, f 2011-C2, D, 144A, 5.839%, 2/15/44		United States		35,000			35,723
	f 2011-C3, D, 144A, 5.856%, 3/15/44		United States		90,000			67,951
	f 2012-C6, D, 144A, 5.767%, 4/15/45		United States		150,000			158,059
	2012-C7, C, 4.968%, 6/15/45		United States		25,000			25,607
	f 2012-C7, E, 144A, 4.968%, 6/15/45		United States		75,000			56,690
								14,375,901
	Thrifts & Mortgage Finance 0.3%
f,q	BX Commercial Mortgage Trust, 144A, FRN, 2019-XL, E, 3.565%,(1-Month USD LIBOR + 1.80%), 10/15/36		United States		1,300,000			1,302,989

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)
	Thrifts & Mortgage Finance (continued)
	2019-XL, F, 3.765%,(1-Month USD LIBOR + 2.00%), 10/15/36		United States		2,000,000	$	2,005,279
							3,308,268
	Total Asset-Backed Securities and Commercial Mortgage-Backed Securities (Cost $69,603,275)						69,829,061
	Municipal Bonds in Reorganization 0.7%
	Puerto Rico 0.7%
n	Puerto Rico Commonwealth GO, Public Improvement, Refunding, Series A, 5.50%, 7/01/39		United States		715,000		480,838
	5.00%, 7/01/41		United States		1,000,000		640,000
n	Puerto Rico Commonwealth GO, Refunding, Series A, 8.00%, 7/01/35		United States		5,300,000		3,286,000
n	Puerto Rico Electric Power Authority Power Revenue,
	A-RSA-1, 5.00%, 7/01/42		United States		1,608,000		1,234,140
	TT-RSA-1, 5.00%, 7/01/32		United States		430,000		330,025
	TT-RSA-1, 5.00%, 7/01/37		United States		865,000		663,887
	WW-RSA-1, 5.25%, 7/01/33		United States		20,000		15,350
	WW-RSA-1, 5.50%, 7/01/38		United States		194,000		149,380
	a XX, 5.25%, 7/01/40		United States		2,180,000		1,673,150
	Total Municipal Bonds in Reorganization (Cost $7,671,566)						8,472,770
		Number of Contracts		Notional Amount#
	Options Purchased 0.0%†
	Calls – Exchange-Traded 0.0%†
	Aurora Cannabis Inc., January Strike Price $5.00, Expires 1/17/20		114		11,400		570
	BP PLC, December Strike Price 5.40 GBP, Expires 12/20/19		42		42,000		136
	CBS Corp., March Strike Price $37.50, Expires 3/20/20		132		13,200		57,090
	DJ EURO STOXX 50 Index, December Strike Price 3,700.00 EUR, Expires 12/20/19		55		550		24,664
	DJ EURO STOXX Banks, December Strike Price 105.00 EUR, Expires 12/20/19		200		10,000		551
	DJ EURO STOXX Banks, December Strike Price 115.00 EUR, Expires 12/20/19		600		30,000		1,653
	DJ EURO STOXX Banks, December Strike Price 120.00 EUR, Expires 12/20/19		137		6,850		377
	Evolent Health Inc., A, December Strike Price $12.50, Expires 12/20/19		150		15,000		300
	Fitbit Inc., A, January Strike Price $7.00, Expires 1/17/20		1,524		152,400		24,384
	Industrial Select Sector SPDR Fund, January Strike Price $84.00, Expires 1/17/20		143		14,300		10,439
	Occidental Petroleum Corp., January Strike Price $42.50, Expires 1/17/20		103		10,300		5,768
	Royal Dutch Petroleum Co., December Strike Price 27.00 EUR, Expires 12/20/19		94		9,400		828
	Spark Therapeutics Inc., December Strike Price $100.00, Expires 12/20/19		176		17,600		212,960
	Team Inc., December Strike Price $20.00, Expires 12/20/19		77		7,700		1,155
	thyssenkrupp AG, December Strike Price 14.00 EUR, Expires 12/20/19		657		65,700		1,448
	TOTAL SA, December Strike Price 50.00 EUR, Expires 12/20/19		52		5,200		687
	Vishay Intertechnology Inc., December Strike Price $20.00, Expires 12/20/19		154		15,400		7,700
	Vodafone Group PLC, January Strike Price 1.55 GBP, Expires 1/17/20		1,554		1,554,000		75,367

42 Semiannual Report franklintempleton.com

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

CONSOLIDATED STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin K2 Alternative Strategies Fund(continued)

		Number of Contracts		Notional Amount#			Value
	Options Purchased (continued)
	Calls – Exchange-Traded(continued)
	Vodafone Group PLC, ADR, January Strike Price $20.00, Expires 1/17/20		364		36,400		$	18,564
								444,641
	Calls –Over-the-Counter 0.0%†
	Currency Options 0.0%†
	EUR/CHF, Counterparty JPHQ, May Strike Price 1.12 CHF, Expires 5/14/20		1		4,000,000	EUR		20,318
	EUR/JPY, Counterparty JPHQ, February Strike Price 123.50 JPY, Expires 2/19/20		1		2,500,000	EUR		6,718
	EUR/USD, Counterparty JPHQ, January Strike Price $1.16, Expires 1/13/20		1		12,000,000	EUR		724
	EUR/USD, Counterparty JPHQ, February Strike Price $1.15, Expires 2/17/20		1		10,000,000	EUR		7,383
	USD/HKD, Counterparty JPHQ, January Strike Price 7.98 HKD, Expires 1/20/20		1		2,000,000			204
								35,347
	Puts – Exchange-Traded 0.0%†
	Allergan PLC, January Strike Price $140.00, Expires 1/17/20		162		16,200			10,125
	DJ EURO STOXX 50 Index, January Strike Price 3,550.00 EUR, Expires 1/17/20		43		430			11,512
	Invesco QQQ Series 1 ETF, December Strike Price $196.00, Expires 12/20/19		591		59,100			38,415
	The Medicines Co., January Strike Price $20.00, Expires 1/17/20		41		4,100			410
	Raytheon Co., January Strike Price $175.00, Expires 1/17/20		14		1,400			665
	S&P 500 Index, January Strike Price $2,900.00, Expires 1/17/20		11		1,100			11,968
	S&P 500 Index, January Strike Price $2,950.00, Expires 1/17/20		11		1,100			16,280
	STOXX Europe 600 Food & Beverage Index, December Strike Price 740.00 EUR, Expires 12/20/19		100		5,000			11,018
	Tallgrass Energy Partners LP, A, January Strike Price $17.00, Expires 1/17/20		229		22,900			18,320
	Tiffany & Co., January Strike Price $100.00, Expires 1/17/20		126		12,600			756
								119,469
	Puts –Over-the-Counter 0.0%†
	Currency Options 0.0%†
	EUR/SEK, Counterparty JPHQ, January Strike Price 10.45 SEK, Expires 1/14/20		1		3,000,000	EUR		11,618
	USD/CLP, Counterparty JPHQ, January Strike Price 725.00 CLP, Expires 1/20/20		1		700,000			5,008
								16,626
	Total Options Purchased (Cost $1,114,728)							616,083
	Total Investments before Short Term Investments (Cost $705,745,082)							832,404,020
		Country		Principal Amount*
	Short Term Investments 30.1%
	Corporate Bonds and Notes (Cost $196,346) 0.0%†
	Pharmaceuticals 0.0%†
f	Bristol-Myers Squibb Co., senior note, 144A, 2.875%, 8/15/20		United States		195,000			196,352

franklintempleton.com Semiannual Report 43

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

CONSOLIDATED STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin K2 Alternative Strategies Fund(continued)

		Country		Principal Amount*			Value
	Short Term Investments(continued)
p	Credit-Linked Notes 0.5%
f	Citigroup Global Markets Holdings Inc., senior note, 144A, d (Arab Republic of Egypt), zero cpn., 1/09/20		Egypt		17,430,185	EGP	$	1,062,895
	d (Arab Republic of Egypt), zero cpn., 3/19/20		Egypt		16,767,729	EGP		993,644
	(The Federal Republic of Nigeria), zero cpn., 1/13/20		Nigeria		196,853,998	NGN		534,914
	d (Ukraine), 15.70%, 1/10/20		Ukraine		21,995,293	UAH		862,053
	d (Ukraine), 15.74%, 1/17/20		Ukraine		21,104,702	UAH		918,126
f	HSBC Bank PLC, senior note, (Arab Republic of Egypt), zero cpn., 144A 5/07/20		Egypt		16,550,000	EGP		968,360
	JPMorgan Chase Bank NA, senior note, (The Federal Republic of Nigeria), zero cpn., 1/13/20		Nigeria		138,000,000	NGN		375,114
	f (Egypt Treasury Bill), 144A, zero cpn., 7/09/20		Egypt		8,316,000	EGP		473,790
	Total Credit-Linked Notes (Cost $6,084,917)							6,188,896
				Shares
	Money Market Funds 23.9%
s,t	Dreyfus Government Cash Management, Institutional, 1.56%		United States		18,455,114			18,455,114
s	Fidelity Investments Money Market Government Portfolio, Institutional, 1.53%		United States		287,809,659			287,809,659
	Total Money Market Funds (Cost $306,264,773)							306,264,773
				Principal Amount*
	Repurchase Agreements (Cost $18,057,281) 1.4%
u	Joint Repurchase Agreement, 1.618%, 12/02/19 (Maturity Value $18,059,716)		United States		18,057,281			18,057,281
	BNP Paribas Securities Corp. (Maturity Value $11,673,800) Deutsche Bank Securities Inc. (Maturity Value $3,050,467) HSBC Securities (USA) Inc. (Maturity Value $3,335,449) Collateralized by U.S. Government Agency Securities, 4.50%, 1/20/49; v U.S. Treasury Bills, 5/14/20 – 8/13/20; U.S. Treasury Bonds, 7.875%–8.75%, 5/15/20–2/15/21; and U.S. Treasury Notes, 1.625%–2.875%, 6/30/20–11/15/21 (valued at $18,415,849)
				Shares
w	Investments from Cash Collateral Received for Loaned Securities 0.4%
	Money Market Funds 0.3%
s,x	Institutional Fiduciary Trust Money Market Portfolio, 1.35%		United States		3,404,000			3,404,000
				Principal Amount*
	Repurchase Agreements 0.1%
u	Joint Repurchase Agreement, 1.63%, 12/02/19 (Maturity Value $1,186,681)		United States		1,186,520			1,186,520
	J.P. Morgan Securities LLC Collateralized by a U.S. Government Agency Obligation, 2.13%, 6/30/21 (valued at $1,199,793)
	Total Investments from Cash Collateral Received for Loaned Securities (Cost $4,590,520)							4,590,520

44 Semiannual Report franklintempleton.com

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

CONSOLIDATED STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin K2 Alternative Strategies Fund(continued)

		Country		Principal Amount*		Value
	U.S. Government and Agency Securities 1.6%
	v U.S. Treasury Bill,
	a 12/05/19		United States		14,395,000	$	14,393,335
	2/20/20–10/08/20		United States		5,905,000		5,858,402
	Total U.S. Government and Agency Securities (Cost $20,245,176)						20,251,737
	Total Investments (Cost $1,061,184,095) 92.8%						1,187,953,579
	Options Written (0.0)%†						(512,165	)
	Securities Sold Short (14.3)%						(183,639,252	)
	Other Assets, less Liabilities 21.5%						277,724,495
	Net Assets 100.0%					$	1,281,526,657
		Number of Contracts		Notional Amount#
y	Options Written (0.0)%†
	Calls – Exchange-Traded (0.0)%†
	AbbVie Inc., December Strike Price $80.00, Expires 12/20/19		1		100		(777	)
	Altria Group Inc., December Strike Price $47.50, Expires 12/20/19		1		100		(258	)
	Altria Group Inc., December Strike Price $50.00, Expires 12/20/19		1		100		(85	)
	AmerisourceBergen Corp., December Strike Price $90.00, Expires 12/20/19		1		100		(138	)
	Best Buy Co. Inc., December Strike Price $77.50, Expires 12/20/19		1		100		(445	)
	Carbonite Inc., December Strike Price $22.50, Expires 12/20/19		792		79,200		(39,600	)
	Cisco Systems Inc., December Strike Price $50.00, Expires 12/20/19		1		100		(3	)
	Comcast Corp., December Strike Price $47.50, Expires 12/20/19		1		100		(2	)
	DJ EURO STOXX 50 Index, December Strike Price 3,750.00 EUR, Expires 12/20/19		55		550		(10,605	)
	DJ EURO STOXX Banks, December Strike Price 125.00 EUR, Expires 12/20/19		937		46,850		(2,581	)
	Eaton Corp. PLC, December Strike Price $87.50, Expires 12/20/19		1		100		(475	)
	Enterprise Products Partners LP, December Strike Price $28.00, Expires 12/20/19		4		400		(20	)
	FirstEnergy Corp., December Strike Price $50.00, Expires 12/20/19		1		100		(1	)
	Fitbit Inc., A, January Strike Price $6.00, Expires 1/17/20		1,513		151,300		(155,839	)
	Garmin Ltd., December Strike Price $90.00, Expires 12/20/19		1		100		(844	)
	Hewlett Packard Enterprise Co., December Strike Price $17.00, Expires 12/20/19		3		300		(18	)
	Iron Mountain Inc., December Strike Price $35.00, Expires 12/20/19		3		300		(3	)
	Leidos Holdings Inc., December Strike Price $85.00, Expires 12/20/19		1		100		(600	)
	Merck & Co. Inc., December Strike Price $87.50, Expires 12/20/19		1		100		(109	)
	MetLife Inc., December Strike Price $50.00, Expires 12/20/19		1		100		(86	)
	Oracle Corp., December Strike Price $57.50, Expires 12/20/19		1		100		(85	)
	Plains GP Holdings LP, December Strike Price $21.00, Expires 12/20/19		2		200		(10	)
	Spark Therapeutics Inc., December Strike Price $110.00, Expires 12/20/19		176		17,600		(59,840	)
	Starbucks Corp., December Strike Price $90.00, Expires 12/20/19		1		100		(18	)
	STOXX Europe 600 Food & Beverage Index, December Strike Price 740.00 EUR, Expires 12/20/19		100		5,000		(166,922	)
	Synchrony Financial, December Strike Price $37.00, Expires 12/20/19		2		200		(194	)
	thyssenkrupp AG, December Strike Price 16.00 EUR, Expires 12/20/19		657		65,700		(724	)
	Tiffany & Co., December Strike Price $135.00, Expires 12/20/19		126		12,600		(1,260	)
	Tiffany & Co., January Strike Price $135.00, Expires 1/17/20		56		5,600		(1,120	)

franklintempleton.com Semiannual Report 45

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

CONSOLIDATED STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin K2 Alternative Strategies Fund(continued)

		Number of Contracts		Notional Amount#			Value
y	Options Written (continued)
	Calls – Exchange-Traded (continued)
	Verizon Communications Inc., December Strike Price $62.50, Expires 12/20/19		1		100		$	(9	)
								(442,671	)
	Calls –Over-the-Counter (0.0)%†
	Currency Options (0.0)%†
	EUR/GBP, Counterparty JPHQ, December Strike Price 0.88 GBP, Expires 12/17/19		1		1,000,000	EUR		(2,927	)
	EUR/SEK, Counterparty JPHQ, January Strike Price 11.25 SEK, Expires 1/14/20		1		750,000	EUR		(57	)
	EUR/USD, Counterparty JPHQ, January Strike Price $1.14, Expires 1/13/20		1		4,000,000	EUR		(1,185	)
	GBP/USD, Counterparty JPHQ, December Strike Price $1.32, Expires 12/17/19		1		1,000,000	GBP		(5,546	)
	USD/CLP, Counterparty JPHQ, January Strike Price 850.00 CLP, Expires 1/20/20		1		175,000			(3,454	)
	USD/HKD, Counterparty JPHQ, January Strike Price 7.85 HKD, Expires 1/20/20		1		1,000,000			(876	)
	USD/ZAR, Counterparty JPHQ, May Strike Price 16.50 ZAR, Expires 5/15/20		1		500,000			(5,585	)
								(19,630	)
	Puts – Exchange-Traded (0.0)%†
	Allergan PLC, January Strike Price $125.00, Expires 1/17/20		162		16,200			(1,944	)
	Cardtronics PLC, A, January Strike Price $35.00, Expires 1/17/20		20		2,000			(1,500	)
	CBS Corp., March Strike Price $32.50, Expires 3/20/20		132		13,200			(5,346	)
	DJ EURO STOXX 50 Index, January Strike Price 3,300.00 EUR, Expires 1/17/20		43		430			(2,653	)
	DJ EURO STOXX Banks, December Strike Price 65.00 EUR, Expires 12/20/19		80		4,000			(220	)
	DJ EURO STOXX Banks, December Strike Price 70.00 EUR, Expires 12/20/19		40		2,000			(110	)
	S&P 500 Index, January Strike Price $2,700.00, Expires 1/17/20		11		1,100			(3,542	)
	S&P 500 Index, January Strike Price $2,750.00, Expires 1/17/20		11		1,100			(4,697	)
								(20,012	)
	Puts –Over-the-Counter (0.0)%†
	Currency Options (0.0)%†
	EUR/GBP, Counterparty JPHQ, December Strike Price 0.84 GBP, Expires 12/17/19		1		1,000,000	EUR		(5,971	)
	EUR/JPY, Counterparty JPHQ, February Strike Price 116.00 JPY, Expires 2/19/20		1		2,500,000	EUR		(5,272	)
	GBP/USD, Counterparty JPHQ, December Strike Price $1.26, Expires 12/17/19		1		1,000,000	GBP		(4,535	)
	GBP/USD, Counterparty JPHQ, February Strike Price $1.26, Expires 2/20/20		1		800,000	GBP		(8,438	)
	USD/CLP, Counterparty JPHQ, January Strike Price 660.00 CLP, Expires 1/20/20		1		700,000			(546	)
	USD/ZAR, Counterparty JPHQ, May Strike Price 14.00 ZAR, Expires 5/15/20		1		500,000			(5,090	)
								(29,852	)
	Total Options Written (Premiums Received $617,001)							(512,165	)

46 Semiannual Report franklintempleton.com

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

CONSOLIDATED STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin K2 Alternative Strategies Fund(continued)

		Country		Shares		Value
z	Securities Sold Short (14.3)%
	Common Stocks (6.2)%
	Aerospace & Defense (0.3)%
	The Boeing Co.		United States		4,886	$	(1,789,155	)
	Raytheon Co.		United States		8,354		(1,816,327	)
	Spirit AeroSystems Holdings Inc., A		United States		5,329		(463,570	)
							(4,069,052	)
	Air Freight & Logistics (0.3)%
	Air Transport Services Group Inc.		United States		25,828		(635,627	)
	Atlas Air Worldwide Holdings Inc.		United States		8,173		(213,234	)
	C.H. Robinson Worldwide Inc.		United States		18,432		(1,416,499	)
	FedEx Corp.		United States		2,948		(471,827	)
	XPO Logistics Inc.		United States		10,337		(854,767	)
							(3,591,954	)
	Airlines (0.1)%
	Spirit Airlines Inc.		United States		15,812		(617,775	)
	Automobiles (0.0)%†
	Winnebago Industries Inc.		United States		9,855		(468,408	)
	Banks (0.1)%
	BB&T Corp.		United States		25,030		(1,369,642	)
	Hope Bancorp Inc.		United States		7,001		(101,584	)
							(1,471,226	)
	Biotechnology (0.7)%
	AbbVie Inc.		United States		27,135		(2,380,554	)
	Cytokinetics Inc.		United States		28,719		(277,713	)
	Halozyme Therapeutics Inc.		United States		18,770		(363,950	)
	Insmed Inc.		United States		19,183		(442,168	)
	Intercept Pharmaceuticals Inc.		United States		11,194		(1,213,094	)
	Ionis Pharmaceuticals Inc.		United States		3,745		(239,530	)
	Ironwood Pharmaceuticals Inc., A		United States		112,412		(1,351,192	)
	Karyopharm Therapeutics Inc.		United States		18,284		(320,336	)
	Ligand Pharmaceuticals Inc.		United States		1,870		(211,310	)
	Neurocrine Biosciences Inc.		United States		11,789		(1,374,715	)
	PDL BioPharma Inc.		United States		143,131		(443,706	)
							(8,618,268	)
	Building Products (0.0)%†
	Patrick Industries Inc.		United States		6,095		(301,824	)
	Chemicals (0.1)%
	Air Products & Chemicals Inc.		United States		5,132		(1,212,846	)
	Dow Inc.		United States		8,760		(467,521	)
							(1,680,367	)
	Commercial Services & Supplies (0.1)%
	Team Inc.		United States		38,125		(616,481	)
	Communications Equipment (0.1)%
	Acacia Communications Inc.		United States		9,249		(616,353	)
	Consumer Finance (0.1)%
	Encore Capital Group Inc.		United States		26,261		(957,739	)
	EZCORP Inc., A		United States		21,164		(108,360	)
	PRA Group Inc.		United States		19,532		(715,652	)
							(1,781,751	)
	Diversified Consumer Services (0.0)%†
	Chegg Inc.		United States		5,753		(223,044	)

franklintempleton.com Semiannual Report 47

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

CONSOLIDATED STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin K2 Alternative Strategies Fund(continued)

		Country		Shares		Value
z	Securities Sold Short (continued)
	Common Stocks (continued)
	Diversified Financial Services (0.0)%†
	Element Fleet Management Corp.		Canada		40,382	$	(348,398	)
	Electronic Equipment, Instruments & Components (0.3)%
	II-VI Inc.		United States		13,639		(398,122	)
	Knowles Corp.		United States		49,085		(1,074,961	)
	OSI Systems Inc.		United States		5,079		(505,310	)
	TTM Technologies Inc.		United States		92,093		(1,234,967	)
	Vishay Intertechnology Inc.		United States		21,077		(419,222	)
							(3,632,582	)
	Entertainment (0.1)%
	Live Nation Entertainment Inc.		United States		17,678		(1,234,101	)
	Sea Ltd., ADR		Taiwan		7,884		(292,024	)
	Zynga Inc., A		United States		48,910		(304,709	)
							(1,830,834	)
	Equity Real Estate Investment Trusts (REITs) (0.1)%
	Innovative Industrial Properties Inc., A		United States		15,702		(1,215,492	)
	Food & Staples Retailing (0.0)%†
	The Chefs’ Warehouse Inc.		United States		8,176		(290,739	)
	Food Products (0.1)%
	Campbell Soup Co.		United States		8,159		(379,965	)
	The Hershey Co.		United States		385		(57,042	)
	Mondelez International Inc., A		United States		8,225		(432,141	)
							(869,148	)
	Health Care Equipment & Supplies (0.2)%
	DexCom Inc.		United States		6,016		(1,367,497	)
	Wright Medical Group NV		United States		50,775		(1,511,572	)
							(2,879,069	)
	Health Care Providers & Services (0.4)%
	Centene Corp.		United States		93,597		(5,659,811	)
	Health Care Technology (0.0)%†
	Allscripts Healthcare Solutions Inc.		United States		11,037		(118,979	)
	Evolent Health Inc., A		United States		3,055		(22,026	)
	Tabula Rasa HealthCare Inc.		United States		8,344		(372,226	)
							(513,231	)
	Hotels, Restaurants & Leisure (0.1)%
	Eldorado Resorts Inc.		United States		18,205		(974,149	)
	Marriott Vacations Worldwide Corp.		United States		3,834		(470,969	)
	Starbucks Corp.		United States		4,804		(410,406	)
							(1,855,524	)
	Household Durables (0.1)%
	PulteGroup Inc.		United States		15,095		(598,517	)
	Toll Brothers Inc.		United States		18,086		(726,514	)
							(1,325,031	)
	Household Products (0.0)%†
	The Procter & Gamble Co.		United States		3,560		(434,534	)
	Independent Power & Renewable Electricity Producers (0.0)%†
	NRG Energy Inc.		United States		4,569		(181,526	)
	Interactive Media & Services (0.1)%
	Zillow Group Inc., C		United States		29,545		(1,156,687	)

48 Semiannual Report franklintempleton.com

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

CONSOLIDATED STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin K2 Alternative Strategies Fund(continued)

		Country		Shares		Value
z	Securities Sold Short (continued)
	Common Stocks (continued)
	Internet & Direct Marketing Retail (0.1)%
	Pinduoduo Inc., ADR		China		1,656	$	(59,533	)
	Wayfair Inc., A		United States		7,387		(627,304	)
							(686,837	)
	IT Services (0.3)%
	Cardtronics PLC, A		United States		13,044		(550,718	)
	CSG Systems International Inc.		United States		13,629		(779,443	)
	KBR Inc.		United States		34,652		(1,031,590	)
	Okta Inc., A		United States		4,435		(575,574	)
	Perficient Inc.		United States		12,004		(507,529	)
							(3,444,854	)
	Machinery (0.2)%
	Kennametal Inc.		United States		31,611		(1,101,011	)
	Stadler Rail AG		Switzerland		14,687		(718,668	)
	Terex Corp.		United States		18,734		(525,863	)
							(2,345,542	)
	Marine (0.0)%†
	A.P. Moeller-Maersk AS, B		Denmark		331		(462,618	)
	Media (0.1)%
	Liberty Latin America Ltd., C		Chile		29,122		(522,449	)
	Sirius XM Holdings, Inc.		United States		67,901		(473,949	)
							(996,398	)
	Metals & Mining (0.1)%
	First Majestic Silver Corp.		Canada		100,549		(1,081,907	)
	Kaiser Aluminum Corp.		United States		1,363		(149,358	)
							(1,231,265	)
	Mortgage Real Estate Investment Trusts (REITs) (0.1)%
	Arbor Realty Trust Inc.		United States		10,495		(159,104	)
	PennyMac Mortgage Investment Trust		United States		8,508		(196,450	)
	Redwood Trust Inc.		United States		22,242		(359,875	)
							(715,429	)
	Oil, Gas & Consumable Fuels (0.1)%
	Callon Petroleum Co.		United States		40,071		(146,259	)
	Diamondback Energy Inc.		United States		2,829		(218,795	)
	SFL Corp Ltd.		Norway		43,013		(609,064	)
							(974,118	)
	Personal Products (0.0)%†
	Herbalife Nutrition Ltd.		United States		12,127		(553,112	)
	Pharmaceuticals (0.2)%
	Aerie Pharmaceuticals Inc.		United States		34,627		(657,567	)
	Aphria Inc.		Canada		37,589		(178,172	)
	Aurora Cannabis Inc.		Canada		59,287		(148,217	)
	Canopy Growth Corp.		Canada		11,346		(209,358	)
	Horizon Therapeutics PLC		United States		28,531		(935,246	)
	Innoviva Inc.		United States		31,502		(424,647	)
	Pacira Biosciences Inc.		United States		7,657		(353,907	)
							(2,907,114	)
	Real Estate Management & Development (0.1)%
	Redfin Corp.		United States		30,764		(593,130	)

franklintempleton.com Semiannual Report 49

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

CONSOLIDATED STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin K2 Alternative Strategies Fund(continued)

		Country		Shares		Value
z	Securities Sold Short (continued)
	Common Stocks (continued)
	Road & Rail (0.2)%
	Avis Budget Group Inc.		United States		45,277	$	(1,346,991	)
	Ryder System Inc.		United States		3,386		(177,731	)
	Saia Inc.		United States		4,629		(439,292	)
							(1,964,014	)
	Semiconductors & Semiconductor Equipment (0.4)%
	Cree Inc.		United States		6,623		(292,803	)
	Enphase Energy Inc.		United States		19,824		(433,551	)
	Inphi Corp.		United States		20,136		(1,402,069	)
	Microchip Technology Inc.		United States		17,368		(1,641,971	)
	Silicon Laboratories Inc.		United States		2,819		(298,616	)
	Synaptics Inc.		United States		6,542		(373,941	)
							(4,442,951	)
	Software (0.6)%
	8x8 Inc.		United States		28,869		(592,392	)
	Altair Engineering Inc., A		United States		16,478		(546,575	)
	Benefitfocus Inc.		United States		4,857		(116,471	)
	Blackline Inc.		United States		2,478		(133,366	)
	Coupa Software Inc.		United States		6,950		(1,066,756	)
	J2 Global Inc.		United States		468		(45,405	)
	LivePerson Inc.		United States		7,052		(279,894	)
	Nuance Communications Inc.		United States		48,174		(863,760	)
	Nutanix Inc., A		United States		22,518		(841,047	)
	Palo Alto Networks Inc.		United States		756		(171,778	)
	Pluralsight Inc., A		United States		14,498		(246,321	)
	PROS Holdings Inc.		United States		4,388		(273,329	)
	Rapid7 Inc.		United States		18,104		(1,015,091	)
	SailPoint Technologies Holding Inc.		United States		25,482		(637,815	)
	Splunk Inc.		United States		2,532		(377,825	)
	Verint Systems Inc.		United States		615		(29,895	)
							(7,237,720	)
	Specialty Retail (0.1)%
	RH		United States		5,264		(1,082,226	)
	Technology Hardware, Storage & Peripherals (0.1)%
	Apple Inc.		United States		2,949		(788,120	)
	Pure Storage Inc., A		United States		17,160		(275,761	)
							(1,063,881	)
	Tobacco (0.0)%†
	Turning Point Brands Inc.		United States		12,398		(342,309	)
	Trading Companies & Distributors (0.1)%
	Fastenal Co.		United States		5,977		(212,303	)
	GATX Corp.		United States		7,490		(605,417	)
	Kaman Corp.		United States		3,172		(201,739	)
	WESCO International Inc.		United States		8,615		(453,321	)
							(1,472,780	)
	Transportation Infrastructure (0.0)%†
	Westshore Terminals Investment Corp.		Canada		20,034		(326,082	)
	Water Utilities (0.0)%†
	American Water Works Co. Inc.		United States		1,918		(232,136	)
	Total Common Stocks (Proceeds $76,998,530)						(79,323,625	)

50 Semiannual Report franklintempleton.com

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

CONSOLIDATED STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin K2 Alternative Strategies Fund(continued)

		Country		Shares		Value
z	Securities Sold Short (continued)
	Exchange Traded Funds (8.1)%
	Consumer Discretionary Select Sector SPDR Fund		United States		4,913	$	(601,597	)
	ETFMG Prime Cyber Security ETF		United States		50,673		(2,146,508	)
	Health Care Select Sector SPDR Fund		United States		24,614		(2,448,847	)
	Invesco QQQ Series 1 ETF		United States		16,984		(3,483,418	)
	iShares Core S&PSmall-Cap ETF		United States		28,686		(2,346,802	)
	iShares NASDAQ Biotechnology ETF		United States		15,618		(1,868,694	)
	iShares North American Tech ETF		United States		23,347		(5,482,109	)
	iShares North American Tech-Multimedia Networking ETF		United States		66,626		(3,642,443	)
	iShares North American Tech-Software ETF		United States		13,719		(3,182,739	)
	iShares PHLX Semiconductor ETF		United States		25,654		(5,989,439	)
	iShares Russell 2000 Growth ETF		United States		14,765		(3,100,207	)
	iShares RussellMid-Cap Growth ETF		United States		7,909		(1,194,655	)
	iShares S&PSmall-Cap 600 Growth ETF		United States		6,732		(1,266,626	)
	iShares U.S. Technology ETF		United States		12,072		(2,700,265	)
	SPDR S&P 500 ETF Trust		United States		191,054		(60,050,183	)
	SPDR S&P MidCap 400 ETF Trust		United States		3,958		(1,451,161	)
	SPDR S&P Oil & Gas Exploration & Production ETF		United States		5,050		(102,818	)
	VanguardSmall-Cap Growth ETF		United States		16,601		(3,257,116	)
	Total Exchange Traded Funds (Proceeds $98,322,107)						(104,315,627	)
	Total Securities Sold Short (Proceeds $175,320,637)					$	(183,639,252	)

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

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

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

^aA 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/or open written option contracts. At November 30, 2019, the aggregate value of these securities and/or cash pledged amounted to $214,363,087, representing 16.7% of net assets.

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

^cNon-income producing.

^dFair valued using significant unobservable inputs. See Note 12 regarding fair value measurements.

^eA portion or all of the security is on loan at November 30, 2019. See Note 1(j).

^fSecurity 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. At November 30, 2019, the aggregate value of these securities was $154,657,852, representing 12.1% of net assets.

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

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

ⁱSee Note 1(g) regarding loan participation notes.

^jSecurity 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. At November 30, 2019, the aggregate value of these securities was $7,901,774, representing 0.6% of net assets.

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

^lPerpetual security with no stated maturity date.

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

ⁿSee Note 7 regarding defaulted securities.

^oSee Note 1(l) regarding senior floating rate interests.

^pSee Note 1(h) regarding credit-linked notes.

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

^rAdjustable 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.

^sThe rate shown is the annualizedseven-day effective yield at period end.

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

franklintempleton.com Semiannual Report 51

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

CONSOLIDATED STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin K2 Alternative Strategies Fund(continued)

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

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

^wSee Note 1(j) regarding securities on loan.

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

^ySee Note 1(e) regarding written options.

^zSee Note 1(i) regarding securities sold short.

^aaSee Note 8 regarding restricted securities.

At November 30, 2019, 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			54	$	2,403,000		12/16/19	$	(57,550	)
Aluminum		Short			54		2,403,000		12/16/19		(4,310	)
Aluminum		Long			13		576,712		3/16/20		(2,950	)
Aluminum		Short			46		2,040,675		3/16/20		50,020
Brent Crude Oil		Long			45		2,722,050		12/30/19		(37,958	)
Cocoa		Long			10		243,268		3/16/20		(110	)
Coffee		Short			5		223,219		3/19/20		(13,139	)
Copper		Long			33		4,828,931		12/16/19		6,853
Copper		Short			33		4,828,931		12/16/19		(107,446	)
Copper		Long			10		1,466,813		3/16/20		(7,929	)
Copper		Short			20		2,933,625		3/16/20		25,915
Corn		Short			22		419,375		3/13/20		(4,021	)
Hard Red Winter Wheat		Short			43		961,050		3/13/20		(46,902	)
Low Sulphur Gas Oil		Short			3		171,525		1/10/20		(1,355	)
Natural Gas		Short			14		319,340		12/27/19		34,388
Silver		Long			50		4,276,500		3/27/20		(33,266	)
Soybean Meal		Short			10		297,100		3/13/20		1,413
Zinc		Long			33		1,894,200		12/16/19		(179,702	)
Zinc		Short			33		1,894,200		12/16/19		(42,118	)
Zinc		Short	��		23		1,303,813		3/16/20		145,226
											(274,941	)
Equity Contracts
CAC 40 10 Euro Indexa		Long			101		6,564,483		12/20/19		(5,493	)
CMEE-Mini Russell 2000 Indexa		Long			1		81,190		12/20/19		23
CMEE-Mini Russell 2000 Index		Short			138		11,204,220		12/20/19		(279,442	)
DAX Indexa		Long			58		21,162,642		12/20/19		1,379,934
DJ EURO STOXX 50 Indexa		Long			304		12,399,687		12/20/19		635,709
DJ EURO STOXX 50 Index		Short			456		18,599,531		12/20/19		(1,005,664	)
FTSE 100 Indexa		Long			164		15,621,168		12/20/19		220,665
FTSE 100 Index		Short			85		8,096,337		12/20/19		(89,904	)
FTSE/JSE Top 40 Index		Long			5		168,117		12/19/19		(4,883	)
FTSE/MIB Index		Short			4		512,841		12/20/19		(32,509	)
Hang Seng Indexa		Long			48		8,073,274		12/30/19		(211,581	)
JPX-Nikkei 400 Index		Long			49		678,889		12/12/19		53,779
MSCI Emerging Market Index		Long			219		11,366,100		12/20/19		103,669
MSCI Singapore Index		Long			64		1,723,545		12/30/19		(8,324	)
MSCI Taiwan Index		Long			12		522,000		12/30/19		(4,881	)
NASDAQ 100E-Mini Indexa		Long			33		5,555,550		12/20/19		283,330
NASDAQ 100E-Mini Index		Short			206		34,680,100		12/20/19		(2,177,964	)
Nikkei 225 Indexa		Long			34		6,598,748		12/12/19		412,802
S&P 500E-Mini Indexa		Long			127		19,962,495		12/20/19		628,419
S&P 500E-Mini Index		Short			1,131		177,776,235		12/20/19		(7,914,319	)
STOXX 600 Banks Index		Long			1,929		14,633,119		12/20/19		627,325
STOXX 600 Banks Index		Short			129		978,576		12/20/19		(55,720	)
STOXX Europe 600 Index		Short			13		291,838		12/20/19		(14,786	)

52 Semiannual Report franklintempleton.com

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

CONSOLIDATED STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin K2 Alternative Strategies Fund(continued)

Futures Contracts(continued)
Description	Type		Number of Contracts		Notional Amount*		Expiration Date		Value/Unrealized Appreciation (Depreciation)
Equity Contracts(continued)
TOPIX Indexa		Long		81	$	12,562,328		12/12/19	$	391,088
TOPIX Index		Short		55		8,529,976		12/12/19		(798,458	)
										(7,867,185	)
Interest Rate Contracts
3 Month EURIBORa		Long		317		87,675,240		12/14/20		(34,261	)
90 Day Eurodollara		Long		634		156,074,950		12/14/20		66,725
90 Day Sterlinga		Long		475		76,251,746		12/16/20		4,992
Australian 10 Yr. Bonda		Long		65		6,467,780		12/16/19		90,221
Australian 10 Yr. Bond		Short		63		6,268,771		12/16/19		(20,318	)
Canadian 10 Yr. Bonda		Long		6		632,703		3/20/20		307
Canadian 10 Yr. Bond		Short		97		10,228,706		3/20/20		(3,753	)
Euro-BOBL		Short		45		6,659,689		12/06/19		53,142
Euro-BTP		Long		136		21,471,161		3/06/20		(6,979	)
Euro-Bund		Long		27		5,089,069		12/06/19		26,221
Euro-Bund		Short		44		8,293,298		12/06/19		251,796
Euro-Bund		Short		22		4,195,128		3/06/20		6,530
Euro-SCHATZ		Short		140		17,273,058		12/06/19		108,726
Euro-SCHATZ		Short		124		15,298,311		3/06/20		1,176
Long Gilt		Short		77		13,220,713		3/27/20		3,115
U.S. Treasury 5 Yr. Note		Short		333		39,616,594		3/31/20		30,217
U.S. Treasury 10 Yr. Note		Long		193		24,966,359		3/20/20		(40,248	)
U.S. Treasury 10 Yr. Note		Short		21		2,716,547		3/20/20		4,765
U.S. Treasury Long Bonda		Long		163		25,911,906		3/20/20		(26,435	)
U.S. Treasury Long Bond		Short		19		3,020,406		3/20/20		8,786
U.S. Treasury Ultra Bond		Long		19		3,566,656		3/20/20		3,995
U.S. Treasury Ultra Bond		Short		12		2,252,625		3/20/20		(719	)
										528,001
Total Futures Contracts									$	(7,614,125	)

*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(k).

At November 30, 2019, 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		21,968,258	$	5,342,534		12/03/19	$	—	$	(154,464	)
Brazilian Real		JPHQ		Sell		21,968,258		5,191,006		12/03/19		6,374		(3,438	)
Canadian Dollar		MSCO		Buy		12,885,071		9,676,743		12/09/19		25,335		(604	)
Canadian Dollar		UBSW		Buy		222,962		169,634		12/09/19		—		(1,761	)
British Pound		BNYM		Sell		3,044,401		3,908,694		12/13/19		—		(31,061	)
Euro		BNYM		Buy		1,258,377		1,388,166		12/13/19		—		(180	)
Euro		BNYM		Sell		22,477,895		24,768,730		12/13/19		—		(24,326	)
Hong Kong Dollar		BNYM		Sell		19,547,118		2,493,339		12/13/19		—		(3,247	)
Swiss Franc		BNYM		Sell		3,652,663		3,696,742		12/13/19		38,481		—
British Pound		MSCO		Buy		74,000		95,977		12/16/19		—		(200	)
British Pound		MSCO		Sell		525,000		642,371		12/16/19		—		(37,128	)
Chilean Peso		JPHQ		Buy		147,189,700		185,000		12/16/19		—		(1,683	)
Malaysian Ringgit		UBSW		Buy		3,445,000		818,776		12/16/19		5,883		—
British Pound		BNYM		Sell		866,536		1,114,296		12/18/19		—		(7,356	)
Chilean Peso		JPHQ		Buy		1,650,756,836		2,238,435		12/18/19		—		(182,235	)

franklintempleton.com Semiannual Report 53

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)
Chilean Peso		JPHQ		Sell		1,347,748,968	$	1,779,988		12/18/19	$	101,219	$	—
Chinese Yuan		JPHQ		Buy		14,763,731		2,086,599		12/18/19		12,216		—
Colombian Peso		JPHQ		Buy		3,143,595,000		910,000		12/18/19		—		(17,181	)
Euro		BNYM		Sell		4,348,487		4,822,258		12/18/19		24,534		(656	)
Euro		BOFA		Sell		982,467		1,089,754		12/18/19		6,655		(1,014	)
Euro		BZWS		Sell		9,380,668		10,425,032		12/18/19		74,657		(814	)
Euro		JPHQ		Buy		1,156,048		1,278,847		12/18/19		849		(4,045	)
Euro		JPHQ		Sell		2,061,029		2,286,444		12/18/19		12,182		—
Euro		MSCO		Sell		2,002,024		2,208,152		12/18/19		6,338		(7,339	)
Euro		UBSW		Sell		6,533		7,229		12/18/19		20		—
Indonesian Rupiah		JPHQ		Buy		12,955,016,497		909,858		12/18/19		6,994		—
Indonesian Rupiah		JPHQ		Sell		60,863,352,374		4,274,562		12/18/19		—		(32,859	)
Mexican Peso		JPHQ		Buy		17,592,361		900,763		12/18/19		—		(4,141	)
Polish Zloty		JPHQ		Buy		5,307,710		1,369,703		12/18/19		16		(14,207	)
Polish Zloty		JPHQ		Sell		8,372,410		2,137,406		12/18/19		—		(787	)
Russian Ruble		JPHQ		Buy		210,592,313		3,271,831		12/18/19		2,881		(9,753	)
Russian Ruble		JPHQ		Sell		563,242,087		8,498,717		12/18/19		—		(233,615	)
South African Rand		JPHQ		Buy		12,914,260		872,532		12/18/19		6,627		—
South African Rand		JPHQ		Sell		68,865,450		4,601,174		12/18/19		—		(86,951	)
Swiss Franc		BNYM		Buy		633,403		638,782		12/18/19		—		(4,096	)
Swiss Franc		BNYM		Sell		1,130,057		1,143,922		12/18/19		11,576		—
Turkish Lira		JPHQ		Buy		4,914,244		828,290		12/18/19		22,259		—
Canadian Dollar		BNYM		Sell		3,556,000		2,694,559		12/19/19		16,840		—
Indian Rupee		JPHQ		Sell		92,845,062		1,272,085		12/19/19		—		(19,898	)
Swiss Franc		BOFA		Sell		8,228,843		8,346,067		12/19/19		99,739		—
Swiss Franc		BZWS		Sell		303,253		306,672		12/19/19		2,775		—
Swiss Franc		GSCO		Sell		601,837		610,730		12/19/19		7,614		—
Swiss Franc		MSCO		Sell		1,527,510		1,544,539		12/19/19		13,784		—
Australian Dollar		JPHQ		Buy		679,932		460,527		12/20/19		—		(349	)
Australian Dollar		JPHQ		Sell		2,321,078		1,582,745		12/20/19		11,837		—
Australian Dollarb		MSCO		Buy		3,163,000		2,151,150		12/20/19		1,620		(12,048	)
Australian Dollarb		MSCO		Sell		26,027,000		17,851,177		12/20/19		236,318		(233	)
British Pound		BZWS		Buy		73,000		94,161		12/20/19		351		(11	)
British Pound		BZWS		Sell		1,711,000		2,206,704		12/20/19		10		(8,251	)
British Pound		DBAB		Buy		76,000		94,412		12/20/19		3,973		—
British Pound		DBAB		Sell		256,000		322,689		12/20/19		—		(8,711	)
British Pound		JPHQ		Buy		2,539,731		3,273,906		12/20/19		13,858		—
British Poundb		MSCO		Buy		12,547,000		16,018,872		12/20/19		230,645		(7,019	)
British Poundb		MSCO		Sell		16,715,000		20,942,040		12/20/19		5,246		(701,316	)
Canadian Dollar		BZWS		Buy		5,239,000		3,981,253		12/20/19		—		(36,164	)
Canadian Dollar		BZWS		Sell		19,000		14,301		12/20/19		—		(6	)
Canadian Dollar		DBAB		Buy		1,811,000		1,369,030		12/20/19		—		(5,305	)
Canadian Dollar		DBAB		Sell		14,302,000		10,817,045		12/20/19		47,304		—
Canadian Dollar		JPHQ		Sell		4,621,698		3,480,935		12/20/19		688		—
Canadian Dollarb		MSCO		Buy		13,153,000		9,995,127		12/20/19		—		(90,610	)
Canadian Dollarb		MSCO		Sell		18,032,000		13,559,507		12/20/19		5,944		(24,956	)
Euro		BZWS		Buy		1,555,000		1,721,132		12/20/19		301		(5,267	)
Euro		BZWS		Sell		1,334,000		1,473,424		12/20/19		1,596		(434	)
Euro		DBAB		Buy		4,790,000		5,345,988		12/20/19		1,595		(61,126	)
Euro		DBAB		Sell		5,853,000		6,511,419		12/20/19		52,624		(835	)
Euro		JPHQ		Sell		3,410,454		3,776,564		12/20/19		12,635		—
Eurob		MSCO		Buy		9,433,000		10,470,414		12/20/19		2,821		(62,554	)
Eurob		MSCO		Sell		28,191,000		31,230,939		12/20/19		131,857		(13,766	)
Hungarian Forint		JPHQ		Buy		130,668,969		433,900		12/20/19		—		(2,960	)
Japanese Yen		JPHQ		Sell		838,970,127		7,736,468		12/20/19		54,511		—
Japanese Yenb		MSCO		Buy		1,665,798,000		15,486,771		12/20/19		—		(234,037	)
Japanese Yenb		MSCO		Sell		1,919,529,000		17,781,248		12/20/19		209,498		(4,251	)

54 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)
Mexican Peso		JPHQ		Buy		318,341,389	$	16,290,843		12/20/19	$	—		$	(70,529	)
Mexican Pesob		MSCO		Buy		46,367,000		2,346,379		12/20/19		21,144			(5,006	)
Mexican Pesob		MSCO		Sell		39,690,000		2,030,317		12/20/19		8,567			(559	)
New Israeli Shekel		JPHQ		Sell		1,590,045		458,649		12/20/19		542			—
New Zealand Dollar		JPHQ		Sell		4,342,188		2,789,075		12/20/19		513			(82	)
New Zealand Dollarb		MSCO		Buy		7,121,000		4,552,520		12/20/19		24,955			(4,219	)
New Zealand Dollarb		MSCO		Sell		3,667,000		2,341,760		12/20/19		1,982			(15,246	)
Norwegian Krone		JPHQ		Buy		51,313,123		5,596,813		12/20/19		—			(30,239	)
Swedish Krona		JPHQ		Buy		9,858,632		1,021,175		12/20/19		9,826			—
Swiss Franc		JPHQ		Sell		8,967,094		9,047,680		12/20/19		60,647			—
Swiss Francb		MSCO		Buy		1,641,000		1,657,921		12/20/19		—			(13,272	)
Swiss Francb		MSCO		Sell		7,524,000		7,628,641		12/20/19		87,915			—
Thai Baht		JPHQ		Sell		13,900,275		460,489		12/20/19		271			—
Turkish Lira		JPHQ		Buy		6,872,641		1,195,923		12/20/19		—			(7,050	)
Chilean Peso		JPHQ		Buy		262,011,575		362,791		12/23/19		—			(36,322	)
Chilean Peso		JPHQ		Sell		262,011,575		368,467		12/23/19		41,998			—
Australian Dollar		MSCO		Buy		100,990		69,257		12/27/19		—			(893	)
Australian Dollar		MSCO		Sell		211,818		144,143		12/27/19		755			—
Brazilian Real		JPHQ		Buy		3,458,364		822,948		12/27/19		992			(8,253	)
Brazilian Real		JPHQ		Sell		3,458,364		821,855		12/27/19		6,168			—
British Pound		MSCO		Buy		118,787		153,003		12/27/19		822			—
British Pound		MSCO		Sell		246,621		317,751		12/27/19		—			(1,615	)
Canadian Dollar		MSCO		Buy		449,763		343,286		12/27/19		—			(4,576	)
Canadian Dollar		MSCO		Sell		1,173,610		885,958		12/27/19		2,128			—
Danish Krone		MSCO		Buy		10,415,624		1,551,810		12/27/19		297			(12,353	)
Danish Krone		MSCO		Sell		42,491,225		6,339,692		12/27/19		58,323			(162	)
Euro		MSCO		Buy		1,525,929		1,693,955		12/27/19		71			(8,955	)
Euro		MSCO		Sell		4,852,554		5,403,015		12/27/19		44,534			(157	)
Japanese Yen		MSCO		Sell		16,553,520		152,396		12/27/19		725			—
Swedish Krona		MSCO		Buy		6,231,755		644,870		12/27/19		7,175			—
Swedish Krona		MSCO		Sell		17,666,707		1,829,217		12/27/19		—			(19,297	)
Swiss Franc		MSCO		Buy		1,063,167		1,078,908		12/27/19		—	��		(12,643	)
Swiss Franc		MSCO		Sell		333,811		335,076		12/27/19		330			(38	)
British Pound		BNYM		Sell		589,000		729,182		12/31/19		—			(33,685	)
British Pound		MSCS		Buy		100,000		129,086		12/31/19		433			—
British Pound		MSCS		Sell		100,000		123,891		12/31/19		—			(5,628	)
Canadian Dollar		BNYM		Buy		395,080		298,000		12/31/19		—			(459	)
Canadian Dollar		BNYM		Sell		7,911,000		5,970,112		12/31/19		14,315			(2,104	)
Euro		BNYM		Buy		1,550,000		1,700,699		12/31/19		11,495			—
Euro		BNYM		Sell		5,305,000		5,840,911		12/31/19		—			(19,211	)
Colombian Peso		MSCS		Sell		780,000,000		224,383		1/02/20		3,052			—
Brazilian Real		JPHQ		Buy		10,984,129		2,586,388		1/03/20		3,464			—
Hungarian Forint		UBSW		Buy		125,270,000		417,559		1/15/20		—			(3,845	)
Norwegian Krone		BOFA		Buy		7,175,000		787,142		1/15/20		—			(8,629	)
Australian Dollar		BOFA		Sell		341,609		234,235		1/21/20		2,840			—
Australian Dollar		JPHQ		Buy		4,814,692		3,271,062		1/21/20		—			(9,740	)
Australian Dollar		UBSW		Sell		599,600		411,264		1/21/20		5,113			—
Canadian Dollar		BOFA		Sell		145,000		109,769		1/21/20		561			—
Euro		BZWS		Sell		115,000		128,777		1/21/20		1,570			—
South Korean Won		JPHQ		Sell		453,204,615		389,290		1/21/20		5,076			—
Australian Dollar		HSBC		Buy		600,000		411,884		1/22/20		—			(5,453	)
Thai Baht		UBSW		Sell		25,860,000		853,367		1/22/20		—			(3,446	)
Japanese Yen		JPHQ		Buy		265,552,992		2,454,550		1/27/20		—			(17,133	)
Euro		BZWS		Sell		760,702		851,185		1/28/20		9,355			—
Euro		MSCO		Sell		498,204		552,426		1/28/20		1,089			—
Euro		UBSW		Sell		9,778,799		10,954,537		1/28/20		132,884			(48	)
Swiss Franc		BZWS		Sell		2,885,910		2,937,627		1/28/20		36,290			—

franklintempleton.com Semiannual Report 55

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)
Swiss Franc		MSCO		Sell		492,148	$	502,314		1/28/20	$	7,535	$	—
Swiss Franc		UBSW		Sell		909,221		927,148		1/28/20		13,067		—
Brazilian Real		CITI		Buy		1,690,000		422,131		1/30/20		—		(24,115	)
British Pound		DBAB		Buy		150,000		193,936		1/31/20		516		—
British Pound		DBAB		Sell		481,000		620,262		1/31/20		—		(3,281	)
Canadian Dollar		JPHQ		Buy		9,000,000		6,850,149		1/31/20		—		(71,581	)
Euro		DBAB		Sell		183,000		204,347		1/31/20		1,793		—
Euro		JPHQ		Sell		300,000		331,499		1/31/20		—		(557	)
South African Rand		MSCS		Sell		17,835,000		1,205,516		1/31/20		—		(1,061	)
Brazilian Real		JPHQ		Buy		6,080,545		1,440,000		2/03/20		3,768		(11,945	)
Brazilian Real		JPHQ		Sell		7,710,259		1,978,215		2/03/20		163,619		(986	)
Taiwan Dollar		JPHQ		Sell		61,540,395		1,997,287		2/04/20		—		(25,984	)
Canadian Dollar		BOFA		Buy		8,201,353		6,241,540		2/05/20		—		(64,422	)
Canadian Dollar		BZWS		Buy		192,588		146,692		2/05/20		—		(1,638	)
British Pound		BOFA		Sell		7,492,079		9,648,157		2/18/20		—		(68,861	)
British Pound		BZWS		Buy		463,255		601,490		2/18/20		—		(661	)
British Pound		UBSW		Buy		628,068		813,896		2/18/20		690		—
Singapore Dollar		CITI		Sell		2,275,000		1,670,798		2/18/20		5,888		—
South Korean Won		JPHQ		Sell		4,258,651,367		3,660,161		2/18/20		47,513		—
Euro		BOFA		Sell		155,000		172,781		2/21/20		1,002		—
Euro		BZWS		Sell		5,995,043		6,683,556		2/25/20		37,924		—
Euro		UBSW		Sell		396,451		439,994		2/25/20		827		(308	)
Taiwan Dollar		JPHQ		Sell		85,411,010		2,828,929		2/25/20		18,209		—
Swiss Franc		MSCO		Sell		5,296,171		5,342,918		2/28/20		7,371		—
Total Forward Exchange Contracts											$	2,449,019	$	(2,801,495	)
Net unrealized appreciation (depreciation)													$	(352,476	)

^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(k).

At November 30, 2019, 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		6/20/23		1,763,000	$	(23,510	)	$	(441	)		$(23,069)
Government of Mexico		(1.00)%		Quarterly		12/20/23		1,917,000		(23,532	)		22,904			(46,436)
Government of South Africa		(1.00)%		Quarterly		6/20/22		1,047,000		5,575			53,152			(47,577)
Government of South Africa		(1.00)%		Quarterly		6/20/24		4,478,000		141,993			196,352			(54,359)
Government of South Korea		(1.00)%		Quarterly		6/20/24		1,910,026		(63,925	)		(64,789	)		864
Government of Turkey		(1.00)%		Quarterly		9/20/20		1,976,000		2,348			157,717			(155,369)
Government of Turkey		(1.00)%		Quarterly		6/20/24		141,000		11,948			14,153			(2,205)
Neiman Marcus Group LLC (The)		(5.00)%		Quarterly		6/20/24		718,000		535,322			556,178			(20,856	)
Contracts to Sell Protectionc,d
Single Name
Government of South Africa		1.00%		Quarterly		12/20/22		874,000		(8,098	)		(17,002	)		8,904			BB+
Government of Turkey		1.00%		Quarterly		12/20/22		826,000		(37,619	)		(37,352	)		(267)			B+
Total Centrally Cleared Swap Contracts									$	540,502		$	880,872			$(340,370)

56 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		Counterparty		Maturity Date		Notional Amounta			Value			Unamortized Upfront Payments (Receipts)			Unrealized Appreciation (Depreciation)		Ratingb
OTC Swap Contracts
Contracts to Buy Protectionc
Single Name
Enel SpA		(1.00)%		Quarterly		BOFA		6/20/23		550,000	EUR	$	(13,880	)	$	(225	)		$ (13,655)
Enel SpA		(1.00)%		Quarterly		MSCS		12/20/23		330,000	EUR		(8,427	)		1,785			(10,212)
Traded Index
CDX.EM.32		(1.00)%		Quarterly		MSCO		12/20/24		1,660,000			75,649			83,126			(7,477)
Contracts to Sell Protectionc,d
Single Name
Altice Luxembourg S.A.		5.00%		Quarterly		GSCO		12/20/24		128,000			(16,755	)		(14,240	)		(2,515)		NR
Dish DBS Corp.		5.00%		Quarterly		GSCO		12/20/24		399,000			(24,818	)		(19,278	)		(5,540)		B-
Government of Italy		1.00%		Quarterly		JPHQ		6/20/24		218,000			2,240			2,176			64		BBBu
Groupe Casino		5.00%		Quarterly		BZWS		12/20/24		210,000			16,199			20,213			(4,014)		B
Hertz Corp. (The)		5.00%		Quarterly		BZWS		12/20/21		674,000			(65,288	)		(57,088	)		(8,200)		B+
Hertz Corp. (The)		5.00%		Quarterly		BZWS		12/20/24		719,000			(73,819	)		(62,512	)		(11,307)		B+
Intrum AB		5.00%		Quarterly		GSCO		12/20/24		183,000			(23,158	)		(18,859	)		(4,299)		BB+
K. Hovnanian Enterprises Inc.		5.00%		Quarterly		BZWS		12/20/24		360,000			98,100			104,118			(6,018)		NR
Kimco Realty Corp.		1.00%		Quarterly		JPHQ		6/20/24		122,000			(884	)		—			(884)		BBB+
Kohl’s Corp.		1.00%		Quarterly		GSCO		12/20/24		1,151,000			17,930			25,034			(7,104)		BBB
Lloyds Bank PLC		1.00%		Quarterly		JPHQ		12/20/24		540,000			(561	)		2,375			(2,936)		BBB+
MBIA Inc.		1.00%		Quarterly		CITI		6/20/21		340,000			(27,817	)		(24,146	)		(3,671)		NR
MBIA Inc.		5.00%		Quarterly		CITI		12/20/24		216,000			(41,317	)		(38,411	)		(2,906)		NR
NRG Energy Inc.		5.00%		Quarterly		BZWS		6/20/24		288,000			(57,050	)		(53,444	)		(3,606)		BB
Simon Property Group LP		1.00%		Quarterly		BZWS		12/20/24		540,000			(16,007	)		(14,608	)		(1,399)		A
Staples Inc.		5.00%		Quarterly		GSCO		6/20/25		353,000			(5,179	)		6,719			(11,898)		B+
Telecom Italia SpA		1.00%		Quarterly		GSCO		12/20/24		122,000			2,501			3,385			(884)		BB+
Transocean Inc.		5.00%		Quarterly		JPHQ		12/20/24		434,000			58,751			73,580			(14,829)		CCC+
Traded Index
CMBX.NA		2.00%		Quarterly		BZWS		11/18/54		2,100,000			(1,036	)		8,865			(9,901)		Investment Grade
CMBX.NA		2.00%		Quarterly		BZWS		8/17/61		3,200,000			(41,802	)		(22,064	)		(19,738)		Investment Grade
CMBX.NA		2.00%		Quarterly		GSCO		11/18/54		1,100,000			(542	)		4,643			(5,185)		Investment Grade
ITRX.EUR.32		1.00%		Quarterly		JPHQ		12/20/24		1,800,000	EUR		56,493			13,575			42,918		Investment Grade
Total OTC Swap Contracts												$	(90,477	)	$	24,719			$(115,196)
Total Credit Default Swap Contracts												$	450,025		$	905,591			$(455,566)

^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 and internal ratings for index swaps. Internal ratings based on mapping into equivalent ratings from external vendors.

^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.

franklintempleton.com Semiannual Report 57

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

CONSOLIDATED STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin K2 Alternative Strategies Fund(continued)

At November 30, 2019, 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 5.88% Pay Floating BZDIOVRA Index		Annually		1/02/23		12,922,100	BRL	$	10,281
Receive Fixed 2.81% Pay Floating CFETS China Fixing Repo 7 Day rate		Quarterly		12/18/24		13,037,476	CNY		(9,487	)
Receive Fixed 2.90% Pay Floating CFETS China Fixing Repo 7 Day rate		Quarterly		12/18/24		9,551,023	CNY		(1,520	)
Receive Fixed 2.90% Pay Floating CFETS China Fixing Repo 7 Day rate		Quarterly		12/18/24		9,552,138	CNY		(1,681	)
Receive Floating rate 6 MonthGBP-LIBOR Pay Fixed rate 0.86%		Semi-Annually		3/18/70		1,216,906	GBP		74,401
Total Interest Rate Swap Contracts								$	71,994

At November 30, 2019, 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

Commodity Contracts – Shorta

Bloomberg Commodity Indexb

0.15%

Monthly

MSCI

9/10/20

2,156,393

$

52,348

Equity Contracts – Longc

Allergan PLC

1-Day FEDEF + 0.40%

Monthly

MSCS

12/23/20

5,555,263

668,545

Altran Technologies SA

1-Month LIBOR + 0.35%

Monthly

BZWS

8/16/20

2,689,238

EUR

18,964

Altran Technologies SA

1-Day EONIA + 0.65%

Monthly

MSCS

9/04/20

1,177,889

EUR

(16,620

)

Anglo American PLC

1-Month LIBOR + 0.50%

Monthly

MSCS

1/20/20

1,362,590

GBP

73,998

Anima Holding SpA

1-Month LIBOR + 0.40%

Monthly

MSCS

12/21/20

1,033,575

EUR

107,746

Ashtead Group PLC

1-Month LIBOR + 0.50%

Monthly

MSCS

1/20/20

616,706

GBP

49,180

Axel Springer SE

1-Day EONIA + 0.65%

Monthly

MSCS

9/04/20

1,283,593

EUR

(1,617

)

Barclays PLC

1-Month LIBOR + 0.40%

Monthly

MSCS

4/16/20

893,736

GBP

(1,308

)

BNP Paribas SA

1-Month LIBOR + 0.40%

Monthly

MSCS

12/21/20

1,904,200

EUR

18,743

Bolsas y Mercados Espanoles SHMSF SA

1-Month LIBOR + 0.48%

Monthly

BZWS

12/21/20

641,105

EUR

(6,697

)

Builders FirstSource Inc.

1-Month LIBOR + 0.50%

Monthly

MSCS

9/22/20

930,564

111,094

Bureau Veritas SA

1-Month EURIBOR + 0.40%

Monthly

MSCS

12/21/20

727,208

EUR

38,546

Caesars Entertainment Corp.

1-Month LIBOR + 0.35%

Monthly

BZWS

8/17/20

1,365,487

(4,330

)

Caesars Entertainment Corp.

1-Day FEDEF + 0.40%

Monthly

MSCS

12/23/20

2,824,848

358,125

Carnival PLC

1-Day FEDEF + 0.65%

Monthly

MSCS

3/17/21

1,332,707

(194,691

)

Celesio AG

1-Day EONIA + 0.65%

Monthly

MSCS

11/04/20

3,737,659

EUR

(16,996

)

Cie Plastic Omnium SA

1-Month EURIBOR + 0.50%

Monthly

MSCS

1/10/20

1,708,627

EUR

(28,078

)

Cobham PLC

1-Day SONIA + 0.65%

Monthly

MSCS

2/06/20

877,181

GBP

(19,940

)

Cobham PLC

1-Month LIBOR + 0.45%

Monthly

BZWS

10/18/20

5,610,304

GBP

(25,598

)

CRH PLC

1-Month EURIBOR + 0.50%

Monthly

MSCS

1/10/20

621,017

EUR

48,860

Croda International PLC

1-Month LIBOR + 0.40%

Monthly

MSCS

4/16/20

635,936

GBP

35,758

Danone SA

1-Month LIBOR + 0.40%

Monthly

MSCS

12/21/20

3,376,395

EUR

33,251

EDP Renovaveis SA

1-Day EONIA + 0.65%

Monthly

MSCS

9/04/20

797,888

EUR

286,078

Energy Transfer Equity LP

1-Month LIBOR + 0.65%

Monthly

CITI

6/22/20

706,909

(27,161

)

Entertainment One Ltd.

1-Day SONIA + 0.65%

Monthly

MSCS

2/06/20

395,609

GBP

(2,507

)

Eurofins Scientific SE

1-Month EURIBOR + 0.40%

Monthly

MSCS

12/21/20

1,940,569

EUR

119,419

Faurecia SE

1-Day EONIA + 0.65%

Monthly

MSCS

9/04/20

100,002

EUR

4,280

Faurecia SE

1-Month LIBOR + 0.35%

Monthly

BZWS

12/08/20

227,867

EUR

(2,885

)

Fiat Chrysler Automobiles NV

1-Day EONIA + 0.65%

Monthly

MSCS

9/04/20

694,138

EUR

(32,561

)

58 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 – Longc(continued)

Fiat Chrysler Automobiles NV

1-Month LIBOR + 0.35%

Monthly

BZWS

12/08/20

1,564,916

EUR

$

(24,556

)

Fortescue Metals Group Ltd.

1-Month BBSW + 0.55%

Monthly

MSCS

1/29/21

2,076,478

AUD

62,899

GrandVision NV

1-Day EONIA + 0.65%

Monthly

MSCS

9/04/20

2,645,513

EUR

11,923

HeidelbergCement AG

1-Month EURIBOR + 0.40%

Monthly

MSCS

12/21/20

2,156,125

EUR

58,836

Hess Corp.

1-Month LIBOR + 0.50%

Monthly

MSCS

9/22/20

3,738,076

(331,819

)

Hikma Pharmaceuticals PLC

1-Month LIBOR + 0.40%

Monthly

MSCS

4/16/20

87,723

GBP

1,774

Hitachi High-Technologies Corp.

1-Month LIBOR + 0.55%

Monthly

MSCS

11/24/21

27,988,691

JPY

11,551

Huaneng Renewables Corp. Ltd.

1-Month HIBOR + 0.55%

Monthly

MSCS

11/24/21

992,961

HKD

99

Iliad SA

1-Month LIBOR + 0.40%

Monthly

MSCS

12/21/20

2,472,701

EUR

587,313

Inmarsat PLC

1-Month LIBOR + 0.45%

Monthly

BZWS

12/07/20

6,041,517

(13,263

)

Inmarsat PLC

1-Day FEDEF + 0.65%

Monthly

MSCS

3/17/21

945,094

304

Innogy SE

1-Day EONIA + 0.65%

Monthly

MSCS

9/04/20

1,038,961

EUR

166,078

ITV PLC

1-Month LIBOR + 0.40%

Monthly

MSCS

4/16/20

1,827,966

GBP

203,030

Just Eat PLC

1-Month LIBOR + 0.45%

Monthly

BZWS

11/24/20

1,467,283

GBP

1,867

Kering SA

1-Month EURIBOR + 0.40%

Monthly

MSCS

12/21/20

1,626,354

EUR

89,884

Knight-Swift Transportation Holdings Inc.

1-Month LIBOR + 0.55%

Monthly

MSCS

9/22/20

4,147,702

568,301

Liberty Property Trust

1-Day FEDEF + 0.40%

Monthly

MSCS

12/23/20

1,132,655

5,220

LINE Corp.

1-Month LIBOR + 0.55%

Monthly

MSCS

11/24/21

63,562,120

JPY

(3,114

)

Mitsubishi Tanabe Pharma Corp.

1-Month LIBOR + 0.55%

Monthly

MSCS

11/24/21

6,559

JPY

13

NVR Inc.

1-Month LIBOR + 0.50%

Monthly

MSCS

9/22/20

2,463,246

1,067,004

Pets at Home Group PLC

1-Month LIBOR + 0.40%

Monthly

MSCS

4/16/20

593,117

GBP

173,609

QIAGEN NV

1-Day EONIA + 0.65%

Monthly

MSCS

9/04/20

349,738

EUR

16,487

Rio Tinto PLC

1-Month LIBOR + 0.50%

Monthly

MSCS

9/22/20

4,020,635

241,047

RSA Insurance Group PLC

1-Month LIBOR + 0.40%

Monthly

MSCS

4/16/20

1,164,744

GBP

11,290

Ryanair Holdings PLC

1-Month EURIBOR + 0.40%

Monthly

MSCS

12/21/20

1,202,159

EUR

7,713

Smiths Group PLC

1-Month LIBOR + 0.40%

Monthly

MSCS

4/16/20

1,048,315

GBP

22,081

Societe Generale SA

1-Month LIBOR + 0.40%

Monthly

MSCS

12/21/20

1,450,194

EUR

(11,069

)

Sophos Group PLC

1-Day FEDEF + 0.65%

Monthly

MSCS

3/17/21

407,249

1,386

Sports Direct International PLC

1-Month LIBOR + 0.40%

Monthly

MSCS

4/16/20

1,546,224

GBP

90,702

Stars Group Inc. (The)

1-Day SONIA + 0.40%

Monthly

MSCS

10/19/21

942,241

GBP

239,073

Stroeer SE & Co. KGaA

1-Month EURIBOR + 0.40%

Monthly

MSCS

12/21/20

3,364,128

EUR

(53,957

)

SunTrust Banks Inc.

1-Day FEDEF + 0.40%

Monthly

MSCS

12/23/20

3,740,131

514,307

Tallgrass Energy Partners LP

1-Month LIBOR + 0.40%

Monthly

BZWS

10/01/20

2,446,182

(12,515

)

TeamViewer AG

1-Month EURIBOR + 0.40%

Monthly

MSCS

12/21/20

26,052

EUR

(76

)

Telefonica SA

1-Day EONIA + 0.65%

Monthly

MSCS

9/04/20

630,832

EUR

(7,851

)

TLG Immobilien AG

1-Day EONIA + 0.65%

Monthly

MSCS

9/04/20

193,962

EUR

1,520

United Technologies Corp.

1-Day FEDEF + 0.40%

Monthly

MSCS

12/23/20

2,258,133

466,213

Vodafone Group PLC

1-Day SONIA + 0.65%

Monthly

MSCS

2/06/20

1,226,971

GBP

195,832

WellCare Health Plans Inc.

1-Day FEDEF + 0.40%

Monthly

MSCS

12/23/20

3,187,600

563,871

6,514,605

Equity Contracts – Shorta

AbbVie Inc.

1-Month LIBOR - 0.35%

Monthly

BZWS

8/20/20

901,937

(36

)

AbbVie Inc.

1-Day FEDEF - 0.35%

Monthly

MSCS

2/04/21

1,974,585

(618,275

)

Aroundtown SA

1-Day EONIA - 0.40%

Monthly

MSCS

9/04/20

194,851

EUR

(2,032

)

BB&T Corp.

1-Month LIBOR - 0.35%

Monthly

BZWS

8/20/20

1,451,811

(19,629

)

BB&T Corp.

1-Day FEDEF - 0.35%

Monthly

MSCS

2/04/21

3,758,162

(532,630

)

Carnival Corp.

1-Day FEDEF - 0.35%

Monthly

MSCS

2/04/21

1,332,327

138,587

Centene Corp.

1-Month LIBOR - 0.35%

Monthly

BZWS

9/03/20

2,562,134

(19,018

)

Centene Corp.

1-Day FEDEF - 0.35%

Monthly

MSCS

2/04/21

1,865,191

(515,452

)

Colruyt SA

1-Day EONIA - 0.40%

Monthly

MSCS

12/21/20

1,714,559

EUR

61,324

Digital Realty Trust Inc.

1-Month LIBOR - 0.35%

Monthly

BZWS

2/12/20

1,160,968

(3,090

)

Eldorado Resorts Inc.

1-Month LIBOR - 0.50%

Monthly

BZWS

8/17/20

1,026,684

3,320

franklintempleton.com Semiannual Report 59

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 – Shorta(continued)

Eldorado Resorts Inc.

1-Day FEDEF - 1.77%

Monthly

MSCS

2/04/21

878,982

$

(295,242

)

Elisa Oyj

1-Day EONIA - 0.40%

Monthly

MSCS

12/21/20

403,574

EUR

2,604

Flutter Entertainment PLC

1-Day SONIA - 0.35%

Monthly

MSCS

2/06/20

1,018,572

GBP

(214,795

)

Flutter Entertainment PLC

1-Month LIBOR - 0.43%

Monthly

BZWS

11/04/20

3,786,721

6,908

Glencore PLC

1-Day SONIA - 0.35%

Monthly

MSCS

1/20/20

421,886

GBP

15,629

Hannover Rueck SE

1-Day EONIA - 0.35%

Monthly

MSCS

12/21/20

729,690

EUR

(14,170

)

Hennes & Mauritz AB

1-Week STIBOR - 0.40%

Monthly

MSCS

11/10/20

7,173,000

SEK

10,391

Hermes International

1-Day EONIA - 0.40%

Monthly

MSCS

1/10/20

29,548

EUR

(4,156

)

JD Sports Fashion PLC

1-Day SONIA - 0.30%

Monthly

MSCS

4/16/20

463,043

GBP

(7,432

)

Marks & Spencer Group PLC

1-Day SONIA - 0.30%

Monthly

MSCS

4/16/20

303,868

GBP

(20,356

)

Morgan Stanley MSPSSPY Index

1-Day FEDEF - 0.35%

Monthly

MSCS

9/22/20

130,576

(734

)

Morgan Stanley MSPSXOP Index

1-Day FEDEF - 0.45%

Monthly

MSCS

9/22/20

1,411,476

(14,582

)

Next PLC

1-Day SONIA - 0.30%

Monthly

MSCS

4/16/20

527,784

GBP

(16,837

)

Peugeot SA

1-Day EONIA - 0.40%

Monthly

MSCS

9/04/20

642,528

EUR

16,602

Peugeot SA

1-Month LIBOR - 0.35%

Monthly

BZWS

12/08/20

1,467,057

EUR

36,676

PG&E Corp.

1-Day FEDEF - 0.35%

Monthly

MSCS

2/04/21

208,599

(10,233

)

Prologis Inc.

1-Day FEDEF - 0.35%

Monthly

MSCS

2/04/21

1,133,556

(7,523

)

Raytheon Co

1-Day FEDEF - 0.35%

Monthly

MSCS

2/04/21

705,423

(63,157

)

S&P High Beta Total Return Index

1-Month LIBOR

Monthly

BZWS

5/04/20

2,528,105

(117,953

)

Swisscom AG

1-Day SARON - 0.35%

Monthly

MSCS

7/14/20

773,934

CHF

(8,590

)

Valeo SA

1-Day EONIA - 0.40%

Monthly

MSCS

1/10/20

356,778

EUR

(67,886

)

WESCO International Inc.

1-Day FEDEF - 0.35%

Monthly

MSCS

2/04/21

293,325

968

(2,280,799

)

Interest Rate Contracts – Longc

Egyptian Treasury Bill

3-Month LIBOR + 0.40%

Monthly

DBAB

5/12/20

593,025

7,228

Egyptian Treasury Bill

3-Month LIBOR + 0.40%

Monthly

GSCO

5/12/20

590,182

7,164

Government of Indonesia

3-Month LIBOR + 0.60%

Monthly

BOFA

4/15/20

1,784,968

10,815

Government of Indonesia

3-Month LIBOR + 0.60%

Quarterly

BOFA

6/22/20

260,257

11,597

Government of Indonesia

3-Month LIBOR + 0.60%

Quarterly

DBAB

5/15/24

352,062

15,588

Government of Indonesia

3-Month LIBOR + 0.60%

Monthly

DBAB

6/15/32

1,913,884

32,475

Government of Indonesia

3-Month LIBOR + 0.60%

Monthly

DBAB

5/15/48

928,803

(5,162

)

79,705

Total Return Swap Contracts

$

4,365,859

*In U.S. dollars unless otherwise indicated.

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

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

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

See Note 10 regarding other derivative information.

See Abbreviations on page 81.

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

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

CONSOLIDATED FINANCIAL STATEMENTS

Consolidated Statement of Assets and Liabilities

November 30, 2019 (unaudited)

Franklin K2 Alternative Strategies Fund

Assets:
Investments in securities:
Cost – Unaffiliated issuers	$	1,038,536,294
Cost –Non-controlled affiliates (Note 3f)		3,404,000
Cost – Unaffiliated repurchase agreements		19,243,801
Value – Unaffiliated issuers†	$	1,165,305,778
Value –Non-controlled affiliates (Note 3f)		3,404,000
Value – Unaffiliated repurchase agreements		19,243,801
Cash		35,130,351
Restricted cash for OTC derivatives (Note 1f)		325,000
Foreign currency, at value (cost $5,928,236)		5,975,757
Receivables:
Investment securities sold		19,278,337
Capital shares sold		2,405,722
Dividends and interest		3,672,138
Deposits with brokers for:
Exchange traded options written		743,355
Securities sold short		185,655,393
OTC derivative contracts		19,508,267
Futures contracts		23,927,654
Centrally cleared swap contracts		931,629
Due from brokers		23,897,218
Variation margin on centrally cleared swap contracts		18,670
OTC swap contracts (upfront payments $352,281)		349,594
Unrealized appreciation on OTC forward exchange contracts		2,449,019
Unrealized appreciation on OTC swap contracts		7,842,338
Unrealized appreciation on unfunded loan commitments (Note 8)		404
Other assets		19,291
Total assets		1,520,083,716
Liabilities:
Payables:
Investment securities purchased		24,026,641
Capital shares redeemed		1,472,250
Management fees		1,802,365
Distribution fees		55,886
Transfer agent fees		208,633
Variation margin on futures contracts		172,009
Deposits from brokers for:
OTC derivative contracts		325,000
Due to brokers		14,688,686
OTC swap contracts (upfront receipts $326,164)		324,875
Options written, at value (premiums received $617,001)		512,165
Securities sold short, at value (proceeds $175,320,637)		183,639,252
Payable upon return of securities loaned		4,590,520
Unrealized depreciation on OTC forward exchange contracts		2,801,495
Unrealized depreciation on OTC swap contracts		3,591,675
Accrued expenses and other liabilities		345,607
Total liabilities		238,557,059
Net assets, at value	$	1,281,526,657
Net assets consist of:
Paid-in capital	$	1,188,488,536
Total distributable earnings (loss)		93,038,121
Net assets, at value	$	1,281,526,657
†Includes securities loaned . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	$	4,473,424

franklintempleton.com The accompanying notes are an integral part of these consolidated financial statements.    |    Semiannual Report 61

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

CONSOLIDATED FINANCIAL STATEMENTS

Consolidated Statement of Assets and Liabilities (continued)

November 30, 2019 (unaudited)

Franklin K2 Alternative Strategies Fund

Class A:
Net assets, at value	$105,112,062
Shares outstanding	9,138,249
Net asset value per sharea	$11.50
Maximum offering price per share (net asset value per share ÷ 94.50%)	$12.17
Class C:
Net assets, at value	$41,575,852
Shares outstanding	3,701,926
Net asset value and maximum offering price per sharea	$11.23
Class R:
Net assets, at value	$955,507
Shares outstanding	83,153
Net asset value and maximum offering price per share	$11.49
Class R6:
Net assets, at value	$41,930,320
Shares outstanding	3,617,724
Net asset value and maximum offering price per share	$11.59
Advisor Class:
Net assets, at value	$1,091,952,916
Shares outstanding	94,408,113
Net asset value and maximum offering price per share	$11.57

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

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

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

CONSOLIDATED FINANCIAL STATEMENTS

Consolidated Statement of Operations

for the six months ended November 30, 2019 (unaudited)

Franklin K2 Alternative Strategies Fund

Investment income:
Dividends: (net of foreign taxes)*
Unaffiliated issuers	$	5,203,610
Interest:
Unaffiliated issuers		9,014,053
Income from securities loaned:
Unaffiliated issuers (net of fees and rebates)		33,048
Non-controlled affiliates (Note 3f)		43,477
Total investment income		14,294,188
Expenses:
Management fees (Note 3a)		11,938,480
Distribution fees: (Note 3c)
Class A		131,752
Class C		216,317
Class R		2,173
Transfer agent fees: (Note 3e)
Class A		53,367
Class C		21,986
Class R		440
Class R6		5,203
Advisor Class		540,843
Custodian fees (Note 4)		108,320
Reports to shareholders		48,747
Registration and filing fees		69,801
Professional fees		226,754
Trustees’ fees and expenses		162,941
Dividends and interest on securities sold short		883,627
Other		60,250
Total expenses		14,471,001
Expense reductions (Note 4)		(17,207	)
Expenses waived/paid by affiliates (Note 3f and 3g)		(985,020	)
Net expenses		13,468,774
Net investment income		825,414
Realized and unrealized gains (losses):
Net realized gain (loss) from:
Investments:
Unaffiliated issuers		19,919,705
Written options		494,873
Foreign currency transactions		119,429
Forward exchange contracts		3,412,788
Futures contracts		5,803,646
Securities sold short		(16,260,177	)
Swap contracts		3,619,125
Net realized gain (loss)		17,109,389
Net change in unrealized appreciation (depreciation) on:
Investments:
Unaffiliated issuers		32,236,489
Translation of other assets and liabilities denominated in foreign currencies		631,549
Forward exchange contracts		(1,910,030	)
Written options		(152,114	)
Futures contracts		(12,022,274	)
Securities sold short		(14,779,779	)
Swap contracts		4,124,043
Net change in unrealized appreciation (depreciation)		8,127,884
Net realized and unrealized gain (loss)		25,237,273
Net increase (decrease) in net assets resulting from operations	$	26,062,687
* Foreign taxes withheld on dividends	$	73,492

franklintempleton.com The accompanying notes are an integral part of these consolidated financial statements.    |    Semiannual Report 63

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

CONSOLIDATED FINANCIAL STATEMENTS

Consolidated Statements of Changes in Net Assets

Franklin K2 Alternative Strategies Fund

	Six Months Ended November 30, 2019 (unaudited)			Year Ended May 31, 2019
Increase (decrease) in net assets:
Operations:
Net investment income	$	825,414		$	6,523,460
Net realized gain (loss)		17,109,389			8,805,411
Net change in unrealized appreciation (depreciation)		8,127,884			640,752
Net increase (decrease) in net assets resulting from operations		26,062,687			15,969,623
Distributions to shareholders:
Class A		—			(2,359,116	)
Class C		—			(1,085,438	)
Class R		—			(16,101	)
Class R6		—			(817,934	)
Advisor Class		—			(21,685,004	)
Total distributions to shareholders		—			(25,963,593	)
Capital share transactions: (Note 2)
Class A		(1,410,813	)		(13,877,422	)
Class C		(4,046,331	)		(7,442,314	)
Class R		95,602			189,631
Class R6		(1,825,524	)		11,235,421
Advisor Class		23,363,860			158,034,578
Total capital share transactions		16,176,794			148,139,894
Net increase (decrease) in net assets		42,239,481			138,145,924
Net assets:
Beginning of period		1,239,287,176			1,101,141,252
End of period	$	1,281,526,657		$	1,239,287,176

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

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

Notes to Consolidated Financial Statements (unaudited)

Franklin K2 Alternative Strategies Fund

1. Organization and Significant Accounting Policies

Franklin Alternative Strategies Funds (Trust) is registered under the Investment Company Act of 1940 (1940 Act) as anopen-end management investment company, consisting of two 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. Class C shares automatically convert to Class A shares after they have been held for 10 years. Each class of shares may differ by its initial sales load, contingent deferred sales charges, voting rights on matters affecting a single class, its exchange privilege and fees due to differing arrangements for distribution and transfer agent fees.

The following summarizes the Fund’s significant accounting policies.

a. Financial Instrument Valuation

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

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

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

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

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

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

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

franklintempleton.com Semiannual Report 65

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Franklin K2 Alternative Strategies Fund(continued)

1. Organization and Significant Accounting Policies(continued)

a. Financial Instrument Valuation(continued)

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

Trading in securities on foreign securities stock exchanges and OTC markets may be completed before 4 p.m. Eastern time. In addition, trading in certain foreign markets may not take place on every Fund’s business day. Occasionally, events occur between the time at which trading in a foreign security is completed and 4 p.m. Eastern time that might call into question the reliability of the value of a portfolio security held by the Fund. As a result, differences may arise between the value of the Fund’s portfolio securities as determined at the foreign market close and the latest indications of value at 4 p.m. Eastern time. 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 anon-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 theirpro-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

66 Semiannual Report franklintempleton.com

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Franklin K2 Alternative Strategies Fund(continued)

MRAs may permit thenon-defaulting party to net andclose-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 29, 2019.

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

Derivative counterparty credit risk is managed through a formal evaluation of the creditworthiness of all potential counterparties. The Fund attempts to reduce its exposure to counterparty credit risk on OTC derivatives, whenever possible, by entering into International Swaps and Derivatives Association (ISDA) master agreements with certain counterparties. These agreements contain various provisions,

including but not limited to collateral requirements, events of default, or early termination. Termination events applicable to the counterparty include certain deteriorations in the credit quality of the counterparty. Termination events applicable to the Fund include failure of the Fund to maintain certain net asset levels and/or limit the decline in net assets over various periods of time. In the event of default or early termination, the ISDA master agreement gives thenon-defaulting party the right to net andclose-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 counterpartynon-performance.

The Fund entered into exchange traded futures contracts primarily to manage and/or gain exposure to commodity price, interest rate and equity price risk. A futures contract is an agreement between the Fund and a counterparty to buy or sell an asset at a specified price on a future date. Required

franklintempleton.com Semiannual Report 67

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Franklin K2 Alternative Strategies Fund(continued)

1. Organization and Significant Accounting Policies(continued)

e. Derivative Financial Instruments(continued)

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

relevant factors). These upfront payments and receipts are amortized over the term of the contract as a realized gain or loss in the Consolidated Statement of Operations.

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

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

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

68 Semiannual Report franklintempleton.com

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Franklin K2 Alternative Strategies Fund(continued)

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 Notes 6 and 10 regarding investment transactions and other derivative information, respectively.

f. Restricted Cash

At November 30, 2019, the Fund held restricted cash in connection with investments in certain derivative securities. Restricted cash is held in a segregated account with the Fund’s custodian/counterparty broker and is reflected in the Consolidated Statement of Assets and Liabilities.

g. Loan Participation Notes

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

h. Credit-Linked Notes

The Fund purchases credit-linked notes. Credit-linked notes are intended to replicate the economic effects that would apply had the Fund directly purchased the underlying reference asset. The risks of credit-linked notes include the potential default of the underlying reference asset, the movement in the value of the currency of the underlying reference asset relative to the credit-linked note, the potential inability of the Fund to dispose of the credit-linked note in the normal course of business, and the possible inability of the counterparties to fulfill their obligations under the contracts.

i. 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.

j. Securities Lending

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

franklintempleton.com Semiannual Report 69

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Franklin K2 Alternative Strategies Fund(continued)

1. Organization and Significant Accounting Policies(continued)

k. 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 whollyowned 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, 2019, 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. All intercompany transactions and balances have been eliminated. For tax purposes, the Fund is required to increase its taxable income by its share of the K2 Subsidiary’s income. Net losses incurred by the K2 Subsidiary cannot offset income earned by the Fund and cannot be carried back or forward by the K2 Subsidiary to offset income from prior or future years. At November 30, 2019, the net assets of the K2 Subsidiary were $24,510,038 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.

l. Senior Floating Rate Interests

The Fund invests in senior secured corporate loans that pay interest at rates which are periodically reset by reference to a base lending rate plus a spread. These base lending rates are generally the prime rate offered by a designated U.S. bank or the London InterBank Offered Rate (LIBOR). Senior secured corporate loans often require prepayment of principal from excess cash flows or at the discretion of the borrower. As a result, actual maturity may be substantially less than the stated maturity. Senior secured corporate loans in which the Fund invests are generally readily marketable, but may be subject to certain restrictions on resale. On July 27, 2017, the United Kingdom’s Financial Conduct Authority announced its intention to cease sustaining LIBOR after 2021. There remains uncertainty regarding the future utilization of LIBOR and the nature of any replacement rate. As such, the potential effect of a transition away from LIBOR on the Fund or the Fund’s investments that use or may use a floating rate based on LIBOR cannot yet be determined.

m. 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, 2019, 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.

n. 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. Facility fees are recognized as income over the expected term of the loan. Dividend income and dividends declared on securities sold short are recorded on theex-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 theex-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

70 Semiannual Report franklintempleton.com

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Franklin K2 Alternative Strategies Fund(continued)

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

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

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

o. 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.

p. 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, 2019, 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, 2019						Year Ended May 31, 2019
	Shares			Amount			Shares			Amount
Class A Shares:
Shares solda		967,589		$	11,112,808			2,351,885		$	26,666,136
Shares issued in reinvestment of distributions		—			—			207,339			2,233,039
Shares redeemed		(1,091,828	)		(12,523,621	)		(3,768,289	)		(42,776,597	)
Net increase (decrease)		(124,239	)	$	(1,410,813	)		(1,209,065	)	$	(13,877,422	)
Class C Shares:
Shares sold		191,913		$	2,154,886			660,253		$	7,380,998
Shares issued in reinvestment of distributions		—			—			93,730			992,601
Shares redeemeda		(552,321	)		(6,201,217	)		(1,421,875	)		(15,815,913	)
Net increase (decrease)		(360,408	)	$	(4,046,331	)		(667,892	)	$	(7,442,314	)
Class R Shares:
Shares sold		11,077		$	126,906			128,380		$	1,438,887
Shares issued in reinvestment of distributions		—			—			1,492			16,101
Shares redeemed		(2,724	)		(31,304	)		(111,838	)		(1,265,357	)
Net increase (decrease)		8,353		$	95,602			18,034		$	189,631

franklintempleton.com Semiannual Report 71

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Franklin K2 Alternative Strategies Fund(continued)

2. Shares of Beneficial Interest(continued)

	Six Months Ended November 30, 2019						Year Ended May 31, 2019
	Shares			Amount			Shares			Amount
Class R6 Shares:
Shares sold		235,647		$	2,723,922			1,328,232		$	15,139,519
Shares issued in reinvestment of distributions		—			—			74,668			807,913
Shares redeemed		(394,470	)		(4,549,446	)		(412,633	)		(4,712,011	)
Net increase (decrease)		(158,823	)	$	(1,825,524	)		990,267		$	11,235,421
Advisor Class Shares:
Shares sold		13,201,802		$	152,117,879			38,287,620		$	435,094,092
Shares issued in reinvestment of distributions		—			—			1,729,893			18,700,140
Shares redeemed		(11,174,770	)		(128,754,019	)		(26,229,040	)		(295,759,654	)
Net increase (decrease)		2,027,032		$	23,363,860			13,788,473		$	158,034,578

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

3. Transactions with Affiliates

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

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

a. Management Fees

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

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

Subadvisors

Apollo Credit Management LLC

Bardin Hill Arbitrage IC Management LP

Chatham Asset Management, LLC

Chilton Investment Company, LLC

Ellington Global Asset Management, LLC

72 Semiannual Report franklintempleton.com

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Franklin K2 Alternative Strategies Fund(continued)

Subadvisors

Emso Asset Management Limited

Graham Capital Management, L.P.

Grantham, Mayo, Van Otterloo & Co. LLC

H2O AM LLP

Impala Asset Management LLC

Jennison Associates, LLC

Lazard Asset Management, LLC

Loomis Sayles & Company, L.P.

P. Schoenfeld Asset Management L.P.

Portland Hill Asset Management Limited

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 Rule12b-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	$	10,041
CDSC retained	$	624

franklintempleton.com Semiannual Report 73

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Franklin K2 Alternative Strategies Fund(continued)

3. Transactions with Affiliates(continued)

e. Transfer Agent Fees

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

For the period ended November 30, 2019, the Fund paid transfer agent fees of $621,839, of which $192,819 was retained by Investor Services.

f. Investments in Affiliated Management Investment Companies

The Fund invests in one or more affiliated management investment companies for purposes other than exercising a controlling influence over the management or policies. Management fees paid by the Fund are waived on assets invested in the affiliated management investment companies, as noted in the Consolidated Statement of Operations, in an amount not to exceed the management and administrative fees paid directly or indirectly by each affiliate. During the period ended November 30, 2019, the Fund held investments in affiliated management investment companies as follows:

	Value at Beginning of Period		Purchases		Sales			Realized Gain (Loss)		Net Change in Unrealized Appreciation (Depreciation)		Value at End of Period		Number of Shares Held at End of Period		Income from Securities Loaned
Non-Controlled Affiliates
Institutional Fiduciary Trust Money Market Portfolio, 1.35% . . . . .	$	4,871,000	$	30,198,000	$	(31,665,000	)	$	—	$	—	$	3,404,000		3,404,000	$	43,477

g. Waiver and Expense Reimbursements

K2 Advisors and Investor Services have contractually agreed in advance to waive or limit their respective fees and to assume as their own expense certain expenses otherwise payable by the Fund so that the expenses (excluding distribution fees, acquired fund fees and expenses, expenses related to securities sold short and certainnon-routine expenses or costs, including those relating to litigation, indemnification, reorganizations and liquidations) for each class of the Fund do not exceed 1.95%, and Class R6 does not exceed 1.87% based on the average net assets of each class until September 30, 2020. Total expenses waived or paid are not subject to recapture subsequent to the Fund’s fiscal year end.

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, 2019, the custodian fees were reduced as noted in the Consolidated Statement of Operations.

74 Semiannual Report franklintempleton.com

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Franklin K2 Alternative Strategies Fund(continued)

5. Income Taxes

At November 30, 2019, the cost of investments and net unrealized appreciation (depreciation) were as follows:

Cost of investments	$	904,905,586
Unrealized appreciation	$	142,652,143
Unrealized depreciation		(46,828,006	)
Net unrealized appreciation (depreciation)	$	95,824,137

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

6. Investment Transactions

Purchases and sales of investments and securities sold short (excluding short term securities) for the period ended November 30, 2019, aggregated $1,296,077,413 and $1,238,345,365, respectively.

At November 30, 2019, in connection with securities lending transactions, the Fund loaned equity investments and corporate bonds and notes and received $4,590,520 of cash collateral. The gross amounts of recognized liability for such transactions is included in payable upon return of securities loaned in the Consolidated Statement of Assets and Liabilities. The agreements can be terminated at any time.

The Fund sold certain long positions held in the portfolio and simultaneously entered into total return swaps on the positions, retaining substantially all of the exposure to the economic return and the related risks on the long positions. At November 30, 2019, the transfers of financial assets accounted for as sales were as follows:

	At Original Transactions Dates				At Period Ended November 30, 2019
	Cost Basis of Positions Sold		Gross Cash Received for Positions Sold		Fair Value of Transferred Assetsa		Gross Derivative Assets Recordedb		Gross Derivative Liabilities Recordedb
Sales and total return swaps	$	5,246,692	$	6,694,932	$	6,904,159	$	6,904,159	$	(6,694,932	)

^a$209,227 of fair value of transferred assets are included as unrealized appreciation on OTC swap contracts in the Consolidated Statement of Assets and Liabilities.

^bBalances are presented on a gross basis, based on each leg of the swap contract, before the application of counterparty and cash collateral offsetting.

See Notes 1(e) and 10 regarding derivative financial instruments and other derivative information, respectively.

7. Credit Risk and Defaulted Securities

The Fund may purchase thepre-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, 2019, the aggregate long value of distressed company securities for which interest recognition has been discontinued was $18,384,960 representing 1.4% of the Fund’s net assets. For information as to specific securities, see the accompanying Consolidated Statement of Investments.

franklintempleton.com Semiannual Report 75

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Franklin K2 Alternative Strategies Fund(continued)

8. Restricted Securities

The Fund invests in securities that are restricted under the Securities Act of 1933 (1933 Act). Restricted securities are often purchased in private placement transactions, and cannot be sold without prior registration unless the sale is pursuant to an exemption under the 1933 Act. Disposal of these securities may require greater effort and expense, and prompt sale at an acceptable price may be difficult. The Fund may have registration rights for restricted securities. The issuer generally incurs all registration costs.

At November 30, 2019, investments in restricted securities, excluding securities exempt from registration under the 1933 Act, were as follows:

Shares		Issuer	Acquisition Date		Cost		Value
	4,970	aOne Call Corp.		10/28/19	$	232,975	$	596,214
	33,337	aOne Call Corp., cvt. pfd.		10/28/19		1,562,669		3,999,100
	Total Restricted Securities (Value is 0.4% of Net Assets)				$	1,795,644	$	4,595,314

^aThe Fund also invests in unrestricted securities of this issuer, valued at $4,031,194 as of November 30, 2019.

9. 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 and any unrealized appreciation or depreciation is included in the Consolidated Statement of Assets and Liabilities and the Consolidated Statement of Operations. Funded portions of credit agreements are presented in the Consolidated Statement of Investments.

At November 30, 2019, unfunded commitments were as follows:

Borrower	Unfunded Commitment
Burger King, Term Loan B	$	124,049

10. Other Derivative Information

At November 30, 2019, the 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	$	660,714	a	Variation margin on futures contracts	$	132,713	a
	Variation margin on centrally cleared swap contracts		84,682	a	Variation margin on centrally cleared swap contracts		12,688	a
	Unrealized appreciation on OTC swap contracts		84,867		Unrealized depreciation on OTC swap contracts		5,162
Foreign exchange contracts	Investments in securities, at value		51,973	b	Options written, at value		49,482
	Unrealized appreciation on OTC forward exchange contracts		2,449,019		Unrealized depreciation on OTC forward exchange contracts		2,801,495

76 Semiannual Report franklintempleton.com

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Franklin K2 Alternative Strategies Fund(continued)

	Asset Derivatives				Liability Derivatives
Derivative Contracts Not Accounted for as Hedging Instruments	Consolidated Statement of Assets and Liabilities Location	Fair Value			Consolidated Statement of Assets and Liabilities Location	Fair Value
Credit contracts	Variation margin on centrally cleared swap contracts	$	9,768	a	Variation margin on centrally cleared swap contracts	$	350,138	a
	OTC swap contracts (upfront payments)		349,594		OTC swap contracts (upfront receipts)		324,875
	Unrealized appreciation on OTC swap contracts		42,982		Unrealized depreciation on OTC swap contracts		158,178
Equity contracts	Investments in securities, at value		564,110	b	Options written, at value		462,683
	Variation margin on futures contracts		4,736,743	a	Variation margin on futures contracts		12,603,928	a
	Unrealized appreciation on OTC swap contracts		7,662,141		Unrealized depreciation on OTC swap contracts		3,428,335
Commodity contracts	Variation margin on futures contracts		263,815	a	Variation margin on futures contracts		538,756	a
	Unrealized appreciation on OTC swap contracts		52,348
Totals		$	17,012,756			$	20,868,433

^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.

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

For the period ended November 30, 2019, the effect of derivative contracts in the 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:
Interest rate contracts	Investments	$	(44,741	)a
	Written options		39,473
	Futures contracts		5,458,350		Futures contracts	$	(1,959,601	)
	Swap contracts		(56,659	)	Swap contracts		185,404
Foreign exchange contracts	Investments		(178,636	)a	Investments		57,228	a
	Written options		166,988		Written options		(32,913	)
	Forward exchange contracts		3,412,788		Forward exchange contracts		(1,910,030	)
Credit contracts	Swap contracts		(31,735	)	Swap contracts		(270,118	)
Equity contracts	Investments		(3,482,561	)a	Investments		709,564	a
	Written options		288,412		Written options		(119,201	)
	Futures contracts		803,247		Futures contracts		(10,801,408	)
	Swap contracts		3,718,713		Swap contracts		4,168,255
Commodity contracts	Futures contracts		(457,951	)	Futures contracts		738,735
	Swap contracts		(11,194	)	Swap contracts		40,502
Totals		$	9,624,494			$	(9,193,583	)

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

franklintempleton.com Semiannual Report 77

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Franklin K2 Alternative Strategies Fund(continued)

10. Other Derivative Information(continued)

For the period ended November 30, 2019, the average month end notional amount of futures contracts, options and swap contracts represented $895,074,317, 34,544,663 shares/units and $174,543,675, respectively. The average month end contract value of forward exchange contracts was $459,032,236.

At November 30, 2019, 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	$	2,449,019	$	2,801,495
Options Purchased		51,973		—
Options Written		—		49,482
Swap Contracts		8,191,932		3,916,550
Total	$	10,692,924	$	6,767,527

^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, 2019, OTC derivative assets, which may be offset against 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
BNYM	$	117,241	$	(117,241	)	$	—	$	—		$	—
BOFA		133,209		(133,209	)		—		—			—
BZWS		365,760		(365,760	)		—		—			—
CITI		5,888		(5,888	)		—		—			—
DBAB		163,096		(84,420	)		—		(78,676	)		—
GSCO		54,559		(54,559	)		—		—			—
HSBC		—		—			—		—			—
JPHQ		186,661		(167,142	)		—		—			19,519
JPHQc		627,752		—			—		—			627,752
MSCId		52,348		—			—		—			52,348
MSCO		259,738		(113,437	)		—		—			146,301
MSCOd		968,512		(968,512	)		—		—			—
MSCS		5,270		(5,270	)		—		—			—
MSCSc		7,594,406		—			—		—			7,594,406
UBSW		158,484		(9,408	)		—		—			149,076
Total	$	10,692,924	$	(2,024,846	)	$	—	$	(78,676	)	$	8,589,402

78 Semiannual Report franklintempleton.com

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Franklin K2 Alternative Strategies Fund(continued)

At November 30, 2019, OTC derivative liabilities, which may be offset against 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
BNYM	$	126,381	$	(117,241	)	$	—	$	(9,140	)	$	—
BOFA		156,806		(133,209	)		—		(23,597	)		—
BZWS		576,715		(365,760	)		—		(210,955	)		—
CITI		120,410		(5,888	)		—		—			114,522
DBAB		84,420		(84,420	)		—		—			—
GSCO		89,802		(54,559	)		—		(35,243	)		—
HSBC		5,453		—			—		—			5,453
JPHQ		167,142		(167,142	)		—		—			—
JPHQc		959,956		—			—		—			959,956
MSCId		—		—			—		—			—
MSCO		113,437		(113,437	)		—		—			—
MSCOd		1,189,092		(968,512	)		—		(220,580	)		—
MSCS		16,901		(5,270	)		—		—			11,631
MSCSc		3,151,604		—			—		—			3,151,604
UBSW		9,408		(9,408	)		—		—			—
Total	$	6,767,527	$	(2,024,846	)	$	—	$	(499,515	)	$	4,243,166

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

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

^cRepresents derivatives not subject to an ISDA master agreement.

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

See Notes 1(e) and 6 regarding derivative financial instruments and investment transactions, respectively.

See Abbreviations on page 81.

11. Credit Facility

The Fund, together with other U.S. registered and foreign investment funds (collectively, Borrowers), managed by Franklin Templeton, are borrowers in a joint syndicated senior unsecured credit facility totaling $2 billion (Global Credit Facility) which matures on February 7, 2020. 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, 2019, the Fund did not use the Global Credit Facility.

franklintempleton.com Semiannual Report 79

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Franklin K2 Alternative Strategies Fund(continued)

12. Fair Value Measurements

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

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

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

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

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

A summary of inputs used as of November 30, 2019, 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
Equity Investmentsb	$	506,184,494	$	21,481	$	4,715,175	c	$	510,921,150
Convertible Bonds		—		117,813,269		—			117,813,269
Corporate Bonds and Notes		—		91,510,897		—			91,510,897
Corporate Bonds and Notes in Reorganization		—		9,827,590		84,600	c		9,912,190
Senior Floating Rate Interests		—		2,256,894		—			2,256,894
Credit-Linked Notes		—		1,354,659		964,474			2,319,133
Foreign Government and Agency Securities		—		18,752,573		—			18,752,573
Asset-Backed Securities and Commercial Mortgage-Backed Securities		—		69,829,061		—			69,829,061
Municipal Bonds in Reorganization		—		8,472,770		—			8,472,770
Options Purchased		564,110		51,973		—			616,083
Short Term Investments		329,920,510		21,792,331		3,836,718			355,549,559
Total Investments in Securities	$	836,669,114	$	341,683,498	$	9,600,967		$	1,187,953,579
Other Financial Instruments:
Futures Contracts	$	5,661,272	$	—	$	—		$	5,661,272
Forward Exchange Contracts		—		2,449,019		—			2,449,019
Swap Contracts		—		7,936,788		—			7,936,788
Unfunded Loan Commitments		—		404		—			404
Total Other Financial Instruments	$	5,661,272	$	10,386,211	$	—		$	16,047,483
Liabilities:
Other Financial Instruments:
Options Written	$	462,683	$	49,482	$	—		$	512,165
Securities Sold Shorta		183,639,252		—		—			183,639,252
Futures Contracts		13,275,397		—		—			13,275,397
Forward Exchange Contracts		—		2,801,495		—			2,801,495
Swap Contracts		—		3,954,501		—			3,954,501
Total Other Financial Instruments	$	197,377,332	$	6,805,478	$	—		$	204,182,810

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

^bIncludes common, preferred and convertible preferred stocks and exchange traded funds as well as other equity interests.

^cIncludes securities determined to have no value at November 30, 2019.

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.

80 Semiannual Report franklintempleton.com

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Franklin K2 Alternative Strategies Fund(continued)

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.

Abbreviations

Counterparty/Exchange		Currency		Selected Portfolio
BNYM	The Bank of New York Mellon Corp.	ARS	Argentine Peso	ADR	American Depositary Receipt
BOFA	Bank of America Corp.	AUD	Australian Dollar	ARLLMONP	Argentina Blended Policy Rate
BZWS	Barclays Bank PLC	BRL	Brazilian Real	ARM	Adjustable Rate Mortgage
CITI	Citigroup, Inc.	CAD	Canadian Dollar	BADLAR	Argentina Deposit Rates Badlar Private Banks ARS
DBAB	Deutsche Bank AG	CHF	Swiss Franc	BBSW	Bank Bill Swap Rate
GSCO	The Goldman Sachs Group, Inc.	CLP	Chilean Peso	BZDIOVRA	Brazil Interbank Deposit Rate
HSBC	HSBC Bank USA, N.A.	CNY	Chinese Yuan	CAC	Cotation Assistee en Continu
JPHQ	JP Morgan Chase & Co.	COP	Colombian Peso	CFETS	China Foreign Exchange Trade System
MSCI	Morgan Stanley Capital International PLC	EGP	Egyptian Pound	CLO	Collateralized Loan Obligation
MSCO	Morgan Stanley	EUR	Euro	CME	Chicago Mercantile Exchange
MSCS	Morgan Stanley Capital Services LLC	GBP	British Pound	DAX	Deutscher Aktienindex
UBSW	UBS AG	HKD	Hong Kong Dollar	EONIA	Euro OverNight Index Average
		JPY	Japanese Yen	ETF	Exchange Traded Fund
		NGN	Nigerian Naira	EURIBOR	Euro Interbank Offered Rate
Index		PLN	Polish Zloty	FEDEF	Federal Funds Effective Rate
		RUB	Russian Ruble	FHLMC	Federal Home Loan Mortgage Corp.
CDX.EM	CDX Emerging Markets Index	SEK	Swedish Krona	FRN	Floating Rate Note
CMBX.NA	Commerical Mortgage Backed North America Index	UAH	Ukraine Hryvnia	FTSE	Financial Times Stock Exchange
		USD	United States Dollar	GO	General Obligation
ITRX.EUR	iTraxx Europe Index	ZAR	South African Rand	HIBOR	Hong Kong Interbank Offer Rate
				JSE	Johannesburg Stock Exchange Index
				LIBOR	London InterBank Offered Rate
				MIB	Milano Italia Borsa
				PIK	PaymentIn-Kind
				REIT	Real Estate Investment Trust
				SARON	Swiss Average Rate Overnight
				SFR	Single Family Revenue
				SONIA	Sterling Overnight Index Average
				SPDR	Standard & Poor’s Depositary Receipt
				STIBOR	Stockholm Interbank Offered Rate
				TOPIX	Tokyo Price Index

franklintempleton.com Semiannual Report 81

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

FRANKLIN K2 ALTERNATIVE STRATEGIES FUND

Shareholder Information

Board Approval ofSub-Advisory Agreement

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

Franklin K2 Alternative Strategies Fund

(Fund)

The Board of Trustees (Board) of Franklin Alternative Strategies Funds (the Trust), including a majority of trustees that are not “interested persons” as such term is defined in section 2(a)(19) of the Investment Company Act of 1940 (hereinafter referred to as “independent trustees”), at anin-person meeting held on October 22, 2019, unanimously approved thesub-advisory agreement (the “NewSub-Advisory Agreement”) with Elementum Advisors, LLC (“Elementum”).

In approving the NewSub-Advisory Agreement, the Board, including the independent trustees, determined that fees to be paid under the NewSub-Advisory Agreement were fair and reasonable and that approval of the NewSub-Advisory Agreement was in the best interests of the Fund and its shareholders. As part of the approval process, the trustees considered the process undertaken and information provided during their consideration and approval on May 22, 2019 of the investment management agreement between K2/D&S Management Co., L.L.C., the Fund’s investment manager (“K2 Advisors”), and the Trust, on behalf of the Fund, and thesub-advisory agreements between K2 Advisors and each of the Fund’s existingsub-advisors.

At an independent trustees’ meeting held on July 16, 2019 the independent trustees met with representatives ofElementum. In making the foregoing approvals, the independent trustees received assistance and advice from their independent counsel and, in addition to the materials provided at prior meetings, considered various materials related to the NewSub-Advisory Agreement including: (1) a copy of the proposed form of NewSub-Advisory Agreement for Elementum; (2) information describing the nature, quality and extent of services that Elementum would provide to the Fund, and the proposedsub-advisory fees payable to Elementum; (3) a report from K2 Advisors on the diligence conducted on Elementum and the reasons for recommending Elementum as asub-advisor for the Fund, including, but not limited to, Elementum’s background, experience, personnel, operations, policies, procedures and compliance functions and plans for the integration of such operations, policies, procedures and compliance functions with those of K2 Advisors; and (4) a report from the Fund’s Chief Compliance Officer regarding Elementum’s compliance program

and capabilities, including Elementum’s policies and procedures in place to address potential conflicts of interest, and the diligence undertaken by the Fund’s Chief Compliance Officer with respect thereto. The Board noted that the terms of the NewSub-Advisory Agreement were substantially similar to the terms of thesub-advisory agreements with the Fund’s existingsub-advisors.

The Board’s consideration of whether to approve the NewSub-Advisory Agreement on behalf of the Fund took into account several factors including, but not limited to, the following: (1) the nature and quality of the services to be provided by Elementum to the Fund under the NewSub-Advisory Agreement; (2) Elementum’s experience as a manager of other accounts; (3) Elementum’s strength and reputation within the industry; (4) the fairness of the compensation under the NewSub-Advisory Agreement; (5) the personnel, operations, financial condition, and investment management capabilities, methodologies and resources of Elementum; (6) profitability matters; (7) reports from K2 Advisors on the diligence conducted on Elementum and the reasons for recommending Elementum as asub-advisor for the Fund, including, but not limited to, Elementum’s background, experience, personnel, operations, policies, procedures and compliance functions and plans for the integration of such operations, policies, procedures and compliance functions with those of K2 Advisors; and (8) a report from the Trust’s Chief Compliance Officer regarding Elementum’s compliance program and capabilities, including Elementum’s policies and procedures in place to address potential conflicts of interest, and the diligence undertaken by the Trust’s Chief Compliance Officer with respect thereto. Particular attention was given to the due diligence and risk management procedures of K2 Advisors with respect to selecting and overseeingsub-advisors of the Fund, as well as Elementum’s risk management program and to derivatives and other complex instruments that are expected to be held by the Fund and how such instruments are expected to be used to pursue the Fund’s investment goals.

The following discussion relates to certain primary factors relevant to the Board’s decision to approve the NewSub-Advisory Agreement. This discussion of the information and factors considered by the Board (including the information and factors discussed above) is not intended to be exhaustive, but rather summarizes certain factors considered by the Board. In view of the wide variety of factors considered, the Board did not, unless otherwise noted, find it practicable to quantify or otherwise assign relative weights to the following factors. In addition, individual trustees may have assigned different weights to various factors.

82 Semiannual Report franklintempleton.com

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

FRANKLIN K2 ALTERNATIVE STRATEGIES FUND

NATURE, EXTENT AND QUALITY OF SERVICES. The trustees reviewed the nature, extent and quality of the services to be provided by Elementum. In this regard, they reviewed the Fund’s investment goal and Elementum’s proposed investment strategy, and Elementum’s ability to implement such investment goal and/or investment strategy, including, but not limited to, Elementum’s trading practices and investment decision processes.

With respect to thesub-advisory services to be provided by Elementum, the Board noted the responsibilities that Elementum would have with respect to the Fund’s assets to be allocated to Elementum byK2-Advisors (the“Sub-Advised Portion”), including, among others, implementing the investment strategies with respect to theSub-Advised Portion and ensuring compliance with the investment strategies, policies, and limitations of theSub-Advised Portion. The trustees considered the successful performance of Elementum in managing other investment products with investment strategies similar to the investment strategies of theSub-Advised Portion of the Fund.

The trustees reviewed the portfolio management team at Elementum that would be responsible for managing theSub-Advised Portion, including the team’s performance, staffing, skills and compensation program. The trustees considered various other products, portfolios and entities that are advised by Elementum, their relative fees and reasons for differences with respect thereto and any potential conflicts. The Board also considered a report from the Trust’s Chief Compliance Officer regarding Elementum’s compliance program as such policies relate to the operations of the Fund. The Board considered the selection and due diligence process employed by K2 Advisors in proposing Elementum as asub-advisor to the Fund, including the due diligence undertaken with respect to Elementum’s compliance capabilities, and efforts to integrate Elementum’s operations, policies, procedures and compliance functions with those of K2 Advisors.

Based on their review, the trustees were satisfied with the nature and quality of the overall services to be provided by Elementum to the Fund and its shareholders and were confident in the abilities of Elementum to implement its proposed investment strategy, and to provide quality services to the Fund and its shareholders.

INVESTMENT PERFORMANCE. The Board noted that, as Elementum had not provided any services to the Fund, there was no investment performance of Elementum with respect to the Fund. The Board considered the investment performance of Elementum in managing other investment products

with similar investment strategies to the investment strategies of theSub-Advised Portion. The Board also considered the performance benchmarks for the Fund and how such benchmarks would be utilized to measure the performance of Elementum in managing theSub-Advised Portion.

COMPARATIVE EXPENSES AND PROFITABILITY. The Board considered the cost of the services to be provided by Elementum. The Board also noted that it could not evaluate Elementum’s profitability with respect to the Fund since no assets had yet been allocated to Elementum.

The Board noted that thesub-advisory fees would be paid by K2 Advisors to Elementum and would not be additional fees to be borne by the Fund. The Board also noted that thesub-advisory fees to be paid by K2 Advisors to Elementum were the product of arms-length negotiations between K2 Advisors and Elementum and the Board considered the allocation of the investment management fee charged to the Fund between K2 Advisors and Elementum in light of the nature, extent and quality of the investment management services expected to be provided by K2 Advisors and Elementum. The trustees considered various other products, portfolios and entities that are advised by Elementum and the allocation of assets and expenses among and within them, as well as their relative fees and reasons for differences with respect thereto and any potential conflicts. The Board considered the extent to which Elementum may derive ancillary benefits from the Fund’s operations.

With respect to the impact on K2 Advisors’ and its affiliates’ profitability as a result of hiring Elementum as asub-advisor to the Fund, the Board considered the following: (1) the fee waiver and expense limitation arrangements in effect, and the amount of Fund expenses that were absorbed since the inception of the Fund by K2 Advisors through such arrangements, (2) the level ofsub-advisory fees to be paid to Elementum, and (3) K2 Advisors’ belief that the hiring of Elementum as asub-advisor will not have a material impact on K2 Advisors’ profitability with respect to the Fund.

Based upon its consideration of all these factors, the Board determined that thesub-advisory fee structure for Elementum was fair and reasonable.

ECONOMIES OF SCALE. The Board considered economies of scale that may be realized by Elementum as the Fund grows larger and the extent to which such economies of scale may be shared with Fund shareholders, as for example, in the level of thesub-advisory fees charged, in the quality and efficiency of services rendered and in increased

franklintempleton.com Semiannual Report 83

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

FRANKLIN K2 ALTERNATIVE STRATEGIES FUND

capital commitments benefiting the Fund directly or indirectly. The Board concluded that economies of scale were deemed not to be a significant factor at that time in light of, among other matters, the fee waiver and expense limitation arrangement in effect

CONCLUSION. After consideration of the foregoing factors, and such other matters as were deemed relevant, and with no single factor being determinative to their decision, the trustees—including a majority of the independent trustees—with the assistance of independent counsel approved the NewSub-Advisory Agreement, including the fees payable thereunder, with Elementum for the Fund.

Proxy Voting Policies and Procedures

The Fund’s investment manager has established Proxy Voting Policies and Procedures (Policies) that the Fund uses to determine how to vote proxies relating to portfolio securities. Shareholders may view the Fund’s complete Policies online at franklintempleton.com. Alternatively, shareholders may request copies of the Policies free of charge by calling the Proxy Group collect at (954)527-7678 or by sending a written request to: Franklin Templeton Companies, LLC, 300 S.E. 2nd Street, Fort Lauderdale, FL 33301, Attention: Proxy Group. Copies of the Fund’s proxy voting records are also made available online at franklintempleton.com and posted on the U.S. Securities and Exchange Commission’s website at sec.gov and reflect the most recent12-month period ended June 30.

Quarterly Consolidated Statement of Investments

The Trust, on behalf of the Fund, files a complete statement of investments with the U.S. Securities and Exchange Commission for the first and third quarters for each fiscal year as an exhibit to its report on FormN-PORT. Shareholders may view the filed FormN-PORT 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.

84 Semiannual Report franklintempleton.com

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.

	Semiannual Report and Shareholder Letter Franklin K2 Alternative Strategies Fund
	Investment Manager	Distributor	Shareholder Services
	K2/D&S Management Co., L.L.C.	Franklin Templeton Distributors, Inc. (800) DIAL BEN®/342-5236 franklintempleton.com	(800) 632-2301
© 2019-2020 Franklin Templeton Investments. All rights reserved.			068 S 01/20

SEMIANNUAL REPORT AND SHAREHOLDER LETTER

FRANKLIN K2 LONG SHORT CREDIT FUND

A Series of Franklin Alternative Strategies Funds

November 30, 2019

Sign up for electronic delivery at franklintempleton.com/edelivery

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

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

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

FRANKLIN TEMPLETON

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

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

Dear Fellow Shareholder:

During the six months ended November 30, 2019, global markets benefited from upbeat economic data in certain regions, encouraging corporate earnings reports, generally accommodative monetary policies by major central banks and periods of optimism about a potential U.S.-China trade agreement. However, global markets also reflected investor concerns about ongoing U.S. trade disputes with China and other trading partners, political uncertainties in the U.S. and the European Union, and slower global economic growth. In this environment, global developed market stocks, as measured by the MSCI World Index, posted a +13.21% total return for the period.¹ Global emerging market stocks, as measured by the MSCI Emerging Markets Index, posted a +6.13% total return.¹ Global government bonds, as measured by the FTSE World Government Bond Index, posted a +2.55% total return.¹

We are committed to our long-term perspective and disciplined investment approach as we conduct a rigorous analysis of Fund subadvisors and markets with a strong 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.

CFA^® is a trademark owned by CFA Institute.

1. Source: Morningstar.

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

On the following pages, the Fund’s portfolio management team reviews investment decisions that pertain to performance during the past six months in light of the economic environment and other factors. Please remember all securities markets fluctuate, as do mutual fund share prices.

We thank you for investing with Franklin Templeton, welcome your questions and comments, and look forward to continuing to serve your investment needs in the future.

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, 2019, 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.

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	33
Notes to Financial Statements	37
Shareholder Information	52

Visitfranklintempleton.comfor fund

updates, to access your account, or to find helpful financial planning tools.

2 Semiannual Report franklintempleton.com

SEMIANNUAL REPORT

Franklin K2 Long Short Credit Fund

This semiannual report for Franklin K2 Long Short Credit Fund covers the period ended November 30, 2019.

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 multiplenon-traditional or alternative strategies in the fixed income and credit areas, including, but not limited to, some or all of the following: credit long short, structured credit and emerging market fixed income. The Fund is structured as a multi-manager fund, meaning the Fund’s assets are managed by multiple subadvisors, and the Fund’s investment manager has overall responsibility for the Fund’s investments.

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

Performance Overview

The Fund’s Class A shares posted a +1.34% cumulative total return for the six months under review. For comparison, the Fund’s primary benchmark, the HFRX Fixed Income - Credit Index, which measures performance of strategies with exposure to credit across a broad continuum of credit substrategies, posted a +2.92% total return for the same period.¹ The Fund’s strategy, which results in a relatively low risk profile, differs from that of the credit index, which has a generally higher risk profile in a rising market environment. This difference may occasionally lead to wide performance discrepancies, especially in periods when investors focus on

Portfolio Composition*

Based on Total Net Assets as of 11/30/19

*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.

risk assets with higher return potential or, conversely, when investors focus on less risky assets to potentially avoid volatile returns. Also for comparison, the Fund’s secondary benchmark, the ICE BofAML U.S.3-Month Treasury Bill Index, which is an index of short-term U.S. government securities with a remaining term to final maturity of less than three months, posted a +1.10% total return.² You can find more of the Fund’s performance data in the Performance Summary beginning on page 7.

Performance data represent past performance, which does not guarantee future results. Investment return and principal value will fluctuate, and you may have a gain or loss when you sell your shares. Current performance may differ from figures shown. For most recentmonth-end performance, go tofranklintempleton.com or call(800)342-5236.

Economic and Market Overview

The global economy expanded during the six months ended November 30, 2019, despite weakness in Europe and Asia. Global stocks were aided by upbeat economic data in some regions, encouraging corporate earnings reports, periods of optimism about a potential U.S.-China trade deal and monetary policy easing by major central banks.

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

However, markets also reflected concerns about political uncertainties in the U.S. (including the impeachment inquiry into President Donald Trump), geopolitical tensions in certain regions, and the impact of U.S. trade disputes with China and other trading partners on global growth and corporate earnings. Overall, global developed and emerging market stocks, as measured by the MSCI All Country World Index, posted a +12.37% total return, slightly lower than the +13.21% total return for global developed market stocks, as measured by the MSCI World Index, for the six months under review.²

The U.S. economy expanded during the six months ended November 30, 2019. After moderating in 2019’s second quarter, the economy grew faster in the third quarter, aided by consumer spending, housing investment, government spending and exports. The manufacturing sector expanded at the start of the period, but contracted during the last four months, while the services sector expanded throughout the period. The unemployment rate decreased slightly from 3.6% in May 2019 to 3.5% atperiod-end.³ The annual inflation rate, as measured by the Consumer Price Index, increased from 1.8% in May 2019 to 2.1% atperiod-end.³

At its July 2019 meeting, the U.S. Federal Reserve (Fed) lowered its target range for the federal funds rate for the first time since December 2008, to 2.00%–2.25%, citing muted inflation pressures and the potential effects of global trade tensions on economic growth. Furthermore, the Fed ended its balance sheet normalization program earlier than previously indicated. The Fed further lowered the federal funds target rate range by 0.25% at its September and October meetings, to 1.50%–1.75%, reiterating the rationale cited at the July meeting.

In Europe, the U.K.’s quarter-on-quarter gross domestic product (GDP) growth contracted in 2019’s second quarter but recovered in the third quarter. The Bank of England kept its key policy rate unchanged during thesix-month period and lowered its GDP forecasts for 2019 and 2020, amid Brexit uncertainties. The eurozone’s quarter-on-quarter GDP growth moderated in 2019’s second quarter and remained stable in the third quarter. The bloc’s annual inflation rate ended the period lower. The European Central Bank (ECB) kept its benchmark interest rate unchanged during the period. In November, the ECB resumed its asset purchase program in an effort to boost the economy.

In developed Asia, Japan’s quarter-on-quarter GDP growth moderated in 2019’s second and third quarters. The Bank of Japan left its benchmark interest rate unchanged and continued its stimulus measures during the review period.

In larger emerging markets, Brazil’s quarter-on-quarter GDP growth accelerated in 2019’s second and third quarters. The Central Bank of Brazil lowered its benchmark interest rate three times during the period. Russia’s annual GDP growth accelerated in 2019’s second and third quarters. The Bank of Russia cut its key interest rate four times during the period. China’s annual GDP growth moderated in 2019’s second and third quarters. The People’s Bank of China implemented an interest-rate reform in August, designating the loan prime rate as the new benchmark for household and business loans, effectively lowering interest rates several times during the period. Overall, global emerging market stocks, as measured by the MSCI Emerging Markets Index, posted a +6.13% total return for the six months under review.²

Investment Strategy

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

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

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

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

4 Semiannual Report franklintempleton.com

FRANKLIN K2 LONG SHORT CREDIT FUND

What are swap agreements?

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

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

options on currencies, securities, indexes and exchange-traded funds; and swaps. The Fund may engage in active and frequent trading as part of its investment strategies.

What is a currency forward contract?

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

What is a futures contract?

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

What is an option?

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

Subadvisors

11/30/19

Credit Long Short

Apollo Credit Management LLC

Chatham Asset Management, LLC

Structured Credit

Ellington Global Asset Management, L.L.C.

Medalist Partners, LP

Emerging Markets Fixed Income

Emso Asset Management Limited

Manager’s Discussion

The Fund’s subadvisors for the six months under review were Apollo Credit Management, Chatham Asset Management, Ellington Global Asset Management, Emso Asset Management and Medalist Partners. These subadvisors are also listed in the Subadvisors table on this page. Four of the five subadvisors posted gains for thesix-month period—Apollo, Medalist, Ellington and Emso. In contrast, Chatham experienced a slight loss.

All three strategies strengthened Fund performance for thesix-month period: credit long short, structured credit and emerging markets fixed income. By asset class, the top contributors to the Fund’s aggregate returns were credit and equity. Conversely, currency exposures and interest-rate derivatives detracted from performance.

In terms of aggregate sector exposures, the top performance drivers for the Fund were mortgage-backed securities (MBS), consumer discretionary and consumer staples. In contrast, equity index hedges and health care hindered returns.

The credit long short strategy benefited from long positions in the consumer discretionary and utilities sectors. In addition, long and then short positions in consumer staples positively contributed to strategy performance. Conversely, health care long positions and equity index hedges were net detractors from strategy results.

In the structured credit strategy, MBS led contributors, with collateralized loan obligations and other asset-backed securities also supporting performance. In contrast, credit index hedges against high-yield bonds detracted from strategy performance.

In the emerging markets fixed income strategy, the drawdown from long positions in U.S. dollar-denominated Argentine sovereign bonds more than offset gains from long positioning in Russian sovereign bonds. Outside of emerging markets, long positions in Puerto Rico general obligation bonds supported strategy performance.

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 future investment needs.

	Robert Christian
	Co-Lead Portfolio Manager

	Brooks Ritchey
	Co-Lead Portfolio Manager

	Art Vinokur
	Portfolio Manager

The foregoing information reflects our analysis, opinions and portfolio holdings as of November 30, 2019, 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.

6 Semiannual Report franklintempleton.com

FRANKLIN K2 LONG SHORT CREDIT FUND

Performance Summary as of November 30, 2019

The performance table does 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 11/30/19¹

Cumulative total return excludes sales charges. Average annual total return includes maximum sales charges. Sales charges will vary depending on the size of the investment and the class of share purchased. The maximum is 5.50% and the minimum is 0%.Class A: 5.50% maximum initial sales charge;Advisor Class: no sales charges. For other share classes, visitfranklintempleton.com.

Share Class	Cumulative Total Return2		Average Annual Total Return3
A4
6-Month		+1.34%		-4.25%
1-Year		+3.91%		-1.83%
3-Year		+11.89%		+1.87%
Since Inception (9/8/15)		+20.34%		+3.09%
Advisor
6-Month		+1.43%		+1.43%
1-Year		+4.09%		+4.09%
3-Year		+12.33%		+3.95%
Since Inception (9/8/15)		+20.93%		+4.60%

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 recentmonth-end performance, go tofranklintempleton.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 Expenses⁵

Share Class	With Fee Waiver		Without Fee Waiver
A		2.84%		3.30%
Advisor		2.59%		3.05%

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 9/30/20. Fund investment results reflect the expense reduction; without this reduction, the results would have been lower.

2. Cumulative total return represents the change in value of an investment over the periods indicated.

3. Average annual total return represents the average annual change in value of an investment over the periods indicated. Return for less than one year, if any, has not been annualized.

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

5. Figures are as stated in the Fund’s current prospectus and may differ from the expense ratios disclosed in the Your Fund’s Expenses and Financial Highlights sections in this report. In periods of market volatility, assets may decline significantly, causing total annual Fund operating expenses to become higher than the figures shown.

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 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 6/1/19		Ending Account Value 11/30/19		Expenses Paid During Period 6/1/19–11/30/191,2		Ending Account Value 11/30/19		Expenses Paid During Period 6/1/19–11/30/191,2		Net Annualized Expense Ratio2
A	$	1,000	$	1,013.40	$	13.93	$	1,011.16	$	13.92		2.77	%
C	$	1,000	$	1,008.80	$	17.71	$	1,007.37	$	17.69		3.53	%
R	$	1,000	$	1,011.60	$	15.23	$	1,009.86	$	15.21		3.03	%
R6	$	1,000	$	1,015.30	$	12.59	$	1,012.51	$	12.57		2.50	%
Advisor	$	1,000	$	1,014.40	$	12.73	$	1,012.36	$	12.72		2.53	%

1. Expenses are equal to the annualized expense ratio for thesix-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 183/366 to reflect theone-half year period.

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

franklintempleton.com Semiannual Report 9

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

Financial Highlights

Franklin K2 Long Short Credit Fund

	Six Months Ended November 30, 2019 (unaudited)		Year Ended May 31,
			2019			2018			2017			2016a
Class A
Per share operating performance (for a share outstanding throughout the period)
Net asset value, beginning of period	$	10.45	$	10.50		$	10.49		$	10.15		$	10.00
Income from investment operationsb:
Net investment incomec		0.13		0.37			0.29			0.23			0.21
Net realized and unrealized gains (losses)		0.01		(0.02	)		0.08			0.53			0.08
Total from investment operations		0.14		0.35			0.37			0.76			0.29
Less distributions from:
Net investment income		—		(0.31	)		(0.19	)		(0.32	)		(0.08	)
Net realized gains		—		(0.09	)		(0.17	)		(0.10	)		(0.06	)
Total distributions		—		(0.40	)		(0.36	)		(0.42	)		(0.14	)
Net asset value, end of period	$	10.59	$	10.45		$	10.50		$	10.49		$	10.15
Total returnd		1.34%		3.42%			3.63%			7.58%			2.99%
Ratios to average net assetse
Expenses before waiver, payments by affiliates and expense reductionf		3.18%		3.15%			3.51%			3.50%			3.37%
Expenses net of waiver, payments by affiliates and expense reductionf		2.77%		2.69%			2.98%	g		2.75%			2.30%	g
Expenses incurred in connection with securities sold short		0.58%		0.62%			0.89%			0.76%			0.40%
Net investment income		2.47%		3.49%			2.71%			2.24%			2.85%
Supplemental data
Net assets, end of period (000’s)		$30,651		$27,870			$45,088			$41,001			$28,198
Portfolio turnover rate		75.16%		158.66%			251.81%			317.70%			511.62%

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

^bThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and repurchases of the Fund’s shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.

^cBased on average daily shares outstanding.

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

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

^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(h).

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

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

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

FINANCIAL HIGHLIGHTS

Franklin K2 Long Short Credit Fund(continued)

	Six Months Ended November 30, 2019 (unaudited)		Year Ended May 31,
			2019			2018			2017			2016a
Class C
Per share operating performance (for a share outstanding throughout the period)
Net asset value, beginning of period	$	10.26	$	10.34		$	10.35		$	10.07		$	10.00
Income from investment operationsb:
Net investment incomec		0.09		0.27			0.19			0.14			0.09
Net realized and unrealized gains (losses)		0.01		(0.01	)		0.07			0.52			0.12
Total from investment operations		0.10		0.26			0.26			0.66			0.21
Less distributions from:
Net investment income		—		(0.25	)		(0.10	)		(0.28	)		(0.08	)
Net realized gains		—		(0.09	)		(0.17	)		(0.10	)		(0.06	)
Total distributions		—		(0.34	)		(0.27	)		(0.38	)		(0.14	)
Net asset value, end of period	$	10.36	$	10.26		$	10.34		$	10.35		$	10.07
Total returnd		0.97%		2.61%			2.70%			6.56%			2.20%
Ratios to average net assetse
Expenses before waiver, payments by affiliates and expense reductionf		3.94%		4.03%			4.37%			4.44%			3.62%
Expenses net of waiver, payments by affiliates and expense reductionf		3.53%		3.57%			3.84%	g		3.69%			2.55%	g
Expenses incurred in connection with securities sold short		0.58%		0.62%			0.89%			0.76%			0.40%
Net investment income		1.71%		2.61%			1.85%			1.30%			2.60%
Supplemental data
Net assets, end of period (000’s)		$2,776		$2,893			$2,503			$1,507			$270
Portfolio turnover rate		75.16%		158.66%			251.81%			317.70%			511.62%

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

^bThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and repurchases of the Fund’s shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.

^cBased on average daily shares outstanding.

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

^eRatios are annualized for periods less than one year.

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

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

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

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

FINANCIAL HIGHLIGHTS

Franklin K2 Long Short Credit Fund(continued)

	Six Months Ended November 30, 2019 (unaudited)			Year Ended May 31,
				2019			2018			2017			2016a
Class R
Per share operating performance (for a share outstanding throughout the period)
Net asset value, beginning of period	$	10.36		$	10.41		$	10.41		$	10.10		$	10.00
Income from investment operationsb:
Net investment incomec		0.12			0.33			0.25			0.20			0.08
Net realized and unrealized gains (losses)		(0.01	)		(0.01	)		0.09			0.53			0.16
Total from investment operations		0.11			0.32			0.34			0.73			0.24
Less distributions from:
Net investment income		—			(0.28	)		(0.17	)		(0.32	)		(0.08	)
Net realized gains		—			(0.09	)		(0.17	)		(0.10	)		(0.06	)
Total distributions		—			(0.37	)		(0.34	)		(0.42	)		(0.14	)
Net asset value, end of period	$	10.47		$	10.36		$	10.41		$	10.41		$	10.10
Total returnd		1.06%			3.12%			3.29%			7.29%			2.48%
Ratios to average net assetse
Expenses before waiver, payments by affiliates and expense reductionf		3.44%			3.50%			3.82%			3.83%			3.37%
Expenses net of waiver, payments by affiliates and expense reductionf		3.03%			3.04%			3.29%	g		3.08%			2.30%	g
Expenses incurred in connection with securities sold short		0.58%			0.62%			0.89%			0.76%			0.40%
Net investment income		2.21%			3.14%			2.40%			1.91%			2.85%
Supplemental data
Net assets, end of period (000’s)		$216			$166			$162			$127			$12
Portfolio turnover rate		75.16%			158.66%			251.81%			317.70%			511.62%

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

^bThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and repurchases of the Fund’s shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.

^cBased on average daily shares outstanding.

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

^eRatios are annualized for periods less than one year.

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

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

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

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

FINANCIAL HIGHLIGHTS

Franklin K2 Long Short Credit Fund(continued)

	Six Months Ended November 30, 2019 (unaudited)		Year Ended May 31,
			2019			2018			2017			2016a
Class R6
Per share operating performance (for a share outstanding throughout the period)
Net asset value, beginning of period	$	10.45	$	10.51		$	10.50		$	10.15		$	10.00
Income from investment operationsb:
Net investment incomec		0.14		0.36			0.31			0.24			0.23
Net realized and unrealized gains (losses)		0.01		—	g		0.08			0.53			0.06
Total from investment operations		0.15		0.36			0.39			0.77			0.29
Less distributions from:
Net investment income		—		(0.33	)		(0.21	)		(0.32	)		(0.08	)
Net realized gains		—		(0.09	)		(0.17	)		(0.10	)		(0.06	)
Total distributions		—		(0.42	)		(0.38	)		(0.42	)		(0.14	)
Net asset value, end of period	$	10.60	$	10.45		$	10.51		$	10.50		$	10.15
Total returnd		1.44%		3.53%			3.76%			7.71%			3.01%
Ratios to average net assetse
Expenses before waiver, payments by affiliates and expense reductionf		3.00%		3.10%			3.35%			3.43%			3.35%
Expenses net of waiver, payments by affiliates and expense reductionf		2.50%		2.55%			2.83%	h		2.68%			2.28%	h
Expenses incurred in connection with securities sold short		0.58%		0.62%			0.89%			0.76%			0.40%
Net investment income		2.74%		3.63%			2.86%			2.31%			2.87%
Supplemental data
Net assets, end of period (000’s)		$469		$233			$13			$13,052			$12,384
Portfolio turnover rate		75.16%		158.66%			251.81%			317.70%			511.62%

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

^bThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and repurchases of the Fund’s shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.

^cBased on average daily shares outstanding.

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

^eRatios are annualized for periods less than one year.

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

^gAmount rounds to less than $0.01 per share.

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

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

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

FINANCIAL HIGHLIGHTS

Franklin K2 Long Short Credit Fund(continued)

	Six Months Ended November 30, 2019 (unaudited)		Year Ended May 31,
			2019			2018			2017			2016a
Advisor Class
Per share operating performance (for a share outstanding throughout the period)
Net asset value, beginning of period	$	10.46	$	10.51		$	10.50		$	10.15		$	10.00
Income from investment operationsb:
Net investment incomec		0.14		0.38			0.30			0.24			0.20
Net realized and unrealized gains (losses)		0.01		(0.01	)		0.09			0.53			0.09
Total from investment operations		0.15		0.37			0.39			0.77			0.29
Less distributions from:
Net investment income		—		(0.33	)		(0.21	)		(0.32	)		(0.08	)
Net realized gains		—		(0.09	)		(0.17	)		(0.10	)		(0.06	)
Total distributions		—		(0.42	)		(0.38	)		(0.42	)		(0.14	)
Net asset value, end of period	$	10.61	$	10.46		$	10.51		$	10.50		$	10.15
Total returnd		1.43%		3.60%			3.75%			7.70%			2.99%
Ratios to average net assetse
Expenses before waiver, payments by affiliates and expense reductionf		2.94%		3.03%			3.37%			3.44%			3.36%
Expenses net of waiver, payments by affiliates and expense reductionf		2.53%		2.57%			2.84%	g		2.69%			2.29%	g
Expenses incurred in connection with securities sold short		0.58%		0.62%			0.89%			0.76%			0.40%
Net investment income		2.71%		3.61%			2.85%			2.30%			2.86%
Supplemental data
Net assets, end of period (000’s)		$92,441		$86,868			$45,514			$25,125			$23,058
Portfolio turnover rate		75.16%		158.66%			251.81%			317.70%			511.62%

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

^bThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and repurchases of the Fund’s shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.

^cBased on average daily shares outstanding.

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

^eRatios are annualized for periods less than one year.

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

^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, 2019 (unaudited)

Franklin K2 Long Short Credit Fund

		Country		Shares/ Rights			Value
	Common Stocks and Other Equity Interests 1.7%
	Diversified Financial Services 0.1%
a,b,u	One Call Corp.		United States		947		$	113,545
	Diversified Telecommunication Services 0.1%
b	Telecom Italia SpA		Italy		92,213			57,729
	Energy Equipment & Services 0.0%†
b	Weatherford International PLC		United States		534,155			12,125
	Equity Real Estate Investment Trusts (REITs) 0.6%
c	Vici Properties Inc.		United States		31,543			780,058
	Food Products 0.0%†
b	Dean Foods Co.		United States		46,977			4,872
	Independent Power & Renewable Electricity Producers 0.7%
c	Clearway Energy Inc., A		United States		31,181			591,815
	Clearway Energy Inc., C		United States		11,144			220,986
								812,801
	Media 0.1%
b	Liberty Global PLC, C		United Kingdom		3,816			82,044
b	Postmedia Network Canada Corp., B		Canada		56,068			65,426
								147,470
						��
	Metals & Mining 0.0%†
	Vedanta Ltd., ADR		India		3,457			27,829
	Multiline Retail 0.1%
c	Nordstrom Inc.		United States		3,640			138,939
	Pharmaceuticals 0.0%†
b	Sanofi, Contingent Value, rts., 12/31/20		France		27,126			23,328
	Total Common Stocks and Other Equity Interests (Cost $1,677,905)							2,118,696
	Convertible Preferred Stocks (Cost $179,099) 0.4%
	Diversified Financial Services 0.4%
a,b,u	One Call Corp., cvt. pfd.		United States		3,821			458,341
	Preferred Stocks 0.2%
	Electric Utilities 0.2%
	SCE Trust II, 5.10%, pfd.		United States		2,616			63,647
	SCE Trust III, 5.75%, pfd., H		United States		1,468			35,511
	SCE Trust IV, 5.375%, pfd., J		United States		4,659			111,630
	SCE Trust V, 5.45%, pfd., K		United States		1,849			44,894
	SCE Trust VI, 5.00%, pfd.		United States		3,162			73,358
	Total Preferred Stocks (Cost $284,707)							329,040
				Principal Amount*
	Convertible Bonds 1.2%
	Independent Power & Renewable Electricity Producers 0.4%
c	Pattern Energy Group Inc., senior note, 4.00%, 7/15/20		United States		540,000			551,717
	Internet & Direct Marketing Retail 0.1%
	Wayfair Inc., senior note, 0.375%, 9/01/22		United States		144,000			151,830
	Media 0.6%
c	Gannett Co. Inc., senior note, 4.75%, 4/15/24		United States		746,000			749,208

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)
	Pharmaceuticals 0.1%
	Teva Pharmaceutical Finance Co. LLC, C, senior bond, 0.25%, 2/01/26		Israel		78,000		$	74,716
	Total Convertible Bonds (Cost $1,500,319)							1,527,471
	Corporate Bonds and Notes 14.5%
	Aerospace & Defense 0.3%
	Triumph Group Inc., senior note, 5.25%, 6/01/22		United States		357,000			358,004
	Automobiles 0.7%
c,d	Tesla Inc., senior note, 144A, 5.30%, 8/15/25		United States		931,000			894,914
	Capital Markets 0.7%
d	eG Global Finance PLC, senior secured note, 144A,
	4.375%, 2/07/25		United Kingdom		192,000	EUR		210,222
	6.75%, 2/07/25		United Kingdom		139,000			137,610
	6.25%, 10/30/25		United Kingdom		261,000	EUR		302,436
	8.50%, 10/30/25		United Kingdom		263,000			276,150
								926,418
	Chemicals 0.2%
d	TPC Group Inc., senior secured note, 144A, 10.50%, 8/01/24		United States		252,000			253,887
	Commercial Services & Supplies 2.6%
d	Harland Clarke Holdings Corp., 144A,
	senior note, 9.25%, 3/01/21		United States		2,349,500			2,185,975
	senior secured note, 8.375%, 8/15/22		United States		533,000			401,249
	R.R. Donnelley & Sons Co., senior bond,
	6.50%, 11/15/23		United States		263,000			271,657
	6.00%, 4/01/24		United States		447,000			462,459
								3,321,340
	Communications Equipment 0.1%
d	Riverbed Technology Inc., senior note, 144A, 8.875%, 3/01/23		United States		298,000			137,080
	Containers & Packaging 0.1%
e	Lecta SA, senior secured note, Reg S,
	f FRN, 6.375%,(3-Month EURIBOR + 6.38%), 8/01/22		Spain		100,000	EUR		53,316
	6.50%, 8/01/23		Spain		100,000	EUR		52,953
								106,269
	Distributors 0.2%
d,g	American News Co. LLC, senior note, 144A, PIK, 8.50%, 9/01/26		United States		248,771			264,287
	Diversified Financial Services 0.4%
d	One Call Corp., senior secured note, first lien, 144A, 7.50%, 7/01/24		United States		469,056			462,020
	Diversified Telecommunication Services 2.6%
d	Altice France SA, senior secured note, 144A, 3.375%, 1/15/28		France		158,000	EUR		177,768
d	Cincinnati Bell Inc., senior note, 144A,
	7.00%, 7/15/24		United States		163,000			153,015
	8.00%, 10/15/25		United States		353,000			323,142
d	Digicel International Finance Ltd. / Digicel Holdings Bermuda Ltd., senior secured note, 144A, 8.75%, 5/25/24		Saint Lucia		37,000			35,412
	Frontier Communications Corp.,
	senior bond, 7.125%, 1/15/23		United States		125,000			57,656
	senior bond, 7.625%, 4/15/24		United States		79,000			37,130
	senior bond, 6.875%, 1/15/25		United States		32,000			14,653
	senior bond, 9.00%, 8/15/31		United States		245,000			112,096
	c,dsenior secured note, 144A, 8.00%, 4/01/27		United States		920,000			952,037
	Hughes Satellite Systems Corp., senior secured note, 5.25%, 8/01/26		United States		183,000			199,076
d	Intelsat Jackson Holdings SA, senior secured note, 144A,
	c 9.50%, 9/30/22		Luxembourg		884,000			990,356
	8.00%, 2/15/24		Luxembourg		172,000			175,868
								3,228,209

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)
	Electric Utilities 0.3%
e	Eskom Holdings SOC Ltd., senior bond, Reg S, 8.45%, 8/10/28		South Africa		200,000			$	213,298
d	Swissport Financing SARL, senior note, 144A, 9.00%, 2/15/25		Luxembourg		100,000				115,093
									328,391
	Energy Equipment & Services 0.7%
d	KCA Deutag UK Finance PLC, senior secured note, 144A, 9.625%, 4/01/23		United Kingdom		100,000				66,781
c,d	Transocean Inc., senior note, 144A, 7.50%, 1/15/26		United States		677,000				609,420
d	Vantage Drilling International, senior secured note, 144A, 9.25%, 11/15/23		United States		260,000				244,292
									920,493
	Equity Real Estate Investment Trusts (REITs) 0.1%
d	VICI Properties LP / VICI Note Co. Inc., senior bond, 144A, 4.625%, 12/01/29		United States		68,000				70,288
	Food & Staples Retailing 0.2%
e	Casino Guichard Perrachon SA, Reg S,
	f,h junior sub. bond, E, FRN, 3.992%, (EUR 5 Year Swap + 3.82%), Perpetual		France		300,000		EUR		197,908
	senior bond, E, 4.048%, 8/05/26		France		100,000		EUR		93,659
									291,567
	Food Products 0.1%
d	JBS USA LUX SA / JBS USA Food Co. / JBS USA Finance Inc., senior bond, 144A, 5.50%, 1/15/30		United States		118,000				126,154
	Gas Utilities 0.0%†
	Clearway Energy Operating LLC, senior note, 5.375%, 8/15/24		United States		45,000				46,238
	Health Care Providers & Services 0.6%
d,i	Aveanna Healthcare LLC, senior secured note, 144A, 9.75%, 12/15/26		United States		381,000				398,145
d,i	Centene Corp., senior bond, 144A, 4.625%, 12/15/29		United States		78,000				81,998
d	Envision Healthcare Corp., senior note, 144A, 8.75%, 10/15/26		United States		306,000				125,566
d	Mallinckrodt International Finance SA / Mallinckrodt CB LLC, senior note, 144A, 5.75%, 8/01/22		United States		290,000				101,319
									707,028
	Hotels, Restaurants & Leisure 1.1%
c,d	Mohegan Gaming & Entertainment, senior note, 144A, 7.875%, 10/15/24		United States		1,428,000				1,389,323
	Household Durables 0.2%
d	K Hovnanian Enterprises Inc., secured note, 144A, 10.50%, 7/15/24		United States		285,000				200,212
	Insurance 0.0%†
d	Ambac Assurance Corp., sub. bond, 144A, 5.10%, 6/07/20		United States		2				4
d,f	Ambac LSNI LLC, senior secured note, 144A, FRN, 7.104%,(3-Month USD LIBOR + 5.00%), 2/12/23		Cayman Islands		8				8
									12
	Media 0.7%					��
	The McClatchy Co.,
	d senior secured bond, 144A, 6.875%, 7/15/31		United States		566,000				454,215
	senior secured note, 9.00%, 7/15/26		United States		254,000				228,567
d	Univision Communications Inc., senior secured note, 144A, 5.125%, 2/15/25		United States		227,000				219,339
									902,121
	Multiline Retail 0.0%†
	Nordstrom Inc., senior bond, 5.00%, 1/15/44		United States		46,000				44,947

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)
	Oil, Gas & Consumable Fuels 1.1%
c,d	American Energy- Permian Basin LLC, senior secured note, 144A, 12.00%, 10/01/24		United States		962,000	$	601,250
d	Moss Creek Resources Holdings Inc., senior note, 144A,
	7.50%, 1/15/26		United States		20,000		13,357
	10.50%, 5/15/27		United States		472,000		348,264
	Petrobras Global Finance BV,
	senior bond, 6.90%, 3/19/49		Brazil		117,000		134,047
	senior note, 8.75%, 5/23/26		Brazil		109,000		138,833
	Southwestern Energy Co., senior bond, 6.20%, 1/23/25		United States		158,000		137,857
							1,373,608
	Pharmaceuticals 0.1%
	Teva Pharmaceutical Finance Netherlands III BV, senior note, 2.20%, 7/21/21		Israel		130,000		125,970
	Specialty Retail 1.0%
	Bed Bath & Beyond Inc., senior bond, 5.165%, 8/01/44		United States		361,000		246,606
c,d	Carvana Co., senior note, 144A, 8.875%, 10/01/23		United States		693,000		719,847
c,d	Staples Inc., senior secured note, 144A, 7.50%, 4/15/26		United States		329,000		344,833
							1,311,286
	Wireless Telecommunication Services 0.4%
d,i	SSL Robotics LLC, senior secured note, 144A, 9.75%, 12/31/23		United States		485,000		505,613
	Total Corporate Bonds and Notes (Cost $18,669,132)						18,295,679
	Corporate Bonds and Notes in Reorganization 1.8%
	Electric Utilities 1.8%
j	Pacific Gas & Electric Co.,
	senior bond, 3.85%, 11/15/23		United States		11,000		10,840
	senior bond, 3.50%, 6/15/25		United States		119,000		116,321
	senior bond, 2.95%, 3/01/26		United States		197,000		192,050
	senior bond, 3.30%, 3/15/27		United States		186,000		181,355
	senior bond, 6.05%, 3/01/34		United States		107,000		113,155
	senior bond, 5.80%, 3/01/37		United States		458,000		477,511
	senior bond, 4.45%, 4/15/42		United States		55,000		54,639
	senior bond, 3.75%, 8/15/42		United States		28,000		27,186
	senior bond, 4.60%, 6/15/43		United States		83,000		82,663
	senior bond, 4.75%, 2/15/44		United States		329,000		332,323
	senior bond, 4.30%, 3/15/45		United States		44,000		43,381
	senior bond, 4.25%, 3/15/46		United States		24,000		23,662
	senior note, 3.75%, 2/15/24		United States		194,000		192,625
	senior note, 3.30%, 12/01/27		United States		226,000		219,791
	d senior note, 144A, 4.25%, 8/01/23		United States		39,000		38,919
	d senior note, 144A, 4.65%, 8/01/28		United States		145,000		146,500
							2,252,921
	Oil, Gas & Consumable Fuels 0.0%†
e,j	Petroleos de Venezuela SA, senior note, Reg S, 6.00%, 10/28/22		Venezuela		98,020		5,881
	Total Corporate Bonds and Notes in Reorganization (Cost $2,191,926)						2,258,802
f,k	Senior Floating Rate Interests 3.3%
	Communications Equipment 0.3%
l	Riverbed Technology Inc., Term Loan B, 4.96%,(1-Month USD LIBOR + 3.25%), 4/24/22		United States		486,895		390,472
	Containers & Packaging 0.1%
	Flex Acquisition Co. Inc., Term Loan B, 5.349%,(1-Month USD LIBOR + 3.25%), 6/29/25		United States		193,721		188,515

18 Semiannual Report franklintempleton.com

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin K2 Long Short Credit Fund(continued)

		Country		Principal Amount*			Value
f,k	Senior Floating Rate Interests (continued)
	Diversified Consumer Services 0.4%
l	Advantage Sales & Marketing Inc.,
	Term Loan 1L, 4.952%,(1-Month USD LIBOR + 3.25%), 7/23/21		United States		302,406		$	284,963
	Term Loan B2, 4.952%,(1-Month USD LIBOR + 3.25%), 7/23/21		United States		244,870			230,747
								515,710
	Diversified Telecommunication Services 0.9%
	CenturyLink Inc., Term Loan B, 4.452%,(3-Month USD LIBOR + 2.75%), 1/31/25		United States		572,822			573,359
	Digicel International Finance Ltd., Term Loan B, 5.34%,(1-Month USD LIBOR + 3.25%), 5/27/24		Saint Lucia		283,049			238,646
	Intelsat Jackson Holdings SA, Term Loan B5, 6.625%, 1/02/24		Luxembourg		329,824			327,969
								1,139,974
	Electronic Equipment, Instruments & Components 0.3%
	Veritas U.S. Inc., Term Loan B1,
	6.202%,(1-Month USD LIBOR + 4.50%), 1/27/23		United States		254,064			238,079
	6.604%,(1-Month USD LIBOR + 4.50%), 1/27/23		United States		90,744			85,034
								323,113
	Multiline Retail 0.2%
l	The Neiman Marcus Group LLC, Term Loan, 7.771%,(1-Month USD LIBOR + 3.25%), 10/25/23		United States		307,452			225,593
	Professional Services 0.0%†
	Acosta Inc., Term Loan B1, 7.00%, (PRIME + 2.25%), 9/26/21		United States		185,429			34,652
	Specialty Retail 1.1%
l	PETCO Animal Supplies Inc., Term Loan B1, 5.177%,(3-Month USD LIBOR + 3.25%), 1/26/23		United States		311,563			247,381
	PetSmart Inc., Term Loan B2, 5.77%,(1-Month USD LIBOR + 4.00%), 3/11/22		United States		802,366			781,805
	Staples Inc., Term Loan B, 6.781%,(1-Month USD LIBOR + 5.00%), 4/16/26		United States		379,231			374,998
								1,404,184
	Total Senior Floating Rate Interests (Cost $4,211,337)							4,222,213
m	Credit-Linked Notes 0.5%
a,d	ICBC Standard Bank PLC, (Ukraine), 144A, 15.36%, 10/01/21		Ukraine		5,336,000	UAH		234,579
d	JPMorgan Chase Bank NA, senior note, (Egypt Treasury Bill), 144A, 16.00%, 6/13/22		Egypt		2,500,000	EGP		160,636
d	JPMorgan Chase Bank NA, senior note, (Egypt Treasury Bill), 144A, 14.35%, 9/12/24		Egypt		3,471,000	EGP		215,927
	Total Credit-Linked Notes (Cost $594,084)							611,142
	Foreign Government and Agency Securities 3.4%
	Government of Argentina, senior bond, 3.38%, 12/31/38		Argentina		36,899	EUR		15,652
e	Government of Bahrain, senior bond, Reg S, 7.00%, 1/26/26		Bahrain		200,000			231,144
	Government of Brazil, senior bond, 4.75%, 1/14/50		Brazil		200,000			193,458
e	Government of Ecuador, senior note, Reg S, 10.75%, 3/28/22		Ecuador		200,000			176,562
	Government of Italy, senior note, 2.375%, 10/17/24		Italy		373,000			365,657
e	Government of Paraguay, senior bond, Reg S, 4.625%, 1/25/23		Paraguay		200,000			211,283
	Government of Poland, senior bond, 2.75%, 10/25/29		Poland		687,000	PLN		187,265
	Government of Russia,
	senior bond, 7.25%, 5/10/34		Russia		88,432,000	RUB		1,461,914
	senior note, 7.40%, 7/17/24		Russia		24,043,000	RUB		392,833
	Government of South Africa, R186, senior bond, 10.50%, 12/21/26		South Africa		8,549,107	ZAR		646,209

franklintempleton.com Semiannual Report 19

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin K2 Long Short Credit Fund(continued)

		Country		Principal Amount*		Value
	Foreign Government and Agency Securities (continued)
	Government of Turkey,
	senior bond, 5.75%, 5/11/47		Turkey		200,000	$	171,569
	senior note, 6.35%, 8/10/24		Turkey		200,000		207,665
	Total Foreign Government and Agency Securities (Cost $4,091,420)						4,261,211
	U.S. Government and Agency Securities 0.6%
	U.S. Treasury Bond, 3.00%, 2/15/48		United States		291,000		339,345
	U.S. Treasury Note,
	1.50%, 9/30/24		United States		56,900		56,538
	1.50%, 10/31/24		United States		216,000		214,591
	1.625%, 8/15/29		United States		100,000		98,537
	1.75%, 11/15/29		United States		13,000		12,968
	Total U.S. Government and Agency Securities (Cost $673,372)						721,979
	Asset-Backed Securities and Commercial Mortgage- Backed Securities 38.1%
	Diversified Financial Services 19.7%
n	Adjustable Rate Mortgage Trust,2005-4, 3A1, FRN, 4.935%, 8/25/35		United States		70,499		70,760
	Alternative Loan Trust,2005-J10, 2A4, 6.00%, 10/25/35		United States		439,235		327,151
d	AMSR Trust, 144A,
	2019-SFR1, H, 6.04%, 1/17/27		United States		750,000		749,961
	2019-SFR1, I, 8.976%, 1/17/27		United States		750,000		749,968
d,o	Ashford Hospitality Trust, 2018-ASHF, E, 144A, FRN, 4.865%,(1-Month USD LIBOR + 3.10%), 4/15/35		United States		1,250,000		1,254,162
d	BANK, 2017-BNK9, D, 144A, 2.80%, 11/15/54		United States		1,100,000		969,565
	Bear StearnsALT-A Trust, FRN,
	n 2004-12, 2A4, 3.833%, 1/25/35		United States		320,625		316,902
	o 2004-6, B1, 4.558%,(1-Month USD LIBOR + 2.85%), 7/25/34		United States		346,495		377,332
d,o	Carlyle Global Market Strategies CLO Ltd.,2018-1A, CR, 144A, FRN, 4.716%,(3-Month USD LIBOR + 2.75%), 4/20/27		United States		2,500,000		2,376,898
d	Castlelake Aircraft Securitization Trust,2018-1, A, 144A, 4.125%, 6/15/43		United States		593,568		605,420
	Chaseflex Trust,2005-2, 1A1, 6.00%, 6/25/35		United States		504,288		487,196
	Citimortgage Alternative Loan Trust,2007-A1, 2A1, 5.50%, 1/25/22		United States		38,278		38,560
d,o	CVP Cascade Ltd.,2014-2A, C, 144A, FRN, 5.803%,(3-Month USD LIBOR + 3.80%), 7/18/26		United States		700,000		693,642
	Delta Funding Home Equity Loan Trust,2000-2, M2, 8.86%, 8/15/30		United States		323,921		286,195
o,p	FNMA,2011-11, SA, IO, FRN, 4.742%, (6.45% –1-Month USD LIBOR), 11/25/41		United States		2,335,598		482,590
d,o	Goldentree Loan Management US CLO 1 Ltd.,2017-1A, D, 144A, FRN, 5.316%,(3-Month USD LIBOR + 3.35%), 4/20/29		United States		1,000,000		1,001,269
d,i,o	Goldentree Loan Management US CLO 6 Ltd.,2019-6A, C, 144A, FRN,(3-Month USD LIBOR + 2.60%) 1/20/33		United States		1,000,000		1,000,000
d,o	GPMT Ltd.,2019-FL2, D, 144A, FRN, 4.715%,(1-Month USD LIBOR + 2.95%), 2/22/36		United States		1,000,000		1,000,500
d,o	Grippen Park CLO Ltd.,2017-1A, D, 144A, FRN, 5.266%,(3-Month USD LIBOR + 3.30%), 1/20/30		United States		500,000		490,906
d	GSMSC Pass-Through Trust, 144A, FRN,
	o 2009-4R, 2A3, 2.273%,(1-Month USD LIBOR + 0.45%), 12/26/36		United States		818,558		470,447
	n 2009-5R, 3A2, 5.50%, 10/26/35		United States		231,855		226,207
d,o	Home Partners of America Trust, 144A, FRN,
	2017-1, F, 5.302%,(1-Month USD LIBOR + 3.54%), 7/17/34		United States		500,000		501,927
	2018-1, E, 3.613%,(1-Month USD LIBOR + 1.85%), 7/17/37		United States		1,200,000		1,201,974
	JPMorgan Mortgage Acquisition Trust,2007-CH2, AF2, 4.608%, 1/25/37		United States		180,859		135,397

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)
	Diversified Financial Services (continued)
d,n,p	JPMorgan Mortgage Trust, IO, 144A, FRN,
	2019-8, B1X, 1.25%, 3/25/50		United States		829,700	$	55,922
	2019-8, B2X, 1.00%, 3/25/50		United States		1,242,669		67,104
	2019-8, B3X, 0.75%, 3/25/50		United States		796,462		32,416
d,o	KREF Ltd.,2018-FL1, D, 144A, FRN, 4.313%,(1-Month USD LIBOR + 2.55%), 6/15/36		United States		300,000		301,290
d,o	Madison Park Funding XXIII Ltd.,2017-23A, C, 144A, FRN, 4.286%,(3-Month USD LIBOR + 2.35%), 7/27/30		United States		700,000		690,404
o	Morgan Stanley ABS Capital I Inc. Trust,2004-NC6, M3, FRN, 3.883%,(1-Month USD LIBOR + 2.18%), 7/25/34		United States		40,985		41,378
d,o	Morgan StanleyRE-REMIC Trust,2013-R8, 2B2, 144A, FRN, 2.663%,(1-Month USD LIBOR + 0.42%), 9/26/36		United States		995,050		708,393
o	National Collegiate Student Loan Trust,2006-1, A5, FRN, 2.058%,(1-Month USD LIBOR + 0.35%), 3/25/33		United States		150,417		141,685
d	Sapphire Aviation Finance I Ltd.,2018-1A, B, 144A, 5.926%, 3/15/40		United States		794,219		820,705
n	Seasoned Credit Risk Transfer Trust, FRN,
	d 2016-1, M2, 144A, 3.75%, 9/25/55		United States		500,000		480,883
	2017-3, M1, 4.00%, 7/25/56		United States		40,000		40,370
d	S-Jets Ltd.,2017-1, A, 144A, 3.967%, 8/15/42		Bermuda		817,189		824,903
d,o	STACR Trust, 144A, FRN,
	2018-HRP1, B1, 5.458%,(1-Month USD LIBOR + 3.75%), 4/25/43		United States		800,000		837,439
	2018-HRP1, B2, 13.458%,(1-Month USD LIBOR + 11.75%), 4/25/43		United States		1,235,179		1,499,134
n	STARM Mortgage Loan Trust,2007-2, 4A1, FRN, 4.831%, 4/25/37		United States		88,078		69,694
o	Suntrust Alternative Loan Trust,2005-1F, 1A1, FRN, 2.358%,(1-Month USD LIBOR + 0.65%), 12/25/35		United States		240,768		204,291
o	Terwin Mortgage Trust,2003-6HE, M2, FRN, 4.333%,(1-Month USD LIBOR + 2.63%), 11/25/33		United States		153,949		145,998
d,o	TPG Real Estate Finance Issuer Ltd.,2018-FL2, D, 144A, FRN, 4.463%,(1-Month USD LIBOR + 2.70%), 11/15/37		United States		300,000		301,327
	Wells Fargo Alternative Loan Trust,2007-PA3, 2A2, 6.00%, 7/25/37		United States		187,836		187,939
d	Wendys Funding LLC,2018-1A, A2I, 144A, 3.573%, 3/15/48		United States		491,250		497,179
d,o	Westchester CLO Ltd.,2007-1A, E, 144A, FRN, 6.209%,(3-Month USD LIBOR + 4.30%), 8/01/22		United States		683,547		685,991
d,o	Zais CLO 1 Ltd.,2018-1A, CR, 144A, FRN, 5.411%,(3-Month USD LIBOR + 3.41%), 4/15/28		United States		500,000		477,513
							24,926,887
	Mortgage Real Estate Investment Trusts (REITs) 18.4%
n	American Home Mortgage Assets Trust,2005-1, 1A1, FRN, 3.957%, 11/25/35		United States		147,832		132,156
n	Banc of America Mortgage Trust, FRN,
	2005-K, 2A1, 3.978%, 12/25/35		United States		224,907		223,673
	2005-L, 1A1, 4.129%, 1/25/36		United States		148,926		138,280
	2005-L, 3A1, 4.645%, 1/25/36		United States		314,999		306,831
d,n	BCAP LLC Trust,2010-RR1, 1A4, 144A, FRN, 4.11%, 3/26/37		United States		333,820		298,213
n	Bear Stearns ARM Trust, FRN,
	2002-11, 1A2, 4.431%, 2/25/33		United States		4,745		4,530
	2006-2, 4A1, 4.13%, 7/25/36		United States		56,897		53,124
d,o	BX Trust, 144A, FRN,
	2017-APPL, E, 4.915%,(1-Month USD LIBOR + 3.15%), 7/15/34		United States		1,530,000		1,535,639
	2017-SLCT, E, 4.915%,(1-Month USD LIBOR + 3.15%), 7/15/34		United States		637,500		639,849
	Citigroup Mortgage Loan Trust,
	o2004-OPT1, M4, FRN, 2.713%,(1-Month USD LIBOR + 1.01%), 10/25/34		United States		588,602		566,679
	2006-WF1, A2E, 4.866%, 3/25/36		United States		465,091		323,744
	n2007-AR5, 2A1A, FRN, 4.566%, 4/25/37		United States		135,209		132,151
	d,o2008-RR1, A1A1, 144A, FRN, 1.778%,(1-Month USD LIBOR + 0.07%), 1/25/37		United States		722,344		671,796

franklintempleton.com Semiannual Report 21

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin K2 Long Short Credit Fund(continued)

		Country		Principal Amount*		Value
	Asset-Backed Securities and Commercial Mortgage- Backed Securities (continued)
	Mortgage Real Estate Investment Trusts (REITs) (continued)
	Countrywide Alternative Loan Trust,
	2005-73CB, 1A2, 6.25%, 1/25/36		United States		192,641	$	201,165
	o2005-IM1, A1, FRN, 2.308%,(1-Month USD LIBOR + 0.60%), 1/25/36		United States		165,737		163,207
	2006-4CB, 2A3, 5.50%, 4/25/36		United States		83,584		81,979
	CS First Boston Mortgage Securities Corp.,
	2002-9, 1A2, 7.50%, 3/25/32		United States		497,114		526,622
	n2004-AR3, CB2, FRN, 4.479%, 4/25/34		United States		144,447		138,599
	d,o2004-CF2, 2M2, 144A, FRN, 3.108%,(1-Month USD LIBOR + 1.40%), 5/25/44		United States		286,604		283,349
	CSMC Mortgage-Backed Trust,2006-4, 9A1, 6.50%, 5/25/36		United States		819,676		467,301
d	FHLMC, 144A, FRN,
	n2018-SPI3, B, 4.156%, 8/25/48		United States		250,000		184,172
	o2019-FTR1, B2, 10.058%,(1-Month USD LIBOR + 8.35%), 1/25/48		United States		350,000		411,694
d,n	FHLMC Seasoned Credit Risk Transfer Trust,2017-2, M1, 144A, FRN, 4.00%, 8/25/56		United States		2,170,000		2,198,275
d,n	FHLMC Structured Agency Credit Risk Debt Notes, 144A, FRN,
	2017-SPI1, M2, 3.98%, 9/25/47		United States		150,000		148,673
	2018-SPI1, M2, 3.739%, 2/25/48		United States		693,000		666,793
	2018-SPI2, M2, 3.814%, 5/25/48		United States		350,000		340,017
	2018-SPI3, M2, 4.156%, 8/25/48		United States		400,000		402,368
n	First Horizon Alternative Mortgage Securities Trust,2004-AA2, 2A1, FRN, 4.43%, 8/25/34		United States		264,707		267,690
	GSR Mortgage Loan Trust,
	2004-6F, 2A4, 5.50%, 5/25/34		United States		214,539		222,861
	n2004-9, B1, FRN, 4.395%, 8/25/34		United States		166,950		163,157
	n2005-AR6, B1, FRN, 4.671%, 9/25/35		United States		631,281		586,532
	2007-1F, 1A1, 5.00%, 12/25/35		United States		226,121		252,283
	Home Equity Mortgage Trust,2004-6, M2, 5.821%, 4/25/35		United States		1,562		1,562
	Impac CMB Trust,
	2004-4, 2A2, 4.84%, 9/25/34		United States		174,682		187,803
	o2004-8, 3B, FRN, 4.333%,(1-Month USD LIBOR + 2.63%), 8/25/34		United States		139,110		138,882
	o2005-2, 2B, FRN, 4.183%,(1-Month USD LIBOR + 2.48%), 4/25/35		United States		120,874		118,255
	o2005-4, 2B1, FRN, 4.183%,(1-Month USD LIBOR + 2.48%), 5/25/35		United States		147,439		145,871
	o2005-4, 2M1, FRN, 2.458%,(1-Month USD LIBOR + 0.75%), 5/25/35		United States		172,012		162,617
	o2005-8, 2B, FRN, 3.958%,(1-Month USD LIBOR + 2.25%), 2/25/36		United States		145,931		144,437
	IndyMac INDX Mortgage Loan Trust, FRN,
	o2004-AR14, 2A1A, 2.428%,(1-Month USD LIBOR + 0.72%), 1/25/35		United States		636,585		548,886
	n2005-AR21, 4A1, 3.899%, 10/25/35		United States		393,237		377,684
	o2006-AR12, A1, 1.898%,(1-Month USD LIBOR + 0.19%), 9/25/46		United States		125,042		120,399
	o2006-AR29, A2, 1.788%,(1-Month USD LIBOR + 0.08%), 11/25/36		United States		164,297		159,322
n	J.P. Morgan Mortgage Trust, FRN,
	2006-A5, 6A1, 3.929%, 8/25/36		United States		339,778		314,724
	2006-A7, 2A3, 3.873%, 1/25/37		United States		147,729		144,467
	2007-A2, 2A1, 4.345%, 4/25/37		United States		210,303		198,118
	d2019-2, B4, 144A, 4.668%, 8/25/49		United States		592,730		598,162
d,o	JPMorgan Chase Commercial Mortgage Securities Trust, 2018-ASH8, F, 144A, FRN, 5.765%,(1-Month USD LIBOR + 4.00%), 2/15/35		United States		1,000,000		1,007,597
	Lehman Mortgage Trust,2005-3, 2A3, 5.50%, 1/25/36		United States		91,030		94,430
	MASTR Adjustable Rate Mortgages Trust, FRN,
	n2004-10, B1, 4.151%, 10/25/34		United States		551,348		347,360
	o2006-OA1, 1A1, 1.918%,(1-Month USD LIBOR + 0.21%), 4/25/46		United States		374,108		344,609
n	MASTR Seasoned Securitization Trust,2004-1, 4A1, FRN, 4.466%, 10/25/32		United States		63,194		65,611
d,o	Motel 6 Trust, 2017-MTL6, F, 144A, FRN, 6.015%,(1-Month USD LIBOR + 4.25%), 8/15/34		United States		583,715		588,972

22 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)
o	New Century Home Equity Loan Trust,2003-4, M1, FRN, 2.833%,(1-Month USD LIBOR + 1.13%), 10/25/33		United States		568,296	$	572,269
n	Provident Funding Mortgage Loan Trust, FRN,
	2003-1, B1, 4.875%, 8/25/33		United States		64,886		63,224
	2004-1, B1, 4.824%, 4/25/34		United States		33,417		32,227
n	RALI Trust, FRN,
	2005-QA2, NB1, 4.212%, 2/25/35		United States		5,416		5,022
	2005-QA8, NB2, 3.696%, 7/25/35		United States		79,183		70,405
	2005-QA8, NB3, 3.585%, 7/25/35		United States		9,193		7,361
	Residential Asset Securitization Trust,2006-A1, 1A1, 6.00%, 4/25/36		United States		428,650		311,117
n	RFMSI Trust,2007-SA2, 3A, FRN, 4.272%, 4/25/37		United States		1,249,385		584,905
d,n	Seasoned Credit Risk Transfer Trust Series,2017-2, M2, 144A, FRN, 4.00%, 8/25/56		United States		230,000		229,383
o	Securitized Asset Backed Receivables LLC Trust,2004-OP2, A2, FRN, 2.408%,(1-Month USD LIBOR + 0.70%), 8/25/34		United States		199,024		194,416
n	Structured ARM Loan Trust, FRN,
	2004-2, 1A1, 4.727%, 3/25/34		United States		133,944		136,240
	2004-4, B1, 4.327%, 4/25/34		United States		450,412		425,234
n	Wachovia Mortgage Loan Trust LLC,2005-B, 1A1, FRN, 4.253%, 10/20/35		United States		545,513		542,294
o	WaMu Mortgage Pass-Through Certificates Trust,2007-OA3, 2A1A, FRN, 3.086%, (1 Year CMT + 0.76%), 4/25/47		United States		65,185		65,786
o	Washington Mutual Mortgage Pass-Through Certificates,2006-4, 3A2B, FRN, 1.788%,(1-Month USD LIBOR + 0.08%), 5/25/36		United States		316,661		249,897
n	Washington Mutual MSC Mortgage Pass-Through Certificates Series Trust, FRN,
	2003-AR2, M, 3.516%, 5/25/33		United States		995,567		969,164
	2003-AR3, B1, 3.959%, 6/25/33		United States		270,801		253,638
							23,255,752
	Total Asset-Backed Securities and Commercial Mortgage-Backed Securities (Cost $46,913,047)						48,182,639
	Municipal Bonds in Reorganization 0.8%
	Puerto Rico 0.8%
j	Puerto Rico Commonwealth GO, Public Improvement, Refunding, Series A,
	5.50%, 7/01/39		United States		155,000		104,237
	5.00%, 7/01/41		United States		225,000		144,000
j	Puerto Rico Commonwealth GO, Refunding, Series A, 8.00%, 7/01/35		United States		1,330,000		824,600
	Total Municipal Bonds in Reorganization (Cost $873,250)						1,072,837
		Number of Contracts		Notional Amount#
	Options Purchased 0.0%†
	Calls – Exchange-Traded 0.0%†
	At Home Group Inc., December Strike Price $10.00, Expires 12/20/19		59		5,900		1,770
	Clearway Energy Inc., C, February Strike Price $20.00, Expires 2/21/20		28		2,800		2,520
	Energy Transfer LP, January Strike Price $14.00, Expires 1/17/20		90		9,000		630
	Energy Transfer LP, January Strike Price $15.00, Expires 1/17/20		45		4,500		135
	Tenneco Inc., A, January Strike Price $13.00, Expires 1/17/20		141		14,100		13,042
							18,097

franklintempleton.com Semiannual Report 23

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin K2 Long Short Credit Fund(continued)

		Number of Contracts		Notional Amount#			Value
	Options Purchased†(continued)
	Puts –Over-the-Counter 0.0%†
	Softbank Group Corp., January Strike Price 4,350.00 JPY, Counterparty GSCO, Expires 1/09/20		3,000		3,000		$	14,226
	Interest Rate Swaptions – Puts –Over-the-Counter 0.0%†
	Pay fixed 2.24%, receive3-Month USD LIBOR, Counterparty JPHQ, Expires 4/30/20		1		806,000			1,720
	Total Options Purchased (Cost $51,509)							34,043
	Total Investments before Short Term Investments (Cost $81,911,109)							84,094,093
		Country		Principal Amount*
	Short Term Investments 33.7%
	Convertible Bonds (Cost $66,834) 0.0%†
	Independent Power & Renewable Electricity Producers 0.0%†
d	Clearway Energy Inc., senior note, 144A, 3.25%, 6/01/20		United States		68,000			66,855
m	Credit-Linked Notes 1.2%
a,d	Citigroup Global Markets Holdings Inc., senior note, 144A,
	(Arab Republic of Egypt), zero cpn., 1/09/20		Egypt		5,000,000	EGP		304,901
	(Arab Republic of Egypt), zero cpn., 3/19/20		Egypt		3,848,385	EGP		228,052
	(Ukraine), 15.70%, 1/10/20		Ukraine		5,349,761	UAH		209,671
	(Ukraine), 15.74%, 1/17/20		Ukraine		5,133,254	UAH		223,314
d	HSBC Bank PLC, senior note, (Arab Republic of Egypt), 144A 5/07/20		Egypt		4,750,000	EGP		277,928
	JPMorgan Chase Bank NA, senior note,
	(The Federal Republic of Nigeria), 1/13/20		Nigeria		81,000,000	NGN		220,176
	d(Egypt Treasury Bill), 144A, zero cpn., 7/09/20		Egypt		1,500,000	EGP		85,460
	Total Credit-Linked Notes (Cost $1,523,942)							1,549,502
				Shares
	Money Market Funds (Cost $34,107,020) 27.0%
q	Fidelity Investments Money Market Government Portfolio, Institutional, 1.53%		United States		34,107,020			34,107,020
				Principal Amount*
	Repurchase Agreements (Cost $6,982,216) 5.5%
r	Joint Repurchase Agreement, 1.618%, 12/02/19 (Maturity Value $6,983,158)		United States		6,982,216			6,982,216
	BNP Paribas Securities Corp. (Maturity Value $4,513,913) Deutsche Bank Securities Inc. (Maturity Value $1,179,525) HSBC Securities (USA) Inc. (Maturity Value $1,289,720) Collateralized by U.S. Government Agency Securities, 4.50%, 1/20/49; s U.S. Treasury Bills, 5/14/20 – 8/13/20; U.S. Treasury Bonds, 7.875% – 8.75%, 5/15/20 – 2/15/21; and U.S. Treasury Notes, 1.625% – 2.875%,6/30/20 – 11/15/21 (valued at $7,120,864)
	Total Investments (Cost $124,591,121) 100.2%							126,799,686
	Securities Sold Short (8.5)%							(10,748,382	)
	Other Assets, less Liabilities 8.3%							10,502,604
	Net Assets 100.0%						$	126,553,908

24 Semiannual Report franklintempleton.com

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin K2 Long Short Credit Fund(continued)

		Country		Shares			Value
t	Securities Sold Short (8.5)%
	Common Stocks (0.3)%
	Equity Real Estate Investment Trusts (REITs) (0.2)%
	Seritage Growth Properties, A		United States		4,907		$	(207,468	)
	Simon Property Group Inc.		United States		759			(114,768	)
								(322,236	)
	Food Products (0.0)%†
	Dean Foods Co.		United States		46,977			(4,872	)
	Internet & Direct Marketing Retail (0.1)%
	Wayfair Inc., A		United States		847			(71,927	)
	Total Common Stocks (Proceeds $480,520)							(399,035	)
				Principal Amount*
	Corporate Bonds and Notes (7.4)%
	Auto Components (0.1)%
e	Garrett LX I Sarl / Garrett Borrowing LLC, senior note, Reg S, 5.125%, 10/15/26		Switzerland		100,000	EUR		(109,105	)
	Automobiles (0.1)%
e	Jaguar Land Rover Automotive PLC, Reg S, 5.625%, 2/01/23		United Kingdom		107,000			(107,801	)
	Banks (0.1)%
e,f,h	China Zheshang Bank Co. Ltd., junior sub. bond, FRN, Reg S, 5.45%, (US 5 Year CMTT-Note + 3.52%), Perpetual		China		72,000			(71,640	)
	Building Products (0.3)%
d	Resideo Funding Inc., senior note, 144A, 6.125%, 11/01/26		United States		342,000			(329,184	)
	Chemicals (0.2)%
d	Hexion Inc., senior note, 144A, 7.875%, 7/15/27		United States		201,000			(203,015	)
	Commercial Services & Supplies (0.5)%
	APX Group Inc., senior note, 7.625%, 9/01/23		United States		29,000			(25,387	)
e	Intrum AB, senior note, Reg S, 3.125%, 7/15/24		Sweden		251,000	EUR		(280,721	)
d	KAR Auction Services Inc., senior note, 144A, 5.125%, 6/01/25		United States		289,000			(294,416	)
								(600,524	)
	Communications Equipment (0.2)%
d	Entercom Media Corp., 144A,
	secured note, 6.50%, 5/01/27		United States		114,000			(120,595	)
	senior note, 7.25%, 11/01/24		United States		124,000			(131,181	)
								(251,776	)
	Construction & Engineering (0.3)%
	Fluor Corp., senior bond,
	3.50%, 12/15/24		United States		281,000			(279,175	)
	4.25%, 9/15/28		United States		139,000			(137,212	)
								(416,387	)
	Containers & Packaging (0.0)%†
d	Flex Acquisition Co. Inc., senior note, 144A, 7.875%, 7/15/26		United States		22,000			(21,061	)
	Diversified Telecommunication Services (0.3)%
	Hughes Satellite Systems Corp., senior note, 6.625%, 8/01/26		United States		183,000			(201,364	)
	Sprint Capital Corp., senior bond, 6.875%, 11/15/28		United States		170,000			(181,695	)
								(383,059	)
	Equity Real Estate Investment Trusts (REITs) (0.6)%
	Intu Metrocentre Finance PLC, senior secured bond, 4.125%, 12/06/28		United Kingdom		696,000	GBP		(829,769	)

franklintempleton.com Semiannual Report 25

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin K2 Long Short Credit Fund(continued)

		Country		Principal Amount*			Value
t	Securities Sold Short(continued)
	Corporate Bonds and Notes (continued)
	Food Products (0.2)%
	B&G Foods Inc., senior note,
	5.25%, 4/01/25		United States		116,000		$	(117,450	)
	5.25%, 9/15/27		United States		174,000			(170,302	)
								(287,752	)
	Health Care Providers & Services (0.1)%
d	Mallinckrodt International Finance SA / Mallinckrodt CB LLC, senior note, 144A, 5.625%, 10/15/23		United States		290,000			(82,045	)
	Independent Power & Renewable Electricity Producers (0.8)%
	NRG Energy Inc.,
	dsenior bond, 144A, 5.25%, 6/15/29		United States		978,000			(1,050,492	)
	senior note, 5.75%, 1/15/28		United States		17,000			(18,403	)
								(1,068,895	)
	Machinery (0.4)%
e	Ansaldo Energia SpA, senior note, Reg S, 2.75%, 5/31/24		Italy		100,000	EUR		(110,082	)
e	Tereos Finance Groupe I SA, senior note, Reg S,
	4.25%, 3/04/20		France		250,000	EUR		(268,268	)
	4.125%, 6/16/23		France		100,000	EUR		(83,259	)
								(461,609	)
	Marine (0.2)%
e	CMA CGM SA, senior note, Reg S, 6.50%, 7/15/22		France		300,000	EUR		(292,871	)
	Media (1.8)%
	Altice Luxembourg SA, senior bond,
	d144A, 7.625%, 2/15/25		Luxembourg		358,000			(373,662	)
	eReg S, 6.25%, 2/15/25		Luxembourg		525,000	EUR		(599,555	)
d	Diamond Sports Group LLC / Diamond Sports Finance Co., senior note, 144A, 6.625%, 8/15/27		United States		1,062,000			(1,037,824	)
e	Virgin Media Finance PLC, senior note, Reg S, 4.50%, 1/15/25		United Kingdom		255,000	EUR		(288,447	)
								(2,299,488	)
	Oil, Gas & Consumable Fuels (0.4)%
	Southwestern Energy Co., senior bond, 7.75%, 10/01/27		United States		526,000			(458,291	)
	Pharmaceuticals (0.2)%
	Teva Pharmaceutical Finance Netherlands III BV, senior note, 6.75%, 3/01/28		Israel		278,000			(273,754	)
	Professional Services (0.1)%
e	The House of Finance NV, senior secured note, Reg S, 4.375%, 7/15/26		Belgium		100,000	EUR		(110,746	)
	Software (0.1)%
d	Veritas U.S. Inc. / Veritas Bermuda Ltd., senior note, 144A, 10.50%, 2/01/24		United States		204,000			(188,275	)
	Specialty Retail (0.1)%
	Bed Bath & Beyond Inc., senior bond,
	3.749%, 8/01/24		United States		132,000			(130,020	)
	4.915%, 8/01/34		United States		15,000			(10,661	)
								(140,681	)
	Wireless Telecommunication Services (0.3)%
e	Softbank Group Corp., senior bond, Reg S, 5.125%, 9/19/27		Japan		300,000			(304,515	)
	Sprint Corp., senior note, 7.625%, 3/01/26		United States		113,000			(123,591	)
								(428,106	)
	Total Corporate Bonds and Notes (Proceeds $9,446,551)							(9,415,834	)

26 Semiannual Report franklintempleton.com

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin K2 Long Short Credit Fund(continued)

		Country		Principal Amount*			Value
t	Securities Sold Short(continued)
	Foreign Government and Agency Securities (Proceeds $689,886) (0.6)%
	Government of Italy, senior bond, 5.25%, 11/01/29		Italy		455,000	EUR	$	(686,192	)
	U.S. Government and Agency Securities (0.2)%
	U.S. Treasury Note,
	2.00%, 5/31/24		United States		101,000			(102,616	)
	2.875%, 5/15/28		United States		133,000			(144,705	)
	Total U.S. Government and Agency Securities (Proceeds $235,501)							(247,321	)
	Total Securities Sold Short (Proceeds $10,852,458)						$	(10,748,382	)

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

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

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

^aFair valued using significant unobservable inputs. See Note 12 regarding fair value measurements.

^bNon-income producing.

^cA portion or all of the security has been segregated as collateral for securities sold short, open swap contracts, open forward exchange contracts and/or open futures contracts. At November 30, 2019, the aggregate value of these securities and/or cash pledged amounted to $9,853,120, representing 7.8% of net assets.

^dSecurity was purchased pursuant to Rule 144A under the Securities Act of 1933 and may be sold in transactions exempt from registration only to qualified institutional buyers or in public offering registered under the Securities Act of 1933. At November 30, 2019, the net value of these securities was $45,208,142, representing 35.7% of net assets.

^eSecurity 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. At November 30, 2019, the net value of these securities was $(1,391,006), representing (1.1)% of net assets.

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

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

^hPerpetual security with no stated maturity date.

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

^jSee Note 7 regarding defaulted securities.

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

^lSee Note 9 regarding unfunded loan commitments.

^mSee Note 1(g) regarding credit-linked notes.

ⁿAdjustable 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.

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

^pInvestment in an interest-only security entitles holders to receive only the interest payment on the underlying instruments. The principal amount shown is the notional amount of the underlying instruments.

^qThe rate shown is the annualizedseven-day effective yield at period end.

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

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

^tSee Note 1(h) regarding securities sold short.

^uSee Note 8 regarding restricted securities.

At November 30, 2019, 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 500E-Mini Index		Short		2	$	314,370		12/20/19	$	(13,528	)
Interest Rate Contracts
U.S. Treasury Long Bond		Long		1		158,969		3/20/20		162
Total Futures Contracts									$	(13,366	)

*As of period end.

franklintempleton.com Semiannual Report 27

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin K2 Long Short Credit Fund(continued)

At November 30, 2019, 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		5,180,134	$	1,259,774		12/03/19	$	—	$	(36,422	)
Brazilian Real		JPHQ		Sell		5,180,134		1,224,044		12/03/19		1,503		(811	)
Chilean Peso		JPHQ		Buy		327,812,171		452,026		12/18/19		—		(43,700	)
Chilean Peso		JPHQ		Sell		327,812,170		432,947		12/18/19		24,620		—
Chinese Yuan		JPHQ		Buy		3,591,823		507,642		12/18/19		2,972		—
Euro		JPHQ		Buy		208,093		230,446		12/18/19		47		(870	)
Euro		JPHQ		Sell		413,651		458,994		12/18/19		2,546		—
Indonesian Rupiah		JPHQ		Buy		2,997,688,158		210,534		12/18/19		1,618		—
Indonesian Rupiah		JPHQ		Sell		14,319,101,885		1,005,661		12/18/19		—		(7,730	)
Mexican Peso		JPHQ		Buy		4,278,916		219,089		12/18/19		—		(1,008	)
Polish Zloty		JPHQ		Buy		1,279,683		330,230		12/18/19		4		(3,421	)
Polish Zloty		JPHQ		Sell		2,024,076		516,730		12/18/19		—		(190	)
Russian Ruble		JPHQ		Buy		45,307,608		703,696		12/18/19		699		(1,959	)
Russian Ruble		JPHQ		Sell		137,078,715		2,068,537		12/18/19		—		(56,689	)
South African Rand		JPHQ		Buy		3,038,931		205,321		12/18/19		1,559		—
South African Rand		JPHQ		Sell		16,311,880		1,089,914		12/18/19		—		(20,543	)
Turkish Lira		JPHQ		Buy		1,195,530		201,505		12/18/19		5,415		—
Brazilian Real		JPHQ		Buy		2,590,067		609,872		1/03/20		817		—
British Pound		JPHQ		Sell		50,000		62,749		1/31/20		—		(2,068	)
Euro		JPHQ		Sell		1,520,000		1,692,429		1/31/20		12,061		(2,051	)
Japanese Yen		JPHQ		Sell		12,670,000		118,325		1/31/20		2,007		—
Total Forward Exchange Contracts											$	55,868	$	(177,462	)
Net unrealized appreciation (depreciation)													$	(121,594	)

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

At November 30, 2019, 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		6/20/23		449,000	$	(5,987	)	$	(63	)	$	(5,924	)
Government of Mexico		(1.00)%		Quarterly		12/20/23		417,000		(5,118	)		4,899			(10,017	)
Government of South Africa		(1.00)%		Quarterly		6/20/22		376,000		2,002			19,788			(17,786	)
Government of South Africa		(1.00)%		Quarterly		6/20/24		900,000		28,538			39,510			(10,972	)
Government of South Korea		(1.00)%		Quarterly		6/20/24		405,474		(13,571	)		(13,756	)		185
Government of Turkey		(1.00)%		Quarterly		6/20/22		6,000		204			316			(112	)
Government of Turkey		(1.00)%		Quarterly		6/20/24		462,000		39,148			46,375			(7,227	)
Traded Index
CDX.NA.HY.25		(5.00)%		Quarterly		12/20/20		1,357,800		(28,033	)		13,578			(41,611	)
CDX.NA.HY.32		(5.00)%		Quarterly		6/20/24		1,762,200		(142,185	)		(104,621	)		(37,564	)

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			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 South Africa		1.00%		Quarterly			12/20/22		184,000		$	(1,705	)	$	(3,412	)	$	1,707		BB
Government of Turkey		1.00%		Quarterly			12/20/22		136,000			(6,194	)		(6,150	)		(44	)	B+
Total Centrally Cleared Swap Contracts											$	(132,901	)	$	(3,536	)	$	(129,365	)
OTC Swap Contracts
Contracts to Buy Protectionc
Single Name					Counterparty
Altice Luxembourg S.A.		(5.00)%		Quarterly	BZWS		12/20/22		18,000	EUR		(2,296	)		218			(2,514	)
Altice Luxembourg S.A.		(5.00)%		Quarterly	BZWS		12/20/22		74,000	EUR		(9,441	)		677			(10,118	)
Altice Luxembourg S.A.		(5.00)%		Quarterly	GSCO		12/20/24		132,000	EUR		(17,278	)		(12,165	)		(5,113	)
Altice Luxembourg S.A.		(5.00)%		Quarterly	JPHQ		12/20/22		94,000	EUR		(11,992	)		1,417			(13,409	)
CenturyLink Inc.		(1.00)%		Quarterly	BZWS		12/20/23		63,000			1,429			5,611			(4,182	)
CenturyLink Inc.		(1.00)%		Quarterly	BZWS		12/20/23		63,000			1,429			5,665			(4,236	)
CenturyLink Inc.		(1.00)%		Quarterly	CITI		12/20/23		38,000			862			3,325			(2,463	)
CenturyLink Inc.		(1.00)%		Quarterly	CITI		12/20/23		63,000			1,429			5,707			(4,278	)
CenturyLink Inc.		(1.00)%		Quarterly	GSCO		12/20/23		63,000			1,429			5,555			(4,126	)
CenturyLink Inc.		(1.00)%		Quarterly	JPHQ		12/20/23		89,000			2,019			7,955			(5,936	)
Dish DBS Corp.		(5.00)%		Quarterly	CITI		12/20/24		365,000			(22,703	)		(2,037	)		(20,666	)
Government of Italy		(1.00)%		Quarterly	BOFA		6/20/24		233,000			2,394			2,226			168
Government of Mexico		(1.00)%		Quarterly	CITI		6/20/24		301,000			(3,040	)		1,504			(4,544	)
Groupe Casino		(5.00)%		Quarterly	BZWS		12/20/24		40,000	EUR		3,085			3,631			(546	)
Groupe Casino		(5.00)%		Quarterly	BZWS		12/20/24		60,000	EUR		4,628			5,777			(1,149	)
Groupe Casino		(5.00)%		Quarterly	JPHQ		12/20/24		55,000	EUR		4,243			5,452			(1,209	)
Hertz Corp. (The)		(5.00)%		Quarterly	BZWS		6/20/20		62,000			(2,241	)		(87	)		(2,154	)
Hertz Corp. (The)		(5.00)%		Quarterly	BZWS		12/20/21		27,000			(2,615	)		97			(2,712	)
Hertz Corp. (The)		(5.00)%		Quarterly	BZWS		12/20/21		68,000			(6,587	)		609			(7,196	)
Hertz Corp. (The)		(5.00)%		Quarterly	GSCO		6/20/20		59,000			(2,133	)		—			(2,133	)
Hertz Corp. (The)		(5.00)%		Quarterly	GSCO		12/20/21		68,000			(6,587	)		(989	)		(5,598	)
Hertz Corp. (The)		(5.00)%		Quarterly	GSCO		12/20/21		68,000			(6,587	)		968			(7,555	)
Hertz Corp. (The)		(5.00)%		Quarterly	GSCO		12/20/21		68,000			(6,587	)		1,087			(7,674	)
Hertz Corp. (The)		(5.00)%		Quarterly	GSCO		12/20/21		136,000			(13,174	)		1,215			(14,389	)
Hertz Corp. (The)		(5.00)%		Quarterly	GSCO		12/20/24		280,000			(33,305	)		(25,637	)		(7,668	)
Hertz Corp. (The)		(5.00)%		Quarterly	GSCO		12/20/24		303,000			(31,109	)		(17,832	)		(13,277	)
Intrum AB		(5.00)%		Quarterly	GSCO		12/20/24		169,000	EUR		(21,387	)		(16,971	)		(4,416	)
Itochu Corp.		(1.00)%		Quarterly	GSCO		6/20/22		17,300,000	JPY		(3,822	)		(2,642	)		(1,180	)
Itochu Corp.		(1.00)%		Quarterly	JPHQ		6/20/22		4,307,000	JPY		(952	)		(679	)		(273	)
Jaguar Land Rover Automotive PLC		(5.00)%		Quarterly	GSCO		12/20/24		18,000	EUR		(266	)		166			(432	)
Jaguar Land Rover Automotive PLC		(5.00)%		Quarterly	GSCO		12/20/24		26,000	EUR		(385	)		240			(625	)
JFE Holdings Inc.		(1.00)%		Quarterly	GSCO		6/20/22		5,746,000	JPY		(1,194	)		(905	)		(289	)
JFE Holdings Inc.		(1.00)%		Quarterly	JPHQ		6/20/22		3,802,000	JPY		(790	)		(608	)		(182	)
K. Hovnanian Enterprises Inc.		(5.00)%		Quarterly	BZWS		6/20/24		38,000			9,542			14,696			(5,154	)
K. Hovnanian Enterprises Inc.		(5.00)%		Quarterly	BZWS		12/20/24		113,000			30,792			37,830			(7,038	)
K. Hovnanian Enterprises Inc.		(5.00)%		Quarterly	GSCO		9/20/24		68,000			17,834			24,417			(6,583	)
K. Hovnanian Enterprises Inc.		(5.00)%		Quarterly	GSCO		12/20/24		57,000			15,532			19,082			(3,550	)
K. Hovnanian Enterprises Inc.		(5.00)%		Quarterly	MSCO		12/20/24		34,000			9,265			12,553			(3,288	)

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 Buy Protectionc(continued)
Single Name(continued)
K. Hovnanian Enterprises Inc.		(5.00)%		Quarterly		MSCS		12/20/23		21,000		$	4,749		$	5,393		$	(644	)
Kimco Realty Corp.		(1.00)%		Quarterly		JPHQ		6/20/24		121,000			(877	)		252			(1,129	)
Kohl’s Corp.		(1.00)%		Quarterly		BOFA		6/20/24		24,000			149			697			(548	)
Kohl’s Corp.		(1.00)%		Quarterly		CITI		6/20/24		24,000			149			716			(567	)
Kohl’s Corp.		(1.00)%		Quarterly		GSCO		6/20/24		913,000			5,662			9,446			(3,784	)
Kohl’s Corp.		(1.00)%		Quarterly		JPHQ		6/20/24		24,000			149			794			(645	)
Kohl’s Corp.		(1.00)%		Quarterly		MSCS		12/20/24		24,000			149			827			(678	)
Lloyds Bank PLC		(1.00)%		Quarterly		BOFA		12/20/22		196,000	EUR		(4,079	)		(1,496	)		(2,583	)
Lloyds Bank PLC		(1.00)%		Quarterly		GSCO		12/20/23		210,000	EUR		(4,328	)		289			(4,617	)
Lloyds Bank PLC		(1.00)%		Quarterly		GSCO		6/20/24		127,000	EUR		(4,655	)		902			(5,557	)
Lloyds Bank PLC		(1.00)%		Quarterly		JPHQ		12/20/22		196,000	EUR		(4,079	)		(1,628	)		(2,451	)
Lloyds Bank PLC		(1.00)%		Quarterly		JPHQ		12/20/23		67,000	EUR		(1,381	)		898			(2,279	)
Lloyds Bank PLC		(1.00)%		Quarterly		JPHQ		12/20/24		121,000	EUR		(126	)		3,677			(3,803	)
Marubeni Corp.		(1.00)%		Quarterly		GSCO		6/20/22		27,269,000	JPY		(5,603	)		(3,446	)		(2,157	)
Marubeni Corp.		(1.00)%		Quarterly		JPHQ		6/20/22		6,291,000	JPY		(1,293	)		(840	)		(453	)
MBIA Inc.		(5.00)%		Quarterly		JPHQ		6/20/21		269,000			(22,008	)		(13,290	)		(8,718	)
MBIA Inc.		(5.00)%		Quarterly		JPHQ		12/20/24		174,000			(33,284	)		(24,806	)		(8,478	)
Mitsui O.S.K. Lines Ltd.		(1.00)%		Quarterly		JPHQ		6/20/22		9,678,000	JPY		(1,543	)		(380	)		(1,163	)
Mitsui O.S.K. Lines Ltd.		(1.00)%		Quarterly		JPHQ		6/20/22		3,618,000	JPY		(577	)		(142	)		(435	)
Nordstrom Inc.		(1.00)%		Quarterly		GSCO		6/20/24		4,000			24			191			(167	)
Nordstrom Inc.		(1.00)%		Quarterly		GSCO		6/20/24		22,000			130			1,050			(920	)
Nordstrom Inc.		(1.00)%		Quarterly		GSCO		6/20/24		60,800			360			3,098			(2,738	)
NRG Energy Inc.		(5.00)%		Quarterly		GSCO		6/20/24		24,000			(4,754	)		(3,810	)		(944	)
Simon Property Group LP		(1.00)%		Quarterly		JPHQ		12/20/24		542,000			(16,066	)		(13,019	)		(3,047	)
Softbank Group Corp.		(1.00)%		Quarterly		BZWS		12/20/23		12,747,000	JPY		3,487			4,547			(1,060	)
Softbank Group Corp.		(1.00)%		Quarterly		BZWS		6/20/24		6,374,000	JPY		2,516			1,854			662
Softbank Group Corp.		(1.00)%		Quarterly		BZWS		6/20/24		12,747,000	JPY		5,032			4,531			501
Softbank Group Corp.		(1.00)%		Quarterly		BZWS		6/20/24		25,494,000	JPY		10,065			7,450			2,615
Softbank Group Corp.		(1.00)%		Quarterly		CITI		6/20/24		12,746,000	JPY		5,032			3,978			1,054
Softbank Group Corp.		(1.00)%		Quarterly		GSCO		12/20/23		12,747,000	JPY		3,487			4,279			(792	)
Softbank Group Corp.		(1.00)%		Quarterly		GSCO		12/20/23		12,747,000	JPY		3,487			4,459			(972	)
Staples Inc.		(5.00)%		Quarterly		GSCO		6/20/25		361,000			(5,296	)		9,847			(15,143	)
Telecom Italia SpA		(1.00)%		Quarterly		BZWS		12/20/24		116,000	EUR		2,378			4,899			(2,521	)
Transocean Inc.		(5.00)%		Quarterly		BZWS		6/20/22		2,000			48			40			8
Transocean Inc.		(5.00)%		Quarterly		GSCO		6/20/22		33,000			784			826			(42	)
Transocean Inc.		(5.00)%		Quarterly		GSCO		6/20/23		98,000			7,078			(2,328	)		9,406
Transocean Inc.		(5.00)%		Quarterly		GSCO		6/20/23		109,000			7,873			(1,844	)		9,717
Transocean Inc.		(5.00)%		Quarterly		GSCO		6/20/23		34,000			2,456			(1,583	)		4,039
Transocean Inc.		(5.00)%		Quarterly		GSCO		12/20/24		239,000			32,354			20,670			11,684
Transocean Inc.		(5.00)%		Quarterly		JPHQ		12/20/24		4,000			541			677			(136	)
Transocean Inc.		(5.00)%		Quarterly		JPHQ		12/20/24		138,000			18,681			23,397			(4,716	)
Transocean Inc.		(5.00)%		Quarterly		MSCO		12/20/24		20,000			2,707			3,195			(488	)
Contracts to Sell Protectionc,d
Single Name
CMA CGM S.A.		5.00%		Quarterly		BZWS		6/20/20		58,000	EUR		(1,088	)		(4,063	)		2,975			B+
CMA CGM S.A.		5.00%		Quarterly		GSCO		6/20/20		50,000	EUR		(938	)		(2,684	)		1,746			B+
K. Hovnanian Enterprises Inc.		5.00%		Quarterly		BZWS		12/20/23		9,000			(2,035	)		(3,795	)		1,760			CC

30 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 Sell Protectionc,d(continued)
Single Name(continued)
K. Hovnanian Enterprises Inc.		5.00%		Quarterly		GSCO		12/20/23		12,000	$	(2,714	)	$	(4,261	)	$	1,547			CC
Total OTC Swap Contracts											$	(97,756	)	$	126,592		$	(224,348	)
Total Credit Default Swap Contracts											$	(230,657	)	$	123,056		$	(353,713	)

^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, 2019, 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 Floating rate 3 MonthUSD-LIBOR Pay Fixed rate 1.75%		Semi-Annually		3/21/20		1,012,000		$	(6,027	)
Receive Floating rate 3 MonthUSD-LIBOR Pay Fixed rate 1.75%		Semi-Annually		6/20/20		1,500,000			(30,668	)
Receive Floating rate 3 MonthUSD-LIBOR Pay Fixed rate 1.75%		Semi-Annually		9/18/21		1,500,000			(56	)
Receive Fixed 5.88% Pay Floating BZDIOVRA Index		Annually		1/02/23		3,144,633	BRL		2,502
Receive Fixed 2.81% Pay Floating CFETS China Fixing Repo 7 Day rate		Quarterly		12/18/24		3,332,157	CNY		(2,425	)
Receive Fixed 2.90% Pay Floating CFETS China Fixing Repo 7 Day rate		Quarterly		12/18/24		2,247,088	CNY		(358	)
Receive Fixed 2.90% Pay Floating CFETS China Fixing Repo 7 Day rate		Quarterly		12/18/24		2,248,189	CNY		(395	)
Receive Floating rate 3 MonthUSD-LIBOR Pay Fixed rate 2.25%		Semi-Annually		6/20/28		1,100,000			(127,203	)
Receive Floating rate 3 MonthUSD-LIBOR Pay Fixed rate 1.68%		Semi-Annually		10/22/29		800,000			1,414
Receive Floating rate 6 MonthGBP-LIBOR Pay Fixed rate 0.86%		Semi-Annually		3/18/70		361,637	GBP		22,101
Total Interest Rate Swap Contracts								$	(141,115	)

*In U.S. dollars unless otherwise indicated.

franklintempleton.com Semiannual Report 31

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin K2 Long Short Credit Fund(continued)

At November 30, 2019, the Fund had the following total return swap contracts outstanding. See Note 1(e).

Total Return Swap Contracts

Underlying Instrument

Financing Rate

Payment Frequency

Counterparty

Maturity Date

Notional Value

Value/Unrealized Appreciation (Depreciation)

OTC Swap Contracts

Equity Contracts – Longa

Clearway Energy Inc.

1-Month LIBOR + 0.40%

Monthly

GSCO

10/07/20

$

6,290

$

305

Clearway Energy Inc.

1-Month LIBOR + 0.40%

Monthly

GSCO

10/09/20

809

33

Clearway Energy Inc.

1-Month LIBOR + 0.40%

Monthly

GSCO

10/14/20

2,422

121

Clearway Energy Inc.

1-Month LIBOR + 0.40%

Monthly

GSCO

10/15/20

1,766

90

Clearway Energy Inc.

1-Month LIBOR + 0.40%

Monthly

GSCO

10/15/20

347

16

Clearway Energy Inc.

1-Month LIBOR + 0.40%

Monthly

GSCO

10/19/20

1,424

68

Clearway Energy Inc.

1-Month LIBOR + 0.40%

Monthly

GSCO

10/20/20

13,238

529

Clearway Energy Inc.

1-Month LIBOR + 0.40%

Monthly

GSCO

10/21/20

1,301

19

Clearway Energy Inc.

1-Month LIBOR + 0.40%

Monthly

GSCO

10/21/20

2,199

77

Clearway Energy Inc.

1-Month LIBOR + 0.40%

Monthly

GSCO

10/23/20

988

6

Clearway Energy Inc.

1-Month LIBOR + 0.40%

Monthly

GSCO

10/26/20

365

(2

)

Clearway Energy Inc.

1-Month LIBOR + 0.40%

Monthly

GSCO

10/27/20

1,540

(10

)

Clearway Energy Inc.

1-Month LIBOR + 0.40%

Monthly

GSCO

10/28/20

1,881

(5

)

Clearway Energy Inc.

1-Month LIBOR + 0.40%

Monthly

GSCO

11/03/20

18,876

1,939

Energy Transfer Equity LP

1-Month LIBOR + 0.65%

Monthly

CITI

6/22/20

396,589

(71,706

)

Energy Transfer Equity LP

1-Month LIBOR + 0.80%

Monthly

GSCO

11/17/20

99,000

4,813

Energy Transfer Equity LP

1-Month LIBOR + 0.50%

Monthly

BOFA

12/31/20

344,263

(8,960

)

(72,667

)

Interest Rate Contracts – Longa

Egyptian Treasury Bill

3-Month LIBOR + 0.40%

Monthly

DBAB

5/12/20

126,359

1,540

Egyptian Treasury Bill

3-Month LIBOR + 0.40%

Monthly

GSCO

5/12/20

123,493

1,499

Government of Indonesia

3-Month LIBOR + 0.60%

Monthly

BOFA

4/15/20

437,914

2,654

Government of Indonesia

3-Month LIBOR + 0.60%

Quarterly

BOFA

6/22/20

54,205

2,415

Government of Indonesia

3-Month LIBOR + 0.60%

Quarterly

DBAB

5/15/24

73,343

3,248

Government of Indonesia

3-Month LIBOR + 0.60%

Monthly

DBAB

6/15/32

450,326

7,641

Government of Indonesia

3-Month LIBOR + 0.60%

Monthly

DBAB

5/15/48

218,570

(1,215

)

17,782

Total Total Return Swap Contracts

$

(54,885

)

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

See Note 10 regarding other derivative information.

See Abbreviations on page 51.

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

November 30, 2019 (unaudited)

Franklin K2 Long Short Credit Fund

Assets:
Investments in securities:
Cost – Unaffiliated issuers	$	117,608,905
Cost – Unaffiliated repurchase agreements		6,982,216
Value – Unaffiliated issuers	$	119,817,470
Value – Unaffiliated repurchase agreements		6,982,216
Cash		686,388
Restricted cash for OTC derivatives (Note 1f)		50,000
Foreign currency, at value (cost $366,520)		450,282
Receivables:
Investment securities sold		2,549,575
Capital shares sold		182,603
Dividends and interest		504,666
Affiliates		10,430
Deposits with brokers for:
Securities sold short		10,609,124
OTC derivative contracts		853,413
Futures contracts		15,300
Centrally cleared swap contracts		403,430
Due from brokers		400,800
Variation margin on futures contracts		666
Variation margin on centrally cleared swap contracts		5,611
OTC swap contracts (upfront payments $312,527)		290,559
Unrealized appreciation on OTC forward exchange contracts		55,868
Unrealized appreciation on OTC swap contracts		74,895
Unrealized appreciation on unfunded loan commitments (Note 8)		29,161
Other assets		24
Total assets		143,972,481
Liabilities:
Payables:
Investment securities purchased		5,460,073
Capital shares redeemed		23,008
Management fees		147,163
Distribution fees		21,139
Deposits from brokers for:
OTC derivative contracts		50,000
Due to brokers		156,846
OTC swap contracts (upfront receipts $192,257)		163,967
Securities sold short, at value (proceeds $10,852,458)		10,748,382
Unrealized depreciation on OTC forward exchange contracts		177,462
Unrealized depreciation on OTC swap contracts		354,128
Accrued expenses and other liabilities		116,405
Total liabilities		17,418,573
Net assets, at value	$	126,553,908
Net assets consist of:
Paid-in capital	$	122,010,040
Total distributable earnings (loss)		4,543,868
Net assets, at value	$	126,553,908

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

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

FINANCIAL STATEMENTS

Statement of Assets and Liabilities(continued)

November 30, 2019 (unaudited)

Franklin K2 Long Short Credit Fund

Class A:
Net assets, at value	$30,651,297
Shares outstanding	2,895,637
Net asset value per sharea	$10.59
Maximum offering price per share (net asset value per share ÷ 94.50%)	$11.20
Class C:
Net assets, at value	$2,776,324
Shares outstanding	268,086
Net asset value and maximum offering price per sharea	$10.36
Class R:
Net assets, at value	$216,115
Shares outstanding	20,634
Net asset value and maximum offering price per share	$10.47
Class R6:
Net assets, at value	$469,331
Shares outstanding	44,275
Net asset value and maximum offering price per share	$10.60
Advisor Class:
Net assets, at value	$92,440,841
Shares outstanding	8,716,400
Net asset value and maximum offering price per share	$10.61

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

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

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

FINANCIAL STATEMENTS

Statement of Operations

for the six months ended November 30, 2019 (unaudited)

Franklin K2 Long Short Credit Fund

Investment income:
Dividends:
Unaffiliated issuers	$	300,347
Interest:
Unaffiliated issuers		2,908,601
Total investment income		3,208,948
Expenses:
Management fees (Note 3a)		1,162,483
Distribution fees: (Note 3c)
Class A		42,858
Class C		14,363
Class R		484
Transfer agent fees: (Note 3e)
Class A		12,718
Class C		1,239
Class R		84
Class R6		260
Advisor Class		38,737
Custodian fees (Note 4) .		36,892
Reports to shareholders		19,161
Registration and filing fees		43,221
Professional fees		79,025
Trustees’ fees and expenses		14,979
Dividends and interest on securities sold short		308,590
Security borrowing fees		47,377
Other		34,008
Total expenses		1,856,479
Expense reductions (Note 4)		(21,111	)
Expenses waived/paid by affiliates (Note 3f)		(228,686	)
Net expenses		1,606,682
Net investment income		1,602,266
Realized and unrealized gains (losses):
Net realized gain (loss) from:
Investments:
Unaffiliated issuers		(23,500	)
Written options		(44,499	)
Foreign currency transactions		(44,361	)
Forward exchange contracts		50,064
Futures contracts		(62,683	)
Securities sold short		949,376
Swap contracts		(25,811	)
Net realized gain (loss)		798,586
Net change in unrealized appreciation (depreciation) on:
Investments:
Unaffiliated issuers		(55,996	)
Translation of other assets and liabilities denominated in foreign currencies		(67,856	)
Forward exchange contracts		(105,712	)
Written options		7,025
Futures contracts		(711	)
Securities sold short		(246,771	)
Swap contracts		(302,865	)
Net change in unrealized appreciation (depreciation)		(772,886	)
Net realized and unrealized gain (loss)		25,700
Net increase (decrease) in net assets resulting from operations	$	1,627,966

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

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

FINANCIAL STATEMENTS

Statements of Changes in Net Assets

Franklin K2 Long Short Credit Fund

	Six Months Ended November 30, 2019 (unaudited)			Year Ended May 31, 2019
Increase (decrease) in net assets:
Operations:
Net investment income	$	1,602,266		$	3,762,777
Net realized gain (loss)		798,586			306,833
Net change in unrealized appreciation (depreciation)		(772,886	)		(199,299	)
Net increase (decrease) in net assets resulting from operations		1,627,966			3,870,311
Distributions to shareholders:
Class A		—			(1,424,776	)
Class C		—			(100,011	)
Class R		—			(5,804	)
Class R6		—			(7,008	)
Advisor Class		—			(2,656,330	)
Total distributions to shareholders		—			(4,193,929	)
Capital share transactions: (Note 2)
Class A		2,428,906			(17,059,204	)
Class C		(142,238	)		409,512
Class R		47,679			5,307
Class R6		231,608			221,435
Advisor Class		4,328,957			41,498,540
Total capital share transactions		6,894,912			25,075,590
Net increase (decrease) in net assets		8,522,878			24,751,972
Net assets:
Beginning of period		118,031,030			93,279,058
End of period	$	126,553,908		$	118,031,030

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

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

FRANKLIN K2 LONG SHORT CREDIT FUND

Notes to Financial Statements (unaudited)

1. Organization and Significant Accounting Policies

Franklin Alternative Strategies Funds (Trust) is registered under the Investment Company Act of 1940 (1940 Act) as anopen-end management investment company, consisting of two 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. Class C shares automatically convert to Class A shares after they have been held for 10 years. Each class of shares may differ by its initial sales load, contingent deferred sales charges, voting rights on matters affecting a single class, its exchange privilege and fees due to differing arrangements for distribution and transfer agent fees.

The following summarizes the Fund’s significant accounting policies.

a. Financial Instrument Valuation

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

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

Securities that trade in multiple markets or on multiple exchanges are valued according to the broadest and most representative market. Certain equity securities are valued based upon fundamental characteristics or relationships to similar securities.

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

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

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

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

franklintempleton.com Semiannual Report 37

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

Franklin K2 Long Short Credit Fund(continued)

1. Organization and Significant Accounting Policies(continued)

a. Financial Instrument Valuation(continued)

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

Trading in securities on foreign securities stock exchanges and OTC markets may be completed before 4 p.m. Eastern time. In addition, trading in certain foreign markets may not take place on every Fund’s business day. Occasionally, events occur between the time at which trading in a foreign security is completed and 4 p.m. Eastern time that might call into question the reliability of the value of a portfolio security held by the Fund. As a result, differences may arise between the value of the Fund’s portfolio securities as determined at the foreign market close and the latest indications of value at 4 p.m. Eastern time. 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 anon-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 theirpro-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 thenon-defaulting party to net and

38 Semiannual Report franklintempleton.com

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

Franklin K2 Long Short Credit Fund(continued)

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 29, 2019.

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

Derivative counterparty credit risk is managed through a formal evaluation of the creditworthiness of all potential counterparties. The Fund attempts to reduce its exposure to counterparty credit risk on OTC derivatives, whenever possible, by entering into International Swaps and Derivatives Association (ISDA) master agreements with certain counterparties. These agreements contain various provisions, including but not limited to collateral requirements, events of default, or early termination. Termination events applicable to the counterparty include certain deteriorations in the credit

quality of the counterparty. Termination events applicable to the Fund include failure of the Fund to maintain certain net asset levels and/or limit the decline in net assets over various periods of time. In the event of default or early termination, the ISDA master agreement gives thenon-defaulting party the right to net andclose-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 counterpartynon-performance.

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

franklintempleton.com Semiannual Report 39

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

Franklin K2 Long Short Credit Fund(continued)

1. Organization and Significant Accounting Policies(continued)

e. Derivative Financial Instruments(continued)

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

See Note 10 regarding other derivative information.

40 Semiannual Report franklintempleton.com

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

Franklin K2 Long Short Credit Fund(continued)

f. Restricted Cash

At November 30, 2019, the Fund held restricted cash in connection with investments in certain derivative securities. Restricted cash is held in a segregated account with the Fund’s custodian/counterparty broker and is reflected in the Statement of Assets and Liabilities.

g. Credit-Linked Notes

The Fund purchases credit-linked notes. Credit-linked notes are intended to replicate the economic effects that would apply had the Fund directly purchased the underlying reference asset. The risks of credit-linked notes include the potential default of the underlying reference asset, the movement in the value of the currency of the underlying reference asset relative to the credit-linked note, the potential inability of the Fund to dispose of the credit-linked note in the normal course of business, and the possible inability of the counterparties to fulfill their obligations under the contracts.

h. 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.

i. Senior Floating Rate Interests

The Fund invests in senior secured corporate loans that pay interest at rates which are periodically reset by reference to a

base lending rate plus a spread. These base lending rates are generally the prime rate offered by a designated U.S. bank or the London InterBank Offered Rate (LIBOR). Senior secured corporate loans often require prepayment of principal from excess cash flows or at the discretion of the borrower. As a result, actual maturity may be substantially less than the stated maturity. Senior secured corporate loans in which the Fund invests are generally readily marketable, but may be subject to certain restrictions on resale. On July 27, 2017, the United Kingdom’s Financial Conduct Authority announced its intention to cease sustaining LIBOR after 2021. There remains uncertainty regarding the future utilization of LIBOR and the nature of any replacement rate. As such, the potential effect of a transition away from LIBOR on the Fund or the Fund’s investments that use or may use a floating rate based on LIBOR cannot yet be determined.

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, 2019, 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.

franklintempleton.com Semiannual Report 41

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

Franklin K2 Long Short Credit Fund(continued)

1. Organization and Significant Accounting Policies(continued)

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. Paydown gains and losses are recorded as an adjustment to interest income separately on the Statement of Operations. Facility fees are recognized as income over the expected term of the loan. Dividend income and dividends declared on securities sold short are recorded on theex-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 theex-dividend date. Distributable earnings are determined according to income tax regulations (tax basis) and may differ from earnings recorded in accordance with U.S. GAAP. These differences may be permanent or temporary. Permanent differences are reclassified among capital accounts to reflect their tax character. These reclassifications have no impact on net assets or the results of operations. Temporary differences are not reclassified, as they may reverse in subsequent periods.

Common expenses incurred by the Trust are allocated among the Funds based on the ratio of net assets of each Fund to the combined net assets of the Trust or based on the

ratio of number of shareholders of each Fund to the combined number of shareholders of the Trust. Fund specific expenses are charged directly to the Fund that incurred the expense.

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

l. Accounting Estimates

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

m. Guarantees and Indemnifications

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

2. Shares of Beneficial Interest

At November 30, 2019, 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, 2019						Year Ended May 31, 2019
	Shares			Amount			Shares			Amount
Class A Shares:
Shares solda		318,112		$	3,357,767			518,127		$	5,443,153
Shares issued in reinvestment of distributions		—			—			49,211			498,509
Shares redeemed		(88,301	)		(928,861	)		(2,195,001	)		(23,000,866	)
Net increase (decrease)		229,811		$	2,428,906			(1,627,663	)	$	(17,059,204	)

42 Semiannual Report franklintempleton.com

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

Franklin K2 Long Short Credit Fund(continued)

	Six Months Ended November 30, 2019						Year Ended May 31, 2019
	Shares			Amount			Shares			Amount
Class C Shares:
Shares sold		24,437		$	252,709			176,881		$	1,824,644
Shares issued in reinvestment of distributions		—			—			10,021			100,011
Shares redeemeda		(38,210	)		(394,947	)		(147,058	)		(1,515,143	)
Net increase (decrease)		(13,773	)	$	(142,238	)		39,844		$	409,512
Class R Shares:
Shares sold		5,832		$	60,910			1,059		$	10,958
Shares issued in reinvestment of distributions		—			—			533			5,358
Shares redeemed		(1,273	)		(13,231	)		(1,066	)		(11,009	)
Net increase (decrease)		4,559		$	47,679			526		$	5,307
Class R6 Shares:
Shares sold		21,947		$	231,608			22,273		$	233,301
Shares issued in reinvestment of distributions		—			—			642			6,497
Shares redeemed		—			—			(1,782	)		(18,363	)
Net increase (decrease)		21,947		$	231,608			21,133		$	221,435
Advisor Class Shares:
Shares sold		1,747,757		$	18,435,082			5,072,991		$	52,995,139
Shares issued in reinvestment of distributions		—			—			166,635			1,688,016
Shares redeemed		(1,336,710	)		(14,106,125	)		(1,263,815	)		(13,184,615	)
Net increase (decrease)		411,047		$	4,328,957			3,975,811		$	41,498,540

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

3. Transactions with Affiliates

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

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

a. Management Fees

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

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

franklintempleton.com Semiannual Report 43

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

Franklin K2 Long Short Credit Fund(continued)

3. Transactions with Affiliates(continued)

a. Management Fees(continued)

Subadvisors

Apollo Credit Management LLC

Chatham Asset Management, LLC

Ellington Global Asset Management, L.L.C.

Emso Asset Management Limited

Medalist Partners, LP

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 Rule12b-1 under the 1940 Act. Under the Fund’s Class A reimbursement distribution plan, the Fund reimburses Distributors for costs incurred in connection with the servicing, sale and distribution of the Fund’s shares up to the maximum annual plan rate. Under the Class A reimbursement distribution plan, costs exceeding the maximum for the current plan year cannot be reimbursed in subsequent periods. In addition, under the Fund’s Class C and R compensation distribution plans, the Fund pays Distributors for costs incurred in connection with the servicing, sale and distribution of the Fund’s shares up to the maximum annual plan rate for each class. The plan year, for purposes of monitoring compliance with the maximum annual plan rates, is February 1 through January 31.

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

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

d. Sales Charges/Underwriting Agreements

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

Sales charges retained net of commissions paid to unaffiliated brokers/dealers	$	505
CDSC retained	$	842

e. Transfer Agent Fees

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

44 Semiannual Report franklintempleton.com

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

Franklin K2 Long Short Credit Fund(continued)

For the period ended November 30, 2019, the Fund paid transfer agent fees of $53,038 of which $21,112 was retained by Investor Services.

f. Waiver and Expense Reimbursements

K2 Advisors and Investor Services have contractually agreed in advance to waive or limit their respective fees and to assume as their own expense certain expenses otherwise payable by the Fund so that the expenses (excluding distribution fees, acquired fund fees and expenses, expenses related to securities sold short, and certain non-routine expenses or costs, including those relating to litigation, indemnification, reorganizations, and liquidations) for Class A, Class C, Class R and Advisor Class of the Fund does not exceed 1.95%, and Class R6 does not exceed 1.89% based on the average net assets of each class until September 30, 2020. Total expenses waived or paid are not subject to recapture subsequent to the Fund’s fiscal year end.

Prior to October 1, 2019, expenses (excluding certain fees and expenses as previously disclosed) for Class R6 were limited to 1.93% based on the average net assets of the class.

g. Other Affiliated Transactions

At November 30, 2019, Franklin Resources, Inc. owned 29.5% of the Fund’s outstanding shares.

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, 2019, the custodian fees were reduced as noted in the Statement of Operations.

5. Income Taxes

At November 30, 2019, the cost of investments and net unrealized appreciation (depreciation) were as follows:

Cost of investments	$	114,149,495
Unrealized appreciation	$	3,796,419
Unrealized depreciation		(2,456,221	)
Net unrealized appreciation (depreciation)	$	1,340,198

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

6. Investment Transactions

Purchases and sales of investments and securities sold short (excluding short term securities) for the period ended November 30, 2019, aggregated $73,689,367 and $79,084,657, respectively.

7. Credit Risk and Defaulted Securities

At November 30, 2019, the Fund had 17.8% of its portfolio invested in high yield, senior secured floating rate loans, or other securities rated below investment grade and unrated securities, if any. These securities may be more sensitive to economic conditions causing greater price volatility and are potentially subject to a greater risk of loss due to default than higher rated securities.

The Fund may purchase thepre-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

franklintempleton.com Semiannual Report 45

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

Franklin K2 Long Short Credit Fund(continued)

7. Credit Risk and Defaulted Securities(continued)

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, 2019, the aggregate long value of distressed company securities for which interest recognition has been discontinued was $3,331,639, representing 2.6% of the Fund’s net assets. For information as to specific securities, see the accompanying Statement of Investments.

8. Restricted Securities

The Fund invests in securities that are restricted under the Securities Act of 1933 (1933 Act). Restricted securities are often purchased in private placement transactions, and cannot be sold without prior registration unless the sale is pursuant to an exemption under the 1933 Act. Disposal of these securities may require greater effort and expense, and prompt sale at an acceptable price may be difficult. The Fund may have registration rights for restricted securities. The issuer generally incurs all registration costs.

At November 30, 2019, investments in restricted securities, excluding securities exempt from registration under the 1933 Act, were as follows:

Shares		Issuer	Acquisition Date		Cost		Value
	947	aOne Call Corp.		10/28/19	$	44,369	$	113,545
	3,821	aOne Call Corp., cvt. pfd.		10/28/19		179,099		458,341
	Total Restricted Securities (Value is 0.5% of Net Assets)				$	223,468	$	571,886

^aThe Fund also invests in unrestricted securities of this issuer, valued at $462,020 as of November 30, 2019.

9. 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 and any unrealized appreciation or depreciation is included in the Statement of Assets and Liabilities and Statement of Operations. Funded portions of credit agreements are presented in the Statement of Investments.

At November 30, 2019, unfunded commitments were as follows:

Borrower	Unfunded Commitment
Advantage Sales & Marketing Inc., Term Loan 1L	$	69,996
Advantage Sales & Marketing Inc., Term Loan B2		32,922
Frontier Communications Corp., Term Loan B		221,402
Groupe Casino, Term Loan B		114,184
Intelsat Jackson Holdings SA, Term Loan		231,011
Macdonald Dett, Term Loan B		199,714
Mallinckrodt International Finance SA, Term Loan B		226,861
The Neiman Marcus Group LLC, Term Loan		14,208
Party City HoldCo., Term Loan		247,073
PETCO Animal Supplies Inc., Term Loan		195,915
Riverbed Technology Inc., Term Loan B		26,328
	$	1,579,614

46 Semiannual Report franklintempleton.com

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

Franklin K2 Long Short Credit Fund(continued)

10. Other Derivative Information

At November 30, 2019, the investments in derivative contracts are reflected in the Statement of Assets and Liabilities as follows:

Derivative Contracts Not Accounted for as Hedging Instruments	Asset Derivatives				Liability Derivatives
	Statement of Assets and Liabilities Location	Fair Value			Statement of Assets and Liabilities Location	Fair Value
Interest rate contracts	Investments in securities, at value	$	1,720	a
	Variation margin on futures contracts		162	b
	Variation margin on centrally cleared swap contracts		26,017	b	Variation margin on centrally cleared swap contracts	$	167,132	b
	Unrealized appreciation on OTC swap contracts		18,997		Unrealized depreciation on OTC swap contracts		1,215
Foreign exchange contracts	Unrealized appreciation on OTC forward exchange contracts		55,868		Unrealized depreciation on OTC forward exchange contracts		177,462
Credit contracts	Variation margin centrally cleared swap contracts		1,892	b	Variation margin centrally cleared swap contracts		131,257	b
	OTC swap contracts (upfront payments)		290,559		OTC swap contracts (upfront receipts)		163,967
	Unrealized appreciation on OTC swap contracts		47,882		Unrealized depreciation on OTC swap contracts		272,230
Equity contracts	Investments in securities, at value		32,323	a
	Unrealized appreciation on OTC swap contracts		8,016		Unrealized depreciation on OTC swap contracts		80,683
					Variation margin on futures contracts		13,528	b
Totals		$	483,436			$	1,007,474

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

^bThis 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.

For the period ended November 30, 2019, the effect of derivative contracts in the 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					Investments	$	(6,300	)a
	Futures contracts	$	(37,938	)	Futures contracts		13,053
	Swap contracts		18,326		Swap contracts		(9,367	)
Foreign exchange contracts	Forward exchange contracts		50,064		Forward exchange contracts		(105,712	)
Credit contracts	Swap contracts		(38,132	)	Swap contracts		(261,690	)
Equity contracts	Investments		(173,439	)a	Investments		(60,769	)a
	Written options		(44,499	)	Written options		7,025
	Futures contracts		(24,745	)	Futures contracts		(13,764	)
	Swap contracts		(6,005	)	Swap contracts		(31,808	)
Totals		$	(256,368	)		$	(469,332	)

^a Purchased 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.

franklintempleton.com Semiannual Report 47

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

Franklin K2 Long Short Credit Fund(continued)

10. Other Derivative Information(continued)

For the period ended November 30, 2019, the average month end notional amount of futures contracts, options and swap contracts represented $578,100, 749,967 shares and $27,863,502, respectively. The average month end contract value of forward exchange contracts was $9,980,154.

At November 30, 2019, 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	$	55,868	$	177,462
Options Purchased		15,946		—
Swap Contracts		365,454		518,095
Total	$	437,268	$	695,557

^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, 2019, OTC derivative assets, which may be offset against OTC derivative liabilities, and collateral received from the counterparty, are as follows:

			Amounts Not Offset in the Statement of Assets and Liabilities
	Gross Amounts of Assets Presented in the Statement of Assets and Liabilities		Financial Instruments Available for Offset			Financial Instruments Collateral Received		Cash Collateral Receiveda			Net Amount (Not less than zero)
Counterparty
BOFA	$	8,160	$	(8,160	)	$	—	$	—		$	—
BZWS		106,653		(58,525	)		—		—			48,128
CITI		16,284		(16,284	)		—		—			—
DBAB		12,429		(1,215	)		—		(11,214	)		—
GSCO		169,667		(169,667	)		—		—			—
JPHQ		15,788		(4,119	)		—		—			11,669
JPHQc		86,319		—			—		—			86,319
MSCO		15,748		(3,776	)		—		—			11,972
MSCS		6,220		(1,322	)		—		—			4,898
Total	$	437,268	$	(263,068	)	$	—	$	(11,214	)	$	162,986

48 Semiannual Report franklintempleton.com

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

Franklin K2 Long Short Credit Fund(continued)

At November 30, 2019, OTC derivative liabilities, which may be offset against OTC derivative assets, and collateral pledged to the counterparty, are as follows:

			Amounts Not Offset in the Statement of Assets and Liabilities
	Gross Amounts of Liabilities Presented in the Statement of Assets and Liabilities		Financial Instruments Available for Offset			Financial Instruments Collateral Pledgedb		Cash Collateral Pledgeda			Net Amount (Not less than zero)
Counterparty
BOFA	$	13,587	$	(8,160	)	$	—	$	(5,427	)	$	—
BZWS		58,525		(58,525	)		—		—			—
CITI		106,261		(16,284	)		—		—			89,977
DBAB		1,215		(1,215	)		—		—			—
GSCO		219,555		(169,667	)		—		(49,888	)		—
JPHQ		4,119		(4,119	)		—		—			—
JPHQc		287,197		—			—		—			287,197
MSCO		3,776		(3,776	)		—		—			—
MSCS		1,322		(1,322	)		—		—			—
Total	$	695,557	$	(263,068	)	$	—	$	(55,315	)	$	377,174

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

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

^cRepresents derivatives not subject to an ISDA master agreement.

See Note 1(e) regarding derivative financial instruments.

See Abbreviations on page 51.

11. Credit Facility

The Fund, together with other U.S. registered and foreign investment funds (collectively, Borrowers), managed by Franklin Templeton, are borrowers in a joint syndicated senior unsecured credit facility totaling $2 billion (Global Credit Facility) which matures on February 7, 2020. 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, 2019, the Fund did not use the Global Credit Facility.

12. 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.)

franklintempleton.com Semiannual Report 49

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

Franklin K2 Long Short Credit Fund(continued)

12. Fair Value Measurements(continued)

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

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

A summary of inputs used as of November 30, 2019, 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
Equity Investmentsb	$	2,334,191	$	—	$	571,886	$	2,906,077
Convertible Bonds		—		1,527,471		—		1,527,471
Corporate Bonds and Notes		—		18,295,679		—		18,295,679
Corporate Bonds and Notes in Reorganization		—		2,258,802		—		2,258,802
Senior Floating Rate Interests		—		4,222,213		—		4,222,213
Credit-Linked Notes		—		376,563		234,579		611,142
Foreign Government and Agency Securities		—		4,261,211		—		4,261,211
U.S. Government and Agency Securities		—		721,979		—		721,979
Asset-Backed Securities and Commercial Mortgage-Backed Securities		—		48,182,639		—		48,182,639
Municipal Bonds in Reorganization		—		1,072,837		—		1,072,837
Options Purchased		18,097		15,946		—		34,043
Short Term Investments		34,107,020		7,632,635		965,938		42,705,593
Total Investments in Securities	$	36,459,308	$	88,567,975	$	1,772,403	$	126,799,686
Other Financial Instruments:
Futures Contracts	$	162	$	—	$	—	$	162
Forward Exchange Contracts		—		55,868		—		55,868
Swap Contracts		—		102,804		—		102,804
Unfunded Loan Commitments		—		29,161		—		29,161
Total Other Financial Instruments	$	162	$	187,833	$	—	$	187,995
Liabilities:
Other Financial Instruments:
Securities Sold Shorta	$	399,035	$	10,349,347	$	—	$	10,748,382
Futures Contracts		13,528		—		—		13,528
Forward Exchange Contracts		—		177,462		—		177,462
Swap Contracts		—		652,517		—		652,517
Total Other Financial Instruments	$	412,563	$	11,179,326	$	—	$	11,591,889

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

^bIncludes common, preferred and convertible preferred stocks as well as other equity interests.

50 Semiannual Report franklintempleton.com

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

Franklin K2 Long Short Credit Fund(continued)

A reconciliation of assets in which Level 3 inputs are used in determining fair value is presented when there are significant Level 3 financial instruments at the beginning and/or end of the period. At November 30, 2019, the reconciliation of assets, is as follows:

	Balance at Beginning of Period		Purchases		Sales		Transfer Into (Out of) Level 3a		Cost Basis Adjustments		Net Realized Gain (Loss)		Net Unrealized Appreciation (Depreciation)		Balance at End of Period		Net Change in Unrealized Appreciation (Depreciation) on Assets Held at Period End
Assets:
Investments in Securities:
Equity Investmentsb	$	—	$	—	$	—	$	571,886	$	—	$	—	$	—	$	571,886	$	—
Credit-Linked Notes		—		220,265		—		—		—		—		14,314		234,579		14,314
Short Term Investments		—		924,182		—		—		—		—		41,756		965,938		41,756
Total Investments in Securities	$	—	$	1,144,447	$	—	$	571,886	$	—	$	—	$	56,070	$	1,772,403	$	56,070

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

^bIncludes common and preferred stocks.

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

13. 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.

Abbreviations

Counterparty		Currency		Selected Portfolio		Index
BOFA	Bank of America Corp.	BRL	Brazilian Real	ADR	American Depositary Receipt	CDX.NA.HY	CDX North America High Yield Index
BZWS	Barclays Bank PLC	CNY	Chinese Yuan	ARM	Adjustable Rate Mortgage
CITI	Citigroup, Inc.	EGP	Egyptian Pound	BZDIOVRA	Brazil Interbank Deposit Rate
DBAB	Deutsche Bank AG	EUR	Euro	CFETS	China Foreign Exchange Trade System
GSCO	The Goldman Sachs Group, Inc.	GBP	British Pound
JPHQ	JP Morgan Chase & Co.	JPY	Japanese Yen	CLO	Collateralized Loan Obligation
MSCO	Morgan Stanley	NGN	Nigerian Naira	CMT	Constant Maturity Treasury Index
MSCS	Morgan Stanley Capital Services LLC	PLN	Polish Zloty	EURIBOR	Euro Interbank Offered Rate
		RUB	Russian Ruble	FHLMC	Federal Home Loan Mortgage Corp.
		UAH	Ukraine Hryvnia
		USD	United States Dollar	FNMA	Federal National Mortgage Association
		ZAR	South African Rand
				FRN	Floating Rate Note
				GO	General Obligation
				IO	Interest-Only
				LIBOR	London InterBank Offered Rate
				PIK	Payment-In-Kind
				PRIME	United States Prime Rate
				REIT	Real Estate Investment Trust

franklintempleton.com Semiannual Report 51

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

FRANKLIN K2 LONG SHORT CREDIT FUND

Shareholder Information

Proxy Voting Policies and Procedures

The Fund’s investment manager has established Proxy Voting Policies and Procedures (Policies) that the Fund uses to determine how to vote proxies relating to portfolio securities. Shareholders may view the Fund’s complete Policies online at franklintempleton.com. Alternatively, shareholders may request copies of the Policies free of charge by calling the Proxy Group collect at (954)527-7678 or by sending a written request to: Franklin Templeton Companies, LLC, 300 S.E. 2nd Street, Fort Lauderdale, FL 33301, Attention: Proxy Group. Copies of the Fund’s proxy voting records are also made available online at franklintempleton.com and posted on the U.S. Securities and Exchange Commission’s website at sec.gov and reflect the most recent12-month period ended June 30.

Quarterly Statement of Investments

The Trust, on behalf of the Fund, files a complete statement of investments with the U.S. Securities and Exchange Commission for the first and third quarters for each fiscal year as an exhibit to its report on FormN-PORT. Shareholders may view the filed FormN-PORT 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.

52 Semiannual Report franklintempleton.com

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.

	Semiannual Report and Shareholder Letter Franklin K2 Long Short Credit Fund
	Investment Manager	Distributor	Shareholder Services
	K2/D&S Management Co., L.L.C.	Franklin Templeton Distributors, Inc. (800) DIAL BEN®/342-5236 franklintempleton.com	(800) 632-2301
© 2019-2020 Franklin Templeton Investments. All rights reserved.			948 S 01/20

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 13(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 experts are Edward I. Altman, Ann Torre Bates and David W. Niemiec and they are “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 forClosed-End Management Investment Companies.                                                                                                                                                                              N/A

Item 8.    Portfolio Managers ofClosed-End Management Investment Companies.                             N/A

Item 9.    Purchases of Equity Securities byClosed-End Management Investment Company and Affiliated Purchasers.                                                                                                                                                                             N/A

Item 10.    Submission of Matters to a Vote of Security Holders.

There have been no changes to the procedures by which shareholders may recommend nominees to the Registrant’s Board of Trustees that would require disclosure herein.

Item 11.    Controls and Procedures.

(a)Evaluation of Disclosure Controls and Procedures. The Registrant maintains disclosure controls and procedures that are designed to provide reasonable assurance that information required to be disclosed in the Registrant’s filings under the Securities Exchange Act of 1934, as amended, and the Investment Company Act of 1940 is recorded, processed, summarized and reported within the periods specified in the rules and forms of the Securities and Exchange Commission. Such information is accumulated and communicated to the Registrant’s management, including its principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure. The Registrant’s management, including the principal executive officer and the principal financial officer, recognizes that any set of controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives.

Within 90 days prior to the filing date of this Shareholder Report onForm N-CSR, the Registrant had carried out an evaluation, under the supervision and with the participation of the Registrant’s management,

including the Registrant’s principal executive officer and the Registrant’s principal financial officer, of the effectiveness of the design and operation of the Registrant’s disclosure controls and procedures. Based on such evaluation, the Registrant’s principal executive officer and principal financial officer concluded that the Registrant’s disclosure controls and procedures are effective.

(b)Changes in Internal Controls. There have been no changes in the Registrant’s internal control over financial reporting that occurred during the period covered by this report that has materially affected, or is reasonably likely to materially affect the internal control over financial reporting.

Item 12.    Disclosure of Securities Lending Activities forClosed-End Management Investment Company.                                                                                                                                             N/A

Item 13.    Exhibits.

(a)    (1) Code of Ethics

(a)    (2) Certifications pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 of Matthew T. Hinkle, Chief Executive Officer - Finance and Administration, and Robert G. Kubilis, Chief Financial Officer and Chief Accounting Officer

(b)     Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 of Matthew T. Hinkle, Chief Executive Officer - Finance and Administration, and Robert G. Kubilis, Chief Financial Officer and Chief Accounting Officer

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

FRANKLIN ALTERNATIVE STRATEGIES FUNDS

By	/S/ MATTHEW T. HINKLE
	Matthew T. Hinkle
	Chief Executive Officer - Finance and Administration
Date January 31, 2020

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 31, 2020
By	/S/ ROBERT G. KUBILIS
	Robert G. Kubilis
	Chief Financial Officer and Chief Accounting Officer
Date January 31, 2020