UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSRS
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-22641
Franklin Alternative Strategies Funds
(Exact name of registrant as specified in charter)
One Franklin Parkway
San Mateo, CA 94403-1906
(Address of principal executive offices) (Zip code)
Craig S. Tyle
One Franklin Parkway
San Mateo, CA 94403-1096
(Name and address of agent for service)
Registrant’s telephone number, including area code: 650-312-2000
Date of fiscal year end: May 31
Date of reporting period: November 30, 2021
Item 1. | Reports to Stockholders. |
The Report to Shareholders is attached herewith.
(b) Not applicable.
SEMIANNUAL REPORT AND SHAREHOLDER LETTER
FRANKLIN K2 ALTERNATIVE STRATEGIES FUND
A Series of Franklin Alternative Strategies Funds
November 30, 2021
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SHAREHOLDER LETTER
Dear Fellow Shareholder:
During the six months ended November 30, 2021, the global economy benefited from continued monetary and fiscal stimulus measures, improved global trade, easing COVID-19 pandemic restrictions and the progress of vaccination programs. During parts of the period, geopolitical tensions, the Chinese government’s regulatory changes, surges of COVID-19 cases in certain regions and the emergence of the Omicron variant pressured global stock and bond prices. Conversely, investor sentiment was boosted by economic growth in the U.S. and China and accommodative monetary policies by some central banks, including the U.S. Federal Reserve and the European Central Bank.
In this environment, global developed market stocks, as measured by the MSCI World Index (USD), posted a +5.08% total return for the period.1 In contrast, global emerging market stocks, as measured by the MSCI Emerging Markets Index (USD), posted a -10.65% total return, while global government bonds, as measured by the FTSE World Government Bond Index (USD), posted a -2.76% total return.1
We are committed to our long-term perspective and disciplined investment approach as we continue to 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 professionals in today’s markets and encourage investors to continue to seek their advice. Amid changing markets and economic conditions, we are confident investors with a well-diversified portfolio and a patient, long-term outlook should be well-positioned for the years ahead.
On the following pages, the Fund’s portfolio management team reviews investment decisions that pertain to performance during the past six months in light of the economic environment and other factors. Please remember all securities markets fluctuate, as do mutual fund share prices.
We thank you for investing with Franklin Templeton, welcome your questions and comments, and look forward to continuing to serve your investment needs in the future.
Sincerely,
Brooks Ritchey
President and Chief Executive Officer –
Investment Management
Franklin Alternative Strategies Funds
This letter reflects our analysis and opinions as of November 30, 2021, unless otherwise indicated. The information is not a complete analysis of every aspect of any market, country, industry, security or fund. Statements of fact are from sources considered reliable.
1. Source: Morningstar.
See www.franklintempletondatasources.com for additional data provider information.
Not FDIC Insured | | | May Lose Value | | | No Bank Guarantee |
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Visit franklintempleton.com for fund updates, to access your account, or to find helpful financial planning tools.
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SEMIANNUAL REPORT
Franklin K2 Alternative Strategies Fund
This semiannual report for Franklin K2 Alternative Strategies Fund covers the period ended November 30, 2021.
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 managed by multiple subadvisors, and the Fund’s investment manager has overall responsibility for the Fund’s investments. The investment manager principally allocates the Fund’s assets among multiple subadvisors who are implementing one or more non-traditional or alternative investment strategies. 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 asset-backed securities, including collateralized debt obligations; as well as derivatives, commodities and currencies.
Performance Overview
The Fund’s Class A shares posted a +0.32% 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 -0.17% cumulative total return for the same period.1 Also for comparison, the Fund’s secondary benchmark, the ICE BofA 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 +0.01%
cumulative total return for the same period.2 You can find more of the Fund’s performance data in the Performance Summary beginning on page 7.
Performance data represent past performance, which does not guarantee future results. Investment return and principal value will fluctuate, and you may have a gain or loss when you sell your shares. Current performance may differ from figures shown. For most recent month-end performance, go to franklintempleton.com or call (800) 342-5236.
Economic and Market Overview
Global developed and emerging market equities, as measured by the MSCI All Country World Index (USD), posted a +3.03% total return for the six months ended November 30, 2021.2 Global equities benefited from the continued progress of vaccination programs for COVID-19, solid economic growth and a rebound in global trade. However, the Chinese government’s imposition of additional restrictions on some businesses pressured Asian and global emerging market stocks. The combination of increased consumer demand and persistent supply-chain disruptions contributed to higher inflation in many countries. Additionally, the spread of the highly contagious Delta variant pressured global stocks, and the emergence of the Omicron variant late in the six-month period injected further uncertainty into equity markets.
In the U.S., the economy continued to recover amid declining unemployment, solid wage growth and high business confidence. Gross domestic product (GDP) growth continued, as strong consumer spending supported the economy. A rebound in corporate earnings and the passage of a bipartisan infrastructure bill further bolstered investor sentiment. The U.S. Federal Reserve (Fed) kept the federal funds target rate at a record-low range of 0.00%–0.25% and continued its program of open-ended U.S. Treasury and mortgage bond purchases to help keep markets functioning. However, in its November 2021 meeting statement, the Fed detailed plans to reduce its purchases of U.S. Treasury and mortgage-backed securities beginning in November. The Fed also noted that it
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.
See www.franklintempletondatasources.com for additional data provider information.
The dollar value, number of shares or principal amount, and names of all portfolio holdings are listed in the Fund’s Consolidated Statement of Investments (SOI). The Consolidated SOI begins on page 15.
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FRANKLIN K2 ALTERNATIVE STRATEGIES FUND
views inflation as partially transitory, and that further employment progress was needed before the Fed would consider raising the range for the federal funds target rate.
The eurozone economy showed signs of recovery, as quarter-over-quarter GDP increased in the second and third quarters of 2021 after contracting for the previous two quarters. Most of the eurozone’s largest economies posted solid growth rates, as increased vaccination rates helped consumer activity return to pre-pandemic levels. Strong corporate earnings growth also helped European developed market equities. However, in November 2021, the annual inflation rate in the eurozone reached the highest level since 1997, two years before the introduction of the euro, and the prospect of energy shortages as winter approached tempered investor optimism. Consequently, European developed market equities, as measured by the MSCI Europe Index (USD), posted a -3.58% total return for the six months under review.2
Asian developed and emerging market equities, as measured by the MSCI All Country Asia Index (USD), posted a -8.18% total return for the six-month period.2 Although China’s economy continued to grow, it was pressured by higher commodity prices, increased fuel costs and production disruption caused by government-mandated suspensions of power use. Asian equity markets experienced heightened volatility due to inflation concerns and rising COVID-19 infection rates in some countries. Unexpected regulatory changes by the Chinese government, which negatively impacted education- and technology-related businesses, and concerns about a Chinese large property developer’s solvency further pressured Asian stocks during the six-month period.
Global emerging market stocks, as measured by the MSCI Emerging Markets Index (USD), posted a -10.65% total return for the six months under review.2 Higher COVID-19 cases in some countries, limited vaccine rollouts and concerns about rising interest rates and elevated inflation dampened investor enthusiasm in global emerging market equities. Interest-rate increases by several central banks, including Brazil, Russia and Mexico, to counter inflation raised investor concerns about a slowdown in economic growth.
Investment Strategy
We manage the Fund using a multi-manager approach. While we have overall responsibility for the Fund’s investments, we principally allocate assets to multiple subadvisors, each of whom independently manages a separate portion of the Fund’s portfolio in accordance with some or all of the following strategies: long short equity, relative value, event driven and global macro. We allocate the Fund’s assets
among these strategies utilizing a top-down approach, generating the Fund’s strategy weightings by taking into account market conditions, risk factors, diversification, liquidity, transparency, and availability of various subadvisors and other investment options, among other things. We allocate the Fund’s assets to specific subadvisors utilizing a bottom-up approach, selecting subadvisors and their weighting within the Fund’s portfolio by taking into account their correlations to various markets and to each other, their risk profiles and their return expectations. Long short equity strategies generally seek to produce returns from investments in the equity markets by taking long and short positions in stocks and stock indexes (through the use of derivatives or through a position in an ETF). Relative value strategies encompass a wide range of investment techniques that are intended to profit from pricing inefficiencies. Event driven strategies generally invest in securities of companies undergoing significant corporate events. Global macro strategies generally focus on macroeconomic opportunities across numerous markets and investments. In addition, the debt securities in which the Fund may invest may have variable or fixed interest rates, may be of any maturity or credit rating, and may include sovereign debt, high yield (“junk”) bonds and distressed debt securities (securities of companies that are, or are about to be, involved in reorganizations, financial restructurings, or bankruptcy) and securities that are in default.
The Fund may take long and/or short positions in a wide range of asset classes, including equities, fixed income, commodities and currencies, among others. Long positions benefit from an increase in the price of the underlying instrument or asset class, while short positions benefit from a decrease in that price. The Fund may use derivatives for hedging and non-hedging (investment) purposes, although no subadvisor is required to hedge any of the Fund’s positions or to use derivatives. Such derivative investments may include futures contracts, swaps, options and currency forward contracts. As a result of the Fund’s use of derivatives, the Fund may have economic leverage, which means the sum of the Fund’s investment exposures through its use of derivatives may significantly exceed the amount of assets invested in the Fund, although these exposures may vary over time. The Fund may engage in active and frequent trading as part of its investment strategies.
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FRANKLIN K2 ALTERNATIVE STRATEGIES FUND
Strategy Allocation* | ||||||||
Based on Total Net Assets as of 11/30/21 | ||||||||
Strategy | Long Positions | Short Positions | ||||||
Event Driven | 16.1% | -8.0% | ||||||
Global Macro | 35.1% | -37.9% | ||||||
Long Short Equity | 34.8% | -20.4% | ||||||
Relative Value | 27.8% | -9.7% | ||||||
Total | 113.8% | -76.0% |
*Figures include the effect of gross notional exposure of derivatives.
Subadvisors | ||||
11/30/21 | ||||
Long Short Equity | ||||
Chilton Investment Company, LLC | ||||
Electron Capital Partners, LLC | ||||
Jennison Associates, LLC | ||||
Portland Hill Asset Management Limited | ||||
Wellington Management Company, LLP | ||||
Relative Value | ||||
Apollo Credit Management LLC | ||||
Benefit Street Partners, L.L.C. | ||||
Ellington Global Asset Management, LLC | ||||
Lazard Asset Management, LLC | ||||
Loomis Sayles & Company, L.P. | ||||
One River Asset Management, LLC | ||||
Event Driven | ||||
Bardin Hill Arbitrage IC Management LP | ||||
P. Schoenfeld Asset Management L.P. | ||||
Global Macro | ||||
BlueBay Asset Management LLP | ||||
Emso Asset Management Limited | ||||
Graham Capital Management, L.P. | ||||
RV Capital Management Private Ltd |
Manager’s Discussion
Three of the Fund’s four underlying strategies in which assets were allocated contributed to the Fund’s positive performance for the six-month period—in order of contribution, long short equity, relative value and event driven. The global macro strategy detracted from the Fund’s performance. Meanwhile, 10 of the Fund’s 17 subadvisors delivered absolute gains. The conditional risk overlay (CRO) was not implemented during the period. The allocation percentages for each strategy are listed in the Strategy Allocation table on this page. The subadvisors with assets allocated at period-end are also listed in the Subadvisors table on this page.
We implemented a position in new relative value subadvisor Benefit Street Partners, or BSP, in September 2021. The subadvisor pursues an active high-yield-bond trading strategy with an opportunistic hedge and fits with our overall favorable outlook for more active strategies in the current environment.
Chilton Investment, Electron Capital Partners, Jennison Associates, Portland Hill Asset Management and Wellington Management were the Fund’s long short equity strategy subadvisors during the period. Chilton, Wellington and Electron were leading overall positive contributors, while Portland Hill was a significant detractor. Positive performance was driven by the strategy’s equity exposure. Currency positioning also contributed positively. In terms of sectors, information technology, industrials and utilities were leading positive contributors to returns, followed by currency hedges. In contrast, equity index hedges hindered returns.
Apollo Credit Management, Benefit Street Partners, Ellington Global Asset Management, Lazard Asset Management, Loomis Sayles & Company and One River Asset Management were the Fund’s relative value strategy subadvisors during the period. Lazard and Ellington were responsible for the bulk of positive contribution, benefiting from a corporate fixed income health care sector allocation and currency positioning (Lazard) as well as asset-backed securities and mortgage securities (Ellington) exposures. Strategy gains were partially offset by detraction from interest-rate weightings. On a sector level, currency, information technology and health care exposures were leading positive contributors. Utilities also contributed meaningfully. In contrast, short exposure to U.S. government bonds negatively affected returns. During the reporting period, no Fund assets were allocated to Brigade Capital Management or Elementum Advisors, two other relative value subadvisors.
Bardin Hill Arbitrage IC Management and P. Schoenfeld Asset Management (PSAM) represented the event driven strategy. Both subadvisors benefited performance, bolstered by long equity positioning and currency hedges, with credit exposures adding to performance modestly. The idiosyncratic nature of performance drivers helped to partially isolate the strategy during periods of broader equity market weakness. Bardin Hill’s long equity position in an American technology company was a key positive contributor, with shares moving higher after the company reported better-than-expected revenue and earnings. PSAM’s long position in a global rental car company also bolstered returns, gaining in the wake of the company’s announcement that it ordered 100,000 electric vehicles for purchase by the end of 2022.
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FRANKLIN K2 ALTERNATIVE STRATEGIES FUND
BlueBay Asset Management, Emso Asset Management, Graham Capital Management and RV Capital Management were the global macro strategy subadvisors. RV Capital positively contributed to performance, while negative performance from BlueBay, Graham and Emso more than offset RV Capital’s positive contribution during the period. Interest-rate exposure was a notable detractor, due to bond futures and emerging market government bonds. Commodities and credit positioning slightly bolstered returns. On a sector level, long exposure to emerging market government bonds and real estate (credit) and equity index hedges hindered returns, partially offset by long exposure to financials.
During the six-month period, in addition to adding BSP as a new subadvisor within the relative value strategy, the team increased allocations to global macro subadvisor BlueBay; long short equity subadvisors Chilton, Portland Hill, and Electron; and relative value subadvisors One River and Lazard. An additional allocation was also made to event driven subadvisor PSAM. Exposure was reduced to global macro subadvisors Graham and Emso.
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, 2021, 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.
CFA® is a trademark owned by CFA Institute.
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FRANKLIN K2 ALTERNATIVE STRATEGIES FUND
Performance Summary as of November 30, 2021
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 11/30/211
Cumulative total return excludes sales charges. Average annual total return includes maximum sales charges. Sales charges will vary depending on the size of the investment and the class of share purchased. The maximum is 5.50% and the minimum is 0%. Class A: 5.50% maximum initial sales charge; Advisor Class: no sales charges. For other share classes, visit franklintempleton.com.
Share Class | Cumulative Total Return2 | Average Annual Total Return3 | ||||||
A4 | ||||||||
6-Month | +0.32% | -5.23% | ||||||
1-Year | +4.48% | -1.25% | ||||||
5-Year | +22.86% | +3.02% | ||||||
Since Inception (10/11/13) | +35.63% | +3.10% | ||||||
Advisor | ||||||||
6-Month | +0.40% | +0.40% | ||||||
1-Year | +4.71% | +4.71% | ||||||
5-Year | +24.39% | +4.46% | ||||||
Since Inception (10/11/13) | +38.46% | +4.08% |
Performance data represent past performance, which does not guarantee future results. Investment return and principal value will fluctuate, and you may have a gain or loss when you sell your shares. Current performance may differ from figures shown. For most recent month-end performance, go to franklintempleton.com or call (800) 342-5236.
See page 8 for Performance Summary footnotes.
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FRANKLIN K2 ALTERNATIVE STRATEGIES FUND
PERFORMANCE SUMMARY
Total Annual Operating Expenses5 | ||||||||
Share Class | With Fee Waiver | Without Fee Waiver | ||||||
A | 2.66% | 2.87% | ||||||
Advisor | 2.41% | 2.62% |
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. Events such as the spread of deadly diseases, disasters, and financial, political or social disruptions, may heighten risks and adversely affect performance. The Fund’s prospectus also includes a description of the main investment risks.
1. The Fund has an expense reduction contractually guaranteed through 9/30/22 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.
See www.franklintempletondatasources.com for additional data provider information.
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FRANKLIN K2 ALTERNATIVE STRATEGIES FUND
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 6/1/21 | Ending Account Value 11/30/21 | Expenses Paid During Period 6/1/21–11/30/211,2 | Ending Account Value 11/30/21 | Expenses Paid During Period 6/1/21–11/30/211,2 | Net Annualized Expense Ratio2 | ||||||||||||||||||
A | $ | 1,000 | $ | 1,003.20 | $ | 12.81 | $ | 1,012.28 | $ | 12.86 | 2.55 | % | ||||||||||||
C | $ | 1,000 | $ | 999.20 | $ | 16.54 | $ | 1,008.52 | $ | 16.62 | 3.30 | % | ||||||||||||
R | $ | 1,000 | $ | 1,002.40 | $ | 14.06 | $ | 1,011.03 | $ | 14.12 | 2.80 | % | ||||||||||||
R6 | $ | 1,000 | $ | 1,004.80 | $ | 11.26 | $ | 1,013.84 | $ | 11.31 | 2.24 | % | ||||||||||||
Advisor | $ | 1,000 | $ | 1,004.00 | $ | 11.55 | $ | 1,013.54 | $ | 11.61 | 2.30 | % |
1. Expenses are equal to the annualized expense ratio for the six-month period as indicated above—in the far right column—multiplied by the simple average account value over the period indicated, and then multiplied by 183/365 to reflect the one-half year period.
2. Reflects expenses after fee waivers and expense reimbursements. Does not include acquired fund fees and expenses.
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FRANKLIN ALTERNATIVE STRATEGIES FUNDS
Consolidated Financial Highlights
Franklin K2 Alternative Strategies Fund
Six Months Ended November 30, 2021 (unaudited) | Year Ended May 31, | |||||||||||||||||||||||
2021 | 2020 | 2019 | 2018 | 2017 | ||||||||||||||||||||
Class A | ||||||||||||||||||||||||
Per share operating performance (for a share outstanding throughout the period) | ||||||||||||||||||||||||
Net asset value, beginning of period | $12.46 | $11.19 | $11.28 | $11.38 | $11.14 | $10.55 | ||||||||||||||||||
|
| |||||||||||||||||||||||
Income from investment operationsa: | ||||||||||||||||||||||||
Net investment income (loss)b | (0.04 | ) | (0.08 | ) | (0.03 | ) | 0.04 | 0.01 | 0.03 | |||||||||||||||
Net realized and unrealized gains (losses) | 0.08 | 1.45 | 0.02 | 0.11 | 0.38 | 0.61 | ||||||||||||||||||
|
| |||||||||||||||||||||||
Total from investment operations | 0.04 | 1.37 | (0.01 | ) | 0.15 | 0.39 | 0.64 | |||||||||||||||||
|
| |||||||||||||||||||||||
Less distributions from: | ||||||||||||||||||||||||
Net investment income | — | — | (0.07 | ) | — | (0.15 | ) | (0.05 | ) | |||||||||||||||
Net realized gains | — | (0.10 | ) | (0.01 | ) | (0.25 | ) | — | — | |||||||||||||||
|
| |||||||||||||||||||||||
Total distributions | — | (0.10 | ) | (0.08 | ) | (0.25 | ) | (0.15 | ) | (0.05 | ) | |||||||||||||
|
| |||||||||||||||||||||||
Net asset value, end of period | $ | 12.50 | $ | 12.46 | $ | 11.19 | $ | 11.28 | $ | 11.38 | $ | 11.14 | ||||||||||||
|
| |||||||||||||||||||||||
Total returnc | 0.32% | 12.25% | (0.15)% | 1.35% | 3.57% | 6.07% | ||||||||||||||||||
Ratios to average net assetsd | ||||||||||||||||||||||||
Expenses before waiver, payments by affiliates and expense reductione | 2.71% | 2.82% | 2.58% | 2.73% | 2.81% | 3.07% | ||||||||||||||||||
Expenses net of waiver, payments by affiliates and expense reductione | 2.55% | f | 2.64% | 2.40% | 2.56% | 2.59% | 2.73% | |||||||||||||||||
Expenses incurred in connection with securities sold short | 0.36% | 0.44% | 0.20% | 0.36% | 0.39% | 0.53% | ||||||||||||||||||
Net investment income (loss) | (0.59)% | (0.67)% | (0.25)% | 0.36% | 0.06% | 0.10% | ||||||||||||||||||
Supplemental data | ||||||||||||||||||||||||
Net assets, end of period (000’s) | $104,373 | $102,138 | $90,205 | $104,452 | $119,214 | $119,385 | ||||||||||||||||||
Portfolio turnover rate | 77.08% | 236.64% | 271.51% | 235.47% | 234.77% | 209.45% |
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%.
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, 2021 (unaudited) | Year Ended May 31, | |||||||||||||||||||||||
2021 | 2020 | 2019 | 2018 | 2017 | ||||||||||||||||||||
Class C | ||||||||||||||||||||||||
Per share operating performance (for a share outstanding throughout the period) | ||||||||||||||||||||||||
Net asset value, beginning of period | $ | 12.11 | $ | 10.95 | $ | 11.05 | $ | 11.25 | $ | 11.00 | $ | 10.45 | ||||||||||||
|
| |||||||||||||||||||||||
Income from investment operationsa: | ||||||||||||||||||||||||
Net investment income (loss)b | (0.08 | ) | (0.15 | ) | (0.11 | ) | (0.05 | ) | (0.08 | ) | (0.04 | ) | ||||||||||||
Net realized and unrealized gains (losses) | 0.07 | 1.41 | 0.02 | 0.10 | 0.39 | 0.59 | ||||||||||||||||||
|
| |||||||||||||||||||||||
Total from investment operations | (0.01 | ) | 1.26 | (0.09 | ) | 0.05 | 0.31 | 0.55 | ||||||||||||||||
|
| |||||||||||||||||||||||
Less distributions from: | ||||||||||||||||||||||||
Net investment income | — | — | — | — | (0.06 | ) | — | |||||||||||||||||
Net realized gains | — | (0.10 | ) | (0.01 | ) | (0.25 | ) | — | — | |||||||||||||||
|
| |||||||||||||||||||||||
Total distributions | — | (0.10 | ) | (0.01 | ) | (0.25 | ) | (0.06 | ) | — | ||||||||||||||
|
| |||||||||||||||||||||||
Net asset value, end of period | $ | 12.10 | $ | 12.11 | $ | 10.95 | $ | 11.05 | $ | 11.25 | $ | 11.00 | ||||||||||||
|
| |||||||||||||||||||||||
Total returnc | (0.08)% | 11.51% | (0.85)% | 0.56% | 2.82% | 5.26% | ||||||||||||||||||
Ratios to average net assetsd | ||||||||||||||||||||||||
Expenses before waiver, payments by affiliates and expense reductione | 3.46% | 3.54% | 3.33% | 3.48% | 3.56% | 3.79% | ||||||||||||||||||
Expenses net of waiver, payments by affiliates and expense reductione | 3.30% | f | 3.36% | 3.15% | 3.31% | 3.34% | 3.45% | |||||||||||||||||
Expenses incurred in connection with securities sold short | 0.36% | 0.44% | 0.20% | 0.36% | 0.39% | 0.53% | ||||||||||||||||||
Net investment income (loss) | (1.34)% | (1.39)% | (1.00)% | (0.39)% | (0.69)% | (0.62)% | ||||||||||||||||||
Supplemental data | ||||||||||||||||||||||||
Net assets, end of period (000’s) | $29,196 | $31,541 | $36,043 | $44,897 | $53,196 | $55,496 | ||||||||||||||||||
Portfolio turnover rate | 77.08% | 236.64% | 271.51% | 235.47% | 234.77% | 209.45% |
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, 2021 (unaudited) | Year Ended May 31, | |||||||||||||||||||||||
2021 | 2020 | 2019 | 2018 | 2017 | ||||||||||||||||||||
Class R | ||||||||||||||||||||||||
Per share operating performance (for a share outstanding throughout the period) | ||||||||||||||||||||||||
Net asset value, beginning of period | $ | 12.44 | $ | 11.20 | $ | 11.28 | $ | 11.42 | $ | 11.17 | $ | 10.61 | ||||||||||||
|
| |||||||||||||||||||||||
Income from investment operationsa: | ||||||||||||||||||||||||
Net investment income (loss)b | (0.05 | ) | (0.11 | ) | (0.06 | ) | 0.02 | (0.02 | ) | (0.25 | ) | |||||||||||||
Net realized and unrealized gains (losses) | 0.08 | 1.45 | 0.02 | 0.09 | 0.39 | 0.86 | ||||||||||||||||||
|
| |||||||||||||||||||||||
Total from investment operations | 0.03 | 1.34 | (0.04 | ) | 0.11 | 0.37 | 0.61 | |||||||||||||||||
|
| |||||||||||||||||||||||
Less distributions from: | ||||||||||||||||||||||||
Net investment income | — | — | (0.03 | ) | — | (0.12 | ) | (0.05 | ) | |||||||||||||||
Net realized gains | — | (0.10 | ) | (0.01 | ) | (0.25 | ) | — | — | |||||||||||||||
|
| |||||||||||||||||||||||
Total distributions | — | (0.10 | ) | (0.04 | ) | (0.25 | ) | (0.12 | ) | (0.05 | ) | |||||||||||||
|
| |||||||||||||||||||||||
Net asset value, end of period | $ | 12.47 | $ | 12.44 | $ | 11.20 | $ | 11.28 | $ | 11.42 | $ | 11.17 | ||||||||||||
|
| |||||||||||||||||||||||
Total returnc | 0.24% | 11.97% | (0.39)% | 1.08% | 3.28% | 5.79% | ||||||||||||||||||
Ratios to average net assetsd | ||||||||||||||||||||||||
Expenses before waiver, payments by affiliates and expense reductione | 2.96% | 3.06% | 2.83% | 2.98% | 3.06% | 3.32% | ||||||||||||||||||
Expenses net of waiver, payments by affiliates and expense reductione | 2.80% | f | 2.88% | 2.65% | 2.81% | 2.84% | 2.98% | |||||||||||||||||
Expenses incurred in connection with securities sold short | 0.36% | 0.44% | 0.20% | 0.36% | 0.39% | 0.53% | ||||||||||||||||||
Net investment income (loss) | (0.84)% | (0.91)% | (0.50)% | 0.11% | (0.19)% | (0.15)% | ||||||||||||||||||
Supplemental data | ||||||||||||||||||||||||
Net assets, end of period (000’s) | $1,139 | $840 | $884 | $844 | $648 | $597 | ||||||||||||||||||
Portfolio turnover rate | 77.08% | 236.64% | 271.51% | 235.47% | 234.77% | 209.45% |
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, 2021 (unaudited) | Year Ended May 31, | |||||||||||||||||||||||
2021 | 2020 | 2019 | 2018 | 2017 | ||||||||||||||||||||
Class R6 | ||||||||||||||||||||||||
Per share operating performance (for a share outstanding throughout the period) | ||||||||||||||||||||||||
Net asset value, beginning of period | $ | 12.58 | $ | 11.25 | $ | 11.34 | $ | 11.41 | $ | 11.17 | $ | 10.59 | ||||||||||||
|
| |||||||||||||||||||||||
Income from investment operationsa: | ||||||||||||||||||||||||
Net investment income (loss)b | (0.02 | ) | (0.04 | ) | 0.01 | 0.08 | 0.03 | 0.02 | ||||||||||||||||
Net realized and unrealized gains (losses) | 0.08 | 1.47 | 0.02 | 0.10 | 0.40 | 0.65 | ||||||||||||||||||
|
| |||||||||||||||||||||||
Total from investment operations | 0.06 | 1.43 | 0.03 | 0.18 | 0.43 | 0.67 | ||||||||||||||||||
|
| |||||||||||||||||||||||
Less distributions from: | ||||||||||||||||||||||||
Net investment income | — | — | (0.11 | ) | — | (0.19 | ) | (0.09 | ) | |||||||||||||||
Net realized gains | — | (0.10 | ) | (0.01 | ) | (0.25 | ) | — | — | |||||||||||||||
|
| |||||||||||||||||||||||
Total distributions | — | (0.10 | ) | (0.12 | ) | (0.25 | ) | (0.19 | ) | (0.09 | ) | |||||||||||||
|
| |||||||||||||||||||||||
Net asset value, end of period | $ | 12.64 | $ | 12.58 | $ | 11.25 | $ | 11.34 | $ | 11.41 | $ | 11.17 | ||||||||||||
|
| |||||||||||||||||||||||
Total returnc | 0.48% | 12.61% | 0.27% | 1.70% | 3.83% | 6.40% | ||||||||||||||||||
Ratios to average net assetsd | ||||||||||||||||||||||||
Expenses before waiver, payments by affiliates and expense reductione | 2.40% | 2.50% | 2.26% | 2.41% | 2.46% | 2.73% | ||||||||||||||||||
Expenses net of waiver, payments by affiliates and expense reductione | 2.24% | f | 2.32% | 2.07% | 2.23% | 2.24% | 2.39% | |||||||||||||||||
Expenses incurred in connection with securities sold short | 0.37% | 0.44% | 0.20% | 0.36% | 0.39% | 0.53% | ||||||||||||||||||
Net investment income (loss) | (0.28)% | (0.35)% | 0.08% | 0.69% | 0.41% | 0.44% | ||||||||||||||||||
Supplemental data | ||||||||||||||||||||||||
Net assets, end of period (000’s) | $53,365 | $27,471 | $15,537 | $42,842 | $31,805 | $265,247 | ||||||||||||||||||
Portfolio turnover rate | 77.08% | 236.64% | 271.51% | 235.47% | 234.77% | 209.45% |
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, 2021 (unaudited) | Year Ended May 31, | |||||||||||||||||||||||
2021 | 2020 | 2019 | 2018 | 2017 | ||||||||||||||||||||
Advisor Class | ||||||||||||||||||||||||
Per share operating performance (for a share outstanding throughout the period) | ||||||||||||||||||||||||
Net asset value, beginning of period | $ | 12.55 | $ | 11.23 | $ | 11.33 | $ | 11.40 | $ | 11.16 | $ | 10.58 | ||||||||||||
|
| |||||||||||||||||||||||
Income from investment operationsa: | ||||||||||||||||||||||||
Net investment income (loss)b | (0.02 | ) | (0.05 | ) | — | c | 0.07 | 0.04 | 0.04 | |||||||||||||||
Net realized and unrealized gains (losses) | 0.07 | 1.47 | 0.01 | 0.11 | 0.38 | 0.62 | ||||||||||||||||||
|
| |||||||||||||||||||||||
Total from investment operations | 0.05 | 1.42 | 0.01 | 0.18 | 0.42 | 0.66 | ||||||||||||||||||
|
| |||||||||||||||||||||||
Less distributions from: | ||||||||||||||||||||||||
Net investment income | — | — | (0.10 | ) | — | (0.18 | ) | (0.08 | ) | |||||||||||||||
Net realized gains | — | (0.10 | ) | (0.01 | ) | (0.25 | ) | — | — | |||||||||||||||
|
| |||||||||||||||||||||||
Total distributions | — | (0.10 | ) | (0.11 | ) | (0.25 | ) | (0.18 | ) | (0.08 | ) | |||||||||||||
|
| |||||||||||||||||||||||
Net asset value, end of period | $ | 12.60 | $ | 12.55 | $ | 11.23 | $ | 11.33 | $ | 11.40 | $ | 11.16 | ||||||||||||
|
| |||||||||||||||||||||||
Total returnd | 0.40% | 12.55% | 0.19% | 1.61% | 3.75% | 6.29% | ||||||||||||||||||
Ratios to average net assetse | ||||||||||||||||||||||||
Expenses before waiver, payments by affiliates and expense reductionf | 2.46% | 2.57% | 2.33% | 2.48% | 2.56% | 2.82% | ||||||||||||||||||
Expenses net of waiver, payments by affiliates and expense reductionf | 2.30% | g | 2.39% | 2.15% | 2.31% | 2.34% | 2.48% | |||||||||||||||||
Expenses incurred in connection with securities sold short | 0.36% | 0.44% | 0.20% | 0.36% | 0.39% | 0.53% | ||||||||||||||||||
Net investment income (loss) | (0.34)% | (0.42)% | — | h | 0.61% | 0.31% | 0.35% | |||||||||||||||||
Supplemental data | ||||||||||||||||||||||||
Net assets, end of period (000’s) | $1,245,036 | $1,152,105 | $977,094 | $1,046,252 | $896,278 | $674,828 | ||||||||||||||||||
Portfolio turnover rate | 77.08% | 236.64% | 271.51% | 235.47% | 234.77% | 209.45% |
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.
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(i).
gBenefit of expense reduction rounds to less than 0.01%.
hAmount 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, 2021 (unaudited)
Franklin K2 Alternative Strategies Fund
Country | Shares/ Warrants/ Rights | Value | ||||||||||||||||
Common Stocks and Other Equity Interests 41.7% | ||||||||||||||||||
Aerospace & Defense 0.1% | ||||||||||||||||||
a | Bombardier Inc., A | Canada | 49,428 | $ | 68,486 | |||||||||||||
a | Bombardier Inc., B | Canada | 1,042,990 | 1,412,480 | ||||||||||||||
|
| |||||||||||||||||
1,480,966 | ||||||||||||||||||
|
| |||||||||||||||||
Air Freight & Logistics 0.3% | ||||||||||||||||||
Expeditors International of Washington Inc. | United States | 1,117 | 135,850 | |||||||||||||||
a | GXO Logistics Inc. | United States | 17,210 | 1,653,020 | ||||||||||||||
United Parcel Service Inc., B | United States | 342 | 67,843 | |||||||||||||||
a | XPO Logistics Inc. | United States | 37,296 | 2,701,722 | ||||||||||||||
|
| |||||||||||||||||
4,558,435 | ||||||||||||||||||
|
| |||||||||||||||||
Airlines 0.1% | ||||||||||||||||||
a,b | Controladora Vuela Cia de Aviacion SAB de CV, ADR | Mexico | 30,418 | 450,795 | ||||||||||||||
a | Japan Airlines Co. Ltd. | Japan | 27,791 | 500,963 | ||||||||||||||
|
| |||||||||||||||||
951,758 | ||||||||||||||||||
|
| |||||||||||||||||
Automobiles 0.1% | ||||||||||||||||||
a,f | Arrival SA | Luxembourg | 71,867 | 674,831 | ||||||||||||||
a | General Motors Co. | United States | 8,800 | 509,256 | ||||||||||||||
|
| |||||||||||||||||
1,184,087 | ||||||||||||||||||
|
| |||||||||||||||||
Banks 0.1% | ||||||||||||||||||
Banco Santander Mexico SA Institucion de Banca Multiple Grupo | Mexico | 693,005 | 886,644 | |||||||||||||||
Barclays PLC | United Kingdom | 108,406 | 264,692 | |||||||||||||||
c | Citigroup Inc. | United States | 894 | 56,948 | ||||||||||||||
c | JPMorgan Chase & Co. | United States | 411 | 65,279 | ||||||||||||||
c | Wells Fargo & Co. | United States | 1,455 | 69,520 | ||||||||||||||
|
| |||||||||||||||||
1,343,083 | ||||||||||||||||||
|
| |||||||||||||||||
Beverages 0.4% | ||||||||||||||||||
The Coca-Cola Co. | United States | 4,092 | 214,625 | |||||||||||||||
Davide Campari-Milano NV | Italy | 279,710 | 4,076,953 | |||||||||||||||
d | Nongfu Spring Co. Ltd., H, 144A | China | 3,790 | 21,750 | ||||||||||||||
PepsiCo Inc. | United States | 397 | 63,433 | |||||||||||||||
Primo Water Corp. | United States | 110,251 | 1,832,371 | |||||||||||||||
Tsingtao Brewery Co. Ltd., H | China | 2,000 | 16,167 | |||||||||||||||
|
| |||||||||||||||||
6,225,299 | ||||||||||||||||||
|
| |||||||||||||||||
Biotechnology 1.5% | ||||||||||||||||||
b | AbbVie Inc. | United States | 20,807 | 2,398,631 | ||||||||||||||
a,e,f | Alder Biopharmaceuticals Inc., Contingent Value, rts., 12/31/24 | United States | 50,624 | 44,549 | ||||||||||||||
a | Allakos Inc. | United States | 3,561 | 279,004 | ||||||||||||||
a | Amicus Therapeutics Inc. | United States | 51,566 | 552,272 | ||||||||||||||
a,b | Apellis Pharmaceuticals Inc. | United States | 28,759 | 1,210,179 | ||||||||||||||
a | Argenx SE, ADR | Netherlands | 4,046 | 1,129,684 | ||||||||||||||
a | BioMarin Pharmaceutical Inc. | United States | 10,900 | 940,561 | ||||||||||||||
a,b | BioNTech SE, ADR | Germany | 3,719 | 1,308,121 | ||||||||||||||
a,b | Blueprint Medicines Corp. | United States | 8,030 | 772,486 | ||||||||||||||
a | CRISPR Therapeutics AG | Switzerland | 8,743 | 698,566 | ||||||||||||||
a | CytoDyn Inc. | United States | 2,742 | 3,428 | ||||||||||||||
a | Denali Therapeutics Inc. | United States | 4,940 | 228,524 | ||||||||||||||
a | Dicerna Pharmaceuticals Inc. | United States | 12,087 | 459,427 | ||||||||||||||
a | Genetron Holdings Ltd., ADR | China | 17,200 | 155,488 | ||||||||||||||
a | I-Mab, ADR | China | 3,466 | 209,554 | ||||||||||||||
a,b | Intellia Therapeutics Inc. | United States | 14,214 | 1,634,752 |
franklintempleton.com | Semiannual Report | 15 |
FRANKLIN ALTERNATIVE STRATEGIES FUNDS
CONSOLIDATED STATEMENT OF INVESTMENTS (UNAUDITED)
Franklin K2 Alternative Strategies Fund (continued)
Country | Shares/ Warrants/ Rights | Value | ||||||||||||||||
Common Stocks and Other Equity Interests (continued) | ||||||||||||||||||
Biotechnology (continued) | ||||||||||||||||||
a,f | Karuna Therapeutics Inc. | United States | 1,897 | $ | 242,626 | |||||||||||||
a | Karyopharm Therapeutics Inc. | United States | 1,000 | 6,950 | ||||||||||||||
a | Kymera Therapeutics Inc. | United States | 4,162 | 231,074 | ||||||||||||||
a | Mirati Therapeutics Inc. | United States | 5,301 | 725,018 | ||||||||||||||
a,f | Monte Rosa Therapeutics Inc. | United States | 6,745 | 130,786 | ||||||||||||||
a | Natera Inc. | United States | 13,824 | 1,264,343 | ||||||||||||||
a | Nurix Therapeutics Inc. | United States | 7,354 | 211,942 | ||||||||||||||
a | ORIC Pharmaceuticals Inc. | United States | 10,440 | 144,490 | ||||||||||||||
a | PMV Pharmaceuticals Inc. | United States | 7,999 | 173,978 | ||||||||||||||
a | Praxis Precision Medicines Inc. | United States | 4,250 | 72,717 | ||||||||||||||
a | ProQR Therapeutics NV | Netherlands | 37,313 | 263,430 | ||||||||||||||
a | Sarepta Therapeutics Inc. | United States | 6,244 | 504,578 | ||||||||||||||
a | Seagen Inc. | United States | 8,201 | 1,312,160 | ||||||||||||||
a | SpringWorks Therapeutics Inc. | United States | 10,600 | 761,610 | ||||||||||||||
a | Swedish Orphan Biovitrum AB | Sweden | 51,864 | 1,265,311 | ||||||||||||||
a | Vertex Pharmaceuticals Inc. | United States | 9,090 | 1,699,285 | ||||||||||||||
a,f | Verve Therapeutics Inc. | United States | 8,505 | 289,850 | ||||||||||||||
a | Zai Lab Ltd., ADR | China | 7,846 | 543,335 | ||||||||||||||
|
| |||||||||||||||||
21,868,709 | ||||||||||||||||||
|
| |||||||||||||||||
Building Products 0.1% | ||||||||||||||||||
Carrier Global Corp. | United States | 30,251 | 1,637,184 | |||||||||||||||
Owens Corning | United States | 392 | 33,257 | |||||||||||||||
|
| |||||||||||||||||
1,670,441 | ||||||||||||||||||
|
| |||||||||||||||||
Capital Markets 0.6% | ||||||||||||||||||
d | Amundi SA, 144A | France | 26,558 | 2,209,445 | ||||||||||||||
d | Anima Holding SpA, 144A | Italy | 102,616 | 483,013 | ||||||||||||||
c | The Blackstone Group Inc., A | United States | 569 | 80,485 | ||||||||||||||
a,b | Capstar Special Purpose Acquisition Corp., A | United States | 10,190 | 101,391 | ||||||||||||||
a | Capstar Special Purpose Acquisition Corp., A, 7/9/27, wts. | United States | 6,891 | 7,580 | ||||||||||||||
a | Coinbase Global Inc., A | United States | 5,320 | 1,675,800 | ||||||||||||||
a,b | E.Merge Technology Acquisition Corp., A | United States | 6,534 | 64,229 | ||||||||||||||
c | The Goldman Sachs Group Inc. | United States | 160 | 60,958 | ||||||||||||||
b | Moody’s Corp. | United States | 9,381 | 3,664,594 | ||||||||||||||
c | Morgan Stanley | United States | 202 | 19,154 | ||||||||||||||
a,f | SCVX Corp., A | United States | 6,585 | 65,718 | ||||||||||||||
|
| |||||||||||||||||
8,432,367 | ||||||||||||||||||
|
| |||||||||||||||||
Chemicals 1.1% | ||||||||||||||||||
a | Ferro Corp. | United States | 129,107 | 2,726,740 | ||||||||||||||
Huntsman Corp. | United States | 2,298 | 72,824 | |||||||||||||||
b | International Flavors & Fragrances Inc. | United States | 7,575 | 1,076,938 | ||||||||||||||
a,c | Kraton Corp. | United States | 8,000 | 368,480 | ||||||||||||||
LyondellBasell Industries NV, A | United States | 664 | 57,854 | |||||||||||||||
b | The Sherwin-Williams Co. | United States | 32,164 | 10,654,003 | ||||||||||||||
Sociedad Quimica y Minera de Chile SA, ADR | Chile | 17,133 | 1,066,700 | |||||||||||||||
a | Tronox Holdings PLC | United States | 13,536 | 297,657 | ||||||||||||||
|
| |||||||||||||||||
16,321,196 | ||||||||||||||||||
|
| |||||||||||||||||
Commercial Services & Supplies 1.0% | ||||||||||||||||||
a | 468 SPAC I SE, A, 4/30/26, wts. | Germany | 41,605 | 117,960 | ||||||||||||||
a | 7GC & Co. Holdings Inc., A, 12/31/26, wts. | United States | 3,244 | 2,531 | ||||||||||||||
a,b | Atlas Crest Investment Corp. II, A | United States | 20,011 | 195,708 | ||||||||||||||
a | Atlas Crest Investment Corp. II, A, 2/28/26, wts. | United States | 8,969 | 9,328 | ||||||||||||||
a,b | CIIG Capital Partners II Inc. | United States | 10,448 | 107,092 |
16 | Semiannual Report | franklintempleton.com |
FRANKLIN ALTERNATIVE STRATEGIES FUNDS
CONSOLIDATED STATEMENT OF INVESTMENTS (UNAUDITED)
Franklin K2 Alternative Strategies Fund (continued)
Country | Shares/ Warrants/ Rights | Value | ||||||||||||||||
Common Stocks and Other Equity Interests (continued) | ||||||||||||||||||
Commercial Services & Supplies (continued) | ||||||||||||||||||
Cintas Corp. | United States | 13,912 | $ | 5,873,507 | ||||||||||||||
a,b | Class Acceleration Corp., A | United States | 13,473 | 131,497 | ||||||||||||||
a | Class Acceleration Corp., A, 3/31/28, wts. | United States | 4,133 | 2,521 | ||||||||||||||
a | CM Life Sciences III Inc. | United States | 8,817 | 91,520 | ||||||||||||||
a,b | CM Life Sciences III Inc., A | United States | 13,400 | 133,464 | ||||||||||||||
a | Digital Transformation Opportunities Corp. | United States | 39,182 | 388,490 | ||||||||||||||
a,b | dMY Technology Group Inc. IV, A | United States | 4,695 | 46,950 | ||||||||||||||
a | dMY Technology Group Inc. IV, A, 12/31/27, wts. | United States | 13,565 | 46,121 | ||||||||||||||
a,b | dMY Technology Group Inc. VI | United States | 26,930 | 292,460 | ||||||||||||||
a | Executive Network Partnering Corp., A | United States | 19,832 | 195,147 | ||||||||||||||
a | Executive Network Partnering Corp., A, 9/25/28, wts. | United States | 2,901 | 2,047 | ||||||||||||||
a,b | Gores Guggenheim Inc., A | United States | 205 | 2,759 | ||||||||||||||
a | Gores Metropoulos II Inc. | United States | 110 | 1,137 | ||||||||||||||
a,f | Gores Metropoulos II Inc., A | United States | 509 | 5,054 | ||||||||||||||
a | Gores Metropoulos II Inc., A, 1/31/28, wts. | United States | 4,212 | 8,003 | ||||||||||||||
a,b | Gores Technology Partners II Inc. | United States | 12,807 | 130,311 | ||||||||||||||
a | Gores Technology Partners II Inc., A | United States | 3,133 | 30,923 | ||||||||||||||
a,b | Gores Technology Partners Inc. | United States | 11,237 | 113,887 | ||||||||||||||
a | Hedosophia European Growth | United Kingdom | 35,835 | 407,598 | ||||||||||||||
a | Hedosophia European Growth, 5/13/27, wts. | United Kingdom | 11,638 | 10,229 | ||||||||||||||
Iron Spark I Inc., A | United States | 5,353 | 53,798 | |||||||||||||||
a | Juniper II Corp. | United States | 11,402 | 115,502 | ||||||||||||||
a | Kins Technology Group Inc., A, 12/31/25, wts. | United States | 1,892 | 1,230 | ||||||||||||||
a | Landcadia Holdings IV Inc. | United States | 4,686 | 47,446 | ||||||||||||||
a | Northern Star Investment Corp. II, A, 1/31/28, wts. | United States | 4,249 | 4,674 | ||||||||||||||
a,b | Novus Capital Corp. II, A | United States | 19,008 | 189,700 | ||||||||||||||
a | Novus Capital Corp. II, A, 12/31/27, wts. | United States | 6,336 | 8,237 | ||||||||||||||
a | One Equity Partners Open Water I Corp., A | United States | 2,269 | 22,123 | ||||||||||||||
a | One Equity Partners Open Water I Corp., A, 12/31/27, wts. | United States | 2,933 | 1,994 | ||||||||||||||
b | Republic Services Inc., A | United States | 40,305 | 5,330,739 | ||||||||||||||
a | Shapeways Holdings Inc., 10/31/26, wts. | United States | 13,286 | 9,299 | ||||||||||||||
a | Tech And Energy Transition Corp. | United States | 8,501 | 84,755 | ||||||||||||||
a,b | Thunder Bridge Capital Partners IV Inc. | United States | 12,385 | 122,240 | ||||||||||||||
a | Tishman Speyer Innovation Corp. II | United States | 1,534 | 15,286 | ||||||||||||||
a | Tishman Speyer Innovation Corp. II, A | United States | 509 | 4,983 | ||||||||||||||
a,b | Twelve Seas Investment Co. II, A | United States | 15,317 | 149,187 | ||||||||||||||
a | Twelve Seas Investment Co. II, A, 3/2/28, wts. | United States | 5,105 | 3,298 | ||||||||||||||
|
| |||||||||||||||||
14,510,735 | ||||||||||||||||||
|
| |||||||||||||||||
Communications Equipment 0.0%† | ||||||||||||||||||
Cisco Systems Inc. | United States | 1,108 | 60,763 | |||||||||||||||
a | Commscope Holding Co. Inc. | United States | 6,524 | 64,979 | ||||||||||||||
|
| |||||||||||||||||
125,742 | ||||||||||||||||||
|
| |||||||||||||||||
Construction & Engineering 0.5% | ||||||||||||||||||
a | AECOM | United States | 18,821 | 1,297,520 | ||||||||||||||
a | Mastec Inc. | United States | 27,598 | 2,543,708 | ||||||||||||||
Quanta Services Inc. | United States | 31,335 | 3,565,296 | |||||||||||||||
|
| |||||||||||||||||
7,406,524 | ||||||||||||||||||
|
| |||||||||||||||||
Construction Materials 0.3% | ||||||||||||||||||
a | Cemex SAB de CV, ADR | Mexico | 69,523 | 427,567 | ||||||||||||||
LafargeHolcim Ltd., B | Switzerland | 69,827 | 3,363,836 | |||||||||||||||
|
| |||||||||||||||||
3,791,403 | ||||||||||||||||||
|
|
franklintempleton.com | Semiannual Report | 17 |
FRANKLIN ALTERNATIVE STRATEGIES FUNDS
CONSOLIDATED STATEMENT OF INVESTMENTS (UNAUDITED)
Franklin K2 Alternative Strategies Fund (continued)
Country | Shares/ Warrants/ Rights | Value | ||||||||||||||||
Common Stocks and Other Equity Interests (continued) | ||||||||||||||||||
Consumer Finance 0.0%† | ||||||||||||||||||
a,f | Katapult Holdings Inc. | United States | 9,358 | $ | 36,777 | |||||||||||||
c | OneMain Holdings Inc., A | United States | 1,061 | 52,827 | ||||||||||||||
|
| |||||||||||||||||
89,604 | ||||||||||||||||||
|
| |||||||||||||||||
Containers & Packaging 0.8% | ||||||||||||||||||
a | Ardagh Metal Packaging SA | United States | 110,998 | 1,037,831 | ||||||||||||||
Ball Corp. | United States | 118,073 | 11,033,922 | |||||||||||||||
|
| |||||||||||||||||
12,071,753 | ||||||||||||||||||
|
| |||||||||||||||||
Distributors 0.3% | ||||||||||||||||||
Pool Corp. | United States | 7,544 | 4,180,281 | |||||||||||||||
|
| |||||||||||||||||
Diversified Consumer Services 0.1% | ||||||||||||||||||
a,f | Mister Car Wash Inc. | United States | 54,593 | 876,764 | ||||||||||||||
|
| |||||||||||||||||
Diversified Financial Services 1.8% | ||||||||||||||||||
a | 2MX Organic SA, 11/16/25, wts. | France | 3,920 | 1,085 | ||||||||||||||
a | Acropolis Infrastructure Acquisition Corp., A, 3/31/26, wts. | United States | 12,094 | 12,034 | ||||||||||||||
a | Adit EdTech Acquisition Corp., 12/31/27, wts. | United States | 276 | 312 | ||||||||||||||
a | AEA-Bridges Impact Corp., 12/31/25, wts. | Cayman Islands | 1,407 | 1,126 | ||||||||||||||
a | AEA-Bridges Impact Corp., A | Cayman Islands | 28,592 | 281,059 | ||||||||||||||
a | Aequi Acquisition Corp. | United States | 1,470 | 14,641 | ||||||||||||||
a | Aequi Acquisition Corp., A | United States | 11,885 | 116,116 | ||||||||||||||
a | African Gold Acquisition Corp., A | United States | 6,518 | 63,485 | ||||||||||||||
a | African Gold Acquisition Corp., A, 3/13/28, wts. | United States | 4,888 | 2,758 | ||||||||||||||
a | Agile Growth Corp. | United States | 3,910 | 39,374 | ||||||||||||||
a,b | Altitude Acquisition Corp., A | United States | 10,922 | 107,909 | ||||||||||||||
a | Altitude Acquisition Corp., A, 11/30/27, wts. | United States | 24,529 | 18,524 | ||||||||||||||
a | Angel Pond Holdings Corp. | United States | 7,260 | 72,716 | ||||||||||||||
a | Apollo Strategic Growth Capital, 10/29/27, wts. | United States | 16,271 | 15,132 | ||||||||||||||
a | Apollo Strategic Growth Capital, A | United States | 8,654 | 85,155 | ||||||||||||||
a | Apollo Strategic Growth Capital, A, 12/31/27, wts. | United States | 3,636 | 3,818 | ||||||||||||||
a | Apollo Strategic Growth Capital II | United States | 8,845 | 88,539 | ||||||||||||||
a | ArcLight Clean Transition Corp. II, A, 2/4/23, wts. | Cayman Islands | 3,265 | 5,093 | ||||||||||||||
a,f | Ares Acquisition Corp., A | United States | 13,000 | 127,270 | ||||||||||||||
a | Ares Acquisition Corp., A, 12/30/21, wts. | United States | 11,095 | �� | 11,650 | |||||||||||||
a | Ascendant Digital Acquisition Corp. III | United States | 4,732 | 47,793 | ||||||||||||||
a | Athena Consumer Acquisition Corp. | United States | 26,389 | 267,848 | ||||||||||||||
a | Athena Technology Acquisition Corp., A, 3/31/28, wts. | United States | 4,454 | 7,884 | ||||||||||||||
a | Athlon Acquisition Corp., A, 3/5/26, wts. | United States | 4,234 | 2,667 | ||||||||||||||
a,b | Atlantic Avenue Acquisition Corp., A | United States | 8,680 | 85,672 | ||||||||||||||
a | Atlantic Avenue Acquisition Corp., A, 10/6/27, wts. | United States | 4,340 | 2,734 | ||||||||||||||
a,b | Atlantic Coastal Acquisition Corp., A | United States | 16,329 | 159,861 | ||||||||||||||
a | Atlantic Coastal Acquisition Corp., A, 12/31/27, wts. | United States | 5,443 | 4,570 | ||||||||||||||
a | Austerlitz Acquisition Corp. I, 2/19/26, wts. | United States | 17,237 | 21,374 | ||||||||||||||
a | Austerlitz Acquisition Corp. I, 12/31/27, wts. | United States | 34,516 | 39,003 | ||||||||||||||
a | Austerlitz Acquisition Corp. I, A | United States | 21,841 | 214,479 | ||||||||||||||
a | Austerlitz Acquisition Corp. II, A | United States | 33,691 | 329,161 | ||||||||||||||
a | Authentic Equity Acquisition Corp. I, 12/31/27, wts. | Cayman Islands | 9,239 | 5,858 | ||||||||||||||
a | B Riley Principal 250 Merger Corp., A, 12/31/27, wts. | United States | 2,651 | 3,022 | ||||||||||||||
a | Biotech Acquisition Co., 11/30/27, wts. | United States | 4,353 | 3,277 | ||||||||||||||
a | Blue Whale Acquisition Corp. I | United Arab Emirates | 12,829 | 127,584 | ||||||||||||||
a | Bridgetown Holdings Ltd., A | Hong Kong | 3,261 | 32,088 | ||||||||||||||
a,b | Broadscale Acquisition Corp., A | United States | 6,216 | 60,855 | ||||||||||||||
a | Broadscale Acquisition Corp., A, 2/2/26, wts. | United States | 1,554 | 1,632 | ||||||||||||||
a | Broadstone Acquisition Corp., 9/15/28, wts. | United States | 25,789 | 28,884 |
18 | Semiannual Report | franklintempleton.com |
FRANKLIN ALTERNATIVE STRATEGIES FUNDS
CONSOLIDATED STATEMENT OF INVESTMENTS (UNAUDITED)
Franklin K2 Alternative Strategies Fund (continued)
Country | Shares/ Warrants/ Rights | Value | ||||||||||||||||
Common Stocks and Other Equity Interests (continued) | ||||||||||||||||||
Diversified Financial Services (continued) | ||||||||||||||||||
a | Burgundy Technology Acquisition Corp. | United States | 8,583 | $ | 85,744 | |||||||||||||
a,b | Carney Technology Acquisition Corp. II, A | United States | 12,636 | 124,212 | ||||||||||||||
a | Carney Technology Acquisition Corp. II, A, 11/30/27, wts. | United States | 5,876 | 5,053 | ||||||||||||||
a | Cartesian Growth Corp., 12/31/27, wts. | United States | 23,214 | 27,044 | ||||||||||||||
a,f | CBRE Acquisition Holdings Inc., A, 12/31/27, wts. | United States | 1 | 2 | ||||||||||||||
a | CC Neuberger Principal Holdings II | United States | 12,116 | 119,827 | ||||||||||||||
a | CC Neuberger Principal Holdings II, 7/29/25, wts. | United States | 11,692 | 13,213 | ||||||||||||||
a | CC Neuberger Principal Holdings III | United States | 558 | 5,588 | ||||||||||||||
a | CC Neuberger Principal Holdings III, 12/31/27, wts. | United States | 6,916 | 8,230 | ||||||||||||||
a | CF Acquisition Corp. V, A | United States | 6,004 | 59,800 | ||||||||||||||
a | CF Acquisition Corp. V, A, 12/31/27, wts. | United States | 24,745 | 24,745 | ||||||||||||||
a,b | Churchill Capital Corp. V, A | United States | 6,430 | 63,335 | ||||||||||||||
a | Churchill Capital Corp. VI | United States | 1,080 | 10,886 | ||||||||||||||
a,b | Churchill Capital Corp. VII | United States | 9,560 | 95,701 | ||||||||||||||
a | Clarim Acquisition Corp., A | United States | 50,724 | 497,095 | ||||||||||||||
a | Clarim Acquisition Corp., A, 12/31/27, wts. | United States | 16,908 | 11,329 | ||||||||||||||
a | Climate Real Impact Solutions II Acquisition Corp., A | United States | 563 | 5,574 | ||||||||||||||
a | Climate Real Impact Solutions II Acquisition Corp., A, 12/31/27, wts. | United States | 112 | 123 | ||||||||||||||
a,b | Colicity Inc. | United States | 37,960 | 379,600 | ||||||||||||||
a | Colicity Inc., A, 12/31/27, wts. | United States | 34 | 36 | ||||||||||||||
a | Colonnade Acquisition Corp. II, 12/31/27, wts. | United States | 13,654 | 10,657 | ||||||||||||||
a,b | Concord Acquisition Corp. II | United States | 79,080 | 799,499 | ||||||||||||||
a | Concord Acquisition Corp. III | United States | 9,774 | 99,695 | ||||||||||||||
a,b | Conyers Park III Acquisition Corp., A | United States | 18,746 | 183,711 | ||||||||||||||
a | Conyers Park III Acquisition Corp., A, 8/12/28, wts. | United States | 2,812 | 3,726 | ||||||||||||||
a | Corner Growth Acquisition Corp. | United States | 17,211 | 175,036 | ||||||||||||||
a | Corner Growth Acquisition Corp., 12/31/27, wts. | United States | 7,606 | 6,845 | ||||||||||||||
a | Corner Growth Acquisition Corp., A | United States | 22,818 | 223,616 | ||||||||||||||
a | Corsair Partnering Corp. | United States | 3,898 | 38,961 | ||||||||||||||
a | Crown PropTech Acquisitions, 12/31/27, wts. | United States | 12,844 | 10,264 | ||||||||||||||
a,b | Crucible Acquisition Corp. | United States | 4,437 | 44,521 | ||||||||||||||
a | Crystal Peak Acquisition | Netherlands | 6,767 | 66,418 | ||||||||||||||
a | Crystal Peak Acquisition, 6/22/26, wts. | Netherlands | 2,725 | — | ||||||||||||||
a,b,f | Decarbonization Plus Acquisition Corp. II, A | United States | 16,370 | 165,010 | ||||||||||||||
a | Decarbonization Plus Acquisition Corp. II, A, 10/2/25, wts. | United States | 7,390 | 15,149 | ||||||||||||||
a | Decarbonization Plus Acquisition Corp. III, A, 12/08/26, wts. | United States | 10,297 | 43,041 | ||||||||||||||
a | Decarbonization Plus Acquisition Corp. IV, A, 12/31/28, wts. | United States | 5,594 | 5,986 | ||||||||||||||
a | DHC Acquisition Corp., A | United States | 6,265 | 61,209 | ||||||||||||||
a | DHC Acquisition Corp., A, 12/31/27, wts. | United States | 2,088 | 1,587 | ||||||||||||||
a | Disruptive Acquisition Corp. I | United States | 6,844 | 68,200 | ||||||||||||||
a,f | Dragoneer Growth Opportunities Corp. II, A | United States | 12,994 | 129,550 | ||||||||||||||
a | Dragoneer Growth Opportunities Corp. III, A | United States | 26,406 | 263,532 | ||||||||||||||
a | ECP Environmental Growth Opportunities Corp. | United States | 5,532 | 56,343 | ||||||||||||||
a | ECP Environmental Growth Opportunities Corp., A | United States | 5,180 | 51,437 | ||||||||||||||
a | ECP Environmental Growth Opportunities Corp., A, 2/11/28, wts. | United States | 1,757 | 1,845 | ||||||||||||||
a | EJF Acquisition Corp. | United States | 63,265 | 630,119 | ||||||||||||||
a | EJF Acquisition Corp., 2/28/27, wts. | United States | 6,521 | 10,564 | ||||||||||||||
a | Elliott Opportunity II Corp. | United States | 36,158 | 374,959 | ||||||||||||||
a | Elliott Opportunity II Corp., A | United States | 24,718 | 243,472 | ||||||||||||||
a | Energy Transition Partners BV | Netherlands | 3,372 | 37,458 | ||||||||||||||
a | Energy Transition Partners BV, 7/16/26, wts. | Netherlands | 1,124 | 612 | ||||||||||||||
a | Enterprise 4.0 Technology Acquisition Corp. | United States | 16,406 | 166,111 | ||||||||||||||
a | ESM Acquisition Corp. | United States | 8,367 | 83,293 | ||||||||||||||
a | European Biotech Acquisition Corp. | Netherlands | 1,230 | 12,214 | ||||||||||||||
a | Far Peak Acquisition Corp. | United States | 25,821 | 264,923 |
franklintempleton.com | Semiannual Report | 19 |
FRANKLIN ALTERNATIVE STRATEGIES FUNDS
CONSOLIDATED STATEMENT OF INVESTMENTS (UNAUDITED)
Franklin K2 Alternative Strategies Fund (continued)
Country | Shares/ Warrants/ Rights | Value | ||||||||||||||||
Common Stocks and Other Equity Interests (continued) | ||||||||||||||||||
Diversified Financial Services (continued) | ||||||||||||||||||
a | Far Peak Acquisition Corp., 12/7/25, wts. | United States | 3,156 | $ | 9,468 | |||||||||||||
a,b | Fast Acquisition Corp. II | United States | 14,427 | 144,775 | ||||||||||||||
a | Fifth Wall Acquisition Corp. III | United States | 5,283 | 52,249 | ||||||||||||||
a | Figure Acquisition Corp. I, A | United States | 1,393 | 13,763 | ||||||||||||||
a | Figure Acquisition Corp. I, A, 12/31/27, wts. | United States | 1,176 | 1,423 | ||||||||||||||
a,b | Fintech Acquisition Corp. VI | United States | 39,608 | 409,151 | ||||||||||||||
a | Fintech Evolution Acquisition Group | United States | 17,597 | 175,970 | ||||||||||||||
a,f | First Reserve Sustainable Growth Corp., A | United States | 32,362 | 321,031 | ||||||||||||||
a | First Reserve Sustainable Growth Corp., A, 12/31/27, wts. | United States | 8,090 | 10,274 | ||||||||||||||
a | Focus Impact Acquisition Corp. | United States | 13,236 | 133,551 | ||||||||||||||
a | Foresight Acquisition Corp., A, 11/19/26, wts. | United States | 1,814 | 2,231 | ||||||||||||||
a | Fortress Capital Acquisition Corp., 12/31/27, wts. | United States | 12,102 | 10,892 | ||||||||||||||
a | Fortress Capital Acquisition Corp., A | United States | 9,805 | 96,187 | ||||||||||||||
a,b | Fortress Value Acquisition Corp. III, A | United States | 10,335 | 101,386 | ||||||||||||||
a | Fortress Value Acquisition Corp. III, A, 12/31/27, wts. | United States | 3,261 | 3,327 | ||||||||||||||
a,b | Fortress Value Acquisition Corp. IV | United States | 8,256 | 82,147 | ||||||||||||||
a | Fortress Value Acquisition Corp. IV, A, 3/18/28, wts. | United States | 9,655 | 9,445 | ||||||||||||||
a | Forum Merger IV Corp. | United States | 2,892 | 29,108 | ||||||||||||||
a | Forum Merger IV Corp., A | United States | 5,283 | 51,721 | ||||||||||||||
a | Forum Merger IV Corp., A, 12/31/27, wts. | United States | 2,568 | 3,210 | ||||||||||||||
a | Freedom Acquisition I Corp., A | United States | 1,955 | 19,061 | ||||||||||||||
a | FTAC Athena Acquisition Corp., A | United States | 28,460 | 283,177 | ||||||||||||||
a | FTAC Athena Acquisition Corp., A, 3/1/26, wts. | United States | 15,965 | 21,553 | ||||||||||||||
a | FTAC Hera Acquisition Corp., 12/31/27, wts. | United States | 8,945 | 9,303 | ||||||||||||||
a | FTAC Hera Acquisition Corp., A | United States | 41,936 | 411,812 | ||||||||||||||
a,b | FTAC Parnassus Acquisition Corp., A | United States | 49,016 | 482,808 | ||||||||||||||
a | FTAC Parnassus Acquisition Corp., A, 3/10/26, wts. | United States | 12,254 | 14,153 | ||||||||||||||
a | FTAC Zeus Acquisition Corp. | United States | 6,342 | 63,801 | ||||||||||||||
a,b | Fusion Acquisition Corp. II | United States | 12,633 | 126,835 | ||||||||||||||
a | Fusion Acquisition Corp. II, A | United States | 3,259 | 31,775 | ||||||||||||||
a | Fusion Acquisition Corp. II, A, 12/31/27, wts. | United States | 1,086 | 820 | ||||||||||||||
a | G Squared Ascend I Inc. | United States | 5,572 | 55,386 | ||||||||||||||
a | G Squared Ascend I Inc., A, 12/31/27, wts. | United States | 3,753 | 4,841 | ||||||||||||||
a | Glenfarne Merger Corp. | United States | 1,231 | 12,267 | ||||||||||||||
a | Global Partner Acquisition Corp II, 12/31/27, wts. | United States | 2,950 | 2,744 | ||||||||||||||
a | Global Partner Acquisition Corp. II, A | United States | 17,700 | 172,664 | ||||||||||||||
a | Gores Holdings VII Inc. | United States | 38,284 | 386,285 | ||||||||||||||
a | Gores Holdings VII Inc., A | United States | 3,841 | 37,834 | ||||||||||||||
a,b | Gores Holdings VIII Inc. | United States | 8,934 | 90,234 | ||||||||||||||
a | Gores Holdings VIII Inc., A | United States | 1,583 | 15,814 | ||||||||||||||
a | Group Nine Acquisition Corp., A | United States | 22,173 | 215,522 | ||||||||||||||
a | Group Nine Acquisition Corp., A, 1/14/26, wts. | United States | 7,391 | 5,011 | ||||||||||||||
a,b | Healthcare Services Acquisition Corp., A | United States | 3,074 | 30,064 | ||||||||||||||
a | Healthcare Services Acquisition Corp., A, 12/31/27, wts. | United States | 4,019 | 2,755 | ||||||||||||||
a | HealthCor Catalio Acquisition Corp., A | United States | 4,875 | 48,653 | ||||||||||||||
a | Innovative International Acquisition Corp. | United States | 13,172 | 133,037 | ||||||||||||||
a | Investindustrial Acquisition Corp., 10/30/27, wts. | United States | 2,150 | 4,085 | ||||||||||||||
a | ION Acquisition Corp. II Ltd., 12/31/27, wts. | Israel | 956 | 1,315 | ||||||||||||||
a | ION Acquisition Corp. II Ltd., A | Israel | 555 | 4,412 | ||||||||||||||
a | ION Acquisition Corp. III Ltd., A | Israel | 11,154 | 109,030 | ||||||||||||||
a | Isos Acquisition Corp., 3/1/26, wts. | United States | 4,326 | 7,268 | ||||||||||||||
a | Ivanhoe Capital Acquisition Corp., A, 12/31/27, wts. | United States | 8,067 | 23,959 | ||||||||||||||
a | Jack Creek Investment Corp., 12/31/27, wts. | United States | 5,880 | 3,763 | ||||||||||||||
a | Jaws Hurricane Acquisition Corp., A, 2/23/23, wts. | United States | 3,747 | 3,972 | ||||||||||||||
a | Jaws Juggernaut Acquisition Corp., A | United States | 6,381 | 62,853 |
20 | Semiannual Report | franklintempleton.com |
FRANKLIN ALTERNATIVE STRATEGIES FUNDS
CONSOLIDATED STATEMENT OF INVESTMENTS (UNAUDITED)
Franklin K2 Alternative Strategies Fund (continued)
Country | Shares/ Warrants/ Rights | Value | ||||||||||||||||
Common Stocks and Other Equity Interests (continued) | ||||||||||||||||||
Diversified Financial Services (continued) | ||||||||||||||||||
a | Jaws Juggernaut Acquisition Corp., A, 2/12/26, wts. | United States | 4,284 | $ | 4,584 | |||||||||||||
a | Jaws Mustang Acquisition Corp. | United States | 6,135 | 62,148 | ||||||||||||||
a | Jaws Mustang Acquisition Corp., 1/30/27, wts. | United States | 6,663 | 8,262 | ||||||||||||||
a | Jaws Mustang Acquisition Corp., A | United States | 7,860 | 77,342 | ||||||||||||||
a | Joff Fintech Acquisition Corp., A | United States | 5,277 | 51,504 | ||||||||||||||
a | Joff Fintech Acquisition Corp., A, 12/31/27, wts. | United States | 1,759 | 1,407 | ||||||||||||||
a | Kairos Acquisition Corp., 12/31/27, wts. | Cayman Islands | 4,433 | 2,784 | ||||||||||||||
a,b | Khosla Ventures Acquisition Co., A | United States | 27,304 | 269,217 | ||||||||||||||
a,b | Khosla Ventures Acquisition Co. III, A | United States | 19,619 | 194,816 | ||||||||||||||
a,b | KKR Acquisition Holdings I Corp. | United States | 10,052 | 100,621 | ||||||||||||||
a | L Catterton Asia Acquisition Corp. | Singapore | 2,279 | 22,950 | ||||||||||||||
a | L&F Acquisition Corp., A, 5/23/27, wts. | Cayman Islands | 6,615 | 5,156 | ||||||||||||||
a | Lakestar SPAC I SE, 12/31/25, wts. | Luxembourg | 716 | 731 | ||||||||||||||
a | Lazard Growth Acquisition Corp. I | United States | 6,383 | 63,105 | ||||||||||||||
a | Lazard Growth Acquisition Corp. I, 12/31/27, wts. | United States | 2,101 | 1,744 | ||||||||||||||
a | LDH Growth Corp. I | United States | 615 | 6,119 | ||||||||||||||
a | Lead Edge Growth Opportunities Ltd. | United States | 4,701 | 46,681 | ||||||||||||||
a | Learn CW Investment Corp. | United States | 19,726 | 199,233 | ||||||||||||||
a | Legato Merger Corp. II | United States | 3,958 | 39,778 | ||||||||||||||
a | Lerer Hippeau Acquisition Corp., A | United States | 20,644 | 201,899 | ||||||||||||||
a | LF Capital Acquisition Corp. II | United States | 13,246 | 133,785 | ||||||||||||||
a | Live Oak Crestview Climate Acquisition Corp., A, 3/12/26, wts. | United States | 452 | 773 | ||||||||||||||
a | Live Oak Mobility Acquisition Corp., A | United States | 3,947 | 38,641 | ||||||||||||||
a | Live Oak Mobility Acquisition Corp., A, 3/4/28, wts. | United States | 6,090 | 7,309 | ||||||||||||||
a,b | Longview Acquisition Corp. II, A | United States | 14,811 | 146,925 | ||||||||||||||
a | Longview Acquisition Corp. II, A, 5/10/26, wts. | United States | 12,250 | 14,088 | ||||||||||||||
a | M3-Brigade Acquisition II Corp., A, 12/31/27, wts. | United States | 7,608 | 9,890 | ||||||||||||||
a | Marlin Technology Corp., 3/5/26, wts. | United States | 3,305 | 2,644 | ||||||||||||||
a | Marlin Technology Corp., A | United States | 9,915 | 96,870 | ||||||||||||||
a | MDH Acquisition Corp., A | United States | 4,587 | 45,320 | ||||||||||||||
a | MDH Acquisition Corp., A, 2/2/28, wts. | United States | 2,293 | 1,422 | ||||||||||||||
a | Motive Capital Corp., 12/9/25, wts. | United States | 18,590 | 25,840 | ||||||||||||||
a | Motive Capital Corp., A | United States | 17,457 | 173,173 | ||||||||||||||
a | The Music Acquisition Corp., A | United States | 5,363 | 52,397 | ||||||||||||||
a | The Music Acquisition Corp., A, 2/5/28, wts. | United States | 2,681 | 1,796 | ||||||||||||||
a | NextGen Acquisition Corp. II, A, 3/31/27, wts. | United States | 3,287 | 7,889 | ||||||||||||||
a | Nightdragon Acquisition Corp. | United States | 21,996 | 220,400 | ||||||||||||||
a | Nightdragon Acquisition Corp., A | United States | 1,253 | 12,298 | ||||||||||||||
a | North Atlantic Acquisition Corp., 10/20/25, wts. | United States | 2,165 | 1,797 | ||||||||||||||
a | North Atlantic Acquisition Corp., A | United States | 6,495 | 63,521 | ||||||||||||||
a | Oaktree Acquisition Corp. II, 9/15/27, wts. | United States | 12,899 | 15,350 | ||||||||||||||
a | Oaktree Acquisition Corp. II, A | United States | 17,512 | 173,544 | ||||||||||||||
a | Obotech Acquisition SE, A | Luxembourg | 4,205 | 46,497 | ||||||||||||||
a | Obotech Acquisition SE, A, 4/30/26, wts. | Luxembourg | 1,401 | 1,112 | ||||||||||||||
a | Orion Biotech Opportunities Corp. | United States | 16,960 | 168,498 | ||||||||||||||
a | Pathfinder Acquisition Corp., 12/31/27, wts. | United States | 7,163 | 7,665 | ||||||||||||||
a | Pathfinder Acquisition Corp., A | United States | 39,072 | 387,985 | ||||||||||||||
a | Pegasus Acquisition Co. Europe BV | Netherlands | 118,076 | 1,325,704 | ||||||||||||||
a | Pegasus Acquisition Co. Europe BV, A | Netherlands | 1,736 | 19,373 | ||||||||||||||
a | Pegasus Acquisition Co. Europe BV, A, 4/27/26, wts. | Netherlands | 579 | 821 | ||||||||||||||
a | Pegasus Digital Mobility Acquisition Corp. | Cayman Islands | 5,616 | 56,441 | ||||||||||||||
a | Peridot Acquisition Corp. II | United States | 2,506 | 25,073 | ||||||||||||||
a,b | Periphas Capital Partnering Corp., A | United States | 10,736 | 264,857 | ||||||||||||||
a | Pershing Square Tontine Holdings Ltd., A | United States | 5,107 | 102,957 | ||||||||||||||
a | Pioneer Merger Corp., A | United States | 2,043 | 20,307 |
franklintempleton.com | Semiannual Report | 21 |
FRANKLIN ALTERNATIVE STRATEGIES FUNDS
CONSOLIDATED STATEMENT OF INVESTMENTS (UNAUDITED)
Franklin K2 Alternative Strategies Fund (continued)
Country | Shares/ Warrants/ Rights | Value | ||||||||||||||||
Common Stocks and Other Equity Interests (continued) | ||||||||||||||||||
Diversified Financial Services (continued) | ||||||||||||||||||
a | Pioneer Merger Corp., A, 12/31/27, wts. | United States | 16,710 | $ | 20,219 | |||||||||||||
a | PMV Consumer Acquisition Corp., A, 8/31/27, wts. | United States | 2,466 | 1,874 | ||||||||||||||
a | Poema Global Holdings Corp., 12/31/27, wts. | United States | 4,433 | 7,979 | ||||||||||||||
a | Poema Global Holdings Corp., A | United States | 8,866 | 88,483 | ||||||||||||||
a | Pontem Corp., 12/31/27, wts. | United States | 5,482 | 4,284 | ||||||||||||||
a | Pontem Corp., A | United States | 16,446 | 161,171 | ||||||||||||||
a | Population Health Investment Co. Inc., A | United States | 1,144 | 11,200 | ||||||||||||||
a,b | Post Holdings Partnering Corp., A | United States | 12,717 | 124,037 | ||||||||||||||
a | Post Holdings Partnering Corp., A, 2/9/23, wts. | United States | 12,973 | 13,753 | ||||||||||||||
a | Power & Digital Infrastructure Acquisition Corp., A | United States | 4,426 | 56,564 | ||||||||||||||
a | Power & Digital Infrastructure Acquisition Corp., A, 2/12/28, wts. | United States | 1,383 | 6,085 | ||||||||||||||
a | Powered Brands, A | United States | 3,648 | 35,604 | ||||||||||||||
a | Primavera Capital Acquisition Corp., 1/19/26, wts. | Hong Kong | 1,524 | 1,509 | ||||||||||||||
a | Primavera Capital Acquisition Corp., A | Hong Kong | 3,048 | 29,718 | ||||||||||||||
a | PWP Forward Acquisition Corp. I | United States | 6,157 | 60,954 | ||||||||||||||
a | PWP Forward Acquisition Corp. I, A, 3/9/26, wts. | United States | 2,959 | 2,471 | ||||||||||||||
a | RCF Acquisition Corp. | United States | 12,616 | 127,295 | ||||||||||||||
a | RedBall Acquisition Corp. | United States | 8,172 | 81,883 | ||||||||||||||
a | Rice Acquisition Corp. II | United States | 13,176 | 142,037 | ||||||||||||||
a | Rigel Resource Acquisition Corp. | United States | 8,142 | 82,397 | ||||||||||||||
a | RMG Acquisition Corp. III | United States | 2,786 | 27,721 | ||||||||||||||
a | RMG Acquisition Corp. III, 12/31/27, wts. | United States | 4,311 | 3,966 | ||||||||||||||
a | RMG Acquisition Corp. III, A | United States | 21,555 | 211,023 | ||||||||||||||
a | Rosecliff Acquisition Corp. I, A | United States | 59,628 | 589,721 | ||||||||||||||
a | Rosecliff Acquisition Corp. I, A, 12/31/27, wts. | United States | 29,338 | 27,871 | ||||||||||||||
a,b | RXR Acquisition Corp. | United States | 9,640 | 95,629 | ||||||||||||||
a | Sarissa Capital Acquisition Corp., A | United States | 13,243 | 130,179 | ||||||||||||||
a,b | Science Strategic Acquisition Corp. Alpha | United States | 5,442 | 54,502 | ||||||||||||||
a | ScION Tech Growth I, 11/1/25, wts. | United Kingdom | 1,102 | 826 | ||||||||||||||
a | ScION Tech Growth I, A | United Kingdom | 3,306 | 32,333 | ||||||||||||||
a | ScION Tech Growth II | United Kingdom | 2,073 | 20,709 | ||||||||||||||
a | SCP & Co. Healthcare Acquisition Co., A, 1/27/28, wts. | United States | 5,434 | 3,097 | ||||||||||||||
a | Silver Crest Acquisition Corp., A | United States | 2,931 | 28,782 | ||||||||||||||
a | Silver Crest Acquisition Corp., A, 12/15/25, wts. | United States | 1,465 | 1,040 | ||||||||||||||
a | Silverbox Engaged Merger Corp. I, A, 12/31/27, wts. | United States | 8,429 | 13,992 | ||||||||||||||
a,b | Simon Property Group Acquisition Holdings Inc. | United States | 31,634 | 316,340 | ||||||||||||||
a | Slam Corp. | United States | 5,816 | 57,869 | ||||||||||||||
a | Slam Corp., A, 12/31/27, wts. | United States | 6,474 | 5,124 | ||||||||||||||
a | Social Capital Hedosophia Holdings Corp., A | United States | 17,956 | 184,408 | ||||||||||||||
a,f | Social Capital Hedosophia Holdings Corp. VI, A | United States | 39,558 | 414,172 | ||||||||||||||
a | Social Capital Suvretta Holdings Corp. I, A | United States | 6,651 | 66,111 | ||||||||||||||
a | Social Capital Suvretta Holdings Corp. II, A | United States | 14,142 | 140,713 | ||||||||||||||
a | Social Capital Suvretta Holdings Corp. III, A | United States | 27,104 | 267,516 | ||||||||||||||
a | Social Capital Suvretta Holdings Corp. IV, A | United States | 27,104 | 267,788 | ||||||||||||||
a | Social Leverage Acquisition Corp. I | United States | 13,866 | 138,521 | ||||||||||||||
a,b | Social Leverage Acquisition Corp. I, A | United States | 3,470 | 33,867 | ||||||||||||||
a,b | Spartan Acquisition Corp. III, A | United States | 32,665 | 324,363 | ||||||||||||||
a | Spartan Acquisition Corp. III, A, 2/4/26, wts. | United States | 13,124 | 20,080 | ||||||||||||||
a | Spindletop Health Acquisition Corp. | United States | 11,406 | 114,972 | ||||||||||||||
a | StoneBridge Acquisition Corp. | United States | 3,244 | 33,137 | ||||||||||||||
a | Supernova Partners Acquisition Co. II Ltd., A | United States | 3,756 | 40,565 | ||||||||||||||
a | Supernova Partners Acquisition Co. II Ltd., A, 12/31/27, wts. | United States | 1,482 | 4,313 | ||||||||||||||
a | Supernova Partners Acquisition Co. III Ltd., A | United States | 8,623 | 85,799 | ||||||||||||||
a | Supernova Partners Acquisition Co. III Ltd., A, 3/31/27, wts. | United States | 6,587 | 6,458 | ||||||||||||||
a | Sustainable Development Acquisition I Corp. | United States | 8,363 | 84,257 |
22 | Semiannual Report | franklintempleton.com |
FRANKLIN ALTERNATIVE STRATEGIES FUNDS
CONSOLIDATED STATEMENT OF INVESTMENTS (UNAUDITED)
Franklin K2 Alternative Strategies Fund (continued)
Country | Shares/ Warrants/ Rights | Value | ||||||||||||||||
Common Stocks and Other Equity Interests (continued) | ||||||||||||||||||
Diversified Financial Services (continued) | ||||||||||||||||||
a,f | SVF Investment Corp., A | United States | 16,643 | $ | 167,595 | |||||||||||||
a | SVF Investment Corp. 2, A | United States | 10,063 | 100,429 | ||||||||||||||
a | SVF Investment Corp. 3, A | United States | 40,808 | 408,080 | ||||||||||||||
a | Tailwind Acquisition Corp., A, 9/7/27, wts. | United States | 11,194 | 7,108 | ||||||||||||||
a | TB SA Acquisition Corp. | Cayman Islands | 22,005 | 219,170 | ||||||||||||||
a | TCV Acquisition Corp., A | United States | 1,698 | 16,895 | ||||||||||||||
a | TCW Special Purpose Acquisition Corp., A | United States | 6,265 | 61,146 | ||||||||||||||
a | TCW Special Purpose Acquisition Corp., A, 12/31/28, wts. | United States | 2,088 | 1,587 | ||||||||||||||
a | Tekkorp Digital Acquisition Corp., 9/29/27, wts. | United States | 1,328 | 1,135 | ||||||||||||||
a | Thimble Point Acquisition Corp., A, 11/19/26, wts. | United States | 18,602 | 22,322 | ||||||||||||||
a | TLG Acquisition One Corp., A | United States | 9,876 | 96,587 | ||||||||||||||
a | TLG Acquisition One Corp., A, 1/25/28, wts. | United States | 3,292 | 2,140 | ||||||||||||||
a | TPG Pace Beneficial II Corp., A | United States | 17,023 | 170,230 | ||||||||||||||
a | TPG Pace Solutions Corp. | United States | 912 | 9,029 | ||||||||||||||
a | Trebia Acquisition Corp., A, 12/31/25, wts. | Cayman Islands | 21,418 | 31,484 | ||||||||||||||
a | Twin Ridge Capital Acquisition Corp., A | United States | 7,511 | 73,157 | ||||||||||||||
a | Twin Ridge Capital Acquisition Corp., A, 3/7/28, wts. | United States | 2,503 | 1,877 | ||||||||||||||
a | two, A | United States | 9,851 | 96,737 | ||||||||||||||
a | USHG Acquisition Corp., A | United States | 28,448 | 295,006 | ||||||||||||||
a | USHG Acquisition Corp., A, 12/31/28, wts. | United States | 12,571 | 25,771 | ||||||||||||||
a | Vahanna Tech Edge Acquisition I Corp. | United States | 7,916 | 79,714 | ||||||||||||||
a | Valor Latitude Acquisition Corp. | United States | 16,723 | 165,892 | ||||||||||||||
a | Vector Acquisition Corp. II, A | United States | 8,707 | 85,764 | ||||||||||||||
a | Velocity Acquisition Corp., A | United States | 6,445 | 62,903 | ||||||||||||||
a | Virgin Group Acquisition Corp. II | United States | 10,835 | 108,350 | ||||||||||||||
a | Virgin Group Acquisition Corp. II, A, 3/13/26, wts. | United States | 9,762 | 10,543 | ||||||||||||||
a | Viveon Health Acquisition Corp., 12/31/27, wts. | United States | 45,618 | 12,089 | ||||||||||||||
a | VMG Consumer Acquisition Corp. | United States | 2,210 | 22,409 | ||||||||||||||
a | VPC Impact Acquisition Holdings II Inc., A | United States | 6,544 | 64,655 | ||||||||||||||
a,b | VPC Impact Acquisition Holdings III Inc., A | United States | 10,252 | 102,520 | ||||||||||||||
a | VPC Impact Acquisition Holdings III Inc., A, 12/31/27, wts. | United States | 4,604 | 7,186 | ||||||||||||||
a | Vy Global Growth | Cayman Islands | 13,775 | 135,822 | ||||||||||||||
a | Waldencast Acquisition Corp. | United States | 279 | 2,879 | ||||||||||||||
a | Warburg Pincus Capital Corp. I-A, 12/31/27, wts. | Cayman Islands | 249 | 237 | ||||||||||||||
a | Warburg Pincus Capital Corp. I-B, 2/17/22, wts. | Cayman Islands | 3,090 | 3,059 | ||||||||||||||
a | Wejo Group Ltd., 11/18/26, wts. | United States | 22,480 | 26,751 | ||||||||||||||
a | Zimmer Energy Transition Acquisition Corp. | United States | 7,144 | 71,833 | ||||||||||||||
|
| |||||||||||||||||
25,671,332 | ||||||||||||||||||
|
| |||||||||||||||||
Diversified Telecommunication Services 0.0%† | ||||||||||||||||||
a | BT Group PLC, A | United Kingdom | 90,814 | 191,172 | ||||||||||||||
Verizon Communications Inc. | United States | 1,263 | 63,491 | |||||||||||||||
|
| |||||||||||||||||
254,663 | ||||||||||||||||||
|
| |||||||||||||||||
Electric Utilities 2.1% | ||||||||||||||||||
Ausnet Services Ltd. | Australia | 1,571,963 | 2,839,172 | |||||||||||||||
Duke Energy Corp. | United States | 2,117 | 205,370 | |||||||||||||||
Edison International | United States | 27,210 | 1,776,269 | |||||||||||||||
a | Energy Harbor Corp. | United States | 76,664 | 3,756,536 | ||||||||||||||
Exelon Corp. | United States | 260,267 | 13,723,879 | |||||||||||||||
b | FirstEnergy Corp. | United States | 32,457 | 1,222,331 | ||||||||||||||
a | PG&E Corp. | United States | 404,146 | 4,801,254 | ||||||||||||||
The Southern Co. | United States | 947 | 57,862 | |||||||||||||||
e | Spark Infrastructure Group | Australia | 1,242,526 | 2,451,270 | ||||||||||||||
|
| |||||||||||||||||
30,833,943 | ||||||||||||||||||
|
|
franklintempleton.com | Semiannual Report | 23 |
FRANKLIN ALTERNATIVE STRATEGIES FUNDS
CONSOLIDATED STATEMENT OF INVESTMENTS (UNAUDITED)
Franklin K2 Alternative Strategies Fund (continued)
Country | Shares/ Warrants/ Rights | Value | ||||||||||||||||
Common Stocks and Other Equity Interests (continued) | ||||||||||||||||||
Electrical Equipment 0.8% | ||||||||||||||||||
a | Array Technologies Inc. | United States | 47,179 | $ | 849,930 | |||||||||||||
a | Ballard Power Systems Inc. | Canada | 12,264 | 185,922 | ||||||||||||||
a | Chargepoint Holdings Inc. | United States | 29,912 | 763,354 | ||||||||||||||
a | Enovix Corp. | United States | 92,698 | 3,244,430 | ||||||||||||||
a | Fluence Energy Inc., A | United States | 67,662 | 2,144,209 | ||||||||||||||
a | Fuelcell Energy Inc. | United States | 99,794 | 866,212 | ||||||||||||||
a | Generac Holdings Inc. | United States | 3,138 | 1,321,851 | ||||||||||||||
a | Plug Power Inc. | United States | 52,515 | 2,092,723 | ||||||||||||||
a | Stem Inc. | United States | 1,209 | 25,655 | ||||||||||||||
a | Sunrun Inc. | United States | 2,717 | 125,090 | ||||||||||||||
|
| |||||||||||||||||
11,619,376 | ||||||||||||||||||
|
| |||||||||||||||||
Electronic Equipment, Instruments & Components 0.3% | ||||||||||||||||||
a | Coherent Inc. | United States | 3,675 | 951,568 | ||||||||||||||
a | Hollysys Automation Technologies Ltd. | China | 63,729 | 985,250 | ||||||||||||||
a,f | II-VI Inc. | United States | 12,423 | 776,810 | ||||||||||||||
a | Rogers Corp. | United States | 3,428 | 934,542 | ||||||||||||||
|
| |||||||||||||||||
3,648,170 | ||||||||||||||||||
|
| |||||||||||||||||
Entertainment 0.3% | ||||||||||||||||||
Activision Blizzard Inc. | United States | 855 | 50,103 | |||||||||||||||
a | Bilibili Inc., Z | China | 246 | 16,183 | ||||||||||||||
a | Roblox Corp., A | United States | 16,178 | 2,040,046 | ||||||||||||||
a | SciPlay Corp., A | United States | 117,660 | 1,889,620 | ||||||||||||||
|
| |||||||||||||||||
3,995,952 | ||||||||||||||||||
|
| |||||||||||||||||
Equity Real Estate Investment Trusts (REITs) 0.2% | ||||||||||||||||||
American Tower Corp. | United States | 245 | 64,308 | |||||||||||||||
a | Braemar Hotels & Resorts Inc. | United States | 47 | 205 | ||||||||||||||
Crown Castle International Corp. | United States | 376 | 68,301 | |||||||||||||||
Cyrusone Inc. | United States | 25,704 | 2,288,170 | |||||||||||||||
Public Storage | United States | 203 | 66,458 | |||||||||||||||
VICI Properties Inc. | United States | 31,567 | 858,622 | |||||||||||||||
|
| |||||||||||||||||
3,346,064 | ||||||||||||||||||
|
| |||||||||||||||||
Food & Staples Retailing 0.5% | ||||||||||||||||||
b | Costco Wholesale Corp. | United States | 13,506 | 7,284,866 | ||||||||||||||
Walmart Inc. | United States | 747 | 105,051 | |||||||||||||||
|
| |||||||||||||||||
7,389,917 | ||||||||||||||||||
|
| |||||||||||||||||
Food Products 0.5% | ||||||||||||||||||
a | Benson Hill Inc., 12/24/25, wts. | United States | 18,066 | 23,305 | ||||||||||||||
Nestle SA | Switzerland | 36,068 | 4,622,900 | |||||||||||||||
a | Pilgrim’s Pride Corp. | United States | 74,041 | 2,079,071 | ||||||||||||||
Tyson Foods Inc., A | United States | 795 | 62,773 | |||||||||||||||
|
| |||||||||||||||||
6,788,049 | ||||||||||||||||||
|
| |||||||||||||||||
Gas Utilities 0.1% | ||||||||||||||||||
Hong Kong & China Gas Co. Ltd. | Hong Kong | 565,396 | 842,772 | |||||||||||||||
|
| |||||||||||||||||
Health Care Equipment & Supplies 1.2% | ||||||||||||||||||
c | Abbott Laboratories | United States | 558 | 70,180 | ||||||||||||||
a | Align Technology Inc. | United States | 2,836 | 1,734,299 | ||||||||||||||
a | Alphatec Holdings Inc. | United States | 123 | 1,365 | ||||||||||||||
a | Axonics Inc. | United States | 6,496 | 353,447 | ||||||||||||||
a | Biolife Solutions Inc. | United States | 6,964 | 265,746 | ||||||||||||||
CONMED Corp. | United States | 2,996 | 393,854 |
24 | Semiannual Report | franklintempleton.com |
FRANKLIN ALTERNATIVE STRATEGIES FUNDS
CONSOLIDATED STATEMENT OF INVESTMENTS (UNAUDITED)
Franklin K2 Alternative Strategies Fund (continued)
Country | Shares/ Warrants/ Rights | Value | ||||||||||||||||
Common Stocks and Other Equity Interests (continued) | ||||||||||||||||||
Health Care Equipment & Supplies (continued) | ||||||||||||||||||
a,f | Cryoport Inc. | United States | 4,634 | $ | 307,883 | |||||||||||||
a,b | DexCom Inc. | United States | 3,392 | 1,908,305 | ||||||||||||||
Hill-Rom Holdings Inc. | United States | 26,470 | 4,116,085 | |||||||||||||||
a | Hologic Inc. | United States | 12,469 | 931,808 | ||||||||||||||
a | Inari Medical Inc. | United States | 3,951 | 326,116 | ||||||||||||||
a | Intuitive Surgical Inc. | United States | 3,300 | 1,070,322 | ||||||||||||||
a | LivaNova PLC | United States | 7,807 | 625,809 | ||||||||||||||
a | Nevro Corp. | United States | 3,527 | 307,131 | ||||||||||||||
a | NuVasive Inc. | United States | 8,385 | 402,983 | ||||||||||||||
a,f | Outset Medical Inc. | United States | 11,122 | 527,183 | ||||||||||||||
a | Shockwave Medical Inc. | United States | 4,760 | 857,943 | ||||||||||||||
a,f | Sight Sciences Inc. | United States | 872 | 18,269 | ||||||||||||||
Stryker Corp. | United States | 5,570 | 1,318,029 | |||||||||||||||
a | Tandem Diabetes Care Inc. | United States | 5,353 | 687,968 | ||||||||||||||
Zimmer Biomet Holdings Inc. | United States | 6,347 | 759,101 | |||||||||||||||
|
| |||||||||||||||||
16,983,826 | ||||||||||||||||||
|
| |||||||||||||||||
Health Care Providers & Services 1.3% | ||||||||||||||||||
a | Agilon Health Inc. | United States | 14,632 | 321,904 | ||||||||||||||
CVS Health Corp. | United States | 42,359 | 3,772,493 | |||||||||||||||
a | Guardant Health Inc. | United States | 3,669 | 385,685 | ||||||||||||||
Humana Inc. | United States | 10,122 | 4,248,305 | |||||||||||||||
a | New Frontier Health Corp. | Hong Kong | 129,738 | 1,416,739 | ||||||||||||||
UnitedHealth Group Inc. | United States | 19,651 | 8,729,367 | |||||||||||||||
|
| |||||||||||||||||
18,874,493 | ||||||||||||||||||
|
| |||||||||||||||||
Health Care Technology 0.1% | ||||||||||||||||||
a | Definitive Healthcare Corp., A | United States | 2,062 | 60,437 | ||||||||||||||
a | Phreesia Inc. | United States | 12,944 | 746,610 | ||||||||||||||
|
| |||||||||||||||||
807,047 | ||||||||||||||||||
|
| |||||||||||||||||
Hotels, Restaurants & Leisure 0.7% | ||||||||||||||||||
a | Airbnb Inc., A | United States | 10,016 | 1,728,160 | ||||||||||||||
a | Carnival Corp. | United States | 1,409 | 24,827 | ||||||||||||||
a | Chipotle Mexican Grill Inc., A | United States | 2,107 | 3,462,665 | ||||||||||||||
a | Crown Resorts Ltd. | Australia | 150,382 | 1,175,031 | ||||||||||||||
Domino’s Pizza Inc. | United States | 5,812 | 3,046,302 | |||||||||||||||
a | Entain PLC | United Kingdom | 15,241 | 338,763 | ||||||||||||||
f | International Game Technology PLC | United States | 4,042 | 109,215 | ||||||||||||||
McDonald’s Corp. | United States | 832 | 203,507 | |||||||||||||||
a | Norwegian Cruise Line Holdings Ltd. | United States | 1,314 | 25,636 | ||||||||||||||
a | Royal Caribbean Cruises Ltd. | United States | 896 | 62,559 | ||||||||||||||
Starbucks Corp. | United States | 1,624 | 178,055 | |||||||||||||||
a | Trip.Com Group Ltd. | China | 574 | 15,542 | ||||||||||||||
a | Wynn Resorts Ltd. | United States | 604 | 48,930 | ||||||||||||||
Yum China Holdings Inc. | China | 306 | 15,331 | |||||||||||||||
|
| |||||||||||||||||
10,434,523 | ||||||||||||||||||
|
| |||||||||||||||||
Household Durables 0.1% | ||||||||||||||||||
Panasonic Corp. | Japan | 67,700 | 738,101 | |||||||||||||||
a | Skyline Champion Corp. | United States | 13,011 | 1,018,111 | ||||||||||||||
|
| |||||||||||||||||
1,756,212 | ||||||||||||||||||
|
| |||||||||||||||||
Household Products 0.0%† | ||||||||||||||||||
The Procter & Gamble Co. | United States | 1,827 | 264,148 | |||||||||||||||
|
|
franklintempleton.com | Semiannual Report | 25 |
FRANKLIN ALTERNATIVE STRATEGIES FUNDS
CONSOLIDATED STATEMENT OF INVESTMENTS (UNAUDITED)
Franklin K2 Alternative Strategies Fund (continued)
Country | Shares/ Warrants/ Rights | Value | ||||||||||||||||
Common Stocks and Other Equity Interests (continued) | ||||||||||||||||||
Independent Power & Renewable Electricity Producers 1.0% | ||||||||||||||||||
The AES Corp. | United States | 290,602 | $ | 6,794,275 | ||||||||||||||
Clearway Energy Inc., C | United States | 32,188 | 1,201,256 | |||||||||||||||
NextEra Energy Partners LP | United States | 35,922 | 3,055,166 | |||||||||||||||
a | Sunnova Energy International Inc. | United States | 51,145 | 1,890,830 | ||||||||||||||
Vistra Corp. | United States | 36,844 | 732,459 | |||||||||||||||
|
| |||||||||||||||||
13,673,986 | ||||||||||||||||||
|
| |||||||||||||||||
Industrial Conglomerates 0.0% | ||||||||||||||||||
Smiths Group PLC | United Kingdom | 17,888 | 341,646 | |||||||||||||||
Toshiba Corp. | Japan | 9,747 | 389,042 | |||||||||||||||
�� |
|
| ||||||||||||||||
730,688 | ||||||||||||||||||
|
| |||||||||||||||||
Insurance 0.8% | ||||||||||||||||||
a | Athene Holding Ltd., A | United States | 72,778 | 5,961,974 | ||||||||||||||
Fidelity National Financial Inc. | United States | 1,367 | 66,860 | |||||||||||||||
c | MetLife Inc. | United States | 1,005 | 58,953 | ||||||||||||||
Old Republic International Corp. | United States | 2,684 | 64,309 | |||||||||||||||
a | Societa Cattolica DI Assicurazione SpA | Italy | 84,879 | 515,477 | ||||||||||||||
a | Trupanion Inc. | United States | 16,806 | 2,072,516 | ||||||||||||||
a | Willis Towers Watson PLC | United States | 14,132 | 3,191,571 | ||||||||||||||
|
| |||||||||||||||||
11,931,660 | ||||||||||||||||||
|
| |||||||||||||||||
Interactive Media & Services 1.4% | ||||||||||||||||||
a,b | Alphabet Inc., A | United States | 2,254 | 6,396,739 | ||||||||||||||
a | Alphabet Inc., C | United States | 731 | 2,082,648 | ||||||||||||||
a | CarGurus Inc., A | United States | 34,729 | 1,302,338 | ||||||||||||||
a,d | Kuaishou Technology, B, 144A | China | 1,600 | 17,370 | ||||||||||||||
a | Match Group Inc. | United States | 9,525 | 1,238,155 | ||||||||||||||
a,b | Meta Platforms Inc., A | United States | 16,178 | 5,249,113 | ||||||||||||||
a | Snap Inc., A | United States | 16,939 | 806,466 | ||||||||||||||
Tencent Holdings Ltd. | China | 56,672 | 3,305,059 | |||||||||||||||
|
| |||||||||||||||||
20,397,888 | ||||||||||||||||||
|
| |||||||||||||||||
Internet & Direct Marketing Retail 0.9% | ||||||||||||||||||
a,b | Alibaba Group Holding Ltd., ADR | China | 23,106 | 2,853,554 | ||||||||||||||
a | Amazon.com Inc. | United States | 1,547 | 5,425,438 | ||||||||||||||
a | Booking Holdings Inc. | United States | 50 | 105,092 | ||||||||||||||
a,d | Deliveroo PLC, A, 144A | United Kingdom | 144,586 | 575,144 | ||||||||||||||
b | eBay Inc. | United States | 38,325 | 2,585,404 | ||||||||||||||
a | JD.Com Inc., A | China | 459 | 19,383 | ||||||||||||||
a,d | Meituan, B, 144A | China | 500 | 15,197 | ||||||||||||||
a | MercadoLibre Inc. | Argentina | 107 | 127,160 | ||||||||||||||
a | Pinduoduo Inc., ADR | China | 191 | 12,701 | ||||||||||||||
a | THG PLC, B | United Kingdom | 51,299 | 120,622 | ||||||||||||||
a | Zooplus AG | Germany | 867 | 474,021 | ||||||||||||||
|
| |||||||||||||||||
12,313,716 | ||||||||||||||||||
|
| |||||||||||||||||
IT Services 1.8% | ||||||||||||||||||
c | Accenture PLC, A | United States | 194 | 69,336 | ||||||||||||||
a | Afterpay Ltd. | Australia | 17,086 | 1,308,458 | ||||||||||||||
a | FleetCor Technologies Inc. | United States | 2,464 | 510,368 | ||||||||||||||
Genpact Ltd. | United States | 48,101 | 2,321,835 | |||||||||||||||
Global Payments Inc. | United States | 28,349 | 3,374,665 | |||||||||||||||
MasterCard Inc., A | United States | 19,120 | 6,021,271 | |||||||||||||||
a,f | MongoDB Inc., A | United States | 4,583 | 2,282,792 | ||||||||||||||
a,d | Nuvei Corp., 144A | Canada | 14,951 | 1,473,571 |
26 | Semiannual Report | franklintempleton.com |
FRANKLIN ALTERNATIVE STRATEGIES FUNDS
CONSOLIDATED STATEMENT OF INVESTMENTS (UNAUDITED)
Franklin K2 Alternative Strategies Fund (continued)
Country | Shares/ Warrants/ Rights | Value | ||||||||||||||||
Common Stocks and Other Equity Interests (continued) | ||||||||||||||||||
IT Services (continued) | ||||||||||||||||||
a,b | PayPal Holdings Inc. | United States | 16,147 | $ | 2,985,418 | |||||||||||||
a,f | Repay Holdings Corp., A | United States | 15,666 | 256,296 | ||||||||||||||
a | Shopify Inc., A | Canada | 1,298 | 1,975,283 | ||||||||||||||
a | Twilio Inc., A | United States | 8,778 | 2,511,825 | ||||||||||||||
f | Visa Inc., A | United States | 731 | 141,646 | ||||||||||||||
|
| |||||||||||||||||
25,232,764 | ||||||||||||||||||
|
| |||||||||||||||||
Leisure Products 0.1% | ||||||||||||||||||
a,b,c | Callaway Golf Co. | United States | 55,500 | 1,496,280 | ||||||||||||||
|
| |||||||||||||||||
Life Sciences Tools & Services 2.3% | ||||||||||||||||||
a | 10x Genomics Inc., A | United States | 2,345 | 358,339 | ||||||||||||||
a | Avantor Inc. | United States | 18,358 | 724,774 | ||||||||||||||
a,b | BIO-RAD Laboratories Inc., A | United States | 451 | 339,693 | ||||||||||||||
Danaher Corp., W | United States | 27,513 | 8,849,281 | |||||||||||||||
Eurofins Scientific SE | Luxembourg | 26,856 | 3,435,667 | |||||||||||||||
Gerresheimer AG | Germany | 9,835 | 902,186 | |||||||||||||||
a | IQVIA Holdings Inc. | United States | 5,100 | 1,321,563 | ||||||||||||||
Lonza Group AG | Switzerland | 484 | 390,272 | |||||||||||||||
a | Mettler-Toledo International Inc. | United States | 5,046 | 7,640,300 | ||||||||||||||
a,f | Olink Holding AB, ADR | Sweden | 3,494 | 73,234 | ||||||||||||||
a,d | Polypeptide Group AG, 144A | United States | 2,088 | 283,122 | ||||||||||||||
a | QIAGEN NV | United States | 5,448 | 300,348 | ||||||||||||||
a | Rapid Micro Biosystems Inc., A | United States | 2,803 | 34,533 | ||||||||||||||
a | Repligen Corp. | United States | 2,054 | 588,471 | ||||||||||||||
Sartorius Stedim Biotech | France | 4,133 | 2,440,010 | |||||||||||||||
Thermo Fisher Scientific Inc. | United States | 8,125 | 5,141,744 | |||||||||||||||
a,d | Wuxi Biologics Cayman Inc., 144A | China | 1,000 | 13,490 | ||||||||||||||
|
| |||||||||||||||||
32,837,027 | ||||||||||||||||||
|
| |||||||||||||||||
Machinery 0.4% | ||||||||||||||||||
a | Berkshire Grey Inc., 7/21/26, wts. | United States | 23,782 | 29,489 | ||||||||||||||
Caterpillar Inc. | United States | 296 | 57,231 | |||||||||||||||
a | CNH Industrial NV | United Kingdom | 15,619 | 255,527 | ||||||||||||||
Cummins Inc. | United States | 261 | 54,745 | |||||||||||||||
Deere & Co. | United States | 8,105 | 2,800,602 | |||||||||||||||
Fanuc Corp. | Japan | 4,007 | 785,542 | |||||||||||||||
a | Kornit Digital Ltd. | Israel | 4,423 | 685,167 | ||||||||||||||
a | Markforged Holding Corp., A, 7/14/26, wts. | United States | 7,162 | 8,809 | ||||||||||||||
a,f | Nikola Corp. | United States | 6,863 | 70,140 | ||||||||||||||
Otis Worldwide Corp. | United States | 792 | 63,677 | |||||||||||||||
b,c | SPX Flow Inc. | United States | 7,898 | 659,562 | ||||||||||||||
a | Velo3d Inc., 12/1/25, wts. | United States | 20,455 | 60,342 | ||||||||||||||
|
| |||||||||||||||||
5,530,833 | ||||||||||||||||||
|
| |||||||||||||||||
Media 0.4% | ||||||||||||||||||
a,b | Altice USA Inc., A | United States | 49,796 | 788,769 | ||||||||||||||
a,f | Cardlytics Inc. | United States | 11,618 | 785,144 | ||||||||||||||
Comcast Corp., A | United States | 1,147 | 57,327 | |||||||||||||||
c | Fox Corp. | United States | 1,639 | 58,529 | ||||||||||||||
The Interpublic Group of Cos. Inc. | United States | 1,727 | 57,319 | |||||||||||||||
a | ITV PLC | United Kingdom | 293,248 | 430,871 | ||||||||||||||
c | Nexstar Media Group Inc., A | United States | 172 | 25,714 | ||||||||||||||
Shaw Communications Inc., B | Canada | 135,622 | 3,928,149 | |||||||||||||||
Stroeer SE & Co. KGaA | Germany | 1,613 | 124,484 | |||||||||||||||
Tegna Inc. | United States | 2,608 | 51,508 | |||||||||||||||
|
| |||||||||||||||||
6,307,814 | ||||||||||||||||||
|
|
franklintempleton.com | Semiannual Report | 27 |
FRANKLIN ALTERNATIVE STRATEGIES FUNDS
CONSOLIDATED STATEMENT OF INVESTMENTS (UNAUDITED)
Franklin K2 Alternative Strategies Fund (continued)
Country | Shares/ Warrants/ Rights | Value | ||||||||||||||||
Common Stocks and Other Equity Interests (continued) | ||||||||||||||||||
Metals & Mining 0.1% | ||||||||||||||||||
a | Hitachi Metals Ltd. | Japan | 49,017 | $ | 910,060 | |||||||||||||
Newmont Corp. | United States | 1,110 | 60,961 | |||||||||||||||
Nucor Corp. | United States | 641 | 68,113 | |||||||||||||||
a | ThyssenKrupp AG | Germany | 31,533 | 345,751 | ||||||||||||||
|
| |||||||||||||||||
1,384,885 | ||||||||||||||||||
|
| |||||||||||||||||
Multiline Retail 0.3% | ||||||||||||||||||
b | Kohl’s Corp. | United States | 17,744 | 909,025 | ||||||||||||||
c | Target Corp. | United States | 15,448 | 3,766,840 | ||||||||||||||
|
| |||||||||||||||||
4,675,865 | ||||||||||||||||||
|
| |||||||||||||||||
Multi-Utilities 0.3% | ||||||||||||||||||
Consolidated Edison Inc. | United States | 54,242 | 4,211,349 | |||||||||||||||
|
| |||||||||||||||||
Oil, Gas & Consumable Fuels 0.1% | ||||||||||||||||||
a,f | Battalion Oil Corp. | United States | 3,790 | 43,395 | ||||||||||||||
California Resources Corp. | United States | 5,609 | 219,144 | |||||||||||||||
Chevron Corp. | United States | 602 | 67,948 | |||||||||||||||
c | ConocoPhillips | United States | 895 | 62,766 | ||||||||||||||
c | EOG Resources Inc. | United States | 738 | 64,206 | ||||||||||||||
Gazprom PJSC, ADR | Russia | 51,831 | 463,887 | |||||||||||||||
c | Marathon Petroleum Corp. | United States | 154 | 9,371 | ||||||||||||||
c | MPLX LP | United States | 1,736 | 50,882 | ||||||||||||||
a | Ranger Oil Corp., A | United States | 280 | 7,538 | ||||||||||||||
a | Whiting Petroleum Corp. | United States | 419 | 27,105 | ||||||||||||||
|
| |||||||||||||||||
1,016,242 | ||||||||||||||||||
|
| |||||||||||||||||
Personal Products 0.2% | ||||||||||||||||||
The Estee Lauder Cos. Inc., A | United States | 406 | 134,820 | |||||||||||||||
a | Unilever PLC | United Kingdom | 44,866 | 2,310,821 | ||||||||||||||
|
| |||||||||||||||||
2,445,641 | ||||||||||||||||||
|
| |||||||||||||||||
Pharmaceuticals 1.1% | ||||||||||||||||||
a | Arvinas Inc. | United States | 3,611 | 273,028 | ||||||||||||||
a | Bausch Health Cos. Inc. | United States | 15,079 | 359,484 | ||||||||||||||
Bristol-Myers Squibb Co. | United States | 32,174 | 1,725,492 | |||||||||||||||
a | Catalent Inc. | United States | 2,601 | 334,645 | ||||||||||||||
c | Eli Lilly & Co., W | United States | 18,363 | 4,554,758 | ||||||||||||||
Hikma Pharmaceuticals PLC | Jordan | 19,075 | 560,681 | |||||||||||||||
a | Horizon Therapeutics PLC | United States | 7,479 | 776,021 | ||||||||||||||
Johnson & Johnson | United States | 1,588 | 247,617 | |||||||||||||||
c | Merck & Co. Inc. | United States | 830 | 62,175 | ||||||||||||||
Novo Nordisk AS, ADR | Denmark | 12,001 | 1,282,067 | |||||||||||||||
Pfizer Inc. | United States | 1,565 | 84,087 | |||||||||||||||
a,f | Revance Therapeutics Inc. | United States | 19,987 | 273,422 | ||||||||||||||
Roche Holding AG | Switzerland | 13,876 | 5,417,334 | |||||||||||||||
|
| |||||||||||||||||
15,950,811 | ||||||||||||||||||
|
| |||||||||||||||||
Professional Services 1.2% | ||||||||||||||||||
a | 51job Inc., ADR | China | 9,765 | 563,440 | ||||||||||||||
a | Clarivate PLC | United States | 92 | 2,147 | ||||||||||||||
a | IHS Markit Ltd. | United States | 50,569 | 6,463,730 | ||||||||||||||
a,d | Intertrust NV, 144A | Netherlands | 385,196 | 8,911,720 | ||||||||||||||
SGS SA | Switzerland | 208 | 627,489 | |||||||||||||||
|
| |||||||||||||||||
16,568,526 | ||||||||||||||||||
|
|
28 | Semiannual Report | franklintempleton.com |
FRANKLIN ALTERNATIVE STRATEGIES FUNDS
CONSOLIDATED STATEMENT OF INVESTMENTS (UNAUDITED)
Franklin K2 Alternative Strategies Fund (continued)
Country | Shares/ Warrants/ Rights | Value | ||||||||||||||||
Common Stocks and Other Equity Interests (continued) | ||||||||||||||||||
Road & Rail 2.1% | ||||||||||||||||||
f | Canadian Pacific Railway Ltd. | Canada | 45,054 | $ | 3,155,132 | |||||||||||||
CSX Corp. | United States | 36,628 | 1,269,526 | |||||||||||||||
a,b | Hertz Global Holdings Inc. | United States | 136,656 | 3,160,170 | ||||||||||||||
Kansas City Southern | United States | 44,952 | 13,074,289 | |||||||||||||||
a | Tusimple Holdings Inc., A | United States | 24,047 | 961,640 | ||||||||||||||
a | Uber Technologies Inc. | United States | 41,899 | 1,592,162 | ||||||||||||||
b | Union Pacific Corp. | United States | 30,099 | 7,092,528 | ||||||||||||||
|
| |||||||||||||||||
30,305,447 | ||||||||||||||||||
|
| |||||||||||||||||
Semiconductors & Semiconductor Equipment 1.9% | ||||||||||||||||||
a | Advanced Micro Devices Inc. | United States | 18,897 | 2,992,718 | ||||||||||||||
Analog Devices Inc. | United States | 52 | 9,373 | |||||||||||||||
c | Applied Materials Inc. | United States | 1,234 | 181,633 | ||||||||||||||
ASML Holding NV, G | Netherlands | 3,026 | 2,395,109 | |||||||||||||||
Azenta Inc. | United States | 3,346 | 378,433 | |||||||||||||||
KLA Corp. | United States | 5,531 | 2,257,367 | |||||||||||||||
LAM Research Corp. | United States | 116 | 78,863 | |||||||||||||||
Marvell Technology Inc. | United States | 64,049 | 4,558,367 | |||||||||||||||
Micron Technology Inc. | United States | 26,593 | 2,233,812 | |||||||||||||||
c | NVIDIA Corp. | United States | 6,468 | 2,113,483 | ||||||||||||||
NXP Semiconductors NV | China | 348 | 77,729 | |||||||||||||||
QUALCOMM Inc. | United States | 1,374 | 248,089 | |||||||||||||||
a | SolarEdge Technologies Inc. | United States | 1,843 | 604,062 | ||||||||||||||
a | Sunpower Corp., A | United States | 921 | 26,387 | ||||||||||||||
Taiwan Semiconductor Manufacturing Co. Ltd., ADR | Taiwan | 160 | 18,744 | |||||||||||||||
c | Texas Instruments Inc. | United States | 13,046 | 2,509,659 | ||||||||||||||
Xilinx Inc. | United States | 26,948 | 6,156,271 | |||||||||||||||
|
| |||||||||||||||||
26,840,099 | ||||||||||||||||||
|
| |||||||||||||||||
Software 4.7% | ||||||||||||||||||
a | Adobe Inc. | United States | 8,892 | 5,956,306 | ||||||||||||||
a | Atlassian Corp. PLC, A | United States | 3,736 | 1,405,931 | ||||||||||||||
a | Autodesk Inc. | United States | 272 | 69,140 | ||||||||||||||
a | Avalara Inc. | United States | 14,659 | 2,047,569 | ||||||||||||||
a | Blackberry Ltd. | Canada | 25,332 | 241,161 | ||||||||||||||
a,b,c | Box Inc., A | United States | 33,842 | 792,241 | ||||||||||||||
a | Ceridian HCM Holding Inc. | United States | 23,060 | 2,522,764 | ||||||||||||||
a | Dynatrace Inc. | United States | 62,296 | 3,915,304 | ||||||||||||||
a | Embark Technology Inc., 12/31/27, wts. | United States | 1,040 | 1,477 | ||||||||||||||
a | Five9 Inc. | United States | 33,702 | 4,796,806 | ||||||||||||||
a | HubSpot Inc. | United States | 3,129 | 2,524,821 | ||||||||||||||
a | Informatica Inc., A | United States | 12,909 | 415,541 | ||||||||||||||
b | Intuit Inc. | United States | 7,596 | 4,954,871 | ||||||||||||||
a | IronSource Ltd. | Israel | 12,605 | 108,151 | ||||||||||||||
a | Livevox Holdings Inc., 6/18/26, wts. | United States | 23,891 | 15,051 | ||||||||||||||
McAfee Corp., A | United States | 101,969 | 2,635,899 | |||||||||||||||
b,c | Microsoft Corp. | United States | 25,687 | 8,491,865 | ||||||||||||||
a | Nextnav Inc., 10/31/27, wts. | United States | 8,747 | 13,120 | ||||||||||||||
a,b | Nuance Communications Inc. | United States | 157,272 | 8,727,023 | ||||||||||||||
c | Oracle Corp. | United States | 711 | 64,516 | ||||||||||||||
a | Palo Alto Networks Inc. | United States | 5,804 | 3,174,440 | ||||||||||||||
a | Salesforce.com Inc. | United States | 12,570 | 3,581,947 | ||||||||||||||
SAP SE | Germany | 52,910 | 6,780,454 | |||||||||||||||
a | ServiceNow Inc. | United States | 3,185 | 2,062,924 | ||||||||||||||
a | Vonage Holdings Corp. | United States | 48,259 | 995,101 |
franklintempleton.com | Semiannual Report | 29 |
FRANKLIN ALTERNATIVE STRATEGIES FUNDS
CONSOLIDATED STATEMENT OF INVESTMENTS (UNAUDITED)
Franklin K2 Alternative Strategies Fund (continued)
Country | Shares/ Warrants/ Rights | Value | ||||||||||||||||
Common Stocks and Other Equity Interests (continued) | ||||||||||||||||||
Software (continued) | ||||||||||||||||||
a | Zix Corp. | United States | 54,106 | $ | 458,278 | |||||||||||||
|
| |||||||||||||||||
66,752,701 | ||||||||||||||||||
|
| |||||||||||||||||
Specialty Retail 1.6% | ||||||||||||||||||
b,c | Bath & Body Works Inc. | United States | 20,576 | 1,545,875 | ||||||||||||||
a | Cazoo Group Ltd., 8/26/26, wts. | Cayman Islands | 19,178 | 29,183 | ||||||||||||||
a | Enjoy Technology Inc., 12/1/25, wts. | United States | 2,085 | 1,459 | ||||||||||||||
a | Five Below Inc. | United States | 16,866 | 3,431,219 | ||||||||||||||
a | Floor & Decor Holdings Inc., A | United States | 14,115 | 1,819,565 | ||||||||||||||
a | Frasers Group PLC | United Kingdom | 180,900 | 1,640,910 | ||||||||||||||
The Home Depot Inc. | United States | 20,256 | 8,114,756 | |||||||||||||||
Lowe’s Cos. Inc. | United States | 116 | 28,372 | |||||||||||||||
Ross Stores Inc. | United States | 605 | 65,999 | |||||||||||||||
The TJX Cos. Inc. | United States | 1,028 | 71,343 | |||||||||||||||
Tractor Supply Co. | United States | 12,509 | 2,818,653 | |||||||||||||||
a,b | Victoria’s Secret & Co. | United States | 5,452 | 295,935 | ||||||||||||||
a,d | Watches of Switzerland Group PLC, 144A | United Kingdom | 167,853 | 2,995,425 | ||||||||||||||
|
| |||||||||||||||||
22,858,694 | ||||||||||||||||||
|
| |||||||||||||||||
Technology Hardware, Storage & Peripherals 0.0%† | ||||||||||||||||||
Apple Inc. | United States | 1,686 | 278,696 | |||||||||||||||
HP Inc. | United States | 2,168 | 76,487 | |||||||||||||||
c | NetApp Inc. | United States | 800 | 71,104 | ||||||||||||||
a,d | Xiaomi Corp., B, 144A | China | 6,400 | 15,920 | ||||||||||||||
|
| |||||||||||||||||
442,207 | ||||||||||||||||||
|
| |||||||||||||||||
Textiles, Apparel & Luxury Goods 0.6% | ||||||||||||||||||
Adidas AG | Germany | 15,140 | 4,378,737 | |||||||||||||||
a | Capri Holdings Ltd. | United States | 46,992 | 2,782,866 | ||||||||||||||
LVMH Moet Hennessy Louis Vuitton SE | France | 174 | 135,301 | |||||||||||||||
Nike Inc., B | United States | 825 | 139,623 | |||||||||||||||
a,d | Samsonite International SA, 144A | United States | 35,674 | 66,712 | ||||||||||||||
b | Tapestry Inc. | United States | 43,737 | 1,754,729 | ||||||||||||||
|
| |||||||||||||||||
9,257,968 | ||||||||||||||||||
|
| |||||||||||||||||
Trading Companies & Distributors 0.5% | ||||||||||||||||||
Brenntag SE | Germany | 42,109 | 3,606,639 | |||||||||||||||
Herc Holdings Inc. | United States | 15,007 | 2,557,943 | |||||||||||||||
IMCD Group NV | Netherlands | 2,228 | 494,882 | |||||||||||||||
|
| |||||||||||||||||
6,659,464 | ||||||||||||||||||
|
| |||||||||||||||||
Transportation Infrastructure 0.3% | ||||||||||||||||||
a | Atlantia SpA | Italy | 75,597 | 1,380,523 | ||||||||||||||
a | Sydney Airport | Australia | 436,123 | 2,568,631 | ||||||||||||||
|
| |||||||||||||||||
3,949,154 | ||||||||||||||||||
|
| |||||||||||||||||
Water Utilities 0.1% | ||||||||||||||||||
Guangdong Investment Ltd. | China | 1,272,652 | 1,694,041 | |||||||||||||||
|
| |||||||||||||||||
Wireless Telecommunication Services 0.1% | ||||||||||||||||||
a | T-Mobile USA Inc. | United States | 5,665 | 616,408 | ||||||||||||||
b | Vodafone Group PLC, ADR | United Kingdom | 49,788 | 730,888 | ||||||||||||||
|
| |||||||||||||||||
1,347,296 | ||||||||||||||||||
|
| |||||||||||||||||
Total Common Stocks and Other Equity Interests | 597,412,680 | |||||||||||||||||
|
|
30 | Semiannual Report | franklintempleton.com |
FRANKLIN ALTERNATIVE STRATEGIES FUNDS
CONSOLIDATED STATEMENT OF INVESTMENTS (UNAUDITED)
Franklin K2 Alternative Strategies Fund (continued)
Country | Shares/ Warrants/ Rights | Value | ||||||||||||||||
Exchange Traded Funds (Cost $613,561) 0.1% | ||||||||||||||||||
Vaneck Oil Services ETF | United States | 3,165 | $ | 564,509 | ||||||||||||||
|
| |||||||||||||||||
Convertible Preferred Stocks 0.1% | ||||||||||||||||||
Banks 0.1% | ||||||||||||||||||
Bank of America Corp., 7.25%, cvt. pfd., L | United States | 206 | 292,108 | |||||||||||||||
Wells Fargo & Co., 7.50%, cvt. pfd., L | United States | 268 | 392,893 | |||||||||||||||
|
| |||||||||||||||||
685,001 | ||||||||||||||||||
|
| |||||||||||||||||
Diversified Telecommunication Services 0.0%† | ||||||||||||||||||
d | 2020 Cash Mandatory Exchangeable Trust, 5.25%, cvt. pfd., 144A | United States | 250 | 249,320 | ||||||||||||||
|
| |||||||||||||||||
Food Products 0.0%† | ||||||||||||||||||
Bunge Ltd., 4.875%, cvt. pfd. | United States | 1,270 | 154,788 | |||||||||||||||
|
| |||||||||||||||||
Gas Utilities 0.0%† | ||||||||||||||||||
El Paso Energy Capital Trust I, 4.75%, cvt. pfd. | United States | 114 | 5,748 | |||||||||||||||
|
| |||||||||||||||||
Health Care Equipment & Supplies 0.0%† | ||||||||||||||||||
Boston Scientific Corp., 5.50%, cvt. pfd., A | United States | 368 | 38,640 | |||||||||||||||
|
| |||||||||||||||||
Media 0.0%† | ||||||||||||||||||
Viacomcbs Inc., 5.75%, cvt. pfd., A | United States | 7,640 | 394,682 | |||||||||||||||
|
| |||||||||||||||||
Total Convertible Preferred Stocks (Cost $1,630,588) | 1,528,179 | |||||||||||||||||
|
| |||||||||||||||||
Preferred Stocks 0.0%† | ||||||||||||||||||
Diversified Financial Services 0.0%† | ||||||||||||||||||
a | 2MX Organic SA, pfd. | France | 3,964 | 44,542 | ||||||||||||||
|
| |||||||||||||||||
Electric Utilities 0.0%† | ||||||||||||||||||
SCE Trust VI, 5.00%, pfd. | United States | 1,425 | 35,340 | |||||||||||||||
|
| |||||||||||||||||
Professional Services 0.0%† | ||||||||||||||||||
Clarivate PLC, 5.25%, pfd. | United Kingdom | 2,010 | 180,317 | |||||||||||||||
|
| |||||||||||||||||
Thrifts & Mortgage Finance 0.0%† | ||||||||||||||||||
FHLMC, pfd., | ||||||||||||||||||
O, 5.81% | United States | 17,150 | 85,407 | |||||||||||||||
Z, 8.375% | United States | 8,177 | 30,010 | |||||||||||||||
FNMA, pfd., | ||||||||||||||||||
a O | United States | 16,250 | 86,125 | |||||||||||||||
S, 8.25% | United States | 15,150 | 59,085 | |||||||||||||||
|
| |||||||||||||||||
260,627 | ||||||||||||||||||
|
| |||||||||||||||||
Total Preferred Stocks (Cost $539,053) | 520,826 | |||||||||||||||||
|
| |||||||||||||||||
Principal Amount* | ||||||||||||||||||
Convertible Bonds 12.3% | ||||||||||||||||||
Aerospace & Defense 0.2% | ||||||||||||||||||
Kaman Corp., senior note, 3.25%, 5/01/24 | United States | 1,430,000 | 1,439,295 | |||||||||||||||
b | Parsons Corp., senior note, 0.25%, 8/15/25 | United States | 1,160,000 | 1,144,920 | ||||||||||||||
|
| |||||||||||||||||
2,584,215 | ||||||||||||||||||
|
| |||||||||||||||||
Air Freight & Logistics 0.2% | ||||||||||||||||||
Air Transport Services Group Inc., senior note, 1.125%, 10/15/24 | United States | 797,000 | 829,499 | |||||||||||||||
Atlas Air Worldwide Holdings Inc., senior note, | ||||||||||||||||||
2.25%, 6/01/22 | United States | 1,706,000 | 2,091,983 | |||||||||||||||
1.875%, 6/01/24 | United States | 246,000 | 380,685 | |||||||||||||||
|
| |||||||||||||||||
3,302,167 | ||||||||||||||||||
|
|
franklintempleton.com | Semiannual Report | 31 |
FRANKLIN ALTERNATIVE STRATEGIES FUNDS
CONSOLIDATED STATEMENT OF INVESTMENTS (UNAUDITED)
Franklin K2 Alternative Strategies Fund (continued)
Country | Principal Amount* | Value | ||||||||||||||||
Convertible Bonds (continued) | ||||||||||||||||||
Airlines 0.2% | ||||||||||||||||||
d | Air France-KLM, senior note, Reg S, 0.125%, 3/25/26 | France | 37,947 | EUR | $ | 690,914 | ||||||||||||
d | GOL Equity Finance SA, senior note, 144A, 3.75%, 7/15/24 | Brazil | 1,190,000 | 1,016,101 | ||||||||||||||
d,f | Jetblue Airways Corp., senior note, 144A, 0.50%, 4/01/26 | United States | 446,000 | 421,916 | ||||||||||||||
Southwest Airlines Co., senior note, 1.25%, 5/01/25 | United States | 320,000 | 431,000 | |||||||||||||||
f | Spirit Airlines Inc., senior note, 1.00%, 5/15/26 | United States | 697,000 | 618,936 | ||||||||||||||
|
| |||||||||||||||||
3,178,867 | ||||||||||||||||||
|
| |||||||||||||||||
Auto Components 0.1% | ||||||||||||||||||
Patrick Industries Inc., senior note, 1.00%, 2/01/23 | United States | 1,049,000 | 1,167,668 | |||||||||||||||
|
| |||||||||||||||||
Automobiles 0.4% | ||||||||||||||||||
d | Fisker Inc., senior note, 144A, 2.50%, 9/15/26 | United States | 1,233,000 | 1,562,555 | ||||||||||||||
d | Li Auto Inc., senior note, 144A, 0.25%, 5/01/28 | China | 1,045,000 | 1,484,423 | ||||||||||||||
NFI Group Inc., 5.00%, 1/15/27 | Canada | 912,000 | CAD | 713,922 | ||||||||||||||
d | NIO Inc., senior note, 144A, zero cpn., 2/01/26 | China | 1,612,000 | 1,434,841 | ||||||||||||||
|
| |||||||||||||||||
5,195,741 | ||||||||||||||||||
|
| |||||||||||||||||
Banks 0.3% | ||||||||||||||||||
Hope Bancorp Inc., senior bond, 2.00%, 5/15/38 | United States | 2,536,000 | 2,452,467 | |||||||||||||||
d | JPMorgan Chase Bank NA, senior note, Reg S, zero cpn., 12/28/23 | United States | 1,200,000 | 1,195,200 | ||||||||||||||
|
| |||||||||||||||||
3,647,667 | ||||||||||||||||||
|
| |||||||||||||||||
Biotechnology 1.0% | ||||||||||||||||||
d | Avid SPV LLC, senior note, 144A, 1.25%, 3/15/26 | United States | 953,000 | 1,538,160 | ||||||||||||||
BioMarin Pharmaceutical Inc., senior sub. note, 1.25%, 5/15/27 | United States | 1,633,000 | 1,701,268 | |||||||||||||||
Coherus Biosciences Inc., senior sub. note, 1.50%, 4/15/26 | United States | 1,158,000 | 1,401,180 | |||||||||||||||
d | Dynavax Technologies Corp., 144A, 2.50%, 5/15/26 | United States | 795,000 | 1,426,528 | ||||||||||||||
Gossamer Bio Inc., senior note, 5.00%, 6/01/27 | United States | 820,000 | 800,320 | |||||||||||||||
Insmed Inc., senior note, 0.75%, 6/01/28 | United States | 1,249,000 | 1,378,584 | |||||||||||||||
d,f | Intercept Pharmaceuticals Inc., senior secured note, 144A, 3.50%, 2/15/26 | United States | 1,213,000 | 1,361,843 | ||||||||||||||
d | Ionis Pharmaceuticals Inc., senior note, 144A, zero cpn., 4/01/26 | United States | 1,031,000 | 879,134 | ||||||||||||||
Karyopharm Therapeutics Inc., senior note, 3.00%, 10/15/25 | United States | 745,000 | 602,053 | |||||||||||||||
Ligand Pharmaceuticals Inc., senior note, 0.75%, 5/15/23 | United States | 1,093,000 | 1,120,325 | |||||||||||||||
d | Mannkind Corp., senior note, 144A, 2.50%, 3/01/26 | United States | 1,207,000 | 1,397,423 | ||||||||||||||
d | Pharming Group NV, senior note, Reg S, 3.00%, 1/21/25 | Netherlands | 800,000 | EUR | 756,668 | |||||||||||||
|
| |||||||||||||||||
14,363,486 | ||||||||||||||||||
|
| |||||||||||||||||
Capital Markets 0.1% | ||||||||||||||||||
d | SGX Treasury I Pte Ltd., senior note, Reg S, zero cpn., 3/01/24 | Singapore | 1,200,000 | EUR | 1,369,080 | |||||||||||||
|
| |||||||||||||||||
Chemicals 0.1% | ||||||||||||||||||
d | Amyris Inc., senior note, 144A, 1.50%, 11/15/26 | United States | 1,201,000 | 1,152,960 | ||||||||||||||
|
| |||||||||||||||||
Consumer Finance 0.7% | ||||||||||||||||||
Encore Capital Group Inc., senior note, | ||||||||||||||||||
3.25%, 3/15/22 | United States | 2,309,000 | 2,949,747 | |||||||||||||||
3.25%, 10/01/25 | United States | 947,000 | 1,482,647 | |||||||||||||||
EZCORP Inc., senior note, 2.875%, 7/01/24 | United States | 1,003,000 | 1,037,478 | |||||||||||||||
PRA Group Inc., senior note, 3.50%, 6/01/23 | United States | 1,672,000 | 1,836,065 | |||||||||||||||
d | SoFi Technologies Inc., senior note, 144A, zero cpn., 10/15/26 | United States | 624,000 | 700,284 | ||||||||||||||
d | Upstart Holdings Inc., senior note, 144A, 0.25%, 8/15/26 | United States | 986,000 | 1,071,763 | ||||||||||||||
d | Zip Co. Ltd., senior note, Reg S, zero cpn., 4/23/28 | Australia | 800,000 | AUD | 487,569 | |||||||||||||
|
| |||||||||||||||||
9,565,553 | ||||||||||||||||||
|
| |||||||||||||||||
Diversified Consumer Services 0.2% | ||||||||||||||||||
Chegg Inc., senior note, | ||||||||||||||||||
0.125%, 3/15/25 | United States | 276,000 | 265,788 | |||||||||||||||
zero cpn., 9/01/26 | United States | 2,433,000 | 2,003,575 |
32 | 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 Consumer Services (continued) | ||||||||||||||||||
Stride Inc., senior note, 1.125%, 9/01/27 | United States | 1,048,000 | $ | 1,034,481 | ||||||||||||||
|
| |||||||||||||||||
3,303,844 | ||||||||||||||||||
|
| |||||||||||||||||
Diversified Financial Services 0.1% | ||||||||||||||||||
Lendingtree Inc., senior note, 0.50%, 7/15/25 | United States | 1,262,000 | 1,030,477 | |||||||||||||||
|
| |||||||||||||||||
Diversified Telecommunication Services 0.1% | ||||||||||||||||||
d | Radius Global Infrastructure Inc., senior note, 144A, 2.50%, 9/15/26 | United States | 1,016,000 | 1,030,605 | ||||||||||||||
|
| |||||||||||||||||
Electrical Equipment 0.0%† | ||||||||||||||||||
d | Stem Inc., senior note, 144A, 0.50%, 12/01/28 | United States | 364,000 | 366,730 | ||||||||||||||
|
| |||||||||||||||||
Electronic Equipment, Instruments & Components 0.3% | ||||||||||||||||||
OSI Systems Inc., senior note, 1.25%, 9/01/22 | United States | 1,614,000 | 1,648,224 | |||||||||||||||
PAR Technology Corp., senior note, 1.50%, 10/15/27 | United States | 801,000 | 801,501 | |||||||||||||||
Vishay Intertechnology Inc., senior note, 2.25%, 6/15/25 | United States | 1,366,000 | 1,396,042 | |||||||||||||||
|
| |||||||||||||||||
3,845,767 | ||||||||||||||||||
|
| |||||||||||||||||
Energy Equipment & Services 0.1% | ||||||||||||||||||
f | Helix Energy Solutions Group Inc., senior note, 6.75%, 2/15/26 | United States | 1,563,000 | 1,506,278 | ||||||||||||||
|
| |||||||||||||||||
Entertainment 0.3% | ||||||||||||||||||
Cinemark Holdings Inc., senior note, 4.50%, 8/15/25 | United States | 1,123,000 | 1,571,498 | |||||||||||||||
Live Nation Entertainment Inc., senior note, 2.00%, 2/15/25 | United States | 370,000 | 456,950 | |||||||||||||||
d | The Marcus Corp., senior note, 144A, 5.00%, 9/15/25 | United States | 750,000 | 1,354,688 | ||||||||||||||
Sea Ltd., senior note, 0.25%, 9/15/26 | Taiwan | 1,190,000 | 1,166,795 | |||||||||||||||
d | Zynga Inc., senior note, 144A, zero cpn., 12/15/26 | United States | 230,000 | 210,737 | ||||||||||||||
|
| |||||||||||||||||
4,760,668 | ||||||||||||||||||
|
| |||||||||||||||||
Equity Real Estate Investment Trusts (REITs) 0.3% | ||||||||||||||||||
d | Braemar Hotels & Resorts Inc., senior note, 144A, 4.50%, 6/01/26 | United States | 485,000 | 514,110 | ||||||||||||||
d | IIP Operating Partnership LP, senior note, 144A, 3.75%, 2/21/24 | United States | 470,000 | 1,838,875 | ||||||||||||||
Pebblebrook Hotel Trust, senior note, 1.75%, 12/15/26 | United States | 1,440,000 | 1,531,440 | |||||||||||||||
Summit Hotel Properties Inc., senior note, 1.50%, 2/15/26 | United States | 1,137,000 | 1,145,124 | |||||||||||||||
|
| |||||||||||||||||
5,029,549 | ||||||||||||||||||
|
| |||||||||||||||||
Food & Staples Retailing 0.2% | ||||||||||||||||||
The Chefs’ Warehouse Inc., senior note, 1.875%, 12/01/24 | United States | 2,405,000 | 2,522,391 | |||||||||||||||
�� |
|
| ||||||||||||||||
Food Products 0.0%† | ||||||||||||||||||
d | Beyond Meat Inc., senior note, 144A, zero cpn., 3/15/27 | United States | 986,000 | 698,827 | ||||||||||||||
|
| |||||||||||||||||
Health Care Equipment & Supplies 0.5% | ||||||||||||||||||
d | Alphatec Holdings Inc., senior note, 144A, 0.75%, 8/01/26 | United States | 969,000 | 926,001 | ||||||||||||||
d | Cutera Inc., senior note, 144A, 2.25%, 3/15/26 | United States | 1,007,000 | 1,303,199 | ||||||||||||||
Mesa Laboratories Inc., senior note, 1.375%, 8/15/25 | United States | 595,000 | 733,537 | |||||||||||||||
NuVasive Inc., senior note, | ||||||||||||||||||
1.00%, 6/01/23 | United States | 2,056,000 | 2,041,865 | |||||||||||||||
0.375%, 3/15/25 | United States | 600,000 | 566,250 | |||||||||||||||
d | SmileDirectClub Inc., senior note, 144A, zero cpn., 2/01/26 | United States | 1,177,000 | 501,510 | ||||||||||||||
Varex Imaging Corp., senior note, 4.00%, 6/01/25 | United States | 1,165,000 | 1,814,487 | |||||||||||||||
|
| |||||||||||||||||
7,886,849 | ||||||||||||||||||
|
| |||||||||||||||||
Health Care Providers & Services 0.1% | ||||||||||||||||||
1life Healthcare Inc., senior note, 3.00%, 6/15/25 | United States | 985,000 | 893,514 | |||||||||||||||
d | Brookdale Senior Living Inc., senior note, 144A, 2.00%, 10/15/26 | United States | 253,000 | 270,356 | ||||||||||||||
Guardant Health Inc., senior note, zero cpn., 11/15/27 | United States | 70,000 | 72,931 | |||||||||||||||
Petiq Inc., senior note, 4.00%, 6/01/26 | United States | 678,000 | 744,472 | |||||||||||||||
|
| |||||||||||||||||
1,981,273 | ||||||||||||||||||
|
|
franklintempleton.com | Semiannual Report | 33 |
FRANKLIN ALTERNATIVE STRATEGIES FUNDS
CONSOLIDATED STATEMENT OF INVESTMENTS (UNAUDITED)
Franklin K2 Alternative Strategies Fund (continued)
Country | Principal Amount* | Value | ||||||||||||||||
Convertible Bonds (continued) | ||||||||||||||||||
Health Care Technology 0.1% | ||||||||||||||||||
d | Bilibili Inc., senior note, 144A, 0.50%, 12/01/26 | China | 95,000 | $ | 92,910 | |||||||||||||
Livongo Health Inc., senior note, 0.875%, 6/01/25 | United States | 105,000 | 122,522 | |||||||||||||||
Tabula Rasa Healthcare Inc., senior sub. note, 1.75%, 2/15/26 | United States | 713,000 | 558,603 | |||||||||||||||
Teladoc Health Inc., senior note, 1.25%, 6/01/27 | United States | 430,000 | 393,089 | |||||||||||||||
|
| |||||||||||||||||
1,167,124 | ||||||||||||||||||
|
| |||||||||||||||||
Hotels, Restaurants & Leisure 0.2% | ||||||||||||||||||
d | Airbnb Inc., senior note, 144A, zero cpn., 3/15/26 | United States | 768,000 | 762,240 | ||||||||||||||
d | Draftkings Inc., senior note, 144A, zero cpn., 3/15/28 | United States | 123,000 | 95,908 | ||||||||||||||
d | Marriott Vacations Worldwide Corp., senior note, 144A, zero cpn., 1/15/26 | United States | 246,000 | 270,293 | ||||||||||||||
Penn National Gaming Inc., senior note, 2.75%, 5/15/26 | United States | 40,000 | 93,952 | |||||||||||||||
Royal Caribbean Cruises Ltd., senior note, 2.875%, 11/15/23 | United States | 1,576,000 | 1,773,157 | |||||||||||||||
|
| |||||||||||||||||
2,995,550 | ||||||||||||||||||
|
| |||||||||||||||||
Independent Power & Renewable Electricity Producers 0.1% | ||||||||||||||||||
d | Sunnova Energy International Inc., senior note, 144A, 0.25%, 12/01/26 | United States | 1,111,000 | 1,386,806 | ||||||||||||||
|
| |||||||||||||||||
Interactive Media & Services 0.0%† | ||||||||||||||||||
d | Twitter Inc., senior note, 144A, zero cpn., 3/15/26 | United States | 130,000 | 116,168 | ||||||||||||||
|
| |||||||||||||||||
Internet & Direct Marketing Retail 0.6% | ||||||||||||||||||
d | Cornwall Jersey Ltd., senior note, Reg S, 0.75%, 4/16/26 | United Kingdom | 200,000 | GBP | 236,163 | |||||||||||||
d | Delivery Hero AG, senior note, Reg S, 1.50%, 1/15/28 | Saudi Arabia | 1,100,000 | EUR | 1,315,893 | |||||||||||||
d,f | Expedia Group Inc., senior note, 144A, zero cpn., 2/15/26 | United States | 85,000 | 91,545 | ||||||||||||||
Fiverr International Ltd., senior note, zero cpn., 11/01/25 | United States | 713,000 | 721,912 | |||||||||||||||
d | Groupon Inc., senior note, 144A, 1.125%, 3/15/26 | United States | 1,298,000 | 1,022,175 | ||||||||||||||
d | Just Eat Takeaway.Com NV, B, senior note, Reg S, 0.625%, 2/09/28 | United Kingdom | 600,000 | EUR | 589,746 | |||||||||||||
Pinduoduo Inc., senior note, zero cpn., 12/01/25 | China | 186,000 | 166,098 | |||||||||||||||
d | Porch Group Inc., senior note, 144A, 0.75%, 9/15/26 | United States | 919,000 | 1,012,049 | ||||||||||||||
d | The Realreal Inc., senior note, 144A, 1.00%, 3/01/28 | United States | 339,000 | 302,524 | ||||||||||||||
d | Takeaway.com NV, senior note, Reg S, 1.25%, 4/30/26 | United Kingdom | 900,000 | EUR | 969,254 | |||||||||||||
Wayfair Inc., senior note, | ||||||||||||||||||
0.625%, 10/01/25 | United States | 1,129,000 | 1,116,016 | |||||||||||||||
1.00%, 8/15/26 | United States | 325,000 | 593,612 | |||||||||||||||
Zillow Group Inc., senior note, 1.375%, 9/01/26 | United States | 25,000 | 35,906 | |||||||||||||||
|
| |||||||||||||||||
8,172,893 | ||||||||||||||||||
|
| |||||||||||||||||
IT Services 0.3% | ||||||||||||||||||
d | Affirm Holdings Inc., senior note, 144A, zero cpn., 11/15/26 | United States | 728,000 | 717,850 | ||||||||||||||
f | CSG Systems International Inc., senior bond, 4.25%, 3/15/36 | United States | 2,217,000 | 2,286,281 | ||||||||||||||
d | Digitalocean Holdings Inc., senior note, 144A, zero cpn., 12/01/26 | United States | 297,000 | 291,617 | ||||||||||||||
d | Fastly Inc., senior note, 144A, zero cpn., 3/15/26 | United States | 1,551,000 | 1,308,656 | ||||||||||||||
|
| |||||||||||||||||
4,604,404 | ||||||||||||||||||
|
| |||||||||||||||||
Leisure Products 0.2% | ||||||||||||||||||
d | NCL Corp. Ltd., senior note, 144A, 1.125%, 2/15/27 | United States | 1,873,000 | 1,725,033 | ||||||||||||||
d | Peloton Interactive Inc., senior note, 144A, zero cpn., 2/15/26 | United States | 695,000 | 582,062 | ||||||||||||||
|
| |||||||||||||||||
2,307,095 | ||||||||||||||||||
|
| |||||||||||||||||
Life Sciences Tools & Services 0.1% | ||||||||||||||||||
d | Inotiv Inc., senior note, 144A, 3.25%, 10/15/27 | United States | 790,000 | 1,083,536 | ||||||||||||||
|
| |||||||||||||||||
Machinery 0.2% | ||||||||||||||||||
f | Fortive Corp., senior note, 0.875%, 2/15/22 | United States | 1,517,000 | 1,525,343 | ||||||||||||||
d | The Greenbrier Cos. Inc., senior note, 144A, 2.875%, 4/15/28 | United States | 1,294,000 | 1,339,290 | ||||||||||||||
|
| |||||||||||||||||
2,864,633 | ||||||||||||||||||
|
|
34 | 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) | ||||||||||||||||||
Media 1.1% | ||||||||||||||||||
Dish Network Corp., | ||||||||||||||||||
senior bond, 3.375%, 8/15/26 | United States | 3,035,000 | $ | 2,805,105 | ||||||||||||||
d senior note, 144A, zero cpn., 12/15/25 | United States | 80,000 | 77,400 | |||||||||||||||
d | Liberty Broadband Corp., 144A, | |||||||||||||||||
senior bond, 1.25%, 9/30/50 | United States | 1,934,000 | 1,926,264 | |||||||||||||||
senior bond, 2.75%, 9/30/50 | United States | 2,256,000 | 2,309,991 | |||||||||||||||
Liberty Interactive LLC, | ||||||||||||||||||
senior bond, 4.00%, 11/15/29 | United States | 1,326,000 | 1,014,390 | |||||||||||||||
senior note, 3.75%, 2/15/30 | United States | 1,784,000 | 1,371,450 | |||||||||||||||
d | Liberty Media Corp., senior bond, 144A, | |||||||||||||||||
2.125%, 3/31/48 | United States | 1,958,000 | 2,021,635 | |||||||||||||||
2.75%, 12/01/49 | United States | 1,720,000 | 1,782,780 | |||||||||||||||
b,d | Magnite Inc., senior note, 144A, 0.25%, 3/15/26 | United States | 1,813,000 | 1,420,109 | ||||||||||||||
d | Techtarget Inc., senior note, 144A, 0.125%, 12/15/25 | United States | 867,000 | 1,286,678 | ||||||||||||||
|
| |||||||||||||||||
16,015,802 | ||||||||||||||||||
|
| |||||||||||||||||
Metals & Mining 0.3% | ||||||||||||||||||
d | Century Aluminum Co., senior note, 144A, 2.75%, 5/01/28 | United States | 571,000 | 582,420 | ||||||||||||||
d | Ivanhoe Mines Ltd., senior note, 144A, 2.50%, 4/15/26 | Canada | 776,000 | 1,022,747 | ||||||||||||||
d | MP Materials Corp., senior note, 144A, 0.25%, 4/01/26 | United States | 1,362,000 | 1,632,782 | ||||||||||||||
Osisko Gold Royalties Ltd., senior note, 4.00%, 12/31/22 | Canada | 383,000 | CAD | 306,562 | ||||||||||||||
Pretium Resources Inc., senior sub. note, 2.25%, 3/15/22 | Canada | 476,000 | 477,047 | |||||||||||||||
|
| |||||||||||||||||
4,021,558 | ||||||||||||||||||
|
| |||||||||||||||||
Mortgage Real Estate Investment Trusts (REITs) 0.8% | ||||||||||||||||||
Apollo Commercial Real Estate Finance Inc., senior note, 4.75%, 8/23/22 | United States | 1,240,000 | 1,252,227 | |||||||||||||||
Arbor Realty Trust Inc., senior note, 4.75%, 11/01/22 | United States | 1,861,000 | 2,041,284 | |||||||||||||||
KKR Real Estate Finance Trust Inc., senior note, 6.125%, 5/15/23 | United States | 715,000 | 755,693 | |||||||||||||||
PennyMac Corp., senior note, | ||||||||||||||||||
5.50%, 11/01/24 | United States | 1,840,000 | 1,841,150 | |||||||||||||||
d144A, 5.50%, 3/15/26 | United States | 1,338,000 | 1,286,858 | |||||||||||||||
Redwood Trust Inc., senior note, 4.75%, 8/15/23 | United States | 2,286,000 | 2,356,009 | |||||||||||||||
Starwood Property Trust Inc., senior note, 4.375%, 4/01/23 | United States | 987,000 | 1,050,633 | |||||||||||||||
Two Harbors Investment Corp., senior note, 6.25%, 1/15/26 | United States | 1,070,000 | 1,091,104 | |||||||||||||||
|
| |||||||||||||||||
11,674,958 | ||||||||||||||||||
|
| |||||||||||||||||
Personal Products 0.2% | ||||||||||||||||||
d | The Beauty Health Co., senior note, 144A, 1.25%, 10/01/26 | United States | 1,120,000 | 1,240,400 | ||||||||||||||
Herbalife Nutrition Ltd., senior note, 2.625%, 3/15/24 | United States | 2,030,000 | 1,997,012 | |||||||||||||||
|
| |||||||||||||||||
3,237,412 | ||||||||||||||||||
|
| |||||||||||||||||
Pharmaceuticals 0.8% | ||||||||||||||||||
Aerie Pharmaceuticals Inc., senior note, 1.50%, 10/01/24 | United States | 713,000 | 636,798 | |||||||||||||||
Aurora Cannabis Inc., senior note, 5.50%, 2/28/24 | Canada | 1,473,000 | 1,253,228 | |||||||||||||||
d | Avadel Finance Cayman Ltd., senior note, 144A, 4.50%, 2/01/23 | United States | 1,459,000 | 1,640,393 | ||||||||||||||
d | Canopy Growth Corp., senior note, 144A, 4.25%, 7/15/23 | Canada | 1,058,000 | CAD | 795,084 | |||||||||||||
Collegium Pharmaceutical Inc., senior note, 2.625%, 2/15/26 | United States | 1,009,000 | 956,658 | |||||||||||||||
Innoviva Inc., sub. note, 2.125%, 1/15/23 | United States | 2,356,000 | 2,547,425 | |||||||||||||||
Omeros Corp., senior note, 5.25%, 2/15/26 | United States | 972,000 | 722,487 | |||||||||||||||
b | Revance Therapeutics Inc., senior note, 1.75%, 2/15/27 | United States | 1,451,000 | 1,169,869 | ||||||||||||||
Zogenix Inc., senior note, 2.75%, 10/01/27 | United States | 1,314,000 | 1,120,448 | |||||||||||||||
|
| |||||||||||||||||
10,842,390 | ||||||||||||||||||
|
| |||||||||||||||||
Photography 0.1% | ||||||||||||||||||
Pacira Biosciences Inc., senior note, 0.75%, 8/01/25 | United States | 867,000 | 908,724 | |||||||||||||||
|
| |||||||||||||||||
Professional Services 0.0%† | ||||||||||||||||||
d | Upwork Inc., senior note, 144A, 0.25%, 8/15/26 | United States | 476,000 | 460,027 | ||||||||||||||
|
|
franklintempleton.com | Semiannual Report | 35 |
FRANKLIN ALTERNATIVE STRATEGIES FUNDS
CONSOLIDATED STATEMENT OF INVESTMENTS (UNAUDITED)
Franklin K2 Alternative Strategies Fund (continued)
Country | Principal Amount* | Value | ||||||||||||||||
Convertible Bonds (continued) | ||||||||||||||||||
Real Estate Management & Development 0.2% | ||||||||||||||||||
d | Opendoor Technologies Inc., senior note, 144A, 0.25%, 8/15/26 | United States | 1,357,000 | $ | 1,449,563 | |||||||||||||
d | Realogy Group LLC / Realogy Co.-Issuer Corp., senior note, 144A, 0.25%, 6/15/26 | United States | 862,000 | 823,210 | ||||||||||||||
d | Redfin Corp., senior note, 144A, 0.50%, 4/01/27 | United States | 1,250,000 | 1,032,500 | ||||||||||||||
|
| |||||||||||||||||
3,305,273 | ||||||||||||||||||
|
| |||||||||||||||||
Road & Rail 0.0%† | ||||||||||||||||||
d | Uber Technologies Inc., senior note, 144A, zero cpn., 12/15/25 | United States | 125,000 | 116,625 | ||||||||||||||
|
| |||||||||||||||||
Semiconductors & Semiconductor Equipment 0.2% | ||||||||||||||||||
d | ams AG, senior note, Reg S, 2.125%, 11/03/27 | Austria | 1,300,000 | EUR | 1,449,710 | |||||||||||||
d | Camtek Ltd., senior note, 144A, zero cpn., 12/01/26 | Israel | 237,000 | 252,287 | ||||||||||||||
d | Impinj Inc., senior note, 144A, 1.125%, 5/15/27 | United States | 279,000 | 279,142 | ||||||||||||||
Sunpower Corp., senior note, 4.00%, 1/15/23 | United States | 859,000 | 1,160,187 | |||||||||||||||
|
| |||||||||||||||||
3,141,326 | ||||||||||||||||||
|
| |||||||||||||||||
Software 1.0% | ||||||||||||||||||
Alteryx Inc., senior note, 0.50%, 8/01/24 | United States | 1,297,000 | 1,234,938 | |||||||||||||||
Avaya Holdings Corp., senior note, 2.25%, 6/15/23 | United States | 1,337,000 | 1,411,203 | |||||||||||||||
d | Bentley Systems Inc., senior note, 144A, 0.375%, 7/01/27 | United States | 382,000 | 353,292 | ||||||||||||||
d | Blackline Inc., senior note, 144A, zero cpn., 3/15/26 | United States | 1,250,000 | 1,206,250 | ||||||||||||||
d | Dye & Durham Ltd., senior note, 144A, 3.75%, 3/01/26 | Canada | 888,000 | CAD | 677,756 | |||||||||||||
b,d | fuboTV Inc., senior note, 144A, 3.25%, 2/15/26 | United States | 1,257,000 | 1,087,561 | ||||||||||||||
b | i3 Verticals LLC, senior note, 1.00%, 2/15/25 | United States | 842,000 | 750,825 | ||||||||||||||
d | Kaleyra Inc., senior note, 144A, 6.125%, 6/01/26 | Italy | 696,000 | 712,602 | ||||||||||||||
Mandiant Inc., senior note, 0.875%, 6/01/24 | United States | 1,182,000 | 1,227,064 | |||||||||||||||
d | Microstrategy Inc., senior note, 144A, zero cpn., 2/15/27 | United States | 594,000 | 479,358 | ||||||||||||||
d | Mitek Systems Inc., senior note, 144A, 0.75%, 2/01/26 | United States | 1,019,000 | 1,110,408 | ||||||||||||||
d | Nutanix Inc., senior note, 144A, 0.25%, 10/01/27 | United States | 1,146,000 | 1,086,551 | ||||||||||||||
Palo Alto Networks Inc., senior note, 0.375%, 6/01/25 | United States | 190,000 | 354,825 | |||||||||||||||
d | Rapid7 Inc., senior note, 144A, 0.25%, 3/15/27 | United States | 1,100,000 | 1,471,230 | ||||||||||||||
Splunk Inc., senior note, 1.125%, 6/15/27 | United States | 1,054,000 | 1,001,959 | |||||||||||||||
d | Veritone Inc., senior note, 144A, 1.75%, 11/15/26 | United States | 546,000 | 553,849 | ||||||||||||||
|
| |||||||||||||||||
14,719,671 | ||||||||||||||||||
|
| |||||||||||||||||
Specialty Retail 0.3% | ||||||||||||||||||
d | Dufry One BV, senior note, Reg S, 0.75%, 3/30/26 | Switzerland | 600,000 | CHF | 618,385 | |||||||||||||
b | Guess? Inc., senior note, 2.00%, 4/15/24 | United States | 1,111,000 | 1,274,178 | ||||||||||||||
d | Shift Technologies Inc., senior note, 144A, 4.75%, 5/15/26 | United States | 981,000 | 899,813 | ||||||||||||||
d | Vroom Inc., senior note, 144A, 0.75%, 7/01/26 | United States | 1,188,000 | 818,819 | ||||||||||||||
|
| |||||||||||||||||
3,611,195 | ||||||||||||||||||
|
| |||||||||||||||||
Technology Hardware, Storage & Peripherals 0.0%† | ||||||||||||||||||
Pure Storage Inc., senior note, 0.125%, 4/15/23 | United States | 319,000 | 411,574 | |||||||||||||||
|
| |||||||||||||||||
Total Convertible Bonds (Cost $172,266,165) | 176,655,406 | |||||||||||||||||
|
| |||||||||||||||||
Corporate Bonds and Notes 10.8% | ||||||||||||||||||
Aerospace & Defense 0.2% | ||||||||||||||||||
The Boeing Co., | ||||||||||||||||||
senior bond, 2.25%, 6/15/26 | United States | 115,000 | 115,425 | |||||||||||||||
senior bond, 2.95%, 2/01/30 | United States | 50,000 | 50,486 | |||||||||||||||
senior bond, 3.375%, 6/15/46 | United States | 90,000 | 88,821 | |||||||||||||||
senior bond, 3.625%, 3/01/48 | United States | 25,000 | 25,209 | |||||||||||||||
senior bond, 3.90%, 5/01/49 | United States | 100,000 | 105,081 | |||||||||||||||
senior bond, 3.75%, 2/01/50 | United States | 130,000 | 135,093 | |||||||||||||||
senior bond, 5.805%, 5/01/50 | United States | 125,000 | 168,849 | |||||||||||||||
senior bond, 3.825%, 3/01/59 | United States | 25,000 | 25,414 | |||||||||||||||
senior bond, 3.95%, 8/01/59 | United States | 30,000 | 31,374 | |||||||||||||||
senior note, 2.196%, 2/04/26 | United States | 435,000 | 434,338 | |||||||||||||||
senior note, 5.15%, 5/01/30 | United States | 140,000 | 162,610 |
36 | 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) | ||||||||||||||||||
Aerospace & Defense (continued) | ||||||||||||||||||
d | Bombardier Inc., senior note, 144A, 7.50%, 12/01/24 | Canada | 822,000 | $ | 853,988 | |||||||||||||
Embraer Netherlands Finance BV, senior bond, 5.05%, 6/15/25 | Brazil | 55,000 | 56,505 | |||||||||||||||
d | Leonardo US Holdings Inc., senior bond, 144A, 6.25%, 1/15/40 | Italy | 236,000 | 277,300 | ||||||||||||||
Spirit Aerosystems Inc., | ||||||||||||||||||
senior bond, 4.60%, 6/15/28 | United States | 20,000 | 18,970 | |||||||||||||||
d senior secured note, 144A, 5.50%, 1/15/25 | United States | 376,000 | 388,051 | |||||||||||||||
|
| |||||||||||||||||
2,937,514 | ||||||||||||||||||
|
| |||||||||||||||||
Airlines 0.2% | ||||||||||||||||||
American Airlines 2015-2 Class Aa Pass-Through Trust, 3.60%, 9/22/27 | United States | 1,021,220 | 1,059,644 | |||||||||||||||
American Airlines 2016-1 Class Aa Pass-Through Trust, AA, 3.575%, 1/15/28 | United States | 411,411 | 430,651 | |||||||||||||||
d | American Airlines Group Inc., senior note, 144A, 3.75%, 3/01/25 | United States | 700,000 | 624,603 | ||||||||||||||
United Airlines 2020-1 Class B Pass-Through Trust, 4.875%, 1/15/26 | United States | 44,900 | 47,120 | |||||||||||||||
d | United Airlines Inc., senior secured note, 144A, | |||||||||||||||||
4.375%, 4/15/26 | United States | 40,000 | 40,237 | |||||||||||||||
4.625%, 4/15/29 | United States | 55,000 | 54,808 | |||||||||||||||
United Airlines Pass-Through Trust, 2019-2, B, 3.50%, 5/01/28 | United States | 342,590 | 340,889 | |||||||||||||||
|
| |||||||||||||||||
2,597,952 | ||||||||||||||||||
|
| |||||||||||||||||
Auto Components 0.0%† | ||||||||||||||||||
Aptiv PLC, senior bond, 3.10%, 12/01/51 | United States | 470,000 | 456,811 | |||||||||||||||
|
| |||||||||||||||||
Automobiles 0.2% | ||||||||||||||||||
d | Aston Martin Capital Holdings Ltd., senior secured note, 144A, 10.50%, 11/30/25 | United Kingdom | 700,000 | 759,066 | ||||||||||||||
Ford Motor Co., senior bond, 3.25%, 2/12/32 | United States | 420,000 | 420,689 | |||||||||||||||
Ford Motor Credit Co. LLC, senior note, 3.625%, 6/17/31 | United States | 700,000 | 715,344 | |||||||||||||||
General Motors Co., senior bond, | ||||||||||||||||||
5.20%, 4/01/45 | United States | 30,000 | 37,106 | |||||||||||||||
5.40%, 4/01/48 | United States | 140,000 | 179,793 | |||||||||||||||
f 5.95%, 4/01/49 | United States | 190,000 | 260,690 | |||||||||||||||
General Motors Financial Co. Inc., | ||||||||||||||||||
g junior sub. note, A, 5.75% to 9/30/27, FRN thereafter, Perpetual | United States | 100,000 | 106,975 | |||||||||||||||
f,g junior sub. note, B, 6.50% to 3/30/28, FRN thereafter, Perpetual | United States | 75,000 | 84,037 | |||||||||||||||
f,g junior sub. note, C, 5.70% to 9/30/30, FRN thereafter, Perpetual | United States | 35,000 | 39,681 | |||||||||||||||
senior note, 1.20%, 10/15/24 | United States | 85,000 | 84,804 | |||||||||||||||
|
| |||||||||||||||||
2,688,185 | ||||||||||||||||||
|
| |||||||||||||||||
Banks 0.6% | ||||||||||||||||||
d | Axis Bank Ltd., senior note, Reg S, 3.00%, 8/08/22 | India | 400,000 | 404,857 | ||||||||||||||
d,h | Banco Hipotecario SA, senior note, 144A, FRN, 38.167%, (ARS BADLAR + 4.00%), 11/07/22 | Argentina | 3,160,000 | ARS | 13,554 | |||||||||||||
d | Banco Macro SA, senior note, 144A, 17.50%, 5/08/22 | Argentina | 1,740,000 | ARS | 7,472 | |||||||||||||
d | Bank of Communications Hong Kong Ltd., sub. bond, Reg S, 2.304% to 7/08/26, FRN thereafter, 7/08/31 | Hong Kong | 400,000 | 391,776 | ||||||||||||||
Barclays PLC, | ||||||||||||||||||
sub. bond, 3.564% to 9/23/30, FRN thereafter, 9/23/35 | United Kingdom | 325,000 | 334,671 | |||||||||||||||
g junior sub. note, 4.375% to 3/15/28, FRN thereafter, Perpetual | United Kingdom | 210,000 | 201,986 | |||||||||||||||
d | Canara Bank, E, senior note, Reg S, 3.875%, 3/28/24 | India | 466,000 | 485,711 | ||||||||||||||
Citigroup Inc., senior note, 1.281% to 11/3/24, FRN thereafter, 11/03/25 | United States | 450,000 | 449,006 | |||||||||||||||
Deutsche Bank AG, | ||||||||||||||||||
senior bond, 3.547% to 9/18/30, FRN thereafter, 9/18/31 | Germany | 150,000 | 158,451 | |||||||||||||||
sub. bond, 3.729% to 1/14/31, FRN thereafter, 1/14/32 | Germany | 400,000 | 408,048 | |||||||||||||||
g | HSBC Holdings PLC, junior sub. note, 6.25% to 3/23/23, FRN thereafter, Perpetual | United Kingdom | 1,400,000 | 1,449,000 |
franklintempleton.com | Semiannual Report | 37 |
FRANKLIN ALTERNATIVE STRATEGIES FUNDS
CONSOLIDATED STATEMENT OF INVESTMENTS (UNAUDITED)
Franklin K2 Alternative Strategies Fund (continued)
Country | Principal Amount* | Value | ||||||||||||||||
Corporate Bonds and Notes (continued) | ||||||||||||||||||
Banks (continued) | ||||||||||||||||||
d | ICICI Bank Ltd., E, senior note, Reg S, 3.25%, 9/09/22 | India | 600,000 | $ | 609,522 | |||||||||||||
d | Indusind Bank Ltd., E, senior note, Reg S, 3.875%, 4/15/22 | India | 1,200,000 | 1,204,788 | ||||||||||||||
Keybank NA, senior note, 0.433% to 6/14/23, FRN thereafter, 6/14/24 | United States | 465,000 | 462,210 | |||||||||||||||
d | Societe Generale SA, sub. bond, 144A, 3.653% to 7/08/30, FRN thereafter, 7/08/35 | France | 200,000 | 206,743 | ||||||||||||||
d | Standard Chartered PLC, sub. bond, 144A, 3.265% to 11/18/30, FRN thereafter, 2/18/36 | United Kingdom | 255,000 | 251,941 | ||||||||||||||
d | State Bank of India, E, senior note, Reg S, 4.50%, 9/28/23 | India | 600,000 | 634,953 | ||||||||||||||
d,g | TMB Bank PCL, E, junior sub. note, Reg S, 4.90% to 12/02/24, FRN thereafter, Perpetual | Thailand | 400,000 | 401,471 | ||||||||||||||
d,i | VTB Bank OJSC Via VTB Capital SA, senior note, loan participation, Reg S, 6.95%, 10/17/22 | Russia | 959,000 | 985,772 | ||||||||||||||
|
| |||||||||||||||||
9,061,932 | ||||||||||||||||||
|
| |||||||||||||||||
Beverages 0.0%† | ||||||||||||||||||
d | Becle SAB de CV, senior bond, 144A, 2.50%, 10/14/31 | Mexico | 235,000 | 230,605 | ||||||||||||||
Fomento Economico Mexicano SAB de CV, senior bond, 3.50%, 1/16/50 | Mexico | 244,000 | 261,999 | |||||||||||||||
|
| |||||||||||||||||
492,604 | ||||||||||||||||||
|
| |||||||||||||||||
Capital Markets 0.5% | ||||||||||||||||||
Ares Capital Corp., | ||||||||||||||||||
senior bond, 3.20%, 11/15/31 | United States | 235,000 | 230,344 | |||||||||||||||
senior note, 2.875%, 6/15/28 | United States | 245,000 | 244,323 | |||||||||||||||
d | Barings BDC Inc., senior note, 144A, 3.30%, 11/23/26 | United States | 125,000 | 123,852 | ||||||||||||||
d | Coinbase Global Inc., senior bond, 144A, 3.625%, 10/01/31 | United States | 800,000 | 743,332 | ||||||||||||||
FS KKR Capital Corp., senior note, | ||||||||||||||||||
3.40%, 1/15/26 | United States | 365,000 | 372,480 | |||||||||||||||
3.125%, 10/12/28 | United States | 155,000 | 152,817 | |||||||||||||||
The Goldman Sachs Group Inc., senior note, 0.925% to 10/21/23, FRN thereafter, 10/21/24 | United States | 465,000 | 463,396 | |||||||||||||||
d | Huarong Finance 2017 Co. Ltd., Reg S, | |||||||||||||||||
senior bond, 4.75%, 4/27/27 | China | 200,000 | 203,500 | |||||||||||||||
g senior note, 4.50% to 1/24/22, FRN thereafter, Perpetual | China | 1,200,000 | 1,198,500 | |||||||||||||||
d | Huarong Finance 2019 Co. Ltd., Reg S, | |||||||||||||||||
senior bond, E, 4.50%, 5/29/29 | China | 600,000 | 598,500 | |||||||||||||||
senior bond, E, 3.875%, 11/13/29 | China | 200,000 | 191,500 | |||||||||||||||
senior bond, E, 3.625%, 9/30/30 | China | 200,000 | 188,000 | |||||||||||||||
g senior note, G, 4.25% to 9/30/25, FRN thereafter, Perpetual | China | 200,000 | 183,000 | |||||||||||||||
senior note, E, 3.25%, 11/13/24 | China | 200,000 | 196,500 | |||||||||||||||
d | Huarong Finance II Co. Ltd., senior bond, Reg S, | |||||||||||||||||
5.00%, 11/19/25 | China | 500,000 | 512,500 | |||||||||||||||
EMTN, 4.875%, 11/22/26 | China | 200,000 | 204,750 | |||||||||||||||
Morgan Stanley, senior note, 1.164% to 9/21/25, FRN thereafter, 10/21/25 | United States | 465,000 | 461,477 | |||||||||||||||
Oaktree Specialty Lending Corp., senior note, 2.70%, 1/15/27 | United States | 75,000 | 74,336 | |||||||||||||||
Owl Rock Capital Corp., senior note, | ||||||||||||||||||
3.40%, 7/15/26 | United States | 290,000 | 295,187 | |||||||||||||||
2.875%, 6/11/28 | United States | 180,000 | 175,995 | |||||||||||||||
Owl Rock Technology Finance Corp., senior note, 2.50%, 1/15/27 | United States | 90,000 | 88,542 | |||||||||||||||
|
| |||||||||||||||||
6,902,831 | ||||||||||||||||||
|
| |||||||||||||||||
Chemicals 0.2% | ||||||||||||||||||
d | Ashland LLC, senior bond, 144A, 3.375%, 9/01/31 | United States | 140,000 | 137,085 | ||||||||||||||
d,g | Bluestar Finance Holdings Ltd., senior note, Reg s, 3.10% to 7/12/24, FRN thereafter, Perpetual | China | 200,000 | 200,361 | ||||||||||||||
d | Braskem Idesa SAPI, senior secured bond, 144A, 6.99%, 2/20/32 | Mexico | 1,297,000 | 1,273,304 | ||||||||||||||
d | Braskem Netherlands Finance BV, senior bond, 144A, 4.50%, 1/31/30 | Brazil | 200,000 | 200,341 |
38 | 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) | ||||||||||||||||||
Chemicals (continued) | ||||||||||||||||||
d,g | CNAC HK Finbridge Co. Ltd., senior note, Reg S, 3.35% to 9/22/23, FRN thereafter, Perpetual | China | 600,000 | $ | 608,200 | |||||||||||||
d | Orbia Advance Corp. SAB de CV, senior bond, 144A, 2.875%, 5/11/31 | Mexico | 200,000 | 195,336 | ||||||||||||||
|
| |||||||||||||||||
2,614,627 | ||||||||||||||||||
|
| |||||||||||||||||
Communications Equipment 0.1% | ||||||||||||||||||
d | Audacy Capital Corp., secured note, 144A, 6.75%, 3/31/29 | United States | 600,000 | 588,435 | ||||||||||||||
d | CommScope Inc., 144A, | |||||||||||||||||
senior note, 7.125%, 7/01/28 | United States | 430,000 | 400,697 | |||||||||||||||
senior secured note, 4.75%, 9/01/29 | United States | 60,000 | 58,149 | |||||||||||||||
d | CommScope Technologies LLC, senior bond, 144A, 5.00%, 3/15/27 | United States | 180,000 | 162,037 | ||||||||||||||
d | HTA Group Ltd., senior note, 144A, 7.00%, 12/18/25 | Democratic Rep of the Congo | 435,000 | 450,225 | ||||||||||||||
j | Riverbed Technology Inc., senior note, 6.00%, 1/13/22 | United States | 54,708 | 54,161 | ||||||||||||||
|
| |||||||||||||||||
1,713,704 | ||||||||||||||||||
|
| |||||||||||||||||
Construction & Engineering 0.1% | ||||||||||||||||||
d | GMR Hyderabad International Airport Ltd., | |||||||||||||||||
senior secured bond, Reg S, 4.25%, 10/27/27 | India | 200,000 | 192,561 | |||||||||||||||
senior secured note, Reg S, 5.375%, 4/10/24 | India | 200,000 | 205,211 | |||||||||||||||
senior secured note, 144A, 4.75%, 2/02/26 | India | 200,000 | 199,225 | |||||||||||||||
d | India Airport Infra, senior secured note, Reg S, 6.25%, 10/25/25 | India | 200,000 | 197,260 | ||||||||||||||
|
| |||||||||||||||||
794,257 | ||||||||||||||||||
|
| |||||||||||||||||
Construction Materials 0.0%† | ||||||||||||||||||
d | Cemex SAB de CV, senior secured bond, 144A, | |||||||||||||||||
5.45%, 11/19/29 | Mexico | 200,000 | 209,808 | |||||||||||||||
5.20%, 9/17/30 | Mexico | 245,000 | 258,963 | |||||||||||||||
3.875%, 7/11/31 | Mexico | 200,000 | 194,996 | |||||||||||||||
|
| |||||||||||||||||
663,767 | ||||||||||||||||||
|
| |||||||||||||||||
Consumer Finance 0.1% | ||||||||||||||||||
g | Ally Financial Inc., C, junior sub. note, 4.70% to 5/15/28, FRN thereafter, Perpetual | United States | 305,000 | 307,288 | ||||||||||||||
d | Muthoot Finance Ltd., senior secured note, Reg S, | |||||||||||||||||
6.125%, 10/31/22 | India | 600,000 | 615,000 | |||||||||||||||
4.40%, 9/02/23 | India | 200,000 | 203,750 | |||||||||||||||
d | PROG Holdings Inc., senior note, 144A, 6.00%, 11/15/29 | United States | 192,000 | 189,958 | ||||||||||||||
d | Shriram Transport Finance Co. Ltd., Reg S, | |||||||||||||||||
senior note, 5.95%, 10/24/22 | India | 200,000 | 202,293 | |||||||||||||||
senior secured note, E, 5.70%, 2/27/22 | India | 600,000 | 601,500 | |||||||||||||||
|
| |||||||||||||||||
2,119,789 | ||||||||||||||||||
|
| |||||||||||||||||
Containers & Packaging 0.0%† | ||||||||||||||||||
d | Mauser Packaging Solutions Holding Co., senior note, 144A, 7.25%, 4/15/25 | United States | 700,000 | 688,170 | ||||||||||||||
|
| |||||||||||||||||
Diversified Consumer Services 0.3% | ||||||||||||||||||
d,g | CMHI Finance BVI Co. Ltd., senior note, Reg S, 3.50% to 10/09/23, FRN thereafter, Perpetual | China | 200,000 | 204,986 | ||||||||||||||
d | The Hertz Corp., senior note, 144A, | |||||||||||||||||
4.625%, 12/01/26 | United States | 598,000 | 590,154 | |||||||||||||||
5.00%, 12/01/29 | United States | 1,292,000 | 1,268,331 | |||||||||||||||
d | Loxam SAS, senior secured note, Reg S, 3.25%, 1/14/25 | France | 100,000 | EUR | 113,408 |
franklintempleton.com | Semiannual Report | 39 |
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 Consumer Services (continued) | ||||||||||||||||||
d | MPH Acquisition Holdings LLC, senior note, 144A, 5.75%, 11/01/28 | United States | 700,000 | $ | 626,500 | |||||||||||||
d | Paysafe Finance PLC / Paysafe Holdings US Corp., senior secured note, 144A, 4.00%, 6/15/29 | United States | 700,000 | 647,370 | ||||||||||||||
d | Sotheby’s/Bidfair Holdings Inc., senior secured note, 144A, 5.875%, 6/01/29 | United States | 700,000 | 703,712 | ||||||||||||||
|
| |||||||||||||||||
4,154,461 | ||||||||||||||||||
|
| |||||||||||||||||
Diversified Financial Services 0.7% | ||||||||||||||||||
d | Advisor Group Holdings Inc., senior note, 144A, 10.75%, 8/01/27 | United States | 656,000 | 715,142 | ||||||||||||||
AerCap Ireland Capital DAC / AerCap Global Aviation Trust, | ||||||||||||||||||
senior bond, 3.30%, 1/30/32 | Ireland | 150,000 | 151,259 | |||||||||||||||
senior note, 6.50%, 7/15/25 | Ireland | 150,000 | 171,706 | |||||||||||||||
senior note, 3.00%, 10/29/28 | Ireland | 150,000 | 151,160 | |||||||||||||||
d | Azure Orbit IV International Finance Ltd., E, senior note, Reg S, 3.75%, 1/25/23 | China | 700,000 | 718,378 | ||||||||||||||
d | Blackstone Secured Lending Fund, senior note, 144A, 2.125%, 2/15/27 | United States | 405,000 | 392,985 | ||||||||||||||
d | Bocom Leasing Management Hong Kong Co. Ltd., senior note, Reg S, | |||||||||||||||||
E, 1.75%, 7/14/23 | Hong Kong | 200,000 | 201,312 | |||||||||||||||
E, 1.125%, 6/18/24 | Hong Kong | 800,000 | 793,666 | |||||||||||||||
d | CDBL Funding 2, senior note, Reg S, | |||||||||||||||||
E, 3.00%, 8/01/22 | China | 200,000 | 202,173 | |||||||||||||||
E, 1.375%, 3/04/24 | China | 800,000 | 796,762 | |||||||||||||||
CDW LLC / CDW Finance Corp., senior bond, 3.569%, 12/01/31 | United States | 175,000 | 179,316 | |||||||||||||||
d | CICC Hong Kong Finance 2016 MTN Ltd., senior note, Reg S, | |||||||||||||||||
E, 1.75%, 8/10/23 | China | 400,000 | 401,541 | |||||||||||||||
E, 1.625%, 1/26/24 | China | 300,000 | 299,699 | |||||||||||||||
d | Constellation Automotive Financing PLC, senior note, 144A, 4.875%, 7/15/27 | United Kingdom | 100,000 | 129,530 | ||||||||||||||
d | Finance of America Funding LLC, senior note, 144A, 7.875%, 11/15/25 | United States | 700,000 | 680,530 | ||||||||||||||
d | Financiera de Desarrollo Territorial SA Findeter, senior bond, 144A, 7.875%, 8/12/24 | Colombia | 393,000,000 | COP | 99,415 | |||||||||||||
d | Indian Railway Finance Corp. Ltd., senior bond, 144A, 2.80%, 2/10/31 | India | 200,000 | 194,830 | ||||||||||||||
d | Jane Street Group / JSG Finance Inc., senior secured note, 144A, 4.50%, 11/15/29 | United States | 126,000 | 125,996 | ||||||||||||||
d | MDC-GMTN BV, senior bond, Reg S, 4.50%, 11/07/28 | United Arab Emirates | 261,000 | 300,464 | ||||||||||||||
d | Rec Ltd., senior note, Reg S, | |||||||||||||||||
4.75%, 5/19/23 | India | 1,000,000 | 1,044,219 | |||||||||||||||
5.25%, 11/13/23 | India | 400,000 | 427,272 | |||||||||||||||
G, 3.375%, 7/25/24 | India | 300,000 | 310,952 | |||||||||||||||
d | Rocket Mortgage LLC / Rocket Mortgage Co.-Issuer Inc., 144A, | |||||||||||||||||
senior bond, 3.875%, 3/01/31 | United States | 420,000 | 415,401 | |||||||||||||||
senior bond, 4.00%, 10/15/33 | United States | 350,000 | 343,605 | |||||||||||||||
senior note, 2.875%, 10/15/26 | United States | 520,000 | 507,733 | |||||||||||||||
senior note, 3.625%, 3/01/29 | United States | 385,000 | 377,098 | |||||||||||||||
|
| |||||||||||||||||
10,132,144 | ||||||||||||||||||
|
| |||||||||||||||||
Diversified Telecommunication Services 0.3% | ||||||||||||||||||
d | Bharti Airtel International Netherlands BV, senior bond, Reg S, 5.125%, 3/11/23 | India | 500,000 | 522,099 | ||||||||||||||
Frontier Communications Holdings LLC, | ||||||||||||||||||
secured note, 5.875%, 11/01/29 | United States | 113,478 | 111,741 | |||||||||||||||
d senior secured note, 144A, 5.875%, 10/15/27 | United States | 465,000 | 480,940 | |||||||||||||||
d senior secured note, 144A, 5.00%, 5/01/28 | United States | 219,000 | 220,018 |
40 | Semiannual Report | franklintempleton.com |
FRANKLIN ALTERNATIVE STRATEGIES FUNDS
CONSOLIDATED STATEMENT OF INVESTMENTS (UNAUDITED)
Franklin K2 Alternative Strategies Fund (continued)
Country | Principal Amount* | Value | ||||||||||||||||
Corporate Bonds and Notes (continued) | ||||||||||||||||||
Diversified Telecommunication Services (continued) | ||||||||||||||||||
d | IHS Holding Ltd., senior note, 144A, | |||||||||||||||||
5.625%, 11/29/26 | Nigeria | 200,000 | $ | 199,550 | ||||||||||||||
6.25%, 11/29/28 | Nigeria | 760,000 | 757,625 | |||||||||||||||
d | Kenbourne Invest SA, senior note, 144A, 6.875%, 11/26/24 | Chile | 200,000 | 208,943 | ||||||||||||||
d,k | Ligado Networks LLC, 144A, PIK, | |||||||||||||||||
secured note, 17.50%, 5/01/24 | United States | 54,603 | 35,690 | |||||||||||||||
senior secured note, 15.50%, 11/01/23 | United States | 1,092,309 | 933,728 | |||||||||||||||
d | Oi Movel SA, senior secured note, Reg S, 8.75%, 7/30/26 | Brazil | 615,000 | 632,995 | ||||||||||||||
d | Telesat Canada / Telesat LLC, senior secured note, 144A, 4.875%, 6/01/27 | Canada | 183,000 | 160,318 | ||||||||||||||
d | Tower Bersama Infrastructure TBK PT, senior note, Reg S, 2.80%, 5/02/27 | Indonesia | 200,000 | 196,995 | ||||||||||||||
|
|
|
| |||||||||||||||
4,460,642 | ||||||||||||||||||
|
|
|
| |||||||||||||||
Electric Utilities 0.4% | ||||||||||||||||||
b,e | Bruce Mansfield Escrow, senior bond, zero cpn., 6/01/34 | United States | 6,394,000 | 23,978 | ||||||||||||||
d,g | China Huaneng Group Hong Kong Treasury Management Holding Ltd., Reg S, senior note, | |||||||||||||||||
2.85% to 12/09/23, FRN thereafter, Perpetual | China | 200,000 | 201,715 | |||||||||||||||
3.08% to 12/09/25, FRN thereafter, Perpetual | China | 400,000 | 405,654 | |||||||||||||||
g | Edison International, junior sub. note, | |||||||||||||||||
A, 5.375% to 3/15/26, FRN thereafter, A, Perpetual | United States | 135,000 | 139,050 | |||||||||||||||
B, 5.00% to 12/15/26, FRN thereafter, B, Perpetual | United States | 20,000 | 20,090 | |||||||||||||||
d | Eskom Holdings SOC Ltd., senior bond, Reg S, 8.45%, 8/10/28 | South Africa | 1,134,000 | 1,207,132 | ||||||||||||||
d | Greenko Investment Co., senior secured note, Reg S, 4.875%, 8/16/23 | India | 200,000 | 202,344 | ||||||||||||||
d | Oryx Funding Ltd., senior bond, 144A, 5.80%, 2/03/31 | Oman | 283,000 | 295,547 | ||||||||||||||
Pacific Gas and Electric Co., | ||||||||||||||||||
secured bond, 4.50%, 7/01/40 | United States | 1,106,000 | 1,159,981 | |||||||||||||||
secured bond, 4.95%, 7/01/50 | United States | 55,000 | 61,830 | |||||||||||||||
secured bond, 3.50%, 8/01/50 | United States | 200,000 | 190,796 | |||||||||||||||
senior bond, 4.30%, 3/15/45 | United States | 95,000 | 97,771 | |||||||||||||||
PG&E Corp., senior secured bond, 5.25%, 7/01/30 | United States | 700,000 | 718,669 | |||||||||||||||
d,g | SMC Global Power Holdings Corp., senior note, Reg S, 5.45% to 5/31/26, FRN thereafter, Perpetual | Philippines | 200,000 | 196,000 | ||||||||||||||
Southern California Edison Co., | ||||||||||||||||||
secured bond, 3.65%, 2/01/50 | United States | 40,000 | 43,029 | |||||||||||||||
senior bond, 4.00%, 4/01/47 | United States | 10,000 | 11,159 | |||||||||||||||
senior bond, C, 4.125%, 3/01/48 | United States | 15,000 | 17,100 | |||||||||||||||
Talen Energy Supply LLC, | ||||||||||||||||||
b senior note, 6.50%, 6/01/25 | United States | 254,000 | 142,798 | |||||||||||||||
d senior secured note, 144A, 7.25%, 5/15/27 | United States | 306,000 | 284,653 | |||||||||||||||
|
|
|
| |||||||||||||||
5,419,296 | ||||||||||||||||||
|
|
|
| |||||||||||||||
Entertainment 0.2% | ||||||||||||||||||
d | AMC Entertainment Holdings Inc., 144A, | |||||||||||||||||
b,k secured note, PIK, 12.00%, 6/15/26 | United States | 1,342,000 | 1,366,317 | |||||||||||||||
f senior secured note, 10.50%, 4/15/25 | United States | 761,000 | 800,952 | |||||||||||||||
Netflix Inc., senior bond, | ||||||||||||||||||
4.875%, 4/15/28 | United States | 80,000 | 90,622 | |||||||||||||||
5.875%, 11/15/28 | United States | 70,000 | 83,891 | |||||||||||||||
6.375%, 5/15/29 | United States | 75,000 | 93,165 | |||||||||||||||
d 144A, 5.375%, 11/15/29 | United States | 20,000 | 23,691 | |||||||||||||||
d 144A, 4.875%, 6/15/30 | United States | 215,000 | 249,319 | |||||||||||||||
d | Roblox Corp., senior note, 144A, 3.875%, 5/01/30 | United States | 750,000 | 753,128 | ||||||||||||||
|
| |||||||||||||||||
3,461,085 | ||||||||||||||||||
|
|
franklintempleton.com | Semiannual Report | 41 |
FRANKLIN ALTERNATIVE STRATEGIES FUNDS
CONSOLIDATED STATEMENT OF INVESTMENTS (UNAUDITED)
Franklin K2 Alternative Strategies Fund (continued)
Country | Principal Amount* | Value | ||||||||||||||||
Corporate Bonds and Notes (continued) | ||||||||||||||||||
Equity Real Estate Investment Trusts (REITs) 0.1% | ||||||||||||||||||
d | Brookfield Property REIT Inc. / BPR Cumulus LLC / BPR Nimbus LLC / GGSI Sellco LL, senior secured note, 144A, 4.50%, 4/01/27 | United States | 700,000 | $ | 666,204 | |||||||||||||
National Health Investors Inc., senior bond, 3.00%, 2/01/31 | United States | 30,000 | 29,060 | |||||||||||||||
d | SBA Communications Corp., senior note, 144A, 3.125%, 2/01/29 | United States | 700,000 | 665,892 | ||||||||||||||
|
| |||||||||||||||||
1,361,156 | ||||||||||||||||||
|
| |||||||||||||||||
Food & Staples Retailing 0.1% | ||||||||||||||||||
d | Casino Guichard Perrachon SA, Reg S, | |||||||||||||||||
senior bond, E, 4.498%, 3/07/24 | France | 200,000 | EUR | 224,372 | ||||||||||||||
g junior sub. note, E, 3.992% to 1/31/24, FRN thereafter, Perpetual | France | 200,000 | EUR | 148,713 | ||||||||||||||
d | JBS USA/Food/Finance, senior bond, 144A, 3.75%, 12/01/31 | United States | 80,000 | 80,958 | ||||||||||||||
d | Marb Bondco PLC, senior bond, 144A, 3.95%, 1/29/31 | Brazil | 425,000 | 401,474 | ||||||||||||||
d | Rite AID Corp., senior secured note, 144A, 7.50%, 7/01/25 | United States | 700,000 | 699,780 | ||||||||||||||
d | Smithfield Foods Inc., senior bond, 144A, 3.00%, 10/15/30 | United States | 30,000 | 30,172 | ||||||||||||||
|
| |||||||||||||||||
1,585,469 | ||||||||||||||||||
|
| |||||||||||||||||
Food Products 0.1% | ||||||||||||||||||
Kraft Heinz Foods Co., senior bond, | ||||||||||||||||||
5.00%, 6/04/42 | United States | 45,000 | 55,018 | |||||||||||||||
4.375%, 6/01/46 | United States | 95,000 | 110,090 | |||||||||||||||
4.875%, 10/01/49 | United States | 150,000 | 187,272 | |||||||||||||||
d | Pilgrim’s Pride Corp., senior bond, 144A, | |||||||||||||||||
4.25%, 4/15/31 | United States | 10,000 | 10,493 | |||||||||||||||
3.50%, 3/01/32 | United States | 210,000 | 211,401 | |||||||||||||||
d | Post Holdings Inc., senior bond, 144A, 4.50%, 9/15/31 | United States | 190,000 | 183,706 | ||||||||||||||
|
| |||||||||||||||||
757,980 | ||||||||||||||||||
|
| |||||||||||||||||
Health Care Equipment & Supplies 0.0%† | ||||||||||||||||||
d | Avantor Funding Inc., senior note, 144A, 3.875%, 11/01/29 | United States | 175,000 | 175,038 | ||||||||||||||
|
| |||||||||||||||||
Health Care Providers & Services 0.2% | ||||||||||||||||||
Centene Corp., | ||||||||||||||||||
senior bond, 3.00%, 10/15/30 | United States | 85,000 | 84,974 | |||||||||||||||
senior bond, 2.50%, 3/01/31 | United States | 350,000 | 336,000 | |||||||||||||||
senior note, 2.625%, 8/01/31 | United States | 120,000 | 115,906 | |||||||||||||||
d | Chrome Holdco SASU, senior note, Reg S, 5.00%, 5/31/29 | France | 140,000 | EUR | 158,108 | |||||||||||||
Encompass Health Corp., senior bond, 4.625%, 4/01/31 | United States | 1,433,000 | 1,425,387 | |||||||||||||||
HCA Inc., senior bond, 3.50%, 9/01/30 | United States | 130,000 | 135,529 | |||||||||||||||
d | LifePoint Health Inc., senior note, 144A, 5.375%, 1/15/29 | United States | 749,000 | 722,560 | ||||||||||||||
d | Molina Healthcare Inc., senior bond, 144A, 3.875%, 5/15/32 | United States | 80,000 | 78,335 | ||||||||||||||
|
| |||||||||||||||||
3,056,799 | ||||||||||||||||||
|
| |||||||||||||||||
Hotels, Restaurants & Leisure 0.4% | ||||||||||||||||||
d | 1011778 BC ULC / New Red Finance Inc., secured note, 144A, 4.375%, 1/15/28 | Canada | 225,000 | 224,353 | ||||||||||||||
d | Carnival Corp., senior note, 144A, | |||||||||||||||||
5.75%, 3/01/27 | United States | 295,000 | 288,960 | |||||||||||||||
6.00%, 5/01/29 | United States | 853,000 | 830,609 | |||||||||||||||
d | GENM Capital Labuan Ltd., senior bond, 144A, 3.882%, 4/19/31 | Malaysia | 200,000 | 197,268 | ||||||||||||||
b,d | Golden Nugget Inc., senior note, 144A, 6.75%, 10/15/24 | United States | 1,098,000 | 1,104,917 | ||||||||||||||
d | Haidilao International Holding Ltd., senior note, Reg S, 2.15%, 1/14/26 | China | 420,000 | 397,076 | ||||||||||||||
d | Hilton Grand Vacations Borrower Escrow LLC, 144A, | |||||||||||||||||
senior bond, 4.875%, 7/01/31 | United States | 50,000 | 49,576 | |||||||||||||||
senior note, 5.00%, 6/01/29 | United States | 155,000 | 154,177 | |||||||||||||||
Hyatt Hotels Corp., senior note, 5.375%, 4/23/25 | United States | 50,000 | 55,595 | |||||||||||||||
d | Lions Gate Capital Holdings LLC, senior note, 144A, 5.50%, 4/15/29 | United States | 700,000 | 709,975 | ||||||||||||||
Marriott International Inc., FF, senior bond, 4.625%, 6/15/30 | United States | 75,000 | 84,530 | |||||||||||||||
d | Marriott Ownership Resorts Inc., senior note, 144A, 4.50%, 6/15/29 | United States | 70,000 | 68,824 | ||||||||||||||
d,f | Penn National Gaming Inc., senior note, 144A, 4.125%, 7/01/29 | United States | 55,000 | 51,975 |
42 | 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) | ||||||||||||||||||
Hotels, Restaurants & Leisure (continued) | ||||||||||||||||||
d | Royal Caribbean Cruises Ltd., senior note, 144A, | |||||||||||||||||
4.25%, 7/01/26 | United States | 45,000 | $ | 42,541 | ||||||||||||||
5.50%, 4/01/28 | United States | 310,000 | 302,182 | |||||||||||||||
d | Scientific Games International Inc., senior note, 144A, | |||||||||||||||||
7.00%, 5/15/28 | United States | 200,000 | 212,750 | |||||||||||||||
f 7.25%, 11/15/29 | United States | 70,000 | 77,310 | |||||||||||||||
Travel + Leisure Co., | ||||||||||||||||||
senior secured bond, 6.00%, 4/01/27 | United States | 10,000 | 10,578 | |||||||||||||||
d senior secured bond, 144A, 4.625%, 3/01/30 | United States | 95,000 | 94,044 | |||||||||||||||
d senior secured note, 144A, 6.625%, 7/31/26 | United States | 125,000 | 135,500 | |||||||||||||||
d senior secured note, 144A, 4.50%, 12/01/29 | United States | 215,000 | 209,969 | |||||||||||||||
|
| |||||||||||||||||
5,302,709 | ||||||||||||||||||
|
| |||||||||||||||||
Household Durables 0.2% | ||||||||||||||||||
d | K. Hovnanian Enterprises Inc., 144A, | |||||||||||||||||
senior secured note, 7.75%, 2/15/26 | United States | 1,628,000 | 1,712,819 | |||||||||||||||
senior secured note, 10.50%, 2/15/26 | United States | 850,000 | 907,090 | |||||||||||||||
d | Topbuild Corp., senior bond, 144A, 4.125%, 2/15/32 | United States | 70,000 | 70,233 | ||||||||||||||
|
| |||||||||||||||||
2,690,142 | ||||||||||||||||||
|
| |||||||||||||||||
Independent Power & Renewable Electricity Producers 0.1% | ||||||||||||||||||
d | Calpine Corp., senior secured bond, 144A, 3.75%, 3/01/31 | United States | 690,000 | 658,578 | ||||||||||||||
d | NTPC Ltd., E, senior bond, Reg S, 4.75%, 10/03/22 | India | 200,000 | 205,614 | ||||||||||||||
|
| |||||||||||||||||
864,192 | ||||||||||||||||||
|
| |||||||||||||||||
Industrial Conglomerates 0.1% | ||||||||||||||||||
General Electric Co., senior bond, 3.625%, 5/01/30 | United States | 110,000 | 124,084 | |||||||||||||||
Icahn Enterprises LP / Icahn Enterprises Finance Corp., senior note, | ||||||||||||||||||
6.25%, 5/15/26 | United States | 85,000 | 87,454 | |||||||||||||||
5.25%, 5/15/27 | United States | 265,000 | 269,179 | |||||||||||||||
4.375%, 2/01/29 | United States | 235,000 | 227,824 | |||||||||||||||
|
| |||||||||||||||||
708,541 | ||||||||||||||||||
|
| |||||||||||||||||
Insurance 0.1% | ||||||||||||||||||
Athene Holding Ltd., senior bond, 3.50%, 1/15/31 | United States | 110,000 | 116,744 | |||||||||||||||
h | Genworth Holdings Inc., senior bond, FRN, 2.159%, (3-Month USD LIBOR + 2.00%), 11/15/36 | United States | 1,643,000 | 994,204 | ||||||||||||||
d | Global Atlantic Finance Co., senior bond, 144A, 4.40%, 10/15/29 | United States | 165,000 | 180,447 | ||||||||||||||
d,g | KDB Life Insurance Co. Ltd., sub. note, Reg S, 7.50% to 5/21/23, FRN thereafter, Perpetual | South Korea | 200,000 | 203,033 | ||||||||||||||
d,g | Tongyang Life Insurance Co. Ltd., sub. note, Reg S, 5.25% to 9/22/25, FRN thereafter, Perpetual | South Korea | 200,000 | 210,197 | ||||||||||||||
|
| |||||||||||||||||
1,704,625 | ||||||||||||||||||
|
| |||||||||||||||||
Interactive Media & Services 0.1% | ||||||||||||||||||
d | Tencent Holdings Ltd., senior bond, Reg S, | |||||||||||||||||
3.84%, 4/22/51 | China | 200,000 | 216,720 | |||||||||||||||
3.94%, 4/22/61 | China | 500,000 | 543,008 | |||||||||||||||
|
| |||||||||||||||||
759,728 | ||||||||||||||||||
|
| |||||||||||||||||
Internet & Direct Marketing Retail 0.1% | ||||||||||||||||||
d | Arches Buyer Inc., senior note, 144A, 6.125%, 12/01/28 | United States | 700,000 | 708,407 | ||||||||||||||
Expedia Group Inc., senior note, 3.25%, 2/15/30 | United States | 225,000 | 232,151 | |||||||||||||||
d | Match Group Holdings II LLC, senior note, 144A, 3.625%, 10/01/31 | United States | 148,000 | 139,750 | ||||||||||||||
d | Meituan, senior bond, Reg S, 3.05%, 10/28/30 | China | 400,000 | 373,234 | ||||||||||||||
|
| |||||||||||||||||
1,453,542 | ||||||||||||||||||
|
| |||||||||||||||||
IT Services 0.1% | ||||||||||||||||||
d | Austin Bidco Inc., senior note, 144A, 7.125%, 12/15/28 | United States | 700,000 | 719,660 | ||||||||||||||
|
|
franklintempleton.com | Semiannual Report | 43 |
FRANKLIN ALTERNATIVE STRATEGIES FUNDS
CONSOLIDATED STATEMENT OF INVESTMENTS (UNAUDITED)
Franklin K2 Alternative Strategies Fund (continued)
Country | Principal Amount* | Value | ||||||||||||||||
Corporate Bonds and Notes (continued) | ||||||||||||||||||
Leisure Products 0.0%† | ||||||||||||||||||
d | NCL Corp. Ltd., senior note, 144A, 5.875%, 3/15/26 | United States | 195,000 | $ | 190,369 | |||||||||||||
d | NCL Finance Ltd., senior note, 144A, 6.125%, 3/15/28 | United States | 65,000 | 63,512 | ||||||||||||||
|
| |||||||||||||||||
253,881 | ||||||||||||||||||
|
| |||||||||||||||||
Marine 0.0%† | ||||||||||||||||||
d | Stena International SA, senior secured bond, 144A, 5.75%, 3/01/24 | Sweden | 299,000 | 308,405 | ||||||||||||||
|
| |||||||||||||||||
Media 0.8% | ||||||||||||||||||
AMC Networks Inc., senior note, 4.25%, 2/15/29 | United States | 618,000 | 604,302 | |||||||||||||||
d | CCO Holdings LLC / CCO Holdings Capital Corp., senior bond, 144A, | |||||||||||||||||
4.25%, 2/01/31 | United States | 1,065,000 | 1,051,070 | |||||||||||||||
4.25%, 1/15/34 | United States | 695,000 | 669,761 | |||||||||||||||
Charter Communications Operating LLC / Charter Communications Operating Capital, senior secured bond, 4.40%, 12/01/61 | United States | 920,000 | 961,033 | |||||||||||||||
d | Clear Channel Outdoor Holdings Inc., senior note, 144A, 7.75%, 4/15/28 | United States | 700,000 | 731,281 | ||||||||||||||
d | CSC Holdings LLC, senior bond, 144A, 4.625%, 12/01/30 | United States | 610,000 | 568,371 | ||||||||||||||
d | Diamond Sports Group LLC / Diamond Sports Finance Co., senior note, 144A, 6.625%, 8/15/27 | United States | 304,000 | 64,410 | ||||||||||||||
d | DIRECTV Holdings LLC / DIRECTV Financing Co. Inc., senior secured note, 144A, 5.875%, 8/15/27 | United States | 257,000 | 261,979 | ||||||||||||||
Dish DBS Corp., | ||||||||||||||||||
senior note, 5.125%, 6/01/29 | United States | 554,000 | 487,575 | |||||||||||||||
d,f senior secured note, 144A, 5.25%, 12/01/26 | United States | 850,000 | 843,442 | |||||||||||||||
d senior secured note, 144A, 5.75%, 12/01/28 | United States | 625,000 | 617,003 | |||||||||||||||
d | Gannett Holdings LLC, senior secured note, 144A, 6.00%, 11/01/26 | United States | 694,000 | 696,009 | ||||||||||||||
d | iHeartCommunications Inc., senior secured note, 144A, | |||||||||||||||||
5.25%, 8/15/27 | United States | 90,000 | 91,519 | |||||||||||||||
4.75%, 1/15/28 | United States | 175,000 | 174,032 | |||||||||||||||
Liberty Interactive LLC, senior bond, 8.25%, 2/01/30 | United States | 840,000 | 900,547 | |||||||||||||||
d | Outfront Media Capital LLC / Outfront Media Capital Corp., senior bond, 144A, 4.625%, 3/15/30 | United States | 65,000 | 64,230 | ||||||||||||||
d | Spanish Broadcasting System Inc., senior secured note, 144A, 9.75%, 3/01/26 | United States | 700,000 | 724,395 | ||||||||||||||
d | Urban One Inc., senior secured note, 144A, 7.375%, 2/01/28 | United States | 800,000 | 816,112 | ||||||||||||||
d,f | Wolverine Escrow LLC, senior secured note, 144A, | |||||||||||||||||
8.50%, 11/15/24 | United States | 332,000 | 311,169 | |||||||||||||||
9.00%, 11/15/26 | United States | 302,000 | 285,337 | |||||||||||||||
|
| |||||||||||||||||
10,923,577 | ||||||||||||||||||
|
| |||||||||||||||||
Metals & Mining 0.3% | ||||||||||||||||||
d | Abja Investment Co. Pte. Ltd., senior note, Reg S, 4.45%, 7/24/23 | India | 200,000 | 207,444 | ||||||||||||||
d | First Quantum Minerals Ltd., senior note, 144A, | |||||||||||||||||
6.875%, 3/01/26 | Zambia | 200,000 | 207,437 | |||||||||||||||
6.875%, 10/15/27 | Zambia | 620,000 | 656,419 | |||||||||||||||
d | FMG Resources August 2006 Pty Ltd., senior bond, 144A, 4.375%, 4/01/31 | Australia | 155,000 | 157,353 | ||||||||||||||
Freeport-McMoRan Inc., senior bond, | ||||||||||||||||||
4.625%, 8/01/30 | United States | 95,000 | 100,479 | |||||||||||||||
5.40%, 11/14/34 | United States | 145,000 | 172,861 | |||||||||||||||
5.45%, 3/15/43 | United States | 20,000 | 24,688 | |||||||||||||||
d,f | Glencore Funding LLC, senior bond, 144A, 2.85%, 4/27/31 | Australia | 390,000 | 388,362 | ||||||||||||||
d | Indonesia Asahan Aluminium Persero PT, senior bond, Reg S, 5.80%, 5/15/50 | Indonesia | 400,000 | 462,060 | ||||||||||||||
d,g | MCC Holding Hong Kong Corp. Ltd., senior note, Reg S, 3.50% to 1/16/23, FRN thereafter, Perpetual | China | 200,000 | 203,000 | ||||||||||||||
d | Novelis Corp., senior bond, 144A, 4.75%, 1/30/30 | United States | 90,000 | 90,998 | ||||||||||||||
d | Taseko Mines Ltd., senior secured note, 144A, 7.00%, 2/15/26 | Canada | 672,000 | 683,709 | ||||||||||||||
d | Vedanta Resources Ltd., senior note, Reg S, 6.375%, 7/30/22 | India | 300,000 | 293,952 |
44 | 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) | ||||||||||||||||||
Metals & Mining (continued) | ||||||||||||||||||
d | Volcan Cia Minera SAA, senior note, 144A, 4.375%, 2/11/26 | Peru | 30,000 | $ | 28,725 | |||||||||||||
|
| |||||||||||||||||
3,677,487 | ||||||||||||||||||
|
| |||||||||||||||||
Mortgage Real Estate Investment Trusts (REITs) 0.1% | ||||||||||||||||||
d | Apollo Commercial Real Estate Finance Inc., senior secured note, 144A, 4.625%, 6/15/29 | United States | 690,000 | 656,380 | ||||||||||||||
d | New Residential Investment Corp., senior note, 144A, 6.25%, 10/15/25 | United States | 700,000 | 691,806 | ||||||||||||||
|
| |||||||||||||||||
1,348,186 | ||||||||||||||||||
|
| |||||||||||||||||
Multiline Retail 0.0%† | ||||||||||||||||||
Kohl’s Corp., senior bond, 5.55%, 7/17/45 | United States | 338,000 | 408,433 | |||||||||||||||
|
| |||||||||||||||||
Oil, Gas & Consumable Fuels 1.6% | ||||||||||||||||||
d | Aker BP ASA, senior bond, 144A, | |||||||||||||||||
3.75%, 1/15/30 | Norway | 350,000 | 371,532 | |||||||||||||||
4.00%, 1/15/31 | Norway | 150,000 | 163,442 | |||||||||||||||
d | Continental Resources Inc., senior bond, 144A, 5.75%, 1/15/31 | United States | 195,000 | 227,519 | ||||||||||||||
DCP Midstream Operating LP, senior bond, | ||||||||||||||||||
5.125%, 5/15/29 | United States | 25,000 | 27,767 | |||||||||||||||
3.25%, 2/15/32 | United States | 195,000 | 195,061 | |||||||||||||||
d | DT Midstream Inc., senior bond, 144A, 4.375%, 6/15/31 | United States | 700,000 | 696,864 | ||||||||||||||
Ecopetrol SA, senior bond, | ||||||||||||||||||
4.625%, 11/02/31 | Colombia | 1,220,000 | 1,168,772 | |||||||||||||||
5.875%, 11/02/51 | Colombia | 970,000 | 885,794 | |||||||||||||||
d | Energean Israel Finance Ltd., 144A, Reg S, | |||||||||||||||||
senior secured bond, 5.875%, 3/30/31 | Israel | 130,000 | 126,588 | |||||||||||||||
senior secured note, 5.375%, 3/30/28 | Israel | 105,000 | 102,966 | |||||||||||||||
g | Energy Transfer LP, H, junior sub. note, 6.50% to 11/15/26, FRN thereafter, Perpetual | United States | 514,000 | 526,850 | ||||||||||||||
Equities Corp., senior note, | ||||||||||||||||||
3.90%, 10/01/27 | United States | 25,000 | 26,094 | |||||||||||||||
5.00%, 1/15/29 | United States | 35,000 | 38,390 | |||||||||||||||
d 144A, 3.125%, 5/15/26 | United States | 15,000 | 15,014 | |||||||||||||||
d,f 144A, 3.625%, 5/15/31 | United States | 130,000 | 132,691 | |||||||||||||||
d | Gray Oak Pipeline LLC, senior note, 144A, 3.45%, 10/15/27 | United States | 20,000 | 20,872 | ||||||||||||||
d | Hurricane Finance PLC, senior note, 144A, 8.00%, 10/15/25 | United Kingdom | 158,000 | 221,379 | ||||||||||||||
d | Laredo Petroleum Inc., senior note, 144A, 7.75%, 7/31/29 | United States | 700,000 | 663,548 | ||||||||||||||
d | Leviathan Bond Ltd., senior note, 144A, Reg S, 6.50%, 6/30/27 | Israel | 100,000 | 105,824 | ||||||||||||||
d | MC Brazil Downstream Trading SARL, senior secured note, Reg S, 7.25%, 6/30/31 | Brazil | 1,012,000 | 973,367 | ||||||||||||||
d | Moss Creek Resources Holdings Inc., senior note, 144A, | |||||||||||||||||
7.50%, 1/15/26 | United States | 268,000 | 236,660 | |||||||||||||||
10.50%, 5/15/27 | United States | 295,000 | 277,984 | |||||||||||||||
d | Northern Oil And Gas Inc., senior note, 144A, 8.125%, 3/01/28 | United States | 856,000 | 888,596 | ||||||||||||||
Occidental Petroleum Corp., senior bond, | ||||||||||||||||||
4.50%, 7/15/44 | United States | 15,000 | 15,038 | |||||||||||||||
4.20%, 3/15/48 | United States | 5,000 | 4,811 | |||||||||||||||
4.40%, 8/15/49 | United States | 10,000 | 9,840 | |||||||||||||||
d | OQ SAOC, senior note, 144A, 5.125%, 5/06/28 | Oman | 224,000 | 225,863 | ||||||||||||||
Ovintiv Inc., senior bond, | ||||||||||||||||||
8.125%, 9/15/30 | United States | 25,000 | 32,944 | |||||||||||||||
7.20%, 11/01/31 | United States | 5,000 | 6,405 | |||||||||||||||
7.375%, 11/01/31 | United States | 5,000 | 6,395 | |||||||||||||||
6.50%, 8/15/34 | United States | 20,000 | 25,551 | |||||||||||||||
6.625%, 8/15/37 | United States | 45,000 | 57,323 | |||||||||||||||
6.50%, 2/01/38 | United States | 10,000 | 12,760 | |||||||||||||||
d | Petrofac Ltd., senior secured note, 144A, 9.75%, 11/15/26 | United Kingdom | 563,000 | 564,430 |
franklintempleton.com | Semiannual Report | 45 |
FRANKLIN ALTERNATIVE STRATEGIES FUNDS
CONSOLIDATED STATEMENT OF INVESTMENTS (UNAUDITED)
Franklin K2 Alternative Strategies Fund (continued)
Country | Principal Amount* | Value | ||||||||||||||||
Corporate Bonds and Notes (continued) | ||||||||||||||||||
Oil, Gas & Consumable Fuels (continued) | ||||||||||||||||||
Petroleos Mexicanos, | ||||||||||||||||||
f senior bond, 5.95%, 1/28/31 | Mexico | 924,000 | $ | 869,392 | ||||||||||||||
senior bond, 6.625%, 6/15/35 | Mexico | 380,000 | 349,165 | |||||||||||||||
senior bond, 6.375%, 1/23/45 | Mexico | 1,018,000 | 824,046 | |||||||||||||||
senior bond, 5.625%, 1/23/46 | Mexico | 775,000 | 584,090 | |||||||||||||||
senior bond, 6.75%, 9/21/47 | Mexico | 798,000 | 657,005 | |||||||||||||||
senior bond, 6.35%, 2/12/48 | Mexico | 1,738,000 | 1,376,765 | |||||||||||||||
senior bond, 6.95%, 1/28/60 | Mexico | 2,172,000 | 1,790,412 | |||||||||||||||
senior note, 3.50%, 1/30/23 | Mexico | 959,000 | 962,591 | |||||||||||||||
d senior note, 144A, 6.875%, 10/16/25 | Mexico | 297,000 | 317,420 | |||||||||||||||
senior note, 4.50%, 1/23/26 | Mexico | 288,000 | 282,555 | |||||||||||||||
d | Qatar Petroleum, senior bond, Reg S, 3.30%, 7/12/51 | Qatar | 300,000 | 307,368 | ||||||||||||||
d | Saudi Arabian Oil Co., senior bond, 144A, 3.25%, 11/24/50 | Saudi Arabia | 285,000 | 273,539 | ||||||||||||||
b | Talos Production Inc., secured note, 12.00%, 1/15/26 | United States | 518,000 | 542,483 | ||||||||||||||
d | Thai Oil PCL, senior bond, Reg S, 3.625%, 1/23/23 | Thailand | 200,000 | 204,399 | ||||||||||||||
d | Tullow Oil PLC, senior secured note, 144A, 10.25%, 5/15/26 | Ghana | 2,278,000 | 2,269,788 | ||||||||||||||
Western Midstream Operating LP, senior bond, | ||||||||||||||||||
5.30%, 2/01/30 | United States | 30,000 | 32,334 | |||||||||||||||
5.30%, 3/01/48 | United States | 45,000 | 52,197 | |||||||||||||||
5.50%, 8/15/48 | United States | 10,000 | 11,576 | |||||||||||||||
6.50%, 2/01/50 | United States | 45,000 | 51,486 | |||||||||||||||
d | YPF Sociedad Anonima, | |||||||||||||||||
senior bond, Reg S, 8.50%, 7/28/25 | Argentina | 331,000 | 252,387 | |||||||||||||||
senior bond, 144A, 6.95%, 7/21/27 | Argentina | 105,000 | 69,692 | |||||||||||||||
senior note, Reg S, 8.75%, 4/04/24 | Argentina | 1,267,000 | 1,081,505 | |||||||||||||||
senior note, Reg S, 8.50%, 3/23/25 | Argentina | 1,008,000 | 880,075 | |||||||||||||||
|
| |||||||||||||||||
23,097,204 | ||||||||||||||||||
|
| |||||||||||||||||
Paper & Forest Products 0.0%† | ||||||||||||||||||
Suzano Austria GMBH, senior bond, 3.75%, 1/15/31 | Brazil | 160,000 | 156,403 | |||||||||||||||
|
| |||||||||||||||||
Pharmaceuticals 0.3% | ||||||||||||||||||
d | Bausch Health Cos. Inc., 144A, | |||||||||||||||||
senior bond, 5.25%, 1/30/30 | United States | 35,000 | 30,073 | |||||||||||||||
senior bond, 5.25%, 2/15/31 | United States | 100,000 | 86,000 | |||||||||||||||
senior note, 5.00%, 1/30/28 | United States | 150,000 | 133,769 | |||||||||||||||
d,f | ENDO Dac / ENDO Finance LLC / ENDO Finco Inc., 144A, | |||||||||||||||||
secured note, 9.50%, 7/31/27 | United States | 1,598,000 | 1,611,327 | |||||||||||||||
b senior note, 6.00%, 6/30/28 | United States | 475,000 | 364,560 | |||||||||||||||
d | Par Pharmaceutical Inc., senior secured note, 144A, 7.50%, 4/01/27 | United States | 639,000 | 645,198 | ||||||||||||||
Teva Pharmaceutical Finance Co. LLC, senior bond, 6.15%, 2/01/36 | Israel | 10,000 | 10,459 | |||||||||||||||
Teva Pharmaceutical Finance Netherlands II BV, senior note, 6.00%, 1/31/25 | Israel | 335,000 | EUR | 405,179 | ||||||||||||||
Teva Pharmaceutical Finance Netherlands III BV, senior bond, 3.15%, 10/01/26 | Israel | 220,000 | 206,252 | |||||||||||||||
4.10%, 10/01/46 | Israel | 1,170,000 | 975,037 | |||||||||||||||
|
| |||||||||||||||||
4,467,854 | ||||||||||||||||||
|
| |||||||||||||||||
Pipelines 0.0%† | ||||||||||||||||||
d | Galaxy Pipeline Assets Bidco Ltd., senior secured bond, 144A, 2.94%, 9/30/40 | United Arab Emirates | 200,000 | 197,867 | ||||||||||||||
|
| |||||||||||||||||
Real Estate Management & Development 0.8% | ||||||||||||||||||
d | Agile Group Holdings Ltd., Reg S, | |||||||||||||||||
g senior note, 8.375% to 12/04/23, FRN thereafter, Perpetual | China | 300,000 | 162,000 | |||||||||||||||
g senior note, 7.875% to 7/31/24, FRN thereafter, Perpetual | China | 230,000 | 124,200 | |||||||||||||||
g senior note, 7.75% to 5/25/25, FRN thereafter, Perpetual | China | 230,000 | 124,200 |
46 | 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) | ||||||||||||||||||
d | Agile Group Holdings Ltd., Reg S, (continued) | |||||||||||||||||
senior secured note, 6.70%, 3/07/22 | China | 632,000 | $ | 504,020 | ||||||||||||||
senior secured note, 4.85%, 8/31/22 | China | 330,000 | 230,340 | |||||||||||||||
senior secured note, 6.05%, 10/13/25 | China | 200,000 | 125,500 | |||||||||||||||
d | CFLD Cayman Investment Ltd., senior note, Reg S, 8.60%, 4/08/24 | China | 200,000 | 64,176 | ||||||||||||||
d | China Evergrande Group, Reg S, | |||||||||||||||||
senior note, 8.75%, 6/28/25 | China | 1,668,000 | 410,745 | |||||||||||||||
senior secured note, 11.50%, 1/22/23 | China | 200,000 | 50,000 | |||||||||||||||
d | CIFI Holdings Group Co. Ltd., senior note, Reg S, | |||||||||||||||||
5.50%, 1/23/22 | China | 200,000 | 198,500 | |||||||||||||||
5.95%, 10/20/25 | China | 200,000 | 191,509 | |||||||||||||||
4.45%, 8/17/26 | China | 200,000 | 181,987 | |||||||||||||||
d | Country Garden Holdings Co. Ltd., senior secured note, Reg S, | |||||||||||||||||
7.125%, 1/27/22 | China | 200,000 | 199,990 | |||||||||||||||
4.75%, 7/25/22 | China | 400,000 | 392,000 | |||||||||||||||
4.75%, 1/17/23 | China | 2,000,000 | 1,934,994 | |||||||||||||||
d | Easy Tactic Ltd., senior secured note, Reg S, 8.125%, 2/27/23 | China | 200,000 | 116,884 | ||||||||||||||
d | Expand Lead Ltd., senior note, Reg S, 4.95%, 7/22/26 | China | 200,000 | 199,039 | ||||||||||||||
d | Gemdale Ever Prosperity Investment Ltd., E, senior note, Reg S, 4.95%, 8/12/24 | China | 300,000 | 298,765 | ||||||||||||||
d | Greenland Global Investment Ltd., senior bond, Reg S, 5.875%, 7/03/24 | China | 200,000 | 172,000 | ||||||||||||||
d | Hunt Cos. Inc., senior secured note, 144A, 5.25%, 4/15/29 | United States | 700,000 | 682,511 | ||||||||||||||
d | Kaisa Group Holdings Ltd., senior secured note, Reg S, | |||||||||||||||||
8.50%, 6/30/22 | China | 692,000 | 231,820 | |||||||||||||||
11.95%, 11/12/23 | China | 200,000 | 65,000 | |||||||||||||||
11.25%, 4/16/25 | China | 994,000 | 326,777 | |||||||||||||||
11.70%, 11/11/25 | China | 200,000 | 65,000 | |||||||||||||||
11.65%, 6/01/26 | China | 200,000 | 66,500 | |||||||||||||||
d | Leading Affluence Ltd., senior bond, Reg S, 4.50%, 1/24/23 | China | 500,000 | 509,153 | ||||||||||||||
d | Logan Group Co. Ltd., senior note, Reg S, | |||||||||||||||||
6.50%, 7/16/23 | China | 200,000 | 189,930 | |||||||||||||||
4.70%, 7/06/26 | China | 300,000 | 265,500 | |||||||||||||||
d | New Metro Global Ltd., senior note, Reg S, 4.625%, 10/15/25 | China | 200,000 | 174,937 | ||||||||||||||
d,g | Overseas Chinese Town Asia Holdings Ltd., senior note, Reg S, 4.50% to 7/15/23, FRN thereafter, Perpetual | China | 200,000 | 203,500 | ||||||||||||||
d | Perfect Point Ventures Ltd., senior note, Reg S, 5.20%, 9/20/25 | Hong Kong | 400,000 | 394,394 | ||||||||||||||
d | Powerlong Real Estate Holdings Ltd., senior note, Reg S, | |||||||||||||||||
4.00%, 7/25/22 | China | 200,000 | 185,000 | |||||||||||||||
4.90%, 5/13/26 | China | 200,000 | 165,900 | |||||||||||||||
d | Shimao Group Holdings Ltd., senior secured note, Reg S, 4.75%, 7/03/22 | China | 200,000 | 164,509 | ||||||||||||||
d | Sunac China Holdings Ltd., Reg S, | China | 300,000 | 208,500 | ||||||||||||||
senior secured note, 7.25%, 6/14/22 | China | 420,000 | 354,900 | |||||||||||||||
senior secured note, 6.65%, 8/03/24 | China | 200,000 | 138,250 | |||||||||||||||
senior secured note, 6.50%, 1/26/26 | China | 400,000 | 275,000 | |||||||||||||||
d | Times China Holdings Ltd., senior secured note, Reg S, 5.55%, 6/04/24 | China | 200,000 | 143,972 | ||||||||||||||
d | Yuzhou Group Holdings Co. Ltd., senior secured note, Reg S, | China | 200,000 | 67,000 | ||||||||||||||
7.70%, 2/20/25 | China | 200,000 | 63,000 | |||||||||||||||
6.35%, 1/13/27 | China | 400,000 | 122,000 | |||||||||||||||
d | Zhenro Properties Group Ltd., senior note, Reg S, 6.63%, 1/07/26 | China | 200,000 | 128,000 | ||||||||||||||
|
| |||||||||||||||||
10,871,902 | ||||||||||||||||||
|
| |||||||||||||||||
Road & Rail 0.2% | ||||||||||||||||||
d | Uber Technologies Inc., senior note, 144A, | United States | 1,085,000 | 1,156,632 | ||||||||||||||
7.50%, 9/15/27 | United States | 455,000 | 494,150 |
franklintempleton.com | Semiannual Report | 47 |
FRANKLIN ALTERNATIVE STRATEGIES FUNDS
CONSOLIDATED STATEMENT OF INVESTMENTS (UNAUDITED)
Franklin K2 Alternative Strategies Fund (continued)
Country | Principal Amount* | Value | ||||||||||||||||
Corporate Bonds and Notes (continued) | ||||||||||||||||||
Road & Rail (continued) | ||||||||||||||||||
Uber Technologies Inc., senior note, 144A, (continued) | ||||||||||||||||||
6.25%, 1/15/28 | United States | 200,000 | $ | 214,807 | ||||||||||||||
4.50%, 8/15/29 | United States | 1,145,000 | 1,135,697 | |||||||||||||||
|
| |||||||||||||||||
3,001,286 | ||||||||||||||||||
|
| |||||||||||||||||
Semiconductors & Semiconductor Equipment 0.1% | ||||||||||||||||||
Broadcom Inc., senior bond, 4.30%, 11/15/32 | United States | 415,000 | 463,525 | |||||||||||||||
Marvell Technology Inc., senior note, 2.95%, 4/15/31 | United States | 95,000 | 97,187 | |||||||||||||||
d | Microchip Technology Inc., senior secured note, 144A, 0.983%, 9/01/24 | United States | 85,000 | 83,804 | ||||||||||||||
d | TSMC Global Ltd., senior bond, Reg S, 2.25%, 4/23/31 | Taiwan | 1,000,000 | 998,611 | ||||||||||||||
|
| |||||||||||||||||
1,643,127 | ||||||||||||||||||
|
| |||||||||||||||||
Specialty Retail 0.4% | ||||||||||||||||||
d | Carvana Co., senior note, 144A, | United States | 180,000 | 180,508 | ||||||||||||||
5.50%, 4/15/27 | United States | 95,000 | 95,025 | |||||||||||||||
5.875%, 10/01/28 | United States | 353,000 | 354,887 | |||||||||||||||
4.875%, 9/01/29 | United States | 603,000 | 573,345 | |||||||||||||||
d | China Grand Automotive Services Ltd., E, senior note, Reg S, 9.125%, 1/30/24 | China | 333,000 | 249,464 | ||||||||||||||
d | Douglas GMBH, senior secured note, 144A, 6.00%, 4/08/26 | Germany | 1,714,000 | EUR | 1,894,029 | |||||||||||||
d | Guitar Center Inc., senior secured note, 144A, 8.50%, 1/15/26 | United States | 754,000 | 800,955 | ||||||||||||||
d,k | Kirk Beauty Sun GMBH, senior note, 144A, PIK, 8.25%, 10/01/26 | Germany | 399,858 | EUR | 429,692 | |||||||||||||
d | LS Finance 2017 Ltd., senior note, Reg S, | Hong Kong | 200,000 | 185,940 | ||||||||||||||
E, 4.875%, 7/15/24 | Hong Kong | 200,000 | 190,684 | |||||||||||||||
Macy’s Retail Holdings LLC, senior bond, 5.125%, 1/15/42 | United States | 700,000 | 673,313 | |||||||||||||||
d | Punch Finance PLC, senior secured note, Reg S, 6.125%, 6/30/26 | United Kingdom | 140,000 | GBP | 186,762 | |||||||||||||
d | Staples Inc., 144A, | United States | 300,000 | 273,726 | ||||||||||||||
senior secured note, 7.50%, 4/15/26 | United States | 300,000 | 298,314 | |||||||||||||||
|
| |||||||||||||||||
6,386,644 | ||||||||||||||||||
|
| |||||||||||||||||
Thrifts & Mortgage Finance 0.1% | ||||||||||||||||||
d | IIFL Finance Ltd., E, senior secured note, Reg S, 5.875%, 4/20/23 | India | 400,000 | 387,988 | ||||||||||||||
d | Indiabulls Housing Finance Ltd., E, senior secured note, Reg S, 6.375%, 5/28/22 | India | 600,000 | 586,812 | ||||||||||||||
d | Nationstar Mortgage Holdings Inc., senior bond, 144A, 5.75%, 11/15/31 | United States | 140,000 | 136,874 | ||||||||||||||
|
| |||||||||||||||||
1,111,674 | ||||||||||||||||||
|
| |||||||||||||||||
Tobacco 0.1% | ||||||||||||||||||
b,d | Vector Group Ltd., senior note, 144A, 10.50%, 11/01/26 | United States | 1,266,000 | 1,305,233 | ||||||||||||||
|
| |||||||||||||||||
Trading Companies & Distributors 0.1% | ||||||||||||||||||
Air Lease Corp., | United States | 360,000 | 367,106 | |||||||||||||||
f,g junior sub. note, B, 4.65% to 6/15/26, FRN thereafter, Perpetual | United States | 180,000 | 184,500 | |||||||||||||||
Aircastle Ltd., | ||||||||||||||||||
d,g junior sub. note, 144A, 5.25% to 6/15/26, FRN thereafter, Perpetual | United States | 55,000 | 56,512 | |||||||||||||||
senior note, 4.25%, 6/15/26 | United States | 310,000 | 334,472 | |||||||||||||||
d | BOC Aviation Ltd., G, senior note, Reg S, 3.00%, 5/23/22 | Singapore | 200,000 | 201,458 | ||||||||||||||
|
| |||||||||||||||||
1,144,048 | ||||||||||||||||||
|
|
48 | 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) | ||||||||||||||||||
Transportation Infrastructure 0.0%† | ||||||||||||||||||
d | Adani Ports & Special Economic Zone Ltd., | India | 500,000 | $ | 498,389 | |||||||||||||
senior note, 144A, 4.20%, 8/04/27 | India | 200,000 | 207,670 | |||||||||||||||
|
| |||||||||||||||||
706,059 | ||||||||||||||||||
|
| |||||||||||||||||
Wireless Telecommunication Services 0.1% | ||||||||||||||||||
d | Bharti Airtel Ltd., senior bond, | India | 700,000 | 747,911 | ||||||||||||||
144A, 3.25%, 6/03/31 | India | 200,000 | 204,784 | |||||||||||||||
d | Softbank Group Corp., senior bond, Reg S, 5.25%, 7/06/31 | Japan | 200,000 | 195,675 | ||||||||||||||
T-Mobile USA Inc., | United States | 220,000 | 224,000 | |||||||||||||||
senior note, 3.375%, 4/15/29 | United States | 455,000 | 458,519 | |||||||||||||||
|
| |||||||||||||||||
1,830,889 | ||||||||||||||||||
|
| |||||||||||||||||
Total Corporate Bonds and Notes | 155,339,511 | |||||||||||||||||
|
|
|
| |||||||||||||||
Corporate Bonds and Notes in Reorganization 0.2% | ||||||||||||||||||
Airlines 0.1% | ||||||||||||||||||
d,l | Aerovias de Mexico SA de CV, senior note, 144A, 7.00%, 2/05/25 | Mexico | 200,000 | 195,358 | ||||||||||||||
d,l | LATAM Finance Ltd., senior note, 144A, | Chile | 400,000 | 383,294 | ||||||||||||||
7.00%, 3/01/26 | Chile | 1,200,000 | 1,152,864 | |||||||||||||||
|
| |||||||||||||||||
1,731,516 | ||||||||||||||||||
|
| |||||||||||||||||
Metals & Mining 0.1% | ||||||||||||||||||
d,l | Samarco Mineracao SA, senior bond, Reg S, | Brazil | 925,000 | 587,375 | ||||||||||||||
5.75%, 10/24/23 | Brazil | 184,000 | 127,267 | |||||||||||||||
|
| |||||||||||||||||
714,642 | ||||||||||||||||||
|
| |||||||||||||||||
Road & Rail 0.0%† | ||||||||||||||||||
b,e,l | Hertz Corp. Escrow, senior note, zero cpn., 1/15/28 | United States | 1,584,000 | — | ||||||||||||||
|
| |||||||||||||||||
Total Corporate Bonds and Notes in Reorganization | 2,446,158 | |||||||||||||||||
|
| |||||||||||||||||
h,m | Senior Floating Rate Interests 0.5% | |||||||||||||||||
Airlines 0.0%† | ||||||||||||||||||
United Airlines Inc., Term Loan B, 4.50%, (1-Month USD LIBOR + 3.75%), 4/21/28 | United States | 99,500 | 99,528 | |||||||||||||||
|
| |||||||||||||||||
Communications Equipment 0.0%† | ||||||||||||||||||
Riverbed Technology Inc., Term Loan B, 7.00%, (3-Month USD LIBOR + 6.00%), 12/31/25 | United States | 170,651 | 155,212 | |||||||||||||||
|
| |||||||||||||||||
Consumer Discretionary Services 0.1% | ||||||||||||||||||
Motel 6, Term Loan B, 5.75%, 1-Month USD LIBOR + 5.00%), 9/09/26 | United States | 40,000 | 40,250 | |||||||||||||||
Travel Leaders Group LLC, Term Loan B, 4.087%, (1-Month USD LIBOR + 4.00%), 1/25/24 | United States | 482,183 | 452,047 | |||||||||||||||
|
| |||||||||||||||||
492,297 | ||||||||||||||||||
|
| |||||||||||||||||
Diversified Financial Services 0.1% | ||||||||||||||||||
MPH Acquisition Holdings LLC, Term Loan B, 4.75%, (3-Month USD LIBOR + 4.25%), 9/01/28 | United States | 815,060 | 779,401 | |||||||||||||||
Ziggo BV, Term Loan H, 3.00%, (3-Month EURIBOR + 3.00%), 1/31/29 | United States | 115,000 | 129,001 | |||||||||||||||
|
| |||||||||||||||||
908,402 | ||||||||||||||||||
|
|
franklintempleton.com | Semiannual Report | 49 |
FRANKLIN ALTERNATIVE STRATEGIES FUNDS
CONSOLIDATED STATEMENT OF INVESTMENTS (UNAUDITED)
Franklin K2 Alternative Strategies Fund (continued)
Country | Principal Amount* | Value | ||||||||||||||||
h,m | Senior Floating Rate Interests (continued) | |||||||||||||||||
Diversified Telecommunication Services 0.2% | ||||||||||||||||||
Frontier Communications Corp., Term Loan DIP, 4.50%, (1-Month USD LIBOR + 3.75%), 12/31/21 | United States | 259,079 | $ | 259,144 | ||||||||||||||
Intelsat Jackson Holdings SA, | United States | 2,467,032 | 2,478,134 | |||||||||||||||
n Term Loan DIP, 5.75%, (3-Month USD LIBOR + 4.75%), 7/13/22 | United States | 144,653 | 145,309 | |||||||||||||||
|
| |||||||||||||||||
2,882,587 | ||||||||||||||||||
|
| |||||||||||||||||
Entertainment 0.0%† | ||||||||||||||||||
Playtika Holding Corp., Term Loan B, 2.84%, (1-Month USD LIBOR + 2.75%), 3/13/28 | United States | 218,900 | 217,806 | |||||||||||||||
|
| |||||||||||||||||
Equity Real Estate Investment Trusts (REITs) 0.0%† | ||||||||||||||||||
The GEO Group Inc., Term Loan B, 2.75%, (3-Month USD LIBOR + 2.00%), 3/22/24 | United States | 267,917 | 251,842 | |||||||||||||||
McCarthy & Stone PLC, Term Loan B, 7.00%, 12/16/25 | United Kingdom | 170,938 | GBP | 226,344 | ||||||||||||||
|
| |||||||||||||||||
478,186 | ||||||||||||||||||
|
| |||||||||||||||||
Health Care Equipment & Supplies 0.0%† | ||||||||||||||||||
Medline, Term Loan B, 3.75%, (1-Month USD LIBOR + 3.25%), 10/23/28 | United States | 85,000 | 84,806 | |||||||||||||||
|
| |||||||||||||||||
Hotels, Restaurants & Leisure 0.0%† | ||||||||||||||||||
Hilton Grand Vacations, Term Loan B, 3.50%, (1-Month USD LIBOR + 3.00%), 8/02/28 | United States | 105,000 | 104,295 | |||||||||||||||
|
| |||||||||||||||||
Household Durables 0.0%† | ||||||||||||||||||
Weber-Stephen Products LLC, Term Loan B, 4.00%, (1-Month USD LIBOR + 3.25%), 10/30/27 | United States | 69,396 | 69,352 | |||||||||||||||
|
| |||||||||||||||||
Insurance 0.0%† | ||||||||||||||||||
AmWINS Group Inc., Term Loan B, 3.00%, (1-Month USD LIBOR + 2.25%), 2/19/28 | United States | 42,705 | 42,171 | |||||||||||||||
|
| |||||||||||||||||
Media 0.1% | ||||||||||||||||||
Advantage Sales & Marketing Inc., Term Loan B1, 5.25%, (3-Month USD LIBOR + 4.50%), 10/28/27 | United States | 670,417 | 672,515 | |||||||||||||||
|
| |||||||||||||||||
Pharmaceuticals 0.0%† | ||||||||||||||||||
Jazz Pharmaceuticals PLC, Term Loan B, 4.00%, (1-Month USD LIBOR + 3.50%), 5/05/28 | United States | 84,788 | 84,735 | |||||||||||||||
|
| |||||||||||||||||
Professional Services 0.0%† | ||||||||||||||||||
CoreLogic Inc., Term Loan B, 4.00%, (1-Month USD LIBOR + 3.50%), 6/02/28 | United States | 170,000 | 168,300 | |||||||||||||||
|
| |||||||||||||||||
Total Senior Floating Rate Interests (Cost $6,514,157) | 6,460,192 | |||||||||||||||||
|
| |||||||||||||||||
h,m | Senior Floating Rate Interests in Reorganization (Cost $203,530) 0.0%† | |||||||||||||||||
Communications Equipment 0.0%† | ||||||||||||||||||
l | Riverbed Technology Inc., Term Loan B, 7.50%, (3-Month USD LIBOR + 6.50%), 12/31/26 | United States | 388,549 | 109,959 | ||||||||||||||
|
| |||||||||||||||||
o | Credit-Linked Notes 0.4% | |||||||||||||||||
d | Citigroup Global Markets Holdings Inc., (Egypt), E, senior note, 144A, zero cpn., 12/16/21 | Egypt | 11,472,817 | EGP | 725,003 | |||||||||||||
d | Citigroup Global Markets Holdings Inc., (Egypt), EMTN, senior note, 144A, zero cpn., 3/31/22 | Egypt | 11,771,928 | EGP | 720,704 | |||||||||||||
d | HSBC Bank PLC, (Egypt), senior note, 144A, zero cpn., 12/23/21 | Egypt | 7,925,000 | EGP | 499,568 | |||||||||||||
d | HSBC Bank PLC, (Egypt), senior note, 144A, zero cpn., 2/10/22 | Egypt | 12,425,000 | EGP | 769,743 | |||||||||||||
e | ICBC Standard Bank PLC, (Egypt), EMTN, zero cpn., 12/30/21 | Egypt | 39,754,711 | EGP | 2,501,698 |
50 | Semiannual Report | franklintempleton.com |
FRANKLIN ALTERNATIVE STRATEGIES FUNDS
CONSOLIDATED STATEMENT OF INVESTMENTS (UNAUDITED)
Franklin K2 Alternative Strategies Fund (continued)
Country | Principal Amount* | Value | ||||||||||||||||
o | Credit-Linked Notes (continued) | |||||||||||||||||
d | JPMorgan Chase Bank NA, (Egypt), senior note, 144A, zero cpn., 3/17/22 | Egypt | 12,389,000 | EGP | $ | 759,663 | ||||||||||||
|
| |||||||||||||||||
Total Credit-Linked Notes (Cost $5,989,294) | 5,976,379 | |||||||||||||||||
|
| |||||||||||||||||
Foreign Government and Agency Securities 4.2% | ||||||||||||||||||
d | Banque Centrale de Tunisie International Bond, senior note, Reg S, | Tunisia | 469,000 | EUR | 436,150 | |||||||||||||
5.625%, 2/17/24 | Tunisia | 796,000 | EUR | 699,696 | ||||||||||||||
Brazil Notas Do Tesouro Nacional Serie F, NTNF, senior bond, 10.00%, 1/01/25 | Brazil | 2,332,000 | BRL | 399,725 | ||||||||||||||
d | CBB International Sukuk Programme Co. Wll, senior note, 144A, 3.875%, 5/18/29 | Bahrain | 1,702,000 | 1,641,298 | ||||||||||||||
d | Export-Import Bank of Korea, senior note, | South Korea | 35,800,000 | INR | 471,558 | |||||||||||||
Reg S, 6.75%, 8/09/22 | South Korea | 7,100,000 | INR | 95,653 | ||||||||||||||
d | Government of Angola, senior bond, Reg S, | Angola | 2,588,000 | 2,395,919 | ||||||||||||||
9.375%, 5/08/48 | Angola | 376,000 | 343,505 | |||||||||||||||
9.125%, 11/26/49 | Angola | 2,083,000 | 1,863,010 | |||||||||||||||
Government of Argentina, senior bond, | Argentina | 7,560,916 | 2,524,741 | |||||||||||||||
2.50%, 7/09/41 | Argentina | 2,480,073 | 769,393 | |||||||||||||||
d | Government of Bahrain, senior bond, Reg S, 7.00%, 1/26/26 | Bahrain | 467,000 | 513,781 | ||||||||||||||
Government of Colombia, senior bond, 5.20%, 5/15/49 | Colombia | 1,449,000 | 1,352,584 | |||||||||||||||
d | Government of Dominican Republic, senior bond, Reg S, | Dominican Republic | 601,000 | 599,504 | ||||||||||||||
5.875%, 1/30/60 | Dominican Republic | 619,000 | 577,217 | |||||||||||||||
d | Government of Ecuador, Reg S, | Ecuador | 3,854,113 | 2,505,173 | ||||||||||||||
senior note, 5.00%, 7/31/30 | Ecuador | 325,960 | 270,143 | |||||||||||||||
Government of Egypt, | Egypt | 23,719,000 | EGP | 1,502,163 | ||||||||||||||
d senior bond, Reg S, 7.50%, 1/31/27 | Egypt | 1,046,000 | 1,051,826 | |||||||||||||||
d senior bond, Reg S, 7.60%, 3/01/29 | Egypt | 789,000 | 754,192 | |||||||||||||||
d senior bond, 144A, 5.875%, 2/16/31 | Egypt | 487,000 | 413,429 | |||||||||||||||
d senior note, Reg S, 5.80%, 9/30/27 | Egypt | 2,870,000 | 2,677,997 | |||||||||||||||
d | Government of El Salvador, senior bond, Reg S, 7.75%, 1/24/23 | El Salvador | 1,166,000 | 921,140 | ||||||||||||||
d | Government of Ghana, | Ghana | 1,048,000 | 1,146,302 | ||||||||||||||
senior note, 144A, zero cpn., 4/07/25 | Ghana | 278,000 | 187,475 | |||||||||||||||
senior note, 144A, 7.75%, 4/07/29 | Ghana | 372,000 | 303,180 | |||||||||||||||
senior note, Reg S, 7.75%, 4/07/29 | Ghana | 200,000 | 163,000 | |||||||||||||||
Government of Italy, senior note, 2.375%, 10/17/24 | Italy | 350,000 | 360,237 | |||||||||||||||
d | Government of Jordan, 144A, | Jordan | 386,000 | 380,924 | ||||||||||||||
senior note, 4.95%, 7/07/25 | Jordan | 578,000 | 593,895 | |||||||||||||||
d | Government of Malaysia, senior bond, Reg S, 3.075%, 4/28/51 | Malaysia | 500,000 | 534,190 | ||||||||||||||
Government of Mexico, | Mexico | 350,000 | 361,155 | |||||||||||||||
senior bond, 3.771%, 5/24/61 | Mexico | 455,000 | 415,185 | |||||||||||||||
senior bond, M, 7.75%, 5/29/31 | Mexico | 13,950,000 | p | MXN | 659,861 | |||||||||||||
senior bond, M 30, 8.50%, 11/18/38 | Mexico | 4,770,400 | p | MXN | 232,651 | |||||||||||||
senior note, M, 6.75%, 3/09/23 | Mexico | 9,060,800 | p | MXN | 424,773 | |||||||||||||
d | Government of Nigeria, | Nigeria | 368,000 | 337,419 | ||||||||||||||
senior bond, Reg S, 8.25%, 9/28/51 | Nigeria | 617,000 | 558,225 | |||||||||||||||
senior note, Reg S, 7.625%, 11/21/25 | Nigeria | 1,531,000 | 1,609,701 | |||||||||||||||
senior note, Reg S, 6.125%, 9/28/28 | Nigeria | 2,958,000 | 2,789,276 |
franklintempleton.com | Semiannual Report | 51 |
FRANKLIN ALTERNATIVE STRATEGIES FUNDS
CONSOLIDATED STATEMENT OF INVESTMENTS (UNAUDITED)
Franklin K2 Alternative Strategies Fund (continued)
Country | Principal Amount* | Value | ||||||||||||||||
Foreign Government and Agency Securities (continued) | ||||||||||||||||||
d | Government of Oman, | Oman | 418,000 | $ | 438,892 | |||||||||||||
senior bond, Reg S, 6.75%, 1/17/48 | Oman | 412,000 | 397,423 | |||||||||||||||
senior bond, Reg S, 7.00%, 1/25/51 | Oman | 1,726,000 | 1,715,374 | |||||||||||||||
senior note, 144A, 4.875%, 6/15/30 | Oman | 221,000 | 232,900 | |||||||||||||||
d | Government of Paraguay, senior bond, Reg S, 4.625%, 1/25/23 | Paraguay | 2,414,000 | 2,498,514 | ||||||||||||||
Government of Peru, senior bond, 6.15%, 8/12/32 | Peru | 894,000 | PEN | 220,535 | ||||||||||||||
Government of Russia, | Russia | 111,039,000 | RUB | 1,246,449 | ||||||||||||||
senior note, 6227, 7.40%, 7/17/24 | Russia | 6,132,000 | RUB | 80,615 | ||||||||||||||
senior note, 6229, 7.15%, 11/12/25 | Russia | 74,375,000 | RUB | 959,986 | ||||||||||||||
d | Government of Saudi Arabia, senior bond, | Saudi Arabia | 910,000 | 930,384 | ||||||||||||||
144A, 3.75%, 1/21/55 | Saudi Arabia | 354,000 | 372,056 | |||||||||||||||
Reg S, 2.75%, 2/03/32 | Saudi Arabia | 302,000 | 308,765 | |||||||||||||||
Government of South Africa, senior bond, | South Africa | 28,482,503 | ZAR | 1,617,323 | ||||||||||||||
2032, 8.25%, 3/31/32 | South Africa | 14,921,596 | ZAR | 822,302 | ||||||||||||||
2035, 8.875%, 2/28/35 | South Africa | 7,186,144 | ZAR | 395,998 | ||||||||||||||
2037, 8.50%, 1/31/37 | South Africa | 24,425,000 | ZAR | 1,273,864 | ||||||||||||||
d | Government of Sri Lanka, senior bond, Reg S, 7.55%, 3/28/30 | Sri Lanka | 955,000 | 529,433 | ||||||||||||||
Government of Turkey, | Turkey | 479,000 | 442,053 | |||||||||||||||
senior note, 6.375%, 10/14/25 | Turkey | 875,000 | 870,760 | |||||||||||||||
d | Government of Ukraine, | Ukraine | 751,000 | 709,166 | ||||||||||||||
senior bond, Reg S, 1.258%, 5/31/40 | Ukraine | 4,955,000 | 4,509,297 | |||||||||||||||
senior note, 144A, 6.876%, 5/21/29 | Ukraine | 302,000 | 281,940 | |||||||||||||||
senior note, Reg S, 6.876%, 5/21/29 | Ukraine | 966,000 | 901,835 | |||||||||||||||
d | Government of Zambia, senior bond, Reg S, | Zambia | 418,000 | 322,905 | ||||||||||||||
8.97%, 7/30/27 | Zambia | 512,000 | 390,800 | |||||||||||||||
International Finance Corp., senior note, 5.85%, 11/25/22 | Supranational | q | 8,120,000 | INR | 109,206 | |||||||||||||
Provincia de Buenos Aires, | Argentina | 18,295,000 | ARS | 81,150 | ||||||||||||||
d,h 144A, FRN, Reg S, 37.909%, (ARS BADLAR + 3.75%), 4/12/25 | Argentina | 3,670,000 | ARS | 12,690 | ||||||||||||||
d senior bond, 144A, | Argentina | 3,300,000 | ARS | 1,292,148 | ||||||||||||||
|
| |||||||||||||||||
Total Foreign Government and Agency Securities | 59,802,009 | |||||||||||||||||
|
| |||||||||||||||||
Foreign Government and Agency Securities in Reorganization (Cost $193,035) 0.0%† | ||||||||||||||||||
l | Government of Lebanon, G, senior bond, 6.375%, 3/09/20 | Lebanon | 1,443,000 | 167,749 | ||||||||||||||
|
| |||||||||||||||||
U.S. Government and Agency Securities 0.1% | ||||||||||||||||||
U.S. Treasury Bond, | ||||||||||||||||||
1.875%, 2/15/41 | United States | 2,000 | 2,007 | |||||||||||||||
1.75%, 8/15/41 | United States | 2,000 | 1,964 | |||||||||||||||
1.625%, 11/15/50 | United States | 556,000 | 533,304 | |||||||||||||||
1.875%, 2/15/51 | United States | 367,000 | 373,250 | |||||||||||||||
U.S. Treasury Note, | ||||||||||||||||||
1.625%, 5/15/31 | United States | 738,000 | 752,472 | |||||||||||||||
1.375%, 11/15/31 | United States | 130,700 | 129,924 | |||||||||||||||
|
| |||||||||||||||||
Total U.S. Government and Agency Securities | 1,792,921 | |||||||||||||||||
|
|
52 | 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 6.6% | ||||||||||||||||||
Diversified Financial Services 5.0% | ||||||||||||||||||
d | AASET Trust, 144A, | |||||||||||||||||
e 2021-1A, A, 2.95%, 11/16/41 | United States | 247,747 | $ | 245,202 | ||||||||||||||
2021-1A, B, 3.80%, 11/16/41 | United States | 1,287,741 | 1,230,437 | |||||||||||||||
d | Accelerated Assets LLC, 2018-1, B, 144A, 4.51%, 12/02/33 | United States | 45,570 | 46,641 | ||||||||||||||
r | ACE Securities Corp. Home Equity Loan Trust, 2003-FM1, M1, FRN, 1.382%, (1-Month USD LIBOR + 1.29%), 11/25/32 | United States | 1,261,281 | 1,284,708 | ||||||||||||||
d | Adams Outdoor Advertising LP, 2018-1, A, 144A, 4.81%, 11/15/48 | United States | 175,457 | 182,865 | ||||||||||||||
d,r | AGL CLO 3 Ltd., 2020-3A, C, 144A, FRN, 2.274%, (3-Month USD LIBOR + 2.15%), 1/15/33 | United States | 285,000 | 285,376 | ||||||||||||||
d | AIM Aviation Finance Ltd., 2015-1A, B1, 144A, 5.072%, 2/15/40 | United States | 170,624 | 68,686 | ||||||||||||||
d,r | Allegro CLO VI Ltd., 2018-2A, D, 144A, FRN, 2.872%, (3-Month USD LIBOR + 2.75%), 1/17/31 | United States | 250,000 | 244,095 | ||||||||||||||
d | American Credit Acceptance Receivables Trust, 144A, | United States | 200,000 | 203,227 | ||||||||||||||
2020-4, D, 1.77%, 12/14/26 | United States | 185,000 | 186,055 | |||||||||||||||
d,r | Apex Credit CLO Ltd., 2018-1A, DR, 144A, FRN, 3.535%, (3-Month USD LIBOR + 3.40%), 10/27/28 | United States | 1,000,000 | 994,492 | ||||||||||||||
d | Arbys Funding LLC, 2020-1A, A2, 144A, 3.237%, 7/30/50 | United States | 98,750 | 102,285 | ||||||||||||||
r | Argent Securities Inc., 2004-W3, M4, FRN, 3.479%, (1-Month USD LIBOR + 4.58%), 2/25/34 | United States | 188,909 | 210,942 | ||||||||||||||
d | Ascentium Equipment Receivables Trust, 2017-2A, C, 144A, 2.87%, 8/10/22 | United States | 25,000 | 25,014 | ||||||||||||||
d | Avis Budget Rental Car Funding AESOP LLC, 144A, | United States | 100,000 | 104,110 | ||||||||||||||
2020-2A, C, 4.25%, 2/20/27 | United States | 100,000 | 106,962 | |||||||||||||||
d,r | Barings CLO Ltd., 2019-4A, C, 144A, FRN, 2.924%, (3-Month USD LIBOR + 2.80%), 1/15/33 | United States | 400,000 | 400,577 | ||||||||||||||
d,r | Barings Euro CLO BV, 2014-1, 144A, FRN, 1.90%, (3-Month EURIBOR + 1.90%), 7/15/31 | Netherlands | 500,000 | 567,999 | ||||||||||||||
s | Bear Stearns ALT-A Trust, 2006-3, 21A1, FRN, 2.655%, 5/25/36 | United States | 1,142,007 | 965,683 | ||||||||||||||
d | Blackbird Capital Aircraft Lease Securitization Ltd., 2016-1A, A, 144A, 4.213%, 12/16/41 | United States | 179,038 | 179,558 | ||||||||||||||
d,r | BNPP IP CLO Ltd., 2017-2A, DR, 144A, FRN, 3.632%, (3-Month USD LIBOR + 3.50%), 10/30/25 | United States | 1,250,000 | 1,242,569 | ||||||||||||||
d,r | BSPRT Issuer Ltd., 2019-FL5, E, 144A, FRN, 2.94%, (1-Month USD LIBOR + 2.85%), 5/15/29 | United States | 1,000,000 | 999,764 | ||||||||||||||
d,r | BX Commercial Mortgage Trust, 2019-XL, E, 144A, FRN, 1.89%, (1-Month USD LIBOR + 1.80%), 10/15/36 | United States | 1,105,000 | 1,102,005 | ||||||||||||||
California Republic Auto Receivables Trust, 2018-1, D, 4.33%, 4/15/25 | United States | 115,000 | 117,715 | |||||||||||||||
d,r | Carlyle US CLO Ltd., 2017-4A, C, 144A, FRN, 2.924%, (3-Month USD LIBOR + 2.80%), 1/15/30 | United States | 250,000 | 241,235 | ||||||||||||||
Carmax Auto Owner Trust, 2018-4, D, 4.15%, 4/15/25 | United States | 60,000 | 61,842 | |||||||||||||||
d | Castlelake Aircraft Structured Trust, 2021-1A, A, 144A, 3.474%, 1/15/46 | United States | 345,001 | 352,657 | ||||||||||||||
d,r | Catamaran CLO Ltd., 144A, FRN, | United States | 2,030,000 | 2,038,232 | ||||||||||||||
2014-2A, D, 4.972%, (3-Month USD LIBOR + 4.85%), 10/18/26 | United States | 1,000,000 | 988,476 | |||||||||||||||
2017-1A, CR, 1.935%, (3-Month USD LIBOR + 1.80%), 1/27/28 | United States | 250,000 | 249,569 | |||||||||||||||
d,r | CHCP Ltd., 2021-FL1, C, 144A, FRN, 2.262%, (1-Month USD LIBOR + 2.21%), 2/15/38 | United States | 1,000,000 | 1,000,500 | ||||||||||||||
CHL Mortgage Pass-Through Trust, | �� | |||||||||||||||||
r 2003-15, 1A1, FRN, 0.592%, (1-Month USD LIBOR + 0.50%), 6/25/42 | United States | 97,857 | 97,613 | |||||||||||||||
2004-4, M, 5.50%, 5/25/34 | United States | 858,371 | 579,616 | |||||||||||||||
2006-21, A8, 5.75%, 2/25/37 | United States | 340,014 | 234,636 | |||||||||||||||
s,t 2006-HYB1, 2A2C, FRN, 2.667%, 3/20/36 | United States | 1,288,861 | 1,254,920 | |||||||||||||||
s 2006-HYB4, 3B, FRN, 3.669%, 6/20/36 | United States | 1,597,977 | 1,357,337 |
franklintempleton.com | Semiannual Report | 53 |
FRANKLIN ALTERNATIVE STRATEGIES FUNDS
CONSOLIDATED STATEMENT OF INVESTMENTS (UNAUDITED)
Franklin K2 Alternative Strategies Fund (continued)
Country | Principal Amount* | Value | ||||||||||||||||
Asset-Backed Securities and Commercial Mortgage-Backed Securities (continued) | ||||||||||||||||||
Diversified Financial Services (continued) | ||||||||||||||||||
d,r | CIFC Funding Ltd., 2021-7A, D, 144A, FRN, 3.128%, (3-Month USD LIBOR + 3.00%), 1/23/35 | United States | 315,000 | $ | 314,609 | |||||||||||||
d | CLI Funding VIII LLC, 2021-1A, A, 144A, 1.64%, 2/18/46 | United States | 370,086 | 362,788 | ||||||||||||||
d,r | Connecticut Avenue Securities Trust, 144A, FRN, | United States | 45,148 | 45,359 | ||||||||||||||
2021-R01, 1B1, 3.15%, (SOFR + 3.10%), 10/25/41 | United States | 100,000 | 100,530 | |||||||||||||||
d | CoreVest American Finance Trust, 144A, | |||||||||||||||||
2019-2, B, 3.424%, 6/15/52 | United States | 100,000 | 105,894 | |||||||||||||||
2020-4, C, 2.25%, 12/15/52 | United States | 100,000 | 97,582 | |||||||||||||||
d | CSMC Trust, 144A, | |||||||||||||||||
s 2019-RP10, A1, FRN, 2.971%, 12/26/59 | United States | 139,180 | 139,721 | |||||||||||||||
s 2020-RPL3, A1, FRN, 2.691%, 3/25/60 | United States | 108,282 | 108,993 | |||||||||||||||
2021-RPL1, A2, 3.937%, 9/27/60 | United States | 155,000 | 154,200 | |||||||||||||||
d,r | Cutwater Ltd., 2017-1A, CR, 144A, FRN, 3.724%, (3-Month USD LIBOR + 3.60%), 7/15/26 | United States | 1,000,000 | 1,001,879 | ||||||||||||||
d | DB Master Finance LLC, 144A, 2019-1A, A23, 4.352%, 5/20/49 | United States | 146,625 | 158,184 | ||||||||||||||
2021-1A, A2II, 2.493%, 11/20/51 | United States | 55,000 | 54,808 | |||||||||||||||
d,s | DBUBS Mortgage Trust, 2017-BRBK, D, 144A, FRN, 3.648%, 10/10/34 | United States | 100,000 | 101,845 | ||||||||||||||
d | Domino’s Pizza Master Issuer LLC, 144A, | |||||||||||||||||
2017-1A, A23, 4.118%, 7/25/47 | United States | 163,625 | 173,968 | |||||||||||||||
2018-1A, A2II, 4.328%, 7/25/48 | United States | 174,600 | 185,080 | |||||||||||||||
2019-1A, A2, 3.668%, 10/25/49 | United States | 167,025 | 177,485 | |||||||||||||||
2021-1A, A2I, 2.662%, 4/25/51 | United States | 223,875 | 226,073 | |||||||||||||||
Drive Auto Receivables Trust, 2018-3, D, 4.30%, 9/16/24 | United States | 12,936 | 13,128 | |||||||||||||||
d | DT Auto Owner Trust, 144A, | |||||||||||||||||
2020-3A, D, 1.84%, 6/15/26 | United States | 80,000 | 80,392 | |||||||||||||||
2021-4A, D, 1.99%, 9/15/27 | United States | 105,000 | 104,885 | |||||||||||||||
d | Education Funding Trust Trust, 2020-A, A, 144A, 2.79%, 7/25/41 | United States | 106,406 | 107,989 | ||||||||||||||
Exeter Automobile Receivables Trust, | United States | 90,000 | 94,789 | |||||||||||||||
2020-3A, C, 1.32%, 7/15/25 | United States | 145,000 | 145,845 | |||||||||||||||
s | Fannie Mae Grantor Trust, 2004-T5, AB7, FRN, 0.586%, 5/28/35 | United States | 312,585 | 303,735 | ||||||||||||||
d | First Investors Auto Owner Trust, 2019-2A, D, 144A, 2.80%, 12/15/25 | United States | 40,000 | 40,747 | ||||||||||||||
d | FirstKey Homes Trust, 144A, | |||||||||||||||||
2020-SFR1, F1, 3.638%, 8/17/37 | United States | 225,000 | 229,614 | |||||||||||||||
2020-SFR2, F1, 3.017%, 10/19/37 | United States | 320,000 | 321,004 | |||||||||||||||
d | Flagship Credit Auto Trust, 2019-4, D, 144A, 3.12%, 1/15/26 | United States | 90,000 | 92,983 | ||||||||||||||
d,r | FREMF Mortgage Trust, 2021-KF112, D, 144A, FRN, 3.04%, (1-Month USD LIBOR + 2.95%), 5/15/28 | United States | 1,600,000 | 1,601,170 | ||||||||||||||
d,r | Galaxy XXVI CLO Ltd., 2018-26A, E, 144A, FRN, 6.01%, (3-Month USD LIBOR + 5.85%), 11/22/31 | United States | 260,000 | 254,811 | ||||||||||||||
d,r | Generate CLO 6 Ltd., 2019-1A, D, 144A, FRN, 4.128%, (3-Month USD LIBOR + 4.00%), 7/22/32 | United States | 455,000 | 456,330 | ||||||||||||||
d | GLS Auto Receivables Trust, 144A, | United States | 150,000 | 152,939 | ||||||||||||||
2020-3A, C, 1.92%, 5/15/25 | United States | 330,000 | 333,780 | |||||||||||||||
d,r | GPMT Ltd., 144A, FRN, | |||||||||||||||||
2018-FL1, C, 2.239%, (1-Month USD LIBOR + 2.15%), 11/19/35 | United States | 1,127,063 | 1,127,404 | |||||||||||||||
2019-FL2, D, 3.039%, (1-Month USD LIBOR + 2.95%), 2/22/36 | United States | 950,000 | 945,868 | |||||||||||||||
d,r | Grand Avenue CRE, 2019-FL1, D, 144A, FRN, 2.889%, (1-Month USD LIBOR + 2.80%), 6/15/37 | United States | 1,250,000 | 1,249,866 | ||||||||||||||
d,r,t | Greystone CRE Notes Ltd., 2021-HC2, A, 144A, FRN, 1.89%, (1-Month USD LIBOR + 1.80%), 12/15/39 | United States | 105,000 | 105,000 | ||||||||||||||
d,r | Grosvenor Place CLO BV, 2015-1X, FRN, Reg S, 7.25%, (3-Month EURIBOR + 7.25%), 10/30/29 | Netherlands | 398,000 | 451,190 | ||||||||||||||
d,r | GSRPM Mortgage Loan Trust, 2002-1A, M1, 144A, FRN, 2.042%, (1-Month USD LIBOR + 1.95%), 11/25/31 | United States | 872,553 | 876,287 | ||||||||||||||
d,r | Halcyon Loan Advisors Funding Ltd., 2014-1A, D, 144A, FRN, 3.622%, (3-Month USD LIBOR + 3.50%), 4/18/26 | United States | 1,490,000 | 1,488,703 |
54 | Semiannual Report | franklintempleton.com |
FRANKLIN ALTERNATIVE STRATEGIES FUNDS
CONSOLIDATED STATEMENT OF INVESTMENTS (UNAUDITED)
Franklin K2 Alternative Strategies Fund (continued)
Country | Principal Amount* | Value | ||||||||||||||||
Asset-Backed Securities and Commercial Mortgage-Backed Securities (continued) | ||||||||||||||||||
Diversified Financial Services (continued) | ||||||||||||||||||
d | HPEFS Equipment Trust, 2020-2A, D, 144A, 2.79%, 7/22/30 | United States | 325,000 | $ | 333,684 | |||||||||||||
d | Kestrel Aircraft Funding Ltd., 2018-1A, A, 144A, 4.25%, 12/15/38 | United States | 210,238 | 207,836 | ||||||||||||||
Legacy Mortgage Asset Trust, | ||||||||||||||||||
d 2019-GS3, A1, 144A, 3.75%, 4/25/59 | United States | 87,956 | 88,397 | |||||||||||||||
d 2019-GS4, A1, 144A, 3.438%, 5/25/59 | United States | 139,767 | 140,002 | |||||||||||||||
2019-PR1, A2, 4.50%, 9/25/59 | United States | 1,600,000 | 1,600,533 | |||||||||||||||
d 2020-GS1, A1, 144A, 2.882%, 10/25/59 | United States | 220,346 | 221,027 | |||||||||||||||
d,r | Marathon CLO V Ltd., 2017-5A, CR, 144A, FRN, 2.91%, (3-Month USD LIBOR + 2.75%), 11/21/27 | United States | 2,200,000 | 2,142,930 | ||||||||||||||
d,r | Marathon CLO VI Ltd., 2018-6A, CR2, 144A, FRN, 3.656%, (3-Month USD LIBOR + 3.50%), 5/13/28 | United States | 1,000,000 | 986,420 | ||||||||||||||
d | Marlette Funding Trust, 2019-4A, B, 144A, 2.95%, 12/17/29 | United States | 290,000 | 292,492 | ||||||||||||||
r | Merrill Lynch Mortgage Investors Trust Series, 2007-MLN1, A2D, FRN, 0.412%, (1-Month USD LIBOR + 0.32%), 3/25/37 | United States | 854,807 | 808,102 | ||||||||||||||
d,s | Mill City Mortgage Loan Trust, 2021-NMR1, M3, 144A, FRN, 2.50%, 11/25/60 | United States | 100,000 | 98,412 | ||||||||||||||
r | MortgageIT Mortgage Loan Trust, FRN, | United States | 1,847,613 | 1,702,321 | ||||||||||||||
2006-1, 2A1B, 0.652%, (1-Month USD LIBOR + 0.56%), 4/25/36 | United States | 605,331 | 248,289 | |||||||||||||||
d,r | Mountain View CLO Ltd., 2018-1A, DRR, 144A, FRN, 3.774%, (3-Month USD LIBOR + 3.65%), 10/15/26 | United States | 2,000,000 | 2,010,128 | ||||||||||||||
d | MVW LLC, 2020-1A, C, 144A, 4.21%, 10/20/37 | United States | 190,376 | 195,967 | ||||||||||||||
d | MVW Owner Trust, 2019-1A, C, 144A, 3.33%, 11/20/36 | United States | 54,366 | 54,982 | ||||||||||||||
d | Navient Private Education Refi Loan Trust, 144A, | |||||||||||||||||
2019-FA, B, 3.12%, 8/15/68 | United States | 210,000 | 216,095 | |||||||||||||||
2019-GA, B, 3.08%, 10/15/68 | United States | 140,000 | 143,898 | |||||||||||||||
d,r | Neuberger Berman CLO XIV Ltd., 2020-14A, CR2, 144A, FRN, 2.036%, (3-Month USD LIBOR + 1.90%), 1/28/30 | United States | 410,000 | 410,802 | ||||||||||||||
d,r | Neuberger Berman Loan Advisers CLO Ltd., 2018-27A, E, 144A, FRN, 5.324%, (3-Month USD LIBOR + 5.20%), 1/15/30 | United States | 350,000 | 341,588 | ||||||||||||||
r | Nomura Home Equity Loan Inc. Home Equity Loan Trust Series, 2006-WF1, M4, FRN, 0.647%, (1-Month USD LIBOR + 0.56%), 3/25/36 | United States | 1,328,910 | 1,342,506 | ||||||||||||||
d,r | Octagon Investment Partners XXII Ltd., 2018-1A, CRR, 144A, FRN, 2.028%, (3-Month USD LIBOR + 1.90%), 1/22/30 | United States | 250,000 | 249,250 | ||||||||||||||
d,r | OHA Credit Funding 2 Ltd., 2021-2A, DR, 144A, FRN, 3.43%, (3-Month USD LIBOR + 3.30%), 4/21/34 | United States | 335,000 | 332,906 | ||||||||||||||
d,r | OHA Credit Funding 4 Ltd., 2021-4A, ER, 144A, FRN, 6.528%, (3-Month USD LIBOR + 6.40%), 10/22/36 | United States | 310,000 | 307,210 | ||||||||||||||
d | OneMain Financial Issuance Trust, 144A, | |||||||||||||||||
2015-3A, B, 4.16%, 11/20/28 | United States | 155,000 | 155,230 | |||||||||||||||
2020-2A, C, 2.76%, 9/14/35 | United States | 100,000 | 102,223 | |||||||||||||||
d,r | Pikes Peak CLO, 2021-4A, ER, 144A, FRN, 6.734%, (3-Month USD LIBOR + 6.61%), 7/15/34 | United States | 250,000 | 245,378 | ||||||||||||||
d | Planet Fitness Master Issuer LLC, 2019-1A, A2, 144A, 3.858%, 12/05/49 | United States | 147,375 | 153,174 | ||||||||||||||
d | Prestige Auto Receivables Trust, 144A, | |||||||||||||||||
2019-1A, E, 3.90%, 5/15/26 | United States | 100,000 | 101,926 | |||||||||||||||
2020-1A, E, 3.67%, 2/15/28 | United States | 100,000 | 102,626 | |||||||||||||||
d | Progress Residential Trust, 144A, | |||||||||||||||||
2019-SFR1, E, 4.466%, 8/17/35 | United States | 115,000 | 115,358 | |||||||||||||||
2019-SFR2, E, 4.142%, 5/17/36 | United States | 175,000 | 175,944 | |||||||||||||||
2020-SFR3, F, 2.796%, 10/17/27 | United States | 100,000 | 99,048 | |||||||||||||||
2021-SFR2, E2, 2.647%, 4/19/38 | United States | 100,000 | 99,461 | |||||||||||||||
2021-SFR4, F, 3.407%, 5/17/38 | United States | 230,000 | 228,569 | |||||||||||||||
2021-SFR7, F, 3.834%, 8/17/40 | United States | 260,000 | 256,236 | |||||||||||||||
r | Ramp Series Trust, 2003-RS9, MII3, FRN, 3.317%, (1-Month USD LIBOR + 2.15%), 10/25/33 | United States | 1,140,907 | 1,153,145 |
franklintempleton.com | Semiannual Report | 55 |
FRANKLIN ALTERNATIVE STRATEGIES FUNDS
CONSOLIDATED STATEMENT OF INVESTMENTS (UNAUDITED)
Franklin K2 Alternative Strategies Fund (continued)
Country | Principal Amount* | Value | ||||||||||||||||
Asset-Backed Securities and Commercial Mortgage-Backed Securities (continued) | ||||||||||||||||||
Diversified Financial Services (continued) | ||||||||||||||||||
d,s | RBSSP Resecuritization Trust, 2009-12, 17A2, 144A, FRN, 2.128%, 10/25/35 | United States | 308,960 | $ | 306,330 | |||||||||||||
Santander Drive Auto Receivables Trust, | ||||||||||||||||||
2020-1, D, 5.35%, 3/15/28 | United States | 240,000 | 256,510 | |||||||||||||||
2020-2, D, 2.22%, 9/15/26 | United States | 100,000 | 101,678 | |||||||||||||||
r | Saxon Asset Securities Trust, 2002-3, M2, FRN, 2.679%, (1-Month USD LIBOR + 2.59%), 12/25/32 | United States | 1,133,472 | 1,149,060 | ||||||||||||||
d | SCF Equipment Leasing LLC, 2021-1A, E, 144A, 3.56%, 8/20/32 | United States | 100,000 | 97,612 | ||||||||||||||
d,s | Security National Mortgage Loan Trust, 2004-1A, AF3, 144A, FRN, 6.42%, 6/25/32 | United States | 1,710,689 | 1,502,118 | ||||||||||||||
d | Sierra Timeshare Receivables Funding LLC, 2021-1A, C, 144A, 1.79%, 11/20/37 | United States | 187,575 | 186,004 | ||||||||||||||
d,r | Silvermore CLO Ltd., 2014-1A, C, 144A, FRN, 3.606%, (3-Month USD LIBOR + 3.45%), 5/15/26 | United States | 1,250,000 | 1,251,840 | ||||||||||||||
d | S-Jets Ltd., 2017-1, A, 144A, 3.967%, 8/15/42 | Bermuda | 386,522 | 385,926 | ||||||||||||||
r | SLM Private Credit Student Loan Trust, 2003-B, A3, FRN, 2.806%, (28-Day T-Bill + 1.00%), 3/15/33 | United States | 200,000 | 194,916 | ||||||||||||||
d,r | SMB Private Education Loan Trust, 2017-B, A2B, 144A, FRN, 0.839%, (1-Month USD LIBOR + 0.75%), 10/15/35 | United States | 52,911 | 53,113 | ||||||||||||||
d | SoFi Consumer Loan Program Trust, 144A, | |||||||||||||||||
2018-1, B, 3.65%, 2/25/27 | United States | 30,473 | 30,694 | |||||||||||||||
2019-4, C, 2.84%, 8/25/28 | United States | 130,000 | 132,165 | |||||||||||||||
d | SoFi Professional Loan Program LLC, 2016-A, B, 144A, 3.57%, 1/26/38 | United States | 27,840 | 27,999 | ||||||||||||||
r | Soundview Home Loan Trust, 2006-WF2, M3, FRN, 0.767%, (1-Month USD LIBOR + 0.68%), 12/25/36 | United States | 1,747,858 | 2,399,154 | ||||||||||||||
d | SpringCastle America Funding LLC, 2020-AA, A, 144A, 1.97%, 9/25/37 | United States | 197,457 | 197,350 | ||||||||||||||
d | Sprite Ltd., 2017-1, B, 144A, 5.75%, 12/15/37 | United States | 164,302 | 146,826 | ||||||||||||||
d | Stack Infrastructure Issuer LLC, 2019-1A, A2, 144A, 4.54%, 2/25/44 | United States | 121,563 | 126,410 | ||||||||||||||
d,r | Staniford Street CLO Ltd., 2014-1A, D, 144A, FRN, 3.616%, (3-Month USD LIBOR + 3.50%), 6/15/25 | United States | 1,266,287 | 1,268,898 | ||||||||||||||
d,r | Starwood Retail Property Trust, 2014-STAR, E, 144A, FRN, 4.49%, (1-Month USD LIBOR + 4.40%), 11/15/27 | United States | 200,000 | 2,375 | ||||||||||||||
d | Textainer Marine Containers VII Ltd., 2021-1A, A, 144A, 1.68%, 2/20/46 | Bermuda | 178,600 | 174,591 | ||||||||||||||
d | Towd Point Mortgage Trust, 144A, FRN, | |||||||||||||||||
s 2018-5, M1, 3.25%, 7/25/58 | United States | 100,000 | 103,196 | |||||||||||||||
s 2019-2, M1, 3.75%, 12/25/58 | United States | 200,000 | 208,685 | |||||||||||||||
s 2019-4, A1, 2.90%, 10/25/59 | United States | 296,601 | 305,946 | |||||||||||||||
r 2019-HE1, M2, 1.842%, (1-Month USD LIBOR + 1.75%), 4/25/48 | United States | 1,481,000 | 1,493,247 | |||||||||||||||
d,r | TPG Real Estate Finance Issuer Ltd., 2018-FL2, C, 144A, FRN, 2.389%, (1-Month USD LIBOR + 2.30%), 11/15/37 | United States | 1,000,000 | 1,000,728 | ||||||||||||||
d | Tricon American Homes Trust, 2020-SFR2, E1, 144A, 2.73%, 11/17/39 | United States | 100,000 | 98,372 | ||||||||||||||
d | VCAT LLC, 144A, | |||||||||||||||||
2021-NPL1, A1, 2.289%, 12/26/50 | United States | 78,836 | 78,944 | |||||||||||||||
2021-NPL5, A1, 1.868%, 8/25/51 | United States | 97,445 | 96,942 | |||||||||||||||
d,r | VMC Finance LLC, 144A, FRN, | |||||||||||||||||
2019-FL3, C, 2.139%, (1-Month USD LIBOR + 2.05%), 9/15/36 | United States | 880,961 | 877,657 | |||||||||||||||
2021-FL4, C, 2.339%, (1-Month USD LIBOR + 2.25%), 6/16/36 | United States | 1,000,000 | 999,805 | |||||||||||||||
d,r | Voya CLO Ltd., 2014-3A, D, 144A, FRN, 5.124%, (3-Month USD LIBOR + 5.00%), 7/25/26 | United States | 2,100,000 | 2,098,137 | ||||||||||||||
d,s | WaMu Commercial Mortgage Securities Trust, 2007-SL2, G, 144A, FRN, 2.355%, 12/27/49 | United States | 2,866,082 | 2,337,166 | ||||||||||||||
d | Wave Trust, 2017-1A, A, 144A, 3.844%, 11/15/42 | United States | 180,569 | 177,677 | ||||||||||||||
s | Wells Fargo Mortgage Backed Securities Trust, 2007-AR6, A2, FRN, 2.595%, 10/25/37 | United States | 145,360 | 142,307 | ||||||||||||||
d | Wendy’s Funding LLC, 2018-1A, A2II, 144A, 3.884%, 3/15/48 | United States | 211,750 | 221,585 |
56 | Semiannual Report | franklintempleton.com |
FRANKLIN ALTERNATIVE STRATEGIES FUNDS
CONSOLIDATED STATEMENT OF INVESTMENTS (UNAUDITED)
Franklin K2 Alternative Strategies Fund (continued)
Country | Principal Amount* | Value | ||||||||||||||||
Asset-Backed Securities and Commercial Mortgage-Backed Securities (continued) | ||||||||||||||||||
Diversified Financial Services (continued) | ||||||||||||||||||
d | Westlake Automobile Receivables Trust, 2020-3A, D, 144A, 1.65%, 2/17/26 | United States | 120,000 | $ | 120,618 | |||||||||||||
|
| |||||||||||||||||
71,457,733 | ||||||||||||||||||
|
| |||||||||||||||||
Equity Real Estate Investment Trusts (REITs) 0.0%† | ||||||||||||||||||
d | American Homes 4 Rent, 144A, | United States | 250,000 | 270,475 | ||||||||||||||
2014-SFR3, E, 6.418%, 12/17/36 | United States | 100,000 | 109,019 | |||||||||||||||
2015-SFR1, E, 5.639%, 4/17/52 | United States | 210,000 | 226,838 | |||||||||||||||
d | Diamond Resorts Owner Trust, 144A, | |||||||||||||||||
2017-1A, C, 6.07%, 10/22/29 | United States | 16,686 | 16,834 | |||||||||||||||
2018-1, C, 4.53%, 1/21/31 | United States | 40,747 | 41,590 | |||||||||||||||
2019-1A, B, 3.53%, 2/20/32 | United States | 39,067 | 39,811 | |||||||||||||||
|
| |||||||||||||||||
704,567 | ||||||||||||||||||
|
| |||||||||||||||||
Mortgage Real Estate Investment Trusts (REITs) 1.6% | ||||||||||||||||||
d | 510 Asset Backed Trust, 2021-NPL1, A1, 144A, 2.24%, 6/25/61 | United States | 145,459 | 144,905 | ||||||||||||||
Alternative Loan Trust, 2007-6, A4, 5.75%, 4/25/47 | United States | 1,128,568 | 931,199 | |||||||||||||||
r | American Home Mortgage Investment Trust, 2006-1, 11A1, FRN, 0.372%, (1-Month USD LIBOR + 0.28%), 3/25/46 | United States | 148,507 | 143,779 | ||||||||||||||
Banc of America Alternative Loan Trust, 2003-8, 1CB1, 5.50%, 10/25/33 | United States | 3,656 | 3,793 | |||||||||||||||
Banc of America Funding Trust, | ||||||||||||||||||
e 2003-1, B2, 6.00%, 5/20/33 | United States | 170,304 | 115,484 | |||||||||||||||
2005-8, 1A1, 5.50%, 1/25/36 | United States | 400,399 | 390,689 | |||||||||||||||
2007-4, 5A1, 5.50%, 11/25/34 | United States | 40,895 | 41,310 | |||||||||||||||
s | Banc of America Mortgage Trust, 2005-A, 2A1, FRN, 2.502%, 2/25/35 | United States | 2,855 | 2,949 | ||||||||||||||
d,r | BBCMS Mortgage Trust, 2020-BID, B, 144A, FRN, 2.63%, (1-Month USD LIBOR + 2.54%), 10/15/37 | United States | 210,000 | 210,606 | ||||||||||||||
d,r | BCAP LLC Trust, 2012-RR4, 9A7, 144A, FRN, 0.249%, (1-Month USD LIBOR + 0.08%), 11/26/36 | United States | 388,374 | 399,877 | ||||||||||||||
s | Bear Stearns ARM Trust, 2007-4, 12A1, FRN, 3.007%, 5/25/37 | United States | 1,229,562 | 1,214,571 | ||||||||||||||
d,r | BXMT Ltd., 2021-FL4, C, 144A, FRN, 1.84%, (1-Month USD LIBOR + 1.75%), 5/15/38 | United States | 2,500,000 | 2,495,146 | ||||||||||||||
d | CIM Trust, 2021-NR2, A1, 144A, 2.568%, 7/25/59 | United States | 175,232 | 175,363 | ||||||||||||||
d,s | Citigroup Commercial Mortgage Trust, 2014-GC21, D, 144A, FRN, 5.107%, 5/10/47 | United States | 330,000 | 307,869 | ||||||||||||||
Citigroup Mortgage Loan Trust, | ||||||||||||||||||
2006-WF1, A2C, 4.831%, 3/25/36 | United States | 474,250 | 287,060 | |||||||||||||||
d,s 2009-10, 6A2, 144A, FRN, 2.167%, 9/25/34 | United States | 27,260 | 28,529 | |||||||||||||||
d 2019-E, A1, 144A, 3.228%, 11/25/70 | United States | 205,652 | 206,000 | |||||||||||||||
Countrywide Alternative Loan Trust, | ||||||||||||||||||
2003-22CB, 1A1, 5.75%, 12/25/33 | United States | 28,505 | 29,686 | |||||||||||||||
2004-16CB, 1A1, 5.50%, 7/25/34 | United States | 13,685 | 14,046 | |||||||||||||||
2004-16CB, 3A1, 5.50%, 8/25/34 | United States | 13,711 | 14,063 | |||||||||||||||
2004-3T1, M, 6.00%, 5/25/34 | United States | 250,846 | 200,284 | |||||||||||||||
2004-J10, 2CB1, 6.00%, 9/25/34 | United States | 45,880 | 47,759 | |||||||||||||||
2005-J1, 2A1, 5.50%, 2/25/25 | United States | 2,140 | 2,164 | |||||||||||||||
r | Countrywide Asset-Backed Certificates, 2005-15, M3, FRN, 0.612%, (1-Month USD LIBOR + 0.52%), 4/25/36 | United States | 2,340,000 | 2,262,889 | ||||||||||||||
s | Countrywide Home Loans Mortgage Pass-Through Trust, 2004-HYB4, 2A1, FRN, 2.603%, 9/20/34 | United States | 39,696 | 40,012 | ||||||||||||||
d,r | Credit Suisse Commercial Mortgage Securities Corp., 2019-SKLZ, D, 144A, FRN, 3.69%, (1-Month USD LIBOR + 3.60%), 1/15/34 | United States | 84,000 | 83,335 | ||||||||||||||
Credit Suisse First Boston Mortgage Securities Corp., | ||||||||||||||||||
2002-10, 1B, 7.50%, 5/25/32 | United States | 149,864 | 141,436 | |||||||||||||||
2003-27, 4A4, 5.75%, 11/25/33 | United States | 12,934 | 13,880 | |||||||||||||||
2005-8, 1A3, 5.25%, 9/25/35 | United States | 89,766 | 88,025 |
franklintempleton.com | Semiannual Report | 57 |
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) | ||||||||||||||||||
d | CSMC OA LLC, 144A, | |||||||||||||||||
2014-USA, A2, 3.953%, 9/15/37 | United States | 150,000 | $ | 158,660 | ||||||||||||||
2014-USA, E, 4.373%, 9/15/37 | United States | 400,000 | 359,669 | |||||||||||||||
r | DSLA Mortgage Loan Trust, 2005-AR5, 2A1A, FRN, 0.749%, (1-Month USD LIBOR + 0.66%), 9/19/45 | United States | 31,789 | 24,072 | ||||||||||||||
d,r | FHLMC, 2021-DNA7, M2, 144A, FRN, 1.848%, (SOFR + 1.80%), 11/25/41 | United States | 100,000 | 100,312 | ||||||||||||||
r | FHLMC Structured Agency Credit Risk Debt Notes, 2015-DNA1, M3, FRN, 3.392%, (1-Month USD LIBOR + 3.30%), 10/25/27 | United States | 88,769 | 90,154 | ||||||||||||||
s | GS Mortgage Securities Trust, | |||||||||||||||||
d 2011-GC5, C, 144A, FRN, 5.302%, 8/10/44 | United States | 100,000 | 85,987 | |||||||||||||||
d 2011-GC5, D, 144A, FRN, 5.302%, 8/10/44 | United States | 195,000 | 96,525 | |||||||||||||||
2014-GC18, B, FRN, 4.885%, 1/10/47 | United States | 100,000 | 99,365 | |||||||||||||||
GSR Mortgage Loan Trust, | ||||||||||||||||||
2005-4F, 6A1, 6.50%, 2/25/35 | United States | 7,786 | 7,917 | |||||||||||||||
s 2005-AR6, 4A5, FRN, 2.71%, 9/25/35 | United States | 23,642 | 23,810 | |||||||||||||||
r | Harborview Mortgage Loan Trust, 2004-11, 2A2A, FRN, 0.729%, (1-Month USD LIBOR + 0.64%), 1/19/35 | United States | 71,474 | 66,474 | ||||||||||||||
IndyMac INDX Mortgage Loan Trust, FRN, | ||||||||||||||||||
s 2004-AR15, B1, 2.674%, 2/25/35 | United States | 1,606,419 | 1,394,209 | |||||||||||||||
r 2004-AR7, A5, 1.312%, (1-Month USD LIBOR + 1.22%), 9/25/34 | United States | 34,477 | 33,108 | |||||||||||||||
s 2005-AR11, A3, 2.956%, 8/25/35 | United States | 38,943 | 35,656 | |||||||||||||||
r 2006-AR2, 2A1, 0.512%, (1-Month USD LIBOR + 0.42%), 2/25/46 | United States | 173,590 | 139,542 | |||||||||||||||
s 2006-AR3, 3A1A, 3.07%, 4/25/36 | United States | 1,860,909 | 1,895,579 | |||||||||||||||
s | JPMorgan Alternative Loan Trust, 2006-A2, 2A2, FRN, 2.922%, 5/25/36 | United States | 1,323,765 | 1,010,368 | ||||||||||||||
d,s | JPMorgan Chase Commercial Mortgage Securities Trust, 144A, FRN, | |||||||||||||||||
2012-C8, C, 4.779%, 10/15/45 | United States | 100,000 | 100,822 | |||||||||||||||
2012-LC9, C, 4.508%, 12/15/47 | United States | 100,000 | 101,130 | |||||||||||||||
2012-LC9, D, 4.508%, 12/15/47 | United States | 120,000 | 118,248 | |||||||||||||||
JPMorgan Mortgage Trust, | ||||||||||||||||||
2004-S1, 2A1, 6.00%, 9/25/34 | United States | 62,733 | 66,217 | |||||||||||||||
s 2006-A3, 2B1, FRN, 2.665%, 4/25/35 | United States | 1,877,673 | 1,269,232 | |||||||||||||||
s 2007-A1, 4A2, FRN, 2.307%, 7/25/35 | United States | 1,251 | 1,256 | |||||||||||||||
d,s 2020-2, B4, 144A, FRN, 3.862%, 7/25/50 | United States | 984,501 | 1,009,931 | |||||||||||||||
r | Lehman XS Trust Series, 2006-2N, 1A1, FRN, 0.612%, (1-Month USD LIBOR + 0.52%), 2/25/46 | United States | 29,781 | 27,598 | ||||||||||||||
MASTR Alternative Loan Trust, | ||||||||||||||||||
2004-2, 8A4, 5.50%, 3/25/34 | United States | 122,266 | 126,413 | |||||||||||||||
2004-8, 2A1, 6.00%, 9/25/34 | United States | 26,776 | 27,857 | |||||||||||||||
s | Merrill Lynch Mortgage Investors MLCC, 2006-2, 2A, FRN, 2.021%, 5/25/36 | United States | 1,694 | 1,728 | ||||||||||||||
s | Morgan Stanley Bank of America Merrill Lynch Trust, 2013-C11, B, FRN, 4.496%, 8/15/46 | United States | 200,000 | 145,291 | ||||||||||||||
d,s | Morgan Stanley Capital I Trust, 2011-C2, E, 144A, FRN, 5.385%, 6/15/44 | United States | 150,000 | 127,820 | ||||||||||||||
d,s | MSBAM Commercial Mortgage Securities Trust, 2012-CKSV, C, 144A, FRN, 4.425%, 10/15/30 | United States | 340,000 | 293,120 | ||||||||||||||
d | PRPM LLC, 144A, | |||||||||||||||||
s 2021-2, A2, FRN, 3.77%, 3/25/26 | United States | 130,000 | 129,088 | |||||||||||||||
2021-3, A1, 1.867%, 4/25/26 | United States | 178,598 | 178,082 | |||||||||||||||
s 2021-9, A1, FRN, 2.363%, 10/25/26 | United States | 137,645 | 136,987 | |||||||||||||||
s | RFMSI Trust, 2005-SA1, 1A1, FRN, 3.623%, 3/25/35 | United States | 87,663 | 52,896 | ||||||||||||||
s | Structured Adjustable Rate Mortgage Loan Trust Series, 2006-8, 1A2, FRN, 3.101%, 9/25/36 | United States | 195,014 | 170,917 | ||||||||||||||
r | Structured ARM Loan Trust, 2005-14, A1, FRN, 0.402%, (1-Month USD LIBOR + 0.31%), 7/25/35 | United States | 184,323 | 131,926 | ||||||||||||||
d | Toorak Mortgage Corp. Ltd., 2021-1, A1, 144A, 2.24%, 6/25/24 | United States | 190,000 | 189,481 |
58 | 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) | ||||||||||||||||||
d | VOLT XCII LLC, 2021-NPL1, A1, 144A, 1.893%, 2/27/51 | United States | 93,422 | $ | 93,322 | |||||||||||||
d | VOLT XCII LLC, 2021-NPL2, A1, 144A, 1.893%, 2/27/51 | United States | 232,595 | 231,427 | ||||||||||||||
d | VOLT XCIV LLC, 2021-NPL3, A2, 144A, 4.949%, 2/27/51 | United States | 215,000 | 213,188 | ||||||||||||||
Wells Fargo Commercial Mortgage Trust, | ||||||||||||||||||
s 2013-LC12, B, FRN, 4.441%, 7/15/46 | United States | 190,000 | 189,369 | |||||||||||||||
2014-LC16, C, 4.458%, 8/15/50 | United States | 215,000 | 134,375 | |||||||||||||||
s 2016-C36, B, FRN, 3.671%, 11/15/59 | United States | 100,000 | 98,328 | |||||||||||||||
s 2016-C36, C, FRN, 4.311%, 11/15/59 | United States | 100,000 | 88,333 | |||||||||||||||
d,s 2019-JWDR, C, 144A, FRN, 3.139%, 9/15/31 | United States | 290,000 | 286,997 | |||||||||||||||
WFRBS Commercial Mortgage Trust, | ||||||||||||||||||
d,s 2011-C3, D, 144A, FRN, 5.513%, 3/15/44 | United States | 243,673 | 121,154 | |||||||||||||||
d,s 2011-C4, E, 144A, FRN, 5.024%, 6/15/44 | United States | 120,000 | 92,077 | |||||||||||||||
s 2012-C10, C, FRN, 4.494%, 12/15/45 | United States | 320,000 | 286,053 | |||||||||||||||
d,s 2012-C6, D, 144A, FRN, 5.982%, 4/15/45 | United States | 150,000 | 150,530 | |||||||||||||||
s 2012-C7, C, FRN, 4.946%, 6/15/45 | United States | 25,000 | 19,362 | |||||||||||||||
d,s 2012-C7, D, 144A, FRN, 4.946%, 6/15/45 | United States | 130,000 | 72,686 | |||||||||||||||
d,s 2012-C7, E, 144A, FRN, 4.946%, 6/15/45 | United States | 75,000 | 13,978 | |||||||||||||||
2014-C20, B, 4.378%, 5/15/47 | United States | 100,000 | 102,220 | |||||||||||||||
s 2014-C24, B, FRN, 4.204%, 11/15/47 | United States | 100,000 | 100,111 | |||||||||||||||
|
| |||||||||||||||||
22,357,665 | ||||||||||||||||||
|
| |||||||||||||||||
Total Asset-Backed Securities and Commercial Mortgage-Backed Securities (Cost $93,483,079) | 94,519,965 | |||||||||||||||||
|
| |||||||||||||||||
Municipal Bonds in Reorganization 0.5% | ||||||||||||||||||
Puerto Rico 0.5% | ||||||||||||||||||
l | Commonwealth of Puerto Rico, | |||||||||||||||||
8.00%, 7/01/35 | United States | 6,335,000 | 5,558,963 | |||||||||||||||
5.50%, 7/01/39 | United States | 715,000 | 673,887 | |||||||||||||||
5.00%, 7/01/41 | United States | 1,000,000 | 900,000 | |||||||||||||||
|
| |||||||||||||||||
Total Municipal Bonds in Reorganization | 7,132,850 | |||||||||||||||||
|
| |||||||||||||||||
Number of Contracts | Notional Amount# | |||||||||||||||||
Options Purchased 0.1% | ||||||||||||||||||
Calls – Exchange-Traded 0.0%† | ||||||||||||||||||
Aerojet Rocketdyne Holdings Inc., February Strike Price $45.00, Expires 2/18/22 | 26 | 2,600 | 4,810 | |||||||||||||||
The AES Corp., January Strike Price $27.00, Expires 1/21/22 | 1,199 | 119,900 | 15,587 | |||||||||||||||
Amyris Inc., March Strike Price $10.00, Expires 3/18/22 | 91 | 9,100 | 4,004 | |||||||||||||||
Avaya Holdings Corp., January Strike Price $22.50, Expires 1/21/22 | 18 | 1,800 | 1,368 | |||||||||||||||
Carnival Corp., January Strike Price $30.00, Expires 1/21/22 | 20 | 2,000 | 180 | |||||||||||||||
Casino Guichard Perrachon SA, December Strike Price 26.00 EUR, Expires 12/17/21 | 86 | 8,600 | 98 | |||||||||||||||
CBOE Volatility Index, December Strike Price $21.00, Expires 12/22/21 | 152 | 15,200 | 84,512 | |||||||||||||||
CBOE Volatility Index, December Strike Price $22.00, Expires 12/22/21 | 124 | 12,400 | 66,464 | |||||||||||||||
CBOE Volatility Index, December Strike Price $23.00, Expires 12/22/21 | 121 | 12,100 | 56,870 | |||||||||||||||
CBOE Volatility Index, January Strike Price $24.00, Expires 1/19/22 | 134 | 13,400 | 74,102 | |||||||||||||||
CBOE Volatility Index, January Strike Price $25.00, Expires 1/19/22 | 227 | 22,700 | 115,770 | |||||||||||||||
CBOE Volatility Index, January Strike Price $30.00, Expires 1/19/22 | 74 | 7,400 | 27,380 | |||||||||||||||
CBOE Volatility Index, February Strike Price $30.00, Expires 2/16/22 | 69 | 6,900 | 30,360 | |||||||||||||||
Cinemark Holdings Inc., January Strike Price $25.00, Expires 1/21/22 | 40 | 4,000 | 1,000 | |||||||||||||||
GOL Linhas Aereas Inteligentes SA, January Strike Price $9.00, Expires 1/21/22 | 59 | 5,900 | 472 |
franklintempleton.com | Semiannual Report | 59 |
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) | ||||||||||||||||||
Helix Energy Solutions Group Inc., December Strike Price $5.00, Expires 12/17/21 | 82 | 8,200 | $ | 410 | ||||||||||||||
Intel Corp., January Strike Price $70.00, Expires 1/21/22 | 100 | 10,000 | 400 | |||||||||||||||
Nikola Corp., January Strike Price $12.50, Expires 1/21/22 | 196 | 19,600 | 16,268 | |||||||||||||||
Nikola Corp., January Strike Price $14.00, Expires 1/21/22 | 95 | 9,500 | 5,510 | |||||||||||||||
Norwegian Cruise Line Holdings Ltd., January Strike Price $32.50, Expires 1/21/22 | 73 | 7,300 | 730 | |||||||||||||||
Norwegian Cruise Line Holdings Ltd., February Strike Price $27.50, Expires 2/18/22 | 73 | 7,300 | 3,139 | |||||||||||||||
NuVasive Inc., December Strike Price $70.00, Expires 12/17/21 | 14 | 1,400 | 350 | |||||||||||||||
Pebblebrook Hotel Trust, December Strike Price $30.00, Expires 12/17/21 | 20 | 2,000 | 300 | |||||||||||||||
S&P 500 Index, December Strike Price $4,600.00, Expires 12/31/21 | 7 | 700 | 65,800 | |||||||||||||||
SPDR Gold Shares ETF, June Strike Price $200.00, Expires 6/17/22 | 147 | 14,700 | 18,228 | |||||||||||||||
Spirit Airlines Inc., January Strike Price $30.00, Expires 1/21/22 | 20 | 2,000 | 360 | |||||||||||||||
Tronox Holdings PLC, December Strike Price $27.00, Expires 12/17/21 | 38 | 3,800 | 380 | |||||||||||||||
Tronox Holdings PLC, February Strike Price $27.00, Expires 2/18/22 | 38 | 3,800 | 1,140 | |||||||||||||||
Vodafone Group PLC, December Strike Price 1.25 GBP, Expires 12/17/21 | 64 | 64,000 | — | |||||||||||||||
Vodafone Group PLC, March Strike Price 1.20 GBP, Expires 3/18/22 | 65 | 65,000 | 2,377 | |||||||||||||||
Vroom Inc., December Strike Price $35.00, Expires 12/17/21 | 10 | 1,000 | 50 | |||||||||||||||
Willis Towers Watson PLC, December Strike Price $250.00, Expires 12/17/21 | 23 | 2,300 | 1,092 | |||||||||||||||
Zogenix Inc., December Strike Price $19.00, Expires 12/17/21 | 12 | 1,200 | 120 | |||||||||||||||
|
| |||||||||||||||||
599,631 | ||||||||||||||||||
|
| |||||||||||||||||
Calls – Over-the-Counter 0.0%† | ||||||||||||||||||
Currency Options 0.0%† | ||||||||||||||||||
USD/RUB, Counterparty BZWS, December Strike Price 82.00 RUB, Expires 12/23/21 | 1 | 130,000 | 200 | |||||||||||||||
|
| |||||||||||||||||
Puts – Exchange-Traded 0.1% | ||||||||||||||||||
Advanced Micro Devices Inc., January Strike Price $135.00, Expires 1/21/22 | 306 | 30,600 | 119,952 | |||||||||||||||
Alcon Inc., May Strike Price $70.00, Expires 5/20/22 | 14 | 1,400 | 3,080 | |||||||||||||||
American Airlines Group Inc., January Strike Price $10.00, Expires 1/20/23 | 40 | 4,000 | 2,920 | |||||||||||||||
Arbor Realty Trust Inc., December Strike Price $17.50, Expires 12/17/21 | 37 | 3,700 | 1,480 | |||||||||||||||
Avis Budget Group Inc., January Strike Price $270.00, Expires 1/21/22 | 17 | 1,700 | 55,046 | |||||||||||||||
Bath & Body Works Inc., January Strike Price $70.00, Expires 1/21/22 | 62 | 6,200 | 18,104 | |||||||||||||||
Box Inc., December Strike Price $22.00, Expires 12/17/21 | 300 | 30,000 | 24,900 | |||||||||||||||
Box Inc., December Strike Price $23.00, Expires 12/17/21 | 17 | 1,700 | 2,006 | |||||||||||||||
Callaway Golf Co., January Strike Price $26.00, Expires 1/21/22 | 824 | 82,400 | 111,240 | |||||||||||||||
Callaway Golf Co., January Strike Price $28.00, Expires 1/21/22 | 16 | 1,600 | 3,800 | |||||||||||||||
CBOE Volatility Index, December Strike Price $21.00, Expires 12/22/21 | 280 | 28,000 | 36,400 | |||||||||||||||
CBOE Volatility Index, December Strike Price $22.00, Expires 12/22/21 | 241 | 24,100 | 42,175 | |||||||||||||||
CBOE Volatility Index, December Strike Price $23.00, Expires 12/22/21 | 222 | 22,200 | 48,840 | |||||||||||||||
CBOE Volatility Index, January Strike Price $30.00, Expires 1/19/22 | 142 | 14,200 | 110,334 | |||||||||||||||
Cinemark Holdings Inc., January Strike Price $10.00, Expires 1/21/22 | 90 | 9,000 | 1,800 | |||||||||||||||
Coinbase Global Inc., March Strike Price $200.00, Expires 3/18/22 | 18 | 1,800 | 9,918 | |||||||||||||||
The Cooper Cos Inc., May Strike Price $360.00, Expires 5/20/22 | 3 | 300 | 7,080 | |||||||||||||||
Crown Holdings Inc., January Strike Price $100.00, Expires 1/21/22 | 111 | 11,100 | 24,420 | |||||||||||||||
Fluor Corp., January Strike Price $15.00, Expires 1/21/22 | 30 | 3,000 | 675 | |||||||||||||||
Fluor Corp., January Strike Price $17.50, Expires 1/21/22 | 30 | 3,000 | 1,500 | |||||||||||||||
Fluor Corp., January Strike Price $20.00, Expires 1/21/22 | 30 | 3,000 | 2,850 | |||||||||||||||
Iron Mountain Inc., January Strike Price $40.00, Expires 1/21/22 | 24 | 2,400 | 960 | |||||||||||||||
Iron Mountain Inc., March Strike Price $42.50, Expires 3/18/22 | 34 | 3,400 | 5,508 | |||||||||||||||
iShares MSCI Emerging Markets ETF, December Strike Price $47.50, Expires 12/31/21 | 431 | 43,100 | 51,720 | |||||||||||||||
The Marcus Corp., December Strike Price $10.00, Expires 12/17/21 | 37 | 3,700 | 1,388 |
60 | 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) | ||||||||||||||||||
Puts – Exchange-Traded (continued) | ||||||||||||||||||
Owens & Minor Inc., March Strike Price $30.00, Expires 3/18/22 | 96 | 9,600 | $ | 13,680 | ||||||||||||||
S&P 500 Index, February Strike Price $4,500.00, Expires 2/18/22 | 29 | 2,900 | 430,940 | |||||||||||||||
Shift Technologies Inc., December Strike Price $5.00, Expires 12/17/21 | 56 | 5,600 | 3,080 | |||||||||||||||
SPDR S&P Retail ETF, December Strike Price $92.00, Expires 12/17/21 | 25 | 2,500 | 4,750 | |||||||||||||||
SPDR S&P Retail ETF, January Strike Price $75.00, Expires 1/21/22 | 64 | 6,400 | 4,224 | |||||||||||||||
SPDR S&P Retail ETF, January Strike Price $85.00, Expires 1/21/22 | 58 | 5,800 | 10,556 | |||||||||||||||
|
| |||||||||||||||||
1,155,326 | ||||||||||||||||||
|
| |||||||||||||||||
Puts – Over-the-Counter 0.0%† | ||||||||||||||||||
The Western Union Co., Counterparty BOFA, May Strike Price $14.00, Expires 5/20/22 | 124 | 12,400 | 11,160 | |||||||||||||||
|
| |||||||||||||||||
Total Options Purchased (Cost $2,507,834) | 1,766,317 | |||||||||||||||||
|
| |||||||||||||||||
Total Investments before Short Term Investments (Cost $956,481,614) | 1,112,195,610 | |||||||||||||||||
|
| |||||||||||||||||
Country | Shares | |||||||||||||||||
Short Term Investments 15.8% | ||||||||||||||||||
Money Market Funds 14.0% | ||||||||||||||||||
u,v | Dreyfus Government Cash Management, Institutional, 0.03% | United States | 17,573,076 | 17,573,076 | ||||||||||||||
u | Fidelity Investments Money Market Government Portfolio, Institutional, 0.01% | United States | 183,354,689 | 183,354,689 | ||||||||||||||
|
| |||||||||||||||||
Total Money Market Funds (Cost $200,927,765) | 200,927,765 | |||||||||||||||||
|
| |||||||||||||||||
w | Investments from Cash Collateral Received for Loaned Securities 0.5% | |||||||||||||||||
Money Market Funds 0.4% | ||||||||||||||||||
u,x | Institutional Fiduciary Trust Money Market Portfolio, 0.01% | United States | 5,752,000 | 5,752,000 | ||||||||||||||
|
| |||||||||||||||||
Principal Amount* | ||||||||||||||||||
Repurchase Agreements 0.1% | ||||||||||||||||||
y | Joint Repurchase Agreement, 0.05%, 12/01/21 (Maturity Value $1,439,227) | United States | 1,439,225 | 1,439,225 | ||||||||||||||
J.P. Morgan Securities LLC | ||||||||||||||||||
|
| |||||||||||||||||
Total Investments from Cash Collateral Received for Loaned Securities (Cost $7,191,225) | 7,191,225 | |||||||||||||||||
|
| |||||||||||||||||
U.S. Government and Agency Securities 1.3% | ||||||||||||||||||
z | Federal Home Loan Bank Discount Notes, 12/01/21 | United States | 5,805,000 | 5,805,000 | ||||||||||||||
z U.S. Treasury Bill, | ||||||||||||||||||
4/21/22 | United States | 12,000,000 | 11,996,827 | |||||||||||||||
8/11/22 | United States | 940,000 | 939,150 | |||||||||||||||
|
| |||||||||||||||||
Total U.S. Government and Agency Securities (Cost $18,742,681) | 18,740,977 | |||||||||||||||||
|
| |||||||||||||||||
Total Investments (Cost $1,183,343,285) 93.4% | 1,339,055,577 | |||||||||||||||||
Options Written (0.0)%† | (434,251 | ) | ||||||||||||||||
Securities Sold Short (17.5)% | (250,220,336 | ) | ||||||||||||||||
Other Assets, less Liabilities 24.1% | 344,709,462 | |||||||||||||||||
|
| |||||||||||||||||
Net Assets 100.0% | $ | 1,433,110,452 | ||||||||||||||||
|
|
franklintempleton.com | Semiannual Report | 61 |
FRANKLIN ALTERNATIVE STRATEGIES FUNDS
CONSOLIDATED STATEMENT OF INVESTMENTS (UNAUDITED)
Franklin K2 Alternative Strategies Fund (continued)
Number of Contracts | Notional Amount# | Value | ||||||||||||||||
aa | Options Written (0.0)%† | |||||||||||||||||
Calls – Exchange-Traded (0.0)%† | ||||||||||||||||||
Abbott Laboratories, December Strike Price $130.00, Expires 12/17/21 | 4 | 400 | $ | (484 | ) | |||||||||||||
Accenture PLC, A, December Strike Price $360.00, Expires 12/17/21 | 1 | 100 | (1,150 | ) | ||||||||||||||
Applied Materials Inc., December Strike Price $150.00, Expires 12/17/21 | 3 | 300 | (1,230 | ) | ||||||||||||||
Bath & Body Works Inc., January Strike Price $80.00, Expires 1/21/22 | 15 | 1,500 | (4,335 | ) | ||||||||||||||
Bath & Body Works Inc., January Strike Price $85.00, Expires 1/21/22 | 46 | 4,600 | (7,268 | ) | ||||||||||||||
The Blackstone Group Inc., A, December Strike Price $135.00, Expires 12/17/21 | 3 | 300 | (3,000 | ) | ||||||||||||||
Box Inc., A, December Strike Price $27.00, Expires 12/17/21 | 118 | 11,800 | (3,540 | ) | ||||||||||||||
Box Inc., A, December Strike Price $29.00, Expires 12/17/21 | 130 | 13,000 | (1,950 | ) | ||||||||||||||
Callaway Golf Co., January Strike Price $31.00, Expires 1/21/22 | 350 | 35,000 | (15,750 | ) | ||||||||||||||
Casino Guichard Perrachon SA, December Strike Price 30.00 EUR, Expires 12/17/21 | 43 | 4,300 | (49 | ) | ||||||||||||||
Casino Guichard Perrachon SA, December Strike Price 34.00 EUR, Expires 12/17/21 | 43 | 4,300 | (49 | ) | ||||||||||||||
Citigroup Inc., December Strike Price $75.00, Expires 12/17/21 | 5 | 500 | (40 | ) | ||||||||||||||
ConocoPhillips, December Strike Price $80.00, Expires 12/17/21 | 7 | 700 | (196 | ) | ||||||||||||||
Eli Lilly & Co., W, December Strike Price $260.00, Expires 12/17/21 | 2 | 200 | (630 | ) | ||||||||||||||
EOG Resources Inc., December Strike Price $100.00, Expires 12/17/21 | 4 | 400 | (200 | ) | ||||||||||||||
Fox Corp., December Strike Price $46.00, Expires 12/17/21 | 11 | 1,100 | (192 | ) | ||||||||||||||
The Goldman Sachs Group Inc., December Strike Price $440.00, Expires 12/17/21 | 1 | 100 | (39 | ) | ||||||||||||||
Hertz Global Holdings Inc., December Strike Price $30.00, Expires 12/17/21 | 14 | 1,400 | (630 | ) | ||||||||||||||
Hertz Global Holdings Inc., February Strike Price $25.00, Expires 2/18/22 | 37 | 3,700 | (13,320 | ) | ||||||||||||||
JPMorgan Chase & Co., December Strike Price $175.00, Expires 12/17/21 | 2 | 200 | (52 | ) | ||||||||||||||
Kraton Corp., December Strike Price $50.00, Expires 12/17/21 | 80 | 8,000 | (400 | ) | ||||||||||||||
Marathon Petroleum Corp., December Strike Price $72.50, Expires 12/17/21 | 1 | 100 | (13 | ) | ||||||||||||||
Merck & Co. Inc., December Strike Price $82.50, Expires 12/17/21 | 4 | 400 | (180 | ) | ||||||||||||||
MetLife Inc., December Strike Price $70.00, Expires 12/17/21 | 7 | 700 | (28 | ) | ||||||||||||||
Microsoft Corp., December Strike Price $320.00, Expires 12/17/21 | 1 | 100 | (1,518 | ) | ||||||||||||||
Morgan Stanley, December Strike Price $110.00, Expires 12/17/21 | 1 | 100 | (10 | ) | ||||||||||||||
MPLX LP, December Strike Price $31.43, Expires 12/17/21 | 12 | 1,200 | (144 | ) | ||||||||||||||
NetApp Inc., December Strike Price $100.00, Expires 12/17/21 | 4 | 400 | (280 | ) | ||||||||||||||
Nexstar Media Group Inc., December Strike Price $165.00, Expires 12/17/21 | 1 | 100 | (65 | ) | ||||||||||||||
NVIDIA Corp., December Strike Price $247.50, Expires 12/17/21 | 1 | 100 | (7,689 | ) | ||||||||||||||
OneMain Holdings Inc., A, December Strike Price $65.00, Expires 12/17/21 | 7 | 700 | (56 | ) | ||||||||||||||
Oracle Corp., December Strike Price $105.00, Expires 12/17/21 | 5 | 500 | (110 | ) | ||||||||||||||
S&P 500 Index, December Strike Price $4,800.00, Expires 12/31/21 | 7 | 700 | (8,610 | ) | ||||||||||||||
SPX FLOW Inc., December Strike Price $85.00, Expires 12/17/21 | 13 | 1,300 | (4,290 | ) | ||||||||||||||
SPX FLOW Inc., March Strike Price $85.00, Expires 3/18/22 | 9 | 900 | (5,355 | ) | ||||||||||||||
Target Corp., December Strike Price $270.00, Expires 12/17/21 | 1 | 100 | (42 | ) | ||||||||||||||
Texas Instruments Inc., December Strike Price $210.00, Expires 12/17/21 | 1 | 100 | (38 | ) | ||||||||||||||
Wells Fargo & Co., December Strike Price $52.50, Expires 12/17/21 | 7 | 700 | (175 | ) | ||||||||||||||
Willis Towers Watson PLC, December Strike Price $260.00, Expires 12/17/21 | 16 | 1,600 | (240 | ) | ||||||||||||||
Willis Towers Watson PLC, December Strike Price $270.00, Expires 12/17/21 | 7 | 700 | (1,662 | ) | ||||||||||||||
|
| |||||||||||||||||
(85,009 | ) | |||||||||||||||||
|
| |||||||||||||||||
Puts – Exchange-Traded (0.0)%† | ||||||||||||||||||
Amyris Inc., March Strike Price $6.00, Expires 3/18/22 | 76 | 7,600 | (6,840 | ) | ||||||||||||||
Avaya Holdings Corp., January Strike Price $17.50, Expires 1/21/22 | 8 | 800 | (608 | ) | ||||||||||||||
Avis Budget Group Inc., January Strike Price $200.00, Expires 1/21/22 | 17 | 1,700 | (14,246 | ) | ||||||||||||||
Bath & Body Works Inc., January Strike Price $60.00, Expires 1/21/22 | 30 | 3,000 | (2,310 | ) | ||||||||||||||
Carnival Corp., January Strike Price $22.50, Expires 1/21/22 | 20 | 2,000 | (10,560 | ) |
62 | 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 | ||||||||||||||||
aa | Options Written† (continued) | |||||||||||||||||
Puts – Exchange-Traded† (continued) | ||||||||||||||||||
Cinemark Holdings Inc., January Strike Price $15.00, Expires 1/21/22 | 40 | 4,000 | $ | (5,800 | ) | |||||||||||||
Crown Holdings Inc., January Strike Price $87.50, Expires 1/21/22 | 111 | 11,100 | (10,545 | ) | ||||||||||||||
GOL Linhas Aereas Inteligentes SA, January Strike Price $7.00, Expires 1/21/22 | 59 | 5,900 | (8,998 | ) | ||||||||||||||
Nikola Corp., January Strike Price $7.50, Expires 1/21/22 | 67 | 6,700 | (3,015 | ) | ||||||||||||||
Nikola Corp., January Strike Price $10.00, Expires 1/21/22 | 129 | 12,900 | (18,963 | ) | ||||||||||||||
Nikola Corp., January Strike Price $11.00, Expires 1/21/22 | 33 | 3,300 | (7,095 | ) | ||||||||||||||
Nikola Corp., January Strike Price $12.50, Expires 1/21/22 | 65 | 6,500 | (21,450 | ) | ||||||||||||||
Norwegian Cruise Line Holdings Ltd., January Strike Price $25.00, Expires 1/21/22 | 40 | 4,000 | (24,560 | ) | ||||||||||||||
Norwegian Cruise Line Holdings Ltd., February Strike Price $20.00, Expires 2/18/22 | 73 | 7,300 | (20,075 | ) | ||||||||||||||
NuVasive Inc., December Strike Price $60.00, Expires 12/17/21 | 14 | 1,400 | (16,660 | ) | ||||||||||||||
Owens & Minor Inc., March Strike Price $20.00, Expires 3/18/22 | 96 | 9,600 | (2,880 | ) | ||||||||||||||
S&P 500 Index, December Strike Price $3,700.00, Expires 12/31/21 | 7 | 700 | (8,190 | ) | ||||||||||||||
S&P 500 Index, February Strike Price $3,900.00, Expires 2/18/22 | 29 | 2,900 | (151,293 | ) | ||||||||||||||
Spirit Airlines Inc., January Strike Price $22.50, Expires 1/21/22 | 20 | 2,000 | (5,720 | ) | ||||||||||||||
SunPower Corp., January Strike Price $23.00, Expires 1/21/22 | 77 | 7,700 | (5,544 | ) | ||||||||||||||
Vodafone Group PLC, March Strike Price 1.05 GBP, Expires 3/18/22 | 65 | 65,000 | (3,890 | ) | ||||||||||||||
|
| |||||||||||||||||
(349,242 | ) | |||||||||||||||||
|
| |||||||||||||||||
Total Options Written (Premiums Received $724,467) | (434,251 | ) | ||||||||||||||||
|
| |||||||||||||||||
Country | Shares | |||||||||||||||||
bb | Securities Sold Short (17.5)% | |||||||||||||||||
Common Stocks (7.6)% | ||||||||||||||||||
Aerospace & Defense (0.0)%† | ||||||||||||||||||
Parsons Corp. | United States | 12,523 | (415,638 | ) | ||||||||||||||
|
| |||||||||||||||||
Air Freight & Logistics (0.4)% | ||||||||||||||||||
Air Transport Services Group Inc. | United States | 11,629 | (287,120 | ) | ||||||||||||||
Atlas Air Worldwide Holdings Inc. | United States | 23,051 | (2,019,498 | ) | ||||||||||||||
C.H. Robinson Worldwide Inc. | United States | 8,898 | (846,111 | ) | ||||||||||||||
United Parcel Service Inc., B | United States | 9,277 | (1,840,278 | ) | ||||||||||||||
|
| |||||||||||||||||
(4,993,007 | ) | |||||||||||||||||
|
| |||||||||||||||||
Airlines (0.0)%† | ||||||||||||||||||
GOL Linhas Aereas Inteligentes SA, ADR | Brazil | 12,002 | (67,571 | ) | ||||||||||||||
Jetblue Airways Corp. | United States | 4,303 | (57,746 | ) | ||||||||||||||
Spirit Airlines Inc. | United States | 6,112 | (127,802 | ) | ||||||||||||||
|
| |||||||||||||||||
(253,119 | ) | |||||||||||||||||
|
| |||||||||||||||||
Auto Components (0.1)% | ||||||||||||||||||
Patrick Industries Inc. | United States | 6,254 | (498,882 | ) | ||||||||||||||
Quantumscape Corp., A | United States | 17,167 | (495,096 | ) | ||||||||||||||
Veoneer Inc. | Sweden | 10,769 | (383,376 | ) | ||||||||||||||
|
| |||||||||||||||||
(1,377,354 | ) | |||||||||||||||||
|
| |||||||||||||||||
Automobiles (0.2)% | ||||||||||||||||||
Fisker Inc. | United States | 59,995 | (1,283,293 | ) | ||||||||||||||
Li Auto Inc., ADR | China | 30,872 | (1,094,104 | ) | ||||||||||||||
NIO Inc., ADR | China | 6,978 | (273,049 | ) | ||||||||||||||
|
| |||||||||||||||||
�� | (2,650,446 | ) | ||||||||||||||||
|
| |||||||||||||||||
Banks (0.0)%† | ||||||||||||||||||
Hope Bancorp Inc. | United States | 11,470 | (164,594 | ) | ||||||||||||||
|
|
franklintempleton.com | Semiannual Report | 63 |
FRANKLIN ALTERNATIVE STRATEGIES FUNDS
CONSOLIDATED STATEMENT OF INVESTMENTS (UNAUDITED)
Franklin K2 Alternative Strategies Fund (continued)
Country | Shares | Value | ||||||||||||||||
bb | Securities Sold Short (continued) | |||||||||||||||||
Common Stocks (continued) | ||||||||||||||||||
Biotechnology (0.5)% | ||||||||||||||||||
Avid Bioservices Inc. | United States | 38,749 | $ | (1,184,169 | ) | |||||||||||||
BioMarin Pharmaceutical Inc. | United States | 1,852 | (159,809 | ) | ||||||||||||||
Coherus Biosciences Inc. | United States | 46,342 | (860,571 | ) | ||||||||||||||
Dynavax Technologies Corp. | United States | 66,558 | (1,074,912 | ) | ||||||||||||||
Gossamer Bio Inc. | United States | 47,102 | (510,586 | ) | ||||||||||||||
Insmed Inc. | United States | 29,179 | (803,006 | ) | ||||||||||||||
Intercept Pharmaceuticals Inc. | United States | 42,421 | (730,065 | ) | ||||||||||||||
Ionis Pharmaceuticals Inc. | United States | 5,582 | (147,923 | ) | ||||||||||||||
Karyopharm Therapeutics Inc. | United States | 30,543 | (212,274 | ) | ||||||||||||||
Ligand Pharmaceuticals Inc. | United States | 1,161 | (187,989 | ) | ||||||||||||||
Mannkind Corp. | United States | 177,201 | (820,441 | ) | ||||||||||||||
Pharming Group NV | Netherlands | 48,818 | (39,009 | ) | ||||||||||||||
|
| |||||||||||||||||
(6,730,754 | ) | |||||||||||||||||
|
| |||||||||||||||||
Capital Markets (0.9)% | ||||||||||||||||||
Apollo Global Management Inc., A | United States | 83,620 | (5,918,624 | ) | ||||||||||||||
S&P Global Inc. | United States | 14,351 | (6,540,181 | ) | ||||||||||||||
|
| |||||||||||||||||
(12,458,805 | ) | |||||||||||||||||
|
| |||||||||||||||||
Chemicals (0.0)%† | ||||||||||||||||||
Amyris Inc. | United States | 55,747 | (382,424 | ) | ||||||||||||||
|
| |||||||||||||||||
Consumer Finance (0.4)% | ||||||||||||||||||
Encore Capital Group Inc. | United States | 69,822 | (4,073,415 | ) | ||||||||||||||
EZCORP Inc., A | United States | 53,647 | (396,988 | ) | ||||||||||||||
LendingTree Inc. | United States | 680 | (77,098 | ) | ||||||||||||||
PRA Group Inc. | United States | 19,165 | (813,746 | ) | ||||||||||||||
SoFi Technologies Inc. | United States | 19,673 | (338,376 | ) | ||||||||||||||
Upstart Holdings Inc. | United States | 2,510 | (514,274 | ) | ||||||||||||||
Zip Co. Ltd. | Australia | 23,000 | (82,760 | ) | ||||||||||||||
|
| |||||||||||||||||
(6,296,657 | ) | |||||||||||||||||
|
| |||||||||||||||||
Diversified Consumer Services (0.0)%† | ||||||||||||||||||
Chegg Inc. | United States | 1,295 | (36,066 | ) | ||||||||||||||
Stride Inc. | United States | 12,983 | (443,110 | ) | ||||||||||||||
|
| |||||||||||||||||
(479,176 | ) | |||||||||||||||||
|
| |||||||||||||||||
Diversified Telecommunication Services (0.0)%† | ||||||||||||||||||
Radius Global Infrastructure Inc., A | United States | 29,267 | (482,906 | ) | ||||||||||||||
|
| |||||||||||||||||
Electric Utilities (0.6)% | ||||||||||||||||||
Duke Energy Corp. | United States | 26,597 | (2,580,175 | ) | ||||||||||||||
Eversource Energy | United States | 21,351 | (1,756,547 | ) | ||||||||||||||
The Southern Co. | United States | 41,665 | (2,545,732 | ) | ||||||||||||||
Terna Rete Elettrica Nazionale SpA | Italy | 218,902 | (1,627,829 | ) | ||||||||||||||
|
| |||||||||||||||||
(8,510,283 | ) | |||||||||||||||||
|
| |||||||||||||||||
Electrical Equipment (0.1)% | ||||||||||||||||||
Array Technologies Inc. | United States | 12,598 | (226,953 | ) | ||||||||||||||
Blink Charging Co. | United States | 11,845 | (455,203 | ) | ||||||||||||||
Stem Inc. | United States | 8,886 | (188,561 | ) | ||||||||||||||
|
| |||||||||||||||||
(870,717 | ) | |||||||||||||||||
|
| |||||||||||||||||
Electronic Equipment, Instruments & Components (0.1)% | ||||||||||||||||||
II-VI Inc. | United States | 3,346 | (209,225 | ) | ||||||||||||||
Itron Inc. | United States | 10,915 | (675,748 | ) | ||||||||||||||
OSI Systems Inc. | United States | 4,211 | (382,906 | ) |
64 | Semiannual Report | franklintempleton.com |
FRANKLIN ALTERNATIVE STRATEGIES FUNDS
CONSOLIDATED STATEMENT OF INVESTMENTS (UNAUDITED)
Franklin K2 Alternative Strategies Fund (continued)
Country | Shares | Value | ||||||||||||||||
bb | Securities Sold Short (continued) | |||||||||||||||||
Common Stocks (continued) | ||||||||||||||||||
Electronic Equipment, Instruments & Components (continued) | ||||||||||||||||||
PAR Technology Corp. | United States | 7,349 | $ | (384,867 | ) | |||||||||||||
Vishay Intertechnology Inc. | United States | 7,558 | (153,957 | ) | ||||||||||||||
|
| |||||||||||||||||
(1,806,703 | ) | |||||||||||||||||
|
| |||||||||||||||||
Energy Equipment & Services (0.0)%† | ||||||||||||||||||
Helix Energy Solutions Group Inc. | United States | 148,590 | (451,714 | ) | ||||||||||||||
|
| |||||||||||||||||
Entertainment (0.2)% | ||||||||||||||||||
Cinemark Holdings Inc. | United States | 62,092 | (963,668 | ) | ||||||||||||||
Live Nation Entertainment Inc. | United States | 2,460 | (262,359 | ) | ||||||||||||||
The Marcus Corp. | United States | 60,556 | (1,057,913 | ) | ||||||||||||||
Sea Ltd., ADR | Taiwan | 1,245 | (358,647 | ) | ||||||||||||||
|
| |||||||||||||||||
(2,642,587 | ) | |||||||||||||||||
|
| |||||||||||||||||
Equity Real Estate Investment Trusts (REITs) (0.2)% | ||||||||||||||||||
Braemar Hotels & Resorts Inc. | United States | 46,226 | (201,546 | ) | ||||||||||||||
Innovative Industrial Properties Inc., A | United States | 7,076 | (1,817,329 | ) | ||||||||||||||
Pebblebrook Hotel Trust | United States | 38,063 | (797,420 | ) | ||||||||||||||
Summit Hotel Properties Inc. | United States | 54,453 | (487,354 | ) | ||||||||||||||
|
| |||||||||||||||||
(3,303,649 | ) | |||||||||||||||||
|
| |||||||||||||||||
Food & Staples Retailing (0.1)% | ||||||||||||||||||
The Chefs’ Warehouse Inc. | United States | 31,079 | (965,625 | ) | ||||||||||||||
|
| |||||||||||||||||
Food Products (0.1)% | ||||||||||||||||||
Beyond Meat Inc. | United States | 2,516 | (176,774 | ) | ||||||||||||||
Kellogg Co. | United States | 12,215 | (747,314 | ) | ||||||||||||||
|
| |||||||||||||||||
(924,088 | ) | |||||||||||||||||
|
| |||||||||||||||||
Gas Utilities (0.4)% | ||||||||||||||||||
Atmos Energy Corp. | United States | 27,619 | (2,494,548 | ) | ||||||||||||||
Snam SpA | Italy | 85,169 | (479,953 | ) | ||||||||||||||
South Jersey Industries Inc. | United States | 69,636 | (1,636,446 | ) | ||||||||||||||
UGI Corp. | United States | 28,746 | (1,185,772 | ) | ||||||||||||||
|
| |||||||||||||||||
(5,796,719 | ) | |||||||||||||||||
|
| |||||||||||||||||
Health Care Equipment & Supplies (0.2)% | ||||||||||||||||||
Alphatec Holdings Inc. | United States | 32,211 | (357,542 | ) | ||||||||||||||
Cutera Inc. | United States | 23,916 | (833,712 | ) | ||||||||||||||
Mesa Laboratories Inc. | United States | 1,643 | (507,342 | ) | ||||||||||||||
NuVasive Inc. | United States | 5,592 | (268,751 | ) | ||||||||||||||
SmileDirectClub Inc., A | United States | 65,172 | (200,078 | ) | ||||||||||||||
Varex Imaging Corp. | United States | 47,874 | (1,366,803 | ) | ||||||||||||||
|
| |||||||||||||||||
(3,534,228 | ) | |||||||||||||||||
|
| |||||||||||||||||
Health Care Providers & Services (0.0)%† | ||||||||||||||||||
1Life Healthcare Inc. | United States | 6,029 | (96,042 | ) | ||||||||||||||
Brookdale Senior Living Inc. | United States | 21,664 | (126,951 | ) | ||||||||||||||
PetIQ Inc., A | United States | 14,379 | (287,149 | ) | ||||||||||||||
|
| |||||||||||||||||
(510,142 | ) | |||||||||||||||||
|
| |||||||||||||||||
Health Care Technology (0.0)%† | ||||||||||||||||||
Tabula Rasa HealthCare Inc. | United States | 3,556 | (40,432 | ) | ||||||||||||||
|
| |||||||||||||||||
Hotels, Restaurants & Leisure (0.2)% | ||||||||||||||||||
Airbnb Inc., A | United States | 808 | (139,412 | ) | ||||||||||||||
Draftkings Inc., A | United States | 728 | (25,153 | ) | ||||||||||||||
Marriott Vacations Worldwide Corp. | United States | 905 | (138,148 | ) | ||||||||||||||
Norwegian Cruise Line Holdings Ltd. | United States | 30,275 | (590,665 | ) |
franklintempleton.com | Semiannual Report | 65 |
FRANKLIN ALTERNATIVE STRATEGIES FUNDS
CONSOLIDATED STATEMENT OF INVESTMENTS (UNAUDITED)
Franklin K2 Alternative Strategies Fund (continued)
Country | Shares | Value | ||||||||||||||||
bb | Securities Sold Short (continued) | |||||||||||||||||
Common Stocks (continued) | ||||||||||||||||||
Hotels, Restaurants & Leisure (continued) | ||||||||||||||||||
Royal Caribbean Cruises Ltd. | United States | 10,859 | $ | (758,176 | ) | |||||||||||||
Scientific Games Corp. | United States | 29,413 | (1,880,079 | ) | ||||||||||||||
|
| |||||||||||||||||
(3,531,633 | ) | |||||||||||||||||
|
| |||||||||||||||||
Independent Power & Renewable Electricity Producers (0.1)% | ||||||||||||||||||
Sunnova Energy International Inc. | United States | 26,697 | (986,988 | ) | ||||||||||||||
|
| |||||||||||||||||
Industrial Conglomerates (0.1)% | ||||||||||||||||||
3M Co. | United States | 4,478 | (761,439 | ) | ||||||||||||||
|
| |||||||||||||||||
Internet & Direct Marketing Retail (0.2)% | ||||||||||||||||||
d | Delivery Hero SE, 144A | Saudi Arabia | 4,668 | (619,492 | ) | |||||||||||||
Fiverr International Ltd. | Israel | 2,137 | (302,642 | ) | ||||||||||||||
Groupon Inc., A | United States | 8,085 | (167,036 | ) | ||||||||||||||
Porch Group Inc. | United States | 27,336 | (575,149 | ) | ||||||||||||||
d | Takeaway.com NV, 144A | United Kingdom | 2,057 | (128,809 | ) | |||||||||||||
Wayfair Inc., A | United States | 3,609 | (894,455 | ) | ||||||||||||||
|
| |||||||||||||||||
(2,687,583 | ) | |||||||||||||||||
|
| |||||||||||||||||
IT Services (0.1)% | ||||||||||||||||||
Affirm Holdings Inc., A | United States | 2,098 | (265,774 | ) | ||||||||||||||
CSG Systems International Inc. | United States | 9,734 | (513,079 | ) | ||||||||||||||
Digitalocean Holdings Inc. | United States | 1,075 | (108,371 | ) | ||||||||||||||
Fastly Inc., A | United States | 6,739 | (274,682 | ) | ||||||||||||||
i3 Verticals Inc., A | United States | 8,365 | (156,007 | ) | ||||||||||||||
|
| |||||||||||||||||
(1,317,913 | ) | |||||||||||||||||
|
| |||||||||||||||||
Leisure Products (0.0)%† | ||||||||||||||||||
Peloton Interactive Inc., A | United States | 78 | (3,432 | ) | ||||||||||||||
|
| |||||||||||||||||
Life Sciences Tools & Services (0.1)% | ||||||||||||||||||
Inotiv Inc. | United States | 14,481 | (753,012 | ) | ||||||||||||||
|
| |||||||||||||||||
Machinery (0.1)% | ||||||||||||||||||
Fortive Corp. | United States | 839 | (61,977 | ) | ||||||||||||||
The Greenbrier Cos. Inc. | United States | 15,091 | (603,489 | ) | ||||||||||||||
NFI Group Inc. | Canada | 12,380 | (199,638 | ) | ||||||||||||||
|
| |||||||||||||||||
(865,104 | ) | |||||||||||||||||
|
| |||||||||||||||||
Marine (0.1)% | ||||||||||||||||||
A.P. Moeller-Maersk AS, B | Denmark | 162 | (487,746 | ) | ||||||||||||||
ZIM Integrated Shipping Services Ltd. | Israel | 4,808 | �� | (265,786 | ) | |||||||||||||
|
| |||||||||||||||||
(753,532 | ) | |||||||||||||||||
|
| |||||||||||||||||
Media (0.2)% | ||||||||||||||||||
Charter Communications Inc., A | United States | 1,115 | (720,602 | ) | ||||||||||||||
Dish Network Corp., A | United States | 11,834 | (369,813 | ) | ||||||||||||||
Magnite Inc. | United States | 10,319 | (181,924 | ) | ||||||||||||||
Sirius XM Holdings Inc. | United States | 141,508 | (863,199 | ) | ||||||||||||||
Techtarget Inc. | United States | 10,553 | (1,019,736 | ) | ||||||||||||||
|
| |||||||||||||||||
(3,155,274 | ) | |||||||||||||||||
|
| |||||||||||||||||
Metals & Mining (0.1)% | ||||||||||||||||||
Century Aluminum Co. | United States | 23,767 | (314,437 | ) | ||||||||||||||
Ivanhoe Mines Ltd., A | Canada | 79,335 | (629,737 | ) | ||||||||||||||
MP Materials Corp. | United States | 24,807 | (1,090,020 | ) | ||||||||||||||
Osisko Gold Royalties Ltd. | Canada | 1,673 | (20,443 | ) | ||||||||||||||
Pretium Resources Inc. | Canada | 2,905 | (39,188 | ) | ||||||||||||||
|
| |||||||||||||||||
(2,093,825 | ) | |||||||||||||||||
|
|
66 | Semiannual Report | franklintempleton.com |
FRANKLIN ALTERNATIVE STRATEGIES FUNDS
CONSOLIDATED STATEMENT OF INVESTMENTS (UNAUDITED)
Franklin K2 Alternative Strategies Fund (continued)
Country | Shares | Value | ||||||||||||||||
bb | Securities Sold Short (continued) | |||||||||||||||||
Common Stocks (continued) | ||||||||||||||||||
Mortgage Real Estate Investment Trusts (REITs) (0.2)% | ||||||||||||||||||
Apollo Commercial Real Estate Finance Inc. | United States | 3,522 | $ | (47,653 | ) | |||||||||||||
Arbor Realty Trust Inc. | United States | 64,962 | (1,140,083 | ) | ||||||||||||||
KKR Real Estate Finance Trust Inc. | United States | 10,828 | (223,382 | ) | ||||||||||||||
PennyMac Mortgage Investment Trust | United States | 29,326 | (509,392 | ) | ||||||||||||||
Redwood Trust Inc. | United States | 22,574 | (289,399 | ) | ||||||||||||||
Starwood Property Trust Inc. | United States | 15,037 | (375,323 | ) | ||||||||||||||
Two Harbors Investment Corp. | United States | 46,868 | (275,584 | ) | ||||||||||||||
|
| |||||||||||||||||
(2,860,816 | ) | |||||||||||||||||
|
| |||||||||||||||||
Personal Products (0.1)% | ||||||||||||||||||
The Beauty Health Co. | United States | 25,975 | (674,311 | ) | ||||||||||||||
Herbalife Nutrition Ltd. | United States | 7,097 | (265,144 | ) | ||||||||||||||
|
| |||||||||||||||||
(939,455 | ) | |||||||||||||||||
|
| |||||||||||||||||
Pharmaceuticals (0.2)% | ||||||||||||||||||
Aerie Pharmaceuticals Inc. | United States | 8,666 | (87,527 | ) | ||||||||||||||
Avadel Pharmaceuticals PLC, ADR | United States | 67,719 | (606,762 | ) | ||||||||||||||
Canopy Growth Corp. | Canada | 2,363 | (25,379 | ) | ||||||||||||||
Collegium Pharmaceutical Inc. | United States | 20,935 | (368,037 | ) | ||||||||||||||
Innoviva Inc. | United States | 48,753 | (815,150 | ) | ||||||||||||||
Omeros Corp. | United States | 38,906 | (280,123 | ) | ||||||||||||||
Revance Therapeutics Inc. | United States | 29,052 | (397,432 | ) | ||||||||||||||
Zogenix Inc. | United States | 31,927 | (359,179 | ) | ||||||||||||||
|
| |||||||||||||||||
(2,939,589 | ) | |||||||||||||||||
|
| |||||||||||||||||
Photography (0.0)%† | ||||||||||||||||||
Pacira Biosciences Inc. | United States | 6,795 | (357,553 | ) | ||||||||||||||
|
| |||||||||||||||||
Professional Services (0.0)%† | ||||||||||||||||||
Upwork Inc. | United States | 4,530 | (168,788 | ) | ||||||||||||||
|
| |||||||||||||||||
Real Estate Management & Development (0.1)% | ||||||||||||||||||
Opendoor Technologies Inc. | United States | 50,685 | (802,850 | ) | ||||||||||||||
Realogy Holdings Corp. | United States | 21,397 | (325,021 | ) | ||||||||||||||
Redfin Corp. | United States | 6,871 | (279,581 | ) | ||||||||||||||
|
| |||||||||||||||||
(1,407,452 | ) | |||||||||||||||||
|
| |||||||||||||||||
Road & Rail (0.4)% | ||||||||||||||||||
Canadian Pacific Railway Ltd. | Canada | 65,250 | (4,569,457 | ) | ||||||||||||||
Hertz Global Holdings Inc. | United States | 49,487 | (1,195,606 | ) | ||||||||||||||
|
| |||||||||||||||||
(5,765,063 | ) | |||||||||||||||||
|
| |||||||||||||||||
Semiconductors & Semiconductor Equipment (0.3)% | ||||||||||||||||||
Advanced Micro Devices Inc. | United States | 15,820 | (2,505,413 | ) | ||||||||||||||
ams AG | Austria | 21,966 | (390,578 | ) | ||||||||||||||
Camtek Ltd. | Israel | 2,772 | (127,845 | ) | ||||||||||||||
Daqo New Energy Corp., ADR | China | 4,443 | (254,762 | ) | ||||||||||||||
Impinj Inc. | United States | 1,786 | (133,896 | ) | ||||||||||||||
Sunpower Corp., A | United States | 24,517 | (702,412 | ) | ||||||||||||||
|
| |||||||||||||||||
(4,114,906 | ) | |||||||||||||||||
|
| |||||||||||||||||
Software (0.3)% | ||||||||||||||||||
Alteryx Inc., A | United States | 964 | (64,077 | ) | ||||||||||||||
Avaya Holdings Corp. | United States | 18,591 | (361,967 | ) | ||||||||||||||
Bentley Systems Inc., B | United States | 2,239 | (107,450 | ) | ||||||||||||||
Blackline Inc. | United States | 3,577 | (393,649 | ) | ||||||||||||||
Dye & Durham Ltd. | Canada | 4,423 | (144,866 | ) | ||||||||||||||
fuboTV Inc. | United States | 11,555 | (226,709 | ) |
franklintempleton.com | Semiannual Report | 67 |
FRANKLIN ALTERNATIVE STRATEGIES FUNDS
CONSOLIDATED STATEMENT OF INVESTMENTS (UNAUDITED)
Franklin K2 Alternative Strategies Fund (continued)
Country | Shares | Value | ||||||||||||||||
bb | Securities Sold Short (continued) | |||||||||||||||||
Common Stocks (continued) | ||||||||||||||||||
Software (continued) | ||||||||||||||||||
Kaleyra Inc. | Italy | 20,742 | $ | (217,376 | ) | |||||||||||||
Mandiant Inc. | United States | 22,388 | (379,924 | ) | ||||||||||||||
Microstrategy Inc., A | United States | 319 | (230,136 | ) | ||||||||||||||
Mitek Systems Inc. | United States | 34,692 | (594,274 | ) | ||||||||||||||
NortonLifeLock Inc. | United States | 14,314 | (355,703 | ) | ||||||||||||||
Nutanix Inc., A | United States | 10,133 | (336,618 | ) | ||||||||||||||
Rapid7 Inc. | United States | 8,704 | (1,079,818 | ) | ||||||||||||||
Splunk Inc. | United States | 701 | (84,821 | ) | ||||||||||||||
Veritone Inc. | United States | 10,099 | (258,938 | ) | ||||||||||||||
|
| |||||||||||||||||
(4,836,326 | ) | |||||||||||||||||
|
| |||||||||||||||||
Specialty Retail (0.1)% | ||||||||||||||||||
Guess? Inc. | United States | 27,243 | (614,330 | ) | ||||||||||||||
Shift Technologies Inc. | United States | 81,561 | (375,996 | ) | ||||||||||||||
Vroom Inc. | United States | 9,345 | (129,241 | ) | ||||||||||||||
|
| |||||||||||||||||
(1,119,567 | ) | |||||||||||||||||
|
| |||||||||||||||||
Technology Hardware, Storage & Peripherals (0.0)%† | ||||||||||||||||||
Pure Storage Inc., A | United States | 8,030 | (248,689 | ) | ||||||||||||||
|
| |||||||||||||||||
Trading Companies & Distributors (0.1)% | ||||||||||||||||||
United Rentals Inc. | United States | 2,486 | (842,108 | ) | ||||||||||||||
|
| |||||||||||||||||
Total Common Stocks (Proceeds $112,856,813) | (108,551,814 | ) | ||||||||||||||||
|
| |||||||||||||||||
Exchange Traded Funds (9.0)% | ||||||||||||||||||
Health Care Select Sector SPDR Fund | United States | 55,708 | (7,226,999 | ) | ||||||||||||||
Invesco QQQ Series 1 ETF | United States | 2,498 | (983,762 | ) | ||||||||||||||
Invesco Solar ETF | United States | 41,666 | (3,728,690 | ) | ||||||||||||||
iShares Nasdaq Biotechnology ETF | United States | 34,711 | (5,353,131 | ) | ||||||||||||||
iShares North American Tech-Software ETF | United States | 38,431 | (15,945,022 | ) | ||||||||||||||
iShares Russell 2000 Growth ETF | United States | 70,526 | (20,599,939 | ) | ||||||||||||||
iShares Russell Mid-Cap Growth ETF | United States | 57,501 | (6,607,440 | ) | ||||||||||||||
SPDR S&P 500 ETF Trust | United States | 151,457 | (68,997,751 | ) | ||||||||||||||
|
| |||||||||||||||||
Total Exchange Traded Funds (Proceeds $125,644,513) | (129,442,734 | ) | ||||||||||||||||
|
| |||||||||||||||||
Principal Amount* | ||||||||||||||||||
Corporate Bonds and Notes (0.7)% | ||||||||||||||||||
Aerospace & Defense (0.0)%† | ||||||||||||||||||
d | Spirit Aerosystems Inc., secured note, 144A, 7.50%, 4/15/25 | United States | 273,000 | (285,939 | ) | |||||||||||||
|
| |||||||||||||||||
Airlines (0.0)%† | ||||||||||||||||||
d | Air France-KLM, senior note, Reg S, 3.00%, 7/01/24 | France | 200,000 | EUR | (217,922 | ) | ||||||||||||
|
| |||||||||||||||||
Auto Components (0.0)%† | ||||||||||||||||||
American Axle & Manufacturing Inc., senior note, 6.875%, 7/01/28 | United States | 166,000 | (177,570 | ) | ||||||||||||||
d | Wheel Pros Inc., senior note, 144A, 6.50%, 5/15/29 | United States | 115,000 | (112,233 | ) | |||||||||||||
|
| |||||||||||||||||
(289,803 | ) | |||||||||||||||||
|
| |||||||||||||||||
Capital Markets (0.0)%† | ||||||||||||||||||
d | Coinbase Global Inc., senior note, 144A, 3.375%, 10/01/28 | United States | 142,000 | (133,709 | ) | |||||||||||||
|
| |||||||||||||||||
Communications Equipment (0.1)% | ||||||||||||||||||
d | Audacy Capital Corp., secured note, 144A, | United States | 462,000 | (452,418 | ) | |||||||||||||
6.75%, 3/31/29 | United States | 144,000 | (141,225 | ) | ||||||||||||||
d | CommScope Technologies LLC, senior bond, 144A, 5.00%, 3/15/27 | United States | 274,000 | (246,656 | ) | |||||||||||||
|
| |||||||||||||||||
(840,299 | ) | |||||||||||||||||
|
|
68 | Semiannual Report | franklintempleton.com |
FRANKLIN ALTERNATIVE STRATEGIES FUNDS
CONSOLIDATED STATEMENT OF INVESTMENTS (UNAUDITED)
Franklin K2 Alternative Strategies Fund (continued)
Country | Principal Amount* | Value | ||||||||||||||||
bb | Securities Sold Short (continued) | |||||||||||||||||
Corporate Bonds and Notes (continued) | ||||||||||||||||||
Construction & Engineering (0.1)% | ||||||||||||||||||
Fluor Corp., senior bond, 4.25%, 9/15/28 | United States | 194,000 | $ | (198,191 | ) | |||||||||||||
d | Sydney Airport Finance Co. Pty Ltd., senior secured bond, 144A, | Australia | 146,000 | (153,819 | ) | |||||||||||||
3.625%, 4/28/26 | Australia | 73,000 | (77,638 | ) | ||||||||||||||
d | Tutor Perini Corp., senior note, 144A, 6.875%, 5/01/25 | United States | 646,000 | (647,357 | ) | |||||||||||||
|
| |||||||||||||||||
(1,077,005 | ) | |||||||||||||||||
|
| |||||||||||||||||
Diversified Consumer Services (0.1)% | ||||||||||||||||||
d | MPH Acquisition Holdings LLC, senior note, 144A, 5.75%, 11/01/28 | United States | 540,000 | (483,300 | ) | |||||||||||||
|
| |||||||||||||||||
Diversified Telecommunication Services (0.0)%† | ||||||||||||||||||
d | British Telecommunications PLC, senior bond, Reg S, 1.874% to 5/18/25, FRN thereafter, 8/18/80 | United Kingdom | 280,000 | EUR | (309,065 | ) | ||||||||||||
d | Telesat Canada / Telesat LLC, senior note, 144A, 6.50%, 10/15/27 | Canada | 131,000 | (102,423 | ) | |||||||||||||
|
| |||||||||||||||||
(411,488 | ) | |||||||||||||||||
|
| |||||||||||||||||
Equity Real Estate Investment Trusts (REITs) (0.0)%† | ||||||||||||||||||
The GEO Group Inc., senior note, 6.00%, 4/15/26 | United States | 133,000 | (114,701 | ) | ||||||||||||||
Simon Property Group LP, senior bond, 2.65%, 7/15/30 | United States | 350,000 | (357,604 | ) | ||||||||||||||
|
| |||||||||||||||||
(472,305 | ) | |||||||||||||||||
|
| |||||||||||||||||
Food & Staples Retailing (0.1)% | ||||||||||||||||||
Koninklijke Ahold Delhaize NV, senior bond, 5.70%, 10/01/40 | Netherlands | 603,000 | (836,479 | ) | ||||||||||||||
The Kroger Co., senior bond, | United States | 241,000 | (338,187 | ) | ||||||||||||||
3.95%, 1/15/50 | United States | 15,000 | (17,383 | ) | ||||||||||||||
d | SEG Holding LLC / SEG Finance Corp., senior secured note, 144A, 5.625%, 10/15/28 | United States | 473,000 | (497,222 | ) | |||||||||||||
d | Sigma Holdco BV, senior note, Reg S, 5.75%, 5/15/26 | Netherlands | 200,000 | EUR | (209,743 | ) | ||||||||||||
|
| |||||||||||||||||
(1,899,014 | ) | |||||||||||||||||
|
| |||||||||||||||||
Food Products (0.1)% | ||||||||||||||||||
B&G Foods Inc., senior note, 5.25%, 9/15/27 | United States | 617,000 | (627,181 | ) | ||||||||||||||
|
| |||||||||||||||||
Health Care Providers & Services (0.0)%† | ||||||||||||||||||
d | Air Methods Corp., senior note, 144A, 8.00%, 5/15/25 | United States | 450,000 | (350,413 | ) | |||||||||||||
|
| |||||||||||||||||
Media (0.1)% | ||||||||||||||||||
d | Dish DBS Corp., senior secured note, 144A, 5.75%, 12/01/28 | United States | 213,000 | (210,274 | ) | |||||||||||||
d | Wolverine Escrow LLC, senior secured note, 144A, 9.00%, 11/15/26 | United States | 287,000 | (271,165 | ) | |||||||||||||
|
| |||||||||||||||||
(481,439 | ) | |||||||||||||||||
|
| |||||||||||||||||
Oil, Gas & Consumable Fuels (0.0)%† | ||||||||||||||||||
Apache Corp., senior bond, 4.375%, 10/15/28 | United States | 75,000 | (79,177 | ) | ||||||||||||||
d | SM Energy Co., secured note, 144A, 10.00%, 1/15/25 | United States | 172,000 | (188,417 | ) | |||||||||||||
|
| |||||||||||||||||
(267,594 | ) | |||||||||||||||||
|
| |||||||||||||||||
Road & Rail (0.0)%† | ||||||||||||||||||
d | The Go-Ahead Group PLC, senior note, Reg S, 2.50%, 7/06/24 | United Kingdom | 309,000 | GBP | (413,506 | ) | ||||||||||||
|
| |||||||||||||||||
Specialty Retail (0.1)% | ||||||||||||||||||
d | Ambience Merger Sub Inc., senior note, 144A, 7.125%, 7/15/29 | United States | 245,000 | (237,445 | ) | |||||||||||||
d | Dufry One BV, senior note, Reg S, 2.00%, 2/15/27 | Switzerland | 528,000 | EUR | (548,458 | ) | ||||||||||||
d | Macy’s Retail Holdings LLC, senior note, 144A, 5.875%, 4/01/29 | United States | 291,000 | (310,643 | ) | |||||||||||||
d | Matalan Finance PLC, senior secured note, Reg S, 6.75%, 1/31/23 | United Kingdom | 128,000 | GBP | (158,189 | ) | ||||||||||||
|
| |||||||||||||||||
(1,254,735 | ) | |||||||||||||||||
|
| |||||||||||||||||
Total Corporate Bonds and Notes | (9,505,652 | ) | ||||||||||||||||
|
|
franklintempleton.com | Semiannual Report | 69 |
FRANKLIN ALTERNATIVE STRATEGIES FUNDS
CONSOLIDATED STATEMENT OF INVESTMENTS (UNAUDITED)
Franklin K2 Alternative Strategies Fund (continued)
Country | Principal Amount* | Value | ||||||||||||||||
bb | Securities Sold Short (continued) | |||||||||||||||||
U.S. Government and Agency Securities (0.2)% | ||||||||||||||||||
U.S. Treasury Bond, | United States | 78,000 | $ | (83,070 | ) | |||||||||||||
1.375%, 8/15/50 | United States | 1,049,000 | (947,009 | ) | ||||||||||||||
U.S. Treasury Note, | United States | 5,600 | (5,560 | ) | ||||||||||||||
0.875%, 11/15/30 | United States | 472,000 | (451,369 | ) | ||||||||||||||
1.25%, 8/15/31 | United States | 1,253,000 | (1,233,128 | ) | ||||||||||||||
|
| |||||||||||||||||
Total U.S. Government and Agency Securities | (2,720,136 | ) | ||||||||||||||||
|
| |||||||||||||||||
Total Securities Sold Short | $ | (250,220,336 | ) | |||||||||||||||
|
|
†Rounds to less than 0.1% of net assets.
*The principal amount is stated in U.S. dollars unless otherwise indicated.
#Notional amount is the number of units specified in the contract, and can include currency units, bushels, shares, pounds, barrels or other units. Currency units are stated in U.S. dollars unless otherwise indicated.
aNon-income producing.
bA portion or all of the security has been segregated as collateral for securities sold short, open swap contracts, open forward exchange contracts, open futures contracts and/or open written option contracts. At November 30, 2021, the aggregate value of these securities and/or cash pledged amounted to $148,769,005, representing 10.4% of net assets.
cA portion or all of the security is held in connection with written option contracts open at period end.
dSecurity was purchased pursuant to Rule 144A or Regulation S under the Securities Act of 1933. 144A securities may be sold in transactions exempt from registration only to qualified institutional buyers or in public offering registered under the Securities Act of 1933. Regulation S securities 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, 2021, the net value of these securities was $317,528,192, representing 22.2% of net assets.
eFair valued using significant unobservable inputs. See Note 14 regarding fair value measurements.
fA portion or all of the security is on loan at November 30, 2021. See Note 1(j).
gPerpetual security with no stated maturity date.
hThe coupon rate shown represents the rate at period end.
iSee Note 1(g) regarding loan participation notes.
jSee Note 10 regarding restricted securities.
kIncome may be received in additional securities and/or cash.
lSee Note 7 regarding defaulted securities.
mSee Note 1(l) regarding senior floating rate interests.
nSee Note 11 regarding unfunded loan commitments.
oSee Note 1(h) regarding credit-linked notes.
pPrincipal amount is stated in 100 Mexican Peso Units.
qA supranational organization is an entity formed by two or more central governments through international treaties.
rThe coupon rate shown represents the rate inclusive of any caps or floors, if applicable, in effect at period end.
sAdjustable 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.
tA portion or all of the security purchased on a delayed delivery basis. See Note 1(d).
uThe rate shown is the annualized seven-day effective yield at period end.
vA portion or all of the security is owned by K2 Holdings Investment Corp., a wholly-owned subsidiary of the Fund. See Note 1(k).
wSee Note 1(j) regarding securities on loan.
xSee Note 3(f) regarding investments in affiliated management investment companies.
ySee Note 1(c) regarding joint repurchase agreement.
zThe security was issued on a discount basis with no stated coupon rate.
aaSee Note 1(e) regarding written options.
bbSee Note 1(i) regarding securities sold short.
70 | Semiannual Report | franklintempleton.com |
FRANKLIN ALTERNATIVE STRATEGIES FUNDS
CONSOLIDATED STATEMENT OF INVESTMENTS (UNAUDITED)
Franklin K2 Alternative Strategies Fund (continued)
At November 30, 2021, 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 | 22 | $ | 1,452,275 | 12/13/21 | $ | (22,058 | ) | ||||||||||||
Aluminum | Short | 22 | 1,452,275 | 12/13/21 | 21,507 | |||||||||||||||
Aluminum | Long | 8 | 525,300 | 3/14/22 | (793 | ) | ||||||||||||||
Aluminum | Short | 2 | 131,325 | 3/14/22 | (2,881 | ) | ||||||||||||||
Brent Crude Oil | Long | 18 | 1,246,140 | 12/30/21 | (212,077 | ) | ||||||||||||||
Cocoa | Long | 8 | 174,063 | 3/16/22 | (5,279 | ) | ||||||||||||||
Coffee | Long | 10 | 871,125 | 3/21/22 | 87,347 | |||||||||||||||
Copper | Long | 11 | 2,618,687 | 12/13/21 | 867 | |||||||||||||||
Copper | Short | 11 | 2,618,688 | 12/13/21 | (36,253 | ) | ||||||||||||||
Copper | Long | 3 | 707,812 | 3/14/22 | (15,322 | ) | ||||||||||||||
Copper | Short | 1 | 235,937 | 3/14/22 | 697 | |||||||||||||||
Corn | Long | 47 | 1,333,625 | 3/14/22 | (11,600 | ) | ||||||||||||||
Cotton | Long | 8 | 425,640 | 3/09/22 | (31,442 | ) | ||||||||||||||
Gasoline | Long | 14 | 1,140,779 | 12/31/21 | (189,611 | ) | ||||||||||||||
Gold 100 Oz | Short | 8 | 1,421,200 | 2/24/22 | 15,161 | |||||||||||||||
Hard Red Winter Wheat | Long | 15 | 616,687 | 3/14/22 | 8,973 | |||||||||||||||
Low Sulphur Gas Oil | Long | 15 | 896,625 | 1/12/22 | (152,798 | ) | ||||||||||||||
Natural Gas | Long | 16 | 730,720 | 12/29/21 | (97,586 | ) | ||||||||||||||
NY Harbor | Long | 14 | 1,211,456 | 12/31/21 | (214,756 | ) | ||||||||||||||
Silver | Short | 14 | 1,597,050 | 3/29/22 | 64,118 | |||||||||||||||
Soybean Meal | Short | 9 | 306,990 | 3/14/22 | 3,895 | |||||||||||||||
Soybean Oil | Short | 2 | 66,384 | 3/14/22 | 3,907 | |||||||||||||||
Soybeans | Short | 2 | 122,650 | 3/14/22 | 3,895 | |||||||||||||||
Sugar | Long | 24 | 499,968 | 2/28/22 | (26,612 | ) | ||||||||||||||
Wheat | Long | 21 | 826,613 | 3/14/22 | (31,019 | ) | ||||||||||||||
WTI Crude Oil | Long | 11 | 727,980 | 12/20/21 | (151,924 | ) | ||||||||||||||
Zinc | Long | 14 | 1,126,563 | 12/13/21 | 73,984 | |||||||||||||||
Zinc | Short | 14 | 1,126,563 | 12/13/21 | (6,778 | ) | ||||||||||||||
Zinc | Long | 8 | 639,600 | 3/14/22 | (15,593 | ) | ||||||||||||||
Zinc | Short | 1 | 79,950 | 3/14/22 | 947 | |||||||||||||||
|
| |||||||||||||||||||
(939,084 | ) | |||||||||||||||||||
|
| |||||||||||||||||||
Currency Contractsa | ||||||||||||||||||||
U.S. Dollar Index | Long | 7 | 672,049 | 12/13/21 | 20,168 | |||||||||||||||
|
| |||||||||||||||||||
Equity Contracts | ||||||||||||||||||||
CAC 40 10 Euro Indexa | Long | 7 | 533,161 | 12/17/21 | (33,905 | ) | ||||||||||||||
CBOE Volatility Index | Long | 52 | 1,335,698 | 12/22/21 | 97,246 | |||||||||||||||
CBOE Volatility Index | Long | 30 | 794,331 | 1/19/22 | 51,700 | |||||||||||||||
CBOE Volatility Index | Long | 26 | 699,564 | 3/15/22 | 68,890 | |||||||||||||||
CBOE Volatility Index | Long | 23 | 621,350 | 4/20/22 | 56,080 | |||||||||||||||
DAX Indexa | Long | 1 | 429,340 | 12/17/21 | (22,030 | ) | ||||||||||||||
DJ EURO STOXX 50 Indexa | Long | 27 | 1,248,401 | 12/17/21 | (34,998 | ) | ||||||||||||||
DJ EURO STOXX 50 Index | Short | 704 | 32,550,898 | 12/17/21 | 632,169 | |||||||||||||||
DJIA Mini E-CBOT Indexa | Long | 18 | 3,101,130 | 12/17/21 | (51,826 | ) | ||||||||||||||
E-Mini Russell 2000a | Long | 7 | 769,055 | 12/17/21 | (51,379 | ) | ||||||||||||||
E-Mini Russell 2000 | Short | 11 | 1,208,515 | 12/17/21 | 88,413 | |||||||||||||||
FTSE 100 Indexa | Long | 19 | 1,788,918 | 12/17/21 | 22,079 | |||||||||||||||
FTSE 100 Index | Short | 88 | 8,285,513 | 12/17/21 | (92,224 | ) | ||||||||||||||
FTSE/MIB Index | Short | 3 | 438,929 | 12/17/21 | (4,435 | ) | ||||||||||||||
Hang Seng Indexa | Short | 13 | 1,956,752 | 12/30/21 | 96,311 | |||||||||||||||
Micro E-Mini Russell 2000 | Short | 238 | 2,614,787 | 12/17/21 | 271,397 | |||||||||||||||
NASDAQ 100 E-Mini Indexa | Long | 13 | 4,199,130 | 12/17/21 | 274,194 | |||||||||||||||
NASDAQ 100 E-Mini Index | Short | 4 | 1,292,040 | 12/17/21 | (30,281 | ) | ||||||||||||||
NASDAQ 100 E-Mini Index | Short | 1 | 323,110 | 3/18/22 | 4,615 |
franklintempleton.com | Semiannual Report | 71 |
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) | ||||||||||||||||||||
Nikkei 225 Indexa | Long | 3 | $ | 729,066 | 12/09/21 | $ | (38,329 | ) | ||||||||||||
S&P 500 E-Mini Indexa | Long | 3 | 684,937 | 12/17/21 | 34,507 | |||||||||||||||
S&P 500 E-Mini Index | Short | 63 | 14,383,687 | 12/17/21 | (197,593 | ) | ||||||||||||||
SGX Nifty 50 | Short | 1 | 34,127 | 12/30/21 | 114 | |||||||||||||||
STOXX 600 Banks Index | Short | 123 | 956,230 | 12/17/21 | (27,751 | ) | ||||||||||||||
STOXX Europe 600 | Short | 6 | 157,764 | 12/17/21 | 2,910 | |||||||||||||||
TOPIX Indexa | Long | 4 | 670,943 | 12/09/21 | (42,390 | ) | ||||||||||||||
TOPIX Index | Short | 2 | 335,471 | 12/09/21 | 27,531 | |||||||||||||||
VSTOXX | Long | 46 | 137,203 | 12/22/21 | 21,807 | |||||||||||||||
VSTOXX | Long | 42 | 124,796 | 1/19/22 | 13,436 | |||||||||||||||
|
| |||||||||||||||||||
1,136,258 | ||||||||||||||||||||
|
| |||||||||||||||||||
Interest Rate Contracts | ||||||||||||||||||||
3 Month EURIBORa | Short | 75 | 21,345,094 | 12/19/22 | (20,857 | ) | ||||||||||||||
10 Yr. Mini JGBa | Long | 16 | 2,151,687 | 12/10/21 | 5,600 | |||||||||||||||
90 Day Eurodollara | Short | 194 | 48,051,375 | 12/19/22 | 164,076 | |||||||||||||||
ASX 90 Day Bank Accepted Bill | Long | 150 | 106,843,171 | 6/09/22 | 11,725 | |||||||||||||||
ASX 90 Day Bank Accepted Bill | Long | 58 | 41,276,082 | 9/08/22 | (47,365 | ) | ||||||||||||||
Australian 10 Yr. Bonda | Long | 38 | 3,777,914 | 12/15/21 | (104,265 | ) | ||||||||||||||
Canadian 10 Yr. Bonda | Short | 6 | 663,008 | 3/22/22 | (9,818 | ) | ||||||||||||||
Euro-BOBLa | Long | 48 | 7,376,157 | 12/08/21 | 11,460 | |||||||||||||||
Euro-Bunda | Long | 10 | 1,954,840 | 12/08/21 | 15,623 | |||||||||||||||
Euro-Buxl | Short | 3 | 742,107 | 12/08/21 | (50,244 | ) | ||||||||||||||
Euro-SCHATZa | Long | 71 | 9,052,146 | 12/08/21 | 9,596 | |||||||||||||||
Japan 10 Yr. Bonda | Long | 3 | 4,032,556 | 12/13/21 | 5,569 | |||||||||||||||
Long Gilta | Long | 4 | 671,783 | 3/29/22 | 8,586 | |||||||||||||||
U.S. Treasury 2 Yr. Notea | Long | 52 | 11,374,188 | 3/31/22 | 15,072 | |||||||||||||||
U.S. Treasury 5 Yr. Notea | Short | 216 | 26,222,063 | 3/31/22 | (139,846 | ) | ||||||||||||||
U.S. Treasury 10 Yr. Notea | Short | 31 | 4,055,187 | 3/22/22 | (43,814 | ) | ||||||||||||||
U.S. Treasury 10 Yr. Ultra | Short | 106 | 15,570,406 | 3/22/22 | (198,198 | ) | ||||||||||||||
U.S. Treasury Long Bonda | Long | 7 | 1,134,875 | 3/22/22 | 27,325 | |||||||||||||||
U.S. Treasury Long Bond | Short | 61 | 9,889,625 | 3/22/22 | (199,146 | ) | ||||||||||||||
U.S. Treasury Ultra Bond | Short | 39 | 7,821,937 | 3/22/22 | (227,007 | ) | ||||||||||||||
|
| |||||||||||||||||||
(765,928 | ) | |||||||||||||||||||
|
| |||||||||||||||||||
Total Futures Contracts |
| $ | (548,586 | ) | ||||||||||||||||
|
|
*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, 2021, 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 | BOFA | Buy | 1,192,000 | 211,535 | 12/02/21 | $ | 495 | $ | — | |||||||||||||||||||||||
Brazilian Real | BOFA | Sell | 1,192,000 | 223,401 | 12/02/21 | 11,371 | — | |||||||||||||||||||||||||
Australian Dollar | JPHQ | Buy | 1,500,000 | 1,105,838 | 12/15/21 | — | (36,289 | ) | ||||||||||||||||||||||||
Japanese Yen | JPHQ | Sell | 64,268,188 | 750,000 | AUD | 12/15/21 | — | (34,009 | ) | |||||||||||||||||||||||
Singapore Dollar | JPHQ | Sell | 739,779 | 750,000 | AUD | 12/15/21 | 7,265 | (14,597 | ) | |||||||||||||||||||||||
Australian Dollar | JPHQ | Sell | 1,000,000 | 746,308 | 12/15/21 | 33,276 | — | |||||||||||||||||||||||||
British Pound | BNYM | Buy | 237,408 | 327,502 | 12/15/21 | — | (11,627 | ) | ||||||||||||||||||||||||
British Pound | BNYM | Sell | 2,590,507 | 3,540,681 | 12/15/21 | 94,049 | (71 | ) | ||||||||||||||||||||||||
British Pound | JPHQ | Buy | 1,000,000 | 1,384,332 | 12/15/21 | — | (53,819 | ) | ||||||||||||||||||||||||
British Pound | JPHQ | Sell | 500,000 | 689,569 | 12/15/21 | 24,313 | — | |||||||||||||||||||||||||
Canadian Dollar | JPHQ | Buy | 1,886,746 | 1,500,000 | 12/15/21 | — | (22,678 | ) |
72 | 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) | ||||||||||||||||||||||||||||||||
Canadian Dollar | JPHQ | Sell | 1,235,937 | 1,000,000 | 12/15/21 | $ | 32,262 | $ | — | |||||||||||||||||||||||
Chinese Yuan | JPHQ | Buy | 31,210,664 | 4,802,357 | 12/15/21 | 93,941 | — | |||||||||||||||||||||||||
Chinese Yuan | JPHQ | Sell | 31,210,664 | 4,839,717 | 12/15/21 | — | (56,580 | ) | ||||||||||||||||||||||||
Chinese Yuan | MSCO | Buy | 7,324,161 | 1,128,000 | 12/15/21 | 19,838 | — | |||||||||||||||||||||||||
Chinese Yuan | MSCO | Sell | 31,594,871 | 4,858,105 | 12/15/21 | — | (93,421 | ) | ||||||||||||||||||||||||
Colombian Peso | JPHQ | Buy | 4,295,968,381 | 1,138,880 | 12/15/21 | — | (65,455 | ) | ||||||||||||||||||||||||
Colombian Peso | JPHQ | Sell | 4,295,968,381 | 1,108,923 | 12/15/21 | 35,498 | — | |||||||||||||||||||||||||
Czech Koruna | JPHQ | Buy | 22,956,706 | 1,063,358 | 12/15/21 | — | (42,780 | ) | ||||||||||||||||||||||||
Czech Koruna | JPHQ | Sell | 22,956,706 | 1,016,853 | 12/15/21 | — | (3,725 | ) | ||||||||||||||||||||||||
Euro | BNYM | Buy | 387,957 | 457,215 | 12/15/21 | — | (16,915 | ) | ||||||||||||||||||||||||
Euro | BNYM | Sell | 4,103,891 | 4,813,981 | 12/15/21 | 157,006 | (612 | ) | ||||||||||||||||||||||||
Chinese Yuan | JPHQ | Sell | 1,928,465 | 250,000 | EUR | 12/15/21 | — | (18,806 | ) | |||||||||||||||||||||||
Euro | JPHQ | Buy | 1,000,000 | 1,184,450 | 12/15/21 | — | (49,530 | ) | ||||||||||||||||||||||||
Euro | JPHQ | Sell | 500,000 | 584,330 | 12/15/21 | 16,870 | — | |||||||||||||||||||||||||
Euro | MSCO | Sell | 1,462,764 | 1,731,430 | 12/15/21 | 71,310 | — | |||||||||||||||||||||||||
Indian Rupee | JPHQ | Buy | 37,657,850 | 500,000 | 12/15/21 | 790 | (469 | ) | ||||||||||||||||||||||||
Indian Rupee | JPHQ | Sell | 37,484,650 | 500,000 | 12/15/21 | 1,980 | — | |||||||||||||||||||||||||
Indonesian Rupiah | JPHQ | Buy | 51,441,487,384 | 3,592,468 | 12/15/21 | 8,024 | (14,403 | ) | ||||||||||||||||||||||||
Indonesian Rupiah | JPHQ | Sell | 51,424,407,384 | 3,574,906 | 12/15/21 | 6,885 | (16,877 | ) | ||||||||||||||||||||||||
Australian Dollar | JPHQ | Sell | 500,000 | 42,723,050 | JPY | 12/15/21 | 21,588 | — | ||||||||||||||||||||||||
New Zealand Dollar | JPHQ | Sell | 750,000 | 61,118,198 | JPY | 12/15/21 | 29,104 | — | ||||||||||||||||||||||||
South Korean Won | JPHQ | Sell | 1,046,277,500 | 100,000,000 | JPY | 12/15/21 | 9,403 | (5,002 | ) | |||||||||||||||||||||||
Japanese Yen | JPHQ | Sell | 244,890 | 2,156 | 12/15/21 | — | (11 | ) | ||||||||||||||||||||||||
Mexican Peso | JPHQ | Buy | 28,929,477 | 1,427,323 | 12/15/21 | — | (82,530 | ) | ||||||||||||||||||||||||
Mexican Peso | JPHQ | Sell | 28,929,477 | 1,390,409 | 12/15/21 | 45,616 | — | |||||||||||||||||||||||||
Japanese Yen | JPHQ | Sell | 81,074,358 | 1,000,000 | NZD | 12/15/21 | — | (35,119 | ) | |||||||||||||||||||||||
New Zealand Dollar | JPHQ | Buy | 800,000 | 557,650 | 12/15/21 | — | (11,730 | ) | ||||||||||||||||||||||||
New Zealand Dollar | JPHQ | Sell | 800,000 | 560,842 | 12/15/21 | 14,922 | — | |||||||||||||||||||||||||
Swedish Krona | JPHQ | Sell | 4,015,992 | 4,000,000 | NOK | 12/15/21 | 24,372 | (27,958 | ) | |||||||||||||||||||||||
Peruvian Nuevo Sol | JPHQ | Buy | 5,121,168 | 1,249,827 | 12/15/21 | 8,284 | — | |||||||||||||||||||||||||
Peruvian Nuevo Sol | JPHQ | Sell | 5,121,168 | 1,295,678 | 12/15/21 | 37,567 | — | |||||||||||||||||||||||||
Russian Ruble | JPHQ | Buy | 395,588,968 | 5,334,317 | 12/15/21 | 16,608 | (29,871 | ) | ||||||||||||||||||||||||
Russian Ruble | JPHQ | Sell | 395,588,968 | 5,309,071 | 12/15/21 | — | (11,983 | ) | ||||||||||||||||||||||||
Australian Dollar | JPHQ | Sell | 250,000 | 248,689 | SGD | 12/15/21 | 5,368 | (1,387 | ) | |||||||||||||||||||||||
Singapore Dollar | JPHQ | Buy | 2,837,211 | 2,100,000 | 12/15/21 | — | (20,909 | ) | ||||||||||||||||||||||||
Singapore Dollar | JPHQ | Sell | 3,717,071 | 2,752,498 | 12/15/21 | 29,623 | (973 | ) | ||||||||||||||||||||||||
South African Rand | JPHQ | Buy | 31,739,886 | 2,023,763 | 12/15/21 | — | (32,684 | ) | ||||||||||||||||||||||||
South African Rand | JPHQ | Sell | 31,739,886 | 2,174,101 | 12/15/21 | 183,021 | — | |||||||||||||||||||||||||
Japanese Yen | JPHQ | Sell | 100,000,000 | 1,052,112,500 | KRW | 12/15/21 | 4,165 | (3,655 | ) | |||||||||||||||||||||||
South Korean Won | JPHQ | Buy | 4,265,825,450 | 3,650,000 | 12/15/21 | — | (59,616 | ) | ||||||||||||||||||||||||
South Korean Won | JPHQ | Sell | 1,057,562,850 | 900,000 | 12/15/21 | 10,012 | (122 | ) | ||||||||||||||||||||||||
Norwegian Krone | JPHQ | Sell | 4,000,000 | 4,053,094 | SEK | 12/15/21 | 31,858 | (24,155 | ) | |||||||||||||||||||||||
Taiwan Dollar | JPHQ | Buy | 164,643,800 | 5,952,183 | 12/15/21 | 10 | (31,032 | ) | ||||||||||||||||||||||||
Taiwan Dollar | JPHQ | Sell | 199,184,875 | 7,220,810 | 12/15/21 | 57,432 | — | |||||||||||||||||||||||||
Thai Baht | JPHQ | Buy | 70,896,830 | 2,150,000 | 12/15/21 | — | (45,831 | ) | ||||||||||||||||||||||||
Australian Dollar | BZWS | Buy | 1,357,000 | 998,965 | 12/17/21 | — | (31,344 | ) | ||||||||||||||||||||||||
Australian Dollar | BZWS | Sell | 14,604,000 | 10,673,912 | 12/17/21 | 260,766 | (340 | ) | ||||||||||||||||||||||||
Australian Dollarb | MSCO | Buy | 6,684,000 | 4,893,150 | 12/17/21 | — | (127,072 | ) | ||||||||||||||||||||||||
Australian Dollarb | MSCO | Sell | 15,411,000 | 11,309,257 | 12/17/21 | 320,345 | (12 | ) | ||||||||||||||||||||||||
British Pound | BNYM | Sell | 2,810,486 | 3,784,348 | 12/17/21 | 44,748 | — | |||||||||||||||||||||||||
British Pound | BZWS | Buy | 3,689,000 | 5,046,965 | 12/17/21 | 2 | (138,427 | ) | ||||||||||||||||||||||||
British Pound | BZWS | Sell | 1,675,000 | 2,278,762 | 12/17/21 | 50,049 | (26 | ) | ||||||||||||||||||||||||
British Poundb | MSCO | Buy | 4,549,000 | 6,268,155 | 12/17/21 | — | (215,309 | ) | ||||||||||||||||||||||||
British Poundb | MSCO | Sell | 8,396,000 | 11,369,668 | 12/17/21 | 198,263 | (213 | ) | ||||||||||||||||||||||||
Canadian Dollar | BZWS | Buy | 2,860,000 | 2,262,406 | 12/17/21 | — | (22,955 | ) | ||||||||||||||||||||||||
Canadian Dollar | BZWS | Sell | 3,496,000 | 2,763,435 | 12/17/21 | 25,980 | — | |||||||||||||||||||||||||
Canadian Dollarb | MSCO | Buy | 6,830,000 | 5,473,135 | 12/17/21 | — | (125,075 | ) | ||||||||||||||||||||||||
Canadian Dollarb | MSCO | Sell | 6,078,000 | 4,778,621 | 12/17/21 | 23,093 | (3,696 | ) | ||||||||||||||||||||||||
Euro | BNYM | Sell | 31,791,080 | 35,977,171 | 12/17/21 | — | (106,649 | ) | ||||||||||||||||||||||||
Euro | BZWS | Buy | 3,486,000 | 4,042,863 | 12/17/21 | 4,627 | (90,784 | ) |
franklintempleton.com | Semiannual Report | 73 |
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) | ||||||||||||||||||||||||||||||||
Euro | BZWS | Sell | 9,404,000 | 11,009,090 | 12/17/21 | $ | 341,747 | $ | (6,470 | ) | ||||||||||||||||||||||
Eurob | MSCO | Buy | 10,374,000 | 12,089,122 | 12/17/21 | 11,147 | (325,473 | ) | ||||||||||||||||||||||||
Eurob | MSCO | Sell | 18,372,000 | 21,621,215 | 12/17/21 | 771,640 | (3,192 | ) | ||||||||||||||||||||||||
Hong Kong Dollar | BNYM | Buy | 2,570,563 | 329,640 | 12/17/21 | 7 | — | |||||||||||||||||||||||||
Hong Kong Dollar | BNYM | Sell | 28,733,348 | 3,688,515 | 12/17/21 | 3,770 | — | |||||||||||||||||||||||||
Japanese Yen | BZWS | Sell | 106,906,000 | 945,420 | 12/17/21 | — | (760 | ) | ||||||||||||||||||||||||
Japanese Yenb | MSCO | Buy | 1,887,084,000 | 16,902,612 | 12/17/21 | 50,800 | (251,626 | ) | ||||||||||||||||||||||||
Japanese Yenb | MSCO | Sell | 2,629,816,000 | 23,695,269 | 12/17/21 | 447,567 | (27,692 | ) | ||||||||||||||||||||||||
Mexican Peso | BZWS | Sell | 19,117,000 | 925,285 | 12/17/21 | 37,013 | — | |||||||||||||||||||||||||
Mexican Pesob | MSCO | Buy | 89,898,000 | 4,417,023 | 12/17/21 | — | (239,908 | ) | ||||||||||||||||||||||||
Mexican Peso | MSCO | Sell | 59,318,000 | 2,913,903 | 12/17/21 | 158,896 | (1,207 | ) | ||||||||||||||||||||||||
New Zealand Dollarb | MSCO | Buy | 6,704,000 | 4,755,187 | 12/17/21 | — | (180,463 | ) | ||||||||||||||||||||||||
New Zealand Dollarb | MSCO | Sell | 4,060,000 | 2,823,900 | 12/17/21 | 54,383 | (976 | ) | ||||||||||||||||||||||||
Swedish Krona | BZWS | Buy | 1,000 | 115 | 12/17/21 | — | (4 | ) | ||||||||||||||||||||||||
Swedish Krona | BZWS | Sell | 12,189,000 | 1,391,649 | 12/17/21 | 38,418 | — | |||||||||||||||||||||||||
Swiss Franc | BNYM | Sell | 13,512,627 | 14,537,991 | 12/17/21 | — | (193,319 | ) | ||||||||||||||||||||||||
Swiss Francb | MSCO | Buy | 2,492,000 | 2,708,205 | 12/17/21 | 9,161 | (617 | ) | ||||||||||||||||||||||||
Swiss Francb | MSCO | Sell | 7,030,000 | 7,634,604 | 12/17/21 | 714 | (30,136 | ) | ||||||||||||||||||||||||
Australian Dollar | BNYM | Sell | 989,000 | 716,671 | 12/22/21 | 11,397 | — | |||||||||||||||||||||||||
Canadian Dollar | BNYM | Sell | 8,399,000 | 6,601,941 | 12/22/21 | 28,422 | (3,640 | ) | ||||||||||||||||||||||||
Euro | BNYM | Sell | 6,067,000 | 7,124,934 | 12/22/21 | 237,041 | — | |||||||||||||||||||||||||
Japanese Yen | BNYM | Sell | 44,888,525 | 402,851 | 12/22/21 | 5,512 | — | |||||||||||||||||||||||||
Kazakhstan Tenge | JPHQ | Buy | 271,096,800 | 624,000 | 12/22/21 | — | (11,286 | ) | ||||||||||||||||||||||||
Kazakhstan Tenge | JPHQ | Sell | 271,096,800 | 622,521 | 12/22/21 | 9,806 | — | |||||||||||||||||||||||||
Colombian Peso | MSCS | Sell | 424,857,000 | 111,548 | 1/11/22 | 5,699 | — | |||||||||||||||||||||||||
Chilean Peso | JPHQ | Buy | 1,653,560,948 | 2,011,670 | 1/25/22 | 2,984 | (28,275 | ) | ||||||||||||||||||||||||
Chilean Peso | JPHQ | Sell | 1,670,840,614 | 2,005,074 | 1/25/22 | 2,608 | (4,671 | ) | ||||||||||||||||||||||||
Colombian Peso | JPHQ | Buy | 14,443,841,331 | 3,669,866 | 1/25/22 | 8,943 | (85,066 | ) | ||||||||||||||||||||||||
Colombian Peso | JPHQ | Sell | 14,927,212,705 | 3,763,621 | 1/25/22 | 56,188 | (6,577 | ) | ||||||||||||||||||||||||
Hungarian Forint | JPHQ | Sell | 380,733,808 | 1,050,000 | EUR | 1/25/22 | 33,471 | (22,174 | ) | |||||||||||||||||||||||
Euro | JPHQ | Sell | 1,081,000 | 1,249,906 | 1/25/22 | 21,465 | — | |||||||||||||||||||||||||
Euro | JPHQ | Sell | 1,210,000 | 442,281,015 | HUF | 1/25/22 | 30,262 | (32,318 | ) | |||||||||||||||||||||||
Indian Rupee | JPHQ | Buy | 322,171,500 | 4,270,000 | 1/25/22 | — | (7,932 | ) | ||||||||||||||||||||||||
Indian Rupee | JPHQ | Sell | 320,410,911 | 4,251,460 | 1/25/22 | 24,670 | (11,987 | ) | ||||||||||||||||||||||||
Indonesian Rupiah | JPHQ | Buy | 41,346,631,631 | 2,879,925 | 1/25/22 | 421 | (9,980 | ) | ||||||||||||||||||||||||
Indonesian Rupiah | JPHQ | Sell | 42,927,794,406 | 3,022,871 | 1/25/22 | 42,738 | — | |||||||||||||||||||||||||
Mexican Peso | JPHQ | Buy | 87,452,413 | 4,120,256 | 1/25/22 | 31,932 | (119,114 | ) | ||||||||||||||||||||||||
Mexican Peso | JPHQ | Sell | 109,829,917 | 5,051,274 | 1/25/22 | 58,266 | (72,057 | ) | ||||||||||||||||||||||||
Peruvian Nuevo Sol | JPHQ | Buy | 4,265,771 | 1,067,891 | 1/25/22 | — | (22,249 | ) | ||||||||||||||||||||||||
Peruvian Nuevo Sol | JPHQ | Sell | 5,511,289 | 1,397,917 | 1/25/22 | 46,969 | — | |||||||||||||||||||||||||
Philippine Peso | JPHQ | Buy | 94,060,200 | 1,860,000 | 1/25/22 | 3,485 | — | |||||||||||||||||||||||||
Philippine Peso | JPHQ | Sell | 94,497,182 | 1,850,000 | 1/25/22 | — | (22,142 | ) | ||||||||||||||||||||||||
Russian Ruble | JPHQ | Buy | 512,023,443 | 7,036,790 | 1/25/22 | — | (206,678 | ) | ||||||||||||||||||||||||
Russian Ruble | JPHQ | Sell | 518,152,584 | 7,176,870 | 1/25/22 | 264,998 | — | |||||||||||||||||||||||||
South African Rand | JPHQ | Buy | 29,212,721 | 1,782,196 | 1/25/22 | 41,280 | (1,306 | ) | ||||||||||||||||||||||||
South African Rand | JPHQ | Sell | 83,049,758 | 5,384,066 | 1/25/22 | 244,213 | (40,450 | ) | ||||||||||||||||||||||||
Thai Baht | JPHQ | Buy | 61,060,400 | 1,840,000 | 1/25/22 | — | (27,461 | ) | ||||||||||||||||||||||||
Thai Baht | JPHQ | Sell | 60,978,952 | 1,870,001 | 1/25/22 | 59,880 | — | |||||||||||||||||||||||||
Turkish Lira | JPHQ | Buy | 20,662,195 | 2,030,000 | 1/25/22 | — | (559,992 | ) | ||||||||||||||||||||||||
Turkish Lira | JPHQ | Sell | 20,557,525 | 2,136,454 | 1/25/22 | 673,891 | — | |||||||||||||||||||||||||
Euro | BOFA | Sell | 370,000 | 431,627 | 1/26/22 | 11,152 | — | |||||||||||||||||||||||||
Euro | BZWS | Sell | 115,000 | 134,129 | 1/26/22 | 3,441 | — | |||||||||||||||||||||||||
British Pound | MSCO | Sell | 580,000 | 802,590 | 1/28/22 | 30,554 | — | |||||||||||||||||||||||||
British Pound | DBAB | Sell | 166,000 | 227,634 | 1/31/22 | 6,674 | — | |||||||||||||||||||||||||
British Pound | JPHQ | Sell | 1,120,000 | 1,531,370 | 1/31/22 | 40,555 | — | |||||||||||||||||||||||||
Euro | JPHQ | Sell | 3,730,000 | 4,389,464 | 1/31/22 | 150,179 | — | |||||||||||||||||||||||||
Hong Kong Dollar | JPHQ | Sell | 520,000 | 66,797 | 1/31/22 | 112 | — | |||||||||||||||||||||||||
Swiss Franc | JPHQ | Sell | 390,000 | 424,150 | 1/31/22 | — | (1,690 | ) | ||||||||||||||||||||||||
Brazilian Real | JPHQ | Buy | 1,687,080 | 297,061 | 2/02/22 | 197 | (1,393 | ) | ||||||||||||||||||||||||
South Korean Won | MSCO | Buy | 1,605,851,629 | 1,360,395 | 2/08/22 | — | (9,768 | ) |
74 | 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) | ||||||||||||||||||||||||||||||||
South Korean Won | MSCO | Sell | 1,399,093,131 | 1,184,573 | 2/08/22 | $ | 7,843 | $ | — | |||||||||||||||||||||||
Euro | HSBC | Sell | 125,000 | 143,184 | 2/17/22 | 1,069 | — | |||||||||||||||||||||||||
Ukraine Hryvnia | JPHQ | Sell | 34,404,000 | 1,220,000 | 2/28/22 | — | (46,044 | ) | ||||||||||||||||||||||||
Taiwan Dollar | JPHQ | Buy | 218,296,000 | 8,000,000 | 3/01/22 | — | (149,016 | ) | ||||||||||||||||||||||||
Taiwan Dollar | JPHQ | Sell | 218,296,000 | 8,137,261 | 3/01/22 | 286,277 | — | |||||||||||||||||||||||||
Brazilian Real | BOFA | Sell | 1,192,000 | 207,121 | 3/03/22 | — | (471 | ) | ||||||||||||||||||||||||
Chilean Peso | MSCO | Sell | 938,020,650 | 1,116,150 | 3/15/22 | 4,509 | (8,534 | ) | ||||||||||||||||||||||||
Chinese Yuan | JPHQ | Sell | 2,575,922 | 400,000 | 3/16/22 | — | (1,317 | ) | ||||||||||||||||||||||||
Czech Koruna | JPHQ | Buy | 22,956,706 | 1,011,967 | 3/16/22 | 2,884 | — | |||||||||||||||||||||||||
Czech Koruna | JPHQ | Sell | 22,956,706 | 1,002,783 | 3/16/22 | — | (12,068 | ) | ||||||||||||||||||||||||
Indian Rupee | JPHQ | Buy | 18,948,150 | 250,000 | 3/16/22 | — | (808 | ) | ||||||||||||||||||||||||
Indian Rupee | JPHQ | Sell | 18,871,625 | 250,000 | 3/16/22 | 1,815 | — | |||||||||||||||||||||||||
Indonesian Rupiah | JPHQ | Buy | 3,626,750,000 | 250,000 | 3/16/22 | 543 | — | |||||||||||||||||||||||||
Indonesian Rupiah | JPHQ | Sell | 45,648,947,384 | 3,165,750 | 3/16/22 | 12,556 | (327 | ) | ||||||||||||||||||||||||
Russian Ruble | JPHQ | Buy | 106,717,848 | 1,397,800 | 3/16/22 | 11,082 | — | |||||||||||||||||||||||||
Russian Ruble | JPHQ | Sell | 182,902,321 | 2,395,671 | 3/16/22 | — | (18,994 | ) | ||||||||||||||||||||||||
South African Rand | JPHQ | Buy | 13,910,024 | 847,637 | 3/16/22 | 14,576 | — | |||||||||||||||||||||||||
South African Rand | JPHQ | Sell | 27,749,110 | 1,735,672 | 3/16/22 | 15,642 | — | |||||||||||||||||||||||||
South Korean Won | JPHQ | Buy | 335,400,900 | 300,000 | 3/16/22 | — | (18,028 | ) | ||||||||||||||||||||||||
South Korean Won | JPHQ | Sell | 335,106,000 | 300,000 | 3/16/22 | 18,276 | — | |||||||||||||||||||||||||
Kazakhstan Tenge | JPHQ | Buy | 153,495,679 | 346,960 | 3/17/22 | — | (6,869 | ) | ||||||||||||||||||||||||
Kazakhstan Tenge | JPHQ | Sell | 153,495,679 | 345,382 | 3/17/22 | 5,290 | — | |||||||||||||||||||||||||
Kazakhstan Tenge | JPHQ | Buy | 129,816,848 | 293,040 | 3/21/22 | — | (5,677 | ) | ||||||||||||||||||||||||
Kazakhstan Tenge | JPHQ | Sell | 129,816,848 | 291,609 | 3/21/22 | 4,245 | — | |||||||||||||||||||||||||
|
| |||||||||||||||||||||||||||||||
Total Forward Exchange Contracts |
| $ | 6,573,274 | $ | (4,677,335 | ) | ||||||||||||||||||||||||||
|
| |||||||||||||||||||||||||||||||
Net unrealized appreciation (depreciation) |
| $ | 1,895,939 | |||||||||||||||||||||||||||||
|
|
*In U.S. dollars unless otherwise indicated.
aMay be comprised of multiple contracts with the same counterparty, currency and settlement date.
bA portion or all of the contracts are owned by K2 Holdings Investment Corp., a wholly-owned subsidiary of the Fund. See Note 1(k).
At November 30, 2021, the Fund had the following credit default swap contracts outstanding. See Note 1(e).
Credit Default Swap Contracts | ||||||||||||||||||||||||||||||||||||||||
Description | Annual Payment Rate Received (Paid) | Payment Frequency | Maturity Date | Notional Amounta | Value | Unamortized Upfront Payments (Receipts) | Unrealized Appreciation (Depreciation) | Ratingb | ||||||||||||||||||||||||||||||||
Centrally Cleared Swap Contracts | ||||||||||||||||||||||||||||||||||||||||
Contracts to Buy Protectionc | ||||||||||||||||||||||||||||||||||||||||
Single Name | ||||||||||||||||||||||||||||||||||||||||
Government of Mexico | (1.00)% | Quarterly | 12/20/23 | 4,039,000 | $ | (37,273 | ) | $ | (11,786 | ) | $ | (25,487 | ) | |||||||||||||||||||||||||||
Government of Mexico | (1.00)% | Quarterly | 12/20/23 | 61,000 | (563 | ) | (945 | ) | 382 | |||||||||||||||||||||||||||||||
Government of Mexico | (1.00)% | Quarterly | 6/20/25 | 142,000 | (679 | ) | (1,790 | ) | 1,111 | |||||||||||||||||||||||||||||||
Government of South Africa | (1.00)% | Quarterly | 12/20/24 | 1,464,000 | 31,619 | 42,608 | (10,989 | ) | ||||||||||||||||||||||||||||||||
Government of South Africa | (1.00)% | Quarterly | 12/20/24 | 4,478,000 | 96,715 | 132,619 | (35,904 | ) | ||||||||||||||||||||||||||||||||
Talen Energy Supply LLC | (1.00)% | Quarterly | 6/20/23 | 527,000 | 159,228 | 198,062 | (38,834 | ) | ||||||||||||||||||||||||||||||||
Traded Index | ||||||||||||||||||||||||||||||||||||||||
CDX.NA.HY.36 | (5.00)% | Quarterly | 6/20/26 | 1,000,000 | (76,522 | ) | (91,200 | ) | 14,678 | |||||||||||||||||||||||||||||||
CDX.NA.HY.37 | (5.00)% | Quarterly | 12/20/26 | 6,779,000 | (515,585 | ) | (512,384 | ) | (3,201 | ) | ||||||||||||||||||||||||||||||
CDX.NA.HY.37 | (5.00)% | Quarterly | 12/20/26 | 2,700,000 | (205,352 | ) | (254,863 | ) | 49,511 | |||||||||||||||||||||||||||||||
iTraxx Europe Crossover S36 | (5.00)% | Quarterly | 12/20/26 | 5,122,000 | EUR | (576,949 | ) | (576,949 | ) | — | ||||||||||||||||||||||||||||||
iTraxx Europe Crossover S36 | (5.00)% | Quarterly | 12/20/26 | 5,130,000 | EUR | (568,379 | ) | (566,296 | ) | (2,083 | ) |
franklintempleton.com | Semiannual Report | 75 |
FRANKLIN ALTERNATIVE STRATEGIES FUNDS
CONSOLIDATED STATEMENT OF INVESTMENTS (UNAUDITED)
Franklin K2 Alternative Strategies Fund (continued)
Credit Default Swap Contracts (continued) | ||||||||||||||||||||||||||||||||||||||||
Description | Annual Payment Rate Received (Paid) | Payment Frequency | Maturity Date | Notional Amounta | Value | Unamortized Upfront Payments (Receipts) | Unrealized Appreciation (Depreciation) | Ratingb | ||||||||||||||||||||||||||||||||
Contracts to Sell Protectionc,d | ||||||||||||||||||||||||||||||||||||||||
Single Name | ||||||||||||||||||||||||||||||||||||||||
Government of South Africa | 1.00% | Quarterly | 12/20/24 | 2,847,000 | $ | (61,489 | ) | $ | (221,735 | ) | $ | 160,246 | BB- | |||||||||||||||||||||||||||
Government of South Africa | 1.00% | Quarterly | 12/20/24 | 874,000 | (18,876 | ) | (25,494 | ) | 6,618 | BB- | ||||||||||||||||||||||||||||||
Talen Energy Supply LLC | 1.00% | Quarterly | 12/20/21 | 159,000 | (15,801 | ) | (33,755 | ) | 17,954 | B- | ||||||||||||||||||||||||||||||
Traded Index | ||||||||||||||||||||||||||||||||||||||||
CDX.NA.HY.37 | 5.00% | Quarterly | 12/20/26 | 1,735,000 | 131,958 | 146,513 | (14,555 | ) | | Non- Investment Grade |
| |||||||||||||||||||||||||||||
|
| |||||||||||||||||||||||||||||||||||||||
Total Centrally Cleared Swap Contracts |
| $ | (1,657,948 | ) | $ | (1,777,395 | ) | $ | 119,447 | |||||||||||||||||||||||||||||||
|
| |||||||||||||||||||||||||||||||||||||||
OTC Swap Contracts | ||||||||||||||||||||||||||||||||||||||||
Contracts to Buy Protectionc | ||||||||||||||||||||||||||||||||||||||||
Single Name | Counterparty | |||||||||||||||||||||||||||||||||||||||
Air France-KLM | (5.00)% | Quarterly | JPHQ | 12/20/21 | 32,000 | EUR | (392 | ) | 65 | (457 | ) | |||||||||||||||||||||||||||||
Air France-KLM | (5.00)% | Quarterly | JPHQ | 12/20/21 | 48,000 | EUR | (588 | ) | 68 | (656 | ) | |||||||||||||||||||||||||||||
Air France-KLM | (5.00)% | Quarterly | JPHQ | 12/20/21 | 64,000 | EUR | (784 | ) | 129 | (913 | ) | |||||||||||||||||||||||||||||
Air France-KLM | (5.00)% | Quarterly | JPHQ | 6/20/22 | 73,000 | EUR | (1,512 | ) | (435 | ) | (1,077 | ) | ||||||||||||||||||||||||||||
Air France-KLM | (5.00)% | Quarterly | JPHQ | 6/20/22 | 23,000 | EUR | (476 | ) | (305 | ) | (171 | ) | ||||||||||||||||||||||||||||
Air France-KLM | (5.00)% | Quarterly | JPHQ | 6/20/22 | 44,000 | EUR | (912 | ) | (278 | ) | (634 | ) | ||||||||||||||||||||||||||||
Air France-KLM | (5.00)% | Quarterly | JPHQ | 6/20/22 | 44,000 | EUR | (912 | ) | (265 | ) | (647 | ) | ||||||||||||||||||||||||||||
American Airlines Inc. | (5.00)% | Quarterly | BZWS | 12/20/21 | 34,000 | (335 | ) | 153 | (488 | ) | ||||||||||||||||||||||||||||||
American Airlines Inc. | (5.00)% | Quarterly | BZWS | 12/20/21 | 73,000 | (719 | ) | 310 | (1,029 | ) | ||||||||||||||||||||||||||||||
American Airlines Inc. | (5.00)% | Quarterly | BZWS | 12/20/23 | 518,000 | 22,084 | 23,279 | (1,195 | ) | |||||||||||||||||||||||||||||||
American Airlines Inc. | (5.00)% | Quarterly | BZWS | 6/20/24 | 143,000 | 7,738 | 7,616 | 122 | ||||||||||||||||||||||||||||||||
American Airlines Inc. | (5.00)% | Quarterly | BZWS | 6/20/26 | 600,000 | 62,965 | 28,845 | 34,120 | ||||||||||||||||||||||||||||||||
American Airlines Inc. | (5.00)% | Quarterly | CITI | 12/20/21 | 44,000 | (433 | ) | 279 | (712 | ) | ||||||||||||||||||||||||||||||
American Airlines Inc. | (5.00)% | Quarterly | CITI | 12/20/21 | 147,000 | (1,447 | ) | 586 | (2,033 | ) | ||||||||||||||||||||||||||||||
American Airlines Inc. | (5.00)% | Quarterly | CITI | 6/20/26 | 103,000 | 10,809 | 9,055 | 1,754 | ||||||||||||||||||||||||||||||||
American Airlines Inc. | (5.00)% | Quarterly | CITI | 6/20/26 | 96,000 | 10,074 | 9,111 | 963 | ||||||||||||||||||||||||||||||||
American Airlines Inc. | (5.00)% | Quarterly | FBCO | 12/20/21 | 29,000 | (285 | ) | 116 | (401 | ) | ||||||||||||||||||||||||||||||
American Airlines Inc. | (5.00)% | Quarterly | FBCO | 12/20/21 | 44,000 | (433 | ) | 204 | (637 | ) | ||||||||||||||||||||||||||||||
American Airlines Inc. | (5.00)% | Quarterly | GSCO | 12/20/21 | 29,000 | (285 | ) | 117 | (402 | ) | ||||||||||||||||||||||||||||||
American Airlines Inc. | (5.00)% | Quarterly | GSCO | 12/20/21 | 73,000 | (719 | ) | 612 | (1,331 | ) | ||||||||||||||||||||||||||||||
American Airlines Inc. | (5.00)% | Quarterly | GSCO | 6/20/23 | 60,000 | 1,423 | 786 | 637 | ||||||||||||||||||||||||||||||||
American Airlines Inc. | (5.00)% | Quarterly | GSCO | 6/20/23 | 60,000 | 1,423 | 1,058 | 365 |
76 | 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 | Annual 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) | ||||||||||||||||||||||||||||||||||||||||
American Airlines Inc. | (5.00)% | Quarterly | GSCO | 6/20/23 | 60,000 | $ | 1,423 | $ | 1,115 | $ | 308 | |||||||||||||||||||||||||||||
American Airlines Inc. | (5.00)% | Quarterly | GSCO | 12/20/23 | 120,000 | 5,116 | 3,677 | 1,439 | ||||||||||||||||||||||||||||||||
American Airlines Inc. | (5.00)% | Quarterly | GSCO | 12/20/23 | 846,000 | 36,068 | 26,080 | 9,988 | ||||||||||||||||||||||||||||||||
American Airlines Inc. | (5.00)% | Quarterly | JPHQ | 12/20/21 | 29,000 | (285 | ) | 191 | (476 | ) | ||||||||||||||||||||||||||||||
American Airlines Inc. | (5.00)% | Quarterly | JPHQ | 12/20/21 | 73,000 | (719 | ) | 315 | (1,034 | ) | ||||||||||||||||||||||||||||||
American Airlines Inc. | (5.00)% | Quarterly | JPHQ | 12/20/25 | 241,000 | 22,397 | 39,825 | (17,428 | ) | |||||||||||||||||||||||||||||||
American Axle & Manufacturing Inc. | (5.00)% | Quarterly | BZWS | 12/20/26 | 330,000 | (13,480 | ) | (12,534 | ) | (946 | ) | |||||||||||||||||||||||||||||
American Axle & Manufacturing Inc. | (5.00)% | Quarterly | BZWS | 12/20/26 | 274,000 | (11,193 | ) | (8,603 | ) | (2,590 | ) | |||||||||||||||||||||||||||||
American Axle & Manufacturing Inc. | (5.00)% | Quarterly | BZWS | 12/20/26 | 330,000 | (13,480 | ) | (8,260 | ) | (5,220 | ) | |||||||||||||||||||||||||||||
American Axle & Manufacturing Inc. | (5.00)% | Quarterly | BZWS | 12/20/26 | 274,000 | (11,193 | ) | (8,011 | ) | (3,182 | ) | |||||||||||||||||||||||||||||
American Axle & Manufacturing Inc. | (5.00)% | Quarterly | BZWS | 12/20/26 | 233,000 | (9,518 | ) | (6,332 | ) | (3,186 | ) | |||||||||||||||||||||||||||||
American Axle & Manufacturing Inc. | (5.00)% | Quarterly | BZWS | 12/20/26 | 121,000 | (4,943 | ) | (3,133 | ) | (1,810 | ) | |||||||||||||||||||||||||||||
American Axle & Manufacturing Inc. | (5.00)% | Quarterly | BZWS | 12/20/26 | 82,000 | (3,350 | ) | (2,400 | ) | (950 | ) | |||||||||||||||||||||||||||||
American Axle & Manufacturing Inc. | (5.00)% | Quarterly | GSCO | 12/20/26 | 137,000 | (4,012 | ) | (4,012 | ) | — | ||||||||||||||||||||||||||||||
Dow Inc. | (1.00)% | Quarterly | GSCO | 6/20/25 | 78,000 | (1,473 | ) | (405 | ) | (1,068 | ) | |||||||||||||||||||||||||||||
Dow Inc. | (1.00)% | Quarterly | GSCO | 6/20/25 | 78,000 | (1,473 | ) | (377 | ) | (1,096 | ) | |||||||||||||||||||||||||||||
Dow Inc. | (1.00)% | Quarterly | GSCO | 6/20/25 | 78,000 | (1,473 | ) | (269 | ) | (1,204 | ) | |||||||||||||||||||||||||||||
GE Capital Funding LLC | (1.00)% | Quarterly | JPHQ | 12/20/26 | 1,037,000 | (16,842 | ) | (10,072 | ) | (6,770 | ) | |||||||||||||||||||||||||||||
Government of Brazil | (1.00)% | Quarterly | BZWS | 12/20/24 | 1,840,000 | 44,972 | 39,937 | 5,035 | ||||||||||||||||||||||||||||||||
Government of Brazil | (1.00)% | Quarterly | BZWS | 12/20/24 | 9,700,000 | 237,079 | 163,907 | 73,172 | ||||||||||||||||||||||||||||||||
Government of Brazil | (1.00)% | Quarterly | BZWS | 12/20/26 | 201,000 | 14,392 | 9,340 | 5,052 | ||||||||||||||||||||||||||||||||
Government of Colombia | (1.00)% | Quarterly | BNPP | 12/20/26 | 461,000 | 27,277 | 27,277 | — | ||||||||||||||||||||||||||||||||
Government of Colombia | (1.00)% | Quarterly | BNPP | 12/20/26 | 760,000 | 44,632 | 44,632 | — | ||||||||||||||||||||||||||||||||
Government of Colombia | (1.00)% | Quarterly | BZWS | 12/20/26 | 535,000 | 30,944 | 30,944 | — | ||||||||||||||||||||||||||||||||
Government of Colombia | (1.00)% | Quarterly | BZWS | 12/20/26 | 1,120,000 | 64,781 | 64,781 | — | ||||||||||||||||||||||||||||||||
Government of Colombia | (1.00)% | Quarterly | DBAB | 12/20/26 | 669,000 | 38,754 | 33,200 | 5,554 | ||||||||||||||||||||||||||||||||
Government of Italy | (1.00)% | Quarterly | BOFA | 6/20/24 | 132,000 | (1,946 | ) | 1,586 | (3,532 | ) | ||||||||||||||||||||||||||||||
Government of Italy | (1.00)% | Quarterly | JPHQ | 6/20/24 | 218,000 | (3,215 | ) | 1,219 | (4,434 | ) | ||||||||||||||||||||||||||||||
Government of Mexico | (1.00)% | Quarterly | BZWS | 6/20/26 | 1,510,000 | 2,713 | 5,284 | (2,571 | ) | |||||||||||||||||||||||||||||||
Government of Mexico | (1.00)% | Quarterly | CITI | 12/20/26 | 345,000 | 2,435 | (167 | ) | 2,602 | |||||||||||||||||||||||||||||||
Government of Turkey | (1.00)% | Quarterly | BZWS | 12/20/23 | 418,000 | 30,510 | 31,319 | (809 | ) | |||||||||||||||||||||||||||||||
Government of Turkey | (1.00)% | Quarterly | BZWS | 12/20/23 | 975,000 | 71,166 | 65,227 | 5,939 | ||||||||||||||||||||||||||||||||
Government of Ukraine | (1.00)% | Quarterly | BZWS | 12/20/22 | 610,000 | (5,797 | ) | 25,111 | (30,908 | ) |
franklintempleton.com | Semiannual Report | 77 |
FRANKLIN ALTERNATIVE STRATEGIES FUNDS
CONSOLIDATED STATEMENT OF INVESTMENTS (UNAUDITED)
Franklin K2 Alternative Strategies Fund (continued)
Credit Default Swap Contracts (continued) | ||||||||||||||||||||||||||||||||||||||||
Description | Annual 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) | ||||||||||||||||||||||||||||||||||||||||
Government of Ukraine | (5.00)% | Quarterly | HSBC | 12/20/26 | 923,000 | $ | 10,137 | $ | — | $ | 10,137 | |||||||||||||||||||||||||||||
Government of Ukraine | (5.00)% | Quarterly | HSBC | 12/20/26 | 382,000 | 4,195 | 7,157 | (2,962 | ) | |||||||||||||||||||||||||||||||
Groupe Casino | (5.00)% | Quarterly | BZWS | 12/20/23 | 60,000 | EUR | (259 | ) | 67 | (326 | ) | |||||||||||||||||||||||||||||
Groupe Casino | (5.00)% | Quarterly | BZWS | 12/20/23 | 60,000 | EUR | (259 | ) | 133 | (392 | ) | |||||||||||||||||||||||||||||
Groupe Casino | (5.00)% | Quarterly | JPHQ | 12/20/23 | 200,000 | EUR | (865 | ) | (5,244 | ) | 4,379 | |||||||||||||||||||||||||||||
Hovnanian | (5.00)% | Quarterly | BZWS | 6/20/26 | 29,000 | 2,558 | 2,818 | (260 | ) | |||||||||||||||||||||||||||||||
Hovnanian | (5.00)% | Quarterly | BZWS | 6/20/26 | 145,000 | 12,791 | 13,441 | (650 | ) | |||||||||||||||||||||||||||||||
Kohl’s Corp. | (1.00)% | Quarterly | GSCO | 12/20/25 | 899,000 | (1,105 | ) | 66,005 | (67,110 | ) | ||||||||||||||||||||||||||||||
Kohl’s Corp. | (1.00)% | Quarterly | MSCO | 12/20/25 | 455,000 | (560 | ) | 33,863 | (34,423 | ) | ||||||||||||||||||||||||||||||
Loxam SAS | (5.00)% | Quarterly | JPHQ | 12/20/26 | 100,000 | EUR | (7,060 | ) | (5,490 | ) | (1,570 | ) | ||||||||||||||||||||||||||||
Macy’s Retail Holdings LLC | (1.00)% | Quarterly | BZWS | 12/20/26 | 71,000 | 3,993 | 5,028 | (1,035 | ) | |||||||||||||||||||||||||||||||
MBIA Inc. | (5.00)% | Quarterly | BZWS | 6/20/22 | 24,000 | (759 | ) | (156 | ) | (603 | ) | |||||||||||||||||||||||||||||
MBIA Inc. | (5.00)% | Quarterly | CITI | 6/20/22 | 40,000 | (1,265 | ) | (722 | ) | (543 | ) | |||||||||||||||||||||||||||||
MBIA Inc. | (5.00)% | Quarterly | CITI | 12/20/24 | 112,000 | (9,331 | ) | (12,030 | ) | 2,699 | ||||||||||||||||||||||||||||||
MBIA Inc. | (5.00)% | Quarterly | GSCO | 6/20/22 | 25,000 | (791 | ) | (357 | ) | (434 | ) | |||||||||||||||||||||||||||||
MBIA Inc. | (5.00)% | Quarterly | GSCO | 12/20/24 | 244,000 | (20,329 | ) | (24,658 | ) | 4,329 | ||||||||||||||||||||||||||||||
Simon Property Group LP | (1.00)% | Quarterly | BZWS | 12/20/26 | 625,000 | (10,482 | ) | (8,837 | ) | (1,645 | ) | |||||||||||||||||||||||||||||
Simon Property Group LP | (1.00)% | Quarterly | JPHQ | 12/20/25 | 291,000 | (5,812 | ) | 5,017 | (10,829 | ) | ||||||||||||||||||||||||||||||
Simon Property Group LP | (1.00)% | Quarterly | MSCO | 12/20/25 | 531,000 | (10,605 | ) | 9,154 | (19,759 | ) | ||||||||||||||||||||||||||||||
Stena AB | (5.00)% | Quarterly | GSCO | 6/20/24 | 87,000 | EUR | (5,790 | ) | 3,988 | (9,778 | ) | |||||||||||||||||||||||||||||
Stena AB | (5.00)% | Quarterly | GSCO | 6/20/24 | 186,000 | EUR | (12,378 | ) | 8,345 | (20,723 | ) | |||||||||||||||||||||||||||||
Stena AB | (5.00)% | Quarterly | GSCO | 12/20/26 | 29,000 | EUR | (1,124 | ) | (837 | ) | (287 | ) | ||||||||||||||||||||||||||||
TDC A/S | (1.00)% | Quarterly | BNPP | 12/20/26 | 70,000 | EUR | 2,737 | 2,636 | 101 | |||||||||||||||||||||||||||||||
TDC A/S | (1.00)% | Quarterly | BNPP | 12/20/26 | 71,000 | EUR | 2,776 | 3,327 | (551 | ) | ||||||||||||||||||||||||||||||
TDC A/S | (1.00)% | Quarterly | BNPP | 12/20/26 | 71,000 | EUR | 2,776 | 3,327 | (551 | ) | ||||||||||||||||||||||||||||||
Telecom Italia | (1.00)% | Quarterly | JPHQ | 12/20/26 | 70,000 | EUR | 5,929 | 3,721 | 2,208 | |||||||||||||||||||||||||||||||
Telecom Italia | (1.00)% | Quarterly | JPHQ | 12/20/26 | 70,000 | EUR | 5,929 | 3,970 | 1,959 | |||||||||||||||||||||||||||||||
Telecom Italia | (1.00)% | Quarterly | JPHQ | 12/20/26 | 70,000 | EUR | 5,929 | 5,480 | 449 | |||||||||||||||||||||||||||||||
Telecom Italia | (1.00)% | Quarterly | JPHQ | 12/20/26 | 68,000 | EUR | 5,760 | 5,489 | 271 | |||||||||||||||||||||||||||||||
Telecom Italia | (1.00)% | Quarterly | JPHQ | 12/20/26 | 139,000 | EUR | 11,774 | 11,356 | 418 | |||||||||||||||||||||||||||||||
Contracts to Sell Protectionc,d | ||||||||||||||||||||||||||||||||||||||||
Single Name | ||||||||||||||||||||||||||||||||||||||||
Euro Garages Ltd. | 5.00% | Quarterly | GSCO | 12/20/26 | 50,000 | EUR | 2,904 | 2,595 | 309 | B | ||||||||||||||||||||||||||||||
Government of Turkey | 1.00% | Quarterly | BZWS | 12/20/26 | 697,000 | (119,859 | ) | (108,522 | ) | (11,337 | ) | B+ | ||||||||||||||||||||||||||||
Government of Turkey | 1.00% | Quarterly | BZWS | 12/20/26 | 279,000 | (47,978 | ) | (47,471 | ) | (507 | ) | B+ | ||||||||||||||||||||||||||||
Groupe Casino | 5.00% | Quarterly | GSCO | 12/20/26 | 70,000 | EUR | (7,929 | ) | (5,702 | ) | (2,227 | ) | BB- | |||||||||||||||||||||||||||
|
| |||||||||||||||||||||||||||||||||||||||
Total OTC Swap Contracts |
| $ | 492,199 | $ | 608,389 | $ | (116,190 | ) | ||||||||||||||||||||||||||||||||
|
| |||||||||||||||||||||||||||||||||||||||
Total Credit Default Swap Contracts
|
| $ | (1,165,749 | ) | $ | (1,169,006 | ) | $ | 3,257 | |||||||||||||||||||||||||||||||
|
|
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.
78 | Semiannual Report | franklintempleton.com |
FRANKLIN ALTERNATIVE STRATEGIES FUNDS
CONSOLIDATED STATEMENT OF INVESTMENTS (UNAUDITED)
Franklin K2 Alternative Strategies Fund (continued)
At November 30, 2021, 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 1.34% | Quarterly | 12/15/22 | 46,000,000,000 | KRW | $ | (78,228 | ) | |||||||||
Receive Fixed 11.59% | Annually | 1/02/23 | 37,424,742 | BRL | 5,811 | |||||||||||
Receive Fixed 7.68% | Annually | 1/02/23 | 27,000,000 | BRL | (158,233 | ) | ||||||||||
Receive Floating rate 3-Month-JIBAR | Quarterly | 1/25/24 | 22,006,060 | ZAR | (1,767 | ) | ||||||||||
Receive Floating rate 3-Month-JIBAR | Quarterly | 1/25/24 | 27,762,629 | ZAR | (2,638 | ) | ||||||||||
Receive Floating rate 6 Month-PRIBOR | Annually | 1/25/24 | 137,702,160 | CZK | (9,784 | ) | ||||||||||
Receive Floating rate 6 Month-PRIBOR | Annually | 1/25/24 | 58,801,602 | CZK | (20,912 | ) | ||||||||||
Receive Floating rate 6 Month-PRIBOR | Annually | 1/25/24 | 25,979,911 | CZK | (9,240 | ) | ||||||||||
Receive Floating rate 6 Month-PRIBOR | Annually | 1/25/24 | 58,915,966 | CZK | (20,953 | ) | ||||||||||
Receive Fixed 8.44% | Annually | 1/02/25 | 12,000,000 | BRL | (122,207 | ) | ||||||||||
Receive Fixed 6.30% | Quarterly | 7/31/25 | 53,795,745 | ZAR | (43,400 | ) | ||||||||||
Receive Fixed 7.57% | Quarterly | 11/04/25 | 39,000,000 | ZAR | 15,018 | |||||||||||
Receive Floating rate 3-Month USD LIBOR | Semi-Annually | 6/16/26 | 1,400,000 | 12,193 | ||||||||||||
Receive Floating rate 3-Month USD LIBOR | Semi-Annually | 6/16/26 | 1,150,000 | 11,431 | ||||||||||||
Receive Fixed 1.25% | Quarterly | 12/15/26 | 1,300,000 | 1,425 | ||||||||||||
Receive Fixed 6.26% | Quarterly | 1/25/27 | 6,652,804,515 | COP | (20,159 | ) | ||||||||||
Receive Floating rate 6 Month-WIBOR | Annually | 3/16/27 | 14,502,985 | PLN | — | |||||||||||
Receive Floating rate 6 Month-SORA | Semi-Annually | 12/15/31 | 1,857,493 | SGD | 59,904 | |||||||||||
Receive Fixed 7.72% | Monthly | 1/13/32 | 64,105,000 | MXN | 40,053 | |||||||||||
Receive Fixed 7.94% | Quarterly | 1/25/32 | 25,017,434 | ZAR | 19,721 | |||||||||||
|
| |||||||||||||||
Total Interest Rate Swap Contracts |
| $ | (321,965 | ) | ||||||||||||
|
|
*In U.S. dollars unless otherwise indicated.
franklintempleton.com | Semiannual Report | 79 |
FRANKLIN ALTERNATIVE STRATEGIES FUNDS
CONSOLIDATED STATEMENT OF INVESTMENTS (UNAUDITED)
Franklin K2 Alternative Strategies Fund (continued)
At November 30, 2021, 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 | ||||||||||||||||||||||
Afterpay Ltd. | 1-Day FEDEF + 0.55% | Monthly | MSCO | 11/11/22 | 295,374 | $ | (29,015 | ) | ||||||||||||||
AKKA Technologies | 1-Month EIBOR + 0.40% | Monthly | BZWS | 9/09/22 | 1,679,003 | EUR | 1,603 | |||||||||||||||
Amundi SA | 1-Day EONIA + 0.40% | Monthly | MSCS | 3/14/25 | 266,038 | EUR | 161,514 | |||||||||||||||
Anima Holding SpA | 1-Month EURIBOR + 0.40% | Monthly | MSCS | 12/21/21 | 2,129,238 | EUR | (265,164 | ) | ||||||||||||||
Avast PLC | 1-Day SONIA + 0.40% | Monthly | BZWS | 7/27/22 | 2,852,688 | GBP | 25,171 | |||||||||||||||
Avast PLC | 1-Day FEDEF + 0.65% | Monthly | MSCO | 9/21/22 | 552,290 | 22,409 | ||||||||||||||||
Barclays PLC | 1-Month LIBOR + 0.40% | Monthly | MSCS | 4/20/22 | 1,058,676 | GBP | (62,736 | ) | ||||||||||||||
BHP Group PLC | 1-Day FEDEF + 0.40% | Monthly | MSCO | 11/22/22 | 1,333,980 | (70,718 | ) | |||||||||||||||
Blue Prism Group PLC | 1-Day SONIA + 0.40% | Monthly | BZWS | 9/07/22 | 730,086 | GBP | 736 | |||||||||||||||
BNP Paribas SA | 1-Month LIBOR + 0.40% | Monthly | MSCS | 3/14/25 | 1,368,172 | EUR | 907,267 | |||||||||||||||
Bureau Veritas SA | 1-Month EURIBOR + 0.40% | Monthly | GSCO | 12/21/21 | 212,386 | EUR | (7,813 | ) | ||||||||||||||
Bureau Veritas SA | 1-Month EURIBOR + 0.40% | Monthly | MSCS | 3/14/25 | 1,082,490 | EUR | 535,166 | |||||||||||||||
Callaway Golf Co. | 1-Day FEDEF + 0.40% | Monthly | MSCO | 11/22/22 | 1,217,822 | (320,228 | ) | |||||||||||||||
CapitaLand Investment Ltd. | 1-Day SORA + 0.55% | Monthly | MSCO | 5/22/23 | 710,355 | SGD | 169,404 | |||||||||||||||
Christian Dior SE | 1-Month EURIBOR + 0.40% | Monthly | BZWS | 5/25/22 | 1,543,050 | EUR | (16,714 | ) | ||||||||||||||
Clearway Energy Inc. | 1-Month LIBOR + 0.35% | Monthly | JPHQ | 1/20/22 | 238,994 | 43,597 | ||||||||||||||||
CorePoint Lodging Inc. | 1-Month LIBOR + 0.35% | Monthly | BZWS | 11/28/22 | 917,832 | (4,834 | ) | |||||||||||||||
CoreSite Realty Corp. | 1-Month LIBOR + 0.35% | Monthly | BZWS | 11/16/22 | 1,144,611 | 2,235 | ||||||||||||||||
Croda International PLC | 1-Month LIBOR + 0.40% | Monthly | MSCS | 4/20/22 | 1,344,683 | GBP | 84,169 | |||||||||||||||
Crown Holdings Inc. | 1-Day FEDEF + 0.40% | Monthly | MSCO | 11/22/22 | 1,692,599 | 104,289 | ||||||||||||||||
Crown Resorts Ltd. | 1-Month BBSW + 0.55% | Monthly | MSCO | 12/22/21 | 247,672 | AUD | (14,166 | ) | ||||||||||||||
CyrusOne Inc. | 1-Month LIBOR + 0.35% | Monthly | BZWS | 11/16/22 | 3,670,887 | (9,063 | ) | |||||||||||||||
Danone SA | 1-Month EURIBOR + 0.40% | Monthly | MSCO | 12/21/21 | 2,010,228 | EUR | (233,917 | ) | ||||||||||||||
Danone SA | 1-Month LIBOR + 0.40% | Monthly | MSCS | 3/14/25 | 3,905,164 | EUR | (185,520 | ) | ||||||||||||||
Electricite de France SA | 1-Day EONIA + 0.40% | Monthly | MSCO | 9/23/22 | 2,273,564 | EUR | 10,294 | |||||||||||||||
Elisa OYJ | 1-Month EURIBOR + 0.40% | Monthly | MSCO | 12/21/21 | 260,810 | EUR | (39,399 | ) | ||||||||||||||
Elisa OYJ | 1-Month EURIBOR + 0.40% | Monthly | MSCS | 3/14/25 | 444,640 | EUR | 60,223 | |||||||||||||||
Energy Transfer LP | 1-Month LIBOR + 0.90% | Monthly | GSCO | 10/04/22 | 121,446 | (16,036 | ) | |||||||||||||||
Energy Transfer LP | 1-Month LIBOR + 0.50% | Monthly | CITI | 10/20/22 | 115,578 | (19,263 | ) | |||||||||||||||
Engie SA | 1-Day EONIA + 0.40% | Monthly | MSCO | 9/23/22 | 4,085,632 | EUR | (195,908 | ) | ||||||||||||||
Entain PLC | 1-Month LIBOR + 0.40% | Monthly | BZWS | 2/28/22 | 316,785 | GBP | (13,446 | ) | ||||||||||||||
Entain PLC | 1-Day SONIA + 0.65% | Monthly | MSCO | 10/17/22 | 419,114 | GBP | (113,948 | ) | ||||||||||||||
Enterprise Products Partners LP | 1-Month LIBOR + 0.90% | Monthly | BOFA | 3/04/22 | 102,869 | (12,211 | ) | |||||||||||||||
Enterprise Products Partners LP | 1-Month LIBOR + 0.90% | Monthly | GSCO | 4/20/22 | 100,201 | (11,935 | ) | |||||||||||||||
ESG Core Investments BV | 1-Day EONIA + 0.65% | Monthly | MSCO | 9/06/22 | 41,835 | EUR | (3,064 | ) | ||||||||||||||
Ferguson PLC | 1-Day EONIA + 0.65% | Monthly | MSCO | 9/23/22 | 654,490 | 269,755 | ||||||||||||||||
Frasers Group PLC | 1-Month LIBOR + 0.40% | Monthly | MSCS | 4/20/22 | 813,732 | GBP | 3,719 | |||||||||||||||
GCP Student Living PLC | 1-Day SONIA + 0.40% | Monthly | BZWS | 7/26/22 | 326,435 | GBP | 2,062 | |||||||||||||||
HeidelbergCement AG | 1-Month EURIBOR + 0.40% | Monthly | MSCS | 12/21/21 | 2,132,035 | EUR | (232,566 | ) | ||||||||||||||
Hermes International | 1-Month EURIBOR + 0.40% | Monthly | MSCO | 12/21/21 | 689,260 | EUR | 121,968 | |||||||||||||||
Hikma Pharmaceuticals PLC | 1-Month LIBOR + 0.40% | Monthly | MSCS | 4/20/22 | 110,696 | GBP | (10,129 | ) | ||||||||||||||
ITV PLC | 1-Month LIBOR + 0.40% | Monthly | MSCS | 4/20/22 | 1,737,983 | GBP | (292,613 | ) | ||||||||||||||
Kansas City Southern | 1-Day FEDEF + 0.40% | Monthly | MSCO | 11/22/22 | 2,547,080 | 82,674 | ||||||||||||||||
Kering SA | 1-Month EURIBOR + 0.40% | Monthly | MSCO | 12/21/21 | 839,642 | EUR | 23,861 | |||||||||||||||
Kering SA | 1-Month EURIBOR + 0.40% | Monthly | MSCS | 3/14/25 | 1,461,221 | EUR | 736,882 | |||||||||||||||
Landmark Infrastructure Partners LP | 1-Month LIBOR + 0.35% | Monthly | BZWS | 5/20/22 | 1,600,983 | 2,936 | ||||||||||||||||
LG Chem Ltd. | 1-Day FEDEF + 0.30% | Monthly | MSCO | 8/10/23 | 2,548,323 | (255,062 | ) | |||||||||||||||
LVMH Moet Hennessy Louis Vuitton SE | 1-Day EONIA + 0.40% | Monthly | MSCS | 3/14/25 | 348,838 | EUR | 370,312 | |||||||||||||||
Meggitt PLC | 1-Day SONIA + 0.65% | Monthly | MSCO | 2/08/22 | 1,223,711 | GBP | (190,297 | ) |
80 | Semiannual Report | franklintempleton.com |
FRANKLIN ALTERNATIVE STRATEGIES FUNDS
CONSOLIDATED STATEMENT OF INVESTMENTS (UNAUDITED)
Franklin K2 Alternative Strategies Fund (continued)
Total Return Swap Contracts (continued) | ||||||||||||||||||||||
Underlying Instrument | Financing Rate | Payment Frequency | Counterparty | Maturity Date | Notional Value* | Value/Unrealized Appreciation (Depreciation) | ||||||||||||||||
OTC Swap Contracts (continued) | ||||||||||||||||||||||
Equity Contracts – Longa (continued) | ||||||||||||||||||||||
Meggitt PLC | 1-Day SONIA + 0.65% | Monthly | BZWS | 8/17/22 | 1,897,785 | GBP | $ | (8,544 | ) | |||||||||||||
MGM Growth Properties LLC | 1-Month LIBOR + 0.35% | Monthly | BZWS | 8/08/22 | 2,509,560 | (58,000 | ) | |||||||||||||||
Nestle SA | 1-Month LIBOR + 0.40% | Monthly | MSCS | 1/20/22 | 1,789,306 | CHF | (85,816 | ) | ||||||||||||||
Nippo Corp. | 1-Day MUTSCALM + 0.50% | Monthly | MSCO | 11/10/22 | 35,904,751 | JPY | (2,521 | ) | ||||||||||||||
Phillips 66 Partners LP | 1-Month LIBOR + 0.35% | Monthly | BZWS | 10/28/22 | 1,312,362 | (15,022 | ) | |||||||||||||||
Playtech PLC | 1-Day SONIA + 0.40% | Monthly | BZWS | 10/19/22 | 621,464 | GBP | 11,220 | |||||||||||||||
Ryanair Holdings PLC | 1-Month EURIBOR + 0.40% | Monthly | MSCS | 12/21/21 | 817,408 | EUR | (168,758 | ) | ||||||||||||||
Sanne Group PLC | 1-Day SONIA + 0.40% | Monthly | BZWS | 6/24/22 | 679,945 | GBP | 2,987 | |||||||||||||||
Siltronic AG | 1-Month LIBOR + 0.40% | Monthly | BZWS | 2/28/22 | 2,434,914 | EUR | (20,595 | ) | ||||||||||||||
Siltronic AG | 1-Day EONIA + 0.65% | Monthly | MSCO | 11/03/22 | 471,192 | EUR | (27,544 | ) | ||||||||||||||
Smith & Nephew PLC | 1-Month LIBOR + 0.40% | Monthly | MSCO | 4/20/22 | 3,800,799 | GBP | (430,592 | ) | ||||||||||||||
Smiths Group PLC | 1-Month LIBOR + 0.40% | Monthly | MSCS | 4/20/22 | 984,659 | GBP | (9,351 | ) | ||||||||||||||
Societe Generale SA | 1-Month LIBOR + 0.40% | Monthly | MSCS | 3/14/25 | 853,440 | EUR | 624,972 | |||||||||||||||
bSpark Infrastructure Group | 1-Month BBSW + 0.55% | Monthly | MSCO | 12/22/21 | 792,475 | AUD | 15,122 | |||||||||||||||
SSE PLC | 1-Day SONIA + 0.40% | Monthly | MSCO | 9/29/22 | 2,753,666 | GBP | (231,659 | ) | ||||||||||||||
Stroeer SE & Co. KGaA | 1-Month EURIBOR + 0.40% | Monthly | MSCS | 12/21/21 | 1,032,647 | EUR | (99,132 | ) | ||||||||||||||
Sydney Airport Finance Co. Pty Ltd. | 1-Month BBSW + 0.55% | Monthly | MSCO | 12/22/21 | 648,764 | AUD | (423 | ) | ||||||||||||||
Teekay LNG Partners LP | 1-Month LIBOR + 0.35% | Monthly | BZWS | 10/05/22 | 3,708,722 | 10,940 | ||||||||||||||||
TGOOD | 1-Day FEDEF + 0.30% | Monthly | MSCO | 9/28/22 | 2,038,297 | 2,583 | ||||||||||||||||
Toshiba Corp. | 1-Day MUTSCALM + 0.55% | Monthly | MSCO | 8/25/23 | 7,280,061 | JPY | (397 | ) | ||||||||||||||
TotalEnergies | 1-Day EONIA + 0.40% | Monthly | MSCO | 9/29/22 | 474,410 | EUR | (37,327 | ) | ||||||||||||||
Ultra Electronics Holdings PLC | 1-Day SONIA + 0.65% | Monthly | MSCO | 2/08/22 | 344,769 | GBP | (22,112 | ) | ||||||||||||||
Vodafone Group PLC | 1-Day SONIA + 0.65% | Monthly | MSCO | 2/08/22 | 951,494 | GBP | 10,733 | |||||||||||||||
Willis Towers Watson PLC | 1-Day FEDEF + 0.40% | Monthly | MSCO | 11/22/22 | 3,309,078 | (69,553 | ) | |||||||||||||||
|
| |||||||||||||||||||||
507,692 | ||||||||||||||||||||||
|
| |||||||||||||||||||||
Equity Contracts – Shortc | ||||||||||||||||||||||
Arthur J. Gallagher & Co. | 1-Day FEDEF - 0.35% | Monthly | MSCO | 2/04/22 | 1,566,238 | (274,221 | ) | |||||||||||||||
BHP Group PLC | 1-Day FEDEF - 2.02% | Monthly | MSCO | 2/04/22 | 1,478,285 | 184,831 | ||||||||||||||||
Canadian Pacific Railway Ltd. | 1-Day FEDEF - 0.35% | Monthly | MSCO | 2/04/22 | 1,896,732 | 69,306 | ||||||||||||||||
China Power | 1-Day HONIX - 0.50% | Monthly | MSCO | 10/13/22 | 3,661,252 | HKD | (52,551 | ) | ||||||||||||||
CLP Holdings | 1-Day HONIX - 0.50% | Monthly | MSCO | 7/20/23 | 11,865,026 | HKD | (13,352 | ) | ||||||||||||||
Colruyt SA | 1-Day EONIA - 0.40% | Monthly | MSCS | 3/14/25 | 1,343,611 | EUR | (13,800 | ) | ||||||||||||||
DJ EURO STOXX 50 Index | 1-Day EONIA - 0.45% | Monthly | MSCO | 3/22/22 | 307,887 | EUR | (231,677 | ) | ||||||||||||||
Elisa OYJ | 1-Day EONIA - 0.40% | Monthly | MSCS | 3/14/25 | 390,256 | EUR | (75,937 | ) | ||||||||||||||
Hannover Rueck SE | 1-Day EONIA - 0.35% | Monthly | MSCS | 3/14/25 | 558,395 | EUR | (173,703 | ) | ||||||||||||||
Hennes & Mauritz AB | 1-Week STIBOR - 0.40% | Monthly | MSCS | 3/14/25 | 5,777,721 | SEK | (68,181 | ) | ||||||||||||||
HMM Co. Ltd. | 1-Day FEDEF - 3.50% | Monthly | MSCO | 11/10/22 | 491,679 | 72,314 | ||||||||||||||||
Huaneng Power | 1-Day HONIX - 4.63% | Monthly | MSCO | 10/24/22 | 3,274,210 | HKD | (10,644 | ) | ||||||||||||||
Industrial Select Sector Index | 1-Day LIBOR - 0.40% | Monthly | MSCO | 8/22/23 | 5,906,140 | 200,527 | ||||||||||||||||
Korea Electric Power Corp. | 1-Day FEDEF - 2.75% | Monthly | MSCO | 8/10/23 | 357,608 | 34,979 | ||||||||||||||||
KOSPI 200 Index | 1-Day FEDEF - 0.35% | Monthly | MSCO | 9/07/23 | 1,844,700 | 116,082 | ||||||||||||||||
LVMH Moet Hennessy Louis Vuitton SE | 1-Day EONIA - 0.30% | Monthly | BZWS | 5/25/22 | 1,370,160 | EUR | 5,352 | |||||||||||||||
Marks & Spencer Group PLC | 1-Day SONIA - 0.30% | Monthly | MSCS | 4/20/22 | 320,470 | GBP | (18,309 | ) | ||||||||||||||
Marsh McLennan | 1-Day FEDEF - 0.35% | Monthly | MSCO | 2/04/22 | 1,455,005 | (180,099 | ) | |||||||||||||||
Morgan Stanley MSHDGCWN Index | 1-Day RBACR - 0.60% | Monthly | MSCO | 8/25/23 | 139,620 | AUD | 53 | |||||||||||||||
Morgan Stanley MSPSARKK Index | 1-Day FEDEF - 0.46% | Monthly | MSCO | 9/21/22 | 361,165 | 5,865 |
franklintempleton.com | Semiannual Report | 81 |
FRANKLIN ALTERNATIVE STRATEGIES FUNDS
CONSOLIDATED STATEMENT OF INVESTMENTS (UNAUDITED)
Franklin K2 Alternative Strategies Fund (continued)
Total Return Swap Contracts (continued) | ||||||||||||||||||||||
Underlying Instrument | Financing Rate | Payment Frequency | Counterparty | Maturity Date | Notional Value* | Value/Unrealized Appreciation (Depreciation) | ||||||||||||||||
OTC Swap Contracts (continued) | ||||||||||||||||||||||
Equity Contracts – Shortc (continued) | ||||||||||||||||||||||
Morgan Stanley MSPSENTH Index | 1-Day SONIA - 0.45% | Monthly | MSCO | 10/31/22 | 284,158 | GBP | $ | 43,613 | ||||||||||||||
Morgan Stanley MSPSFERL Index | 1-Day FEDEF - 0.35% | Monthly | MSCO | 9/21/22 | 277,233 | (52,236 | ) | |||||||||||||||
Morgan Stanley MSPSHRTZ Index | 1-Day FEDEF - 0.35% | Monthly | MSCO | 9/21/22 | 703,650 | 63,890 | ||||||||||||||||
Morgan Stanley MSPSKSS Index | 1-Day FEDEF - 0.40% | Monthly | MSCO | 9/21/22 | 337,234 | (23,292 | ) | |||||||||||||||
Morgan Stanley MSPSPRMW Index | 1-Day FEDEF - 0.55% | Monthly | MSCO | 9/21/22 | 574,402 | (75,680 | ) | |||||||||||||||
Morgan Stanley MSPSPRNT Index | 1-Day FEDEF - 1.48% | Monthly | MSCO | 9/21/22 | 51,663 | (292 | ) | |||||||||||||||
Morgan Stanley MSPSSPY Index | 1-Day FEDEF - 0.35% | Monthly | MSCO | 9/21/22 | 136,569 | (6,186 | ) | |||||||||||||||
Morgan Stanley MSPSVLRS Index | 1-Day FEDEF - 0.35% | Monthly | MSCO | 10/26/22 | 230,517 | 23,587 | ||||||||||||||||
Morgan Stanley MSPSVOD Index | 1-Day FEDEF - 0.39% | Monthly | MSCO | 9/21/22 | 655,308 | (40,544 | ) | |||||||||||||||
Morgan Stanley MSPSXLU Index | 1-Day FEDEF - 0.35% | Monthly | MSCO | 9/21/22 | 5,664,202 | 110,021 | ||||||||||||||||
Morgan Stanley MSPSXPOH Index | 1-Day FEDEF - 0.35% | Monthly | MSCO | 9/21/22 | 946,276 | (10,313 | ) | |||||||||||||||
Next PLC | 1-Day SONIA - 0.30% | Monthly | MSCS | 4/20/22 | 690,538 | GBP | 44,341 | |||||||||||||||
Nike Inc. | 1-Day FEDEF - 0.35% | Monthly | MSCO | 3/16/22 | 1,305,529 | (7,770 | ) | |||||||||||||||
Nippon Yusen | 1-Day MUTSCALM - 0.40% | Monthly | MSCO | 11/28/22 | 68,921,613 | JPY | 4,674 | |||||||||||||||
NortonLifeLock Inc. | 1-Day FEDEF - 0.35% | Monthly | MSCO | 11/09/22 | 55,332 | 1,553 | ||||||||||||||||
Philadelphia SE Utility Index | 1-Day FEDEF - 0.05% | Monthly | MSCO | 8/22/23 | 3,936,403 | 100,875 | ||||||||||||||||
Phillips 66 | 1-Month LIBOR - 0.35% | Monthly | BZWS | 10/28/22 | 1,305,604 | (15,869 | ) | |||||||||||||||
Siltronic AG | 1-Day EONIA - 4.00% | Monthly | BZWS | 3/04/22 | 1,238,747 | EUR | (5,426 | ) | ||||||||||||||
Square Inc. | 1-Day FEDEF - 0.35% | Monthly | MSCO | 11/10/22 | 296,731 | 28,360 | ||||||||||||||||
STOXX Europe 600 Utilities Index | 1-Day EONIA - 0.45% | Monthly | MSCO | 9/13/23 | 3,227,351 | EUR | 67,381 | |||||||||||||||
Straits Times Index | 1-Day SOFR - 0.65% | Monthly | MSCO | 5/24/23 | 673,401 | SGD | 9,663 | |||||||||||||||
Swisscom AG | 1-Day SARON - 0.35% | Monthly | MSCS | 3/14/25 | 749,259 | CHF | (61,191 | ) | ||||||||||||||
VICI Properties Inc. | 1-Month LIBOR - 0.35% | Monthly | BZWS | 8/08/22 | 2,541,992 | 53,909 | ||||||||||||||||
|
| |||||||||||||||||||||
(170,097 | ) | |||||||||||||||||||||
|
| |||||||||||||||||||||
Interest Rate Contracts – Longa | ||||||||||||||||||||||
Government of Egypt | 1-Day FEDEF | Monthly | CITI | 1/11/22 | 476,021 | 22,068 | ||||||||||||||||
Government of Indonesia | 3-Month LIBOR + 0.70% | Monthly | BOFA | 5/18/22 | 2,043,470 | (32,110 | ) | |||||||||||||||
Government of Indonesia | 3-Month LIBOR + 0.60% | Monthly | DBAB | 6/15/32 | 573,840 | 39,768 | ||||||||||||||||
|
| |||||||||||||||||||||
29,726 | ||||||||||||||||||||||
|
| |||||||||||||||||||||
Total - Total Return Swap Contracts |
| $ | 367,321 | |||||||||||||||||||
|
|
*In U.S. dollars unless otherwise indicated.
aThe Fund receives the total return on the underlying instrument and pays a variable financing rate.
bFair valued using significant unobservable inputs. See Note 14 regarding fair value measurements.
cThe Fund receives the variable financing rate and pays the total return on the underlying instrument.
See Note 12 regarding other derivative information.
See Abbreviations on page 104.
82 | Semiannual Report | franklintempleton.com |
FRANKLIN ALTERNATIVE STRATEGIES FUNDS
CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Statement of Assets and Liabilities
November 30, 2021 (unaudited)
Franklin K2 Alternative Strategies Fund
Assets: | ||||
Investments in securities: | ||||
Cost – Unaffiliated issuers | $ | 1,176,152,060 | ||
Cost – Non-controlled affiliates (Note 3f) | 5,752,000 | |||
Cost – Unaffiliated repurchase agreements | 1,439,225 | |||
|
| |||
Value – Unaffiliated issuers† | $ | 1,331,864,352 | ||
Value – Non-controlled affiliates (Note 3f) | 5,752,000 | |||
Value – Unaffiliated repurchase agreements | 1,439,225 | |||
Cash | 61,621,113 | |||
Restricted cash for OTC derivatives (Note 1f) | 3,020,000 | |||
Foreign currency, at value (cost $7,324,672) | 6,895,935 | |||
Receivables: | ||||
Investment securities sold | 35,092,337 | |||
Capital shares sold | 1,153,286 | |||
Dividends and interest | 4,814,765 | |||
Deposits with brokers for: | ||||
Exchange traded options written | 133,903 | |||
Securities sold short | 244,574,018 | |||
OTC derivative contracts | 31,012,181 | |||
Futures contracts | 9,017,804 | |||
Centrally cleared swap contracts | 1,656,220 | |||
Due from brokers | 14,459,310 | |||
Variation margin on centrally cleared swap contracts | 3,712 | |||
OTC swap contracts (upfront payments $1,022,060) | 894,273 | |||
Unrealized appreciation on OTC forward exchange contracts | 6,573,274 | |||
Unrealized appreciation on OTC swap contracts | 5,898,124 | |||
Other assets | 8,244 | |||
|
| |||
Total assets | 1,765,884,076 | |||
|
| |||
Liabilities: | ||||
Payables: | ||||
Investment securities purchased | 43,876,850 | |||
Capital shares redeemed | 1,359,883 | |||
Management fees | 2,037,577 | |||
Distribution fees | 46,399 | |||
Trustees’ fees and expenses | 14,056 | |||
Transfer agent fees | 222,027 | |||
Deposits from brokers for: | ||||
OTC derivative contracts | 3,020,000 | |||
Variation margin on futures contracts | 58,035 | |||
Due to brokers | 13,350,873 | |||
OTC swap contracts (upfront receipts $318,012) | 285,884 | |||
Options written, at value (premiums received $724,467) | 434,251 | |||
Securities sold short, at value (proceeds $250,976,790) | �� | 250,220,336 | ||
Payable upon return of securities loaned (Note 1j) | 7,191,225 | |||
Unrealized depreciation on OTC forward exchange contracts | 4,677,335 | |||
Unrealized depreciation on OTC swap contracts | 5,646,993 | |||
Unrealized depreciation on unfunded loan commitments (Note 11) | 22,745 | |||
Accrued expenses and other liabilities | 309,155 | |||
|
| |||
Total liabilities | 332,773,624 | |||
|
| |||
Net assets, at value | $ | 1,433,110,452 | ||
|
| |||
Net assets consist of: | ||||
Paid-in capital | $ | 1,247,767,006 | ||
Total distributable earnings (loss) | 185,343,446 | |||
|
| |||
Net assets, at value | $ | 1,433,110,452 | ||
|
| |||
†Includes securities loaned | $ | 15,260,059 |
franklintempleton.com | The accompanying notes are an integral part of these consolidated financial statements. | Semiannual Report | 83 |
FRANKLIN ALTERNATIVE STRATEGIES FUNDS
CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Statement of Assets and Liabilities (continued)
November 30, 2021 (unaudited)
Franklin K2 Alternative Strategies Fund
Class A: | ||||
Net assets, at value | $ | 104,373,018 | ||
|
| |||
Shares outstanding | 8,350,335 | |||
|
| |||
Net asset value per sharea | $ | 12.50 | ||
|
| |||
Maximum offering price per share (net asset value per share ÷ 94.50%) | $ | 13.23 | ||
|
| |||
Class C: | ||||
Net assets, at value | $ | 29,196,259 | ||
|
| |||
Shares outstanding | 2,413,778 | |||
|
| |||
Net asset value and maximum offering price per sharea | $ | 12.10 | ||
|
| |||
Class R: | ||||
Net assets, at value | $ | 1,139,356 | ||
|
| |||
Shares outstanding | 91,371 | |||
|
| |||
Net asset value and maximum offering price per share | $ | 12.47 | ||
|
| |||
Class R6: | ||||
Net assets, at value | $ | 53,365,449 | ||
|
| |||
Shares outstanding | 4,222,946 | |||
|
| |||
Net asset value and maximum offering price per share | $ | 12.64 | ||
|
| |||
Advisor Class: | ||||
Net assets, at value | $ | 1,245,036,370 | ||
|
| |||
Shares outstanding | 98,806,099 | |||
|
| |||
Net asset value and maximum offering price per share | $ | 12.60 | ||
|
|
aRedemption price is equal to net asset value less contingent deferred sales charges, if applicable.
84 | 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, 2021 (unaudited)
Franklin K2 Alternative Strategies Fund
Investment income: | ||||
Dividends (net of foreign taxes)* | ||||
Unaffiliated issuers | $ | 2,064,233 | ||
Interest: (net of foreign taxes)~ | ||||
Unaffiliated issuers | 11,362,014 | |||
Income from securities loaned: | ||||
Unaffiliated entities (net of fees and rebates) | 52,504 | |||
Non-controlled affiliates (Note 3f) | 189 | |||
|
| |||
Total investment income | 13,478,940 | |||
|
| |||
Expenses: | ||||
Management fees (Note 3a) | 12,996,815 | |||
Distribution fees: (Note 3c) | ||||
Class A | 129,910 | |||
Class C | 152,780 | |||
Class R | 2,283 | |||
Transfer agent fees: (Note 3e) | ||||
Class A | 48,997 | |||
Class C | 14,402 | |||
Class R | 431 | |||
Class R6 | 6,112 | |||
Advisor Class | 567,886 | |||
Custodian fees (Note 4) . | 124,237 | |||
Reports to shareholders fees | 50,734 | |||
Registration and filing fees | 52,155 | |||
Professional fees | 304,303 | |||
Trustees’ fees and expenses | 209,398 | |||
Dividends and interest on securities sold short | 1,299,783 | |||
Security borrowing fees | 1,202,491 | |||
Other | 76,102 | |||
|
| |||
Total expenses | 17,238,819 | |||
|
| |||
Expense reductions (Note 4) | (20,001 | ) | ||
Expenses waived/paid by affiliates (Note 3f and 3g) | (1,122,836 | ) | ||
|
| |||
Net expenses | 16,095,982 | |||
|
| |||
Net investment income (loss) | (2,617,042 | ) | ||
|
| |||
Realized and unrealized gains (losses): | ||||
Net realized gain (loss) from: | ||||
Investments: | ||||
Unaffiliated issuers | 44,497,888 | |||
Written options | 698,852 | |||
Foreign currency transactions | (564,144 | ) | ||
Forward exchange contracts | 2,940,314 | |||
Futures contracts | (8,054,427 | ) | ||
Securities sold short | (20,772,240 | ) | ||
Swap contracts | (968,475 | ) | ||
|
| |||
Net realized gain (loss) | 17,777,768 | |||
|
| |||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments: | ||||
Unaffiliated issuers | (22,481,528 | ) | ||
Translation of other assets and liabilities denominated in foreign currencies | (266,259 | ) | ||
Forward exchange contracts | 3,871,678 | |||
Written options | 120,574 | |||
Futures contracts | 543,531 | |||
Securities sold short | 10,563,198 | |||
Swap contracts | (3,306,280 | ) | ||
|
| |||
Net change in unrealized appreciation (depreciation) | (10,955,086 | ) | ||
|
| |||
Net realized and unrealized gain (loss) | 6,822,682 | |||
|
| |||
Net increase (decrease) in net assets resulting from operations | $ | 4,205,640 | ||
|
| |||
* Foreign taxes withheld on dividends | $ | 73,000 | ||
~ Foreign taxes withheld on interest | $ | 21,764 |
franklintempleton.com | The accompanying notes are an integral part of these financial statements. | Semiannual Report | 85 |
FRANKLIN ALTERNATIVE STRATEGIES FUNDS
CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Statements of Changes in Net Assets
Franklin K2 Alternative Strategies Fund
Six Months Ended November 30, 2021 (unaudited) | Year Ended May 31, 2021 | |||||||
Increase (decrease) in net assets: | ||||||||
Operations: | ||||||||
Net investment income (loss) | $ | (2,617,042 | ) | $ | (5,706,292 | ) | ||
Net realized gain (loss) | 17,777,768 | 82,760,682 | ||||||
Net change in unrealized appreciation (depreciation) | (10,955,086 | ) | 64,678,301 | |||||
|
| |||||||
Net increase (decrease) in net assets resulting from operations | 4,205,640 | 141,732,691 | ||||||
|
| |||||||
Distributions to shareholders: | ||||||||
Class A | — | (770,421 | ) | |||||
Class C | — | (270,063 | ) | |||||
Class R | — | (6,563 | ) | |||||
Class R6 | — | (218,294 | ) | |||||
Advisor Class | — | (8,558,261 | ) | |||||
|
| |||||||
Total distributions to shareholders | — | (9,823,602 | ) | |||||
|
| |||||||
Capital share transactions: (Note 2) | ||||||||
Class A | 1,964,793 | 1,751,000 | ||||||
Class C | (2,335,970 | ) | (7,911,374 | ) | ||||
Class R | 299,653 | (133,193 | ) | |||||
Class R6 | 25,945,345 | 9,227,168 | ||||||
Advisor Class | 88,936,324 | 59,488,692 | ||||||
|
| |||||||
Total capital share transactions | 114,810,145 | 62,422,293 | ||||||
|
| |||||||
Net increase (decrease) in net assets | 119,015,785 | 194,331,382 | ||||||
Net assets: | ||||||||
Beginning of period | 1,314,094,667 | 1,119,763,285 | ||||||
|
| |||||||
End of period | $ | 1,433,110,452 | $ | 1,314,094,667 | ||||
|
|
86 | Semiannual Report | The accompanying notes are an integral part of these financial statements. | franklintempleton.com |
FRANKLIN ALTERNATIVE STRATEGIES FUNDS
Notes to Consolidated Financial Statements
Franklin K2 Alternative Strategies Fund
1. Organization and Significant Accounting Policies
Franklin Alternative Strategies Funds (Trust) is registered under the Investment Company Act of 1940 (1940 Act) as an open-end management investment company, consisting of 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. Effective August 2, 2021, Class C shares automatically convert to Class A shares on a monthly basis, after they have been held for 8 years. Prior to August 2, 2021, Class C shares converted to Class A shares after a 10-year holding period. Each class of shares may differ by its initial sales load, contingent deferred sales charges, voting rights on matters affecting a single class, its exchange privilege and fees due to differing arrangements for distribution and transfer agent fees.
The following summarizes the Fund’s significant accounting policies.
a. Financial Instrument Valuation
The Fund’s investments in financial instruments are carried at fair value daily. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants on the measurement date. The Fund calculates the net asset value
(NAV) per share each business day as of 4 p.m. Eastern time or the regularly scheduled close of the New York Stock Exchange (NYSE), whichever is earlier. Under compliance policies and procedures approved by the Trust’s Board of Trustees (the Board), the Fund’s administrator has responsibility for oversight of valuation, including leading the cross-functional Valuation Committee (VC). The Fund may utilize independent pricing services, quotations from securities and financial instrument dealers, and other market sources to determine fair value.
Equity securities, exchange traded funds and derivative financial instruments listed on an exchange or on the NASDAQ National Market System are valued at the last quoted sale price or the official closing price of the day, respectively. Foreign equity securities are valued as of the close of trading on the foreign stock exchange on which the security is primarily traded or as of 4 p.m. Eastern time. The value is then converted into its U.S. dollar equivalent at the foreign exchange rate in effect at 4 p.m. Eastern time on the
day that the value of the security is determined. Over-the-counter (OTC) securities are valued within the range of the most recent quoted bid and ask prices. Securities that trade in multiple markets or on multiple exchanges are valued according to the broadest and most representative market. Certain equity securities are valued based upon fundamental characteristics or relationships to similar securities.
Debt securities generally trade in the OTC market rather than on a securities exchange. The Fund’s pricing services use multiple valuation techniques to determine fair value. In instances where sufficient market activity exists, the pricing services may utilize a market-based approach through which quotes from market makers are used to determine fair value. In instances where sufficient market activity may not exist or is limited, the pricing services also utilize proprietary valuation models which may consider market characteristics such as benchmark yield curves, credit spreads, estimated default rates, anticipated market interest rate volatility, coupon rates, anticipated timing of principal repayments, underlying collateral, and other unique security features in order to estimate the relevant cash flows, which are then discounted to calculate the fair value. Securities denominated in a foreign currency are converted into their U.S. dollar equivalent at the foreign exchange rate in effect at 4 p.m. Eastern time on the date that the values of the foreign debt securities are determined.
Investments in open-end mutual funds are valued at the closing NAV. Investments in repurchase agreements are valued at cost, which approximates fair value.
Certain derivative financial instruments are centrally cleared or trade in the OTC market. The Fund’s pricing services use various techniques including industry standard option pricing models and proprietary discounted cash flow models to determine the fair value of those instruments. The Fund’s net benefit or obligation under the derivative contract, as measured by the fair value of the contract, is included in net assets.
The Fund has procedures to determine the fair value of financial instruments for which market prices are not reliable or readily available. Under these procedures, the Fund primarily employs a market-based approach which may use related or comparable assets or liabilities, recent transactions, market multiples, book values, and other relevant information for the investment to determine the fair value of the investment. An income-based valuation approach may also be used in which
franklintempleton.com | Semiannual Report | 87 |
FRANKLIN ALTERNATIVE STRATEGIES FUNDS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Franklin K2 Alternative Strategies Fund (continued)
1. Organization and Significant Accounting Policies (continued)
a. Financial Instrument Valuation (continued)
the anticipated future cash flows of the investment are discounted to calculate fair value. Discounts may also be applied due to the nature or duration of any restrictions on the disposition of the investments. Due to the inherent uncertainty of valuations of such investments, the fair values may differ significantly from the values that would have been used had an active market existed.
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. Events can 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, an independent pricing service may be used to adjust the value of the Funds’ portfolio securities to the latest indications of fair value at 4 p.m. Eastern time. At November 30, 2021, certain securities may have been fair valued using these procedures, in which case the securities were categorized as Level 2 inputs within the fair value hierarchy (referred to as “market level fair value”). See the Fair Value Measurements note for more information.
When the last day of the reporting period is a non-business day, certain foreign markets may be open on those days that the Fund’s NAV is not calculated, which could result in differences between the value of the Fund’s portfolio securities on the last business day and the last calendar day of the reporting period. Any significant security valuation changes due to an open foreign market are adjusted and reflected by the Fund for financial reporting purposes.
b. Foreign Currency Translation
Portfolio securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollars based on the exchange rate of such currencies against U.S. dollars on the date of valuation. The Fund may enter into foreign currency exchange contracts to facilitate transactions denominated in a foreign currency. Purchases and sales of
securities, income and expense items denominated in foreign currencies are translated into U.S. dollars at the exchange rate in effect on the transaction date. Portfolio securities and assets and liabilities denominated in foreign currencies contain risks that those currencies will decline in value relative to the U.S. dollar. Occasionally, events may impact the availability or reliability of foreign exchange rates used to convert the U.S. dollar equivalent value. If such an event occurs, the foreign exchange rate will be valued at fair value using procedures established and approved by the Board.
The Fund does not separately report the effect of changes in foreign exchange rates from changes in market prices on securities held. Such changes are included in net realized and unrealized gain or loss from investments in the Consolidated Statement of Operations.
Realized foreign exchange gains or losses arise from sales of foreign currencies, currency gains or losses realized between the trade and settlement dates on securities transactions and the difference between the recorded amounts of dividends, interest, and foreign withholding taxes and the
U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign exchange gains and losses arise from changes in foreign exchange rates on foreign denominated assets and liabilities other than investments in securities held at the end of the reporting period.
c. Joint Repurchase Agreement
The Fund enters into a joint repurchase agreement whereby its uninvested cash balance is deposited into a joint cash account with other funds managed by the investment manager or an affiliate of the investment manager and is used to invest in one or more repurchase agreements. The value and face amount of the joint repurchase agreement are allocated to the funds based on their pro-rata interest. A repurchase agreement is accounted for as a loan by the Fund to the seller, collateralized by securities which are delivered to the Fund’s custodian. The fair value, including accrued interest, of the initial collateralization is required to be at least 102% of the dollar amount invested by the funds, with the value of the underlying securities marked to market daily to maintain coverage of at least 100%. Repurchase agreements are subject to the terms of Master Repurchase Agreements (MRAs) with approved counterparties (sellers). The MRAs contain various provisions, including but not limited to events of default and maintenance of collateral for repurchase agreements. In the event of default by either the seller or the Fund, certain
88 | Semiannual Report | franklintempleton.com |
FRANKLIN ALTERNATIVE STRATEGIES FUNDS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Franklin K2 Alternative Strategies Fund (continued)
MRAs may permit the non-defaulting party to net and close-out all transactions, if any, traded under such agreements. The Fund may sell securities it holds as collateral and apply the proceeds towards the repurchase price and any other amounts owed by the seller to the Fund in the event of default by the seller. This could involve costs or delays in addition to a loss on the securities if their value falls below the repurchase price owed by the seller. The joint repurchase agreement held by the Fund at period end, as indicated in the Consolidated Statement of Investments, had been entered into on November 30, 2021.
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.
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 the non-defaulting party the right to net and close-out all transactions traded, whether or not arising under the ISDA agreement, to one net amount payable by one counterparty to the other. However, absent an event of default or early termination, OTC derivative assets and liabilities are presented gross and not offset in the Consolidated Statement of Assets and Liabilities. Early termination by the counterparty may result in an immediate payment by the Fund of any net liability owed to that counterparty under the ISDA agreement.
Collateral requirements differ by type of derivative. Collateral or initial margin requirements are set by the broker or exchange clearing house for exchange traded and centrally cleared derivatives. Initial margin deposited is held at the exchange and can be in the form of cash and/or securities. For OTC derivatives traded under an ISDA master agreement, posting of collateral is required by either the Fund or the applicable counterparty if the total net exposure of all OTC derivatives with the applicable counterparty exceeds the minimum transfer amount, which typically ranges from
$100,000 to $250,000, and can vary depending on the counterparty and the type of the agreement. Generally, collateral is determined at the close of Fund business each day and any additional collateral required due to changes in derivative values may be delivered by the Fund or the counterparty the next business day, or within a few business days. Collateral pledged and/or received by the Fund for OTC derivatives, if any, is held in segregated accounts with the Fund’s custodian/counterparty broker and can be in the form of cash and/or securities. Unrestricted cash may be invested according to the Fund’s investment objectives. To the extent that the amounts due to the Fund from its counterparties are not subject to collateralization or are not fully collateralized, the Fund bears the risk of loss from counterparty non-performance.
The Fund entered into exchange traded futures contracts primarily to manage and/or gain exposure to commodity price, interest rate, equity price and foreign exchange rate 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,
franklintempleton.com | Semiannual Report | 89 |
FRANKLIN ALTERNATIVE STRATEGIES FUNDS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Franklin K2 Alternative Strategies Fund (continued)
1. Organization and Significant Accounting Policies (continued)
e. Derivative Financial Instruments (continued)
and the daily change in fair value is accounted for as a variation margin payable or receivable in the Consolidated Statement of Assets and Liabilities.
The Fund entered into OTC forward exchange contracts primarily to manage and/or gain exposure to certain foreign currencies. A forward exchange contract is an agreement between the Fund and a counterparty to buy or sell a foreign currency at a specific exchange rate on a future date.
The Fund entered into credit default swap contracts primarily to manage and/or gain exposure to credit risk. A credit default swap is an agreement between the Fund and a counterparty whereby the buyer of the contract receives credit protection and the seller of the contract guarantees the credit worthiness of a referenced debt obligation. These agreements may be privately negotiated in the over-the-counter market (OTC credit default swaps) or may be executed in a multilateral trade facility platform, such as a registered exchange (centrally cleared credit default swaps). The underlying referenced debt obligation may be a single issuer of corporate or sovereign debt, a credit index, a basket of issuers or indices, or a tranche of a credit index or basket of issuers or indices. In the event of a default of the underlying referenced debt obligation, the buyer is entitled to receive the notional amount of the credit default swap contract from the seller in exchange for the referenced debt obligation, a net settlement amount equal to the notional amount of the credit default swap less the recovery value of the referenced debt obligation, or other agreed upon amount. For centrally cleared credit default swaps, required initial margins are pledged by the Fund, and the daily change in fair value is accounted for as a variation margin payable or receivable in the Consolidated Statement of Assets and Liabilities. Over the term of the contract, the buyer pays the seller a periodic stream of payments, provided that no event of default has occurred. Such periodic payments are accrued daily as an unrealized appreciation or depreciation until the payments are made, at which time they are realized. Upfront payments and receipts are reflected in the Consolidated Statement of Assets and Liabilities and represent compensating factors between stated terms of the credit default swap agreement and prevailing market conditions (credit spreads and other relevant factors). These upfront payments and receipts are
amortized over the term of the contract as a realized gain or loss in the Consolidated Statement of Operations.
The Fund entered into interest rate swap contracts primarily to manage interest rate risk. An interest rate swap is an agreement between the Fund and a counterparty to exchange cash flows based on the difference between two interest rates, applied to a notional amount. These agreements may be privately negotiated in the over-the-counter market (OTC interest rate swaps) or may be executed on a registered exchange (centrally cleared interest rate swaps). For centrally cleared interest rate swaps, required initial margins are pledged by the Fund, and the daily change in fair value is accounted for as a variation margin payable or receivable in the Consolidated Statement of Assets and Liabilities. Over the term of the contract, contractually required payments to be paid and to be received are accrued daily and recorded as unrealized depreciation and appreciation until the payments are made, at which time they are realized.
The Fund entered into OTC total return swap contracts primarily to manage and/or gain exposure to interest rate, equity price and credit risk of an underlying instrument such as a stock, bond, index or basket of securities or indices. A total return swap is an agreement between the Fund and a counterparty to exchange a return linked to an underlying instrument for a floating or fixed rate payment, both based upon a notional amount. Over the term of the contract, contractually required payments to be paid or received are accrued daily and recorded as unrealized appreciation or depreciation until the payments are made, at which time they are recognized as realized gain or loss.
The Fund purchased or wrote exchange traded and/or OTC option contracts primarily to manage and/or gain exposure to equity price and foreign exchange rate risk. An option is a contract entitling the holder to purchase or sell a specific amount of shares or units of an asset or notional amount of a swap (swaption), at a specified price. When an option is purchased or written, an amount equal to the premium paid or received is recorded as an asset or liability, respectively. Upon exercise of an option, the acquisition cost or sales proceeds of the underlying investment is adjusted by any premium received or paid. Upon expiration of an option, any premium received or paid is recorded as a realized gain or loss. Upon closing an option other than through expiration or exercise, the difference between the premium received or paid and the cost to close the position is recorded as a realized gain or loss.
90 | Semiannual Report | franklintempleton.com |
FRANKLIN ALTERNATIVE STRATEGIES FUNDS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Franklin K2 Alternative Strategies Fund (continued)
See Notes 6 and 12 regarding investment transactions and other derivative information, respectively.
f. Restricted Cash
At November 30, 2021, 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 collateral in the form of cash and/or U.S. Government and Agency Securities 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. Any cash collateral received 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. Additionally, the Fund received $8,741,681 in U.S. Government and Agency Securities as collateral. These securities received as collateral are held in segregated accounts with the Fund’s custodian. The Fund cannot repledge or resell these securities received as collateral. As such, the non-cash collateral is excluded from the Consolidated Statement of Assets and Liabilities. The Fund may receive income from the investment of 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 any cash collateral investment, securities loaned, and the risk that the agent may default on its obligation to the Fund. If the
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FRANKLIN ALTERNATIVE STRATEGIES FUNDS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Franklin K2 Alternative Strategies Fund (continued)
1. Organization and Significant Accounting Policies (continued)
j. Securities Lending (continued)
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.
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 wholly-owned subsidiary of the Fund, and is able to invest in certain financial instruments and commodity-linked derivative investments consistent with the investment objective of the Fund. At November 30, 2021, 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, 2021, the net assets of the K2 Subsidiary were $21,065,227 representing 1.5% 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.
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, 2021, 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. Paydown gains and losses are recorded as an adjustment to 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 the ex-dividend date except for certain dividends from securities where the dividend rate is not available. In such cases, the dividend is recorded as soon as the information is received by the Fund. Distributions to shareholders are recorded on the ex-dividend date. Distributable earnings are determined according to income tax regulations
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FRANKLIN ALTERNATIVE STRATEGIES FUNDS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Franklin K2 Alternative Strategies Fund (continued)
(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.
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, 2021, 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, 2021 | Year Ended May 31, 2021 | |||||||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||||||
Class A Shares: | ||||||||||||||||||||
Shares solda | 763,648 | $ | 9,604,446 | 1,951,153 | $ | 23,399,007 | ||||||||||||||
Shares issued in reinvestment of distributions | — | — | 57,588 | 702,572 | ||||||||||||||||
Shares redeemed | (607,919 | ) | (7,639,653 | ) | (1,878,747 | ) | (22,350,579 | ) | ||||||||||||
|
| |||||||||||||||||||
Net increase (decrease) | 155,729 | $ | 1,964,793 | 129,994 | $ | 1,751,000 | ||||||||||||||
|
| |||||||||||||||||||
Class C Shares: | ||||||||||||||||||||
Shares sold | 197,230 | $ | 2,405,282 | 378,698 | $ | 4,426,844 | ||||||||||||||
Shares issued in reinvestment of distributions | — | — | 20,310 | 241,483 | ||||||||||||||||
Shares redeemeda | (388,721 | ) | (4,741,252 | ) | (1,086,696 | ) | (12,579,701 | ) | ||||||||||||
|
| |||||||||||||||||||
Net increase (decrease) | (191,491 | ) | $ | (2,335,970 | ) | (687,688 | ) | $ | (7,911,374 | ) | ||||||||||
|
| |||||||||||||||||||
Class R Shares: | ||||||||||||||||||||
Shares sold | 25,795 | $ | 323,759 | 7,188 | $ | 83,786 | ||||||||||||||
Shares issued in reinvestment of distributions | — | — | 538 | 6,563 | ||||||||||||||||
Shares redeemed | (1,940 | ) | (24,106 | ) | (19,125 | ) | (223,542 | ) | ||||||||||||
|
| |||||||||||||||||||
Net increase (decrease) | 23,855 | $ | 299,653 | (11,399 | ) | $ | (133,193 | ) | ||||||||||||
|
|
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FRANKLIN ALTERNATIVE STRATEGIES FUNDS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Franklin K2 Alternative Strategies Fund (continued)
2. Shares of Beneficial Interest (continued)
Six Months Ended November 30, 2021 | Year Ended May 31, 2021 | |||||||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||||||
Class R6 Shares: | ||||||||||||||||||||
Shares sold | 2,393,692 | $ | 30,438,624 | 1,604,568 | $ | 19,048,050 | ||||||||||||||
Shares issued in reinvestment of distributions | — | — | 15,991 | 196,690 | ||||||||||||||||
Shares redeemed | (354,326 | ) | (4,493,279 | ) | (817,737 | ) | (10,017,572 | ) | ||||||||||||
|
| |||||||||||||||||||
Net increase (decrease) | 2,039,366 | $ | 25,945,345 | 802,822 | $ | 9,227,168 | ||||||||||||||
|
| |||||||||||||||||||
Advisor Class Shares: | ||||||||||||||||||||
Shares sold | 14,688,334 | $ | 186,253,218 | 25,684,121 | $ | 308,883,780 | ||||||||||||||
Shares issued in reinvestment of distributions | — | — | 466,135 | 5,719,482 | ||||||||||||||||
Shares redeemed | (7,688,175 | ) | (97,316,894 | ) | (21,325,304 | ) | (255,114,570 | ) | ||||||||||||
|
| |||||||||||||||||||
Net increase (decrease) | 7,000,159 | $ | 88,936,324 | 4,824,952 | $ | 59,488,692 | ||||||||||||||
|
|
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 Distributors, LLC (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 based on the average daily net assets of the Fund and K2 Subsidiary as follows:
Annualized Fee Rate | Net Assets | |
1.90% | Up to and including $1 billion | |
1.85% | Over $1 billion, up to and including $1.5 billion | |
1.80% | Over $1.5 billion, up to and including $3 billion | |
1.75% | In excess of $3 billion |
For the period ended November 30, 2021, the annualized gross effective management fee rate was 1.89% of the Fund’s average daily net assets.
Management fees paid by the Fund are reduced on assets invested in the K2 Subsidiary, in an amount equal to the management fees paid by the K2 Subsidiary.
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FRANKLIN ALTERNATIVE STRATEGIES FUNDS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Franklin K2 Alternative Strategies Fund (continued)
Under each subadvisory agreement, the below entities provide subadvisory services to the Fund or K2 Subsidiary. The subadvisory fees are paid by K2 Advisors and are not an additional expense of the Fund or K2 Subsidiary. Each subadvisor is compensated for managing its respective portion of the average daily net assets of the Fund or K2 Subsidiary.
Subadvisors |
Apollo Credit Management LLC |
Bardin Hill Arbitrage IC Management LP |
Benefit Street Partners L.L.C.* |
BlueBay Asset Management, LLP |
Chilton Investment Company, LLC |
Electron Capital Partners, LLC |
Ellington Global Asset Management, LLC |
Emso Asset Management Limited |
Graham Capital Management, L.P. |
Jennison Associates, LLC |
Lazard Asset Management, LLC |
Loomis Sayles & Company, L.P. |
One River Asset Management, LLC |
P. Schoenfeld Asset Management L.P. |
Portland Hill Asset Management Limited |
RV Capital Management Private, Ltd. |
Wellington Management Company, LLP |
*An affiliate of K2 Advisors.
b. Administrative Fees
Under an agreement with K2 Advisors, FT Services provides administrative services to the Fund and K2 Subsidiary. The fee is paid by K2 Advisors based on the Fund’s and K2 Subsidiary’s average daily net assets, and is not an additional expense of the Fund or K2 Subsidiary.
c. Distribution Fees
The Board has adopted distribution plans for each share class, with the exception of Class R6 and Advisor Class shares, pursuant to Rule 12b-1 under the 1940 Act. Under the Fund’s Class A reimbursement distribution plan, the Fund reimburses Distributors for costs incurred in connection with the servicing, sale and distribution of the Fund’s shares up to the maximum annual plan rate. Under the Class A reimbursement distribution plan, costs exceeding the maximum for the current plan year cannot be reimbursed in subsequent periods. In addition, under the Fund’s Class C and R compensation distribution plans, the Fund pays Distributors for costs incurred in connection with the servicing, sale and distribution of the Fund’s shares up to the maximum annual plan rate for each class. The plan year, for purposes of monitoring compliance with the maximum annual plan rates, is February 1 through January 31.
The maximum annual plan rates, based on the average daily net assets, for each class, are as follows:
Class A | 0.30% | |||
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.
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FRANKLIN ALTERNATIVE STRATEGIES FUNDS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Franklin K2 Alternative Strategies Fund (continued)
3. Transactions with Affiliates (continued)
d. Sales Charges/Underwriting Agreements
Front-end sales charges and contingent deferred sales charges (CDSC) do not represent expenses of the Fund. These charges are deducted from the proceeds of sales of Fund shares prior to investment or from redemption proceeds prior to remittance, as applicable. Distributors has advised the Fund of the following commission transactions related to the sales and redemptions of the Fund’s shares for the period:
Sales charges retained net of commissions paid to unaffiliated brokers/dealers | $ | 7,066 | ||
CDSC retained | $ | 692 |
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, 2021, the Fund paid transfer agent fees of $637,828 of which $221,658 was retained by Investor Services.
f. Investments in Affiliated Management Investment Companies
The Fund invests in one or more affiliated management investment companies. As defined in the 1940 Act, an investment is deemed to be a “Controlled Affiliate” of a fund when a fund owns, either directly or indirectly, 25% or more of the affiliated fund’s outstanding shares or has the power to exercise control over management or policies of such fund. The Fund does not invest for purposes of 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, 2021, 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, 0.01% | $ | 3,305,000 | $ | 32,389,000 | $ | (29,942,000 | ) | $ | — | $ | — | $ | 5,752,000 | 5,752,000 | $ | 189 | ||||||||||||||||
|
|
g. Waiver and Expense Reimbursements
K2 Advisors has contractually agreed in advance to waive or limit its fees and to assume as their own expense certain expenses otherwise payable by the Fund so that the operating expenses (excluding interest expense, distribution fees, acquired fund fees and expenses, expenses related to securities sold short and certain non-routine expenses or costs, including those relating to litigation, indemnification, reorganizations and liquidations) for each class of the Fund do not exceed 1.95% based on the average net assets of each class until September 30, 2022. Total expenses waived or paid are not subject to recapture subsequent to the Fund’s fiscal year end.
Investor Services has contractually agreed in advance to waive or limit its fees so that the Class R6 transfer agent fees do not exceed 0.03% based on the average net assets of the class until September 30, 2022.
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FRANKLIN ALTERNATIVE STRATEGIES FUNDS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Franklin K2 Alternative Strategies Fund (continued)
4. Expense Offset Arrangement
The Fund has entered into an arrangement with its custodian whereby credits realized as a result of uninvested cash balances are used to reduce a portion of the Fund’s custodian expenses. During the period ended November 30, 2021, the custodian fees were reduced as noted in the Consolidated Statement of Operations.
5. Income Taxes
At November 30, 2021, the cost of investments and net unrealized appreciation (depreciation) for income tax purposes were as follows:
Cost of investments | $ | 965,240,646 | ||
|
| |||
Unrealized appreciation | $ | 182,230,469 | ||
Unrealized depreciation | (58,839,956 | ) | ||
|
| |||
Net unrealized appreciation (depreciation) | $ | 123,390,513 | ||
|
|
Differences between income and/or capital gains as determined on a book basis and a tax basis are primarily due to differing treatments of foreign currency transactions, 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, 2021, aggregated $1,065,253,084 and $985,313,061, respectively.
At November 30, 2021, in connection with securities lending transactions, the Fund loaned equity investments and corporate bonds and notes and received $7,191,225 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, 2021, the transfers of financial assets accounted for as sales were as follows:
At Original Transactions Dates | At Period Ended November 30, 2021 | |||||||||||||||||||
Cost Basis of Positions Sold | Gross Cash Received for Positions Sold | Fair Value of Transferred Assetsa | Gross Derivative Assets | Gross Derivative Liabilities | ||||||||||||||||
Sales and total return swaps | $ | 841,774 | $ | 1,148,234 | $ | 829,709 | $ | 830,152 | $ | (1,148,677 | ) | |||||||||
|
|
|
|
a$(318,525) of fair value of transferred assets are included as unrealized depreciation 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 12 regarding derivative financial instruments and other derivative information, respectively.
7. Credit Risk and Defaulted Securities
At November 30, 2021, the Fund had 5.4% of its portfolio invested in high yield, senior secured floating rate loans, or other securities rated below investment grade as determined by Nationally Recognized Statistical Credit Ratings Organizations and/or internally, by investment management and unrated securities. 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.
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FRANKLIN ALTERNATIVE STRATEGIES FUNDS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Franklin K2 Alternative Strategies Fund (continued)
7. Credit Risk and Defaulted Securities (continued)
The Fund may purchase the pre-default or defaulted debt of distressed companies. Distressed companies are financially troubled and could be or are already involved in financial restructuring or bankruptcy. Risks associated with purchasing these securities include the possibility that the bankruptcy or other restructuring process takes longer than expected, or that distributions in restructuring are less than anticipated, either or both of which may result in unfavorable consequences to the Fund. If it becomes probable that the income on debt securities, including those of distressed companies, will not be collected, the Fund discontinues accruing income and recognizes an adjustment for uncollectible interest.
At November 30, 2021, the aggregate long value of distressed company securities for which interest recognition has been discontinued was $9,856,716, representing 0.7% of the Fund’s net assets. For information as to specific securities, see the accompanying Consolidated Statement of Investments.
8. Concentration of Risk
Investments in issuers domiciled or with significant operations in developing or emerging market countries may be subject to higher risks than investments in developed countries. These risks include fluctuating currency values, underdeveloped legal or business systems, and changing local and regional economic, political and social conditions, which may result in greater market volatility. In addition, certain foreign securities may not be as liquid as U.S. securities. Currencies of developing or emerging market countries may be subject to significantly greater risks than currencies of developed countries, including the potential inability to repatriate those currencies into U.S. dollars.
At November 30, 2021, the Fund had less than 0.1% of its net assets denominated in Argentine Pesos. Argentina has restricted currency repatriation since September 2019, and had restructured certain issues of its debt. Political and economic conditions in Argentina could continue to affect the value of the Fund’s holdings.
9. Novel Coronavirus Pandemic
The global outbreak of the novel coronavirus disease, known as COVID-19, has caused adverse effects on many companies, sectors, nations, regions and the markets in general, and may continue for an unpredictable duration. The effects of this pandemic may materially impact the value and performance of the Fund, its ability to buy and sell fund investments at appropriate valuations and its ability to achieve its investment objectives.
10. 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, 2021, investments in restricted securities, excluding securities exempt from registration under the 1933 Act, were as follows:
Principal Amount | Issuer | Acquisition Date | Cost | Value | ||||||||||
54,708 | Riverbed Technology Inc., senior note, 6.00%, 1/13/22 | 10/13/21 | $ | 54,451 | $ | 54,161 | ||||||||
|
|
|
| |||||||||||
Total Restricted Securities (Value is less than 0.1% of Net Assets) | $ | 54,451 | $ | 54,161 | ||||||||||
|
|
|
|
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FRANKLIN ALTERNATIVE STRATEGIES FUNDS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Franklin K2 Alternative Strategies Fund (continued)
11. 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, 2021, unfunded commitments were as follows:
Borrower | Unfunded Commitment | |||
Intelsat Jackson Holdings SA, Term Loan DIP | $ | 28,931 | ||
Upfield Group BV, Term Loan RC | 726,041 | |||
|
| |||
$ | 754,972 | |||
|
|
12. Other Derivative Information
At November 30, 2021, 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 | $ | 274,632 | a | Variation margin on futures contracts | $ | 1,040,560 | a | ||||
Variation margin on centrally cleared swap contracts | 165,556 | a | Variation margin on centrally cleared swap contracts | 487,521 | a | |||||||
Unrealized appreciation on OTC swap contracts | 61,836 | Unrealized depreciation on OTC swap contracts | 32,110 | |||||||||
Foreign exchange contracts | Investments in securities, at value | 200 | b | |||||||||
Variation margin on futures contracts | 20,168 | a | ||||||||||
Unrealized appreciation on OTC forward exchange contracts | 6,573,274 | Unrealized depreciation on OTC forward exchange contracts | 4,677,335 | |||||||||
Credit contracts | Variation margin on centrally cleared swap contracts | 250,500 | a | Variation margin on centrally cleared swap contracts | 131,053 | a | ||||||
OTC swap contracts (upfront payments) | 894,273 | OTC swap contracts (upfront receipts) | 285,884 | |||||||||
Unrealized appreciation on OTC swap contracts | 174,309 | Unrealized depreciation on OTC swap contracts | 290,499 | |||||||||
Equity contracts | Investments in securities, at value | 1,766,117 | b | Options written, at value | 434,251 | |||||||
Variation margin on futures contracts | 1,763,399 | a | Variation margin on futures contracts | 627,141 | a | |||||||
Unrealized appreciation on OTC swap contracts | 5,661,979 | Unrealized depreciation on OTC swap contracts | 5,324,384 | |||||||||
Commodity contracts | Variation margin on futures contracts | 285,298 | a | Variation margin on futures contracts | 1,224,382 | a | ||||||
|
|
|
| |||||||||
Totals | $ | 17,891,541 | $ | 14,555,120 | ||||||||
|
|
|
|
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.
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FRANKLIN ALTERNATIVE STRATEGIES FUNDS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Franklin K2 Alternative Strategies Fund (continued)
12. Other Derivative Information (continued)
For the period ended November 30, 2021, 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: | Net change in unrealized appreciation (depreciation) on: | |||||||||||
Interest rate contracts | Futures contracts | $ | (4,023,560 | ) | Futures contracts | $ | (629,287 | ) | ||||
Swap contracts | (309,398 | ) | Swap contracts | (241,833 | ) | |||||||
Foreign exchange contracts | Forward exchange contracts | 2,940,314 | Investments | (11,825 | )a | |||||||
Futures contracts | (16,534 | ) | Forward exchange contracts | 3,871,678 | ||||||||
Futures contracts | 20,098 | |||||||||||
Credit contracts | Swap contracts | (769,881 | ) | Swap contracts | 597,601 | |||||||
Equity contracts | Investments | (3,694,424 | )a | Investments | 130,112 | a | ||||||
Written options | 698,852 | Written options | 120,574 | |||||||||
Futures contracts | (6,558,736 | ) | Futures contracts | 3,413,753 | ||||||||
Swap contracts | 110,804 | Swap contracts | (3,662,048 | ) | ||||||||
Commodity contracts | Futures contracts | 2,544,403 | Futures contracts | (2,261,033 | ) | |||||||
|
|
|
| |||||||||
Totals | $ | (9,078,160 | ) | $ | 1,347,790 | |||||||
|
|
|
|
aPurchased option contracts are included in net realized gain (loss) from investments and net change in unrealized appreciation (depreciation) on investments in the Consolidated Statement of Operations.
For the period ended November 30, 2021, the average month end notional amount of options, futures contracts and swap contracts represented 1,314,631 shares/units, $425,949,854 and $282,944,327, respectively. The average month end contract value of forward exchange contracts was $390,275,085.
At November 30, 2021, 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 | $ | 6,573,274 | $ | 4,677,335 | ||||
Options Purchased | 11,360 | — | ||||||
Swap Contracts | 6,792,397 | 5,932,877 | ||||||
|
| |||||||
Total | $ | 13,377,031 | $ | 10,610,212 | ||||
|
|
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.
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FRANKLIN ALTERNATIVE STRATEGIES FUNDS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Franklin K2 Alternative Strategies Fund (continued)
At November 30, 2021, 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 | Financial Instruments Collateral Receiveda | Cash Collateral Receiveda | Net Amount (Not less than zero) | ||||||||||||||||
Counterparty | ||||||||||||||||||||
BNPP | $ | 81,300 | $ | (1,102 | ) | $ | — | $ | — | $ | 80,198 | |||||||||
BNYM | 581,952 | (332,833 | ) | (249,119 | ) | — | — | |||||||||||||
BOFA | 35,764 | (35,764 | ) | — | — | — | ||||||||||||||
BZWS | 1,522,374 | (744,521 | ) | — | — | 777,853 | ||||||||||||||
CITI | 49,117 | (35,470 | ) | — | — | 13,647 | ||||||||||||||
DBAB | 85,196 | — | — | — | 85,196 | |||||||||||||||
FBCO | 320 | (320 | ) | — | — | — | ||||||||||||||
GSCO | 131,753 | (131,753 | ) | — | — | — | ||||||||||||||
HSBC | 18,363 | (2,962 | ) | — | — | 15,401 | ||||||||||||||
JPHQ | 1,989,174 | (1,422,573 | ) | (496,496 | ) | — | 70,105 | |||||||||||||
JPHQb | 1,153,708 | — | — | — | 1,153,708 | |||||||||||||||
MSCO | 946,470 | | (946,470 | ) | — | — | — | |||||||||||||
MSCOb | 1,215,128 | — | — | — | 1,215,128 | |||||||||||||||
MSCOc | 2,032,148 | (1,532,667 | ) | — | — | 499,481 | ||||||||||||||
MSCS | 3,534,264 | (1,822,906 | ) | — | — | 1,711,358 | ||||||||||||||
|
| |||||||||||||||||||
Total | $ | 13,377,031 | $ | (7,009,341 | ) | $ | (745,615 | ) | $ | — | $ | 5,622,075 | ||||||||
|
|
At November 30, 2021, 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 | Financial Instruments Collateral Pledged | Cash Collateral Pledgeda | Net Amount (Not less than zero) | ||||||||||||||||
Counterparty | ||||||||||||||||||||
BNPP | $ | 1,102 | $ | (1,102 | ) | $ | — | $ | — | $ | — | |||||||||
BNYM | 332,833 | (332,833 | ) | — | — | — | ||||||||||||||
BOFA | 48,324 | (35,764 | ) | — | (12,560 | ) | — | |||||||||||||
BZWS | 744,521 | (744,521 | ) | — | — | — | ||||||||||||||
CITI | 35,470 | (35,470 | ) | — | — | — | ||||||||||||||
DBAB | — | — | — | — | — | |||||||||||||||
FBCO | 1,038 | (320 | ) | — | — | 718 | ||||||||||||||
GSCO | 178,061 | (131,753 | ) | — | (46,308 | ) | — | |||||||||||||
HSBC | 2,962 | (2,962 | ) | — | — | — | ||||||||||||||
JPHQ | 1,422,573 | (1,422,573 | ) | — | — | — | ||||||||||||||
JPHQb | 1,055,143 | — | — | — | 1,055,143 | |||||||||||||||
MSCO | 1,674,086 | (946,470 | ) | — | — | 727,616 | ||||||||||||||
MSCOb | 1,758,526 | — | — | — | 1,758,526 | |||||||||||||||
MSCOc | 1,532,667 | (1,532,667 | ) | — | — | — | ||||||||||||||
MSCS | 1,822,906 | (1,822,906 | ) | — | — | — | ||||||||||||||
|
| |||||||||||||||||||
Total | $ | 10,610,212 | $ | (7,009,341 | ) | $ | — | $ | (58,868 | ) | $ | 3,542,003 | ||||||||
|
|
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FRANKLIN ALTERNATIVE STRATEGIES FUNDS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Franklin K2 Alternative Strategies Fund (continued)
12. Other Derivative Information (continued)
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.
bRepresents derivatives not subject to an ISDA master agreement.
cRepresents 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 104.
13. 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 $2.675 billion (Global Credit Facility) which matures on February 4, 2022. 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, 2021, the Fund did not use the Global Credit Facility.
14. 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, 2021, 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 | $ | 527,809,173 | $ | 69,721,202 | $ | 2,495,819 | $ | 600,026,194 | ||||||||
Convertible Bonds | — | 176,655,406 | — | 176,655,406 | ||||||||||||
Corporate Bonds and Notes | — | 155,315,533 | 23,978 | 155,339,511 | ||||||||||||
Corporate Bonds and Notes in Reorganization | — | 2,446,158 | — | c | 2,446,158 | |||||||||||
Senior Floating Rate Interests | — | 6,460,192 | — | 6,460,192 | ||||||||||||
Senior Floating Rate Interests in Reorganization | — | 109,959 | — | 109,959 | ||||||||||||
Credit-Linked Notes | — | 3,474,681 | 2,501,698 | 5,976,379 | ||||||||||||
Foreign Government and Agency Securities | — | 59,802,009 | — | 59,802,009 |
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FRANKLIN ALTERNATIVE STRATEGIES FUNDS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Franklin K2 Alternative Strategies Fund (continued)
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Foreign Government and Agency Securities in Reorganization | $ | — | $ | 167,749 | $ | — | $ | 167,749 | ||||||||
U.S. Government and Agency Securities | — | 1,792,921 | — | 1,792,921 | ||||||||||||
Asset-Backed Securities and Commercial Mortgage-Backed Securities | — | 94,159,279 | 360,686 | 94,519,965 | ||||||||||||
Municipal Bonds in Reorganization | — | 7,132,850 | — | 7,132,850 | ||||||||||||
Options Purchased | 1,766,117 | 200 | — | 1,766,317 | ||||||||||||
Short Term Investments | 219,615,742 | 7,244,225 | — | 226,859,967 | ||||||||||||
|
| |||||||||||||||
Total Investments in Securities | $ | 749,191,032 | $ | 584,482,364 | d | $ | 5,382,181 | $ | 1,339,055,577 | |||||||
|
| |||||||||||||||
Other Financial Instruments: | ||||||||||||||||
Futures Contracts | $ | 2,343,497 | $ | — | $ | — | $ | 2,343,497 | ||||||||
Forward Exchange Contracts | — | 6,573,274 | — | 6,573,274 | ||||||||||||
Swap Contracts | — | 6,299,058 | 15,122 | 6,314,180 | ||||||||||||
|
| |||||||||||||||
Total Other Financial Instruments | $ | 2,343,497 | $ | 12,872,332 | $ | 15,122 | $ | 15,230,951 | ||||||||
|
| |||||||||||||||
Liabilities: |
| |||||||||||||||
Other Financial Instruments: |
| |||||||||||||||
Options Written | $ | 434,251 | $ | — | $ | — | $ | 434,251 | ||||||||
Securities Sold Shorta | 234,138,372 | 16,081,964 | e | — | 250,220,336 | |||||||||||
Futures Contracts | 2,892,083 | — | — | 2,892,083 | ||||||||||||
Forward Exchange Contracts | — | 4,677,335 | — | 4,677,335 | ||||||||||||
Swap Contracts | — | 6,265,567 | — | 6,265,567 | ||||||||||||
Unfunded Loan Commitments | — | 22,745 | — | 22,745 | ||||||||||||
|
| |||||||||||||||
Total Other Financial Instruments | $ | 237,464,706 | $ | 27,047,611 | $ | — | $ | 264,512,317 | ||||||||
|
|
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, 2021.
dIncludes foreign securities valued at $69,471,883, which were categorized as Level 2 as a result of the application of market level fair value procedures. See the Financial Instrument Valuation note for more information.
eIncludes foreign securities valued at $3,856,176, which were categorized as Level 2 as a result of the application of market level fair value procedures. See the Financial Instrument Valuation note for more information.
A reconciliation in which Level 3 inputs are used in determining fair value is presented when there are significant Level 3 assets and/or liabilities at the beginning and/or end of the period.
15. New Accounting Pronouncements
In March 2020, the Financial Accounting Standards Board issued Accounting Standards Update (ASU) No. 2020-04, Reference Rate Reform (Topic 848)—Facilitation of the Effects of Reference Rate Reform on Financial Reporting. In January 2021, the FASB issued ASU No. 2021-01, with further amendments to Topic 848. The amendments in the ASUs provide optional temporary accounting recognition and financial reporting relief from the effect of certain types of contract modifications due to the planned discontinuation of the LIBOR and other interbank-offered based reference rates as of the end of 2021 for certain LIBOR settings and 2023 for the remainder. The ASUs are effective for certain reference rate-related contract modifications that occur during the period March 12, 2020 through December 31, 2022. Management has reviewed the requirements and believes the adoption of these ASUs will not have a material impact on the financial statements.
16. 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.
franklintempleton.com | Semiannual Report | 103 |
FRANKLIN ALTERNATIVE STRATEGIES FUNDS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Franklin K2 Alternative Strategies Fund (continued)
Counterparty | Currency | Selected Portfolio | ||||||||
BNPP | BNP Paribas | ARS | Argentine Peso | ADR | American Depositary Receipt | |||||
BNYM | The Bank of New York Mellon Corp. | AUD | Australian Dollar | ARM | Adjustable Rate Mortgage | |||||
BOFA | Bank of America Corp. | BRL | Brazilian Real | BADLAR | Argentina Deposit Rates BADLAR Private Banks ARS | |||||
BZWS | Barclays Bank PLC | CAD | Canadian Dollar | |||||||
CITI | Citigroup, Inc. | CHF | Swiss Franc | BBSW | Bank Bill Swap Rate | |||||
DBAB | Deutsche Bank, AG | COP | Colombian Peso | BRLCDI | Brazil Cetip Di Interbank Deposit Rate | |||||
FBCO | Credit Suisse Group AG | CZK | Czech Koruna | CAC | Cotation Assistee en Continu | |||||
GSCO | The Goldman Sachs Group, Inc. | EGP | Egyptian Pound | CLO | Collateralized Loan Obligation | |||||
HSBC | HSBC Bank USA, N.A. | EUR | Euro | COPIBR | Colombian Peso Interbank Offered Rate | |||||
JPHQ | JP Morgan Chase & Co. | GBP | British Pound | DAX | Deutscher Aktienindex | |||||
MSCO | Morgan Stanley & Co. LLC | HKD | Hong Kong Dollar | DIP | Debtor-In-Possession | |||||
MSCS | Morgan Stanley Capital Services LLC | HUF | Hungarian Forint | DJIA | Dow Jones Industrial Average | |||||
INR | Indian Rupee | EIBOR | Emirates Interbank Offered Rate | |||||||
JPY | Japanese Yen | EONIA | Euro OverNight Index Average | |||||||
KRW | South Korean Won | ETF | Exchange Traded Fund | |||||||
MXN | Mexican Peso | EURIBOR | Euro Interbank Offered Rate | |||||||
NOK | Norwegian Krone | FEDEF | Federal Funds Effective Rate | |||||||
NZD | New Zealand Dollar | FHLMC | Federal Home Loan Mortgage Corp. | |||||||
PEN | Peruvian Nuevo Sol | FNMA | Federal National Mortgage Association | |||||||
PLN | Polish Zloty | FRN | Floating Rate Note | |||||||
RUB | Russian Ruble | FTSE | Financial Times Stock Exchange | |||||||
SEK | Swedish Krona | HONIX | Hong Kong Overnight Index Rate | |||||||
SGD | Singapore Dollar | JIBAR | Johannesburg Interbank Agreed Rate | |||||||
USD | United States Dollar | KDR | Korean Depositary Receipt | |||||||
ZAR | South African Rand | LIBOR | London InterBank Offered Rate | |||||||
MIB | Milano Italia Borsa | |||||||||
Index | MSCI | Morgan Stanley Capital International | ||||||||
MTN | Medium Term Note | |||||||||
CDX.NA.HY | CDX North America High Yield Index | MUTSCALM | Japan Unsecured Overnight Call Rate | |||||||
PIK | Payment In-Kind | |||||||||
PRIBOR | Prague Interbank Offered Rate | |||||||||
RBACR | Reserve Bank of Australia Cash Rate | |||||||||
RC | Revolving Loan Commitment | |||||||||
REIT | Real Estate Investment Trust | |||||||||
SARON | Swiss Average Rate Overnight | |||||||||
SOFR | Secured Overnight Financing Rate | |||||||||
SONIA | Sterling Overnight Index Average | |||||||||
SORA | Singapore Overnight Rate Average | |||||||||
SPAC | Special Purpose Acquisition Company | |||||||||
SPDR | Standard & Poor’s Depositary Receipt | |||||||||
STIBOR | Stockholm Interbank Offered Rate | |||||||||
TOPIX | Tokyo Price Index | |||||||||
WIBOR | Warsaw Interbank Offered Rate |
104 | Semiannual Report | franklintempleton.com |
FRANKLIN ALTERNATIVE STRATEGIES FUNDS
Board Approval of Sub-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 a meeting held on July 13, 2021, unanimously approved the sub-advisory agreement (the “New Sub-Advisory Agreement”) with Benefit Street Partners, L.L.C. (“Sub-Advisor”) with respect to the Fund.
In approving the New Sub-Advisory Agreement, the Board, including the independent trustees, determined that fees to be paid under the New Sub-Advisory Agreement were fair and reasonable and that approval of the New Sub-Advisory Agreement was in the best interests of the Fund and its shareholders. As part of the approval process, the trustees considered the process undertaken and information provided during their consideration and approval on May 19, 2021 of the investment management agreement between K2/D&S Management Co., L.L.C., the Fund’s investment manager (“K2 Advisors”), and the Trust, on behalf of the Fund, and the sub-advisory agreements between K2 Advisors and the Fund’s existing sub-advisors.
In making the foregoing approvals, the independent trustees received assistance and advice from their independent counsel and, in addition to the materials provided at prior meetings, considered various materials related to the New Sub-Advisory Agreement including: (1) a copy of the proposed form of New Sub-Advisory Agreement for the Sub-Advisor; (2) information describing the nature, quality and extent of services that the Sub-Advisor would provide to the Fund, and the proposed sub-advisory fees payable to the Sub-Adviser; (3) a report from K2 Advisors on the diligence conducted on the Sub-Advisor and the reasons for recommending the Sub-Advisor as a sub-advisor for the Fund, including, but not limited to, the Sub-Advisor’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 the Sub-Advisor’s compliance program and capabilities, including the Sub-Advisor’s policies and procedures in place to address potential conflicts
of interest, and the diligence undertaken by the Fund’s Chief Compliance Officer with respect thereto. The Board noted that the terms of the New Sub-Advisory Agreement were substantially similar to the terms of the sub-advisory agreements with the Fund’s existing sub-advisors and identical to the terms of the Sub-Advisor’s sub-advisory agreement with the Franklin K2 Long Short Credit Fund.
The Board’s consideration of whether to approve the New Sub-Advisory Agreement on behalf of the Fund took into account several factors including, but not limited to, the following: (1) the nature and quality of the services to be provided by the Sub-Advisor to the Fund under the New Sub-Advisory Agreement; (2) the Sub-Advisor’s experience as a manager of other accounts, including as a sub-advisor to the Franklin K2 Long Short Credit Fund; (3) the Sub-Advisor’s strength and reputation within the industry; (4) the fairness of the compensation under the New Sub-Advisory Agreement; (5) the personnel, operations, financial condition, and investment management capabilities, methodologies and resources of the Sub-Advisor; (6) profitability matters; (7) reports from K2 Advisors on the diligence conducted on the Sub-Advisor and the reasons for recommending the Sub-Advisor as a sub-advisor for the Fund, including, but not limited to, the Sub-Advisor’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 the Sub-Advisor’s compliance program and capabilities, including the Sub-Advisor’s policies and procedures in place to address potential conflicts of interest, and the diligence undertaken by the Trust’s Chief Compliance Officer with respect thereto. Particular attention was given to the due diligence and risk management procedures of K2 Advisors with respect to selecting and overseeing sub-advisors of the Fund, as well as the Sub-Advisor’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 goal.
The following discussion relates to certain primary factors relevant to the Board’s decision to approve the New Sub-Advisory Agreement. This discussion of the information and factors considered by the Board (including the information and factors discussed above) is not intended to be
franklintempleton.com | Semiannual Report | 105 |
FRANKLIN ALTERNATIVE STRATEGIES FUNDS
SHAREHOLDER INFORMATION
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.
NATURE, EXTENT AND QUALITY OF SERVICES. The trustees reviewed the nature, extent and quality of the services to be provided by the Sub-Advisor. In this regard, they reviewed the Fund’s investment goal and the Sub-Advisor’s proposed investment strategy, and the Sub-Advisor’s ability to implement such investment goal and/or investment strategy, including, but not limited to, the Sub-Advisor’s trading practices and investment decision processes.
With respect to the sub-advisory services to be provided by the Sub-Advisor, the Board noted the responsibilities that the Sub-Advisor would have with respect to the Fund’s assets to be allocated to it by K2-Advisors (the “Sub-Advised Portion”), including, among others, implementing the investment strategies with respect to the Sub-Advised Portion and ensuring compliance with the investment strategies, policies, and limitations of the Sub-Advised Portion. The trustees considered the successful performance of the Sub-Advisor in managing other investment products with investment strategies similar to the investment strategies of its Sub-Advised Portion, including the performance of the Sub-Advisor as a sub-advisor to the Franklin K2 Long Short Credit Fund.
The trustees reviewed the portfolio management teams at the Sub-Advisor that would be responsible for managing the Sub-Advised Portion, including the team’s performance, staffing, skills and compensation program. The trustees considered various other products, portfolios and entities that are advised by the Sub-Advisor, 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 the Sub-Advisor’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 the Sub-Advisor as a sub-advisor to the Fund, including the due diligence undertaken with respect to the Sub-Advisor’s compliance capabilities, and efforts to integrate the Sub-Advisor’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 the Sub-Advisor to the Fund and its shareholders and were
confident in the abilities of the Sub-Advisor to implement its proposed investment strategies, and to provide quality services to the Fund and its shareholders.
INVESTMENT PERFORMANCE. The Board noted that, as the Sub-Advisor had not provided any services to the Fund, there was no investment performance of the Sub-Advisor with respect to the Fund. The Board considered the investment performance of the Sub-Advisor in managing other investment products with similar investment strategies to the investment strategies of the Sub-Advised Portion, including the performance of the Sub-Advisor as a sub-advisor to the Franklin K2 Long Short Credit Fund. The Board also considered the performance benchmarks for the Fund and how such benchmarks would be utilized to measure the performance of the Sub-Advisor in managing the Sub-Advised Portion.
COMPARATIVE EXPENSES AND PROFITABILITY. The Board considered the cost of the services to be provided by the Sub-Advisor. The Board also noted that it could not evaluate the Sub-Advisor’s profitability with respect to the Fund since no assets had yet been allocated to the Sub-Advisor.
The Board noted that the sub-advisory fees would be paid by K2 Advisors to the Sub-Advisor and would not be additional fees to be borne by the Fund. The Board also noted that the sub-advisory fees to be paid by K2 Advisors to the Sub-Advisor were the product of negotiations between K2 Advisors and the Sub-Advisor and the Board considered the allocation of the investment management fee charged to the Fund between K2 Advisors and the Sub-Advisor in light of the nature, extent and quality of the investment management services expected to be provided by K2 Advisors and the Sub-Advisor. The trustees considered various other products, portfolios and entities that are advised by the Sub-Advisor 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 the Sub-Advisor 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 the Sub-Advisor as a sub-advisor to the Fund, the Board considered the following: (1) the fee waiver and expense limitation arrangements in effect, the amount of Fund expenses that were absorbed since the inception of the Fund by K2 Advisors through such arrangements, and the expected impact of the engagement of the Sub-Advisor on the amount of Fund expenses being
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FRANKLIN ALTERNATIVE STRATEGIES FUNDS
SHAREHOLDER INFORMATION
waived by K2 Advisors (2) the level of sub-advisory fees to be paid to the Sub-Advisor, and (3) whether there is a conflict of interest from which K2 Advisors or the Sub-Advisor derives an inappropriate advantage.
Based upon its consideration of all these factors, the Board determined that the sub-advisory fee structure for the Sub-Advisor was fair and reasonable. In doing so, the Board, including the Independent Trustees, found that the appointment of the Sub-Advisor is in the best interests of the Fund and its shareholders, and does not involve a conflict of interest from which K2 Advisors or the Sub-Advisor derives an inappropriate advantage.
ECONOMIES OF SCALE. The Board considered economies of scale that may be realized by the Sub-Advisor 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 the sub-advisory fees charged, in the quality and efficiency of services rendered and in increased capital commitments benefiting the Fund directly or indirectly. The Board concluded that economies of scale were deemed not to be a significant factor at that time in light of, among other matters, the fee waiver and expense limitation arrangement in effect.
CONCLUSION. After consideration of the foregoing factors, and such other matters as were deemed relevant, and with no single factor being determinative to their decision, the trustees—including a majority of the independent trustees—with the assistance of independent counsel approved the New Sub-Advisory Agreement, including the fees payable thereunder, with the Sub-Advisor for the Fund.
Proxy Voting Policies and Procedures
The Fund’s investment manager has established Proxy Voting Policies and Procedures (Policies) that the Fund uses to determine how to vote proxies relating to portfolio securities. Shareholders may view the Fund’s complete Policies online at franklintempleton.com. Alternatively, shareholders may request copies of the Policies free of charge by calling the Proxy Group collect at (954) 527-7678 or by sending a written request to: Franklin Templeton Companies, LLC, 300 S.E. 2nd Street, Fort Lauderdale, FL 33301, Attention: Proxy Group. Copies of the Fund’s proxy voting records are also made available online at franklintempleton.com and posted on the U.S. Securities and Exchange Commission’s website at sec.gov and reflect the most recent 12-month period ended June 30.
Quarterly Consolidated Statement of Investments
The Trust, on behalf of the Fund, files a complete 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 Form N-PORT. Shareholders may view the filed Form N-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.
Householding of Reports and Prospectuses
You will receive, or receive notice of the availability of, the Fund’s financial reports every six months. In addition, you will receive an annual updated summary prospectus (detail prospectus available upon request). To reduce Fund expenses, we try to identify related shareholders in a household and send only one copy of the financial reports (to the extent received by mail) and summary prospectus. This process, called “householding,” will continue indefinitely unless you instruct us otherwise. If you prefer not to have these documents householded, please call us at (800) 632-2301. At any time you may view current prospectuses/summary prospectuses and financial reports on our website. If you choose, you may receive these documents through electronic delivery.
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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 Distributors, LLC (800) DIAL BEN®/342-5236 franklintempleton.com | (800) 632-2301 | ||||
© 2022 Franklin Templeton Investments. All rights reserved. | 068 S 01/22 |
SEMIANNUAL REPORT AND SHAREHOLDER LETTER
FRANKLIN K2 LONG SHORT CREDIT FUND
A Series of Franklin Alternative Strategies Funds
November 30, 2021
Sign up for electronic delivery at franklintempleton.com/edelivery
SHAREHOLDER LETTER
Dear Fellow Shareholder:
During the six months ended November 30, 2021, the global economy benefited from continued monetary and fiscal stimulus measures, improved global trade, easing COVID-19 pandemic restrictions and the progress of vaccination programs. During parts of the period, geopolitical tensions, the Chinese government’s regulatory changes, surges of COVID-19 cases in certain regions and the emergence of the Omicron variant pressured global stock and bond prices. Conversely, investor sentiment was boosted by economic growth in the U.S. and China and accommodative monetary policies by some central banks, including the U.S. Federal Reserve and the European Central Bank.
In this environment, global developed market stocks, as measured by the MSCI World Index (USD), posted a +5.08% total return for the period.1 In contrast, global emerging market stocks, as measured by the MSCI Emerging Markets Index (USD), posted a -10.65% total return, while global government bonds, as measured by the FTSE World Government Bond Index (USD), posted a -2.76% total return.1
We are committed to our long-term perspective and disciplined investment approach as we continue to 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 professionals in today’s markets and encourage investors to continue to seek their advice. Amid changing
markets and economic conditions, we are confident investors with a well-diversified portfolio and a patient, long-term outlook should be well-positioned for the years ahead.
On the following pages, the Fund’s portfolio management team reviews investment decisions that pertain to performance during the past six months in light of the economic environment and other factors. Please remember all securities markets fluctuate, as do mutual fund share prices.
We thank you for investing with Franklin Templeton, welcome your questions and comments, and look forward to continuing to serve your investment needs in the future.
Sincerely,
Brooks Ritchey
President and Chief Executive Officer –
Investment Management
Franklin Alternative Strategies Funds
This letter reflects our analysis and opinions as of November 30, 2021, unless otherwise indicated. The information is not a complete analysis of every aspect of any market, country, industry, security or fund. Statements of fact are from sources considered reliable.
1. Source: Morningstar.
See www.franklintempletondatasources.com for additional data provider information.
Not FDIC Insured | | | May Lose Value | | | No Bank Guarantee |
franklintempleton.com | Semiannual Report | 1 |
Contents | ||||
Semiannual Report | ||||
Franklin K2 Long Short Credit Fund | 3 | |||
Performance Summary | 6 | |||
Your Fund’s Expenses | 8 | |||
Financial Highlights and Statement of Investments | 9 | |||
Financial Statements | 33 | |||
Notes to Financial Statements | 37 | |||
Shareholder Information | 52 |
Visit franklintempleton.com for fund updates, to access your account, or to find helpful financial planning tools.
2 | Semiannual Report | franklintempleton.com |
SEMIANNUAL REPORT
Franklin K2 Long Short Credit Fund
This semiannual report for Franklin K2 Long Short Credit Fund covers the period ended November 30, 2021.
Your Fund’s Goal and Main Investments
The Fund seeks total return through a combination of current income, capital preservation and capital appreciation. The Fund seeks to achieve its investment goal by allocating its assets across multiple 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. As defined in the Fund’s prospectus, credit-related investments include, but are not limited to: U.S. or foreign debt obligations of any credit quality, maturity or duration; all varieties of fixed income, variable-rate and floating-rate debt securities and investments; and derivatives, such as swap agreements, futures contracts and options, and other transactions and instruments that provide exposure to credit-related investments.
Performance Overview
The Fund’s Class A shares posted a +0.09% 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 -0.19% cumulative total return for the same period.1 Also for comparison, the Fund’s secondary benchmark, the ICE BofA 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 +0.01% cumulative total return.2 You can
find more of the Fund’s performance data in the Performance Summary beginning on page 6.
Performance data represent past performance, which does not guarantee future results. Investment return and principal value will fluctuate, and you may have a gain or loss when you sell your shares. Current performance may differ from figures shown. For most recent month-end performance, go to franklintempleton.com or call (800) 342-5236.
Portfolio Composition | ||||
11/30/21 | ||||
% of Total Net Assets | ||||
Long Positions | 75.8% | |||
Short Positions | -3.9% | |||
Short-Term Investments | 20.9% | |||
Other Assets, less Liabilities | 7.2% |
Economic and Market Overview
Global developed and emerging market equities, as measured by the MSCI All Country World Index (USD), posted a +3.03% total return for the six months ended November 30, 2021.2 Global equities benefited from the continued progress of vaccination programs for COVID-19, solid economic growth and a rebound in global trade. However, the Chinese government’s imposition of additional restrictions on some businesses pressured Asian and global emerging market stocks. The combination of increased consumer demand and persistent supply-chain disruptions contributed to higher inflation in many countries. Additionally, the spread of the highly contagious Delta variant pressured global stocks, and the emergence of the Omicron variant late in the six-month period injected further uncertainty into equity markets.
In the U.S., the economy continued to recover amid declining unemployment, solid wage growth and high business confidence. Gross domestic product (GDP) growth continued, as strong consumer spending supported the economy. A rebound in corporate earnings and the passage of a bipartisan infrastructure bill further bolstered investor
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.
See www.franklintempletondatasources.com for additional data provider information.
The dollar value, number of shares or principal amount, and names of all portfolio holdings are listed in the Fund’s Statement of Investments (SOI). The SOI begins on page 14.
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FRANKLIN K2 LONG SHORT CREDIT FUND
sentiment. The U.S. Federal Reserve (Fed) kept the federal funds target rate at a record-low range of 0.00%–0.25% and continued its program of open-ended U.S. Treasury and mortgage bond purchases to help keep markets functioning. However, in its November 2021 meeting statement, the Fed detailed plans to reduce its purchases of U.S. Treasury and mortgage-backed securities beginning in November. The Fed also noted that it views inflation as partially transitory, and that further employment progress was needed before the Fed would consider raising the range for the federal funds target rate.
The eurozone economy showed signs of recovery, as quarter-over-quarter GDP increased in the second and third quarters of 2021 after contracting for the previous two quarters. Most of the eurozone’s largest economies posted solid growth rates, as increased vaccination rates helped consumer activity return to pre-pandemic levels. Strong corporate earnings growth also helped European developed market equities. However, in November 2021, the annual inflation rate in the eurozone reached the highest level since 1997, two years before the introduction of the euro, and the prospect of energy shortages as winter approached tempered investor optimism. Consequently, European developed market equities, as measured by the MSCI Europe Index (USD), posted a -3.58% total return for the six months under review.2
Asian developed and emerging market equities, as measured by the MSCI All Country Asia Index (USD), posted a -8.18% total return for the six-month period.2 Although China’s economy continued to grow, it was pressured by higher commodity prices, increased fuel costs and production disruption caused by government-mandated suspensions of power use. Asian equity markets experienced heightened volatility due to inflation concerns and rising COVID-19 infection rates in some countries. Unexpected regulatory changes by the Chinese government, which negatively impacted education- and technology-related businesses, and concerns about a Chinese large property developer’s solvency further pressured Asian stocks during the six-month period.
Global emerging market stocks, as measured by the MSCI Emerging Markets Index (USD), posted a -10.65% total return for the six months under review.2 Higher COVID-19 cases in some countries, limited vaccine rollouts and concerns about rising interest rates and elevated inflation dampened investor enthusiasm in global emerging market equities. Interest-rate increases by several central banks, including Brazil, Russia and Mexico, to counter inflation raised investor concerns about a slowdown in economic growth.
Investment Strategy
We manage the Fund using a multi-manager approach. While we have overall responsibility for the Fund’s investments, we allocate the Fund’s assets to multiple subadvisors, each of whom independently manages a separate portion of the Fund’s portfolio in accordance with some or all of the following strategies: credit long short, structured credit and emerging market fixed income. We allocate the Fund’s assets among these strategies utilizing a top-down approach, generating the Fund’s strategy and subadvisor weightings by taking into account market conditions, risk factors, diversification, liquidity, transparency, and other investment options, among other things. We allocate the Fund’s assets to specific subadvisors utilizing a bottom-up approach, selecting subadvisors and their weighting within the Fund’s portfolio by taking into account their correlation to various markets and to each other, risk profiles and their return expectations.
Credit long short strategies seek to isolate issuer-specific exposure, while limiting general market risks, by taking long and/or short positions in debt securities and other related instruments. Structured credit strategies aim to profit from trading in interest-rate sensitive securities such as residential and commercial MBS, REITs, credit default swaps on various indexes, collateralized loan obligations (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.
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.
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FRANKLIN K2 LONG SHORT CREDIT FUND
Subadvisors |
11/30/21 |
Credit Long Short |
Apollo Credit Management LLC |
Benefit Street Partners L.L.C. |
Structured Credit |
Ellington Global Asset Management, LLC |
Medalist Partners, LP |
Emerging Market Fixed Income |
Emso Asset Management Limited |
Manager’s Discussion
The Fund’s subadvisors for the six months under review were Apollo Management, Benefit Street Partners, 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 the period, led by structured credit subadvisors Ellington and Medalist. The emerging market fixed income subadvisor, Emso, posted a decline for the period.
Two of the Fund’s three underlying strategies—structured credit and credit long short—contributed to the Fund’s positive performance for the period, while the emerging market fixed income strategy detracted from performance. On an asset class level, credit positioning was the top positive contributor to the Fund’s aggregate returns, with additional positive contribution from currencies (net short positioning versus the U.S. dollar) and equity exposures. Conversely, interest-rate positioning detracted from Fund performance.
In terms of aggregate sector exposures, the top positive performance drivers for the Fund were MBS, ABS and utilities. In contrast, long positions in emerging market government bonds and short positions in U.S. government bonds negatively affected returns, as did equity index hedges.
In the structured credit strategy, MBS and ABS led positive contributors. In contrast, credit index hedges detracted from performance. Ellington, the top overall positive-performing subadvisor during the period, benefited from residential MBS, driven by an increase in trading activity, and collateralized loan obligations, as loan performance and trading value broadly remained solid.
The credit long short strategy benefited from exposures to sectors such as utilities (long positioning), currencies (net short positioning versus the U.S. dollar) and energy (long positioning). Conversely, information technology (long positioning) and equity index hedges were net detractors from strategy results.
For the emerging market fixed income strategy, detractors from performance included emerging market sovereign bonds (long positioning), especially in the Ukraine, South Africa, Russia and Egypt, along with short positioning in U.S. government bond futures. U.S. index futures (short positioning) also hindered results. Conversely, positive contributors included municipal bonds in Puerto Rico (long positioning), driven by renewed optimism around restructuring, as well as short positioning in both interest-rate swaps in Poland and currency forward contracts in South Africa.
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, 2021, the end of the reporting period. The way we implement our main investment strategies and the resulting portfolio holdings may change depending on factors such as market and economic conditions. These opinions may not be relied upon as investment advice or an offer for a particular security. The information is not a complete analysis of every aspect of any market, country, industry, security or the Fund. Statements of fact are from sources considered reliable, but the investment manager makes no representation or warranty as to their completeness or accuracy. Although historical performance is no guarantee of future results, these insights may help you understand our investment management philosophy.
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FRANKLIN K2 LONG SHORT CREDIT FUND
Performance Summary as of November 30, 2021
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 11/30/211
Cumulative total return excludes sales charges. Average annual total return includes maximum sales charges. Sales charges will vary depending on the size of the investment and the class of share purchased. The maximum is 5.50% and the minimum is 0%. Class A: 5.50% maximum initial sales charge; Advisor Class: no sales charges. For other share classes, visit franklintempleton.com.
Share Class | Cumulative Total Return2 | Average Annual Total Return3 | ||||||
A4 | ||||||||
6-Month | +0.09% | -5.38% | ||||||
1-Year | +4.34% | -1.37% | ||||||
5-Year | +21.59% | +2.81% | ||||||
Since Inception (9/8/15) | +30.77% | +3.46% | ||||||
Advisor | ||||||||
6-Month | +0.18% | +0.18% | ||||||
1-Year | +4.46% | +4.46% | ||||||
5-Year | +22.59% | +4.16% | ||||||
Since Inception (9/8/15) | +31.97% | +4.56% |
Performance data represent past performance, which does not guarantee future results. Investment return and principal value will fluctuate, and you may have a gain or loss when you sell your shares. Current performance may differ from figures shown. For most recent month-end performance, go to franklintempleton.com or call (800) 342-5236.
See page 7 for Performance Summary footnotes.
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FRANKLIN K2 LONG SHORT CREDIT FUND
PERFORMANCE SUMMARY
Total Annual Operating Expenses5
Share Class | With Fee Waiver | Without Fee Waiver | ||||||
A | 2.33% | 2.92% | ||||||
Advisor | 2.08% | 2.67% |
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 have 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. Events such as the spread of deadly diseases, disasters, and financial, political or social disruptions, may heighten risks and adversely affect performance. The Fund’s prospectus also includes a description of the main investment risks, including the risks of foreign investments.
1. The Fund has an expense reduction contractually guaranteed through 9/30/22. 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.
See www.franklintempletondatasources.com for additional data provider information.
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FRANKLIN K2 LONG SHORT CREDIT FUND
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 6/1/21 | Ending Account Value 11/30/21 | Expenses Paid During Period 6/1/21–11/30/211,2 | Ending Account Value 11/30/21 | Expenses Paid During Period 6/1/21–11/30/211,2 | Net Annualized Expense Ratio2 | ||||||||||||||||||
A | $ | 1,000 | $ | 1,000.90 | $ | 10.83 | $ | 1,014.24 | $ | 10.91 | 2.16 | % | ||||||||||||
C | $ | 1,000 | $ | 997.20 | $ | 14.57 | $ | 1,010.48 | $ | 14.67 | 2.91 | % | ||||||||||||
R | $ | 1,000 | $ | 1,000.00 | $ | 12.13 | $ | 1,012.94 | $ | 12.21 | 2.42 | % | ||||||||||||
R6 | $ | 1,000 | $ | 1,002.70 | $ | 9.09 | $ | 1,015.99 | $ | 9.15 | 1.81 | % | ||||||||||||
Advisor | $ | 1,000 | $ | 1,002.70 | $ | 9.64 | $ | 1,015.44 | $ | 9.70 | 1.92 | % |
1. Expenses are equal to the annualized expense ratio for the six-month period as indicated above—in the far right column—multiplied by the simple average account value over the period indicated, and then multiplied by 183/365 to reflect the one-half year period.
2. Reflects expenses after fee waivers and expense reimbursements. Does not include acquired fund fees and expenses.
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FRANKLIN ALTERNATIVE STRATEGIES FUNDS
Franklin K2 Long Short Credit Fund
Six Months Ended November 30, 2021 (unaudited) | Year Ended May 31, | |||||||||||||||||||||||
2021 | 2020 | 2019 | 2018 | 2017 | ||||||||||||||||||||
Class A | ||||||||||||||||||||||||
Per share operating performance (for a share outstanding throughout the period) | ||||||||||||||||||||||||
Net asset value, beginning of period | $ | 10.90 | $ | 9.86 | $ | 10.45 | $ | 10.50 | $ | 10.49 | $ | 10.15 | ||||||||||||
|
| |||||||||||||||||||||||
Income from investment operationsa: | ||||||||||||||||||||||||
Net investment incomeb | 0.13 | 0.28 | 0.23 | 0.37 | 0.29 | 0.23 | ||||||||||||||||||
Net realized and unrealized gains (losses) | (0.12 | ) | 1.03 | (0.53 | ) | (0.02 | ) | 0.08 | 0.53 | |||||||||||||||
|
| |||||||||||||||||||||||
Total from investment operations | 0.01 | 1.31 | (0.30 | ) | 0.35 | 0.37 | 0.76 | |||||||||||||||||
|
| |||||||||||||||||||||||
Less distributions from: | ||||||||||||||||||||||||
Net investment income | — | (0.26 | ) | (0.25 | ) | (0.31 | ) | (0.19 | ) | (0.32 | ) | |||||||||||||
Net realized gains | — | (0.01 | ) | (0.04 | ) | (0.09 | ) | (0.17 | ) | (0.10 | ) | |||||||||||||
|
| |||||||||||||||||||||||
Total distributions | — | (0.27 | ) | (0.29 | ) | (0.40 | ) | (0.36 | ) | (0.42 | ) | |||||||||||||
|
| |||||||||||||||||||||||
Net asset value, end of period | $ | 10.91 | $ | 10.90 | $ | 9.86 | $ | 10.45 | $ | 10.50 | $ | 10.49 | ||||||||||||
|
| |||||||||||||||||||||||
Total returnc | 0.09% | 13.33% | (2.92)% | 3.42% | 3.63% | 7.58% | ||||||||||||||||||
Ratios to average net assetsd | ||||||||||||||||||||||||
Expenses before waiver, payments by affiliates and expense reductione | 2.62% | 2.85% | 3.24% | 3.15% | 3.51% | 3.50% | ||||||||||||||||||
Expenses net of waiver, payments by affiliates and expense reductione | 2.16% | f | 2.27% | f | 2.74% | 2.69% | 2.98% | f | 2.75% | |||||||||||||||
Expenses incurred in connection with securities sold short | 0.27% | 0.41% | 0.58% | 0.62% | 0.89% | 0.76% | ||||||||||||||||||
Net investment income | 2.34% | 2.61% | 2.24% | 3.49% | 2.71% | 2.24% | ||||||||||||||||||
Supplemental data | ||||||||||||||||||||||||
Net assets, end of period (000’s) | $23,487 | $26,581 | $20,212 | $27,870 | $45,088 | $41,001 | ||||||||||||||||||
Portfolio turnover rate | 81.03% | 194.81% | 205.14% | 158.66% | 251.81% | 317.70% |
aThe 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.
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 financial statements. | Semiannual Report | 9 |
FRANKLIN ALTERNATIVE STRATEGIES FUNDS
FINANCIAL HIGHLIGHTS
Franklin K2 Long Short Credit Fund (continued)
Six Months Ended November 30, 2021 (unaudited) | Year Ended May 31, | |||||||||||||||||||||||
2021 | 2020 | 2019 | 2018 | 2017 | ||||||||||||||||||||
Class C | ||||||||||||||||||||||||
Per share operating performance (for a share outstanding throughout the period) | ||||||||||||||||||||||||
Net asset value, beginning of period | $ | 10.70 | $ | 9.69 | $ | 10.26 | $ | 10.34 | $ | 10.35 | $ | 10.07 | ||||||||||||
|
| |||||||||||||||||||||||
Income from investment operationsa: | ||||||||||||||||||||||||
Net investment incomeb | 0.08 | 0.19 | 0.15 | 0.27 | 0.19 | 0.14 | ||||||||||||||||||
Net realized and unrealized gains (losses) | (0.11 | ) | 1.01 | (0.52 | ) | (0.01 | ) | 0.07 | 0.52 | |||||||||||||||
|
| |||||||||||||||||||||||
Total from investment operations | (0.03 | ) | 1.20 | (0.37 | ) | 0.26 | 0.26 | 0.66 | ||||||||||||||||
|
| |||||||||||||||||||||||
Less distributions from: | ||||||||||||||||||||||||
Net investment income | — | (0.18 | ) | (0.16 | ) | (0.25 | ) | (0.10 | ) | (0.28 | ) | |||||||||||||
Net realized gains | — | (0.01 | ) | (0.04 | ) | (0.09 | ) | (0.17 | ) | (0.10 | ) | |||||||||||||
|
| |||||||||||||||||||||||
Total distributions | — | (0.19 | ) | (0.20 | ) | (0.34 | ) | (0.27 | ) | (0.38 | ) | |||||||||||||
|
| |||||||||||||||||||||||
Net asset value, end of period | $ | 10.67 | $ | 10.70 | $ | 9.69 | $ | 10.26 | $ | 10.34 | $ | 10.35 | ||||||||||||
|
| |||||||||||||||||||||||
Total returnc | (0.28)% | 12.40% | (3.66)% | 2.61% | 2.70% | 6.56% | ||||||||||||||||||
Ratios to average net assetsd | ||||||||||||||||||||||||
Expenses before waiver, payments by affiliates and expense reductione | 3.37% | 3.64% | 3.96% | 4.03% | 4.37% | 4.44% | ||||||||||||||||||
Expenses net of waiver, payments by affiliates and expense reductione | 2.91% | f | 3.05% | f | 3.46% | 3.57% | 3.84% | f | 3.69% | |||||||||||||||
Expenses incurred in connection with securities sold short | 0.27% | 0.41% | 0.58% | 0.62% | 0.89% | 0.76% | ||||||||||||||||||
Net investment income | 1.59% | 1.82% | 1.52% | 2.61% | 1.85% | 1.30% | ||||||||||||||||||
Supplemental data | ||||||||||||||||||||||||
Net assets, end of period (000’s) | $2,684 | $2,945 | $2,882 | $2,893 | $2,503 | $1,507 | ||||||||||||||||||
Portfolio turnover rate | 81.03% | 194.81% | 205.14% | 158.66% | 251.81% | 317.70% |
aThe 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.
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%.
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, 2021 (unaudited) | Year Ended May 31, | |||||||||||||||||||||||
2021 | 2020 | 2019 | 2018 | 2017 | ||||||||||||||||||||
Class R | ||||||||||||||||||||||||
Per share operating performance (for a share outstanding throughout the period) | ||||||||||||||||||||||||
Net asset value, beginning of period | $ | 10.79 | $ | 9.77 | $ | 10.36 | $ | 10.41 | $ | 10.41 | $ | 10.10 | ||||||||||||
|
| |||||||||||||||||||||||
Income from investment operationsa: | ||||||||||||||||||||||||
Net investment incomeb | 0.11 | 0.25 | 0.21 | 0.33 | 0.25 | 0.20 | ||||||||||||||||||
Net realized and unrealized gains (losses) | (0.12 | ) | 1.01 | (0.53 | ) | (0.01 | ) | 0.09 | 0.53 | |||||||||||||||
|
| |||||||||||||||||||||||
Total from investment operations | (0.01 | ) | 1.26 | (0.32 | ) | 0.32 | 0.34 | 0.73 | ||||||||||||||||
|
| |||||||||||||||||||||||
Less distributions from: | ||||||||||||||||||||||||
Net investment income | — | (0.23 | ) | (0.23 | ) | (0.28 | ) | (0.17 | ) | (0.32 | ) | |||||||||||||
Net realized gains | — | (0.01 | ) | (0.04 | ) | (0.09 | ) | (0.17 | ) | (0.10 | ) | |||||||||||||
|
| |||||||||||||||||||||||
Total distributions | — | (0.24 | ) | (0.27 | ) | (0.37 | ) | (0.34 | ) | (0.42 | ) | |||||||||||||
|
| |||||||||||||||||||||||
Net asset value, end of period | $ | 10.78 | $ | 10.79 | $ | 9.77 | $ | 10.36 | $ | 10.41 | $ | 10.41 | ||||||||||||
|
| |||||||||||||||||||||||
Total returnc | (0.09)% | 12.95% | (3.13)% | 3.12% | 3.29% | 7.29% | ||||||||||||||||||
Ratios to average net assetsd | ||||||||||||||||||||||||
Expenses before waiver, payments by affiliates and expense reductione | 2.87% | 3.15% | 3.46% | 3.50% | 3.82% | 3.83% | ||||||||||||||||||
Expenses net of waiver, payments by affiliates and expense reductione | 2.42% | f | 2.55% | f | 2.96% | 3.04% | 3.29% | f | 3.08% | |||||||||||||||
Expenses incurred in connection with securities sold short | 0.27% | 0.41% | 0.58% | 0.62% | 0.89% | 0.76% | ||||||||||||||||||
Net investment income | 2.09% | 2.31% | 2.02% | 3.14% | 2.40% | 1.91% | ||||||||||||||||||
Supplemental data | ||||||||||||||||||||||||
Net assets, end of period (000’s) | $212 | $196 | $169 | $166 | $162 | $127 | ||||||||||||||||||
Portfolio turnover rate | 81.03% | 194.81% | 205.14% | 158.66% | 251.81% | 317.70% |
aThe 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.
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 financial statements. | Semiannual Report | 11 |
FRANKLIN ALTERNATIVE STRATEGIES FUNDS
FINANCIAL HIGHLIGHTS
Franklin K2 Long Short Credit Fund (continued)
Six Months Ended November 30, 2021 (unaudited) | Year Ended May 31, | |||||||||||||||||||||||
2021 | 2020 | 2019 | 2018 | 2017 | ||||||||||||||||||||
Class R6 | ||||||||||||||||||||||||
Per share operating performance (for a share outstanding throughout the period) | ||||||||||||||||||||||||
Net asset value, beginning of period | $10.94 | $9.87 | $10.45 | $10.51 | $10.50 | $10.15 | ||||||||||||||||||
|
| |||||||||||||||||||||||
Income from investment operationsa: | ||||||||||||||||||||||||
Net investment incomeb | 0.15 | 0.31 | 0.26 | 0.36 | 0.31 | 0.24 | ||||||||||||||||||
Net realized and unrealized gains (losses) | (0.12 | ) | 1.02 | (0.53 | ) | — | c | 0.08 | 0.53 | |||||||||||||||
|
| |||||||||||||||||||||||
Total from investment operations | 0.03 | 1.33 | (0.27) | 0.36 | 0.39 | 0.77 | ||||||||||||||||||
|
| |||||||||||||||||||||||
Less distributions from: | ||||||||||||||||||||||||
Net investment income | — | (0.25 | ) | (0.27 | ) | (0.33 | ) | (0.21 | ) | (0.32 | ) | |||||||||||||
Net realized gains | — | (0.01 | ) | (0.04 | ) | (0.09 | ) | (0.17 | ) | (0.10 | ) | |||||||||||||
|
| |||||||||||||||||||||||
Total distributions | — | (0.26 | ) | (0.31 | ) | (0.42 | ) | (0.38 | ) | (0.42 | ) | |||||||||||||
|
| |||||||||||||||||||||||
Net asset value, end of period | $ | 10.97 | $ | 10.94 | $ | 9.87 | $ | 10.45 | $ | 10.51 | $ | 10.50 | ||||||||||||
|
| |||||||||||||||||||||||
Total returnd | 0.18% | 13.54% | (2.58)% | 3.53% | 3.76% | 7.71% | ||||||||||||||||||
Ratios to average net assetse | ||||||||||||||||||||||||
Expenses before waiver, payments by affiliates and expense reductionf | 3.66% | 2.58% | 2.95% | 3.10% | 3.35% | 3.43% | ||||||||||||||||||
Expenses net of waiver, payments by affiliates and expense reductionf | 1.81% | g | 1.99% | g | 2.41% | 2.55% | 2.83% | g | 2.68% | |||||||||||||||
Expenses incurred in connection with securities sold short | 0.24% | 0.42% | 0.58% | 0.62% | 0.89% | 0.76% | ||||||||||||||||||
Net investment income | 2.70% | 2.88% | 2.57% | 3.63% | 2.86% | 2.31% | ||||||||||||||||||
Supplemental data | ||||||||||||||||||||||||
Net assets, end of period (000’s) | $6 | $6 | $5 | $233 | $13 | $13,052 | ||||||||||||||||||
Portfolio turnover rate | 81.03% | 194.81% | 205.14% | 158.66% | 251.81% | 317.70% |
aThe 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.
bBased on average daily shares outstanding.
cAmount rounds to less than $0.01 per share.
dTotal return is not annualized for periods less than one year.
eRatios are annualized for periods less than one year.
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%.
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, 2021 (unaudited) | Year Ended May 31, | |||||||||||||||||||||||
2021 | 2020 | 2019 | 2018 | 2017 | ||||||||||||||||||||
Advisor Class | ||||||||||||||||||||||||
Per share operating performance (for a share outstanding throughout the period) | ||||||||||||||||||||||||
Net asset value, beginning of period | $ | 10.91 | $ | 9.88 | $ | 10.46 | $ | 10.51 | $ | 10.50 | $ | 10.15 | ||||||||||||
|
| |||||||||||||||||||||||
Income from investment operationsa: | ||||||||||||||||||||||||
Net investment incomeb | 0.14 | 0.30 | 0.26 | 0.38 | 0.30 | 0.24 | ||||||||||||||||||
Net realized and unrealized gains (losses) | (0.12 | ) | 1.02 | (0.53 | ) | (0.01 | ) | 0.09 | 0.53 | |||||||||||||||
|
| |||||||||||||||||||||||
Total from investment operations | 0.02 | 1.32 | (0.27 | ) | 0.37 | 0.39 | 0.77 | |||||||||||||||||
|
| |||||||||||||||||||||||
Less distributions from: | ||||||||||||||||||||||||
Net investment income | — | (0.28 | ) | (0.27 | ) | (0.33 | ) | (0.21 | ) | (0.32 | ) | |||||||||||||
Net realized gains | — | (0.01 | ) | (0.04 | ) | (0.09 | ) | (0.17 | ) | (0.10 | ) | |||||||||||||
|
| |||||||||||||||||||||||
Total distributions | — | (0.29 | ) | (0.31 | ) | (0.42 | ) | (0.38 | ) | (0.42 | ) | |||||||||||||
|
| |||||||||||||||||||||||
Net asset value, end of period | $ | 10.93 | $ | 10.91 | $ | 9.88 | $ | 10.46 | $ | 10.51 | $ | 10.50 | ||||||||||||
|
| |||||||||||||||||||||||
Total returnc | 0.18% | 13.45% | (2.61)% | 3.60% | 3.75% | 7.70% | ||||||||||||||||||
Ratios to average net assetsd | ||||||||||||||||||||||||
Expenses before waiver, payments by affiliates and expense reductione | 2.37% | 2.65% | 2.96% | 3.03% | 3.37% | 3.44% | ||||||||||||||||||
Expenses net of waiver, payments by affiliates and expense reductione | 1.92% | f | 2.06%f | 2.46% | 2.57% | 2.84%f | 2.69% | |||||||||||||||||
Expenses incurred in connection with securities sold short | 0.27% | 0.41% | 0.58% | 0.62% | 0.89% | 0.76% | ||||||||||||||||||
Net investment income | 2.59% | 2.81% | 2.52% | 3.61% | 2.85% | 2.30% | ||||||||||||||||||
Supplemental data | ||||||||||||||||||||||||
Net assets, end of period (000’s) | $80,058 | $76,637 | $73,047 | $86,868 | $45,514 | $25,125 | ||||||||||||||||||
Portfolio turnover rate | 81.03% | 194.81% | 205.14% | 158.66% | 251.81% | 317.70% |
aThe 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.
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 financial statements. | Semiannual Report | 13 |
FRANKLIN ALTERNATIVE STRATEGIES FUNDS
Statement of Investments, November 30, 2021 (unaudited)
Franklin K2 Long Short Credit Fund
Country | Shares/Warrants | Value | ||||||||||||||||
Common Stocks and Other Equity Interests 2.2% | ||||||||||||||||||
Automobiles 0.2% | ||||||||||||||||||
a | General Motors Co. | United States | 2,700 | $ | 156,249 | |||||||||||||
|
| |||||||||||||||||
Biotechnology 0.0%† | ||||||||||||||||||
a | CytoDyn Inc. | United States | 2,389 | 2,986 | ||||||||||||||
|
| |||||||||||||||||
Commercial Services & Supplies 0.2% | ||||||||||||||||||
a | CM Life Sciences III Inc. | United States | 2,593 | 26,915 | ||||||||||||||
a | Executive Network Partnering Corp., A | United States | 6,280 | 61,795 | ||||||||||||||
a | Executive Network Partnering Corp., A, 9/25/28, wts. | United States | 925 | 653 | ||||||||||||||
a | Gores Technology Partners II Inc. | United States | 362 | 3,683 | ||||||||||||||
a | Gores Technology Partners Inc. | United States | 145 | 1,470 | ||||||||||||||
a | Hedosophia European Growth | United Kingdom | 1,142 | 12,770 | ||||||||||||||
Iron Spark I Inc., A | United States | 1,578 | 15,859 | |||||||||||||||
a | Landcadia Holdings IV Inc. | United States | 1,374 | 13,912 | ||||||||||||||
a | Tech And Energy Transition Corp. | United States | 2,499 | 24,915 | ||||||||||||||
a | Tishman Speyer Innovation Corp. II, A | United States | 113 | 1,106 | ||||||||||||||
a | Twelve Seas Investment Co. II, A | United States | 3,059 | 29,795 | ||||||||||||||
a | Twelve Seas Investment Co. II, A, 3/2/28, wts. | United States | 1,019 | 658 | ||||||||||||||
|
| |||||||||||||||||
193,531 | ||||||||||||||||||
|
| |||||||||||||||||
Communications Equipment 0.0%† | ||||||||||||||||||
a | Commscope Holding Co. Inc. | United States | 2,026 | 20,179 | ||||||||||||||
|
| |||||||||||||||||
Diversified Financial Services 0.8% | ||||||||||||||||||
a | 2MX Organic SA, 11/16/25, wts. | France | 1,165 | 322 | ||||||||||||||
a | Aequi Acquisition Corp. | United States | 440 | 4,382 | ||||||||||||||
a | Aequi Acquisition Corp., A | United States | 3,553 | 34,713 | ||||||||||||||
a | African Gold Acquisition Corp., A | United States | 1,912 | 18,623 | ||||||||||||||
a | African Gold Acquisition Corp., A, 3/13/28, wts. | United States | 1,434 | 809 | ||||||||||||||
a | Agile Growth Corp. | United States | 1,147 | 11,550 | ||||||||||||||
a | Ares Acquisition Corp., A | United States | 2,110 | 20,657 | ||||||||||||||
a | Ares Acquisition Corp., A, 12/31/27, wts. | United States | 566 | 594 | ||||||||||||||
a | Blue Whale Acquisition Corp. I | United Arab Emirates | 3,792 | 37,711 | ||||||||||||||
a | CF Acquisition Corp. V, A | United States | 1,761 | 17,540 | ||||||||||||||
a | CF Acquisition Corp. V, A, 12/31/27, wts. | United States | 603 | 603 | ||||||||||||||
a | Corsair Partnering Corp. | United States | 1,149 | 11,484 | ||||||||||||||
a | Crystal Peak Acquisition | Netherlands | 1,993 | 19,561 | ||||||||||||||
a | Crystal Peak Acquisition, 6/22/26, wts. | Netherlands | 802 | — | ||||||||||||||
a | Decarbonization Plus Acquisition Corp. II, A | United States | 1,373 | 13,840 | ||||||||||||||
a | DHC Acquisition Corp., A | United States | 1,838 | 17,957 | ||||||||||||||
a | DHC Acquisition Corp., A, 12/31/27, wts. | United States | 612 | 465 | ||||||||||||||
a | Disruptive Acquisition Corp. I | United States | 2,007 | 20,000 | ||||||||||||||
a | Dragoneer Growth Opportunities Corp. III, A | United States | 3,050 | 30,439 | ||||||||||||||
a | ECP Environmental Growth Opportunities Corp., A, 2/11/28, wts. | United States | 135 | 142 | ||||||||||||||
a | Elliott Opportunity II Corp. | United States | 1,335 | 13,844 | ||||||||||||||
a | European Biotech Acquisition Corp. | Netherlands | 361 | 3,585 | ||||||||||||||
a | Far Peak Acquisition Corp. | United States | 7,608 | 78,058 | ||||||||||||||
a | Fast Acquisition Corp. II | United States | 213 | 2,138 | ||||||||||||||
a | Figure Acquisition Corp. I, A | United States | 409 | 4,041 | ||||||||||||||
a | Figure Acquisition Corp. I, A, 12/31/27, wts. | United States | 345 | 417 | ||||||||||||||
a | Forum Merger IV Corp. | United States | 849 | 8,545 | ||||||||||||||
a | Freedom Acquisition I Corp., A | United States | 573 | 5,587 | ||||||||||||||
a | FTAC Hera Acquisition Corp., A | United States | 1,805 | 17,725 | ||||||||||||||
a | Fusion Acquisition Corp. II, A | United States | 956 | 9,321 | ||||||||||||||
a | Fusion Acquisition Corp. II, A, 12/31/27, wts. | United States | 318 | 240 | ||||||||||||||
a | Glenfarne Merger Corp. | United States | 361 | 3,597 | ||||||||||||||
a | Investindustrial Acquisition Corp., 10/30/27, wts. | United States | 580 | 1,102 | ||||||||||||||
a | ION Acquisition Corp. III Ltd., A | Israel | 796 | 7,781 | ||||||||||||||
a | Joff Fintech Acquisition Corp., A | United States | 1,575 | 15,372 |
14 | Semiannual Report | franklintempleton.com |
FRANKLIN ALTERNATIVE STRATEGIES FUNDS
STATEMENT OF INVESTMENTS (UNAUDITED)
Franklin K2 Long Short Credit Fund (continued)
Country | Shares/Warrants | Value | ||||||||||||||||
Common Stocks and Other Equity Interests (continued) | ||||||||||||||||||
Diversified Financial Services (continued) | ||||||||||||||||||
a | Joff Fintech Acquisition Corp., A, 12/31/27, wts. | United States | 525 | $ | 420 | |||||||||||||
a | Khosla Ventures Acquisition Co. III, A | United States | 3,158 | 31,359 | ||||||||||||||
a | L Catterton Asia Acquisition Corp. | Singapore | 668 | 6,727 | ||||||||||||||
a | Lakestar SPAC I SE, 12/31/25, wts. | Luxembourg | 210 | 214 | ||||||||||||||
a | LDH Growth Corp. I | United States | 180 | 1,791 | ||||||||||||||
a | Lead Edge Growth Opportunities Ltd. | United States | 1,379 | 13,694 | ||||||||||||||
a | Lerer Hippeau Acquisition Corp., A | United States | 2,839 | 27,765 | ||||||||||||||
a | Live Oak Mobility Acquisition Corp., A | United States | 757 | 7,411 | ||||||||||||||
a | MDH Acquisition Corp., A | United States | 1,367 | 13,506 | ||||||||||||||
a | MDH Acquisition Corp., A, 2/2/28, wts. | United States | 683 | 424 | ||||||||||||||
a | The Music Acquisition Corp., A | United States | 1,590 | 15,534 | ||||||||||||||
a | The Music Acquisition Corp., A, 2/5/28, wts. | United States | 795 | 533 | ||||||||||||||
a | Nightdragon Acquisition Corp., A | United States | 367 | 3,602 | ||||||||||||||
a | Obotech Acquisition SE, A | Luxembourg | 1,240 | 13,711 | ||||||||||||||
a | Obotech Acquisition SE, A, 4/30/26, wts. | Luxembourg | 413 | 328 | ||||||||||||||
a | Pegasus Acquisition Co. Europe BV | Netherlands | 1,768 | 19,850 | ||||||||||||||
a | Pegasus Digital Mobility Acquisition Corp. | Cayman Islands | 1,665 | 16,733 | ||||||||||||||
a | Peridot Acquisition Corp. II | United States | 735 | 7,354 | ||||||||||||||
a | Pershing Square Tontine Holdings Ltd., A | United States | 1,507 | 30,381 | ||||||||||||||
a | Pioneer Merger Corp., A | United States | 597 | 5,934 | ||||||||||||||
a | Population Health Investment Co. Inc., A | United States | 342 | 3,348 | ||||||||||||||
a | Powered Brands, A | United States | 1,065 | 10,394 | ||||||||||||||
a | PWP Forward Acquisition Corp. I | United States | 1,807 | 17,889 | ||||||||||||||
a | Silver Crest Acquisition Corp., A | United States | 857 | 8,416 | ||||||||||||||
a | Silver Crest Acquisition Corp., A, 3/31/28, wts. | United States | 428 | 304 | ||||||||||||||
a | Supernova Partners Acquisition Co. II Ltd., A | United States | 1,102 | 11,902 | ||||||||||||||
a | Supernova Partners Acquisition Co. II Ltd., A, 12/31/27, wts. | United States | 435 | 1,266 | ||||||||||||||
a | Supernova Partners Acquisition Co. III Ltd. | United States | 2,530 | 25,174 | ||||||||||||||
a | SVF Investment Corp. 2, A | United States | 72 | 719 | ||||||||||||||
a | SVF Investment Corp. 3, A | United States | 72 | 720 | ||||||||||||||
a | TCV Acquisition Corp., A | United States | 500 | 4,975 | ||||||||||||||
a | TCW Special Purpose Acquisition Corp., A | United States | 1,838 | 17,939 | ||||||||||||||
a | TCW Special Purpose Acquisition Corp., A, 12/31/28, wts. | United States | 612 | 465 | ||||||||||||||
a | Tekkorp Digital Acquisition Corp., 10/26/27, wts. | United States | 433 | 370 | ||||||||||||||
a | TPG Pace Beneficial II Corp., A | United States | 83 | 830 | ||||||||||||||
a | Twin Ridge Capital Acquisition Corp., A | United States | 2,202 | 21,448 | ||||||||||||||
a | Twin Ridge Capital Acquisition Corp., A, 12/31/28, wts. | United States | 734 | 551 | ||||||||||||||
a | VPC Impact Acquisition Holdings III Inc., A | United States | 1,445 | 14,450 | ||||||||||||||
a | Waldencast Acquisition Corp. | United States | 82 | 846 | ||||||||||||||
a | Zimmer Energy Transition Acquisition Corp. | United States | 2,110 | 21,216 | ||||||||||||||
|
| |||||||||||||||||
813,238 | ||||||||||||||||||
|
| |||||||||||||||||
Diversified Telecommunication Services 0.2% | ||||||||||||||||||
a | BT Group PLC, A | United Kingdom | 26,436 | 55,650 | ||||||||||||||
a | Liberty Global PLC, C | United Kingdom | 5,073 | 135,145 | ||||||||||||||
|
| |||||||||||||||||
190,795 | ||||||||||||||||||
|
| |||||||||||||||||
Equity Real Estate Investment Trusts (REITs) 0.2% | ||||||||||||||||||
VICI Properties Inc. | United States | 9,272 | 252,199 | |||||||||||||||
|
| |||||||||||||||||
Independent Power & Renewable Electricity Producers 0.4% | ||||||||||||||||||
b | Clearway Energy Inc., A | United States | 11,757 | 405,969 | ||||||||||||||
|
|
|
| |||||||||||||||
Internet & Direct Marketing Retail 0.0%† | ||||||||||||||||||
a | THG PLC, B | United Kingdom | 14,340 | 33,718 | ||||||||||||||
|
| |||||||||||||||||
Media 0.1% | ||||||||||||||||||
a | Altice USA Inc., A | United States | 4,509 | 71,423 | ||||||||||||||
|
|
franklintempleton.com | Semiannual Report | 15 |
FRANKLIN ALTERNATIVE STRATEGIES FUNDS
STATEMENT OF INVESTMENTS (UNAUDITED)
Franklin K2 Long Short Credit Fund (continued)
Country | Shares/Warrants | Value | ||||||||||||||||
Common Stocks and Other Equity Interests (continued) | ||||||||||||||||||
Oil, Gas & Consumable Fuels 0.0%† | ||||||||||||||||||
a,c | Bighorn Permian Resources LLC, 2/1/24, wts. | United States | 1,346 | $ | 20,129 | |||||||||||||
|
| |||||||||||||||||
Pharmaceuticals 0.1% | ||||||||||||||||||
a | Bausch Health Cos. Inc. | United States | 4,071 | 97,053 | ||||||||||||||
|
| |||||||||||||||||
Professional Services 0.0%† | ||||||||||||||||||
a,c,d | Acosta Inc. | United States | 923 | 7,476 | ||||||||||||||
|
| |||||||||||||||||
Textiles, Apparel & Luxury Goods 0.0%† | ||||||||||||||||||
a,e | Samsonite International SA, 144A | United States | 10,513 | 19,660 | ||||||||||||||
|
| |||||||||||||||||
Total Common Stocks and Other Equity Interests (Cost $1,978,597) | 2,284,605 | |||||||||||||||||
|
| |||||||||||||||||
Convertible Preferred Stocks 0.3% | ||||||||||||||||||
Media 0.2% | ||||||||||||||||||
Viacomcbs Inc., 5.75%, cvt. pfd., A | United States | 4,492 | 232,057 | |||||||||||||||
|
| |||||||||||||||||
Professional Services 0.1% | ||||||||||||||||||
a,c,d | Acosta Inc., cvt. pfd. | United States | 925 | 46,250 | ||||||||||||||
|
| |||||||||||||||||
Total Convertible Preferred Stocks | 278,307 | |||||||||||||||||
|
| |||||||||||||||||
Preferred Stocks 0.1% | ||||||||||||||||||
Diversified Financial Services 0.0%† | ||||||||||||||||||
a | 2MX Organic SA, pfd. | France | 1,177 | 13,225 | ||||||||||||||
|
| |||||||||||||||||
Electric Utilities 0.0%† | ||||||||||||||||||
SCE Trust VI, 5.00%, pfd. | United States | 1,042 | 25,842 | |||||||||||||||
|
| |||||||||||||||||
Thrifts & Mortgage Finance 0.1% | ||||||||||||||||||
FHLMC, pfd., | ||||||||||||||||||
O, 5.81% | United States | 9,100 | �� | 45,318 | ||||||||||||||
Z, 8.375% | United States | 2,420 | 8,881 | |||||||||||||||
FNMA, pfd., | ||||||||||||||||||
a O | United States | 8,600 | 45,580 | |||||||||||||||
S, 8.25% | United States | 4,475 | 17,453 | |||||||||||||||
|
| |||||||||||||||||
117,232 | ||||||||||||||||||
|
| |||||||||||||||||
Total Preferred Stocks (Cost $146,898) | 156,299 | |||||||||||||||||
|
| |||||||||||||||||
Principal Amount* | ||||||||||||||||||
Convertible Bonds 1.8% | ||||||||||||||||||
Airlines 0.2% | ||||||||||||||||||
e | Air France-KLM, senior note, Reg S, 0.125%, 3/25/26 | France | 10,925 | EUR | 198,915 | |||||||||||||
|
| |||||||||||||||||
Diversified Consumer Services 0.4% | ||||||||||||||||||
Chegg Inc., senior note, | ||||||||||||||||||
0.125%, 3/15/25 | United States | 82,000 | 78,966 | |||||||||||||||
zero cpn., 9/01/26 | United States | 424,000 | 349,164 | |||||||||||||||
|
| |||||||||||||||||
428,130 | ||||||||||||||||||
|
| |||||||||||||||||
Internet & Direct Marketing Retail 0.5% | ||||||||||||||||||
e | Just Eat Takeaway.Com NV, B, senior note, Reg S, 0.625%, 2/09/28 | United Kingdom | 200,000 | EUR | 196,582 | |||||||||||||
Pinduoduo Inc., senior note, zero cpn., 12/01/25 | China | 56,000 | 50,008 | |||||||||||||||
e | The Realreal Inc., senior note, 144A, 1.00%, 3/01/28 | United States | 102,000 | 91,025 | ||||||||||||||
Wayfair Inc., senior note, 1.00%, 8/15/26 | United States | 96,000 | 175,344 | |||||||||||||||
|
| |||||||||||||||||
512,959 | ||||||||||||||||||
|
| |||||||||||||||||
IT Services 0.0%† | ||||||||||||||||||
e | Fastly Inc., senior note, 144A, zero cpn., 3/15/26 | United States | 19,000 | 16,031 | ||||||||||||||
|
|
16 | Semiannual Report | franklintempleton.com |
FRANKLIN ALTERNATIVE STRATEGIES FUNDS
STATEMENT OF INVESTMENTS (UNAUDITED)
Franklin K2 Long Short Credit Fund (continued)
Country | Principal Amount* | Value | ||||||||||||||||
Convertible Bonds (continued) | ||||||||||||||||||
Leisure Products 0.1% | ||||||||||||||||||
e | Peloton Interactive Inc., senior note, 144A, zero cpn., 2/15/26 | United States | 136,000 | $ | 113,900 | |||||||||||||
|
| |||||||||||||||||
Specialty Retail 0.6% | ||||||||||||||||||
e | Dufry One BV, senior note, Reg S, 0.75%, 3/30/26 | Switzerland | 600,000 | CHF | 618,385 | |||||||||||||
|
| |||||||||||||||||
Total Convertible Bonds (Cost $1,919,670) | 1,888,320 | |||||||||||||||||
|
| |||||||||||||||||
Corporate Bonds and Notes 25.5% | ||||||||||||||||||
Aerospace & Defense 0.1% | ||||||||||||||||||
e | Spirit Aerosystems Inc., senior secured note, 144A, 5.50%, 1/15/25 | United States | 118,000 | 121,782 | ||||||||||||||
|
| |||||||||||||||||
Airlines 0.4% | ||||||||||||||||||
e | American Airlines Group Inc., senior note, 144A, 3.75%, 3/01/25 | United States | 499,000 | 445,253 | ||||||||||||||
|
| |||||||||||||||||
Automobiles 0.6% | ||||||||||||||||||
e | Aston Martin Capital Holdings Ltd., senior secured note, 144A, 10.50%, 11/30/25 | | United Kingdom | | 400,000 | 433,752 | ||||||||||||
Ford Motor Credit Co. LLC, senior note, 3.625%, 6/17/31 | United States | 166,000 | 169,639 | |||||||||||||||
|
| |||||||||||||||||
603,391 | ||||||||||||||||||
|
| |||||||||||||||||
Banks 0.2% | ||||||||||||||||||
e,f | VTB Bank OJSC Via VTB Capital SA, senior note, loan participation, Reg S, 6.95%, 10/17/22 | Russia | 200,000 | 205,583 | ||||||||||||||
|
| |||||||||||||||||
Capital Markets 0.4% | ||||||||||||||||||
e | Coinbase Global Inc., senior bond, 144A, 3.625%, 10/01/31 | United States | 500,000 | 464,583 | ||||||||||||||
|
| |||||||||||||||||
Chemicals 0.6% | ||||||||||||||||||
e | Braskem Idesa SAPI, senior secured bond, 144A, 6.99%, 2/20/32 | Mexico | 200,000 | 196,346 | ||||||||||||||
e | Polar US Borrower LLC / Schenectady International Group Inc., senior note, 144A, 6.75%, 5/15/26 | United States | 500,000 | 486,620 | ||||||||||||||
|
| |||||||||||||||||
682,966 | ||||||||||||||||||
|
| |||||||||||||||||
Communications Equipment 0.4% | ||||||||||||||||||
e | Audacy Capital Corp., secured note, 144A, 6.75%, 3/31/29 | United States | 450,000 | 441,326 | ||||||||||||||
d | Riverbed Technology Inc., senior note, 6.00%, 1/13/22 | United States | 35,221 | 34,869 | ||||||||||||||
|
| |||||||||||||||||
476,195 | ||||||||||||||||||
|
| |||||||||||||||||
Construction & Engineering 0.6% | ||||||||||||||||||
e | Artera Services LLC, senior secured note, 144A, 9.033%, 12/04/25 | United States | 273,000 | 275,013 | ||||||||||||||
e | Brand Industrial Services Inc., senior note, 144A, 8.50%, 7/15/25 | United States | 400,000 | 394,936 | ||||||||||||||
|
| |||||||||||||||||
669,949 | ||||||||||||||||||
|
| |||||||||||||||||
Consumer Finance 0.1% | ||||||||||||||||||
e | PROG Holdings Inc., senior note, 144A, 6.00%, 11/15/29 | United States | 58,000 | 57,383 | ||||||||||||||
|
| |||||||||||||||||
Containers & Packaging 0.4% | ||||||||||||||||||
e | Mauser Packaging Solutions Holding Co., senior note, 144A, 7.25%, 4/15/25 | United States | 400,000 | 393,240 | ||||||||||||||
|
| |||||||||||||||||
Diversified Consumer Services 1.4% | ||||||||||||||||||
e | The Hertz Corp., senior note, 144A, | |||||||||||||||||
4.625%, 12/01/26 | United States | 228,000 | 225,009 | |||||||||||||||
5.00%, 12/01/29 | United States | 509,000 | 499,675 | |||||||||||||||
e | MPH Acquisition Holdings LLC, senior note, 144A, 5.75%, 11/01/28 | United States | 400,000 | 358,000 | ||||||||||||||
e | Paysafe Finance PLC / Paysafe Holdings US Corp., senior secured note, 144A, 4.00%, 6/15/29 | United States | 250,000 | 231,204 | ||||||||||||||
e | Sotheby’s/Bidfair Holdings Inc., senior secured note, 144A, 5.875%, 6/01/29 | United States | 200,000 | 201,060 | ||||||||||||||
|
| |||||||||||||||||
1,514,948 | ||||||||||||||||||
|
|
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) | ||||||||||||||||||
Diversified Financial Services 1.0% | ||||||||||||||||||
e | Advisor Group Holdings Inc., senior note, 144A, 10.75%, 8/01/27 | United States | 360,000 | $ | 392,456 | |||||||||||||
e | Constellation Automotive Financing PLC, senior note, 144A, 4.875%, 7/15/27 | United Kingdom | 100,000 | 129,530 | ||||||||||||||
e | Finance of America Funding LLC, senior note, 144A, 7.875%, 11/15/25 | United States | 500,000 | 486,092 | ||||||||||||||
e | Jane Street Group / JSG Finance Inc., senior secured note, 144A, 4.50%, 11/15/29 | United States | 64,000 | 63,998 | ||||||||||||||
|
| |||||||||||||||||
1,072,076 | ||||||||||||||||||
|
| |||||||||||||||||
Diversified Telecommunication Services 0.2% | ||||||||||||||||||
Frontier Communications Holdings LLC, | ||||||||||||||||||
secured note, 5.875%, 11/01/29 | United States | 34,658 | 34,127 | |||||||||||||||
e senior secured note, 144A, 5.875%, 10/15/27 | United States | 125,000 | 129,285 | |||||||||||||||
e senior secured note, 144A, 5.00%, 5/01/28 | United States | 55,000 | 55,256 | |||||||||||||||
e | Telesat Canada / Telesat LLC, senior secured note, 144A, 4.875%, 6/01/27 | Canada | 58,000 | 50,811 | ||||||||||||||
|
| |||||||||||||||||
269,479 | ||||||||||||||||||
|
| |||||||||||||||||
Electric Utilities 1.1% | ||||||||||||||||||
g | Edison International, B, junior sub. note, 5.00% to 12/15/26, FRN thereafter, Perpetual | United States | 6,000 | 6,027 | ||||||||||||||
e | Eskom Holdings SOC Ltd., senior bond, Reg S, 8.45%, 8/10/28 | South Africa | 200,000 | 212,898 | ||||||||||||||
Pacific Gas and Electric Co., secured bond, | ||||||||||||||||||
4.50%, 7/01/40 | United States | 320,653 | 336,303 | |||||||||||||||
4.95%, 7/01/50 | United States | 60,000 | 67,451 | |||||||||||||||
PG&E Corp., senior secured bond, 5.25%, 7/01/30 | United States | 500,000 | 513,335 | |||||||||||||||
|
| |||||||||||||||||
1,136,014 | ||||||||||||||||||
|
| |||||||||||||||||
Entertainment 0.8% | ||||||||||||||||||
e,h | AMC Entertainment Holdings Inc., secured note, 144A, PIK, 12.00%, 6/15/26 | United States | 360,000 | 366,523 | ||||||||||||||
e | Roblox Corp., senior note, 144A, 3.875%, 5/01/30 | United States | 500,000 | 502,085 | ||||||||||||||
|
| |||||||||||||||||
868,608 | ||||||||||||||||||
|
| |||||||||||||||||
Equity Real Estate Investment Trusts (REITs) 0.9% | ||||||||||||||||||
e | Brookfield Property REIT Inc. / BPR Cumulus LLC / BPR Nimbus LLC / GGSI Sellco LL, senior secured note, 144A, 4.50%, 4/01/27 | United States | 500,000 | 475,860 | ||||||||||||||
e | SBA Communications Corp., senior note, 144A, 3.125%, 2/01/29 | United States | 500,000 | 475,638 | ||||||||||||||
|
| |||||||||||||||||
951,498 | ||||||||||||||||||
|
| |||||||||||||||||
Food & Staples Retailing 0.6% | ||||||||||||||||||
e,g | Casino Guichard Perrachon SA, E, junior sub. note, 3.992% to 1/31/24, FRN thereafter, Reg S, Perpetual | France | 200,000 | EUR | 148,713 | |||||||||||||
e | Rite AID Corp., senior secured note, 144A, 7.50%, 7/01/25 | United States | 500,000 | 499,843 | ||||||||||||||
|
| |||||||||||||||||
648,556 | ||||||||||||||||||
|
| |||||||||||||||||
Health Care Providers & Services 0.5% | ||||||||||||||||||
Encompass Health Corp., senior bond, 4.625%, 4/01/31 | United States | 334,000 | 332,226 | |||||||||||||||
e | LifePoint Health Inc., senior note, 144A, 5.375%, 1/15/29 | United States | 187,000 | 180,399 | ||||||||||||||
|
| |||||||||||||||||
512,625 | ||||||||||||||||||
|
| |||||||||||||||||
Hotels, Restaurants & Leisure 0.8% | ||||||||||||||||||
e | Carnival Corp., senior note, 144A, 6.00%, 5/01/29 | United States | 426,000 | 414,818 | ||||||||||||||
e | Lions Gate Capital Holdings LLC, senior note, 144A, 5.50%, 4/15/29 | United States | 400,000 | 405,700 | ||||||||||||||
|
| |||||||||||||||||
820,518 | ||||||||||||||||||
|
|
18 | Semiannual Report | franklintempleton.com |
FRANKLIN ALTERNATIVE STRATEGIES FUNDS
STATEMENT OF INVESTMENTS (UNAUDITED)
Franklin K2 Long Short Credit Fund (continued)
Country | Principal Amount* | Value | ||||||||||||||||
Corporate Bonds and Notes (continued) | ||||||||||||||||||
Household Durables 0.9% | ||||||||||||||||||
e | K. Hovnanian Enterprises Inc., 144A, | |||||||||||||||||
senior secured note, 7.75%, 2/15/26 | United States | 626,000 | $ | 658,615 | ||||||||||||||
senior secured note, 10.50%, 2/15/26 | United States | 250,000 | 266,791 | |||||||||||||||
|
| |||||||||||||||||
925,406 | ||||||||||||||||||
|
| |||||||||||||||||
Independent Power & Renewable Electricity Producers 0.3% | ||||||||||||||||||
e | Calpine Corp., senior secured bond, 144A, 3.75%, 3/01/31 | United States | 355,000 | 338,833 | ||||||||||||||
|
| |||||||||||||||||
Insurance 0.5% | ||||||||||||||||||
e,i | Sitka Holdings LLC, senior secured note, 144A, FRN, 5.25%, (3-Month USD LIBOR + 4.50%), 7/06/26 | United States | 500,000 | 509,956 | ||||||||||||||
|
| |||||||||||||||||
Internet & Direct Marketing Retail 0.6% | ||||||||||||||||||
e | Arches Buyer Inc., senior note, 144A, 6.125%, 12/01/28 | United States | 502,000 | 508,029 | ||||||||||||||
e | Match Group Holdings II LLC, senior note, 144A, 3.625%, 10/01/31 | United States | 107,000 | 101,036 | ||||||||||||||
|
| |||||||||||||||||
609,065 | ||||||||||||||||||
|
| |||||||||||||||||
IT Services 0.3% | ||||||||||||||||||
e | Austin Bidco Inc., senior note, 144A, 7.125%, 12/15/28 | United States | 286,000 | 294,032 | ||||||||||||||
|
| |||||||||||||||||
Leisure Products 0.4% | ||||||||||||||||||
e | Majordrive Holdings IV LLC, senior note, 144A, 6.375%, 6/01/29 | United States | 400,000 | 383,616 | ||||||||||||||
|
| |||||||||||||||||
Marine 0.1% | ||||||||||||||||||
e | Stena International SA, senior secured bond, 144A, 5.75%, 3/01/24 | Sweden | 100,000 | 103,146 | ||||||||||||||
|
| |||||||||||||||||
Media 3.0% | ||||||||||||||||||
AMC Networks Inc., senior note, 4.25%, 2/15/29 | United States | 441,000 | 431,225 | |||||||||||||||
e | Clear Channel Outdoor Holdings Inc., senior note, 144A, 7.75%, 4/15/28 | United States | 364,000 | 380,266 | ||||||||||||||
e | DIRECTV Holdings LLC / DIRECTV Financing Co. Inc., senior secured note, 144A, 5.875%, 8/15/27 | United States | 101,000 | 102,957 | ||||||||||||||
Dish DBS Corp., | ||||||||||||||||||
senior note, 5.125%, 6/01/29 | United States | 92,000 | 80,969 | |||||||||||||||
e senior secured note, 144A, 5.25%, 12/01/26 | United States | 220,000 | 218,303 | |||||||||||||||
e senior secured note, 144A, 5.75%, 12/01/28 | United States | 310,000 | 306,034 | |||||||||||||||
e | Gannett Holdings LLC, senior secured note, 144A, 6.00%, 11/01/26 | United States | 455,000 | 456,317 | ||||||||||||||
Liberty Interactive LLC, senior bond, 8.25%, 2/01/30 | United States | 360,000 | 385,949 | |||||||||||||||
e | Spanish Broadcasting System Inc., senior secured note, 144A, 9.75%, 3/01/26 | United States | 259,000 | 268,026 | ||||||||||||||
e | Urban One Inc., senior secured note, 144A, 7.375%, 2/01/28 | United States | 506,000 | 516,191 | ||||||||||||||
|
| |||||||||||||||||
3,146,237 | ||||||||||||||||||
|
| |||||||||||||||||
Metals & Mining 0.4% | ||||||||||||||||||
e | Taseko Mines Ltd., senior secured note, 144A, 7.00%, 2/15/26 | Canada | 387,000 | 393,743 | ||||||||||||||
|
| |||||||||||||||||
Mortgage Real Estate Investment Trusts (REITs) 0.8% | ||||||||||||||||||
e | Apollo Commercial Real Estate Finance Inc., senior secured note, 144A, 4.625%, 6/15/29 | United States | 355,000 | 337,703 | ||||||||||||||
e | New Residential Investment Corp., senior note, 144A, 6.25%, 10/15/25 | United States | 520,000 | 513,913 | ||||||||||||||
|
| |||||||||||||||||
851,616 | ||||||||||||||||||
|
| |||||||||||||||||
Multiline Retail 0.1% | ||||||||||||||||||
Kohl’s Corp., senior bond, 5.55%, 7/17/45 | United States | 123,000 | 148,631 | |||||||||||||||
|
| |||||||||||||||||
Oil, Gas & Consumable Fuels 4.3% | ||||||||||||||||||
e | DT Midstream Inc., senior bond, 144A, 4.375%, 6/15/31 | United States | 336,000 | 334,495 | ||||||||||||||
g | Energy Transfer LP, H, junior sub. note, 6.50% to 11/15/26, FRN thereafter, Perpetual | United States | 149,000 | 152,725 | ||||||||||||||
e | Hurricane Finance PLC, senior note, 144A, 8.00%, 10/15/25 | United Kingdom | 134,000 | 187,752 | ||||||||||||||
e | Laredo Petroleum Inc., senior note, 144A, 7.75%, 7/31/29 | United States | 500,000 | 473,962 | ||||||||||||||
e | MC Brazil Downstream Trading SARL, senior secured note, Reg S, 7.25%, 6/30/31 | Brazil | 271,000 | 260,655 |
franklintempleton.com | Semiannual Report | 19 |
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 (continued) | ||||||||||||||||||
e | Moss Creek Resources Holdings Inc., senior note, 144A, | |||||||||||||||||
7.50%, 1/15/26 | United States | 422,000 | $ | 372,651 | ||||||||||||||
10.50%, 5/15/27 | United States | 515,000 | 485,295 | |||||||||||||||
e | Northern Oil And Gas Inc., senior note, 144A, 8.125%, 3/01/28 | United States | 446,000 | 462,984 | ||||||||||||||
Occidental Petroleum Corp., senior note, 5.50%, 12/01/25 | United States | 500,000 | 535,740 | |||||||||||||||
e | Petrofac Ltd., senior secured note, 144A, 9.75%, 11/15/26 | United Kingdom | 200,000 | 200,508 | ||||||||||||||
Petroleos Mexicanos, | ||||||||||||||||||
senior bond, 5.95%, 1/28/31 | Mexico | 87,000 | 81,858 | |||||||||||||||
senior bond, 6.375%, 1/23/45 | Mexico | 242,000 | 195,893 | |||||||||||||||
senior bond, 6.75%, 9/21/47 | Mexico | 165,000 | 135,847 | |||||||||||||||
senior bond, 6.35%, 2/12/48 | Mexico | 283,000 | 224,180 | |||||||||||||||
senior bond, 6.95%, 1/28/60 | Mexico | 101,000 | 83,256 | |||||||||||||||
senior note, 3.50%, 1/30/23 | Mexico | 135,000 | 135,505 | |||||||||||||||
e senior note, 144A, 6.875%, 10/16/25 | Mexico | 47,000 | 50,231 | |||||||||||||||
senior note, 4.50%, 1/23/26 | Mexico | 53,000 | 51,998 | |||||||||||||||
e | Tullow Oil PLC, senior note, Reg S, 10.25%, 5/15/26 | Ghana | 200,000 | 199,279 | ||||||||||||||
|
| |||||||||||||||||
4,624,814 | ||||||||||||||||||
|
| |||||||||||||||||
Pharmaceuticals 0.2% | ||||||||||||||||||
e | Par Pharmaceutical Inc., senior secured note, 144A, 7.50%, 4/01/27 | United States | 209,000 | 211,027 | ||||||||||||||
|
| |||||||||||||||||
Real Estate Management & Development 0.4% | ||||||||||||||||||
e | Hunt Cos. Inc., senior secured note, 144A, 5.25%, 4/15/29 | United States | 410,000 | 399,756 | ||||||||||||||
|
| |||||||||||||||||
Specialty Retail 2.1% | ||||||||||||||||||
e | Carvana Co., senior note, 144A, | |||||||||||||||||
5.50%, 4/15/27 | United States | 28,000 | 28,007 | |||||||||||||||
5.875%, 10/01/28 | United States | 40,000 | 40,214 | |||||||||||||||
4.875%, 9/01/29 | United States | 178,000 | 169,246 | |||||||||||||||
e | Douglas GMBH, senior secured note, 144A, 6.00%, 4/08/26 | Germany | 531,000 | EUR | 586,773 | |||||||||||||
e | Guitar Center Inc., senior secured note, 144A, 8.50%, 1/15/26 | United States | 222,000 | 235,825 | ||||||||||||||
e,h | Kirk Beauty Sun GMBH, senior note, 144A, PIK, 8.25%, 10/01/26 | Germany | 147,591 | EUR | 158,603 | |||||||||||||
Macy’s Retail Holdings LLC, senior bond, 5.125%, 1/15/42 | United States | 500,000 | 480,938 | |||||||||||||||
e | Staples Inc., 144A, | |||||||||||||||||
senior note, 10.75%, 4/15/27 | United States | 400,000 | 364,968 | |||||||||||||||
senior secured note, 7.50%, 4/15/26 | United States | 200,000 | 198,876 | |||||||||||||||
|
| |||||||||||||||||
2,263,450 | ||||||||||||||||||
|
| |||||||||||||||||
Total Corporate Bonds and Notes | 27,117,975 | |||||||||||||||||
|
| |||||||||||||||||
i,j | Senior Floating Rate Interests 2.1% | |||||||||||||||||
Communications Equipment 0.1% | ||||||||||||||||||
Riverbed Technology Inc., Term Loan B, 7.00%, (3-Month USD LIBOR + 6.00%), 12/31/25 | United States | 109,866 | 99,927 | |||||||||||||||
|
| |||||||||||||||||
Consumer Discretionary Services 0.1% | ||||||||||||||||||
Travel Leaders Group LLC, Term Loan B, 4.087%, (1-Month USD LIBOR + 4.00%), 1/25/24 | United States | 142,255 | 133,364 | |||||||||||||||
|
| |||||||||||||||||
Diversified Financial Services 0.2% | ||||||||||||||||||
MPH Acquisition Holdings LLC, Term Loan B, 4.75%, (3-Month USD LIBOR + 4.25%), 9/01/28 | United States | 248,765 | 237,881 | |||||||||||||||
|
| |||||||||||||||||
Diversified Telecommunication Services 1.4% | ||||||||||||||||||
Frontier Communications Corp., Term Loan DIP, 4.50%, (1-Month USD LIBOR + 3.75%), 12/31/21 | United States | 83,702 | 83,723 | |||||||||||||||
Intelsat Jackson Holdings SA, | ||||||||||||||||||
Term Loan B3, 8.00%, (6-Month USD LIBOR + 3.75%), 11/27/23 | United States | 281,120 | 282,460 | |||||||||||||||
Term Loan B4, 8.75%, (1-Month USD LIBOR + 4.50%), 1/02/24 | United States | 20,944 | 21,038 | |||||||||||||||
Term Loan B5, 8.625%, (6-Month USD LIBOR + 6.63%), 1/02/24 | United States | 329,824 | 331,681 |
20 | Semiannual Report | franklintempleton.com |
FRANKLIN ALTERNATIVE STRATEGIES FUNDS
STATEMENT OF INVESTMENTS (UNAUDITED)
Franklin K2 Long Short Credit Fund (continued)
Country | Principal Amount* | Value | ||||||||||||||||
i,j | Senior Floating Rate Interests (continued) | |||||||||||||||||
Diversified Telecommunication Services (continued) | ||||||||||||||||||
Intelsat Jackson Holdings SA, (continued) | ||||||||||||||||||
k Term Loan DIP, 5.75%, (3-Month USD LIBOR + 4.75%), 7/13/22 | United States | 700,000 | $ | 703,174 | ||||||||||||||
|
| |||||||||||||||||
1,422,076 | ||||||||||||||||||
|
| |||||||||||||||||
Equity Real Estate Investment Trusts (REITs) 0.1% | ||||||||||||||||||
The GEO Group Inc., Term Loan B, 2.75%, (3-Month USD LIBOR + 2.00%), 3/22/24 | United States | 79,482 | 74,713 | |||||||||||||||
McCarthy & Stone PLC, Term Loan B, 7.00%, 12/16/25 | United Kingdom | 50,969 | GBP | 67,490 | ||||||||||||||
|
| |||||||||||||||||
142,203 | ||||||||||||||||||
|
| |||||||||||||||||
Media 0.2% | ||||||||||||||||||
Advantage Sales & Marketing Inc., Term Loan B1, 5.25%, (3-Month USD LIBOR + 4.50%), 10/28/27 | United States | 197,802 | 198,420 | |||||||||||||||
|
| |||||||||||||||||
Total Senior Floating Rate Interests | 2,233,871 | |||||||||||||||||
|
| |||||||||||||||||
i, j | Senior Floating Rate Interests in Reorganization (Cost $176,070) 0.1% | |||||||||||||||||
Communications Equipment 0.1% | ||||||||||||||||||
l | Riverbed Technology Inc., Term Loan B, 7.50%, (3-Month USD LIBOR + 6.50%), 12/31/26 | United States | 250,151 | 70,793 | ||||||||||||||
|
| |||||||||||||||||
m | Credit-Linked Notes 0.9% | |||||||||||||||||
e | Citigroup Global Markets Holdings Inc., (Egypt), E, senior note, 144A, zero cpn., 12/16/21 | Egypt | 2,808,164 | EGP | 177,457 | |||||||||||||
e | Citigroup Global Markets Holdings Inc., (Egypt), EMTN, senior note, 144A, zero cpn., 3/31/22 | Egypt | 2,788,269 | EGP | 170,704 | |||||||||||||
e | HSBC Bank PLC, (Egypt), senior note, 144A, zero cpn., 12/23/21 | Egypt | 1,450,000 | EGP | 91,404 | |||||||||||||
e | HSBC Bank PLC, (Egypt), senior note, 144A, zero cpn., 2/10/22 | Egypt | 8,925,000 | EGP | 552,914 | |||||||||||||
|
| |||||||||||||||||
Total Credit-Linked Notes (Cost $995,063) | 992,479 | |||||||||||||||||
|
| |||||||||||||||||
Foreign Government and Agency Securities 5.6% | ||||||||||||||||||
e | CBB International Sukuk Programme Co. Wll, senior note, 144A, 3.875%, 5/18/29 | Bahrain | 467,000 | 450,344 | ||||||||||||||
e | Government of Angola, senior bond, Reg S, | |||||||||||||||||
8.00%, 11/26/29 | Angola | 201,000 | 186,082 | |||||||||||||||
9.375%, 5/08/48 | Angola | 200,000 | 182,715 | |||||||||||||||
e | Government of Bahrain, senior bond, Reg S, 7.00%, 1/26/26 | Bahrain | 200,000 | 220,035 | ||||||||||||||
e | Government of Egypt, senior bond, Reg S, | |||||||||||||||||
7.50%, 1/31/27 | Egypt | 400,000 | 402,228 | |||||||||||||||
7.60%, 3/01/29 | Egypt | 200,000 | 191,177 | |||||||||||||||
e | Government of Germany, senior bond, Reg S, 0.50%, 2/15/25 | Germany | 94,000 | EUR | 110,932 | |||||||||||||
e | Government of Ghana, senior note, Reg S, 7.75%, 4/07/29 | Ghana | 213,000 | 173,595 | ||||||||||||||
Government of Italy, senior note, 2.375%, 10/17/24 | Italy | 373,000 | 383,909 | |||||||||||||||
e | Government of Jordan, senior note, 144A, 4.95%, 7/07/25 | Jordan | 200,000 | 205,500 | ||||||||||||||
e | Government of Nigeria, senior note, Reg S, 7.625%, 11/21/25 | Nigeria | 400,000 | 420,562 | ||||||||||||||
e | Government of Oman, senior bond, Reg S, | |||||||||||||||||
6.25%, 1/25/31 | Oman | 216,000 | 226,796 | |||||||||||||||
6.75%, 1/17/48 | Oman | 200,000 | 192,924 | |||||||||||||||
e | Government of Paraguay, senior bond, Reg S, 4.625%, 1/25/23 | Paraguay | 421,000 | 435,739 | ||||||||||||||
Government of Russia, | ||||||||||||||||||
senior bond, 6233, 6.10%, 7/18/35 | Russia | 27,868,000 | RUB | 312,827 | ||||||||||||||
senior note, 6229, 7.15%, 11/12/25 | Russia | 28,550,000 | RUB | 368,505 | ||||||||||||||
e | Government of Saudi Arabia, senior bond, 144A, 2.75%, 2/03/32 | Saudi Arabia | 221,000 | 225,950 | ||||||||||||||
Government of South Africa, senior bond, | ||||||||||||||||||
2030, 8.00%, 1/31/30 | South Africa | 2,600,259 | ZAR | 147,651 | ||||||||||||||
2035, 8.875%, 2/28/35 | South Africa | 1,564,783 | ZAR | 86,229 |
franklintempleton.com | Semiannual Report | 21 |
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, 6.50%, 9/20/33 | Turkey | 200,000 | $ | 184,573 | ||||||||||||||
senior note, 6.375%, 10/14/25 | Turkey | 200,000 | 199,031 | |||||||||||||||
e | Government of Ukraine, Reg S, | |||||||||||||||||
senior bond, 7.375%, 9/25/32 | Ukraine | 200,000 | 188,859 | |||||||||||||||
senior bond, 1.258%, 5/31/40 | Ukraine | 171,000 | 155,619 | |||||||||||||||
senior note, 6.876%, 5/21/29 | Ukraine | 400,000 | 373,431 | |||||||||||||||
|
| |||||||||||||||||
Total Foreign Government and Agency Securities | 6,025,213 | |||||||||||||||||
|
| |||||||||||||||||
U.S. Government and Agency Securities 0.5% | ||||||||||||||||||
U.S. Treasury Bond, | ||||||||||||||||||
1.875%, 2/15/41 | United States | 1,000 | 1,004 | |||||||||||||||
1.75%, 8/15/41 | United States | 1,100 | 1,080 | |||||||||||||||
1.625%, 11/15/50 | United States | 77,000 | 73,857 | |||||||||||||||
1.875%, 2/15/51 | United States | 104,000 | 105,771 | |||||||||||||||
U.S. Treasury Note, | ||||||||||||||||||
1.625%, 5/15/31 | United States | 309,000 | 315,059 | |||||||||||||||
1.375%, 11/15/31 | United States | 39,400 | 39,166 | |||||||||||||||
|
| |||||||||||||||||
Total U.S. Government and Agency Securities | 535,937 | |||||||||||||||||
|
| |||||||||||||||||
Asset-Backed Securities and Commercial Mortgage-Backed Securities 34.9% | ||||||||||||||||||
Diversified Financial Services 16.3% | ||||||||||||||||||
e,n | AMSR Trust, 2021-SFR1, G, 144A, FRN, 4.612%, 6/17/38 | United States | 500,000 | 510,309 | ||||||||||||||
e,o | Assurant CLO Ltd., 2019-5A, D, 144A, FRN, 4.324%, (3-Month USD LIBOR + 4.20%), 1/15/33 | United States | 1,500,000 | 1,488,375 | ||||||||||||||
e,o | Blue Ridge CLO Ltd. II, 2014-2A, C, 144A, FRN, 3.922%, (3-Month USD LIBOR + 3.80%), 7/18/26 | United States | 700,000 | 700,539 | ||||||||||||||
e,o | Catskill Park CLO Ltd., 2017-1A, C, 144A, FRN, 3.832%, (3-Month USD LIBOR + 3.70%), 4/20/29 | United States | 1,000,000 | 1,003,538 | ||||||||||||||
CitiMortgage Alternative Loan Trust, 2007-A1, 2A1, 5.50%, 1/25/22 | United States | 15,845 | 15,070 | |||||||||||||||
e | FRTKL, 2021-SFR1, G, 144A, 4.105%, 9/17/38 | United States | 990,000 | 975,823 | ||||||||||||||
e,o | GPMT Ltd., 2019-FL2, D, 144A, FRN, 3.039%, (1-Month USD LIBOR + 2.95%), 2/22/36 | United States | 700,000 | 696,955 | ||||||||||||||
e,o | GSMSC Pass-Through Trust, 2009-4R, 2A3, 144A, FRN, 0.539%, (1-Month USD LIBOR + 0.45%), 12/26/36 | United States | 706,258 | 500,488 | ||||||||||||||
e,o | Hull Street CLO Ltd., 2014-1A, D, 144A, FRN, 3.722%, (3-Month USD LIBOR + 3.60%), 10/18/26 | United States | 1,130,000 | 1,109,727 | ||||||||||||||
e,o | KREF Ltd., 2021-FL2, C, 144A, FRN, 2.089%, (1-Month USD LIBOR + 2.00%), 2/15/39 | United States | 500,000 | 500,625 | ||||||||||||||
e,o | Mountain View CLO Ltd., 2018-1A, DRR, 144A, FRN, 3.774%, (3-Month USD LIBOR + 3.65%), 10/15/26 | United States | 1,290,000 | 1,296,533 | ||||||||||||||
e,o | OCP CLO Ltd., 2021-8RA, C, 144A, FRN, 3.872%, (3-Month USD LIBOR + 3.75%), 1/17/32 | United States | 1,000,000 | 992,500 | ||||||||||||||
o | Ramp Series Trust, 2003-RS9, MII3, FRN, 3.317%, (1-Month USD LIBOR + 2.15%), 10/25/33 | United States | 1,156,753 | 1,169,161 | ||||||||||||||
e | S-Jets Ltd., 2017-1, A, 144A, 3.967%, 8/15/42 | Bermuda | 722,471 | 721,358 | ||||||||||||||
e,o | Staniford Street CLO Ltd., 2014-1A, D, 144A, FRN, 3.616%, (3-Month USD LIBOR + 3.50%), 6/15/25 | United States | 890,238 | 892,074 | ||||||||||||||
n | STARM Mortgage Loan Trust, 2007-2, 4A1, FRN, 2.474%, 4/25/37 | United States | 57,249 | 39,626 | ||||||||||||||
e | Stellar Jay Ireland DAC, 2021-1, B, 144A, 5.926%, 10/15/41 | Ireland | 1,000,000 | 999,990 | ||||||||||||||
o | Suntrust Alternative Loan Trust, 2005-1F, 1A1, FRN, 0.742%, (1-Month USD LIBOR + 0.65%), 12/25/35 | United States | 122,563 | 104,936 | ||||||||||||||
o | Terwin Mortgage Trust, 2003-6HE, M2, FRN, 2.717%, (1-Month USD LIBOR + 2.63%), 11/25/33 | United States | 43,660 | 45,214 |
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) | ||||||||||||||||||
Diversified Financial Services (continued) | ||||||||||||||||||
e | Thunderbolt II Aircraft Lease Ltd., 2018-A, A, 144A, 4.147%, 9/15/38 | United States | 2,584,976 | $ | 2,583,829 | |||||||||||||
e,o | VMC Finance LLC, 2019-FL3, C, 144A, FRN, 2.139%, (1-Month USD LIBOR + 2.05%), 9/15/36 | United States | 880,961 | 877,657 | ||||||||||||||
Wells Fargo Alternative Loan Trust, 2007-PA3, 2A2, 6.00%, 7/25/37 | United States | 110,207 | 112,273 | |||||||||||||||
|
| |||||||||||||||||
17,336,600 | ||||||||||||||||||
|
| |||||||||||||||||
Mortgage Real Estate Investment Trusts (REITs) 18.6% | ||||||||||||||||||
Alternative Loan Trust, 2005-J10, 2A4, 6.00%, 10/25/35 | United States | 412,039 | 272,313 | |||||||||||||||
n | American Home Mortgage Assets Trust, 2005-1, 1A1, FRN, 2.771%, 11/25/35 | United States | 103,690 | 94,448 | ||||||||||||||
n | Banc of America Mortgage Trust, FRN, | |||||||||||||||||
2005-K, 2A1, 2.564%, 12/25/35 | United States | 152,953 | 149,096 | |||||||||||||||
2005-L, 1A1, 3.073%, 1/25/36 | United States | 90,884 | 89,168 | |||||||||||||||
2005-L, 3A1, 3.133%, 1/25/36 | United States | 130,690 | 128,064 | |||||||||||||||
e,o | BBCMS Mortgage Trust, 2019-BWAY, E, 144A, FRN, 2.94%, (1-Month USD LIBOR + 2.85%), 11/15/34 | United States | 2,000,000 | 1,899,309 | ||||||||||||||
e,n | BCAP LLC Trust, 2010-RR1, 1A4, 144A, FRN, 3.144%, 3/26/37 | United States | 191,814 | 167,453 | ||||||||||||||
n | Bear Stearns ARM Trust, FRN, | |||||||||||||||||
2002-11, 1A2, 2.834%, 2/25/33 | United States | 2,827 | 2,638 | |||||||||||||||
2006-2, 4A1, 3.115%, 7/25/36 | United States | 35,026 | 32,908 | |||||||||||||||
e,o | BXMT Ltd., 2021-FL4, C, 144A, FRN, 1.84%, (1-Month USD LIBOR + 1.75%), 5/15/38 | United States | 500,000 | 499,029 | ||||||||||||||
Citigroup Commercial Mortgage Trust, | ||||||||||||||||||
2015-GC33, D, 3.172%, 9/10/58 | United States | 2,000,000 | 1,806,072 | |||||||||||||||
e,n 2016-P4, D, 144A, FRN, 4.10%, 7/10/49 | United States | 2,000,000 | 1,777,708 | |||||||||||||||
n | Citigroup Mortgage Loan Trust, 2007-AR5, 2A1A, FRN, 3.425%, 4/25/37 | United States | 83,326 | 83,035 | ||||||||||||||
Countrywide Alternative Loan Trust, | ||||||||||||||||||
2005-73CB, 1A2, 6.25%, 1/25/36 | United States | 129,017 | 134,141 | |||||||||||||||
o 2005-IM1, A1, FRN, 0.692%, (1-Month USD LIBOR + 0.60%), 1/25/36 | United States | 121,270 | 117,430 | |||||||||||||||
n | Credit Suisse First Boston Mortgage Securities Corp., 2004-AR3, CB2, FRN, 2.415%, 4/25/34 | Switzerland | 113,844 | 104,248 | ||||||||||||||
CSMC Mortgage-Backed Trust, 2006-4, 9A1, 6.50%, 5/25/36 | United States | 735,947 | 382,230 | |||||||||||||||
e,n | FARM Mortgage Trust, 2021-1, B, 144A, FRN, 3.249%, 1/25/51 | United States | 987,184 | 852,978 | ||||||||||||||
e,o,p | FNMA, 2021-R02, 2B1, 144A, FRN, 3.35%, (SOFR + 3.30%), 11/25/41 | United States | 650,000 | 652,437 | ||||||||||||||
o | FREMF Mortgage Trust, 2018-KF52, B, FRN, 2.038%, (1-Month USD LIBOR + 1.95%), 9/25/28 | United States | 783,009 | 779,575 | ||||||||||||||
GSR Mortgage Loan Trust, 2004-6F, 2A4, 5.50%, 5/25/34 | United States | 87,602 | 89,572 | |||||||||||||||
Impac CMB Trust, | ||||||||||||||||||
2004-4, 2A2, 5.214%, 9/25/34 | United States | 136,237 | 147,931 | |||||||||||||||
o 2004-8, 3B, FRN, 2.717%, (1-Month USD LIBOR + 2.63%), 8/25/34 | United States | 97,249 | 99,809 | |||||||||||||||
o 2005-2, 2B, FRN, 2.567%, (1-Month USD LIBOR + 2.48%), 4/25/35 | United States | 83,532 | 82,319 | |||||||||||||||
o 2005-4, 2M1, FRN, 0.842%, (1-Month USD LIBOR + 0.50%), 5/25/35 | United States | 147,428 | 137,781 | |||||||||||||||
o 2005-8, 2B, FRN, 2.342%, (1-Month USD LIBOR + 2.25%), 2/25/36 | United States | 75,124 | 75,725 | |||||||||||||||
IndyMac INDX Mortgage Loan Trust, FRN, | ||||||||||||||||||
n 2005-AR23, 3A1, 2.504%, 11/25/35 | United States | 674,204 | 664,272 | |||||||||||||||
o 2006-AR12, A1, 0.282%, (1-Month USD LIBOR + 0.19%), 9/25/46 | United States | 162,640 | 153,149 | |||||||||||||||
o 2006-AR29, A2, 0.252%, (1-Month USD LIBOR + 0.16%), 11/25/36 | United States | 284,617 | 288,639 | |||||||||||||||
n 2007-AR5, 2A1, 2.969%, 5/25/37 | United States | 363,100 | 341,170 | |||||||||||||||
n | JPMBB Commercial Mortgage Securities Trust, 2015-C31, D, FRN, 4.275%, 8/15/48 | United States | 702,000 | 643,961 | ||||||||||||||
n | JPMorgan Mortgage Trust, FRN, | |||||||||||||||||
2006-A5, 6A1, 2.823%, 8/25/36 | United States | 187,213 | 165,480 | |||||||||||||||
2006-A7, 2A3, 3.095%, 1/25/37 | United States | 81,919 | 77,499 | |||||||||||||||
2007-A2, 2A1, 2.979%, 4/25/37 | United States | 122,079 | 108,873 | |||||||||||||||
Lehman Mortgage Trust, 2005-3, 2A3, 5.50%, 1/25/36 | United States | 57,754 | 59,307 |
franklintempleton.com | Semiannual Report | 23 |
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) | ||||||||||||||||||
MASTR Adjustable Rate Mortgages Trust, FRN, | ||||||||||||||||||
n 2004-10, B1, 2.37%, 10/25/34 | United States | 445,019 | $ | 408,036 | ||||||||||||||
o 2006-OA1, 1A1, 0.302%, (1-Month USD LIBOR + 0.21%), 4/25/46 | United States | 205,627 | 190,950 | |||||||||||||||
n | MASTR Alternative Loan Trust, 2007-HF1, 3A1, FRN, 2.283%, 10/25/47 | United States | 488,443 | 362,013 | ||||||||||||||
n | MASTR Seasoned Securitization Trust, 2004-1, 4A1, FRN, 2.41%, 10/25/32 | United States | 66,934 | 69,773 | ||||||||||||||
n | RFMSI Trust, 2007-SA2, 3A, FRN, 5.367%, 4/25/37 | United States | 738,142 | 248,344 | ||||||||||||||
o | Securitized Asset Backed Receivables LLC Trust, 2004-OP2, A2, FRN, 0.792%, (1-Month USD LIBOR + 0.70%), 8/25/34 | United States | 199,024 | 195,390 | ||||||||||||||
e,o | STACR Trust, 2018-HRP1, B2, 144A, FRN, 11.842%, (1-Month USD LIBOR + 11.75%), 5/25/43 | United States | 2,889,096 | 3,259,751 | ||||||||||||||
n | Structured ARM Loan Trust, 2004-4, B1, FRN, 2.621%, 4/25/34 | United States | 412,669 | 372,836 | ||||||||||||||
n | Wachovia Mortgage Loan Trust LLC, 2005-B, 1A1, FRN, 2.178%, 10/20/35 | United States | 217,960 | 212,977 | ||||||||||||||
n | WAMU Mortgage Pass-Through Certificates Series Trust, 2006-AR12, 1A1, FRN, 2.956%, 10/25/36 | United States | 966,153 | 972,268 | ||||||||||||||
o | Washington Mutual Mortgage Pass-Through Certificates, 2006-4, 3A2B, FRN, 0.252%, (1-Month USD LIBOR + 0.16%), 5/25/36 | United States | 214,259 | 174,061 | ||||||||||||||
n | Washington Mutual MSC Mortgage Pass-Through Certificates Series Trust, 2003-AR3, B1, FRN, 3.045%, 6/25/33 | United States | 224,931 | 222,022 | ||||||||||||||
|
| |||||||||||||||||
19,848,188 | ||||||||||||||||||
|
| |||||||||||||||||
Total Asset-Backed Securities and Commercial Mortgage-Backed Securities (Cost $36,883,194) | 37,184,788 | |||||||||||||||||
|
| |||||||||||||||||
Municipal Bonds in Reorganization 1.8% | ||||||||||||||||||
Puerto Rico 1.8% | ||||||||||||||||||
l | Commonwealth of Puerto Rico, |
| ||||||||||||||||
8.00%, 7/01/35 | United States | 1,745,000 | 1,531,238 | |||||||||||||||
5.50%, 7/01/39 | United States | 155,000 | 146,087 | |||||||||||||||
5.00%, 7/01/41 | United States | 225,000 | 202,500 | |||||||||||||||
|
| |||||||||||||||||
Total Municipal Bonds in Reorganization (Cost $1,212,050) | 1,879,825 | |||||||||||||||||
|
| |||||||||||||||||
Number of Contracts | Notional Amount# | |||||||||||||||||
Options Purchased 0.0%† | ||||||||||||||||||
Calls – Exchange-Traded 0.0%† | ||||||||||||||||||
Casino Guichard Perrachon SA, December Strike Price 26.00 EUR, Expires 12/17/21 | 24 | 2,400 | 27 | |||||||||||||||
SPDR Gold Shares ETF, June Strike Price $200.00, Expires 6/17/22 | 43 | 4,300 | 5,332 | |||||||||||||||
|
| |||||||||||||||||
5,359 | ||||||||||||||||||
|
| |||||||||||||||||
Puts – Exchange-Traded 0.0%† | ||||||||||||||||||
Alcon Inc., May Strike Price $70.00, Expires 5/20/22 | 4 | 400 | 880 | |||||||||||||||
Coinbase Global Inc., March Strike Price $200.00, Expires 3/18/22 | 5 | 500 | 2,755 | |||||||||||||||
The Cooper Cos Inc., May Strike Price $360.00, Expires 5/20/22 | 1 | 100 | 2,360 | |||||||||||||||
Fluor Corp., January Strike Price $15.00, Expires 1/21/22 | 8 | 800 | 180 | |||||||||||||||
Fluor Corp., January Strike Price $17.50, Expires 1/21/22 | 8 | 800 | 400 | |||||||||||||||
Fluor Corp., January Strike Price $20.00, Expires 1/21/22 | 8 | 800 | 760 | |||||||||||||||
Iron Mountain Inc., January Strike Price $40.00, Expires 1/21/22 | 7 | 700 | 280 | |||||||||||||||
Iron Mountain Inc., March Strike Price $42.50, Expires 3/18/22 | 10 | 1,000 | 1,620 | |||||||||||||||
Owens & Minor Inc., March Strike Price $30.00, Expires 3/18/22 | 28 | 2,800 | 3,990 | |||||||||||||||
SPDR S&P Retail ETF, December Strike Price $92.00, Expires 12/17/21 | 7 | 700 | 1,330 | |||||||||||||||
SPDR S&P Retail ETF, January Strike Price $75.00, Expires 1/21/22 | 19 | 1,900 | 1,254 |
24 | Semiannual Report | franklintempleton.com |
FRANKLIN ALTERNATIVE STRATEGIES FUNDS
STATEMENT OF INVESTMENTS (UNAUDITED)
Franklin K2 Long Short Credit Fund (continued)
Number of Contracts | Notional Amount# | Value | ||||||||||||||||
Options Purchased (continued) | ||||||||||||||||||
Puts – Exchange-Traded (continued) | ||||||||||||||||||
SPDR S&P Retail ETF, January Strike Price $85.00, Expires 1/21/22 | 17 | 1,700 | $ | 3,094 | ||||||||||||||
|
| |||||||||||||||||
18,903 | ||||||||||||||||||
|
| |||||||||||||||||
Puts – Over-the-Counter 0.0%† | ||||||||||||||||||
The Western Union Co., Counterparty BOFA, May Strike Price $14.00, Expires 5/20/22 | 36 | 3,600 | 3,240 | |||||||||||||||
|
| |||||||||||||||||
Total Options Purchased (Cost $45,062) | 27,502 | |||||||||||||||||
|
| |||||||||||||||||
Total Investments before Short Term Investments (Cost $80,057,188) | 80,675,914 | |||||||||||||||||
|
| |||||||||||||||||
Country | Shares | |||||||||||||||||
Short Term Investments 20.9% | ||||||||||||||||||
Money Market Funds (Cost $17,850,091) 16.8% | ||||||||||||||||||
q | Fidelity Investments Money Market Government Portfolio, Institutional, 0.01% | United States | 17,850,091 | 17,850,091 | ||||||||||||||
Principal Amount* | ||||||||||||||||||
Repurchase Agreements (Cost $4,402,397) 4.1% | ||||||||||||||||||
r | Joint Repurchase Agreement, 0.025%, 12/01/21 (Maturity Value $4,402,400) | United States | 4,402,397 | 4,402,397 | ||||||||||||||
BNP Paribas Securities Corp. (Maturity Value $2,530,148) | ||||||||||||||||||
Collateralized by U.S. Government Agency Securities, 4.00% - 4.50%, 11/20/48 - 3/20/49; and U.S. Treasury Notes, 0.16% - 0.38%, 4/30/22 - 4/30/25, (Valued at $4,490,432) | ||||||||||||||||||
Total Investments (Cost $102,309,676) 96.7% | 102,928,402 | |||||||||||||||||
Options Written (0.0)%† | (867 | ) | ||||||||||||||||
Securities Sold Short (3.9)% | (4,225,944 | ) | ||||||||||||||||
Other Assets, less Liabilities 7.2% | 7,744,430 | |||||||||||||||||
|
| |||||||||||||||||
Net Assets 100.0% | $ | 106,446,021 | ||||||||||||||||
|
| |||||||||||||||||
Number of Contracts | Notional Amount# | |||||||||||||||||
s | Options Written (0.0)%† | |||||||||||||||||
Calls – Exchange-Traded (0.0)%† | ||||||||||||||||||
Casino Guichard Perrachon SA, December Strike Price 30.00 EUR, Expires 12/17/21 | 12 | 1,200 | (13 | ) | ||||||||||||||
Casino Guichard Perrachon SA, December Strike Price 34.00 EUR, Expires 12/17/21 | 12 | 1,200 | (14 | ) | ||||||||||||||
|
| |||||||||||||||||
(27 | ) | |||||||||||||||||
|
| |||||||||||||||||
Puts – Exchange-Traded (0.0)%† | ||||||||||||||||||
Owens & Minor Inc., March Strike Price $20.00, Expires 3/18/22 | 28 | 2,800 | (840 | ) | ||||||||||||||
|
| |||||||||||||||||
Total Options Written (Premiums Received $1,424) | (867 | ) | ||||||||||||||||
|
| |||||||||||||||||
Country | Shares | |||||||||||||||||
t | Securities Sold Short (3.9)% | |||||||||||||||||
Common Stocks (0.2)% | ||||||||||||||||||
Internet & Direct Marketing Retail (0.2)% | ||||||||||||||||||
Wayfair Inc., A | United States | 653 | (161,839 | ) | ||||||||||||||
|
|
franklintempleton.com | Semiannual Report | 25 |
FRANKLIN ALTERNATIVE STRATEGIES FUNDS
STATEMENT OF INVESTMENTS (UNAUDITED)
Franklin K2 Long Short Credit Fund (continued)
Country | Shares | Value | ||||||||||||||||
t | Securities Sold Short (continued) | |||||||||||||||||
Common Stocks (continued) | ||||||||||||||||||
IT Services (0.0)%† | ||||||||||||||||||
Fastly Inc., A | United States | 63 | $ | (2,568 | ) | |||||||||||||
|
| |||||||||||||||||
Total Common Stocks (Proceeds $171,352) | (164,407 | ) | ||||||||||||||||
|
| |||||||||||||||||
Principal Amount* | ||||||||||||||||||
Corporate Bonds and Notes (3.2)% | ||||||||||||||||||
Aerospace & Defense (0.1)% | ||||||||||||||||||
e | Spirit Aerosystems Inc., secured note, 144A, 7.50%, 4/15/25 | United States | 87,000 | (91,123 | ) | |||||||||||||
|
| |||||||||||||||||
Auto Components (0.1)% | ||||||||||||||||||
American Axle & Manufacturing Inc., senior note, 6.875%, 7/01/28 | United States | 50,000 | (53,485 | ) | ||||||||||||||
e | Wheel Pros Inc., senior note, 144A, 6.50%, 5/15/29 | United States | 32,000 | (31,230 | ) | |||||||||||||
|
| |||||||||||||||||
(84,715 | ) | |||||||||||||||||
|
| |||||||||||||||||
Banks (0.1)% | ||||||||||||||||||
e,g | China Zheshang Bank Co. Ltd., junior sub. bond, 5.45% to 3/29/22, FRN thereafter, Reg S, Perpetual | China | 72,000 | (72,369 | ) | |||||||||||||
|
| |||||||||||||||||
Capital Markets (0.0)%† | ||||||||||||||||||
e | Coinbase Global Inc., senior note, 144A, 3.375%, 10/01/28 | United States | 42,000 | (39,548 | ) | |||||||||||||
|
| |||||||||||||||||
Communications Equipment (0.2)% | ||||||||||||||||||
e | Audacy Capital Corp., secured note, 144A, | |||||||||||||||||
6.50%, 5/01/27 | United States | 136,000 | (133,180 | ) | ||||||||||||||
6.75%, 3/31/29 | United States | 44,000 | (43,152 | ) | ||||||||||||||
e | CommScope Technologies LLC, senior bond, 144A, 5.00%, 3/15/27 | United States | 84,000 | (75,617 | ) | |||||||||||||
|
| |||||||||||||||||
(251,949 | ) | |||||||||||||||||
|
| |||||||||||||||||
Construction & Engineering (0.4)% | ||||||||||||||||||
Fluor Corp., senior bond, | ||||||||||||||||||
3.50%, 12/15/24 | United States | 136,000 | (139,594 | ) | ||||||||||||||
4.25%, 9/15/28 | United States | 54,000 | (55,167 | ) | ||||||||||||||
e | Sydney Airport Finance Co. Pty Ltd., senior secured bond, 144A, | |||||||||||||||||
3.375%, 4/30/25 | Australia | 42,000 | (44,249 | ) | ||||||||||||||
3.625%, 4/28/26 | Australia | 22,000 | (23,398 | ) | ||||||||||||||
e | Tutor Perini Corp., senior note, 144A, 6.875%, 5/01/25 | United States | 199,000 | (199,418 | ) | |||||||||||||
|
| |||||||||||||||||
(461,826 | ) | |||||||||||||||||
|
| |||||||||||||||||
Diversified Consumer Services (0.1)% | ||||||||||||||||||
e | MPH Acquisition Holdings LLC, senior note, 144A, 5.75%, 11/01/28 | United States | 160,000 | (143,200 | ) | |||||||||||||
|
| |||||||||||||||||
Diversified Telecommunication Services (0.2)% | ||||||||||||||||||
e | British Telecommunications PLC, senior bond, Reg S, 1.874% to 5/18/25, FRN thereafter, 8/18/80 | United Kingdom | 200,000 | EUR | (220,761 | ) | ||||||||||||
e | Telesat Canada / Telesat LLC, senior note, 144A, 6.50%, 10/15/27 | Canada | 41,000 | (32,056 | ) | |||||||||||||
|
| |||||||||||||||||
(252,817 | ) | |||||||||||||||||
|
| |||||||||||||||||
Equity Real Estate Investment Trusts (REITs) (0.1)% | ||||||||||||||||||
The GEO Group Inc., senior note, 6.00%, 4/15/26 | United States | 40,000 | (34,496 | ) | ||||||||||||||
Simon Property Group LP, senior bond, 2.65%, 7/15/30 | United States | 115,000 | (117,499 | ) | ||||||||||||||
|
| |||||||||||||||||
(151,995 | ) | |||||||||||||||||
|
| |||||||||||||||||
Food & Staples Retailing (0.6)% | ||||||||||||||||||
Koninklijke Ahold Delhaize NV, senior bond, 5.70%, 10/01/40 | Netherlands | 196,000 | (271,890 | ) | ||||||||||||||
The Kroger Co., senior bond, | ||||||||||||||||||
5.40%, 1/15/49 | United States | 78,000 | (109,455 | ) | ||||||||||||||
3.95%, 1/15/50 | United States | 4,000 | (4,635 | ) | ||||||||||||||
e | SEG Holding LLC / SEG Finance Corp., senior secured note, 144A, 5.625%, 10/15/28 | United States | 149,000 | (156,630 | ) |
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) | |||||||||||||||||
Corporate Bonds and Notes (continued) | ||||||||||||||||||
Food & Staples Retailing (continued) | ||||||||||||||||||
e | Sigma Holdco BV, senior note, Reg S, 5.75%, 5/15/26 | Netherlands | 100,000 | EUR | $ | (104,872 | ) | |||||||||||
|
| |||||||||||||||||
(647,482 | ) | |||||||||||||||||
|
| |||||||||||||||||
Food Products (0.2)% | ||||||||||||||||||
B&G Foods Inc., senior note, 5.25%, 9/15/27 | United States | 196,000 | (199,234 | ) | ||||||||||||||
|
| |||||||||||||||||
Health Care Providers & Services (0.1)% | ||||||||||||||||||
e | Air Methods Corp., senior note, 144A, 8.00%, 5/15/25 | United States | 132,000 | (102,788 | ) | |||||||||||||
|
| |||||||||||||||||
Media (0.1)% | ||||||||||||||||||
e | Dish DBS Corp., senior secured note, 144A, 5.75%, 12/01/28 | United States | 63,000 | (62,194 | ) | |||||||||||||
e | Wolverine Escrow LLC, senior secured note, 144A, 9.00%, 11/15/26 | United States | 85,000 | (80,310 | ) | |||||||||||||
|
| |||||||||||||||||
(142,504 | ) | |||||||||||||||||
|
| |||||||||||||||||
Oil, Gas & Consumable Fuels (0.1)% | ||||||||||||||||||
e | SM Energy Co., secured note, 144A, 10.00%, 1/15/25 | United States | 54,000 | (59,154 | ) | |||||||||||||
|
| |||||||||||||||||
Professional Services (0.1)% | ||||||||||||||||||
e | Teleperformance, senior note, Reg S, 1.875%, 7/02/25 | France | 100,000 | EUR | (119,733 | ) | ||||||||||||
|
| |||||||||||||||||
Specialty Retail (0.7)% | ||||||||||||||||||
e | Ambience Merger Sub Inc., senior note, 144A, 7.125%, 7/15/29 | United States | 71,000 | (68,811 | ) | |||||||||||||
e | Dufry One BV, senior note, Reg S, 2.00%, 2/15/27 | Switzerland | 528,000 | EUR | (548,458 | ) | ||||||||||||
e | Macy’s Retail Holdings LLC, senior note, 144A, 5.875%, 4/01/29 | United States | 87,000 | (92,872 | ) | |||||||||||||
|
| |||||||||||||||||
(710,141 | ) | |||||||||||||||||
|
| |||||||||||||||||
Total Corporate Bonds and Notes (Proceeds $3,602,922) | (3,530,578 | ) | ||||||||||||||||
|
| |||||||||||||||||
U.S. Government and Agency Securities (0.5)% | ||||||||||||||||||
U.S. Treasury Bond, | ||||||||||||||||||
1.375%, 11/15/40 | United States | 2,000 | (1,845 | ) | ||||||||||||||
1.375%, 8/15/50 | United States | 266,700 | (240,770 | ) | ||||||||||||||
U.S. Treasury Note, | ||||||||||||||||||
1.25%, 9/30/28 | United States | 1,300 | (1,291 | ) | ||||||||||||||
0.875%, 11/15/30 | United States | 205,000 | (196,039 | ) | ||||||||||||||
1.125%, 2/15/31 | United States | 28,000 | (27,340 | ) | ||||||||||||||
1.25%, 8/15/31 | United States | 64,700 | (63,674 | ) | ||||||||||||||
|
| |||||||||||||||||
Total U.S. Government and Agency Securities (Proceeds $548,105) | (530,959 | ) | ||||||||||||||||
|
| |||||||||||||||||
Total Securities Sold Short (Proceeds $4,322,379) | $ | (4,225,944 | ) | |||||||||||||||
|
|
†Rounds to less than 0.1% of net assets.
*The principal amount is stated in U.S. dollars unless otherwise indicated.
#Notional amount is the number of units specified in the contract, and can include currency units, bushels, shares, pounds, barrels or other units. Currency units are stated in U.S. dollars unless otherwise indicated.
aNon-income producing.
bA portion or all of the security has been segregated as collateral for securities sold short, open swap contracts, open forward exchange contracts, open futures contracts and/or open written option contracts. At November 30, 2021, the aggregate value of these securities and/or cash pledged amounted to $995,710, representing 0.9% of net assets.
cFair valued using significant unobservable inputs. See Note 13 regarding fair value measurements.
dSee Note 9 regarding restricted securities.
eSecurity was purchased pursuant to Rule 144A or Regulation S under the Securities Act of 1933. 144A securities may be sold in transactions exempt from registration only to qualified institutional buyers or in public offering registered under the Securities Act of 1933. Regulation S securities 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, 2021, the net value of these securities was $51,502,611, representing 48.4% of net assets.
fSee Note 1(g) regarding loan participation notes.
gPerpetual security with no stated maturity date.
franklintempleton.com | Semiannual Report | 27 |
FRANKLIN ALTERNATIVE STRATEGIES FUNDS
STATEMENT OF INVESTMENTS (UNAUDITED)
Franklin K2 Long Short Credit Fund (continued)
hIncome may be received in additional securities and/or cash.
iThe coupon rate shown represents the rate at period end.
jSee Note 1(j) regarding senior floating rate interests.
kSee Note 10 regarding unfunded loan commitments.
lSee Note 7 regarding defaulted securities.
mSee Note 1(h) 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.
pA portion or all of the security purchased on a delayed delivery basis. See Note 1(d).
qThe rate shown is the annualized seven-day effective yield at period end.
rSee Note 1(c) regarding joint repurchase agreement.
sSee Note 1(e) regarding written options.
tSee Note 1(i) regarding securities sold short.
At November 30, 2021, 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 | ||||||||||||||||||||
CBOE Volatility Index | Long | 9 | $ | 231,178 | 12/22/21 | $ | 16,423 | |||||||||||||
E-Mini Russell 2000 | Short | 5 | 549,325 | 12/17/21 | 16,363 | |||||||||||||||
S&P 500 E-Mini Index | Short | 3 | 684,938 | 12/17/21 | (12,471 | ) | ||||||||||||||
|
| |||||||||||||||||||
20,315 | ||||||||||||||||||||
|
| |||||||||||||||||||
Interest Rate Contracts | ||||||||||||||||||||
U.S. Treasury 10 Yr. Note | Short | 1 | 130,813 | 3/22/22 | (1,924 | ) | ||||||||||||||
U.S. Treasury Long Bond | Short | 7 | 1,134,875 | 3/22/22 | (26,044 | ) | ||||||||||||||
|
| |||||||||||||||||||
(27,968 | ) | |||||||||||||||||||
|
| |||||||||||||||||||
Total Futures Contracts |
| $ | (7,653 | ) | ||||||||||||||||
|
|
*As of period end.
At November 30, 2021, 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 | ||||||||||||||||||||||||||||
Colombian Peso | JPHQ | Buy | 1,150,840,566 | $ | 305,093 | 12/15/21 | $ | — | $ | (17,535 | ) | |||||||||||||||||
Colombian Peso | JPHQ | Sell | 1,150,840,566 | 297,068 | 12/15/21 | 9,510 | — | |||||||||||||||||||||
Czech Koruna | JPHQ | Buy | 5,601,383 | 259,457 | 12/15/21 | — | (10,439 | ) | ||||||||||||||||||||
Czech Koruna | JPHQ | Sell | 5,601,383 | 248,110 | 12/15/21 | — | (909 | ) | ||||||||||||||||||||
Indonesian Rupiah | JPHQ | Buy | 9,389,872,441 | 658,107 | 12/15/21 | — | (3,520 | ) | ||||||||||||||||||||
Indonesian Rupiah | JPHQ | Sell | 9,389,872,441 | 650,809 | 12/15/21 | — | (3,778 | ) | ||||||||||||||||||||
Mexican Peso | JPHQ | Buy | 8,315,084 | 410,250 | 12/15/21 | — | (23,722 | ) | ||||||||||||||||||||
Mexican Peso | JPHQ | Sell | 8,315,084 | 399,637 | 12/15/21 | 13,109 | — | |||||||||||||||||||||
Peruvian Nuevo Sol | JPHQ | Buy | 1,406,262 | 343,200 | 12/15/21 | 2,275 | — | |||||||||||||||||||||
Peruvian Nuevo Sol | JPHQ | Sell | 1,406,262 | 355,791 | 12/15/21 | 10,316 | — | |||||||||||||||||||||
Russian Ruble | JPHQ | Buy | 104,210,391 | 1,400,906 | 12/15/21 | 5,184 | (4,361 | ) | ||||||||||||||||||||
Russian Ruble | JPHQ | Sell | 104,210,391 | 1,398,394 | 12/15/21 | — | (3,337 | ) | ||||||||||||||||||||
South African Rand | JPHQ | Buy | 9,370,571 | 598,645 | 12/15/21 | — | (10,817 | ) | ||||||||||||||||||||
South African Rand | JPHQ | Sell | 9,370,571 | 641,346 | 12/15/21 | 53,519 | — | |||||||||||||||||||||
British Pound | JPHQ | Buy | 100,000 | 137,268 | 1/31/22 | — | (4,159 | ) | ||||||||||||||||||||
British Pound | JPHQ | Sell | 590,000 | 806,704 | 1/31/22 | 21,364 | — | |||||||||||||||||||||
Euro | JPHQ | Sell | 1,820,000 | 2,141,776 | 1/31/22 | 73,278 | — | |||||||||||||||||||||
Hong Kong Dollar | JPHQ | Sell | 155,000 | 19,911 | 1/31/22 | 34 | — |
28 | Semiannual Report | franklintempleton.com |
FRANKLIN ALTERNATIVE STRATEGIES FUNDS
STATEMENT OF INVESTMENTS (UNAUDITED)
Franklin K2 Long Short Credit 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 | JPHQ | Sell | 580,000 | $ | 630,079 | 1/31/22 | $ | — | $ | (3,222 | ) | |||||||||||||||||
Czech Koruna | JPHQ | Buy | 5,601,383 | 246,918 | 3/16/22 | 703 | — | |||||||||||||||||||||
Czech Koruna | JPHQ | Sell | 5,601,383 | 244,677 | 3/16/22 | — | (2,944 | ) | ||||||||||||||||||||
Indonesian Rupiah | JPHQ | Sell | 9,389,872,441 | 651,577 | 3/16/22 | 2,906 | — | |||||||||||||||||||||
Russian Ruble | JPHQ | Buy | 34,193,012 | 447,905 | 3/16/22 | 3,509 | — | |||||||||||||||||||||
Russian Ruble | JPHQ | Sell | 57,320,597 | 750,790 | 3/16/22 | — | (5,953 | ) | ||||||||||||||||||||
South African Rand | JPHQ | Buy | 3,755,187 | 229,134 | 3/16/22 | 3,631 | — | |||||||||||||||||||||
South African Rand | JPHQ | Sell | 7,765,195 | 485,703 | 3/16/22 | 4,377 | — | |||||||||||||||||||||
|
| |||||||||||||||||||||||||||
Total Forward Exchange Contracts |
| $ | 203,715 | $ | (94,696 | ) | ||||||||||||||||||||||
|
| |||||||||||||||||||||||||||
Net unrealized appreciation (depreciation) |
| $ | 109,019 | |||||||||||||||||||||||||
|
|
aMay be comprised of multiple contracts with the same counterparty, currency and settlement date.
At November 30, 2021, the Fund had the following credit default swap contracts outstanding. See Note 1(e).
Credit Default Swap Contracts | ||||||||||||||||||||||||||||||||||||||||
Description | Annual 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 | 186,000 | $ | (1,440 | ) | $ | (26 | ) | $ | (1,414 | ) | |||||||||||||||||||||||||||
Government of Mexico | (1.00)% | Quarterly | 12/20/23 | 787,000 | (7,263 | ) | (5,984 | ) | (1,279 | ) | ||||||||||||||||||||||||||||||
Government of Mexico | (1.00)% | Quarterly | 12/20/23 | 15,000 | (138 | ) | (232 | ) | 94 | |||||||||||||||||||||||||||||||
Government of Mexico | (1.00)% | Quarterly | 6/20/25 | 105,000 | (501 | ) | (1,323 | ) | 822 | |||||||||||||||||||||||||||||||
Government of South Africa | (1.00)% | Quarterly | 12/20/24 | 322,000 | 6,955 | 9,249 | (2,294 | ) | ||||||||||||||||||||||||||||||||
Government of South Africa | (1.00)% | Quarterly | 12/20/24 | 900,000 | 19,438 | 26,654 | (7,216 | ) | ||||||||||||||||||||||||||||||||
Traded Index | ||||||||||||||||||||||||||||||||||||||||
CDX.NA.HY.34 | (5.00)% | Quarterly | 6/20/25 | 1,840,000 | (129,762 | ) | (27,734 | ) | (102,028 | ) | ||||||||||||||||||||||||||||||
CDX.NA.HY.35 | (5.00)% | Quarterly | 12/22/25 | 1,930,000 | (144,407 | ) | (183,350 | ) | 38,943 | |||||||||||||||||||||||||||||||
Contracts to Sell Protectionc,d | ||||||||||||||||||||||||||||||||||||||||
Single Name | ||||||||||||||||||||||||||||||||||||||||
Government of South Africa | 1.00% | Quarterly | 12/20/24 | 646,000 | (13,952 | ) | (50,313 | ) | 36,361 | BB- | ||||||||||||||||||||||||||||||
Government of South Africa | 1.00% | Quarterly | 12/20/24 | 184,000 | (3,974 | ) | (5,367 | ) | 1,393 | BB- | ||||||||||||||||||||||||||||||
|
| |||||||||||||||||||||||||||||||||||||||
Total Centrally Cleared Swap Contracts |
| $ | (275,044 | ) | $ | (238,426 | ) | $ | (36,618 | ) | ||||||||||||||||||||||||||||||
|
| |||||||||||||||||||||||||||||||||||||||
OTC Swap Contracts | ||||||||||||||||||||||||||||||||||||||||
Contracts to Buy Protectionc | ||||||||||||||||||||||||||||||||||||||||
Single Name | Counterparty | |||||||||||||||||||||||||||||||||||||||
Air France-KLM | (5.00)% | Quarterly | JPHQ | 12/20/21 | 9,000 | EUR | (111 | ) | 18 | (129 | ) | |||||||||||||||||||||||||||||
Air France-KLM | (5.00)% | Quarterly | JPHQ | 12/20/21 | 14,000 | EUR | (171 | ) | 20 | (191 | ) | |||||||||||||||||||||||||||||
Air France-KLM | (5.00)% | Quarterly | JPHQ | 12/20/21 | 19,000 | EUR | (232 | ) | 39 | (271 | ) | |||||||||||||||||||||||||||||
Air France-KLM | (5.00)% | Quarterly | JPHQ | 6/20/22 | 21,000 | EUR | (435 | ) | (125 | ) | (310 | ) | ||||||||||||||||||||||||||||
Air France-KLM | (5.00)% | Quarterly | JPHQ | 6/20/22 | 7,000 | EUR | (145 | ) | (93 | ) | (52 | ) | ||||||||||||||||||||||||||||
Air France-KLM | (5.00)% | Quarterly | JPHQ | 6/20/22 | 13,000 | EUR | (269 | ) | (82 | ) | (187 | ) | ||||||||||||||||||||||||||||
Air France-KLM | (5.00)% | Quarterly | JPHQ | 6/20/22 | 13,000 | EUR | (269 | ) | (78 | ) | (191 | ) | ||||||||||||||||||||||||||||
American Airlines Group Inc. | (5.00)% | Quarterly | BZWS | 12/20/21 | 9,000 | (89 | ) | 40 | (129 | ) | ||||||||||||||||||||||||||||||
American Airlines Group Inc. | (5.00)% | Quarterly | BZWS | 12/20/21 | 23,000 | (226 | ) | 98 | (324 | ) | ||||||||||||||||||||||||||||||
American Airlines Group Inc. | (5.00)% | Quarterly | BZWS | 12/20/21 | 23,000 | (227 | ) | 99 | (326 | ) | ||||||||||||||||||||||||||||||
American Airlines Group Inc. | (5.00)% | Quarterly | BZWS | 12/20/23 | 39,000 | 1,663 | 1,107 | 556 | ||||||||||||||||||||||||||||||||
American Airlines Group Inc. | (5.00)% | Quarterly | BZWS | 12/20/23 | 66,000 | 2,814 | 2,966 | (152 | ) | |||||||||||||||||||||||||||||||
American Airlines Group Inc. | (5.00)% | Quarterly | BZWS | 6/20/24 | 42,000 | 2,273 | 2,237 | 36 |
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 | Annual 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) |
| |||||||||||||||||||||||||||||||||||||||
American Airlines Group Inc. | (5.00)% | Quarterly | BZWS | 6/20/26 | 200,000 | $ | 20,988 | $ | 9,615 | $ | 11,373 | |||||||||||||||||||||||||||||
American Airlines Group Inc. | (5.00)% | Quarterly | CITI | 12/20/21 | 14,000 | (138 | ) | 89 | (227 | ) | ||||||||||||||||||||||||||||||
American Airlines Group Inc. | (5.00)% | Quarterly | CITI | 12/20/21 | 43,000 | (423 | ) | 172 | (595 | ) | ||||||||||||||||||||||||||||||
American Airlines Group Inc. | (5.00)% | Quarterly | CITI | 6/20/26 | 28,000 | 2,938 | 2,657 | 281 | ||||||||||||||||||||||||||||||||
American Airlines Group Inc. | (5.00)% | Quarterly | CITI | 6/20/26 | 34,000 | 3,568 | 2,989 | 579 | ||||||||||||||||||||||||||||||||
American Airlines Group Inc. | (5.00)% | Quarterly | FBCO | 12/20/21 | 9,000 | (89 | ) | 36 | (125 | ) | ||||||||||||||||||||||||||||||
American Airlines Group Inc. | (5.00)% | Quarterly | FBCO | 12/20/21 | 14,000 | (138 | ) | 65 | (203 | ) | ||||||||||||||||||||||||||||||
American Airlines Group Inc. | (5.00)% | Quarterly | GSCO | 12/20/21 | 9,000 | (89 | ) | 36 | (125 | ) | ||||||||||||||||||||||||||||||
American Airlines Group Inc. | (5.00)% | Quarterly | GSCO | 12/20/21 | 24,000 | (237 | ) | 201 | (438 | ) | ||||||||||||||||||||||||||||||
American Airlines Group Inc. | (5.00)% | Quarterly | GSCO | 6/20/23 | 19,000 | 451 | 249 | 202 | ||||||||||||||||||||||||||||||||
American Airlines Group Inc. | (5.00)% | Quarterly | GSCO | 6/20/23 | 19,000 | 451 | 335 | 116 | ||||||||||||||||||||||||||||||||
American Airlines Group Inc. | (5.00)% | Quarterly | GSCO | 6/20/23 | 19,000 | 450 | 353 | 97 | ||||||||||||||||||||||||||||||||
American Airlines Group Inc. | (5.00)% | Quarterly | GSCO | 12/20/23 | 38,000 | 1,620 | 1,164 | 456 | ||||||||||||||||||||||||||||||||
American Airlines Group Inc. | (5.00)% | Quarterly | GSCO | 12/20/23 | 46,000 | 1,961 | 1,418 | 543 | ||||||||||||||||||||||||||||||||
American Airlines Group Inc. | (5.00)% | Quarterly | JPHQ | 12/20/21 | 10,000 | (98 | ) | 66 | (164 | ) | ||||||||||||||||||||||||||||||
American Airlines Group Inc. | (5.00)% | Quarterly | JPHQ | 12/20/25 | 75,000 | 6,970 | 12,394 | (5,424 | ) | |||||||||||||||||||||||||||||||
American Axle & Manufacturing Inc. | (5.00)% | Quarterly | BZWS | 12/20/26 | 119,000 | (4,862 | ) | (4,520 | ) | (342 | ) | |||||||||||||||||||||||||||||
American Axle & Manufacturing Inc. | (5.00)% | Quarterly | BZWS | 12/20/26 | 96,000 | (3,922 | ) | (3,014 | ) | (908 | ) | |||||||||||||||||||||||||||||
American Axle & Manufacturing Inc. | (5.00)% | Quarterly | BZWS | 12/20/26 | 119,000 | (4,861 | ) | (2,979 | ) | (1,882 | ) | |||||||||||||||||||||||||||||
American Axle & Manufacturing Inc. | (5.00)% | Quarterly | BZWS | 12/20/26 | 96,000 | (3,922 | ) | (2,807 | ) | (1,115 | ) | |||||||||||||||||||||||||||||
American Axle & Manufacturing Inc. | (5.00)% | Quarterly | BZWS | 12/20/26 | 82,000 | (3,349 | ) | (2,228 | ) | (1,121 | ) | |||||||||||||||||||||||||||||
American Axle & Manufacturing Inc. | (5.00)% | Quarterly | BZWS | 12/20/26 | 36,000 | (1,470 | ) | (932 | ) | (538 | ) | |||||||||||||||||||||||||||||
American Axle & Manufacturing Inc. | (5.00)% | Quarterly | BZWS | 12/20/26 | 29,000 | (1,185 | ) | (849 | ) | (336 | ) | |||||||||||||||||||||||||||||
American Axle & Manufacturing Inc. | (5.00)% | Quarterly | GSCO | 12/20/26 | 48,000 | (1,406 | ) | (1,406 | ) | — | ||||||||||||||||||||||||||||||
Dow Inc. | (1.00)% | Quarterly | GSCO | 6/20/25 | 66,000 | (1,246 | ) | (342 | ) | (904 | ) | |||||||||||||||||||||||||||||
Dow Inc. | (1.00)% | Quarterly | GSCO | 6/20/25 | 66,000 | (1,247 | ) | (228 | ) | (1,019 | ) | |||||||||||||||||||||||||||||
Dow Inc. | (1.00)% | Quarterly | GSCO | 6/20/25 | 7,000 | (132 | ) | (34 | ) | (98 | ) | |||||||||||||||||||||||||||||
GE Capital Funding LLC | (1.00)% | Quarterly | JPHQ | 12/20/26 | 338,000 | (5,490 | ) | (3,283 | ) | (2,207 | ) | |||||||||||||||||||||||||||||
Government of Brazil | (1.00)% | Quarterly | BZWS | 12/20/26 | 182,000 | 13,032 | 8,457 | 4,575 | ||||||||||||||||||||||||||||||||
Government of Italy | (1.00)% | Quarterly | BOFA | 6/20/24 | 233,000 | (3,435 | ) | 1,248 | (4,683 | ) | ||||||||||||||||||||||||||||||
Government of Italy | (1.00)% | Quarterly | BOFA | 6/20/24 | 140,000 | (2,064 | ) | 1,683 | (3,747 | ) | ||||||||||||||||||||||||||||||
Government of Turkey | (1.00)% | Quarterly | BZWS | 12/20/23 | 124,000 | 9,051 | 9,291 | (240 | ) | |||||||||||||||||||||||||||||||
Government of Turkey | (1.00)% | Quarterly | BZWS | 12/20/23 | 290,000 | 21,167 | 19,401 | 1,766 | ||||||||||||||||||||||||||||||||
Hovnanian Enterprises Inc. | (5.00)% | Quarterly | BZWS | 6/20/26 | 8,000 | 705 | 777 | (72 | ) | |||||||||||||||||||||||||||||||
Hovnanian Enterprises Inc. | (5.00)% | Quarterly | BZWS | 6/20/26 | 40,000 | 3,529 | 3,708 | (179 | ) | |||||||||||||||||||||||||||||||
Itochu Corp. | (1.00)% | Quarterly | GSCO | 6/20/22 | 12,107,000 | JPY | (791 | ) | (390 | ) | (401 | ) | ||||||||||||||||||||||||||||
JFE Holdings Inc. | (1.00)% | Quarterly | GSCO | 6/20/22 | 5,348,000 | JPY | (339 | ) | (178 | ) | (161 | ) | ||||||||||||||||||||||||||||
Kohl’s Corp. | (1.00)% | Quarterly | CITI | 12/20/25 | 207,000 | (255 | ) | 15,406 | (15,661 | ) | ||||||||||||||||||||||||||||||
Kohl’s Corp. | (1.00)% | Quarterly | GSCO | 12/20/25 | 154,000 | (189 | ) | 11,307 | (11,496 | ) | ||||||||||||||||||||||||||||||
Kohl’s Corp. | (1.00)% | Quarterly | MSCS | 12/20/25 | 221,000 | (272 | ) | 16,448 | (16,720 | ) | ||||||||||||||||||||||||||||||
Macy’s Retail Holdings LLC | (1.00)% | Quarterly | BZWS | 12/20/26 | 21,000 | 1,181 | 1,487 | (306 | ) | |||||||||||||||||||||||||||||||
Marubeni Corp. | (1.00)% | Quarterly | CITI | 6/20/25 | 3,711,000 | JPY | (972 | ) | 773 | (1,745 | ) | |||||||||||||||||||||||||||||
Marubeni Corp. | (1.00)% | Quarterly | GSCO | 6/20/22 | 18,860,000 | JPY | (1,211 | ) | (502 | ) | (709 | ) |
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 | Annual 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) |
| |||||||||||||||||||||||||||||||||||||||
MBIA Inc. | (5.00)% | Quarterly | BZWS | 6/20/22 | 23,000 | $ | (728 | ) | $ | (150 | ) | $ | (578 | ) | ||||||||||||||||||||||||||
MBIA Inc. | (5.00)% | Quarterly | CITI | 6/20/22 | 36,000 | (1,138 | ) | (650 | ) | (488 | ) | |||||||||||||||||||||||||||||
MBIA Inc. | (5.00)% | Quarterly | GSCO | 6/20/22 | 21,000 | (664 | ) | (300 | ) | (364 | ) | |||||||||||||||||||||||||||||
MBIA Inc. | (5.00)% | Quarterly | JPHQ | 12/20/24 | 97,000 | (8,082 | ) | (8,353 | ) | 271 | ||||||||||||||||||||||||||||||
Mitsui O.S.K. Lines Ltd. | (1.00)% | Quarterly | JPHQ | 6/20/22 | 3,878,000 | JPY | (231 | ) | (33 | ) | (198 | ) | ||||||||||||||||||||||||||||
Mitsui O.S.K. Lines Ltd. | (1.00)% | Quarterly | JPHQ | 6/20/22 | 3,618,000 | JPY | (215 | ) | (30 | ) | (185 | ) | ||||||||||||||||||||||||||||
Simon Property Group LP | (1.00)% | Quarterly | JPHQ | 12/20/25 | 434,000 | (8,668 | ) | 7,482 | (16,150 | ) | ||||||||||||||||||||||||||||||
Simon Property Group LP | (1.00)% | Quarterly | MSCS | 12/20/25 | 340,000 | (6,790 | ) | 5,862 | (12,652 | ) | ||||||||||||||||||||||||||||||
Softbank Group Corp. | (1.00)% | Quarterly | BZWS | 12/20/26 | 33,600,000 | JPY | 23,013 | 20,822 | 2,191 | |||||||||||||||||||||||||||||||
Stena AB | (5.00)% | Quarterly | GSCO | 6/20/24 | 92,000 | EUR | (6,122 | ) | 4,128 | (10,250 | ) | |||||||||||||||||||||||||||||
Stena AB | (5.00)% | Quarterly | GSCO | 12/20/26 | 9,000 | EUR | (349 | ) | (260 | ) | (89 | ) | ||||||||||||||||||||||||||||
TDC A/S | (1.00)% | Quarterly | BNPP | 12/20/26 | 20,000 | EUR | 782 | 753 | 29 | |||||||||||||||||||||||||||||||
TDC A/S | (1.00)% | Quarterly | BNPP | 12/20/26 | 20,000 | EUR | 782 | 937 | (155 | ) | ||||||||||||||||||||||||||||||
TDC A/S | (1.00)% | Quarterly | BNPP | 12/20/26 | 20,000 | EUR | 782 | 937 | (155 | ) | ||||||||||||||||||||||||||||||
Telecom Italia | (1.00)% | Quarterly | JPHQ | 12/20/26 | 20,000 | EUR | 1,694 | 1,063 | 631 | |||||||||||||||||||||||||||||||
Telecom Italia | (1.00)% | Quarterly | JPHQ | 12/20/26 | 20,000 | EUR | 1,694 | 1,134 | 560 | |||||||||||||||||||||||||||||||
Telecom Italia | (1.00)% | Quarterly | JPHQ | 12/20/26 | 20,000 | EUR | 1,695 | 1,566 | 129 | |||||||||||||||||||||||||||||||
Telecom Italia | (1.00)% | Quarterly | JPHQ | 12/20/26 | 22,000 | EUR | 1,864 | 1,776 | 88 | |||||||||||||||||||||||||||||||
Telecom Italia | (1.00)% | Quarterly | JPHQ | 12/20/26 | 41,000 | EUR | 3,473 | 3,350 | 123 | |||||||||||||||||||||||||||||||
Contracts to Sell Protectionc,d | ||||||||||||||||||||||||||||||||||||||||
Single Name |
| |||||||||||||||||||||||||||||||||||||||
Euro Garage Ltd. | 5.00% | Quarterly | GSCO | 12/20/26 | 16,000 | EUR | 929 | 830 | 99 | B | ||||||||||||||||||||||||||||||
Government of Turkey | 1.00% | Quarterly | BZWS | 12/20/26 | 207,000 | (35,597 | ) | (32,230 | ) | (3,367 | ) | B+ | ||||||||||||||||||||||||||||
Government of Turkey | 1.00% | Quarterly | BZWS | 12/20/26 | 83,000 | (14,273 | ) | (14,122 | ) | (151 | ) | B+ | ||||||||||||||||||||||||||||
Groupe Casino | 5.00% | Quarterly | GSCO | 12/20/26 | 21,000 | EUR | (2,379 | ) | (1,711 | ) | (668 | ) | BB- | |||||||||||||||||||||||||||
|
| |||||||||||||||||||||||||||||||||||||||
Total OTC Swap Contracts |
| $ | 278 | $ | 97,180 | $ | (96,902 | ) | ||||||||||||||||||||||||||||||||
|
| |||||||||||||||||||||||||||||||||||||||
Total Credit Default Swap Contracts |
| $ | (274,766 | ) | $ | (141,246 | ) | $ | (133,520 | ) | ||||||||||||||||||||||||||||||
|
|
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, 2021, 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 Month USD-LIBOR | Quarterly | 3/18/22 | 1,100,000 | $ | (3,507 | ) | ||||||||||
Receive Floating rate 6 Month-WIBOR | Annually | 3/16/27 | 3,980,767 | PLN | — | |||||||||||
Receive Floating rate 3 Month USD-LIBOR | Quarterly | 6/20/28 | 1,100,000 | (136,032 | ) |
franklintempleton.com | Semiannual Report | 31 |
FRANKLIN ALTERNATIVE STRATEGIES FUNDS
STATEMENT OF INVESTMENTS (UNAUDITED)
Franklin K2 Long Short Credit Fund (continued)
Interest Rate Swap Contracts (continued) | ||||||||||||||||
Description | Payment Frequency | Maturity Date | Notional Amount* | Value/Unrealized Appreciation (Depreciation) | ||||||||||||
Centrally Cleared Swap Contracts (continued) | ||||||||||||||||
Receive Floating rate 6 Month-SORA | Semi-Annually | 12/15/31 | 455,901 | SGD | $ | 14,703 | ||||||||||
|
| |||||||||||||||
Total Interest Rate Swap Contracts |
| $ | (124,836 | ) | ||||||||||||
|
|
*In U.S. dollars unless otherwise indicated.
At November 30, 2021, 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 + 0.35 | % | Monthly | JPHQ | 1/20/22 | $ | 42,775 | $ | 7,876 | |||||||||||||||
Clearway Energy Inc. | 1-Month LIBOR + 0.40 | % | Monthly | GSCO | 4/20/22 | 126,174 | 22,996 | |||||||||||||||||
Clearway Energy Inc. | 1-Month LIBOR + 0.40 | % | Monthly | BZWS | 5/16/22 | 8,221 | 840 | |||||||||||||||||
Energy Transfer LP | 1-Month LIBOR + 0.90 | % | Monthly | GSCO | 10/04/22 | 36,005 | (4,754 | ) | ||||||||||||||||
Energy Transfer LP | 1-Month LIBOR + 0.50 | % | Monthly | CITI | 10/20/22 | 34,265 | (5,711 | ) | ||||||||||||||||
Enterprise Products Partners LP | 1-Month LIBOR + 0.90 | % | Monthly | BOFA | 3/04/22 | 30,167 | (3,581 | ) | ||||||||||||||||
Enterprise Products Partners LP | 1-Month LIBOR + 0.90 | % | Monthly | GSCO | 4/20/22 | 32,422 | (3,862 | ) | ||||||||||||||||
|
| |||||||||||||||||||||||
13,804 | ||||||||||||||||||||||||
|
| |||||||||||||||||||||||
Interest Rate Contracts – Longa | ||||||||||||||||||||||||
Government of Egypt | 1-Day FEDEF | Monthly | CITI | 1/11/22 | 86,712 | 4,020 | ||||||||||||||||||
Government of Indonesia | 3-Month LIBOR + 0.70 | % | Monthly | BOFA | 2/17/22 | 114,441 | (3,236 | ) | ||||||||||||||||
Government of Indonesia | 3-Month LIBOR + 0.70 | % | Monthly | BOFA | 5/18/22 | 431,215 | (6,776 | ) | ||||||||||||||||
Government of Indonesia | 3-Month LIBOR + 0.60 | % | Monthly | DBAB | 6/15/32 | 103,643 | 7,183 | |||||||||||||||||
|
| |||||||||||||||||||||||
1,191 | ||||||||||||||||||||||||
|
| |||||||||||||||||||||||
Total - Total Return Swap Contracts |
| $ | 14,995 | |||||||||||||||||||||
|
|
aThe Fund receives the total return on the underlying instrument and pays a variable financing rate.
See Note 11 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, 2021 (unaudited)
Franklin K2 Long Short Credit Fund
Assets: | ||||
Investments in securities: | ||||
Cost – Unaffiliated issuers | $ | 97,907,279 | ||
Cost – Unaffiliated repurchase agreements | 4,402,397 | |||
|
| |||
Value – Unaffiliated issuers | $ | 98,526,005 | ||
Value – Unaffiliated repurchase agreements | 4,402,397 | |||
Cash | 870,927 | |||
Restricted cash for OTC derivatives (Note 1f) | 70,000 | |||
Foreign currency, at value (cost $500,915) | 500,060 | |||
Receivables: | ||||
Investment securities sold | 814,471 | |||
Capital shares sold | 879,475 | |||
Dividends and interest | 606,268 | |||
Deposits with brokers for: | ||||
Securities sold short | 4,254,192 | |||
OTC derivative contracts | 360,000 | |||
Futures contracts | 86,500 | |||
Centrally cleared swap contracts | 234,653 | |||
Due from brokers | 238,512 | |||
Variation margin on futures contracts | 47,141 | |||
OTC swap contracts (upfront payments $224,311) | 179,089 | |||
Unrealized appreciation on OTC forward exchange contracts | 203,715 | |||
Unrealized appreciation on OTC swap contracts | 67,616 | |||
|
| |||
Total assets | 112,341,021 | |||
|
| |||
Liabilities: | ||||
Payables: | ||||
Investment securities purchased | 852,294 | |||
Capital shares redeemed | 156,061 | |||
Management fees | 104,579 | |||
Distribution fees | 7,120 | |||
Trustees’ fees and expenses | 1,592 | |||
Transfer agent fees | 16,413 | |||
Deposits from brokers for: | ||||
OTC derivative contracts | 70,000 | |||
Due to brokers | 37,133 | |||
OTC swap contracts (upfront receipts $101,352) | 81,909 | |||
Options written, at value (premiums received $1,424) | 867 | |||
Securities sold short, at value (proceeds $4,322,379) | 4,225,944 | |||
Unrealized depreciation on OTC forward exchange contracts | 94,696 | |||
Unrealized depreciation on OTC swap contracts | 149,523 | |||
Unrealized depreciation on unfunded loan commitments (Note 10) | 4,403 | |||
Accrued expenses and other liabilities | 92,466 | |||
|
| |||
Total liabilities | 5,895,000 | |||
|
| |||
Net assets, at value | $ | 106,446,021 | ||
|
| |||
Net assets consist of: | ||||
Paid-in capital | $ | 102,486,855 | ||
Total distributable earnings (loss) | 3,959,166 | |||
|
| |||
Net assets, at value | $ | 106,446,021 | ||
|
|
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, 2021 (unaudited)
Franklin K2 Long Short Credit Fund
Class A: | ||||
Net assets, at value | $23,486,656 | |||
|
| |||
Shares outstanding | 2,153,641 | |||
|
| |||
Net asset value per sharea | $10.91 | |||
|
| |||
Maximum offering price per share (net asset value per share ÷ 94.50%) | $11.54 | |||
|
| |||
Class C: | ||||
Net assets, at value | $2,684,207 | |||
|
| |||
Shares outstanding | 251,604 | |||
|
| |||
Net asset value and maximum offering price per sharea | $10.67 | |||
|
| |||
Class R: | ||||
Net assets, at value | $211,835 | |||
|
| |||
Shares outstanding | 19,650 | |||
|
| |||
Net asset value and maximum offering price per share | $10.78 | |||
|
| |||
Class R6: | ||||
Net assets, at value | $5,823 | |||
|
| |||
Shares outstanding | 531 | |||
|
| |||
Net asset value and maximum offering price per share | $10.97 | |||
|
| |||
Advisor Class: | ||||
Net assets, at value | $80,057,500 | |||
|
| |||
Shares outstanding | 7,323,392 | |||
|
| |||
Net asset value and maximum offering price per share | $10.93 | |||
|
|
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, 2021 (unaudited)
Franklin K2 Long Short Credit Fund
Investment income: | ||||
Dividends: | ||||
Unaffiliated issuers | $ | 45,136 | ||
Interest: | ||||
Unaffiliated issuers: | ||||
Paydown gain (loss) | 265,135 | |||
Paid in cash | 2,103,770 | |||
|
| |||
Total investment income | 2,414,041 | |||
|
| |||
Expenses: | ||||
Management fees (Note 3a) | 857,725 | |||
Distribution fees: (Note 3c) | ||||
Class A | 31,553 | |||
Class C | 14,055 | |||
Class R | 494 | |||
Transfer agent fees: (Note 3e) | ||||
Class A | 13,045 | |||
Class C | 1,458 | |||
Class R | 104 | |||
Class R6 | 41 | |||
Advisor Class | 41,095 | |||
Custodian fees (Note 4) . | 42,532 | |||
Reports to shareholders fees | 15,341 | |||
Registration and filing fees | 34,120 | |||
Professional fees | 81,373 | |||
Trustees’ fees and expenses | 15,406 | |||
Dividends and interest on securities sold short | 112,015 | |||
Security borrowing fees | 33,236 | |||
Other | 24,246 | |||
|
| |||
Total expenses | 1,317,839 | |||
Expense reductions (Note 4) | (804 | ) | ||
Expenses waived/paid by affiliates (Note 3f) | (244,367 | ) | ||
|
| |||
Net expenses | 1,072,668 | |||
|
| |||
Net investment income | 1,341,373 | |||
|
| |||
Realized and unrealized gains (losses): | ||||
Net realized gain (loss) from: | ||||
Investments: | ||||
Unaffiliated issuers | 1,055,177 | |||
Written options | 16,993 | |||
Foreign currency transactions | (47,317 | ) | ||
Forward exchange contracts | (48,021 | ) | ||
Futures contracts | (200,112 | ) | ||
Securities sold short | (344,681 | ) | ||
Swap contracts | (289,549 | ) | ||
|
| |||
Net realized gain (loss) | 142,490 | |||
|
| |||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments: | ||||
Unaffiliated issuers | (2,525,347 | ) | ||
Translation of other assets and liabilities denominated in foreign currencies | (79,592 | ) | ||
Forward exchange contracts | 311,948 | |||
Written options | 1,573 | |||
Futures contracts | 20,020 | |||
Securities sold short | 481,973 | |||
Swap contracts | 443,739 | |||
|
| |||
Net change in unrealized appreciation (depreciation) | (1,345,686 | ) | ||
|
| |||
Net realized and unrealized gain (loss) | (1,203,196 | ) | ||
|
| |||
Net increase (decrease) in net assets resulting from operations | $ | 138,177 | ||
|
|
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, 2021 (unaudited) | Year Ended May 31, 2021 | |||||||
Increase (decrease) in net assets: | ||||||||
Operations: | ||||||||
Net investment income | $ | 1,341,373 | $ | 2,724,125 | ||||
Net realized gain (loss) | 142,490 | 1,198,529 | ||||||
Net change in unrealized appreciation (depreciation) | (1,345,686 | ) | 8,574,158 | |||||
|
| |||||||
Net increase (decrease) in net assets resulting from operations | 138,177 | 12,496,812 | ||||||
|
| |||||||
Distributions to shareholders: | ||||||||
Class A | — | (567,339 | ) | |||||
Class C | — | (51,591 | ) | |||||
Class R | — | (4,161 | ) | |||||
Class R6 | — | (138 | ) | |||||
Advisor Class | — | (1,899,712 | ) | |||||
|
| |||||||
Total distributions to shareholders | — | (2,522,941 | ) | |||||
|
| |||||||
Capital share transactions: (Note 2) | ||||||||
Class A | (3,119,582 | ) | 4,161,929 | |||||
Class C | (252,540 | ) | (226,267 | ) | ||||
Class R | 16,449 | 8,527 | ||||||
Advisor Class | 3,298,910 | (3,869,073 | ) | |||||
|
| |||||||
Total capital share transactions | (56,763 | ) | 75,116 | |||||
|
| |||||||
Net increase (decrease) in net assets | 81,414 | 10,048,987 | ||||||
Net assets: | ||||||||
Beginning of period | 106,364,607 | 96,315,620 | ||||||
|
| |||||||
End of period | $ | 106,446,021 | $ | 106,364,607 | ||||
|
|
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
1. Organization and Significant Accounting Policies
Franklin Alternative Strategies Funds (Trust) is registered under the Investment Company Act of 1940 (1940 Act) as an open-end management investment company, consisting of 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. Effective August 2, 2021, Class C shares automatically convert to Class A shares on a monthly basis, after they have been held for 8 years. Prior to August 2, 2021, Class C shares converted to Class A shares after a 10-year holding period. Each class of shares may differ by its initial sales load, contingent deferred sales charges, voting rights on matters affecting a single class, its exchange privilege and fees due to differing arrangements for distribution and transfer agent fees.
The following summarizes the Fund’s significant accounting policies.
a. Financial Instrument Valuation
The Fund’s investments in financial instruments are carried at fair value daily. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants on the measurement date. The Fund calculates the net asset value (NAV) per share each business day as of 4 p.m. Eastern time or the regularly scheduled close of the New York Stock Exchange (NYSE), whichever is earlier. Under compliance policies and procedures approved by the Trust’s Board of Trustees (the Board), the Fund’s administrator has responsibility for oversight of valuation, including leading the cross-functional Valuation Committee (VC). The Fund may utilize independent pricing services, quotations from securities and financial instrument dealers, and other market sources to determine fair value.
Equity securities and derivative financial instruments listed on an exchange or on the NASDAQ National Market System are valued at the last quoted sale price or the official closing price of the day, respectively. Foreign equity securities are valued as of the close of trading on the foreign stock exchange on which the security is primarily traded or as of 4 p.m. Eastern time. The value is then converted into its U.S. dollar equivalent at the foreign exchange rate in effect at 4 p.m. Eastern time on the day that the value of the security
is determined. Over-the-counter (OTC) securities are valued within the range of the most recent quoted bid and ask prices. Securities that trade in multiple markets or on multiple exchanges are valued according to the broadest and most representative market. Certain equity securities are valued based upon fundamental characteristics or relationships to similar securities.
Debt securities generally trade in the OTC market rather than on a securities exchange. The Fund’s pricing services use multiple valuation techniques to determine fair value. In instances where sufficient market activity exists, the pricing services may utilize a market-based approach through which quotes from market makers are used to determine fair value. In instances where sufficient market activity may not exist or is limited, the pricing services also utilize proprietary valuation models which may consider market characteristics such as benchmark yield curves, credit spreads, estimated default rates, anticipated market interest rate volatility, coupon rates, anticipated timing of principal repayments, underlying collateral, and other unique security features in order to estimate the relevant cash flows, which are then discounted to calculate the fair value. Securities denominated in a foreign currency are converted into their U.S. dollar equivalent at the foreign exchange rate in effect at 4 p.m. Eastern time on the date that the values of the foreign debt securities are determined.
Investments in open-end mutual funds are valued at the closing NAV. Investments in repurchase agreements are valued at cost, which approximates fair value.
Certain derivative financial instruments are centrally cleared or trade in the OTC market. The Fund’s pricing services use various techniques including industry standard option pricing models and proprietary discounted cash flow models to determine the fair value of those instruments. The Fund’s net benefit or obligation under the derivative contract, as measured by the fair value of the contract, is included in net assets.
The Fund has procedures to determine the fair value of financial instruments for which market prices are not reliable or readily available. Under these procedures, the Fund primarily employs a market-based approach which may use related or comparable assets or liabilities, recent transactions, market multiples, book values, and other relevant information for the investment to determine the fair value of the investment. An income-based valuation approach may also be used in which the anticipated future cash flows of the investment are discounted to calculate fair value. Discounts may also be applied due to the nature or duration of any restrictions on
franklintempleton.com | Semiannual Report | 37 |
FRANKLIN ALTERNATIVE STRATEGIES FUNDS
NOTES TO FINANCIAL STATEMENTS
Franklin K2 Long Short Credit Fund (continued)
1. Organization and Significant Accounting Policies (continued)
a. Financial Instrument Valuation (continued)
the disposition of the investments. Due to the inherent uncertainty of valuations of such investments, the fair values may differ significantly from the values that would have been used had an active market existed.
Trading in securities on foreign securities stock exchanges and OTC markets may be completed before 4 p.m. Eastern time. In addition, trading in certain foreign markets may not take place on every Fund’s business day. Events can 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, an independent pricing service may be used to adjust the value of the Funds’ portfolio securities to the latest indications of fair value at 4 p.m. Eastern time. At November 30, 2021, certain securities may have been fair valued using these procedures, in which case the securities were categorized as Level 2 inputs within the fair value hierarchy (referred to as “market level fair value”). See the Fair Value Measurements note for more information.
When the last day of the reporting period is a non-business day, certain foreign markets may be open on those days that the Fund’s NAV is not calculated, which could result in differences between the value of the Fund’s portfolio securities on the last business day and the last calendar day of the reporting period. Any significant security valuation changes due to an open foreign market are adjusted and reflected by the Fund for financial reporting purposes.
b. Foreign Currency Translation
Portfolio securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollars based on the exchange rate of such currencies against U.S. dollars on the date of valuation. The Fund may enter into foreign currency exchange contracts to facilitate transactions denominated in a foreign currency. Purchases and sales of securities, income and expense items denominated in foreign currencies are translated into U.S. dollars at the exchange rate in effect on the transaction date. Portfolio securities and
assets and liabilities denominated in foreign currencies contain risks that those currencies will decline in value relative to the U.S. dollar. Occasionally, events may impact the availability or reliability of foreign exchange rates used to convert the U.S. dollar equivalent value. If such an event occurs, the foreign exchange rate will be valued at fair value using procedures established and approved by the Board.
The Fund does not separately report the effect of changes in foreign exchange rates from changes in market prices on securities held. Such changes are included in net realized and unrealized gain or loss from investments in the Statement of Operations.
Realized foreign exchange gains or losses arise from sales of foreign currencies, currency gains or losses realized between the trade and settlement dates on securities transactions and the difference between the recorded amounts of dividends, interest, and foreign withholding taxes and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign exchange gains and losses arise from changes in foreign exchange rates on foreign denominated assets and liabilities other than investments in securities held at the end of the reporting period.
c. Joint Repurchase Agreement
The Fund enters into a joint repurchase agreement whereby its uninvested cash balance is deposited into a joint cash account with other funds managed by the investment manager or an affiliate of the investment manager and is used to invest in one or more repurchase agreements. The value and face amount of the joint repurchase agreement are allocated to the funds based on their pro-rata interest. A repurchase agreement is accounted for as a loan by the Fund to the seller, collateralized by securities which are delivered to the Fund’s custodian. The fair value, including accrued interest, of the initial collateralization is required to be at least 102% of the dollar amount invested by the funds, with the value of the underlying securities marked to market daily to maintain coverage of at least 100%. Repurchase agreements are subject to the terms of Master Repurchase Agreements (MRAs) with approved counterparties (sellers). The MRAs contain various provisions, including but not limited to events of default and maintenance of collateral for repurchase agreements. In the event of default by either the seller or the Fund, certain MRAs may permit the non-defaulting party to net and close-out all transactions, if any, traded under such agreements. The Fund may sell securities it holds as collateral and
38 | Semiannual Report | franklintempleton.com |
FRANKLIN ALTERNATIVE STRATEGIES FUNDS
NOTES TO FINANCIAL STATEMENTS
Franklin K2 Long Short Credit Fund (continued)
apply the proceeds towards the repurchase price and any other amounts owed by the seller to the Fund in the event of default by the seller. This could involve costs or delays in addition to a loss on the securities if their value falls below the repurchase price owed by the seller. The joint repurchase agreement held by the Fund at period end, as indicated in the Statement of Investments, had been entered into on November 30, 2021.
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.
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 the non-defaulting party the right to net and close-out all transactions traded, whether or not arising under the ISDA agreement, to one net amount payable by one counterparty to the other. However, absent an event of default or early termination, OTC derivative assets and liabilities are presented gross and not offset in the Statement of Assets and Liabilities. Early termination by the counterparty may result in an immediate payment by the Fund of any net liability owed to that counterparty under the ISDA agreement.
Collateral requirements differ by type of derivative. Collateral or initial margin requirements are set by the broker or exchange clearing house for exchange traded and centrally cleared derivatives. Initial margin deposited is held at the exchange and can be in the form of cash and/or securities.
For OTC derivatives traded under an ISDA master agreement, posting of collateral is required by either the Fund or the applicable counterparty if the total net exposure of all OTC derivatives with the applicable counterparty exceeds the minimum transfer amount, which typically ranges from $100,000 to $250,000, and can vary depending on the counterparty and the type of the agreement. Generally, collateral is determined at the close of Fund business each day and any additional collateral required due to changes in derivative values may be delivered by the Fund or the counterparty the next business day, or within a few business days. Collateral pledged and/or received by the Fund for OTC derivatives, if any, is held in segregated accounts with the Fund’s custodian/counterparty broker and can be in the form of cash and/or securities. Unrestricted cash may be invested according to the Fund’s investment objectives. To the extent that the amounts due to the Fund from its counterparties are not subject to collateralization or are not fully collateralized, the Fund bears the risk of loss from counterparty non-performance.
The Fund entered into exchange traded futures contracts primarily to manage and/or gain exposure to interest rate and equity price risk. A futures contract is an agreement between the Fund and a counterparty to buy or sell an asset at a specified price on a future date. Required initial margins are pledged by the Fund, and the daily change in fair value is accounted for as a variation margin payable or receivable in the Statement of Assets and Liabilities.
franklintempleton.com | Semiannual Report | 39 |
FRANKLIN ALTERNATIVE STRATEGIES FUNDS
NOTES TO FINANCIAL STATEMENTS
Franklin K2 Long Short Credit Fund (continued)
1. Organization and Significant Accounting Policies (continued)
e. Derivative Financial Instruments(continued)
The Fund entered into OTC forward exchange contracts primarily to manage and/or gain exposure to certain foreign currencies. A forward exchange contract is an agreement between the Fund and a counterparty to buy or sell a foreign currency at a specific exchange rate on a future date.
The Fund entered into credit default swap contracts primarily to manage and/or gain exposure to credit risk. A credit default swap is an agreement between the Fund and a counterparty whereby the buyer of the contract receives credit protection and the seller of the contract guarantees the credit worthiness of a referenced debt obligation. These agreements may be privately negotiated in the over-the-counter market (OTC credit default swaps) or may be executed in a multilateral trade facility platform, such as a registered exchange (centrally cleared credit default swaps). The underlying referenced debt obligation may be a single issuer of corporate or sovereign debt, a credit index, a basket of issuers or indices, or a tranche of a credit index or basket of issuers or indices. In the event of a default of the underlying referenced debt obligation, the buyer is entitled to receive the notional amount of the credit default swap contract from the seller in exchange for the referenced debt obligation, a net settlement amount equal to the notional amount of the credit default swap less the recovery value of the referenced debt obligation, or other agreed upon amount. For centrally cleared credit default swaps, required initial margins are pledged by the Fund, and the daily change in fair value is accounted for as a variation margin payable or receivable in the Statement of Assets and Liabilities. Over the term of the contract, the buyer pays the seller a periodic stream of payments, provided that no event of default has occurred. Such periodic payments are accrued daily as an unrealized appreciation or depreciation until the payments are made, at which time they are realized. Upfront payments and receipts are reflected in the Statement of Assets and Liabilities and represent compensating factors between stated terms of the credit default swap agreement and prevailing market conditions (credit spreads and other relevant factors). These upfront payments and receipts are amortized over the term of the contract as a realized gain or loss in the Statement of Operations.
The Fund entered into interest rate swap contracts primarily to manage interest rate risk. An interest rate swap is an
agreement between the Fund and a counterparty to exchange cash flows based on the difference between two interest rates, applied to a notional amount. These agreements may be privately negotiated in the over-the-counter market (OTC interest rate swaps) or may be executed on a registered exchange (centrally cleared interest rate swaps). For centrally cleared interest rate swaps, required initial margins are pledged by the Fund, and the daily change in fair value is accounted for as a variation margin payable or receivable in the Statement of Assets and Liabilities. Over the term of the contract, contractually required payments to be paid and to be received are accrued daily and recorded as unrealized depreciation and appreciation until the payments are made, at which time they are realized.
The Fund entered into OTC total return swap contracts primarily to manage and/or gain exposure to interest rate, equity price and credit risk of an underlying instrument such as a stock, bond, index or basket of securities or indices. A total return swap is an agreement between the Fund and a counterparty to exchange a return linked to an underlying instrument for a floating or fixed rate payment, both based upon a notional amount. Over the term of the contract, contractually required payments to be paid or received are accrued daily and recorded as unrealized appreciation or depreciation until the payments are made, at which time they are recognized as realized gain or loss.
The Fund purchased or wrote exchange traded and/or OTC option contracts primarily to manage and/or gain exposure to equity price risk. An option is a contract entitling the holder to purchase or sell a specific amount of shares or units of an asset or notional amount of a swap (swaption), at a specified price. When an option is purchased or written, an amount equal to the premium paid or received is recorded as an asset or liability, respectively. Upon exercise of an option, the acquisition cost or sales proceeds of the underlying investment is adjusted by any premium received or paid. Upon expiration of an option, any premium received or paid is recorded as a realized gain or loss. Upon closing an option other than through expiration or exercise, the difference between the premium received or paid and the cost to close the position is recorded as a realized gain or loss.
See Note 11 regarding other derivative information.
40 | Semiannual Report | franklintempleton.com |
FRANKLIN ALTERNATIVE STRATEGIES FUNDS
NOTES TO FINANCIAL STATEMENTS
Franklin K2 Long Short Credit Fund (continued)
f. Restricted Cash
At November 30, 2021, 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. 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. 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.
k. 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
franklintempleton.com | Semiannual Report | 41 |
FRANKLIN ALTERNATIVE STRATEGIES FUNDS
NOTES TO FINANCIAL STATEMENTS
Franklin K2 Long Short Credit Fund (continued)
1. Organization and Significant Accounting Policies (continued)
k. Income and Deferred Taxes (continued)
sustained upon examination by the tax authorities based on its technical merits. As of November 30, 2021, 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.
l. 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 separately in 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 the ex-dividend date except for certain dividends from securities where the dividend rate is not available. In such cases, the dividend is recorded as soon as the information is received by the Fund. Distributions to shareholders are recorded on the ex-dividend date. Distributable earnings are determined according to income tax regulations (tax basis) and may differ from earnings recorded in accordance with U.S. GAAP. These differences may be permanent or temporary. Permanent differences are reclassified among capital accounts to reflect their tax character. These reclassifications have no impact on net assets or the results of operations. Temporary differences are not reclassified, as they may reverse in subsequent periods.
Common expenses incurred by the Trust are allocated among the Funds based on the ratio of net assets of each Fund to the combined net assets of the Trust or based on the ratio of number of shareholders of each Fund to the combined number of shareholders of the Trust. Fund specific expenses are charged directly to the Fund that incurred the expense.
Realized and unrealized gains and losses and net investment income, excluding class specific expenses, are allocated
daily to each class of shares based upon the relative proportion of net assets of each class. Differences in per share distributions by class are generally due to differences in class specific expenses.
m. 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.
n. 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.
42 | Semiannual Report | franklintempleton.com |
FRANKLIN ALTERNATIVE STRATEGIES FUNDS
NOTES TO FINANCIAL STATEMENTS
Franklin K2 Long Short Credit Fund (continued)
2. Shares of Beneficial Interest
At November 30, 2021, 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, 2021 | Year Ended May 31, 2021 | |||||||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||||||
Class A Shares: | ||||||||||||||||||||
Shares solda | 319,974 | $ | 3,504,807 | 822,527 | $ | 8,771,228 | ||||||||||||||
Shares issued in reinvestment of distributions | — | — | 28,242 | 300,782 | ||||||||||||||||
Shares redeemed | (604,590 | ) | (6,624,389 | ) | (461,890 | ) | (4,910,081 | ) | ||||||||||||
|
| |||||||||||||||||||
Net increase (decrease) | (284,616 | ) | $ | (3,119,582 | ) | 388,879 | $ | 4,161,929 | ||||||||||||
|
| |||||||||||||||||||
Class C Shares: | ||||||||||||||||||||
Shares sold | 37,204 | $ | 399,699 | 36,427 | $ | 380,419 | ||||||||||||||
Shares issued in reinvestment of distributions | — | — | 4,906 | 51,466 | ||||||||||||||||
Shares redeemeda | (60,738 | ) | (652,239 | ) | (63,557 | ) | (658,152 | ) | ||||||||||||
|
| |||||||||||||||||||
Net increase (decrease) | (23,534 | ) | $ | (252,540 | ) | (22,224 | ) | $ | (226,267 | ) | ||||||||||
|
| |||||||||||||||||||
Class R Shares: | ||||||||||||||||||||
Shares sold | 1,525 | $ | 16,449 | 466 | $ | 5,000 | ||||||||||||||
Shares issued in reinvestment of distributions | — | — | 337 | 3,557 | ||||||||||||||||
Shares redeemed | — | — | (3 | ) | (30 | ) | ||||||||||||||
|
| |||||||||||||||||||
Net increase (decrease) | 1,525 | $ | 16,449 | 800 | $ | 8,527 | ||||||||||||||
|
| |||||||||||||||||||
Class R6 Shares: | ||||||||||||||||||||
Shares sold | — | $ | — | — | $ | — | ||||||||||||||
Shares issued in reinvestment of distributions | — | — | — | — | ||||||||||||||||
Shares redeemed | — | — | — | — | ||||||||||||||||
|
| |||||||||||||||||||
Net increase (decrease) | — | $ | — | — | $ | — | ||||||||||||||
|
| |||||||||||||||||||
Advisor Class Shares: | ||||||||||||||||||||
Shares sold | 2,261,037 | $ | 24,813,761 | 3,735,776 | $ | 39,446,888 | ||||||||||||||
Shares issued in reinvestment of distributions | — | — | 144,113 | 1,534,808 | ||||||||||||||||
Shares redeemed | (1,959,322 | ) | (21,514,851 | ) | (4,254,581 | ) | (44,850,769 | ) | ||||||||||||
|
| |||||||||||||||||||
Net increase (decrease) | 301,715 | $ | 3,298,910 | (374,692 | ) | $ | (3,869,073 | ) | ||||||||||||
|
|
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 Distributors, LLC (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 1.60% per year of the average daily net assets of the Fund.
franklintempleton.com | Semiannual Report | 43 |
FRANKLIN ALTERNATIVE STRATEGIES FUNDS
NOTES TO FINANCIAL STATEMENTS
Franklin K2 Long Short Credit Fund (continued)
3. Transactions with Affiliates (continued)
a. Management Fees (continued)
Under each subadvisory agreement, the below entities provide subadvisory services to the Fund. The subadvisory fees are paid by K2 Advisors and are not an additional expense of the Fund. Each subadvisor is compensated for managing its respective portion of the average daily net assets of the Fund.
Subadvisors |
Apollo Credit Management LLC |
Benefit Street Partners L.L.C.* |
Ellington Global Asset Management, LLC |
Emso Asset Management Limited |
Medalist Partners, LP |
* An affiliate of K2 Advisors.
b. Administrative Fees
Under an agreement with K2 Advisors, FT Services provides administrative services to the Fund. The fee is paid by K2 Advisors based on the Fund’s average daily net assets, and is not an additional expense of the Fund.
c. Distribution Fees
The Board has adopted distribution plans for each share class, with the exception of Class R6 and Advisor Class shares, pursuant to Rule 12b-1 under the 1940 Act. Under the Fund’s Class A reimbursement distribution plan, the Fund reimburses Distributors for costs incurred in connection with the servicing, sale and distribution of the Fund’s shares up to the maximum annual plan rate. Under the Class A reimbursement distribution plan, costs exceeding the maximum for the current plan year cannot be reimbursed in subsequent periods. In addition, under the Fund’s Class C and R compensation distribution plans, the Fund pays Distributors for costs incurred in connection with the servicing, sale and distribution of the Fund’s shares up to the maximum annual plan rate for each class. The plan year, for purposes of monitoring compliance with the maximum annual plan rates, is February 1 through January 31.
The maximum annual plan rates, based on the average daily net assets, for each class, are as follows:
Class A | 0.25% | |||
Class C | 1.00% | |||
Class R | 0.50% |
d. Sales Charges/Underwriting Agreements
Front-end sales charges and contingent deferred sales charges (CDSC) do not represent expenses of the Fund. These charges are deducted from the proceeds of sales of Fund shares prior to investment or from redemption proceeds prior to remittance, as applicable. Distributors has advised the Fund of the following commission transactions related to the sales and redemptions of the Fund’s shares for the period:
Sales charges retained net of commissions paid to unaffiliated brokers/dealers | $ | 1,003 | ||
CDSC retained | $ | 81 |
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
Franklin K2 Long Short Credit Fund (continued)
For the period ended November 30, 2021, the Fund paid transfer agent fees of $55,743, of which $22,243 was retained by Investor Services.
f. Waiver and Expense Reimbursements
K2 Advisors has contractually agreed in advance to waive or limit its fees and to assume as their own expense certain expenses otherwise payable by the Fund so that the operating expenses (excluding interest expense, distribution fees, acquired fund fees and expenses, expenses related to securities sold short, and certain non-routine expenses or costs, including those relating to litigation, indemnification, reorganizations and liquidations) for each class of the Fund do not exceed 1.65% based on the average net assets of each class until September 30, 2022. Total expenses waived or paid are not subject to recapture subsequent to the Fund’s fiscal year end.
Investor Services has contractually agreed in advance to waive or limit its fees so that the Class R6 transfer agent fees do not exceed 0.03% based on the average net assets of the class until September 30, 2022.
g. Other Affiliated Transactions
At November 30, 2021, Franklin Resources, Inc. owned 7.10% 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, 2021, the custodian fees were reduced as noted in the Statement of Operations.
5. Income Taxes
At November 30, 2021, the cost of investments and net unrealized appreciation (depreciation) for income tax purposes were as follows:
Cost of investments | $ | 97,917,599 | ||
|
| |||
Unrealized appreciation | $ | 2,828,717 | ||
Unrealized depreciation | (2,327,949 | ) | ||
|
| |||
Net unrealized appreciation (depreciation) | $ | 500,768 | ||
|
|
Differences between income and/or capital gains as determined on a book basis and a tax basis are primarily due to differing treatments of foreign currency transactions and wash sales.
6. Investment Transactions
Purchases and sales of investments and securities sold short (excluding short term securities) for the period ended November 30, 2021, aggregated $69,314,210 and $68,329,641, respectively.
7. Credit Risk and Defaulted Securities
At November 30, 2021, the Fund had 25.4% of its portfolio invested in high yield, senior secured floating rate loans, or other securities rated below investment grade as determined by Nationally Recognized Statistical Credit Ratings Organizations and/or internally, by investment management and unrated securities. These securities may be more sensitive to economic conditions causing greater price volatility and are potentially subject to a greater risk of loss due to default than higher rated securities.
The Fund may purchase the pre-default or defaulted debt of distressed companies. Distressed companies are financially troubled and could be or are already involved in financial restructuring or bankruptcy. Risks associated with purchasing these
franklintempleton.com | Semiannual Report | 45 |
FRANKLIN ALTERNATIVE STRATEGIES FUNDS
NOTES TO FINANCIAL STATEMENTS
Franklin K2 Long Short Credit Fund (continued)
7. Credit Risk and Defaulted Securities (continued)
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, 2021, the aggregate long value of distressed company securities for which interest recognition has been discontinued was $1,950,618, representing 1.8% of the Fund’s net assets. For information as to specific securities, see the accompanying Statement of Investments.
8. Novel Coronavirus Pandemic
The global outbreak of the novel coronavirus disease, known as COVID-19, has caused adverse effects on many companies, sectors, nations, regions and the markets in general, and may continue for an unpredictable duration. The effects of this pandemic may materially impact the value and performance of the Fund, its ability to buy and sell fund investments at appropriate valuations and its ability to achieve its investment objectives.
9. 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, 2021, investments in restricted securities, excluding securities exempt from registration under the 1933 Act, were as follows:
Shares/ Principal Amount | Issuer | Acquisition Date | Cost | Value | ||||||||||||
923 | Acosta Inc. | 12/31/19 | $ | 8,144 | $ | 7,476 | ||||||||||
925 | Acosta Inc., cvt. pfd. | 12/31/19-6/30/21 | 50,262 | 46,250 | ||||||||||||
35,221 | Riverbed Technology Inc., senior note, 6.00%, 1/13/22 | 10/13/21 | 35,055 | 34,869 | ||||||||||||
|
| |||||||||||||||
Total Restricted Securities (Value is 0.1% of Net Assets) | $ | 93,461 | $ | 88,595 | ||||||||||||
|
|
10. 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 the Statement of Operations. Funded portions of credit agreements are presented in the Statement of Investments.
At November 30, 2021, unfunded commitments were as follows:
Borrower | Unfunded Commitment | |||
Intelsat Jackson Holdings SA, Term Loan DIP | $ | 140,000 | ||
Upfield Group BV, Term Loan RC | 214,532 | |||
|
| |||
$ | 354,532 | |||
|
|
46 | Semiannual Report | franklintempleton.com |
FRANKLIN ALTERNATIVE STRATEGIES FUNDS
NOTES TO FINANCIAL STATEMENTS
Franklin K2 Long Short Credit Fund (continued)
11. Other Derivative Information
At November 30, 2021, the investments in derivative contracts are reflected in the Statement of Assets and Liabilities as follows:
Asset Derivatives | Liability Derivatives | |||||||||||
Derivative Contracts Not Accounted for as Hedging Instruments | Statement of Assets and Liabilities Location | Fair Value | Statement of Assets and Liabilities Location | Fair Value | ||||||||
Interest rate contracts | Variation margin on centrally cleared swap contracts | $ | 14,703 | a | Variation margin on centrally cleared swap contracts | $ | 139,539 | a | ||||
Unrealized appreciation on OTC swap contracts | 11,203 | Unrealized depreciation on OTC swap contracts | 10,012 | |||||||||
Variation margin on futures contracts | 27,968 | a | ||||||||||
Foreign exchange contracts | Unrealized appreciation on OTC forward exchange contracts | 203,715 | Unrealized depreciation on OTC forward exchange contracts | 94,696 | ||||||||
Credit contracts | Variation margin on centrally cleared swap contracts | 77,613 | a | Variation margin on centrally cleared swap contracts | 114,231 | a | ||||||
OTC swap contracts (upfront payments) | 179,089 | OTC swap contracts (upfront receipts) | 81,909 | |||||||||
Unrealized appreciation on OTC swap contracts | 24,701 | Unrealized depreciation on OTC swap contracts | 121,603 | |||||||||
Equity contracts | Investments in securities, at value | 27,502 | b | Options written, at value | 867 | |||||||
Unrealized appreciation on OTC swap contracts | 31,712 | Unrealized depreciation on OTC swap contracts | 17,908 | |||||||||
Variation margin on futures contracts | 32,786 | a | Variation margin on futures contracts | 12,471 | a | |||||||
|
|
|
| |||||||||
Totals | $ | 603,024 | $ | 621,204 | ||||||||
|
|
|
|
aThis amount reflects the cumulative appreciation (depreciation) of futures contracts and centrally cleared swap contracts as reported in the Statement of Investments. Only the variation margin receivable/payable at period end is separately reported within the Statement of Assets and Liabilities. Prior variation margin movements were recorded to cash upon receipt or payment.
bPurchased option contracts are included in investments in securities, at value in the Statement of Assets and Liabilities.
For the period ended November 30, 2021, 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 | |||||||||||
Interest rate contracts | Swap contracts | $ | 10,087 | Swap contracts | $ | 67,545 | ||||||
Futures contracts | (56,260 | ) | Futures contracts | (27,234 | ) | |||||||
Foreign exchange contracts | Forward exchange contracts | (48,021 | ) | Forward exchange contracts | 311,948 | |||||||
Credit contracts | Swap contracts | (421,977 | ) | Swap contracts | 351,830 | |||||||
Equity contracts | Investments | (70,023 | )a | Investments | (23,054 | )a | ||||||
Written options | 16,993 | Written options | 1,573 | |||||||||
Futures contracts | (143,852 | ) | Futures contracts | 47,254 | ||||||||
Swap contracts | 122,341 | Swap contracts | 24,364 | |||||||||
|
|
|
| |||||||||
Totals | $ | (590,712 | ) | $ | 754,226 | |||||||
|
|
|
|
aPurchased option contracts are included in net realized gain (loss) from investments and net change in unrealized appreciation (depreciation) on investments in the Statement of Operations.
franklintempleton.com | Semiannual Report | 47 |
FRANKLIN ALTERNATIVE STRATEGIES FUNDS
NOTES TO FINANCIAL STATEMENTS
Franklin K2 Long Short Credit Fund (continued)
11. Other Derivative Information (continued)
For the period ended November 30, 2021, the average month end notional amount of options, futures contracts and swap contracts represented 36,500 shares, $3,082,563 and $21,184,096, respectively. The average month end contract value of forward exchange contracts was $9,958,035.
At November 30, 2021, 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 | $ | 203,715 | $ | 94,696 | ||||
Options Purchased | 3,240 | — | ||||||
Swap Contracts | 246,705 | 231,432 | ||||||
|
| |||||||
Total | $ | 453,660 | $ | 326,128 | ||||
|
|
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, 2021, 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 Received | Net Amount (Not less than zero) | ||||||||||||||||
Counterparty | ||||||||||||||||||||
BNPP | $ | 2,656 | $ | (310 | ) | $ | — | $ | — | $ | 2,346 | |||||||||
BOFA | 6,171 | (6,171 | ) | — | — | — | ||||||||||||||
BZWS | 101,442 | (75,897 | ) | — | — | 25,545 | ||||||||||||||
CITI | 26,966 | (25,077 | ) | — | — | 1,889 | ||||||||||||||
DBAB | 7,183 | — | — | — | 7,183 | |||||||||||||||
FBCO | 101 | (101 | ) | — | — | — | ||||||||||||||
GSCO | 44,530 | (40,689 | ) | — | — | 3,841 | ||||||||||||||
JPHQ | 133,262 | (45,117 | ) | — | (70,000 | ) | 18,145 | |||||||||||||
JPHQa | 109,039 | — | — | — | 109,039 | |||||||||||||||
MSCS | 22,310 | (22,310 | ) | — | — | — | ||||||||||||||
|
| |||||||||||||||||||
Total | $ | 453,660 | $ | (215,672 | ) | $ | — | $ | (70,000 | ) | $ | 167,988 | ||||||||
|
|
48 | Semiannual Report | franklintempleton.com |
FRANKLIN ALTERNATIVE STRATEGIES FUNDS
NOTES TO FINANCIAL STATEMENTS
Franklin K2 Long Short Credit Fund (continued)
At November 30, 2021, 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 Pledged | Cash Collateral Pledgedb | Net Amount (Not less than zero) | ||||||||||||||||
Counterparty | ||||||||||||||||||||
BNPP | $ | 310 | $ | (310 | ) | $ | — | $ | — | $ | — | |||||||||
BOFA | 22,023 | (6,171 | ) | — | (15,852 | ) | — | |||||||||||||
BZWS | 75,897 | (75,897 | ) | — | — | — | ||||||||||||||
CITI | 25,077 | (25,077 | ) | — | — | — | ||||||||||||||
DBAB | — | — | — | — | — | |||||||||||||||
FBCO | 328 | (101 | ) | — | (227 | ) | — | |||||||||||||
GSCO | 40,689 | (40,689 | ) | — | — | — | ||||||||||||||
JPHQ | 45,117 | (45,117 | ) | — | — | — | ||||||||||||||
JPHQa | 87,315 | — | — | — | 87,315 | |||||||||||||||
MSCS | 29,372 | (22,310 | ) | — | (7,062 | ) | — | |||||||||||||
|
| |||||||||||||||||||
Total | $ | 326,128 | $ | (215,672 | ) | $ | — | $ | (23,141 | ) | $ | 87,315 | ||||||||
|
|
aRepresents derivatives not subject to an ISDA master agreement.
bIn some instances, the collateral amounts disclosed in the table above were adjusted due to the requirement to limit the collateral amounts to avoid the effect of over collateralization. Actual collateral received and/or pledged may be more than the amounts disclosed herein.
See Note 1(e) regarding derivative financial instruments.
See Abbreviations on page 51.
12. 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 $2.675 billion (Global Credit Facility) which matures on February 4, 2022. 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, 2021, the Fund did not use the Global Credit Facility.
franklintempleton.com | Semiannual Report | 49 |
FRANKLIN ALTERNATIVE STRATEGIES FUNDS
NOTES TO FINANCIAL STATEMENTS
Franklin K2 Long Short Credit Fund (continued)
13. 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, 2021, 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 | $ | 2,570,046 | $ | 75,310 | $ | 73,855 | $ | 2,719,211 | ||||||||
Convertible Bonds | — | 1,888,320 | — | 1,888,320 | ||||||||||||
Corporate Bonds and Notes | — | 27,117,975 | — | 27,117,975 | ||||||||||||
Senior Floating Rate Interests | — | 2,233,871 | — | 2,233,871 | ||||||||||||
Senior Floating Rate Interests in Reorganization | — | 70,793 | — | 70,793 | ||||||||||||
Credit-Linked Notes | — | 992,479 | — | 992,479 | ||||||||||||
Foreign Government and Agency Securities | — | 6,025,213 | — | 6,025,213 | ||||||||||||
U.S. Government and Agency Securities | — | 535,937 | — | 535,937 | ||||||||||||
Asset-Backed Securities and Commercial Mortgage-Backed Securities | — | 37,184,788 | — | 37,184,788 | ||||||||||||
Municipal Bonds in Reorganization | — | 1,879,825 | — | 1,879,825 | ||||||||||||
Options Purchased | 27,502 | — | — | 27,502 | ||||||||||||
Short Term Investments | 17,850,091 | 4,402,397 | — | 22,252,488 | ||||||||||||
|
| |||||||||||||||
Total Investments in Securities | $ | 20,447,639 | $ | 82,406,908 | c | $ | 73,855 | $ | 102,928,402 | |||||||
|
| |||||||||||||||
Other Financial Instruments: | ||||||||||||||||
Futures Contracts | $ | 32,786 | $ | — | $ | — | $ | 32,786 | ||||||||
Forward Exchange Contracts | — | 203,715 | — | 203,715 | ||||||||||||
Swap Contracts | — | 159,932 | — | 159,932 | ||||||||||||
|
| |||||||||||||||
Total Other Financial Instruments | $ | 32,786 | $ | 363,647 | $ | — | $ | 396,433 | ||||||||
|
| |||||||||||||||
Liabilities: | ||||||||||||||||
Other Financial Instruments: | ||||||||||||||||
Options Written | $ | 867 | $ | — | $ | — | $ | 867 | ||||||||
Securities Sold Shorta | 164,407 | 4,061,537 | — | 4,225,944 | ||||||||||||
Futures Contracts | 40,439 | — | — | 40,439 | ||||||||||||
Forward Exchange Contracts | — | 94,696 | — | 94,696 | ||||||||||||
Swap Contracts | — | 403,293 | — | 403,293 | ||||||||||||
Unfunded Loan Commitments | — | 4,403 | — | 4,403 | ||||||||||||
|
| |||||||||||||||
Total Other Financial Instruments | $ | 205,713 | $ | 4,563,929 | $ | — | $ | 4,769,642 | ||||||||
|
|
aFor detailed categories, see the accompanying Statement of Investments.
bIncludes common, preferred and convertible preferred stocks as well as other equity interests.
cIncludes foreign securities valued at $75,310, which were categorized as Level 2 as a result of the application of market level fair value procedures. See the Financial Instrument Valuation note for more information.
A reconciliation in which Level 3 inputs are used in determining fair value is presented when there are significant Level 3 assets and/or liabilities at the beginning and/or end of the period.
50 | Semiannual Report | franklintempleton.com |
FRANKLIN ALTERNATIVE STRATEGIES FUNDS
NOTES TO FINANCIAL STATEMENTS
Franklin K2 Long Short Credit Fund (continued)
14. New Accounting Pronouncements
In March 2020, the Financial Accounting Standards Board issued Accounting Standards Update (ASU) No. 2020-04, Reference Rate Reform (Topic 848) – Facilitation of the Effects of Reference Rate Reform on Financial Reporting. In January 2021, the FASB issued ASU No. 2021-01, with further amendments to Topic 848. The amendments in the ASUs provide optional temporary accounting recognition and financial reporting relief from the effect of certain types of contract modifications due to the planned discontinuation of the LIBOR and other interbank-offered based reference rates as of the end of 2021 for certain LIBOR settings and 2023 for the remainder. The ASUs are effective for certain reference rate-related contract modifications that occur during the period March 12, 2020 through December 31, 2022. Management has reviewed the requirements and believes the adoption of these ASUs will not have a material impact on the financial statements.
15. 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.
Counterparty | Currency | Selected Portfolio | ||||||||
BNPP | BNP Paribas | CHF | Swiss Franc | ARM | Adjustable Rate Mortgage | |||||
BOFA | Bank of America Corp. | EGP | Egyptian Pound | CLO | Collateralized Loan Obligation | |||||
BZWS | Barclays Bank PLC | EUR | Euro | DIP | Debtor-In-Possession | |||||
CITI | Citigroup, Inc. | GBP | British Pound | ETF | Exchange Traded Fund | |||||
DBAB | Deutsche Bank AG | JPY | Japanese Yen | FEDEF | Federal Funds Effective Rate | |||||
FBCO | Credit Suisse Group AG | PLN | Polish Zloty | FHLMC | Federal Home Loan Mortgage Corp. | |||||
GSCO | The Goldman Sachs Group, Inc. | RUB | Russian Ruble | FNMA | Federal National Mortgage Association | |||||
JPHQ | JP Morgan Chase & Co. | SGD | Singapore Dollar | FRN | Floating Rate Note | |||||
MSCS | Morgan Stanley Capital Services LLC | USD | United States Dollar | LIBOR | London InterBank Offered Rate | |||||
ZAR | South African Rand | PIK | Payment In-Kind | |||||||
RC | Revolving Loan Commitment | |||||||||
REIT | Real Estate Investment Trust | |||||||||
Index | SFR | Single Family Revenue | ||||||||
CDX.NA.HY | CDX North America High Yield Index | SOFR | Secured Overnight Financing Rate | |||||||
SORA | Singapore Overnight Rate Average | |||||||||
SPAC | Special Purpose Acquisition Company | |||||||||
SPDR | Standard & Poor’s Depositary Receipt | |||||||||
WIBOR | Warsaw Interbank Offered Rate | |||||||||
franklintempleton.com | Semiannual Report | 51 |
FRANKLIN ALTERNATIVE STRATEGIES FUNDS
Proxy Voting Policies and Procedures
The Fund’s investment manager has established Proxy Voting Policies and Procedures (Policies) that the Fund uses to determine how to vote proxies relating to portfolio securities. Shareholders may view the Fund’s complete Policies online at franklintempleton.com. Alternatively, shareholders may request copies of the Policies free of charge by calling the Proxy Group collect at (954) 527-7678 or by sending a written request to: Franklin Templeton Companies, LLC, 300 S.E. 2nd Street, Fort Lauderdale, FL 33301, Attention: Proxy Group. Copies of the Fund’s proxy voting records are also made available online at franklintempleton.com and posted on the U.S. Securities and Exchange Commission’s website at sec.gov and reflect the most recent 12-month period ended June 30.
Quarterly Statement of Investments
The Trust, on behalf of the Fund, files a complete statement of investments with the U.S. Securities and Exchange Commission for the first and third quarters for each fiscal year as an exhibit to its report on Form N-PORT. Shareholders may view the filed Form N-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.
Householding of Reports and Prospectuses
You will receive, or receive notice of the availability of, the Fund’s financial reports every six months. In addition, you will receive an annual updated summary prospectus (detail prospectus available upon request). To reduce Fund expenses, we try to identify related shareholders in a household and send only one copy of the financial reports (to the extent received by mail) and summary prospectus. This process, called “householding,” will continue indefinitely unless you instruct us otherwise. If you prefer not to have these documents householded, please call us at (800) 632-2301. At any time you may view current prospectuses/summary prospectuses and financial reports on our website. If you choose, you may receive these documents through electronic delivery.
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 Distributors, LLC (800) DIAL BEN®/342-5236 franklintempleton.com | (800) 632-2301 | ||||
© 2022 Franklin Templeton Investments. All rights reserved. | 948 S 01/22 |
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 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. |
Not Applicable.
Item 5. | Audit Committee of Listed Registrants. |
Not Applicable.
Item 6. | Investments. |
Not applicable.
Item 7. | Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies. |
Not applicable.
Item 8. | Portfolio Managers of Closed-End Management Investment Companies. |
Not applicable.
Item 9. | Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers. |
Not applicable.
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) | The registrant’s principal executive and principal financial officers, or persons performing similar functions, have concluded that the registrant’s disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940, as amended (the “1940 Act”) (17 CFR 270.30a-3(c))) are effective, as of a date within 90 days of the filing date of the report that includes the disclosure required by this paragraph, based on their evaluation of these controls and procedures required by Rule 30a-3(b) under the 1940 Act (17 CFR 270.30a-3(b)) and Rules 13a-15(b) or 15d-15(b) under the Securities Exchange Act of 1934, as amended (17 CFR 240.13a-15(b) or 240.15d-15(b)). |
(b) | There were no changes in the registrant’s internal control over financial reporting (as defined in Rule 30a-3(d) under the 1940 Act (17 CFR 270.30a-3(d))) that occurred during the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting. |
Item 12. Disclosure | of Securities Lending Activities for Closed-End Management Investment Companies. |
Not applicable.
Item 13. | Exhibits. |
(a)(1) Code of Ethics
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.
(Registrant) Franklin Alternative Strategies Funds |
By (Signature and Title) | /s/ Matthew T. Hinkle | |||
Matthew T. Hinkle, Chief Executive Officer – Finance and Administration | ||||
Date January 26, 2022 |
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 (Signature and Title) | /s/ Matthew T. Hinkle | |||
Matthew T. Hinkle, Chief Executive Officer – Finance and Administration | ||||
Date January 26, 2022 | ||||
By (Signature and Title) | /s/ Christopher Kings | |||
Christopher Kings, Treasurer, Chief Financial Officer and Chief Accounting Officer | ||||
Date January 26, 2022 |