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Semi-Annual Report(Unaudited)Legg MasonAlternative Funds ICAVAn Irish collective asset-management vehicle with variable capital havingregistration number C139549 and established as an umbrella fund withsegregated liability between sub-fundsFor the six months ended 31 December 2017

Legg Mason Alternative Funds ICAV Semi-Annual Report 31 December 2017

Table of ContentsGeneral Information 2

Investment Manager’s Report 3

Portfolio of Investments 4

Statement of Financial Position 12

Statement of Comprehensive Income 13

Statement of Changes in Net Assets Attributable to Holders of Redeemable Participating Shares 14

Notes to Financial Statements 16

Statement of Major Portfolio Changes 22

General Data Protection Regulation 23

Financial Information – Total Expense Ratios (TER) 24

1


General Information

Board of Directors*

Brian Collins (Ireland) (Independent)Fionnuala Doris (Ireland) (Independent)Joseph Keane (Ireland) (Independent)Joseph Carrier (U.S.)Joseph LaRocque (U.S.)Jane Trust (U.S.)

Registered Office of the ICAV

Arthur CoxTen Earlsfort TerraceDublin 2, Ireland

Promoter and Investment Manager

Legg Mason Investments (Europe) Limited201 BishopsgateLondon EC2M 3ABUnited Kingdom

Sub-Investment Manager

EnTrustPermal Ltd.12 St. James’s SquareLondon SW1Y 4LBUnited Kingdom

Independent Auditors

PricewaterhouseCoopersChartered Accountants & Registered AuditorsOne Spencer DockNorth Wall QuayDublin 1, Ireland

Distributors and Shareholder Servicing Agents

Legg Mason Investor Services, LLC100 International DriveBaltimore, Maryland 21202U.S.A.

Legg Mason Investments (Europe) Limited201 BishopsgateLondon EC2M 3ABUnited Kingdom

Legg Mason Asset Management Hong Kong Limited12/F, York House15 Queen’s Road CentralHong Kong

Legg Mason Asset Management Singapore Pte. Limited1 George Street, # 23-02Singapore 049145

EnTrustPermal Ltd.12 St. James’s SquareLondon SW1Y 4LBUnited Kingdom

Administrator

State Street Fund Services (Ireland)Limited78 Sir John Rogerson’s QuayDublin 2, Ireland

Secretary

Bradwell LimitedArthur Cox BuildingEarlsfort TerraceDublin 2, Ireland

Irish Legal Adviser

Arthur CoxTen Earlsfort TerraceDublin 2, Ireland

Depositary

State Street Custodial Services (Ireland)Limited78 Sir John Rogerson’s QuayDublin 2, Ireland

Swiss Representative**

First Independent Fund Services LtdKlausstrasse 33CH-8008 ZurichSwitzerland

Swiss Paying Agent

NPB New Private Bank LtdLimmatquai 1/am BellevueCH-8024 ZurichSwitzerland

* All of the Directors are non-executive Directors.** The Prospectus, the instrument of incorporation, the KIID, the annual and semi-annual reports of the Fund may be obtained free of charge from

the Swiss Representative. In respect of the Shares distributed in and from Switzerland to Qualified Investors, the place of performance and theplace of jurisdiction is at the registered office of the Swiss Representative.

2


Investment Manager’s ReportMarket review for EnTrustPermal Alternative Income Strategy

Global Economic Review

Global economic growth accelerated during the six months ended 31 December2017. In its October 2017 World Economic Outlook Update, the InternationalMonetary Fund (“IMF”) said, “The pickup in growth projected in the April 2017World Economic Outlook is strengthening. The global growth forecast for 2017 and2018 – 3.6 percent and 3.7 percent, respectively – is 0.1 percentage point higher inboth years than in the April [2017] and July [2017] forecasts. Notable pickups ininvestment, trade, and industrial production, coupled with strengthening businessand consumer confidence, are supporting the recovery.” From a regionalperspective, the IMF estimates the US economy will expand 2.2% in 2017,compared to 2.1% in 2016. Eurozone growth in 2017 is projected to be 2.1%,versus 1.8% in 2016, whereas Japan’s economy is expected to expand 1.5% in2017, compared to 1.0% in 2016. Elsewhere, the IMF projects that overall growthin emerging market countries will accelerate to 4.6% in 2017, versus 4.3% in 2016.

Market Review – Fixed Income fixed

Global fixed income markets generated modest gains during the reporting period.In the US, short-term Treasury yields moved sharply higher as the US Federal ReserveBoard raised interest rates in December 2017 and announced that it anticipatedmaking three additional rate hikes in 2018. Longer-term Treasury yields also movedhigher, albeit to a lesser extent, as inflation remained relatively well contained.Longer-term sovereign yields in Europe traded in a fairly narrow range and, overall,only modestly changed over the reporting period. Meanwhile, investment-gradeand lower rated corporate bond prices fluctuated but were positive overall givengenerally solid investor demand. Emerging market debt also performed relativelywell given positive economic data, less concern over a significant change in US tradepolicy and a weakening US dollar. The US dollar’s weakness occurred as theEuropean Central Bank and the Bank of England insinuated that they may pareback their accommodative monetary policies in 2018.

Market Review – Global Equities

Global equities generated strong returns during the reporting period. This wasdriven by a number of factors, including accelerating global growth, corporateprofits that often exceeded expectations and continued accommodative monetarypolicy from a number of central banks. More recently, the passage of a US taxreform bill was viewed as a positive by investors. Demand for equities was alsostrong as they looked to generate incremental returns in the low interest rateenvironment. While the returns for US equities were impressive, gains from non-USdeveloped and emerging market equities were even stronger amid an improvingeconomic outlook and supportive monetary policy.

Yours sincerely,

Legg Mason Investments (Europe) Limited

It should be noted that the value of investments and the income from them may godown as well as up. Investment involves risks, including the possible loss of theamount invested. Past performance is not a reliable indicator of future results.

This information and data in this material has been prepared from sources believedreliable but is not guaranteed in any way by Legg Mason Investments (Europe)Limited nor any Legg Mason, Inc. company or affiliate (together “Legg Mason”). Norepresentation is made that the information is correct as of any time subsequent toits date.

Opinions expressed are subject to change without notice and do not take intoaccount the particular investment objectives, financial situations or needs ofinvestors.

This material is not intended for any person or use that would be contrary to locallaw or regulation. Legg Mason is not responsible and takes no liability for theonward transmission of this material.

Issued and approved by Legg Mason Investments (Europe) Limited, registered office201 Bishopsgate, London, EC2M 3AB. Registered in England and Wales, CompanyNo. 1732037. Authorised and regulated by the UK Financial Conduct Authority.

3


EnTrustPermal Alternative Income Strategy

Portfolio of Investments

FaceValue(000’s)

Value(000’s)

US$

% ofNet

AssetValue

Transferable Securities — 64.79%Bonds — 55.21%Argentina — 1.69% (30 June 2017: 1.47%)

1,225 Argentine Republic Government International Bond 5.625% due 26/01/22 1,292 0.212,775 Capex SA 6.875% due 15/05/24 2,896 0.482,625 Cia Latinoamericana de Infraestructura & Servicios SA 9.500% due 20/07/23 2,796 0.461,450 Mastellone Hermanos SA 12.625% due 03/07/21 1,597 0.26

325 YPF SA 7.000% due 15/12/47 322 0.051,200 YPF SA 8.750% due 04/04/24 1,378 0.23

10,281 1.69

Austria — 0.39% (30 June 2017: 0.57%)

2,370 Erste Group Bank AG 6.375% due 28/03/23^ 2,393 0.39

Belize — 0.11% (30 June 2017: 0.00%)

1,150 Belize Government International Bond 4.938% due 20/02/34 683 0.11

Bermuda — 0.63% (30 June 2017: 0.36%)

1,050 Cosan Ltd 5.950% due 20/09/24 1,078 0.181,000 Digicel Group Ltd 8.250% due 30/09/20 984 0.161,745 Geopark Ltd 6.500% due 21/09/24 1,790 0.29

3,852 0.63

Brazil — 0.07% (30 June 2017: 0.00%)

400 Cemig Geracao e Transmissao SA 9.250% due 05/12/24 431 0.07

Canada — 1.94% (30 June 2017: 1.18%)

4,579 First Quantum Minerals Ltd 7.500% due 01/04/25 4,968 0.821,725 St Marys Cement Inc Canada 5.750% due 28/01/27 1,820 0.302,282 Teck Resources Ltd 5.400% due 01/02/43 2,293 0.381,000 Valeant Pharmaceuticals International Inc 6.125% due 15/04/25 915 0.151,680 Valeant Pharmaceuticals International Inc 9.000% due 15/12/25 1,751 0.29

11,747 1.94

Cayman Islands — 5.87% (30 June 2017: 3.60%)

328 ALM VII R Ltd 5.399% due 15/10/28^ 340 0.061,400 Benefit Street Partners CLO VII Ltd 6.704% due 18/07/27^ 1,396 0.231,500 Braskem Finance Ltd 5.750% due 15/04/21 1,590 0.26

305 Canyon Capital CLO 2014-1 Ltd 4.628% due 30/04/25^ 305 0.051,500 Carlyle Global Market Strategies CLO 2016-1 Ltd 8.963% due 20/04/27^ 1,523 0.251,000 CFIP CLO 2017-1 Ltd 7.596% due 18/01/30^ 996 0.16

525 China Overseas Finance Cayman VI Ltd 5.950% due 08/05/24 596 0.10750 Cole Park CLO Ltd 2015-1 7.463% due 20/10/28^ 750 0.12

1,092 Comunicaciones Celulares SA Via Comcel Trust 6.875% due 06/02/24 1,130 0.191,000 Dewolf Park CLO Ltd 7.454% due 15/10/30^ 1,010 0.17

585 EC Finance Plc 2.375% due 15/11/22 718 0.122,503 Globalworth Real Estate Investments Ltd 2.875% due 20/06/22 3,086 0.513,000 GoldenTree Loan Opportunities VII Ltd 4.667% due 25/04/25^ 3,007 0.492,125 Grupo Aval Ltd 4.750% due 26/09/22 2,154 0.352,175 Lloyds Bank Plc 10.375% due 12/02/24^ 2,907 0.48

600 Madison Park Funding XIV Ltd 4.613% due 20/07/26^ 599 0.10412 Magnetite VIII Ltd 6.309% due 15/04/26^ 411 0.07

3,474 Naviera Armas SA 6.500% due 31/07/23^ 4,417 0.73500 Octagon Investment Partners 24 Ltd 6.031% due 21/05/27^ 495 0.08

2,500 OHA Loan Funding 2012-1 Ltd 5.513% due 23/01/27^ 2,561 0.421,400 TCI-Symphony CLO 2016-1 Ltd 5.159% due 13/10/29^ 1,418 0.233,197 Transocean Phoenix 2 Ltd 7.750% due 15/10/24 3,500 0.58

750 Wellfleet CLO 2015-1 Ltd 7.163% due 20/10/27^ 748 0.12

35,657 5.87

Chile — 0.20% (30 June 2017: 0.14%)

1,225 Empresa Electrica Angamos SA 4.875% due 25/05/29 1,223 0.20

Dominican Republic — 0.31% (30 June 2017: 0.28%)

1,800 Dominican Republic International Bond 5.500% due 27/01/25 1,906 0.31

El Salvator — 0.02% (30 June 2017: 0.02%)

85 El Salvador Government International Bond 8.625% due 28/02/29 99 0.02

France — 1.50% (30 June 2017: 0.91%)

2,693 Picard Groupe SAS 3.000% due 30/11/23^ 3,239 0.532,799 SMCP Group SAS 5.875% due 01/05/23 3,621 0.601,900 Tikehau Capital SCA 3.000% due 27/11/23 2,243 0.37

9,103 1.50

Investments are categorised by country of incorporation.The accompanying notes are an integral part of the Financial Statements

4



Portfolio of Investments – (continued)

FaceValue(000’s)

Value(000’s)

US$

% ofNet

AssetValue

Guatemala — 0.00% (30 June 2017: 0.18%)

Guernsey — 0.74% (30 June 2017: 0.79%)4,322 Pershing Square Holdings Ltd 5.500% due 15/07/22 4,474 0.74

Hungary — 0.32% (30 June 2017: 0.27%)1,730 Hungary Government International Bond 5.375% due 21/02/23 1,925 0.32

India — 0.00% ( 30 June 2017: 0.09%)

Ireland — 0.24% (30 June 2017: 0.33%)1,350 Koks OAO Via Koks Finance DAC 7.500% due 04/05/22 1,430 0.24

Italy — 1.24% (30 June 2017: 1.06%)840 Intesa Sanpaolo SpA 6.250% due 31/12/99^ 1,094 0.18807 Intesa Sanpaolo SpA 7.000% due 29/12/49^ 1,071 0.18

2,088 UniCredit SpA 5.375% due 31/12/99^ 2,509 0.411,799 UniCredit SpA 6.625% due 31/12/99^ 2,342 0.39

389 Wind Tre SpA 2.625% due 20/01/23 457 0.08

7,473 1.24

Jersey — 1.78% (30 June 2017: 2.08%)772 Aston Martin Capital Holdings Ltd 5.750% due 15/04/22 1,095 0.18

2,143 Aston Martin Capital Holdings Ltd 6.500% due 15/04/22 2,250 0.375,164 Mercury Bondco Plc 7.125% due 30/05/21 6,394 1.05

280 Mercury Bondco Plc 8.250% due 30/05/21 349 0.06725 Petropavlovsk 2016 Ltd 8.125% due 14/11/22 711 0.12

10,799 1.78

Luxembourg — 3.55% (30 June 2017: 3.77%)602 Altice Finco SA 4.750% due 15/01/28 688 0.11

3,122 Altice Finco SA 8.125% due 15/01/24 3,262 0.54750 Altice Finco SA 9.000% due 15/06/23 952 0.16

1,194 Altice Luxembourg SA 7.250% due 15/05/22 1,451 0.24596 Boardriders SA 9.500% due 15/12/20 658 0.11

1,600 Cosan Luxembourg SA 7.000% due 20/01/27 1,724 0.281,750 Gazprom OAO Via Gaz Capital SA 4.950% due 23/03/27 1,820 0.30

200 Klabin Finance SA 4.875% due 19/09/27 197 0.034,557 Matterhorn Telecom Holding SA 4.875% due 01/05/23 5,534 0.91

490 Millicom International Cellular SA 5.125% due 15/01/28 490 0.08511 Millicom International Cellular SA 6.000% due 15/03/25 543 0.09854 Picard Bondco SA 5.500% due 30/11/24 1,039 0.17

1,400 Puma International Financing SA 5.125% due 06/10/24 1,428 0.247 Puma International Financing SA 6.750% due 01/02/21 7 0.00

1,350 Raizen Fuels Finance SA 5.300% due 20/01/27 1,413 0.23325 TMK OAO Via TMK Capital SA 6.750% due 03/04/20 342 0.06

21,548 3.55

Mexico — 1.54% (30 June 2017: 1.80%)900 Axtel SAB de CV 6.375% due 14/11/24 927 0.15

1,375 Cemex SAB de CV 5.700% due 11/01/25 1,451 0.241,179 Credito Real SAB de CV SOFOM ER 7.250% due 20/07/23 1,250 0.21

700 Cydsa SAB de CV 6.250% due 04/10/27 706 0.12164 Grupo Famsa SAB de CV 7.250% due 01/06/20 163 0.03

1,375 Grupo KUO SAB de CV 5.750% due 07/07/27 1,424 0.231,875 Mexichem SAB de CV 5.875% due 17/09/44 1,941 0.321,350 TV Azteca SAB de CV 8.250% due 09/08/24 1,434 0.24

9,296 1.54

Netherlands — 2.36% (30 June 2017: 3.11%)1,525 AES Andres BV / Dominican Power Partners / Empresa Generadora de Electricidad It 7.950% due

11/05/26 1,651 0.271,004 ASR Nederland NV 10.000% due 29/08/49^ 1,418 0.23

10,484 Exmar Netherlands BV 8.780% due 07/07/19^ 1,312 0.221,000 IHS Netherlands Holdco BV 9.500% due 27/10/21 1,076 0.18

350 Lukoil International Finance BV 4.563% due 24/04/23 364 0.061,900 Lukoil International Finance BV 4.750% due 02/11/26 1,993 0.331,975 Myriad International Holdings BV 5.500% due 21/07/25 2,151 0.35

175 Petrobras Global Finance BV 5.999% due 27/01/28 175 0.031,425 Petrobras Global Finance BV 7.375% due 17/01/27 1,569 0.26

675 Petrobras Global Finance BV 8.375% due 23/05/21 770 0.13905 Royal Bank of Scotland NV 7.750% due 15/05/23 1,074 0.18675 VTR Finance BV 6.875% due 15/01/24 712 0.12

14,265 2.36

Panama — 0.29% (30 June 2017: 0.19%)1,825 AES El Salvador Trust II 6.750% due 28/03/23 1,739 0.29


5




FaceValue(000’s)

Value(000’s)

US$

% ofNet

AssetValue

Paraguay — 0.00% (30 June 2017: 0.27%)

Spain — 1.04% (30 June 2017: 1.31%)

2,400 Banco de Sabadell SA 6.500% due 31/12/99^ 3,017 0.501,000 Banco Santander SA 5.250% due 31/12/99^ 1,263 0.211,600 Bankia SA 6.000% due 31/12/99^ 2,005 0.33

6,285 1.04

Sweden — 0.00% (30 June 2017: 0.59%)

Turkey — 0.12% (30 June 2017: 0.38%)

675 Turkey Government International Bond 6.250% due 26/09/22 733 0.12

United Kingdom — 0.85% (30 June 2017: 1.29%)

1,000 Liquid Telecommunications Financing Plc 8.500% due 13/07/22 1,053 0.172,668 Mclaren Finance Plc 5.000% due 01/08/22 3,556 0.59

402 Pinewood Finco Plc 3.750% due 01/12/23 548 0.09

5,157 0.85

United States — 28.35% (30 June 2017: 31.45%)

1,500 AIMCO CLO Series 2015-A 9.179% due 15/01/28^ 1,500 0.25967 Alternative Loan Trust 2006-6CB 1.902% due 25/05/36^ 500 0.08

3,689 Ambac Assurance Corp 5.100% due 07/06/20 4,740 0.7824,298 American Home Mortgage Investment Trust 2007-1 2.078% due 25/05/47 4,185 0.69

401 Apidos CLO XVIII 4.613% due 22/07/26^ 404 0.071,464 Ascent Resources Utica Holdings LLC / ARU Finance Corp 10.000% due 01/04/22 1,570 0.264,477 Ashland LLC 6.875% due 15/05/43 4,969 0.823,398 Atrium Hotel Portfolio Trust 5.353% due 15/11/19^ 3,347 0.554,220 Aveta Inc Escrow 7.000% due 01/04/19 – –1,167 Banc of America Funding 2006-7 Trust 1.602% due 25/10/36^ 845 0.141,522 Banc of America Funding 2015-R8 Trust 3.780% due 26/08/35^ 977 0.163,750 Bank of America Corp 2.650% due 01/04/19 3,771 0.621,000 Carlyle Global Market Strategies CLO 2015-2 Ltd 6.674% due 27/04/27^ 998 0.163,401 Carnow Auto Receivables Trust 2017-1 5.750% due 16/10/23 3,396 0.561,372 Carrington Mortgage Loan Trust Series 2005-NC4 2.302% due 25/09/35^ 908 0.15

698 Carrington Mortgage Loan Trust Series 2006-NC2 1.822% due 25/06/36^ 418 0.073,560 CFG Investments 2017-1 Ltd 7.870% due 15/11/26 3,676 0.61

268 Chinos Holdings Inc 7.000% due 31/12/99 107 0.023,750 Citigroup Inc 2.050% due 07/06/19 3,739 0.626,350 CNX Resources Corp 5.875% due 15/04/22 6,485 1.072,710 CNX Resources Corp 8.000% due 01/04/23 2,905 0.483,600 CONSOL Energy Inc 11.000% due 15/11/25 3,780 0.621,988 Continental Resources Inc 4.900% due 01/06/44 1,899 0.311,896 CPS Auto Receivables Trust 2017-C 5.720% due 16/09/24 1,928 0.323,050 CSMC Trust 2017-PFHP 5.968% due 15/12/20^ 3,022 0.501,014 Deephaven Residential Mortgage Trust 2017-1 6.250% due 26/12/46^ 1,014 0.17

695 Deephaven Residential Mortgage Trust 2017-3 6.250% due 25/10/47^ 694 0.114,715 Denbury Resources Inc 4.625% due 15/07/23 3,018 0.50

240 Denbury Resources Inc 5.500% due 01/05/22 164 0.032,075 Digicel Group Ltd 7.125% due 01/04/22 1,921 0.322,000 Elevation CLO 2016-5 Ltd 8.309% due 15/07/28^ 2,023 0.331,440 Endeavor Energy Resources LP / EER Finance Inc 5.500% due 30/01/26 1,465 0.241,920 Endeavor Energy Resources LP / EER Finance Inc 5.750% due 30/01/28 1,972 0.323,081 Era Group Inc 7.750% due 15/12/22 2,989 0.492,000 Extraction Oil & Gas Inc 7.375% due 15/05/24 2,135 0.351,708 First Franklin Mortgage Loan Trust 2004-FF7 3.352% due 25/09/34^ 1,665 0.27

350 First Horizon Alternative Mortgage Securities Trust 2005-FA7 2.082% due 25/10/35^ 267 0.04317 First Horizon Alternative Mortgage Securities Trust 2006-FA8 1.922% due 25/02/37^ 189 0.03480 Fresh Market Inc 9.750% due 01/05/23 298 0.05

1,600 Frontier Communications Corp 11.000% due 15/09/25 1,176 0.192,750 GLS Auto Receivables Trust 2015-1 9.790% due 15/10/25 2,834 0.47

350 HarborView Mortgage Loan Trust 2005-15 1.871% due 20/10/45^ 272 0.045,414 HarborView Mortgage Loan Trust 2007-7 2.552% due 25/10/37^ 4,340 0.714,516 Home Equity Asset Trust 2006-3 1.952% due 25/07/36^ 3,457 0.575,012 Hyatt Hotel Portfolio Trust 2017-HYT2 5.625% due 09/08/32^ 5,021 0.83

250 ING Investment Management CLO Ltd 5.613% due 14/06/22^ 249 0.04353 J Crew Brand LLC / J Crew Brand Corp 13.000% due 15/09/21 413 0.07100 JP Morgan Chase Commercial Mortgage Securities Trust 2007-C1 5.946% due 15/02/51^ 100 0.02

2,694 JPMDB Commercial Mortgage Securities Trust 2017-C7 3.000% due 15/10/50 2,146 0.354,800 JPMorgan Chase & Co 4.625% due 31/12/99^ 4,692 0.771,090 KOC Holding AS 3.500% due 24/04/20 1,091 0.185,764 L Brands Inc 7.600% due 15/07/37 5,894 0.97

657 LB Commercial Mortgage Trust 2007-C3 1.827% due 15/07/44^ 645 0.111,050 Lehman Mortgage Trust 2006-4 1.952% due 25/08/36^ 336 0.06


6




FaceValue(000’s)

Value(000’s)

US$

% ofNet

AssetValue

United States — 28.35% (30 June 2017: 31.45%) (continued)

500 Magnetite XVIII Ltd 5.416% due 15/11/28^ 507 0.081,476 Morgan Stanley Capital I Trust 2007-HQ11 5.508% due 12/02/44^ 1,474 0.24

500 MP CLO VIII Ltd 7.278% due 28/10/27^ 500 0.082,027 Newcastle Mortgage Securities Trust 2006-1 2.032% due 25/03/36^ 1,634 0.271,200 Parsley Energy LLC / Parsley Finance Corp 5.375% due 15/01/25 1,212 0.203,360 Parsley Energy LLC / Parsley Finance Corp 5.625% due 15/10/27 3,436 0.574,850 Peabody Energy Corp 10.000% due 15/03/22 – –

935 Peabody Energy Corp 6.000% due 31/03/22 970 0.16765 Peabody Energy Corp 6.375% due 31/03/25 796 0.13480 PetSmart Inc 7.125% due 15/03/23 284 0.05

1,300 Prosper Marketplace Issuance Trust Series 2017-1 5.210% due 15/11/23 1,309 0.22441 PRPM 2017-2 LLC 5.000% due 25/09/22 424 0.07

2,897 RALI Series 2006-QS18 Trust 2.002% due 25/12/36^ 2,055 0.342,356 RAMP Series 2005-EFC1 Trust 2.262% due 25/05/35^ 2,173 0.362,910 RAMP Series 2005-EFC6 Trust 2.437% due 25/11/35^ 2,613 0.431,627 RAMP Series 2006-EFC1 Trust 1.982% due 25/02/36^ 1,480 0.241,177 RASC Series 2002-KS8 Trust 6.190% due 25/12/32 1,185 0.205,923 Southwestern Energy Co 7.750% due 01/10/27 6,318 0.962,050 Stillwater Mining Co 7.125% due 27/06/25 2,107 0.35

888 Structured Asset Securities Corp Mortgage Loan Trust 2007-BC1 1.782% due 25/02/37^ 609 0.1060 TerraForm Power Operating LLC 4.250% due 31/01/23 60 0.0160 TerraForm Power Operating LLC 5.000% due 31/01/28 59 0.01

1,000 THL Credit Wind River 2016-1 CLO Ltd 8.859% due 15/07/28^ 1,020 0.172,000 United States Treasury Bill 0.000% due 04/01/18 2,000 0.33

10,000 United States Treasury Bill 0.000% due 15/02/18 9,985 1.6412,000 United States Treasury Bill 0.000% due 24/05/18 11,932 1.96

2,213 Upstart Securitization Trust 2017-1 6.350% due 20/06/24 2,251 0.371,635 Upstart Securitization Trust 2017-2 5.590% due 20/03/25 1,637 0.27

172,579 28.35

Virgin Islands — 0.06% (30 June 2017: 0.08%)

350 Gold Fields Orogen Holdings BVI Ltd 4.875% due 10/07/20 357 0.06

Total Bonds (Cost: US$325,162) (30 June 2017: 57.57%) 335,435 55.21

Common Stock — 7.14%Germany — 0.03% (30 June 2017: 0.04%)

5 McKesson Europe AG 158 0.03

Netherlands — 0.79% (30 June 2017: 1.48%)

41 NXP Semiconductors NV 4,798 0.7618 Playa Hotels & Resorts NV 190 0.03

4,988 0.79

Switzerland — 0.00% (30 June 2017: 0.02%)

United States — 6.30% (30 June 2017: 3.87%)

20 Aetna Inc 3,624 0.60339 Akorn Inc 10,928 1.81

7 Ambac Financial Group Inc 105 0.0232 Ares Capital Corp 509 0.08

3 Ares Commercial Real Estate Corp 39 0.0193 Avaya Holdings Corp 1,630 0.27

9 Blackstone Mortgage Trust Inc 294 0.054 CenturyLink Inc 61 0.01

16 Chimera Investment Corp 288 0.0546 Granite Point Mortgage Trust Inc 823 0.14

6 Invesco Mortgage Capital Inc 107 0.0239 Monsanto Co 4,524 0.7458 Peabody Energy Corp 2,286 0.3814 Santander Consumer USA Holdings Inc 260 0.0442 Scripps Networks Interactive Inc 3,609 0.59

1 Straight Path Communications Inc 100 0.0295 Time Warner Inc 8,661 1.4314 Two Harbors Investment Corp 230 0.04

38,078 6.30

Virgin Islands — 0.02% (30 June 2017: 0.00%)

10 J2 Acquisition Ltd 100 0.02

Total Common Stock (Cost: US$44.562) (30 June 2017: 5.41%) 43,324 7.14


7




FaceValue(000’s)

Value(000’s)

US$

% ofNet

AssetValue

Preffered Stock — 0.00% (30 June 2017: 0.15%)Warrant — 0.00%

10 J2 Acquisition Ltd 6 –

Total Warrant (Cost: US$-) (30 June 2017: 0.00%) 6 –

Exchange Traded Fund — 2.44%United States — 2.44% (30 June 2017: 1.88%)

108 Altaba Inc 7,564 1.25210 BlackRock Debt Strategies Fund Inc 2,452 0.40200 PowerShares Fundamental High Yield Corporate Bond Portfolio 3,790 0.62

20 Xtrackers USD High Yield Corporate Bond ETF 1,009 0.17

Total Exchange Traded Fund (Cost: US$12,221) (30 June 2017: 1.88%) 14,815 2.44

Total Investments (Cost: US$381,945) (30 June 2017: 65.01%) 393,580 64.79

Other Assets in Excess of Liabilities (30 June 2017: 34.99%) 213,936 35.21

Total Net Assets 607,516 100.00

* Amounts shown as “–” are less than US$500 or 500 shares.^ Variable rate security. The interest rate shown reflects the rate in effect at 31 December 2017.

Analysis of Total AssetsClassifications

% ofTotal

Assets

Transferable securities admitted to an official stock exchange listing 12.61Transferable securities traded on a regulated market 35.90Other transferable securities of the type referred to in Regulations 68 (1)(a), (b) and (c) 12.65Exchange Traded Fund 2.39OTC financial derivative instruments 3.05Exchange traded financial derivative instruments 0.14Other Assets 33.26

100.00

Options Contracts (30 June 2017: 0.03%) Counterparty

Value(‘000’s)

US$

% ofNet

AssetValue

Purchased Options – 0.01% (30 June 2017: 0.04%)NXP Semiconductors NV January 2018 Call 100 Morgan Stanley 26 –NXP Semiconductors NV January 2018 Call 110 Morgan Stanley 2 –Time Warner Inc April 2018 Call 90 Morgan Stanley 41 0.01

Total Purchased Options (Cost: $74) 69 0.01

Written Options – 0.00% (30 June 2017: (0.01%)NXP Semiconductors NV April 2018 Call 125 Morgan Stanley (2) –Time Warner Inc January 2018 Put 80 Morgan Stanley (2) –Time Warner Inc January 2018 Call 92.5 Morgan Stanley – –

Total Written Options (Cost: $(59)) (4) –

Total Options (Cost: $15) 65 0.01

Open Futures Contracts — 0.06% (30 June 2017: (0.20)%)

Schedule of Futures Contracts CounterpartyNominal

Value

NotionalValue(000’s)

UnrealisedAppreciation/(Depreciation)of Contracts

(000’s)

% ofNet

AssetValue

90 Day Euro Future June 2019 Barclays (227) (55,467) 59 0.0190 Day Euro Future December 2019 Barclays (210) (51,277) 54 0.01US 5 Year Note CBT March 2018 Barclays (195) (22,652) 16 –90 Day Euro Future June 2020 Barclays (179) (43,698) 40 0.01Bank Accepted Future December 2018 Barclays (108) (26,407) 47 0.01US 2 Year Note CBT March 2018 Barclays (98) (20,983) 46 0.01US 10 Year Note CBT March 2018 Barclays (78) (9,676) 59 0.01Australia 3 Year Bond Future March 2018 Barclays (67) (7,443) (7) –US 10 Year Note CBT March 2018 Barclays (47) (5,830) (21) –Bank Accepted Future September 2018 Barclays (32) (7,833) 6 –90 Day Euro Future June 2021 Barclays (26) (6,344) (4) –Us Long Bond CBT March 2018 Barclays (26) (3,978) 19 –3 Month Euro Euribor June 2020 Barclays (22) (5,484) 3 –Canada 10 Year Bond Future March 2018 Barclays (16) (2,156) 1 –


8




Open Futures Contracts — 0.06% (30 June 2017: (0.20)%) – (continued)

Schedule of Futures Contracts CounterpartyNominal

Value

NotionalValue(000’s)


(000’s)

% ofNet

AssetValue

MSCI Taiwan Index January 2018 Credit Suisse (3) (118) (1) –90 Day Sterling Future June 2019 Barclays (1) (124) – –Hscei Future January 2018 Credit Suisse 2 1,173 1 –FTSE China A50 January 2018 Credit Suisse 3 40 (1) –Australia 10 Year Bond Future March 2018 Barclays 6 775 (4) –Euro Buxl 30 Year Bond March 2018 Barclays 6 983 (26) –DAX Index Future March 2018 Credit Suisse 8 2,582 (58) (0.01)Nikkei 225 CME March 2018 Credit Suisse 11 1,251 5 –US Ultra Bond CBT March 2018 Barclays 12 2,012 2 –Omxs30 Index Futures January 2018 Credit Suisse 13 2,047 (7) –Topix Index Futures March 2018 Credit Suisse 15 272,550 37 0.02S&P/TSX 60 Index Futures March 2018 Credit Suisse 18 3,447 21 –Euro-BTP Future March 2018 Barclays 21 2,859 (82) (0.01)Spi 200 Index Futures March 2018 Credit Suisse 21 3,161 8 –Euro-Bobl Future March 2018 Barclays 22 2,895 (22) –Hang Seng Index Future January 2018 Credit Suisse 22 32,943 63 0.01US Long Bond CBT March 2018 Barclays 22 3,366 7 –Amsterdam Index Future January 2018 Credit Suisse 25 2,723 (44) (0.01)90 Day Sterling Future June 2020 Barclays 27 3,339 – –Euro-Bund Future March 2018 Barclays 28 4,527 (9) –Euro-OAT Future March 2018 Barclays 29 4,500 (83) (0.01)NASDAQ 100 E-Mini March 2018 Credit Suisse 30 3,845 (4) –Long Gilt Future March 2018 Barclays 33 4,130 8 –S&P 500 Emini Futures March 2018 Credit Suisse 33 4,415 23 –90 Day Sterling Future December 2019 Barclays 34 4,208 – –MSCI Singapore Index ETS January 2018 Credit Suisse 36 1,397 5 –Emin Russell 2000 March 2018 Credit Suisse 37 2,843 18 –Cac40 10 Euro Future January 2018 Credit Suisse 41 2,177 (42) (0.02)Euro Stoxx 50 March 2018 Credit Suisse 42 1,467 (44) (0.02)FTSE/JSE TOP 40 March 2018 Credit Suisse 48 25,524 52 0.01MSCI Emerging Markets Index March 2018 Credit Suisse 52 3,026 109 0.02FTSE 100 Index Future March 2018 Credit Suisse 58 4,430 138 0.02Nikkei 225 Mini March 2018 Credit Suisse 97 220,675 11 –Euro-Schatz Future March 2018 Barclays 100 11,198 (15) –SGX Nifty 50 January 2018 Credit Suisse 109 2,302 10 –3 Month Euro Euribor December 2018 Barclays 115 28,819 (11) –

Unrealised Appreciation on futures contracts 868 0.14Unrealised Depreciation on futures contracts (485) (0.08)

Net Appreciation on futures contracts US$ 383 0.06

Schedule of Credit Default Swaps — (0.11)% (30 June 2017: (0.03)%)

Counterparty Reference EntityBuy/Sell

ProtectionExpiration

Date

NotionalAmount(000’s)

FairValue(000’s)

% ofNet

AssetValue

Barclays Allstate Corp 6.750% due 15/05/18 Buy 22/12/20 275 US$ (7) –Barclays Allstate Corp 6.750% due 15/05/18 Buy 21/06/21 3,475 (19) –Barclays Avon Products Inc 6.500% due 01/03/19 Buy 21/06/20 15,000 674 0.11Barclays Avon Products Inc 6.500% due 01/03/19 Sell 21/06/22 10,000 (823) (0.14)Barclays Brazilian Government International Bond 12.250% due 06/03/30 Buy 21/12/22 6,300 177 0.03Barclays Brazilian Government International Bond 12.250% due 06/03/30 Buy 21/12/22 1,125 31 0.01Barclays Brazilian Government International Bond 4.250% due 07/01/25 Buy 21/12/22 10,000 (83) (0.01)Barclays Brazilian Government International Bond 4.250% due 07/01/25 Buy 21/12/22 950 26 –Barclays CDX.EM 1.000% due 20/12/22 Buy 21/12/22 14,356 129 0.02Barclays CDX.EM 1.000% due 20/12/22 Buy 21/12/22 377 3 –Morgan Stanley CDX.NA.HY.27 5.000% due 20/12/22 Buy 20/12/21 5,000 (425) (0.07)Barclays CDX.NA.HY.29 5.000% due 20/12/22 Buy 21/12/22 5,000 (39) (0.01)JPMorgan Chase Bank China Government International Bond 7.500% due 28/10/27 Buy 21/12/22 10,900 (252) (0.04)Morgan Stanley Domtar Corp 4.400% due 01/04/22 Buy 21/12/22 350 (9) –Barclays Domtar Corp 4.400% due 01/04/22 Buy 21/06/21 3,400 (192) (0.03)Barclays Frontier Communications Corp 9.000% due 15/08/31 Buy 21/06/21 5,000 827 0.15Credit Suisse iTraxx Europe Crossover 5.000% due 20/12/22 Buy 21/12/22 9,100 (1,333) (0.22)Barclays Hertz Corp 5.875% due 15/10/20 Buy 21/06/20 15,000 (684) (0.11)Barclays Hertz Corp 5.875% due 15/10/20 Sell 21/06/20 10,000 721 0.12Barclays Hess Corp 8.125% due 15/02/19 Buy 21/06/22 10,000 14 –Barclays JC Penney Corp Inc 6.375% due 15/10/36 Buy 21/12/22 538 53 0.01Barclays Kobe Steel Ltd 2.070% due 22/02/17 Buy 21/06/21 35,000 4 –Barclays Kobe Steel Ltd 2.070% due 22/02/17 Buy 21/12/20 100,000 13 –

The accompanying notes are an integral part of the Financial Statements

9




Schedule of Credit Default Swaps — (0.11)% (30 June 2017: (0.03)%) – (continued)

Counterparty Reference EntityBuy/Sell

ProtectionExpiration

Date

NotionalAmount(000’s)

FairValue(000’s)

% ofNet

AssetValue

Morgan Stanley Kohl’s Corp 4.000% due 01/11/21 Buy 21/06/21 50 US$ – –Barclays Kohl’s Corp 4.000% due 01/11/21 Buy 21/06/21 3,400 (290) (0.05)Morgan Stanley Kohl’s Corp 4.000% due 01/11/21 Buy 21/06/21 300 (3) –Barclays L Brands Inc 8.500% due 15/06/19 Buy 21/12/20 1,200 (17) –Barclays McClatchy Co 6.875% due 15/03/29 Buy 21/12/22 700 20 –Barclays Mexico Government International Bond 4.150% due 28/03/27 Buy 21/06/20 3,500 10 –Barclays Mexico Government International Bond 4.150% due 28/03/27 Buy 21/12/22 9,950 28 –Barclays Peruvian Government International Bond 8.750% due 21/11/33 Buy 21/12/22 3,600 (47) (0.01)

BarclaysRepublic of South Africa Government International Bond 5.500%due 09/03/20 Buy 21/12/22 1,250 32 0.01

BarclaysRepublic of South Africa Government International Bond 5.500%due 09/03/20 Buy 21/12/22 5,875 153 0.03

Barclays Russian Foreign Bond - Eurobond 7.500% due 31/03/30 Buy 21/12/22 11,100 91 0.01Morgan Stanley Ryder System Inc 2.550% due 01/06/19 Buy 21/12/22 300 (7) –Barclays Ryder System Inc 2.550% due 01/06/19 Buy 21/12/20 3,450 (60) (0.01)JPMorgan Chase Bank SFR Group SA 5.375% due 15/05/22 Sell 21/06/21 1,412 113 0.02Barclays Transocean Inc 7.375% due 15/04/18 Buy 21/12/19 10,000 (396) (0.07)Barclays Transocean Inc 7.375% due 15/04/18 Sell 21/06/20 10,000 852 0.14Barclays Turkey Government International Bond 11.875% due 15/01/30 Buy 21/06/22 900 26 –Barclays Weatherford International Ltd 4.500% due 15/04/22 Buy 21/12/22 960 6 –

Unrealised Appreciation on Credit Default Swaps US$ 4,003 0.66Unrealised Depreciation on Credit Default Swaps (4,686) (0.77)

Net Depreciation of Credit Default Swaps US$ (683) (0.11)

Schedule of Equity Swaps — 0.03% (30 June 2017: 0.02%)

Shares(000’s) Reference Entity Counterparty

FairValue(000’s)

% ofNet

AssetValue

0 Reynolds American Inc Morgan Stanley US$ (1) –20 Alibaba Group Holding Ltd Morgan Stanley 59 0.0210 CVS Health Corp Morgan Stanley 21 –52 Discovery Communications Inc Morgan Stanley 52 0.0193 AT&T Inc Morgan Stanley – –18 VanEck Vectors Semiconductor ETF Morgan Stanley 23 –

US$154 0.03

Unrealised Appreciation on Equity Swaps 155 0.03Unrealised Depreciation on Equity Swaps (1) –

Net Appreciation on Equity Swaps US$154 0.03

Schedule of Forward Foreign Currency Exchange Contracts — 2.10% (30 June 2017: 3.53%)

Expiration Date CounterpartyBuy Currency

(000’s)Sell Currency

(000’s)


(000’s)

% ofNet

AssetValue

03/01/18 State Street Bank EUR 535 USD 639 US$ 3 –03/01/18 State Street Bank USD 44 EUR 37 – –05/01/18 JPMorgan Chase AUD 3,910 JPY 340,685 27 –05/01/18 JPMorgan Chase AUD 2,880 USD 2,227 20 –05/01/18 JPMorgan Chase CAD 2,270 USD 1,794 12 –05/01/18 JPMorgan Chase CHF 1,830 USD 1,866 12 –05/01/18 JPMorgan Chase EUR 236 PLN 990 (1) –05/01/18 JPMorgan Chase EUR 2,440 TRY 11,169 (16) –05/01/18 JPMorgan Chase EUR 8,480 USD 10,089 87 0.0105/01/18 JPMorgan Chase GBP 5,820 USD 7,791 67 0.0105/01/18 JPMorgan Chase HUF 647,040 USD 2,484 15 –05/01/18 JPMorgan Chase ILS 9,460 USD 2,696 23 –05/01/18 JPMorgan Chase JPY 98,020 USD 870 – –05/01/18 JPMorgan Chase MXN 2,330 USD 121 (3) –05/01/18 JPMorgan Chase NOK 5,260 USD 636 5 –05/01/18 JPMorgan Chase NZD 1,010 USD 712 4 –05/01/18 JPMorgan Chase PLN 20,190 EUR 4,789 53 0.0105/01/18 JPMorgan Chase PLN 17,230 USD 4,833 116 0.0305/01/18 JPMorgan Chase SEK 9,680 USD 1,168 13 –05/01/18 JPMorgan Chase SGD 17,430 USD 12,928 104 0.0205/01/18 JPMorgan Chase THB 72,600 USD 2,227 – –


10




Schedule of Forward Foreign Currency Exchange Contracts — 2.10% (30 June 2017: 3.53%) – (continued)

Expiration Date CounterpartyBuy Currency

(000’s)Sell Currency

(000’s)


(000’s)

% ofNet

AssetValue

05/01/18 JPMorgan Chase TRY 1,498 EUR 330 US$ (1) –05/01/18 JPMorgan Chase TRY 9,030 USD 2,349 31 0.0105/01/18 JPMorgan Chase TRY 6,600 ZAR 21,849 (26) –05/01/18 JPMorgan Chase USD 958 AUD 1,250 (17) –05/01/18 JPMorgan Chase USD 1,338 CAD 1,720 (30) –05/01/18 JPMorgan Chase USD 2,027 CHF 2,000 (25) –05/01/18 JPMorgan Chase USD 121 GBP 90 (1) –05/01/18 JPMorgan Chase USD 95 HUF 25,150 (2) –05/01/18 JPMorgan Chase USD 40 ILS 140 – –05/01/18 JPMorgan Chase USD 3,589 JPY 404,570 (1) –05/01/18 JPMorgan Chase USD 2,165 MXN 41,690 45 0.0105/01/18 JPMorgan Chase USD 1,996 NOK 16,660 (34) (0.01)05/01/18 JPMorgan Chase USD 1,003 NZD 1,430 (11) –05/01/18 JPMorgan Chase USD 116 PLN 410 (2) –05/01/18 JPMorgan Chase USD 1,103 SEK 9,300 (34) (0.02)05/01/18 JPMorgan Chase USD 134 SGD 180 (1) –05/01/18 JPMorgan Chase USD 21 THB 700 – –05/01/18 JPMorgan Chase USD 2,351 TRY 9,100 (48) (0.02)05/01/18 JPMorgan Chase USD 585 ZAR 7,480 (22) –05/01/18 JPMorgan Chase ZAR 42,768 TRY 12,790 89 0.0105/01/18 JPMorgan Chase ZAR 33,600 USD 2,646 69 0.0110/01/18 Morgan Stanley EUR 1,270 USD 1,502 22 –10/01/18 Morgan Stanley USD 53,110 EUR 45,110 (1,042) (0.18)10/01/18 Morgan Stanley USD 4,988 GBP 3,735 (56) (0.01)10/01/18 Morgan Stanley USD 1,221 NOK 10,200 (21) –31/01/18 State Street Bank CHF 377 USD 381 7 –31/01/18 State Street Bank EUR 450,468 USD 527,987 13,389 2.2131/01/18 State Street Bank GBP 3,501 USD 4,625 106 0.0231/01/18 State Street Bank USD 17 CHF 17 – –31/01/18 State Street Bank USD 21,936 EUR 18,589 (409) (0.07)31/01/18 State Street Bank USD 34 GBP 25 – –14/02/18 Morgan Stanley USD 154 EUR 130 (2) –21/03/18 JPMorgan Chase BRL 1,910 USD 575 (4) –21/03/18 JPMorgan Chase CAD 230 USD 179 4 –21/03/18 JPMorgan Chase CHF 80 USD 81 1 –21/03/18 JPMorgan Chase CLP 1,883,210 USD 3,033 26 –21/03/18 JPMorgan Chase EUR 158 PLN 670 (2) –21/03/18 JPMorgan Chase EUR – USD – – –21/03/18 JPMorgan Chase HUF 7,170 USD 27 1 –21/03/18 JPMorgan Chase INR 717,410 USD 11,030 104 0.0321/03/18 JPMorgan Chase KRW 6,650,500 USD 6,101 121 0.0221/03/18 JPMorgan Chase MXN 6,080 USD 312 (7) –21/03/18 JPMorgan Chase NOK 560 USD 67 1 –21/03/18 JPMorgan Chase PHP 173,160 USD 3,416 41 0.0121/03/18 JPMorgan Chase PLN 670 EUR 158 1 –21/03/18 JPMorgan Chase PLN 440 USD 123 3 –21/03/18 JPMorgan Chase SGD 580 USD 429 5 –21/03/18 JPMorgan Chase USD 1,236 BRL 4,140 (2) –21/03/18 JPMorgan Chase USD 179 CAD 230 (4) –21/03/18 JPMorgan Chase USD 81 CHF 80 (1) –21/03/18 JPMorgan Chase USD 312 CLP 203,920 (19) –21/03/18 JPMorgan Chase USD 27 HUF 7,170 (1) –21/03/18 JPMorgan Chase USD 566 INR 36,580 (1) –21/03/18 JPMorgan Chase USD 73 KRW 77,610 – –21/03/18 JPMorgan Chase USD 313 MXN 6,080 8 –21/03/18 JPMorgan Chase USD 67 NOK 560 (1) –21/03/18 JPMorgan Chase USD 39 PHP 1,960 – –21/03/18 JPMorgan Chase USD 123 PLN 440 (4) –21/03/18 JPMorgan Chase USD 429 SGD 580 (5) –22/03/18 JPMorgan Chase JPY 21,380 USD 190 1 –22/03/18 JPMorgan Chase USD 190 JPY 21,380 (1) –

Unrealised Appreciation on Forward Foreign Currency Contracts 14,636 2.41Unrealised Depreciation on Forward Foreign Currency Contracts (1,857) (0.31)

Net Appreciation on Forward Foreign Currency Contracts US$ 12,779 2.10


11


Statement of Financial PositionEnTrustPermal Alternative

Income Strategy

(in ‘000’s) NoteAs at

31 December 2017As at

30 June 2017CURRENT ASSETS

Cash 8 94,449 76,793Cash Collateral 8 21,781 12,822Cash equivalent 8 74,083 42,245Amounts due from broker 8 7,470 7,192Financial assets at fair value through profit or loss: 1

Investments 393,580 278,232Options at fair value 69 179Unrealised appreciation on futures contracts 868 53Unrealised appreciation on forward foreign exchange contracts 14,636 15,917Unrealised appreciation on swap contracts 4,158 2,029

Receivable from holders of redeemable participating shares 64 130Receivable for investment sold 2,845 14Interest receivable 5,159 2,721Dividend receivable 51 49Prepaid expenses 79 95

Total Current Assets 619,292 438,471

CURRENT LIABILITIESFinancial liabilities at fair value through profit or loss: 1Designated as held for trading

Options at fair value (4) (49)Unrealised depreciation on futures contracts (485) (926)Unrealised depreciation on forward foreign exchange contracts (1,857) (790)Unrealised depreciation on swap contracts (4,687) (2,075)

Payable for fund shares redeemed (638) (221)Payable for investment purchased (2,211) (4,050)Payable for distributions (546) (496)Investment Manager fees payable (288) (174)Sub-Adviser fees payable (485) (316)Administrator and Depositary fees payable (21) (62)Shareholder service fees payable (11) (6)Audit fees payable (13) (27)Legal fees payable (71) (43)Performance fees payable (235) (909)Accrued expenses and other liabilities (224) (325)

Total Liabilities (excluding net assets attributable to holders of redeemableparticipating shares) (11,776) (10,469)Net assets attributable to holders of redeemable participating shares 1 607,516 428,002

Total NAV(000’s)

No. Shares(000’s)* NAV/Share

EnTrustPermal Alternative Income StrategyAs at 31 December 2017Class A US$ Accumulating 11,526 109 105.96Class A US$ Distributing Plus (Q) 207 2 100.78Class A Accumulating Euro (Hedged) 37,375 366 102.13Class A Euro Distributing Plus (Q) (Hedged) 9,087 93 97.20Class E Euro Accumulating (Hedged)** 1 – 100.44Class R US$ Accumulating 837 8 109.40Class R US$ Distributing Plus (Q) 358 3 104.08Class R Euro Accumulating (Hedged) 227,357 2,140 106.26Class R Euro Distributing Plus (Q) (Hedged) 30,106 298 101.19Class R GBP Distributing Plus (Q) (Hedged) 3,529 35 99.89Class S US$ Accumulating 35,625 330 108.08Class S Euro Accumulating E (Hedged) 16,268 155 105.05Class X Euro Accumulating (Hedged) 18,948 178 106.21Premier Class US$ Accumulating 29,061 270 107.64Premier Class US$ Distributing Plus (Q) 12 – 102.43Premier Class Accumulating Euro (Hedged) 96,806 932 103.91Premier Class Euro Distributing Plus (Q) (Hedged) 1,397 14 99.29Premier Class CHF Accumulating (Hedged) 366 4 102.40

Total NAV(000’s)

No. Shares(000’s)* NAV/Share

EnTrustPermal Alternative Income StrategyAs at 30 June 2017Class A US$ Accumulating 10,161 98 103.70Class A US$ Distributing Plus (Q) 1,158 12 100.62Class A Accumulating Euro (Hedged) 21,945 217 101.05Class A Euro Distributing Plus (e) (M)**** 30 – 100.81Class A Euro Distributing Plus (Q) (Hedged) 9,445 96 98.13Class E US$ Accumulating*** 47 – 104.34Class R US$ Accumulating 1,592 15 106.53Class R US$ Distributing Plus (Q) 282 3 103.40Class R Euro Accumulating (Hedged) 234,322 2,240 104.61Class R Euro Distributing Plus (Q) (Hedged) 27,446 270 101.64Class R GBP Distributing Plus (Q) (Hedged) 3,045 30 99.93Class S US$ Accumulating 2,257 21 105.29Class S Euro Accumulating E (Hedged) 1,299 13 103.44Class X Euro Accumulating (Hedged) 10,259 98 104.76Premier Class US$ Accumulating 12,506 119 104.95Premier Class US$ Distributing Plus (Q) 11 – 101.87Premier Class Accumulating Euro (Hedged) 40,454 395 102.42Premier Class Euro Distributing Plus (Q) (Hedged) 1,305 13 99.84Premier Class CHF Accumulating (Hedged) 252 2 101.09* If a class has less than 500 shares, they are shown as “–”.** Class launched on 28th August 2017.*** Class terminated on 16th August 2017.**** Class terminated on 14th November 2017.


12


Statement of Comprehensive IncomeEnTrustPermal Alternative

Income Strategy

(in ‘000’s) Note

For the periodended

31 December 2017

For the periodended

31 December 2016INVESTMENT INCOME

Gross dividend income $ 392 $ 379Interest income 7,748 4,152Other Income 39 157Equalisation 154 (483)Net gain/(loss) on financial assets and liabilities at fair value through profit or loss:

Net realised gain/(loss) on financial instruments held for trading 23,502 (6,385)Net unrealised gain/(loss) on financial instruments held for trading 3,593 (2,931)

Total Investment Income/(Loss) 35,428 (5,111)

EXPENSESInvestment Manager fees 4 (1,462) (823)Sub-Adviser fees 4 (2,505) (1,678)Administrator and Depositary fees 4 (439) (322)Shareholder service fees 4 (54) (24)Audit fees 4 (14) (14)Directors fees and expenses 4 (14) (2)Legal fees (138) (123)Performance fees (235) (145)Other expenses (525) (283)Transaction costs (48) (29)

Total Expenses (5,434) (3,443)

Expense waivers and reimbursements 4 – –*

Total Net Expenses (5,434) (3,443)

Net Profit/(Loss) before finance costs 29,994 (8,554)

FINANCE COSTS:Distribution paid 5 (1,074) (436)

Profit/(Loss) for the financial period 28,920 (8,990)

Witholding tax on dividends and other taxation (129) (113)

Increase/(Decrease) in Net Assets attributable to Holders of Redeemable ParticipatingShares $ 28,791 $ (9,103)

* Amounts shown as “–” are less than US$500.


13


Statement of Changes in Net Assets Attributable to Holders of Redeemable Participating Shares

EnTrustPermal AlternativeIncome Strategy

(in 000's)

For the periodended

31 December 2017

For the periodended

31 December 2016Net Increase/(Decrease) in netassets attributable to holdersof redeemable participatingshares 28,791 (9,103)

REDEEMABLE PARTICIPATINGSHARE TRANSACTIONS

Net proceeds from sales of shares 205,604 52,893Net proceeds from reinvesteddistributions – 2Cost of shares reacquired (54,881) (34,708)

Increase in Net Assets fromRedeemable Participating Sharetransactions 150,723 18,187Increase in net assets attributableto holders of redeemableparticipating shares 179,514 9,084

NET ASSETS ATTRIBUTABLE TOHOLDERS OF REDEEMABLEPARTICIPATING SHARES

Beginning of period 428,002 330,338

End of period 607,516 339,422


(000’s)*For the period ended

31 December 2017Class A US$ AccumulatingSold 12Redeemed (1)

Net Increase 11

Class A US$ Distributing Plus (Q)Sold –Redeemed (10)

Net Decrease (10)

Class A Accumulating Euro (Hedged)Sold 172Redeemed (23)

Net Increase 149

Class A Euro Distributing Plus (e) (M)Sold –Redeemed –

Net Decrease –

Class A Euro Distributing Plus (Q) (Hedged)Sold 6Redeemed (9)

Net Decrease (3)

Class E US$ AccumulatingSold –Redeemed –

Net Decrease –

Class R US$ AccumulatingSold 3Redeemed (10)

Net Decrease (7)

Class R US$ Distributing Plus (Q)Sold 1Redeemed (1)

Net Increase –

Class R Euro Accumulating (Hedged)Sold 26Redeemed (126)

Net Decrease (100)

Class R Euro Distributing Plus (Q) (Hedged)Sold 37Redeemed (9)

Net Increase 28

Class R GBP Distributing Plus (Q) (Hedged)Sold 6Redeemed (1)

Net Increase 5


(000’s)*For the period ended

31 December 2017Class S US$ AccumulatingSold 496Redeemed (187)

Net Increase 309

Class S US$ Distributing Plus (Q)Sold –Redeemed –

Net Increase –

Class S Euro Accumulating E (Hedged)Sold 142Redeemed –

Net Increase 142

Class S Euro Distributing Plus Q (Hedged)Sold –Redeemed –

Net Decrease –

Class X Euro Accumulating (Hedged)Sold 101Redeemed (21)

Net Increase 80

Premier Class US$ AccumulatingSold 164Redeemed (13)

Net Increase 151

Premier Class US$ Distributing Plus (Q)Sold –Redeemed –

Net Increase –

Premier Class Accumulating Euro (Hedged)Sold 601Redeemed (64)

Net Increase 537

Premier Class Euro Distributing Plus (Q) (Hedged)Sold 1Redeemed –

Net Increase 1

Premier Class CHF Accumulating (Hedged)Sold 2Redeemed –

Net Increase 2

Strategy Class E Euro Accumulating (Hedged)Sold –Redeemed –

Net Increase –

* If there are less than 500 shares, they are shown as “–”.


14


Statement of Changes in Net Assets Attributable to Holders of Redeemable Participating Shares –(continued)


(000's)*For the period ended

31 December 2016Class A US$ AccumulatingSold 24Redeemed –

Net Increase 24

Class A US$ Distributing Plus (Q)Sold 3Redeemed (6)

Net Decrease (3)

Class A Accumulating Euro (Hedged)Sold 15Redeemed (5)

Net Increase 10

Class A Euro Distributing Plus (e) (M)Sold –Redeemed –

Net Increase –

Class A Euro Distributing Plus (Q) (Hedged)Sold 4Redeemed (13)

Net Decrease (9)

Class E US$ AccumulatingSold –Redeemed –

Net Increase –

Class R US$ AccumulatingSold –Redeemed (6)

Net Decrease (6)

Class R US$ Distributing Plus (Q)Sold 3Redeemed –

Net Increase 3

Class R Euro Accumulating (Hedged)Sold 35Redeemed (228)

Net Decrease (193)

Class R Euro Distributing Plus (Q) (Hedged)Sold 209Redeemed (3)

Net Increase 206

Class R GBP Distributing Plus (Q) (Hedged)Sold 31Redeemed –

Net Increase 31


(000's)*For the period ended

31 December 2016Class S US$ AccumulatingSold –Redeemed (2)

Net Decrease (2)

Class S US$ Distributing Plus (Q)Sold –Redeemed –

Net Increase –

Class S Euro Accumulating E (Hedged)Sold –Redeemed –

Net Increase –

Class S Euro Distributing Plus Q (Hedged)Sold –Redeemed –

Net Increase –

Class X Euro Accumulating (Hedged)Sold 20Redeemed (5)

Net Increase 15

Premier Class US$ AccumulatingSold 92Redeemed –

Net Increase 92

Premier Class US$ Distributing Plus (Q)Sold –Redeemed –

Net Increase –

Premier Class Accumulating Euro (Hedged)Sold 29Redeemed (26)

Net Increase 3

Premier Class Euro Distributing Plus (Q) (Hedged)Sold 9Redeemed (19)

Net Decrease (10)

Premier Class CHF Accumulating (Hedged)Sold 1Redeemed –

Net Increase 1

* If there are less than 500 shares, they are shown as “–”.


15


Notes to Financial Statements1. Background

Legg Mason Alternative Funds ICAV (the “ICAV”) is an open-ended Irish Collective Asset-management Vehicle with variable capital formed under the laws of Ireland andpursuant to the Irish Collective Asset-management Vehicles Act 2015 (“The ICAV Act”). The ICAV is authorised by the Central Bank of Ireland (the “Central Bank”), underthe European Communities (Undertaking for Collective Investment in Transferable Securities) Regulations, 2011 (as amended), and under The Central Bank (Supervision AndEnforcement) Act 2013 (Section 48(1) (Undertakings For Collective Investment In Transferable Securities) Regulations 2015) (together the “UCITS Regulations”). It wasformed on 17 July 2015 with registration number C139549. Its objective, as set out in the ICAV’s Instrument of Incorporation, is the collective investment in transferablesecurities and other liquid financial assets of capital raised from the public. The ICAV is organised in the form of an umbrella fund. The Instrument of Incorporation providesfor separate sub-funds, each representing interests in a defined portfolio of assets and liabilities, which may be established from time to time with the prior approval of theCentral Bank. The Instrument of Incorporation of the ICAV also provides that the ICAV may offer separate classes of shares, each representing interests in a sub-fundcomprising a distinct portfolio of investments. A separate portfolio of assets shall not be maintained for a class. Currently only 1 sub-fund, the EnTrustPermal AlternativeIncome Strategy (“The Fund”) has been established by the ICAV. The Fund formed on 17 July 2015 and was launched on 25 August 2015.

Sub-Advisers

EnTrustPermal Ltd., under the Sub-Investment Management Agreement, relating to the Fund is authorised to engage one or more Sub-Advisers for the purpose of assistingit with carrying out its duties and responsibilities as Sub-Investment Manager by exercising investment discretion over a Portfolio, provided the appointment of each Sub-Adviser is in accordance with the requirements of the Central Bank of Ireland (the “Central Bank”).

During the period covered by this report, the Investment Manager had engaged the following entities as Sub-Advisers to provide investment management services to the Fund:

• Axonic Capital LLC

• Brevan Howard Asset Management LLP

• Eiffel Investment Group

• Gracie Capital LP

• Gramercy LLC

• Twin Capital Management LLC

Certain information concerning the Sub-Advisers will be provided by the Sub-Investment Manager, free of charge, upon a Shareholder’s request and shall be available at theinternet address http://www.entrustpermal.com.

2. Significant Accounting Policies

Consistent accounting policies, presentation and methods of computation have been followed in these condensed financial statements as were applied in the preparation ofthe Company’s audited financial statements for the financial year ended 30 June 2017, as described in those financial statements.

(a) Basis of Preparation

These condensed unaudited financial statements have been prepared in accordance with Financial Reporting Standard 104 (“FRS 104”), “Interim Financial Reporting”, Irishstatute comprising of the ICAV Act and the UCITS Regulations. The financial statements have been prepared on a going concern basis for the ICAV under the historical costconvention as modified by the revaluation of financial assets and financial liabilities held at fair value through the profit or loss.

These condensed unaudited financial statements should be read in conjunction with the Company’s annual audited financial statements for the year ended 30 June 2017,which have been prepared in accordance with FRS 102, Irish Statute comprising of the ICAV Act and the UCITS Regulations. The ICAV has availed of the exemption availableto open-ended investment funds under Section 7 “Statement of Cash Flows” of FRS 102, not to prepare a cash flow statement on the basis that substantially all of theICAV’s investments are highly liquid and carried at fair value and the ICAV provides a statement of changes in net assets attributable to holders of redeemable participatingshares.

All references to net assets throughout this document refer to net assets attributable to holders of Redeemable Participating Shares unless otherwise stated. All the ICAV’sassets and liabilities are held for the purposes of being traded or are expected to be realised within one period.

3. Efficient Portfolio Management

Subject to the conditions and within the limits from time to time laid down by the Central Bank, and except as otherwise stated in the investment objective and policies of a Fund,the Investment Managers and/or Sub-Investment Manager(s) may employ investment techniques and instruments such as futures, forward foreign currency contracts and otherderivatives for investment purposes or for efficient portfolio management purposes. Furthermore, new techniques and instruments may be developed which may be suitable foruse by the Fund in the future and a Fund may employ such techniques and instruments subject to the prior approval of, and any restrictions imposed by, the Central Bank.

For UCITS which have engaged in efficient portfolio management techniques, under UCITS Notice 8.5, a UCITS is required to disclose the revenues arising from repurchaseagreements and stocklending transactions for the entire reporting period together with the direct and indirect operational costs and fees incurred. There were no suchtechniques employed for the period end 31 December 2017 (period ended 30 June 2017: None).

There was no repurchase agreements or security lending contracts entered into during the period ended 31 December 2017 (period ended 31 December 2016: None).

4. Operating Expenses and Other Related Party Transactions

Pursuant to the Investment Management Agreement between the ICAV and Legg Mason Investments (Europe) Limited (the “Investment Manager”), the InvestmentManager is entitled to receive an investment management fee out of the assets of the Fund for its services as the Investment Manager, which accrues on each Dealing Dayand is payable monthly in arrears. Pursuant to the Sub-Investment Management Agreement, the Investment Manager shall pay the Sub-Investment Manager aSub-Investment Management Fee and out-of-pocket expenses of the Sub-Investment Manager out of its own Investment Management Fee. The maximum investmentmanagement fee for each launched class, at 31 December 2017 (expressed as a percentage of the Fund’s net asset value attributable to such class) is as follows:

EnTrustPermal Alternative Income StrategyMaximum InvestmentManagement Fee*

Class A US$ Accumulating 2.25%Class A US$ Distributing Plus (Q) 2.25%Class A Accumulating Euro (Hedged) 2.25%Class A Euro Distributing Plus (Q) (Hedged) 2.25%Class E Euro Accumulating (Hedged) 2.50%

16


Notes to Financial Statements – (continued)4. Operating Expenses and Other Related Party Transactions – (continued)

EnTrustPermal Alternative Income StrategyMaximum InvestmentManagement Fee*

Class R US$ Accumulating 1.65%Class R US$ Distributing Plus (Q) 1.65%Class R Euro Accumulating (Hedged) 1.65%Class R Euro Distributing Plus (Q) (Hedged) 1.65%Class R GBP Distributing Plus (Q) (Hedged) 1.65%Class S US$ Accumulating 1.50%Class S Euro Accumulating E (Hedged) 1.50%Class X Euro Accumulating (Hedged) 1.65%Premier Class US$ Accumulating 1.65%Premier Class US$ Distributing Plus (Q) 1.65%Premier Class Accumulating Euro (Hedged) 1.65%Premier Class Euro Distributing Plus (Q) (Hedged) 1.65%Premier Class CHF Accumulating (Hedged) 1.65%

* The maximum Management Fee includes a combination of the Investment Management Fee and Distribution Fee payable by the ICAV to the Investment Manager andthe Distributor on each Share Class of the Fund.

Expense Waivers

The Investment Manager may voluntarily undertake to reduce or waive its investment management fee or to make other arrangements to reduce the expenses of the Fundto the extent that such expenses exceed such lower expense limitation as the Investment Manager may, by notice to the Shareholders, voluntarily declare to be effective.The Investment Manager has currently undertaken to reimburse the Fund so that “Specified Expenses” (as described below) of each Class in the Fund’s financial year do notexceed the percentage of the average daily Net Asset Value of such Class listed above. “Specified Expenses” is defined to include all expenses incurred in the business of theFund, which include offering costs, administration fees, investment management fees, investor servicing fees and custody fees. “Specified Expenses” does not include thefollowing: (i) establishment expenses relating to the Fund; (ii) Performance Fees or Additional Performance Fees; (iii) distributor fees; (iv) Eligible Collective InvestmentScheme fees and expenses; (v) brokerage and trading costs; (vi) interest payments; (vii) taxes; or (viii) extraordinary expenses. The Investment Manager may terminate ormodify this arrangement at any time at its sole discretion upon 30 days’ notice in writing to the Fund’s Shareholders.

During the period ended 31 December 2017 the total amount reimbursed on the Fund was US$Nil (period ended 31 December 2016: US$243), which included InvestmentManager fees waived of US$Nil (period ended 31 December 2016: US$236).

Shareholder service fees are payable on all classes except: Class R Share Classes, Class S Share Classes and Premier Share Classes, (each as defined in the Prospectus). Duringthe period ended 31 December 2017 the shareholder services fees waived on the EnTrustPermal Alternative Income Strategy Fund were US$35 (period ended 31 December2016: US$7).

Administrator and Depositary Fees

State Street Custodial Services (Ireland) Limited acts as Depositary and State Street Fund Services (Ireland) Limited acts as Administrator to the ICAV. The combinedadministration and depositary fee will not exceed 0.20% per annum of the Net Asset Value of the Fund.

Performance Fees

The Sub-Investment Manager and each of the Sub-Advisers may be entitled to receive a fee (a ‘‘Performance Fee’’) depending on the performance of the share classes ofthe Fund. For the purposes of calculating such performance fees, the term “Performance Period” means the period beginning on 1 July and ending on 30 June of each year,with the exception of the first Performance Period for a Share Class, which will begin upon the initial issue of Shares in that Share Class and end on the following 30 Juneand the first Performance Period for a Portfolio, which will begin upon the appointment of such Sub-Adviser to manage said Portfolio and will end on the following 30 June.

Sub-Investment Manager Performance Fee: Under the terms of the Sub-Investment Management Agreement, the ICAV will pay to the Sub-Investment Manager out of theassets of the Fund a Performance Fee on each Share Class; provided that the Performance Fee on a Share Class is payable only if the Net Asset Value of such Share Class(before any accruals of Performance Fees or Additional Performance Fees, as defined below) has increased by at least 4 per cent at the end of the relevant PerformancePeriod from the Net Asset Value of such Share Class as at the end of the prior Performance Period, or in the case of the first Performance Period, the Initial Offer Price ofsuch Share Class (the “Sub-Investment Manager Hurdle Rate”). The Performance Fee shall be equal to 15 per cent of the New Net Appreciation of the relevant Share Classduring the Performance Period above the Sub-Investment Manager Hurdle Rate.

The Performance Fee (if any) will accrue each Dealing Day. The amount accrued on each Dealing Day will be determined by calculating the Performance Fee that would bepayable if that day was the last day of the current Performance Period. The Performance Fee will be payable by the Fund to the Sub-Investment Manager annually in arrearswithin 45 calendar days of the end of each Performance Period. The calculation of the Performance Fee shall be based upon unaudited information but will be verified bythe Depositary.

Sub-Adviser Performance Fees: Under the terms of the sub-advisory agreements between the Sub-Investment Manager and the Sub-Advisers, the Sub-Investment Managershall pay each Sub-Adviser a performance fee (the “Sub-Adviser Performance Fee”); provided that the Sub-Adviser Performance Fee is payable on a Sub-Adviser’s Portfolioonly if the Net Asset Value of such Portfolio (before any accruals of Sub-Adviser Performance Fees) has increased by at least 4 per cent at end of relevant Performance Periodfrom the Net Asset Value of such Portfolio as at the end of the prior Performance Period (the “Sub-Adviser Hurdle Rate”). The Sub-Adviser Hurdle Rate will be pro-rated forany Sub-Adviser who is appointed after the commencement of a Performance Period to reflect the period the Sub-Adviser managed the Sub-Adviser’s portfolio during therelevant Performance Period. The Sub-Adviser Fee shall be equal to 10 per cent of the New Net Appreciation of the Portfolio allocated to such Sub-Adviser during thePerformance Period above the Sub-Adviser Hurdle Rate. The Sub-Adviser is entitled to receive such Sub-Adviser Performance Fee until such time, if ever, that the Sub-Adviserceases to manage the Portfolio (the “Term of Appointment”).

The Sub-Adviser Performance Fee will be calculated and accrued daily during the Term of Appointment and for each Performance Period. Where a Sub-Adviser is entitled toreceive a Sub-Adviser Performance Fee in a Performance Period, all or part of that Sub-Adviser Performance Fee, depending upon the arrangements with that Sub-Adviser,will be paid to the Sub-Adviser for that Performance Period. Upon the termination of a Sub-Adviser’s appointment, any Sub-Adviser Performance Fees owed will be paid infull. The calculation of any Sub-Adviser Performance Fee must be verified by the Depositary.

Additional Performance Fee: The Sub-Investment Manager will pay the Sub-Adviser Performance Fees for a particular Performance Period out of the Performance Fee paid toit for such Performance Period. However, if, as of the end of any Performance Period, the sum of all Sub-Adviser Performance Fees payable to Sub-Advisers in respect of aPerformance Period exceeds the Performance Fee payable to the Sub-Investment Manager, the Fund will pay an additional amount (the “Additional Performance Fee”) tothe Sub-Investment Manager which shall, in turn, remit the Additional Performance Fee to the relevant Sub-Adviser to cover the shortfall. This may occur where, forexample, during a Performance Period one or more Sub-Advisers add value in respect of their Portfolio, while other Sub-Advisers add negative value with respect to theirrespective Portfolios. Any such Additional Performance Fee paid by the Fund will be deducted from the Sub-Investment Manager’s Performance Fee before payment to theSub-Investment Manager in subsequent Performance Periods; provided that upon a redemption, the amount of the Additional Performance Fee to be deducted from theSub-Investment Manager’s Performance Fee in subsequent Performance Periods shall be decreased by an amount proportionate to the percentage of outstanding Sharesredeemed in the relevant Class. For the avoidance of doubt, if the Fund or the Sub-Investment Management Agreement is terminated following the payment of anAdditional Performance Fee, the Sub-Investment Manager shall not be required to reimburse the Fund such Additional Performance Fee. The ICAV’s Prospectus was updatedwith effect on 15 March 2017 to clarify that the Sub-Adviser Hurdle Rate will be pro-rated for any Sub-Adviser whose Term of Appointment is shorter than the performancefee period. This is to reflect the provisions of the sub-advisory agreements.

17


Notes to Financial Statements – (continued)4. Operating Expenses and Other Related Party Transactions – (continued)

Performance Fees – (continued)

Performance fees accrued for the period ended 31 December 2017 were US$235,027 (period ended 31 December 2016: US$144,518).

Directors’ Remuneration

Directors’ fees accrued for the period ended 31 December 2017 were US$14,251 (period ended 31 December 2016: US$1,853).

Director’s fees are not payable in respect of Joseph Carrier, Joseph LaRocque and Jane Trust who are employees of the Investment Manager or its affiliates.

Other Related Party Transactions

As at 31 December 2017, a wholly owned company of Legg Mason Inc., LM International Holdings LP, held 0.0025% (30 June 2017: 0.0031%) of the issued share capital of theFund.

As at 31 December 2017, one institution held 55.01% of the redeemable participating shares of the Fund (30 June 2017: 68.88%).

5. Distributions to Holders of Redeemable Participating Shares

Distributing Share Classes

The letter in parentheses at the end of the name of each Distributing Share Class indicates a particular frequency of dividend declarations and dividend payments, asdetailed in the following table.

Distributing Share Class Designation Frequency of Dividend Declarations Frequency of Dividend Payments

(D) Daily Monthly(M) Monthly Monthly(Q) Quarterly Quarterly (March, June, September, December)(S) Semi-Annually Semi-Annually (June, December)(A) Annually Annually (June)

For each Distributing Share Class, at the time of each dividend declaration: (1) all, or some portion of, net investment income, if any, will be declared as a dividend; and(2) all, or some portion, of realised and unrealised capital gains net of realised and unrealised capital losses may be, but is not required to be, declared as a dividend.

Distributing Plus Share Classes, may charge certain fees and expenses to capital rather than income, and there is an increased risk that investors in these Share Classes may notreceive back the full amount invested when redeeming their holding. The declaration of distributions in Distributing Plus Share Classes which may charge certain fees andexpenses to capital rather than income could result in the erosion of capital for investors in those Distributing Plus Share Classes and that increased income will be achieved byforegoing some of the potential for future capital growth. All expenses of the Distributing Plus (e) Share Classes would be charged to capital. The Distributing Plus (e) ShareClasses paid a distribution of US$1,074,149 (period ended 31 December 2016: US$435,960) out of which US$236 were reinvested in the Fund at 31 December 2017(31 December 2016: US$1,975).

During the period, the Fund has charged no fees or expenses to capital on Distributing Plus (e) Share Class (period ended 31 December 2016: US$9,000).

Accumulating Share Classes

With respect to Accumulating Share Classes, it is intended that, in the normal course of business, distributions will not be declared and that any net investment incomeattributable to each Accumulating Share Class will be accumulated daily in the respective net asset value per share of each respective Share Class.

6. Connected Parties

Regulation 41(1) of the Central Bank (Supervision and Enforcement) Act 2014 (Section 48(1)) (Undertakings for Collective Investment in Transferrable Securities) Regulations2015 (“Central Bank Regulations”) states that “a responsible person shall ensure that any transaction between a UCITS and a connected person is conducted (a) at arm’slength; and (b) in the best interest of the unit-holders of the UCITS”.

As required under UCITS Regulation 78(4) of the Central Bank Regulations, the Directors are satisfied that there are in place arrangements, evidenced by written procedures,to ensure that the obligations that are prescribed by Regulation 41(1) are applied to all transactions with a connected party; and all transactions with connected parties thatwere entered into during the financial period to which the report relates complied with the obligations that are prescribed by Regulation 41(1).

7. Taxation

Under current Irish law and practice, the ICAV qualifies as an investment undertaking as defined in Section 739B of the Taxes Consolidation Act, 1997 (as amended). On thatbasis, the ICAV will not generally be liable to Irish tax in respect of its income and gains, other than on the occurrence of a chargeable event. Generally a chargeable event ariseson any distribution, redemption, repurchase, cancellation, transfer of shares or on the ending of a ‘Relevant Period’, a ‘Relevant Period’ being an eight year period beginningwith the acquisition of the shares by the shareholders and each subsequent period of eight years beginning immediately after the preceding Relevant Year.

No Irish tax will arise on the ICAV in respect of chargeable events in respect of:

(i) a shareholder who is neither Irish resident nor ordinarily resident in Ireland for tax purposes, at the time of the chargeable event, provided an appropriate validdeclaration is in place, or the ICAV has been authorised by Irish Revenue to make gross payments in the absence of appropriate declarations; and

(ii) certain exempted Irish tax resident shareholders who have provided the ICAV with the necessary signed statutory declarations.

In addition, any transaction (which might otherwise be a chargeable event) in relation to shares held in a recognised clearing system as designated by order of the IrishRevenue Commissioners will not constitute a chargeable event.

In the absence of an appropriate declaration, the ICAV will be liable to Irish tax on the occurrence of a chargeable event. There were no chargeable events during the periodunder review.

Capital gains, dividends and interest received may be subject to taxes, including withholding taxes imposed by the country of origin and such taxes may not be recoverableby the Fund or its shareholders.

18


Notes to Financial Statements – (continued)8. Cash and Cash Equivalents

Cash at bank and cash held for diversification is included within cash and cash equivalents. Cash at bank is held with State Street Bank and Trust and its Sub-depositories.Cash held for diversification is held with Citibank and BNP Paribas.

Counterparty

Cash at bank(US$000)

31 December 2017

Cash held fordiversification

(US$000)31 December 2017

Cash at bank(US$000)

30 June 2017

Cash held fordiversification

(US$000)30 June 2017

BNP Paribas – 37,529 – 10,391Citibank – 36,554 – 31,854State Street Bank and Trust 94,449 – 76,793 –

Total amount 94,449 74,083 76,793 42,245

Cash collateral relates to cash provided to brokers for collateral purposes. As at 30 June 2017, cash collateral is held for options and swaps by JP Morgan, Barclays Bank,Credit Suisse and Morgan Stanley.

Counterparty

Cash collateral(US$000)

31 December 2017

Cash collateral(US$000)

30 June 2017

Barclays Bank (760) 41Credit Suisse 2,160 2,149JP Morgan 6,753 3,184Morgan Stanley 13,628 7,448

Total amount 21,781 12,822

Cash at broker relates to cash provided to brokers for margin requirements for futures, options and swaps. As at 31 December 2017, Margin cash is held with Credit Suisseand Barclays Bank.

Counterparty

Margin cash(US$000)

31 December 2017

Margin cash(US$000)

30 June 2017

Barclays Bank 3,287 2,368Credit Suisse 4,183 4,824Morgan Stanley –

Total amount 7,470 7,192

9. Commitments and Contingent Liabilities

There were no significant commitments or contingent liabilities at the Statement of Financial Position date (30 June 2017: Nil).

10. Soft Commission Arrangements

The Investment Manager or Sub-Advisers may direct transactions to brokers in return for research services. In such circumstances, the Investment Manager or Sub-Advisersmay enter into soft commission agreements or similar arrangements with such brokers. Under such arrangements, the Investment Manager or Sub-Advisers must ensurethat the broker or counterparty to the arrangement has agreed to provide best execution to the Fund and that the benefit provided assists the Investment Manager orSub-Advisers in its provision of investment services to the Fund. The total value of soft commission arrangements entered into on behalf of the Fund for the period ended31 December 2017 is US$19,143 (period ended 31 December 2016: US$10,114).

11. Exchange Rates

The following exchange rates were used in these financial statements to obtain the equivalent U.S. Dollar amounts.

USD CountryExchange rates as at

31 December 2017Exchange rates as at

30 June 2017Australian Dollar 1.2816 1.3011Brazilian Real 3.3171 3.3129British Pound 0.7407 0.7678Canadian Dollar 1.2570 1.2968Chilean Peso 615.4000 –Euro 0.8334 0.8755Hong Kong Dollar 7.8129 7.8075Hungarian forint 258.9574 –Indian Rupee 63.8275 64.6375Israesli Sheqel 3.4797 –Japanese Yen 112.6750 112.4750Mexican Peso 19.6625 18.1488New Zealand Dollar 1.4110 1.3646Norwegian Krone 8.2106 8.3488Philippine Peso 49.9200 –Polish Zloty 3.4810 3.7057Singapore Dollar 1.3375 –South African Rand 12.3725 13.0825South Korean Won 1070.5500 –Swedish Krona 8.2031 8.4247Swiss Franc 0.9745 0.9589Thailand Baht 32.5900 –Turkish Lira 3.7905 3.5185

12. Direct Brokerage Services

During the period ending 31 December 2017 the ICAV did not utilise any direct brokerage services (year ending 30 June 2017: None).

13. Risk Exposure and Risk Management

The ICAV has appointed Legg Mason Investments (Europe) Limited as Investment Manager for the Fund. Legg Mason Investments (Europe) Limited has made the decision todelegate all responsibility for providing discretionary portfolio management services to the Fund, to a Sub-Investment Manager, and Risk Manager (“EnTrustPermal Ltd.”) ofthe Fund, EntrustPermal Ltd. provided that Investment Manager remains responsible to the Fund for the performance of its agreed upon obligations. EnTrustPermal Ltd. isresponsible for monitoring the Fund’s use of FDIs against regulatory limits and measuring the risks associated with FDI used by the Fund and their contribution to the Fund’soverall risk profile. The monitoring is done by EnTrustPermal Ltd. at the Sub-Adviser sleeve level and the overall Fund portfolio level. Day-to-day risk management of thefinancial instruments (including FDIs) held by the Fund is the responsibility of the EnTrustPermal Ltd. and Sub-Adviser.

19


Notes to Financial Statements – (continued)13. Risk Exposure and Risk Management – (continued)

EnTrustPermal Ltd. operates a risk management process on behalf of the Fund in relation to the Fund’s use of FDIs which allows EnTrustPermal Ltd. to measure, monitor andmanage various risks associated with FDIs and which is intended to ensure that the Fund’s FDI exposure remains within the limits described below. The risk managementprocess is described in a statement, a copy of which has been filed with the Central Bank, and which will be updated from time to time to include any additional FDIs whicha Sub-Adviser or EnTrustPermal Ltd. proposes to employ on behalf of the Fund (the “Risk Management Process”). Until such time as the Risk Management Process has beenupdated and cleared by the Central Bank, however, neither a Sub-Adviser nor EnTrustPermal Ltd. will use any FDI which is not for the time being included in the RiskManagement Process.

EnTrustPermal Ltd. pursuant to various sub-adviser agreements, delegates certain investment management responsibilities in relation to Portfolios to Sub-Advisersrepresenting distinct investment styles and expertise in an asset class.

The ICAV’s financial risk management objectives and policies continue to be consistent with those disclosed in the ICAV’s Annual Report and Audited Financial Statementsas at and for the financial period ended 30 June 2017.

Fair Value Estimation

The ICAV classifies fair value measurements using a fair value hierarchy that reflects the significance of the inputs used in making the measurements.

The fair value hierarchy has the following levels:

Level 1: The unadjusted quoted price in an active market for identical assets or liabilities that the entity can access at the measurement date.

Level 2: Inputs other than quoted prices included within Level 1 that are observable (ie developed using market data) for the asset or liability, either directly orindirectly.

Level 3: Inputs are unobservable (ie for which market data is unavailable) for the asset or liability.

The level in the fair value hierarchy within which the fair value measurement is categorised in its entirety is determined on the basis of the lowest level input that issignificant to the fair value measurement in its entirety. For this purpose, the significance of an input is assessed against the fair value measurement in its entirety. If a fairvalue measurement uses observable inputs that require significant adjustment based on unobservable inputs, that measurement is a Level 3 measurement. Assessing thesignificance of a particular input to the fair value measurement in its entirety requires judgement, considering factors specific to the asset or liability.

The determination of what constitutes “observable” requires significant judgement by the Investment Manager. The Investment Manager considers observable data to bethat market data that is readily available, regularly distributed or updated, reliable and verifiable, not proprietary, and provided by independent sources that are activelyinvolved in the relevant market.

For each class of assets and liabilities not measured at fair value in the Statement of Financial Position but for which fair value is disclosed, FRS 102 requires the ICAV todisclose the level within the fair value hierarchy which the fair value measurement would be categorised and a description of the valuation technique and inputs used in thetechnique.

Assets and liabilities not carried at fair value are carried at amortised cost; their carrying values are a reasonable approximation of fair value.

Cash and cash equivalents include deposits held with banks and other short-term investments in an active market and they are categorised as Level 2.

Receivable for investments sold and other receivables include the contractual amounts for settlement of trades and other obligations due to the ICAV. Payable forinvestments purchased and other payables represent the contractual amounts and obligations due by the ICAV for settlement of trades and expenses. All receivable andpayable balances are categorised as Level 2.

The puttable value of redeemable shares is calculated based on the net difference between total assets and all other liabilities of each Fund within the ICAV in accordancewith the Funds’ offering documentation. These shares are not traded on an active market. A demand feature is attached to these shares, as they are redeemable at theholders’ option and can be put back to the Funds at any dealing date for cash/assets equal to a proportionate share of the Fund’s NAV attributable to the share class.

The fair value is based on the amount payable on demand, discounted from the first date that the amount could be required to be paid. The impact of discounting in thisinstance is not material. As such, Level 2 is deemed to be the most appropriate categorisation for net assets attributable to holders of redeemable shares held.

All forward foreign exchange contracts are classified as Level 2 since they are valued using observable inputs but are not quoted in an active market.

The ICAV holds two bond investments classified within level 3, Peabody Energy Corp and CC Receivables Acquisition LLC with market value of US$2,998 (30 June 2016:none). There were no transfers between levels during the year ended 30 June 2017 and period ended 30 June 2016.

The following table analyses under the fair value hierarchy the Funds’ financial assets and financial liabilities measured at fair value at 31 December 2017 and 30 June 2017:

EnTrustPermal Alternative Income Strategy Fundas at 31 December 2017

(000’s)

EnTrustPermal Alternative Income Strategy Fundas at 30 June 2017

(000’s)

Level 1Bonds US$ – US$ –Equity Instruments 58,139 31,188Warrant 6 3Derivative assets held for trading 868 130Derivative liabilities held for trading (485) (967)

58,528 30,354

Level 2Bonds 335,435 243,409Equity Instruments – –Preferred Stock – 634Derivative assets held for trading 18,863 18,048Derivative liabilities held for trading (6,548) (2,873)

347,750 259,218

Level 3Bonds – US$ 2,998Equity Instruments – –Derivative assets held for trading – –Derivative liabilities held for trading – –

Total Investments US$406,278 US$292,570

20


Notes to Financial Statements – (continued)14. Significant Shareholders

The following tables detail the number of shareholders with significant holdings of at least 20 per cent of the ICAV and the percentage of that holding of the ICAV’s NAV asat 31 December 2017 and 30 June 2017.

Fund

Number ofsignificant

shareholdersTotal holding as at31 December 2017

Aggregate shareholdingas a % of the Fund

EnTrustPermal Alternative Income Strategy Fund 1 2,719,036 55.01

Fund

Number ofsignificant

shareholdersTotal holding as at

30 June 2017Aggregate shareholding

as a % of the Fund

EnTrustPermal Alternative Income Strategy Fund 1 2,509,734 68.88

15. Significant Events

There were no events during the period, which require adjustment to, or disclosure in the financial statements.

16. Segregated Liability

The ICAV is an umbrella fund with segregated liability between its sub-funds. As such, as a matter of Irish law the assets of each of the Funds will not be exposed to theliabilities of the ICAV’s other sub-funds. Notwithstanding the foregoing there can be no assurance that, should an action be brought against the ICAV in the court ofanother jurisdiction, the segregated nature of the sub-funds would necessarily be upheld. As at 31 December 2017 there was only one sub-fund launched in the ICAV(30 June 2017: one).

17. Subsequent Events

There were no events since the period end, which require adjustment to or disclosure in the financial statements.

18. Seasonal or cyclical changes

The Fund is not subject to seasonal or cyclical changes.

19. Approval of the Report

On 16 February 2018, the Semi-Annual Report and unaudited financial statements were presented to and noted by the Board of Directors and were approved for filing withthe Central Bank of Ireland and for circulation to the shareholders.

21


Statement of Major Portfolio Changes*


MAJOR PURCHASESCOST

(in 000’s)United States Treasury Bill 0.000% due 16/11/17 17,956Time Warner Inc 11,333United States Treasury Bill 0.000% due 15/02/18 9,969Akorn Inc 9,678Southwestern Energy Co 7.750% due 01/10/27 6,885Hyatt Hotel Portfolio Trust 2017-HYT2 5.625% due 09/08/32 4,985Aetna Inc 4,858Picard Groupe SAS 3.000% due 30/11/32 4,817NXP Semiconductors NV 4,815Ambac Assurance Corp 5.100% due 07/06/20 4,786JPMorgan Chase & Co 4.625% due 31/12/99 4,740Scripps Networks Interactive Inc 4,165Cabelas Inc 4,125Brocade Communications Systems Inc 4,013PowerShares Fundamental High Yield Corporate Bond Portfolio 3,815Zayo Group LLC 5.750% due 15/01/27 3,727CONSOL Energy Inc 11.000% due 15/11/2025 11.000%due 15/11/25 3,663Alere Inc 3,574Mclaren Finance PLC 5.000% due 01/08/22 3,566SMCP Group SAS 5.875% due 01/05/23 3,560CFG Investments 2017-1 Ltd 7.870% due 15/11/26 3,560

MAJOR SALESPROCEEDS

(in 000’s)United States Treasury Bill 0.000% due 16/11/2017 7,988Sprint Corp 7.875% due 15/09/23 5,332GLS Auto Receivables Trust 2016-1 9.130% due 18/01/22 4,326Regal Entertainment Group 3,920JPMorgan Chase & Co 2.200% due 22/10/19 3,752Zayo Group LLC 5.750% due 15/01/27 3,700Petra Diamonds US Treasury Plc 7.250% due 01/05/22 3,374Exeter Automobile Receivables Trust 2017-3 5.280%due 15/10/24 3,339Brocade Communications Systems Inc 3,048Netflix Inc 4.375% due 15/11/26 2,711First Franklin Mortgage Loan Trust 2004-FF7 3.127%due 25/09/34 2,650Intrum Justitia AB 2.750% due 15/07/22 2,522Citicorp Residential Mortgage Trust Series 2006-1 5.365%due 25/07/36 2,471Alternative Loan Trust 2005-J4 3.577% due 25/07/35 2,464GLS Auto Receivables Trust 2015-1 9.790% due 15/10/25 2,350California Resources Corp 8.000% due 15/12/22 2,350Alere Inc 2,343United States Treasury Bill 0.000% due 04/01/18 1,990Royal Bank of Scotland Group Plc 7.640 % due 31/12/49 1,654Picard Groupe SAS 3.000% due 30/11/2023 1,645Time Warner Inc 1,638Petra Diamonds US Treasury PLC 7.250% due 01/05/22 1,633Braskem Finance Ltd 5.750% due 15/04/21 1,626

* Major portfolio changes are defined as the aggregate purchases of a security exceeding one per cent of the total value of purchases for the year and aggregate salesof a security exceeding one per cent of the total value of sales for the year. At a minimum, the 20 largest purchases and 20 largest sales must be shown.

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General Data Protection Regulation

Effective 25 May 2018, there will be changes to the rules applicable to the processing of personal data (including Shareholder data) by the ICAV. The purpose of thisdisclosure is to notify Shareholders of their rights as data subjects and to explain how and why the ICAV and its service providers hold and process personal data.

By completing the application form for ICAV shares, investors provide personal information, which may constitute “personal data” within the meaning of the DataProtection Legislation1. The following indicates the purposes for which Shareholders’ personal data may be used by the ICAV and the legal bases for such uses:

• to manage and administer the Shareholder’s holding in the ICAV and any related accounts on an ongoing basis as required for the performance of the contractbetween the ICAV and the Shareholder and to comply with legal and regulatory requirements;

• to carry out statistical analysis (including data profiling) and market research in the ICAV’s legitimate business interest;

• for any other specific purposes where the Shareholder has given specific consent. Such consent may be subsequently withdrawn by the Shareholder at any time,without affecting the lawfulness of processing based on consent before its withdrawal;

• to comply with legal, taxation and regulatory obligations applicable to the Shareholder and/or the ICAV from time to time, including applicable anti-money launderingand counter terrorist legislation. In particular, in order to comply with the Common Reporting Standard (as implemented in Ireland by Section 891E, Section 891F andSection 891G of the Taxes Consolidation Act 1997 (as amended) and regulations made pursuant to those sections), Shareholders’ personal data (including financialinformation) may be shared with the Irish tax authorities and the Revenue Commissioners. They in turn may exchange information (including personal data andfinancial information) with foreign tax authorities (including foreign tax authorities located outside the European Economic Area). Please consult the AEOI (AutomaticExchange of Information) webpage on www.revenue.ie for further information in this regard;

• for disclosure or transfer, whether in Ireland or countries outside Ireland, including without limitation the United States, which may not have the same data protectionlaws as Ireland, to third parties including financial advisers, regulatory bodies, auditors, technology providers or to the ICAV and its delegates and its or their dulyappointed agents and any of their respective related, associated or affiliated companies for the purposes specified above as required for the performance of thecontract between the ICAV and the Shareholder or as needed in the ICAV’s legitimate business interests.

Shareholders’ personal data may be disclosed by the ICAV to its delegates and service providers (including Investment Managers, Sub-Investment Managers, Distributors,Shareholder Servicing Agents, the Administrator and the Depositary), its duly authorised agents and any of its respective related, associated or affiliated companies,professional advisors, regulatory bodies, auditors and technology providers for the same purpose(s).

Shareholders’ personal data may be transferred to countries which may not have the same or equivalent data protection laws as Ireland. If such transfer occurs, the ICAVwill ensure that such processing of such personal data complies with Data Protection Legislation and, in particular, that appropriate measures are in place, such as enteringinto Model Contractual Clauses (as published by the European Commission) or ensuring that the recipient is Privacy Shield certified, if appropriate. If you require moreinformation on the means of transfer of their data or a copy of the relevant safeguards, please contact the Administrator, by email at [email protected], byphone at +353 1 242 5568 or by fax at +353 1 438 9582.

Pursuant to the Data Protection Legislation, Shareholders have several rights which they may exercise in respect of their personal data, namely:

• the right of access to personal data held by the ICAV;

• the right to amend and rectify any inaccuracies in the personal data held by the ICAV;

• the right to erase the personal data held by the ICAV;

• the right to data portability of the personal data held by the ICAV; and

• the right to request restriction of the processing of the personal data held by the ICAV.

In addition, shareholders have the right to object to processing of personal data by the ICAV.

The above rights will be exercisable by shareholders subject to limitations as provided for in the Data Protection Legislation. Shareholders may make a request to the ICAV toexercise these rights by contacting the Administrator, by email at [email protected], by phone at +353 1 242 5568 or by fax at +353 1 438 9582.

Please note that Shareholders’ personal data will be retained by the ICAV for the duration of their investment and otherwise in accordance with the ICAV’s legal obligationsincluding, but not limited to, the ICAV’s record retention policy.

The ICAV is a data controller within the meaning of the Data Protection Legislation and undertakes to hold any personal information provided by shareholders in confidenceand in accordance with the Data Protection Legislation. Note that Shareholders have the right to lodge a complaint with the Office of the Data Protection Commissioner ifthey believe that the processing of their data has been unlawful.

1 “Data Protection Legislation” means the Irish Data Protection Act, 1988 and 2003, the EU Data Protection Directive 95/46/EC, the EU ePrivacy Directive 2002/58/EC (asamended) and any relevant transposition of, or successor or replacement to, those laws (including, when they come into force, the General Data Protection Regulation(Regulation (EU) 2016/679) and the successor to the ePrivacy Directive).

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Financial Information – Total Expense Ratios (TER)

Total Expense Ratios (“TER”)

The Total Expense Ratio (“TER”) was calculated according to currently valid guidelines of the Swiss Funds & Asset Management Association SFAMA.

The key figures were as follows:

Share Class TER TER

31 December2017

30 June2017*

Class A US$ Accumulating 2.61% 2.66%Class A US$ Distributing Plus (Q) 2.64% 2.66%Class A Accumulating Euro (Hedged) 2.65% 2.70%Class A Euro Distributing Plus (e) (M) – 2.71%Class A Euro Distributing Plus (Q) (Hedged) 2.67% 2.71%Class E US$ Accumulating – 2.91%Class E Euro Accumulating (Hedged) 2.50% –Class R US$ Accumulating 1.61% 1.66%Class R US$ Distributing Plus (Q) 1.61% 1.66%Class R Euro Accumulating (Hedged) 1.65% 1.70%Class R Euro Distributing Plus (Q) (Hedged) 1.66% 1.71%Class R GBP Distributing Plus (Q) (Hedged) 1.67% 1.70%Class S US$ Accumulating 1.69% 1.76%Class S Euro Accumulating E (Hedged) 1.74% 1.81%Class X Euro Accumulating (Hedged) 2.05% 2.09%Premier Class US$ Accumulating 1.86% 1.90%Premier Class US$ Distributing Plus (Q) 1.85% 1.90%Premier Class Accumulating Euro (Hedged) 1.89% 1.93%Premier Class Euro Distributing Plus (Q) (Hedged) 1.91% 1.96%Premier Class CHF Accumulating (Hedged) 1.94% 1.96%

1) The Total Expense Ratio (“TER”) is calculated according to the following formula: (total expenses / AF)* 100; AF (= average fund assets)* The TER figures disclosed in the annual financial statements for the year ended 30 June 2017 showed the maximum expense caps. The above shows the actual TER as

at 30 June 2017.

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