UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM N-CSR

CERTIFIED SHAREHOLDER REPORT OF REGISTERED

MANAGEMENT INVESTMENT COMPANIES

Investment Company Act file number 811-05387

Franklin Mutual Series Funds

(Exact name of registrant as specified in charter)

101 John F. Kennedy Parkway, Short Hills, NJ 07078-2705

(Address of principal executive offices) (Zip code)

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

(Name and address of agent for service)

Registrant’s telephone number, including area code: (210) 912-2100

Date of fiscal year end: 12/31

Date of reporting period: 12/31/19

Item 1. Reports to Stockholders.

    Sign up for electronic delivery at franklintempleton.com/edelivery

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

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

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

FRANKLIN TEMPLETON

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

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

Dear Franklin Mutual Beacon Fund Shareholder:

As we enter 2020, the factors that lifted stocks to record highs in 2019—accommodative central bank monetary policies and progress on a proposed trade deal between the U.S. and China—continue to be sources of optimism for growth. The near-term threat of recession has eased, with the U.S. economy showing resilience as low unemployment and moderately rising wages have encouraged consumer spending, which has supported the expansion. In contrast, business investment and exports were weak in 2019, but there are nascent signs of increasing industrial activity.

Tariffs, trade battles and geopolitical conflict may continue to dominate headlines in 2020 and account for a disproportionate source of market volatility. The U.S. and China agreed in principle to a phase-one trade agreement in late 2019. However, a re-escalation of the tariff dispute between the world’s two largest economies is not out of the question, as negotiations on a phase-two trade agreement are scheduled to start after the anticipated phase-one signing ceremony in January. There was clarity on Brexit as British voters delivered a resounding election victory to Prime Minister Boris Johnson and his Conservative Party, which should pave the way for a conclusive exit agreement. The terms of U.K. departure, however, must still be finalized. Late in the period, tensions in the Middle East were on the rise, following the death of an American contractor in Iraq in late December and a retaliatory U.S. military strike two days later.

During the period, we took advantage of market turbulence to seek out a larger number of stocks whose risk/reward profiles turned more favorable. Subsequently, we used the market appreciation to exit from or trim select positions that reached or exceeded our estimates of intrinsic value. Market volatility continues to present occasional opportunities in

individual stocks, and in certain sectors, notably those considered to be economically sensitive. We continue to focus on situations in which company-specific actions are more important than economic improvement in driving shareholder value.

Valuation is an essential factor in our analysis, and we always ask ourselves if current and potential investments represent an attractive balance of risk and reward. Amid the all-time highs reached by the Standard & Poor’s^® 500 Index (S&P 500^®) during the period, we maintained our focus on individual securities and the prospects for each business in the context of its valuation and the backdrop of potential political and economic risks.

We continue to adhere to a bottom-up stock selection process that is disciplined, driven by rigorous fundamental analysis, and that attempts to limit downside risk. In our view, actively investing in underappreciated and misunderstood companies with identifiable catalysts for unlocking shareholder value can offer meaningful upside potential and a degree of downside protection in periods of financial market turbulence.

We recognize the important role of financial advisors in today’s markets and encourage investors to continue to seek their advice. Amid changing markets and economic conditions, we are confident investors with a well-diversified portfolio and a patient, long-term outlook will 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 12 months considering the

Not FDIC Insured | May Lose Value | No Bank Guarantee 

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economic environment and other factors. Please remember all securities markets fluctuate, as do mutual fund share prices.

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

Sincerely,

Peter A. Langerman

Chairman, President and Chief Executive Officer

Franklin Mutual Advisers, LLC

This letter reflects our analysis and opinions as of December 31, 2019, unless otherwise indicated. The information is not a complete analysis of every aspect of any market, country, industry, security or fund. Statements of fact are from sources considered reliable.

 Contents

Annual Report
Franklin Mutual Beacon Fund	3
Performance Summary	8
Your Fund’s Expenses	11
Financial Highlights and Statement of Investments	12
Financial Statements	23
Notes to Financial Statements	28
Report of Independent Registered Public Accounting Firm	41
Tax Information	42
Board Members and Officers	43
Shareholder Information	48
Visit franklintempleton.com for fund updates, to access your account, or to find helpful financial planning tools.

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ANNUAL REPORT

Franklin Mutual Beacon Fund

This annual report for Franklin Mutual Beacon Fund covers the fiscal year ended December 31, 2019.

Your Fund’s Goal and Main Investments

The Fund seeks capital appreciation, which may occasionally be short term, with income as a secondary goal. Under normal market conditions, the Fund invests primarily in equity securities of U.S. and foreign companies that we believe are available at market prices less than their intrinsic value. The equity securities in which the Fund invests are primarily common stock, with a current focus on mid- and large-cap companies. To a lesser extent, the Fund also invests in merger arbitrage securities and the debt and equity of distressed companies. The Fund may invest a substantial portion, potentially up to 100% of its assets, in foreign securities, which may include sovereign debt and participations in foreign government debt. The Geographic Composition bar chart on this page lists the leading countries where the Fund invests.

Performance Overview

The Fund’s Class Z shares posted a +24.96% cumulative total return for the 12 months ended December 31, 2019. In comparison, the Fund’s benchmark, the MSCI World Index (USD), which tracks stock performance in global developed markets, posted a +28.40% total return.¹ You can find more of the Fund’s performance data in the Performance Summary beginning on page 8.

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

Economic and Market Overview

Global developed and emerging market stocks, as measured by the MSCI All Country World Index (USD), posted a +27.30% total return during the 12 months ended December 31, 2019.¹ Although global economic growth

Geographic Composition*

Based on Total Net Assets as of 12/31/19

*Figures are stated as a percentage of total and may not equal 100% or may be negative due to rounding, use of any derivatives, unsettled trades or other factors. The Fund held 39.6% of total net assets in foreign securities.

slowed from 2018, interest-rate cuts from many central banks and the easing of trade tensions near period-end contributed to the generally positive environment for equities worldwide. Reflecting investor optimism and slowing but resilient economic growth, stocks advanced in every major region of the globe.

In the U.S., solid economic growth also supported equities, as healthy consumer spending and a strong labor market kept the economy afloat. The unemployment rate fell during the year, reaching 3.5% in September, November and December 2019, the lowest recorded unemployment rate in 50 years.² Wages also grew, albeit at a moderate pace, and inflation remained persistently low. In addition, deficit spending by the U.S. government boosted current growth at the expense of long-term debt. Despite the strength in the

1. Source: Morningstar.

The index is unmanaged and includes reinvestment of any income or distributions. It does not reflect any fees, expenses or sales charges. One cannot invest directly in an index, and an index is not representative of the Fund’s portfolio.

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

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 17.

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consumer sector, some parts of the economy struggled, particularly heavy industry. Annual industrial production contracted late in the reporting period, manufacturing output stalled and capital spending declined.

The U.S. Federal Reserve (Fed) provided a substantial boost to equity markets early in the reporting period as it shifted to a more accommodative monetary policy. In January 2019, the Fed signaled the end of its tightening cycle and cut the federal funds rate three times thereafter, lowering it to a range of 1.50%–1.75%. Stocks responded positively to the interest-rate cuts and gained further in December 2019 after the Fed indicated it would likely leave interest rates unchanged in 2020.

Growth slowed overall in the eurozone, particularly in Germany and Italy. Germany, which is heavily reliant on exports, was adversely affected by the trade conflict between the U.S. and China and the resulting slowdown in global trade. In Italy, political uncertainty and budget concerns caused the country’s annual gross domestic product (GDP) growth to stall in 2019’s first quarter before modestly improving in the second and third quarters. Despite sluggish economic conditions, European developed market equities, as measured by the MSCI Europe Index-NR (Local Currency), posted a +23.75% total return for the 12-month period, as easing trade tensions buoyed investor optimism and an electoral victory by the Conservative Party in the U.K. alleviated uncertainty surrounding Brexit.³ Although the European Central Bank left its headline refinancing rate unchanged, it lowered the deposit rate and restarted its bond-buying stimulus program, further supporting stocks.

Economic growth in Asia was relatively solid overall, despite slowdowns in several large emerging market countries, such as China and India. Japan’s economy grew amid the Bank of Japan’s sizable stimulus program. The trade war between the U.S. and China provided the backdrop for Asian stocks, which rose and fell in sync with investor sentiment regarding a trade deal. A phase one trade agreement between the two countries reached in December 2019 propelled Asian developed and emerging market stocks, which ultimately ended with a +19.23% total return over the 12-month period, as measured by the MSCI All Country Asia Index (USD).⁴

Emerging market stocks overall experienced several sharp selloffs and subsequent rebounds throughout the reporting period before ending with gains. In aggregate, economic growth slowed somewhat from 2018 but remained solid,

although there was some variation among individual countries. Many central banks in emerging markets cut interest rates throughout the reporting period, which, along with resilient GDP growth, provided a supportive environment for equities. Russian stocks posted the highest returns among emerging markets as the threat of further sanctions receded and a solid fiscal environment reassured investors. Overall, global emerging markets, as measured by the MSCI Emerging Markets Index (USD), posted a +18.90% total return for the 12-month period.¹

Investment Strategy

At Franklin Mutual Series, we are committed to our distinctive value approach to investing, which we believe can generate above-average risk-adjusted returns over time for our shareholders. Our major investment strategy is investing in undervalued stocks. When selecting undervalued equities, we are attracted to what we believe are fundamentally strong companies with healthy balance sheets, high-quality assets, substantial free cash flow and shareholder-oriented management teams and whose stocks are trading at discounts to our assessment of the companies’ intrinsic or business value. We also look for asset-rich companies whose shares may be trading at depressed levels due to concerns over short-term earnings disappointments, litigation, management strategy or other perceived negatives. This strict value approach is not only intended to improve the likelihood of capital appreciation, but also reduces the risk of substantial declines, in our opinion. While the vast majority of our undervalued equity investments are made in publicly traded companies globally, we may invest occasionally in privately held companies as well.

To a lesser extent, we complement this more traditional investment strategy with two others. One is distressed investing, a highly specialized field that has proven quite profitable during certain periods over the years. Distressed investing is complex and can take many forms. The most common distressed investment the Fund undertakes is the purchase of financially troubled or bankrupt companies’ debt at a substantial discount to face value. After the financially distressed company is reorganized, often in bankruptcy court, the old debt is typically replaced with new securities issued by the financially stronger company.

The other piece of our investment strategy is participating in arbitrage situations, another highly specialized field. When companies announce proposed mergers or takeovers,

3. Source: Morningstar. Net Returns (NR) include income net of tax withholding when dividend are paid.

4. Source: MSCI.

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commonly referred to as deals, the target company may trade at a discount to the bid it ultimately accepts. One form of arbitrage involves purchasing the target company’s stock when it is trading below the value we believe it would receive in a deal. In keeping with our commitment to a relatively conservative investment approach, we typically focus our arbitrage efforts on announced deals, and avoid rumored deals or other situations we consider relatively risky. In addition, it is our practice to hedge the Fund’s currency exposure when we deem it advantageous for our shareholders.

What is meant by “hedge”?

To hedge an investment is to take a position intended to offset potential losses that may be incurred by a companion financial instrument. Hedging an investment may also offset potential gains.

Manager’s Discussion

The end of a decade is a natural time for reflection about the years that have just passed and to look ahead to what the next 10 might have in store. Across Wall Street, we see many prognostications, and while we are not in the forecasting business, we do allow ourselves to think about investment opportunities over such an extended time period. But experience has taught us that while trying to predict the exact course of markets and/or economic and political events that will drive them may be fun, it is not all that useful.

As 2010 began, the global economy was still recovering from the Global Financial Crisis. The U.S. government owned significant portions of the banking and automotive sectors. The Fed had already started quantitative easing (QE), with QE 2 and QE 3 still to come. In Europe, concerns about Greece’s finances were emerging, and in China the effects of 2009’s massive stimulus programs were starting to take hold.

Over the subsequent years we saw ongoing, global QE, culminating in trillions of dollars of debt yielding negative interest rates. The European Union (EU) was in continuous upheaval, with Greece threatening to leave, but eventually staying in the eurozone; the U.K. pursuing and achieving Brexit; and ongoing strain between core members Germany, France, Italy and Spain. In the U.S., average annual economic growth was restrained and finished the decade

Top 10 Sectors/Industries    

Based on Equity Securities as of 12/31/19    

	% of Total Net Assets
Pharmaceuticals	12.9%
Banks	9.3%
Software	8.1%
Technology Hardware, Storage & Peripherals	6.6%
Media	5.6%
Health Care Equipment & Supplies	3.9%
Electrical Equipment	3.7%
Tobacco	3.7%
Textiles, Apparel & Luxury Goods	3.5%
Entertainment	3.4%

below 2%, trailing the minimum 3% expectation of prior decades. Strong corporate profits and lower corporate tax rates were bright spots.

Equity markets delivered a very good decade—one of the best in history—with the MSCI World Index (USD) and the S&P 500 posting average annual total returns of +10.08% and +13.56%, respectively.⁵ During the decade, Franklin Mutual Beacon Fund, Class Z posted an average annual total return of +9.81%, a solid absolute return that nonetheless lagged the MSCI World Index (USD), its benchmark. The Fund’s value strategy, which seeks to identify mispriced securities and limit downside risk, was out of favor in an environment that generally encouraged investors to assume more risk. Conversely, the Fund’s Class Z shares posted an average annual total return of +5.36% in the prior decade, compared with +0.23% for the MSCI World Index (USD).¹ Our active investment approach focusing on individual opportunities was more conducive to the prior decade’s greater volatility.

In our view, going forward we expect more political and monetary uncertainty and economic growth in unexpected places. Corporate profits will have good years and bad years. Some industries will be massively disrupted, while others will find a way to adjust and prosper, even within the context of artificial intelligence and machine learning. Recent events, such as the coronavirus outbreak, have caused, and may continue to cause, uncertainty and volatility in the Chinese economy, potentially leading to vulnerability in 2020 global growth expectations. As for investment positioning, we

5. 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.

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

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intend to avoid forecasts that would lead us to make the Fund’s success dependent on a specific set of outcomes. Rather, we will seek to continue with our time-tested value process and complement it with new tools that enhance our security evaluation and selection process. To that end, we have integrated risk and quantitative portfolio analysis tools that provide us with fresh insights about performance, and help us identify companies and securities that we believe satisfy our investors’ goals of risk-adjusted returns that are not wholly dependent on any one economic or political scenario.

Fund Performance

Turning to Fund performance, top positive contributors included Charter Communications, JPMorgan Chase and Novartis. JPMorgan Chase and Novartis are listed among the Fund’s largest positions in the Top 10 Equity Holdings table on this page.

Shares of U.S.-based cable operator Charter Communications surged after the company reported operating and financial results that were broadly ahead of consensus estimates. Capital expenditures were lower than expected and drove free cash flow, which was used during the period to buy back $3.1 billion of the company’s stock. The market was anticipating share repurchases totaling $2.25 billion. Revenue accelerated 5.1% compared with consensus forecasts of 4.5%. The increased revenue, however, did not reflect the impact of a broad-based increase in per subscriber fees implemented during the period, which could drive revenue growth and margin expansion in 2020. According to the company’s management, there has not been a meaningful decrease in customers as a result of the higher per subscriber fees.

The stock price of U.S.-based banking company JPMorgan Chase trended up during the year but rose sharply after it reported third-quarter earnings that beat consensus estimates. The results were broad based, with stronger-than-expected revenues from the company’s consumer and investment banking divisions. A reduction in net interest income, which declines when interest rates fall, was less than expected, mitigated by revenue from JPMorgan Chase’s diversified banking operation.

The market responded positively to Novartis’ announcement of the official process and dates for its tax-free spinoff of Alcon, its eye care device and consumer products business. In addition, the Switzerland-based drug maker made good progress on its pipeline and delivered solid operational results. The company’s share price pulled back later in the period due to concerns about pharmaceutical drug pricing

Top 10 Equity Holdings    

12/31/19    

Company Sector/Industry, Country	% of Total Net Assets
Novartis AG	4.0%
Pharmaceuticals, Switzerland
Medtronic PLC	3.9%
Health Care Equipment & Supplies, U.S.
GlaxoSmithKline PLC	3.8%
Pharmaceuticals, U.K.
Sensata Technologies Holding PLC	3.7%
Electrical Equipment, U.S.
Samsung Electronics Co. Ltd.	3.7%
Technology Hardware, Storage & Peripherals, South Korea
British American Tobacco PLC	3.7%
Tobacco, U.K.
The Walt Disney Co.	3.4%
Entertainment, U.S.
Wells Fargo & Co.	3.4%
Banks, U.S.
The Hartford Financial Services Group Inc.	3.2%
Insurance, U.S.
JPMorgan Chase & Co.	3.2%
Banks, U.S.

and fallout from a subsidiary’s data manipulation regarding gene therapy Zolgensma. Zolgensma remains on the market, although the U.S. Food and Drug Administration was critical of the delay in informing them of the issue. We believe Novartis’ innovative product pipeline remains underappreciated and that the company’s management has room to further improve operating margins.

During the period under review, Fund investments that detracted from performance included Indiabulls Housing Finance, Baidu and Dufry (not held at period-end).

Shares of Indiabulls Housing Finance, an India-based consumer finance company, declined beginning in June following an unsubstantiated allegation of fraudulent loans, which the company vigorously disputed. After declining dramatically, the company’s stock price recovered modestly in late 2019 after India’s Ministry of Corporate Affairs filed an affidavit in the Delhi High Court stating that the five loans, which were the subject of the false claim were repaid or are standard accounts.

Shares of China-based internet search firm Baidu slid after the company posted a 2019 first-quarter loss, attributable to a weaker Chinese economy and increased governmental regulation that hindered advertising sales growth. Earnings

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improved in subsequent quarters, but the overhang from the U.S.-China trade dispute hampered the stock price.

Management continues to invest heavily in its video-streaming platform and other initiatives, such as artificial intelligence. We believe these investments may help Baidu further diversify its business into new growth markets.

The share price of Dufry, a Switzerland-based operator of global duty-free and duty-paid stores in airports and other transportation-related facilities, fell earlier in 2019 due to foreign exchange and economic pressures, particularly related to its business in Latin America. Dufry’s stock rallied in November 2019 after the company beat third-quarter consensus estimates for revenue and free cash flow.

During the period, the Fund held currency forwards and futures seeking to hedge most of the currency risk of the portfolio’s non-U.S. dollar investments. The hedges had a modestly positive overall impact on the Fund’s performance.

What is a currency forward?

A currency forward is a direct agreement between the Fund and a counterparty to buy or sell a foreign currency in exchange for another currency at a specific exchange rate on a future date.

What is a future?

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

As fellow shareholders, we found recent relative performance disappointing, but it is not uncommon for our strategy to lag the equity markets at times. We remain committed to our disciplined, value investment approach as we seek to generate attractive, long-term, risk-adjusted returns for shareholders.

Thank you for your participation in Franklin Mutual Beacon Fund. We look forward to continuing to serve your investment needs.

	Christian Correa, CFA   Co-Portfolio Manager
	Mandana Hormozi   Co-Portfolio Manager
	Aman Gupta, CFA   Co-Portfolio Manager

The foregoing information reflects our analysis, opinions and portfolio holdings as of December 31, 2019, the end of the reporting period. The way we implement our main investment strategies and the resulting portfolio holdings may change depending on factors such as market and economic conditions. These opinions may not be relied upon as investment advice or an offer for a particular security. The information is not a complete analysis of every aspect of any market, country, industry, security or the Fund. Statements of fact are from sources considered reliable, but the investment manager makes no representation or warranty as to their completeness or accuracy. Although historical performance is no guarantee of future results, these insights may help you understand our investment management philosophy.

CFA^® is a trademark owned by CFA Institute.

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Performance Summary as of December 31, 2019

The performance table and graphs do 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 12/31/19¹

Cumulative total return excludes sales charges. Average annual total return includes maximum sales charges. Sales charges will vary depending on the size of the investment and the class of share purchased. The maximum is 5.50% and the minimum is 0%. Class A: 5.50% maximum initial sales charge. For other share classes, visit franklintempleton.com.

Share Class	Cumulative  Total Return2		Average Annual    Total Return3
Z
1-Year		+24.96%		+24.96%
5-Year		+46.00%		+7.86%
10-Year		+154.88%		+9.81%
A4
1-Year		+24.69%		+17.86%
5-Year		+44.23%		+6.39%
10-Year		+147.92%		+8.89%

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 10 for Performance Summary footnotes.

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PERFORMANCE SUMMARY

Total Return Index Comparison for a Hypothetical $10,000 Investment¹

Total return represents the change in value of an investment over the periods shown. It includes any applicable maximum sales charge, Fund expenses, account fees and reinvested distributions. The unmanaged index includes reinvestment of any income or distributions. It differs from the Fund in composition and does not pay management fees or expenses. One cannot invest directly in an index.

Class Z (1/1/10–12/31/19)

Class A (1/1/10–12/31/19)

See page 10 for Performance Summary footnotes.

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PERFORMANCE SUMMARY

Distributions (1/1/19–12/31/19)

Share Class	Net Investment Income		Short-Term             Capital Gain		Long-Term         Capital Gain		Total
Z		$0.3613		$0.1106		$0.2819		$0.7538
A		$0.3228		$0.1106		$0.2819		$0.7153
C		$0.1809		$0.1106		$0.2819		$0.5734
R		$0.2850		$0.1106		$0.2819		$0.6775
R6		$0.3714		$0.1106		$0.2819		$0.7639

Total Annual Operating Expenses⁶

Share Class	With Fee Waiver		Without Fee Waiver
Z		0.81%		0.81%
A		1.06%		1.06%

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

All investments involve risks, including possible loss of principal. Value securities may not increase in price as anticipated or may decline further in value. Special risks are associated with foreign investing, including currency fluctuations, economic instability and political developments. Because the Fund may invest its assets in companies in a specific region, including Europe, it is subject to greater risks of adverse developments in that region and/or the surrounding regions than a fund that is more broadly diversified geographically. Current political and financial uncertainty surrounding the European Union may increase market volatility and the economic risk of investing in companies in Europe. Smaller-company stocks have exhibited greater price volatility than larger-company stocks, particularly over the short term. The Fund’s investments in companies engaged in mergers, reorganizations or liquidations also involve special risks as pending deals may not be completed on time or on favorable terms. The Fund may invest in lower-rated bonds, which entail higher credit risk. The Fund’s prospectus also includes a description of the main investment risks.

1. The Fund has a fee waiver associated with any investment it makes in a Franklin Templeton money fund and/or other Franklin Templeton fund, contractually guaranteed through 4/30/20. Fund investment results reflect the fee waiver; without this waiver, 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. Source: Morningstar. The MSCI World Index (USD) is a free float-adjusted, market capitalization-weighted index designed to measure equity market performance in global developed markets.

6. 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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Your Fund’s Expenses

As a Fund shareholder, you can incur two types of costs: (1) transaction costs, including sales charges (loads) on Fund purchases and redemptions; and (2) ongoing Fund costs, including management fees, distribution and service (12b-1) fees, and other Fund expenses. All mutual funds have ongoing costs, sometimes referred to as operating expenses. The table below shows ongoing costs of investing in the Fund and can help you understand these costs and compare them with those of other mutual funds. The table assumes a $1,000 investment held for the six months indicated.

Actual Fund Expenses

The table below provides information about actual account values and actual expenses in the columns under the heading “Actual.” In these columns the Fund’s actual return, which includes the effect of Fund expenses, is used to calculate the “Ending Account Value” for each class of shares. You can estimate the expenses you paid during the period by following these steps (of course, your account value and expenses will differ from those in this illustration): Divide your account value by $1,000 (if your account had an $8,600 value, then $8,600 ÷ $1,000 = 8.6). Then multiply the result by the number in the row for your class of shares under the headings “Actual” and “Expenses Paid During Period” (if Actual Expenses Paid During Period were $7.50, then 8.6 x $7.50 = $64.50). In this illustration, the actual expenses paid this period are $64.50.

Hypothetical Example for Comparison with Other Funds

Under the heading “Hypothetical” in the table, information is provided about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. This information may not be used to estimate the actual ending account balance or expenses you paid for the period, but it can help you compare ongoing costs of investing in the Fund with those of other funds. To do so, compare this 5% hypothetical example for the class of shares you hold with the 5% hypothetical examples that appear in the shareholder reports of other funds.

Please note that expenses shown in the table are meant to highlight ongoing costs and do not reflect any transactional costs. Therefore, information under the heading “Hypothetical” is useful in comparing ongoing costs only, and will not help you compare total costs of owning different funds. In addition, if transactional costs were included, your total costs would have been higher.

		Actual		Hypothetical
		(actual return after expenses)		(5% annual return before expenses)
			Expenses		Expenses	Net
	Beginning	Ending	Paid During	Ending	Paid During	Annualized
Share	Account	Account	Period	Account	Period	Expense
Class	Value 7/1/19	Value 12/31/19	7/1/19–12/31/191, 2	Value 12/31/19	7/1/19–12/31/191, 2	Ratio2
Z	$1,000	$1,095.90	$4.23	$1,021.17	$ 4.08	0.80%
A	$1,000	$1,095.10	$5.54	$1,019.91	$ 5.35	1.05%
C	$1,000	$1,090.50	$9.48	$1,016.13	$ 9.15	1.80%
R	$1,000	$1,093.20	$6.86	$1,018.65	$ 6.61	1.30%
R6	$1,000	$1,096.50	$3.91	$1,021.48	$ 3.77	0.74%

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 184/365 to reflect the one-half year period.

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

franklintempleton.com Annual Report         11

FRANKLIN MUTUAL SERIES FUNDS

Financial Highlights

Franklin Mutual Beacon Fund

				Year Ended December 31,
	2019			2018			2017			2016			2015
Class Z
Per share operating performance (for a share outstanding throughout the year)
Net asset value, beginning of year		$13.76			$16.61			$15.30			$14.30			$16.59
Income from investment operationsa:
Net investment incomeb		0.33			0.29			0.29			0.37	c		0.29
Net realized and unrealized gains (losses)		3.06			(1.68	)		1.90			1.93			(0.99	)
Total from investment operations		3.39			(1.39	)		2.19			2.30			(0.70	)
Less distributions from:
Net investment income		(0.36	)		(0.31	)		(0.31	)		(0.37	)		(0.37	)
Net realized gains		(0.39	)		(1.15	)		(0.57	)		(0.93	)		(1.22	)
Total distributions		(0.75	)		(1.46	)		(0.88	)		(1.30	)		(1.59	)
Net asset value, end of year		$16.40			$13.76			$16.61			$15.30			$14.30
Total return		24.96%			(8.24)%			14.39%			16.11%			(4.14)%
Ratios to average net assets
Expensesd,e		0.81%	f		0.80%	f		0.78%			0.80%			0.84%	f
Expenses incurred in connection with securities sold short		0.02%			0.01%			—%			0.01%			0.04%
Net investment income		2.11%			1.77%			1.78%			2.48%	c		1.73%
Supplemental data
Net assets, end of year (000’s)		$2,600,744			$2,271,217			$2,700,327			$2,564,120			$2,420,165
Portfolio turnover rate		30.72%			47.20%			24.80%			30.94%			35.80%

^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.

^cNet investment income per share includes approximately $0.10 per share related to income received in the form of special dividends in connection with certain Fund holdings. Excluding this amount, the ratio of net investment income to average net assets would have been 1.81%.

^dIncludes 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(d).

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

^fBenefit of waiver and payments by affiliates rounds to less than 0.01%.

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

FRANKLIN MUTUAL SERIES FUNDS

FINANCIAL HIGHLIGHTS

Franklin Mutual Beacon Fund (continued)

				Year Ended December 31,
	2019			2018			2017			2016			2015
Class A
Per share operating performance (for a share outstanding throughout the year)
Net asset value, beginning of year		$13.63			$16.47			$15.18			$14.20			$16.47
Income from investment operationsa:
Net investment incomeb		0.29			0.25			0.25			0.33	c		0.24
Net realized and unrealized gains (losses)		3.03			(1.67	)		1.87			1.91			(0.97	)
Total from investment operations		3.32			(1.42	)		2.12			2.24			(0.73	)
Less distributions from:
Net investment income		(0.32	)		(0.27	)		(0.26	)		(0.33	)		(0.32	)
Net realized gains		(0.39	)		(1.15	)		(0.57	)		(0.93	)		(1.22	)
Total distributions		(0.71	)		(1.42	)		(0.83	)		(1.26	)		(1.54	)
Net asset value, end of year		$16.24			$13.63			$16.47			$15.18			$14.20
Total returnd		24.69%			(8.49)%			14.09%			15.80%			(4.33)%
Ratios to average net assets
Expensese,f		1.06%	g		1.05%	g		1.03%			1.05%			1.12%	g
Expenses incurred in connection with securities sold short		0.02%			0.01%			—%			0.01%			0.04%
Net investment income		1.86%			1.52%			1.53%			2.23%	c		1.45%
Supplemental data
Net assets, end of year (000’s)		$1,028,482			$890,294			$983,048			$992,306			$1,019,568
Portfolio turnover rate		30.72%			47.20%			24.80%			30.94%			35.80%

^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.

^cNet investment income per share includes approximately $0.10 per share related to income received in the form of special dividends in connection with certain Fund holdings. Excluding this amount, the ratio of net investment income to average net assets would have been 1.56%.

^dTotal return does not reflect sales commissions or contingent deferred sales charges, if applicable.

^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(d).

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

^gBenefit of waiver and payments by affiliates rounds to less than 0.01%.

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

FRANKLIN MUTUAL SERIES FUNDS

FINANCIAL HIGHLIGHTS

Franklin Mutual Beacon Fund (continued)

				Year Ended December 31,
	2019			2018			2017			2016			2015
Class C
Per share operating performance (for a share outstanding throughout the year)
Net asset value, beginning of year		$13.65			$16.34			$15.06			$14.10			$16.36
Income from investment operationsa:
Net investment incomeb		0.17			0.13			0.12			0.22	c		0.12
Net realized and unrealized gains (losses)		3.04			(1.65	)		1.86			1.88			(0.96	)
Total from investment operations		3.21			(1.52	)		1.98			2.10			(0.84	)
Less distributions from:
Net investment income		(0.18	)		(0.02	)		(0.13	)		(0.21	)		(0.20	)
Net realized gains		(0.39	)		(1.15	)		(0.57	)		(0.93	)		(1.22	)
Total distributions		(0.57	)		(1.17	)		(0.70	)		(1.14	)		(1.42	)
Net asset value, end of year		$16.29			$13.65			$16.34			$15.06			$14.10
Total returnd		23.74%			(9.19)%			13.25%			14.94%			(5.06)%
Ratios to average net assets
Expensese,f		1.81%	g		1.80%	g		1.78%			1.80%			1.84%	g
Expenses incurred in connection with securities sold short		0.02%			0.01%			—%			0.01%			0.04%
Net investment income		1.11%			0.77%			0.78%			1.48%	c		0.73%
Supplemental data
Net assets, end of year (000’s)		$52,620			$59,828			$260,113			$275,138			$285,333
Portfolio turnover rate		30.72%			47.20%			24.80%			30.94%			35.80%

^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.

^cNet investment income per share includes approximately $0.10 per share related to income received in the form of special dividends in connection with certain Fund holdings. Excluding this amount, the ratio of net investment income to average net assets would have been 0.81%.

^dTotal return does not reflect sales commissions or contingent deferred sales charges, if applicable.

^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(d).

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

^gBenefit of waiver and payments by affiliates rounds to less than 0.01%.

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

FRANKLIN MUTUAL SERIES FUNDS

FINANCIAL HIGHLIGHTS

Franklin Mutual Beacon Fund (continued)

	Year Ended December 31,
	2019			2018			2017			2016			2015
Class R
Per share operating performance (for a share outstanding throughout the year)
Net asset value, beginning of year		$13.46			$16.28			$15.01			$14.05			$16.33
Income from investment operationsa:
Net investment incomeb		0.24			0.20			0.21			0.30	c		0.20
Net realized and unrealized gains (losses)		3.01			(1.64	)		1.84			1.89			(0.97	)
Total from investment operations		3.25			(1.44	)		2.05			2.19			(0.77	)
Less distributions from:
Net investment income		(0.29	)		(0.23	)		(0.21	)		(0.30	)		(0.29	)
Net realized gains		(0.39	)		(1.15	)		(0.57	)		(0.93	)		(1.22	)
Total distributions		(0.68	)		(1.38	)		(0.78	)		(1.23	)		(1.51	)
Net asset value, end of year		$16.03			$13.46			$16.28			$15.01			$14.05
Total return		24.33%			(8.65)%			13.76%			15.58%			(4.61)%
Ratios to average net assets
Expensesd,e		1.31%	f		1.30%	f		1.28%			1.30%			1.34%	f
Expenses incurred in connection with securities sold short		0.02%			0.01%			—%			0.01%			0.04%
Net investment income		1.61%			1.27%			1.28%			1.98%	c		1.23%
Supplemental data
Net assets, end of year (000’s)		$1,769			$1,662			$1,601			$2,035			$2,343
Portfolio turnover rate		30.72%			47.20%			24.80%			30.94%			35.80%

^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.

^cNet investment income per share includes approximately $0.10 per share related to income received in the form of special dividends in connection with certain Fund holdings. Excluding this amount, the ratio of net investment income to average net assets would have been 1.31%.

^dIncludes 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(d).

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

^fBenefit of waiver and payments by affiliates rounds to less than 0.01%.

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

FRANKLIN MUTUAL SERIES FUNDS

FINANCIAL HIGHLIGHTS

Franklin Mutual Beacon Fund (continued)

	Year Ended December 31,
	2019			2018			2017			2016			2015
Class R6
Per share operating performance (for a share outstanding throughout the year)
Net asset value, beginning of year		$13.75			$16.60			$15.30			$14.30			$16.58
Income from investment operationsa:
Net investment incomeb		0.34			0.30			0.37			0.38	c		0.30
Net realized and unrealized gains (losses)		3.07			(1.68	)		1.82			1.93			(0.98	)
Total from investment operations		3.41			(1.38	)		2.19			2.31			(0.68	)
Less distributions from:
Net investment income		(0.37	)		(0.32	)		(0.32	)		(0.38	)		(0.38	)
Net realized gains		(0.39	)		(1.15	)		(0.57	)		(0.93	)		(1.22	)
Total distributions		(0.76	)		(1.47	)		(0.89	)		(1.31	)		(1.60	)
Net asset value, end of year		$16.40			$13.75			$16.60			$15.30			$14.30
Total return		25.13%			(8.18)%			14.42%			16.20%			(3.98)%
Ratios to average net assets
Expenses before waiver and payments by affiliatesd		0.76%			0.75%			0.72%			0.71%			0.74%
Expenses net of waiver and payments by affiliatesd,e		0.74%			0.73%			0.71%			0.71%			0.74%	f
Expenses incurred in connection with securities sold short		0.02%			0.01%			—%			0.01%			0.04%
Net investment income		2.18%			1.84%			1.85%			2.57%	c		1.83%
Supplemental data
Net assets, end of year (000’s)		$90,220			$79,358			$106,845			$604			$48,844
Portfolio turnover rate		30.72%			47.20%			24.80%			30.94%			35.80%

^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.

^cNet investment income per share includes approximately $0.10 per share related to income received in the form of special dividends in connection with certain Fund holdings. Excluding this amount, the ratio of net investment income to average net assets would have been 1.90%.

^dIncludes 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(d).

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

^fBenefit of waiver and payments by affiliates rounds to less than 0.01%.

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

FRANKLIN MUTUAL SERIES FUNDS

Statement of Investments, December 31, 2019

Franklin Mutual Beacon Fund

	Country		Shares/ Rights/ Warrants		Value
Common Stocks and Other Equity Interests 89.1%
Aerospace & Defense 2.5%
BAE Systems PLC		United Kingdom		12,866,872	$	96,250,552
Auto Components 0.0%†
a,b,c International Automotive Components Group Brazil LLC		Brazil		2,846,329		103,322
Banks 9.3%
JPMorgan Chase & Co.		United States		866,030		120,724,582
Standard Chartered PLC		United Kingdom		10,733,493		101,274,603
Wells Fargo & Co.		United States		2,408,650		129,585,370
						351,584,555
Chemicals 2.2%
BASF SE		Germany		1,114,194		84,154,692
Communications Equipment 2.7%
Cisco Systems Inc.		United States		2,098,742		100,655,666
Consumer Finance 2.7%
Capital One Financial Corp.		United States		1,003,098		103,228,815
Diversified Financial Services 1.7%
a M&G PLC		United Kingdom		19,901,470		62,522,366
Diversified Telecommunication Services 1.8%
Koninklijke KPN NV		Netherlands		22,591,444		66,656,845
Electrical Equipment 3.7%
a Sensata Technologies Holding PLC		United States		2,626,802		141,505,824
Entertainment 3.4%
The Walt Disney Co.		United States		897,700		129,834,351
Equity Real Estate Investment Trusts (REITs) 2.7%
Brixmor Property Group Inc.		United States		4,722,700		102,057,547
Food Products 2.7%
The Kraft Heinz Co.		United States		3,192,437		102,573,001
Health Care Equipment & Supplies 3.9%
Medtronic PLC		United States		1,281,090		145,339,660
Hotels, Restaurants & Leisure 1.7%
Sands China Ltd.		Macau		11,770,400		62,913,024
Insurance 3.2%
The Hartford Financial Services Group Inc.		United States		2,017,900		122,627,783
Interactive Media & Services 1.7%
a Baidu Inc., ADR		China		504,347		63,749,461
IT Services 3.1%
Cognizant Technology Solutions Corp., A		United States		1,870,330		115,997,867
Media 5.6%
a Charter Communications Inc., A		United States		204,487		99,192,554
a Discovery Inc., C		United States		3,439,423		104,868,007
a iHeartMedia Inc., A		United States		416,304		7,035,538
a,b iHeartMedia Inc., B		United States		7,025		100,914

franklintempleton.com Annual Report         17

FRANKLIN MUTUAL SERIES FUNDS

STATEMENT OF INVESTMENTS

Franklin Mutual Beacon Fund (continued)

	Country		Shares/ Rights/ Warrants		Value
Common Stocks and Other Equity Interests (continued)
Media (continued)
a iHeartMedia Inc., wts., A, 5/01/39		United States		418	$	7,064
						211,204,077
Oil, Gas & Consumable Fuels 2.4%
Caltex Australia Ltd.		Australia		742,312		17,682,627
Royal Dutch Shell PLC, A		United Kingdom		2,503,893		73,471,080
						91,153,707
Pharmaceuticals 12.9%
Allergan PLC		United States		298,700		57,102,479
a Bristol-Myers Squibb Co., rts., 2/01/49		United States		574,700		1,729,847
Eli Lilly & Co.		United States		588,112		77,295,560
GlaxoSmithKline PLC		United Kingdom		6,044,376		142,417,377
Merck & Co. Inc.		United States		640,129		58,219,733
Novartis AG, ADR		Switzerland		1,574,971		149,134,004
						485,899,000
Software 8.1%
a Check Point Software Technologies Ltd.		Israel		791,712		87,848,364
NortonLifeLock Inc.		United States		4,522,056		115,402,869
Oracle Corp.		United States		1,911,500		101,271,270
						304,522,503
Technology Hardware, Storage & Peripherals 2.9%
Western Digital Corp.		United States		1,717,900		109,035,113
Textiles, Apparel & Luxury Goods 3.5%
Cie Financiere Richemont SA		Switzerland		734,796		57,757,023
Tapestry Inc.		United States		2,714,300		73,204,671
						130,961,694
Thrifts & Mortgage Finance 1.0%
Indiabulls Housing Finance Ltd.		India		8,676,627		38,084,501
Tobacco 3.7%
British American Tobacco PLC		United Kingdom		3,250,051		139,100,887
Total Common Stocks and Other Equity Interests (Cost $2,570,246,565)						3,361,716,813
Preferred Stocks 6.6%
Automobiles 2.9%
d Porsche Automobil Holding SE, 3.316%, pfd		Germany		1,451,423		108,469,817
Technology Hardware, Storage & Peripherals 3.7%
d Samsung Electronics Co. Ltd., 3.119%, pfd		South Korea		3,571,169		140,253,006
Total Preferred Stocks (Cost $140,382,977)						248,722,823

18         Annual Report franklintempleton.com

FRANKLIN MUTUAL SERIES FUNDS

STATEMENT OF INVESTMENTS

Franklin Mutual Beacon Fund (continued)

	Country		Principal Amount		Value
Corporate Notes and Senior Floating Rate Interests 1.6%
Frontier Communications Corp.,
senior note, 10.50%, 9/15/22		United States	$	16,691,000	$	8,183,797
senior note, 11.00%, 9/15/25		United States		23,907,000		11,654,662
e,f Veritas U.S. Inc,
Term Loan B1, 6.299%, (1-month USD LIBOR + 4.50%), 1/27/23		United States		14,399,189		13,919,221
Term Loan B1, 6.445%, (3-month USD LIBOR + 4.50%), 1/27/23		United States		2,766,189		2,673,984
g Veritas U.S. Inc./Veritas Bermuda Ltd.,
senior note, 144A, 7.50%, 2/01/23		United States		2,766,000		2,767,148
senior note, 144A, 10.50%, 2/01/24		United States		22,708,000		21,071,094
Total Corporate Notes and Senior Floating Rate Interests (Cost $76,702,881)						60,269,906
			Shares
Companies in Liquidation 0.0%†
a,b,h Clear Channel Communications Inc., Contingent Distribution		United States		18,873,000		—
a,b,h iHeartCommunications Inc., Contingent Distribution		United States		20,894,418		—
a,b,h Tribune Media, Litigation Trust, Contingent Distribution		United States		499,183		—
a,b,h Vistra Energy Corp., Litigation Trust, Contingent Distribution		United States		46,282,735		25,456
a,b,h Walter Energy Inc., Litigation Trust, Contingent Distribution		United States		5,229,000		—
Total Companies in Liquidation (Cost $1,456,075)						25,456
Total Investments before Short Term Investments (Cost $2,788,788,498)						3,670,734,998
			Principal Amount
Short Term Investments 2.7%
U.S. Government and Agency Securities 2.7%
i U.S. Treasury Bill,
1/02/20 - 5/21/20		United States	$	59,500,000		59,281,925
j 3/05/20 - 5/28/20		United States		45,000,000		44,857,793
Total U.S. Government and Agency Securities (Cost $104,097,270)						104,139,718
Total Investments (Cost $2,892,885,768) 100.0%						3,774,874,716
Securities Sold Short (0.6)%						(22,902,996	)
Other Assets, less Liabilities 0.6%						21,862,442
Net Assets 100.0%					$	3,773,834,162
			Shares
k Securities Sold Short (Proceeds $19,775,446) (0.6)%
Common Stocks (0.6)%
Biotechnology (0.6)%
AbbVie Inc		United States		258,674		(22,902,996	)

franklintempleton.com Annual Report         19

FRANKLIN MUTUAL SERIES FUNDS

STATEMENT OF INVESTMENTS

Franklin Mutual Beacon Fund (continued)

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

^aNon-income producing.

^bFair valued using significant unobservable inputs. See Note 13 regarding fair value measurements.

^cSee Note 10 regarding restricted securities.

^dVariable rate security. The rate shown represents the yield at period end.

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

^fSee Note 1(f) regarding senior floating rate interests.

^gSecurity was purchased pursuant to Rule 144A under the Securities Act of 1933 and may be sold in transactions exempt from registration only to qualified institutional buyers or in a public offering registered under the Securities Act of 1933. At December 31, 2019, the aggregate value of these securities was $23,838,242, representing 0.6% of net assets.

^hContingent distributions represent the right to receive additional distributions, if any, during the reorganization of the underlying company. Shares represent total underlying principal of debt securities.

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

^jA portion or all of the security has been segregated as collateral for securities sold short and/or open forward exchange contracts. At December 31, 2019, the aggregate value of these securities pledged amounted to $20,897,213, representing 0.6% of net assets.

^kSee Note 1(d) regarding securities sold short.

At December 31, 2019, the Fund had the following futures contracts outstanding. See Note 1(c).

Futures Contracts

Description	Type		Number of Contracts		Notional  Amount*		Expiration Date		Value/ Unrealized Appreciation (Depreciation)
Currency Contracts
EUR/USD		Short		825		$116,345,625		3/16/20		$(1,119,204	)
GBP/USD		Short		1,141		94,788,575		3/16/20		(728,971	)
Total Futures Contracts										$(1,848,175	)

*As of period end.

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FRANKLIN MUTUAL SERIES FUNDS

STATEMENT OF INVESTMENTS

Franklin Mutual Beacon Fund (continued)

At December 31, 2019, the Fund had the following forward exchange contracts outstanding. See Note 1(c).

Forward Exchange Contracts

Currency	Counterpartya		Type		Quantity		Contract Amount		Settlement Date		Unrealized Appreciation		Unrealized Depreciation
OTC Forward Exchange Contracts
Euro		BOFA		Buy		2,249,565	$	2,511,868		1/15/20		$    13,335	$	—
Euro		BOFA		Sell		10,940,338		12,175,532		1/15/20		—		(105,320	)
Euro		HSBK		Buy		1,622,992		1,823,529		1/15/20		—		(1,673	)
Euro		HSBK		Sell		882,000		996,660		1/15/20		6,589		—
Euro		HSBK		Sell		7,403,383		8,264,778		1/15/20		—		(45,738	)
Euro		SSBT		Sell		2,152,974		2,406,946		1/15/20		—		(9,830	)
Euro		UBSW		Sell		6,679,233		7,565,830		1/15/20		68,193		—
Euro		UBSW		Sell		14,603,974		16,295,411		1/15/20		—		(97,978	)
British Pound		BOFA		Sell		1,326,025		1,662,636		1/16/20		—		(94,452	)
British Pound		HSBK		Sell		23,938,359		30,260,694		1/16/20		—		(1,459,537	)
South Korean Won		HSBK		Buy		19,581,884,700		16,906,440		1/17/20		38,784		—
South Korean Won		HSBK		Sell		39,913,553,071		33,423,564		1/17/20		—		(1,115,713	)
South Korean Won		UBSW		Buy		4,971,463,348		4,219,899		1/17/20		82,167		—
South Korean Won		UBSW		Sell		52,909,145,306		44,710,929		1/17/20		—		(1,074,110	)
Australian Dollar		HSBK		Sell		278,978		196,322		2/14/20		357		—
Australian Dollar		HSBK		Sell		4,311,978		2,971,392		2/14/20		—		(57,511	)
Australian Dollar		UBSW		Sell		19,761,990		13,646,784		2/14/20		—		(234,822	)
British Pound		BOFA		Sell		9,776,019		12,101,929		2/14/20		—		(862,424	)
British Pound		HSBK		Sell		16,417,853		20,023,676		2/14/20		—		(1,748,666	)
British Pound		SSBT		Sell		19,266,872		23,551,783		2/14/20		—		(1,998,755	)
British Pound		UBSW		Sell		1,778,621		2,215,187		2/14/20		—		(143,511	)
Euro		BOFA		Sell		2,052,641		2,294,872		2/18/20		—		(14,149	)
Euro		HSBK		Sell		2,539,067		2,842,683		2/18/20		—		(13,519	)
Euro		SSBT		Sell		3,351,281		3,730,091		2/18/20		—		(39,771	)
Euro		UBSW		Sell		3,670,729		4,112,595		2/18/20		—		(16,615	)
Euro		HSBK		Sell		1,081,059		1,204,124		4/07/20		—		(15,749	)
Euro		SSBT		Sell		31,433,239		35,201,606		4/07/20		—		(267,843	)
Euro		UBSW		Sell		25,060,819		28,068,794		4/07/20		—		(209,980	)
British Pound		BOFA		Sell		7,692,076		9,949,301		4/24/20		—		(270,489	)
British Pound		HSBK		Sell		5,014,534		6,486,522		4/24/20		—		(175,849	)
South Korean Won		HSBK		Sell		49,720,899,763		42,843,794		5/15/20		—		(348,786	)
South Korean Won		UBSW		Sell		43,248,030,258		37,378,475		5/15/20		—		(191,120	)
Euro		SSBT		Sell		10,049,351		11,266,428		5/21/20		—		(104,419	)
Euro		UBSW		Sell		10,049,351		11,267,283		5/21/20		—		(103,564	)
British Pound		BOFA		Sell		1,645,098		2,209,533		5/22/20		22,237		—
British Pound		BOFA		Sell		22,191,307		29,123,611		5/22/20		—		(381,591	)
British Pound		HSBK		Sell		1,990,889		2,673,426		5/22/20		26,372		—
British Pound		HSBK		Sell		51,311,772		66,910,969		5/22/20		—		(1,312,339	)

franklintempleton.com Annual Report         21

FRANKLIN MUTUAL SERIES FUNDS

STATEMENT OF INVESTMENTS

Franklin Mutual Beacon Fund (continued)

Forward Exchange Contracts (continued)

Currency	Counterpartya		Type		Quantity		Contract Amount		Settlement Date		Unrealized Appreciation		Unrealized Depreciation
OTC Forward Exchange Contracts (continued)
British Pound		UBSW		Sell		1,645,098	$	2,210,999		5/22/20		$  23,703	$	—
Total Forward Exchange Contracts												$281,737	$	(12,515,823	)
Net unrealized appreciation (depreciation)													$	(12,234,086	)

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

See Note 11 regarding other derivative information.

See Abbreviations on page 40.

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

FRANKLIN MUTUAL SERIES FUNDS

FINANCIAL STATEMENTS

Statement of Assets and Liabilities

December 31, 2019

Franklin Mutual Beacon Fund

Assets:
Investments in securities:
Cost - Unaffiliated issuers	$	2,892,885,768
Value - Unaffiliated issuers	$	3,774,874,716
Cash		320,471
Receivables:
Capital shares sold		1,261,930
Dividends and interest		9,654,523
European Union tax reclaims		3,389,044
Deposits with brokers for:
Securities sold short		23,355,775
Futures contracts		4,421,280
Unrealized appreciation on OTC forward exchange contracts		281,737
Other assets		1,452,845
Total assets		3,819,012,321
Liabilities:
Payables:
Investment securities purchased		961,436
Capital shares redeemed		3,853,593
Management fees		2,136,795
Distribution fees		260,489
Transfer agent fees		526,696
Trustees’ fees and expenses		302,524
Variation margin on futures contracts		1,325,530
Securities sold short, at value (proceeds $19,775,446)		22,902,996
Unrealized depreciation on OTC forward exchange contracts		12,515,823
Accrued expenses and other liabilities		392,277
Total liabilities		45,178,159
Net assets, at value	$	3,773,834,162
Net assets consist of:
Paid-in capital	$	2,878,837,071
Total distributable earnings (losses)		894,997,091
Net assets, at value	$	3,773,834,162

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

FRANKLIN MUTUAL SERIES FUNDS

FINANCIAL STATEMENTS

Statement of Assets and Liabilities (continued)

December 31, 2019

Franklin Mutual Beacon Fund

Class Z:
Net assets, at value	$	2,600,743,834
Shares outstanding		158,538,329
Net asset value and maximum offering price per share		$16.40
Class A:
Net assets, at value	$	1,028,481,778
Shares outstanding		63,328,967
Net asset value per sharea		$16.24
Maximum offering price per share (net asset value per share ÷ 94.50%)		$17.19
Class C:
Net assets, at value	$	52,619,909
Shares outstanding		3,230,426
Net asset value and maximum offering price per sharea		$16.29
Class R:
Net assets, at value	$	1,768,705
Shares outstanding		110,330
Net asset value and maximum offering price per share		$16.03
Class R6:
Net assets, at value	$	90,219,936
Shares outstanding		5,501,592
Net asset value and maximum offering price per share		$16.40

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

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

FRANKLIN MUTUAL SERIES FUNDS

FINANCIAL STATEMENTS

Statement of Operations

for the year ended December 31, 2019

Franklin Mutual Beacon Fund

Investment income:
Dividends: (net of foreign taxes)*
Unaffiliated issuers	$	88,645,922
Interest:
Unaffiliated issuers		15,386,504
Income from securities loaned:
Unaffiliated issuers (net of fees and rebates)		322,938
Non-controlled affiliates (Note 3f)		21,748
Total investment income		104,377,112
Expenses:
Management fees (Note 3a)		24,166,236
Distribution fees: (Note 3c)
Class A		2,416,817
Class C		571,965
Class R		8,412
Transfer agent fees: (Note 3e)
Class Z		2,122,730
Class A		831,616
Class C		49,203
Class R		1,448
Class R6		37,267
Custodian fees (Note 4)		276,260
Reports to shareholders		180,506
Registration and filing fees		144,453
Professional feesa		(119,971	)
Trustees’ fees and expenses		215,588
Dividends on securities sold short		695,220
Other		86,781
Total expenses		31,684,531
Expense reductions (Note 4)		(18,205	)
Expenses waived/paid by affiliates (Note 3f and 3g)		(23,721	)
Net expenses		31,642,605
Net investment income		72,734,507
Realized and unrealized gains (losses):
Net realized gain (loss) from:
Investments:
Unaffiliated issuers		25,638,802
Foreign currency transactions		135,604
Forward exchange contracts		22,896,380
Futures contracts		6,145,223
Securities sold short		(3,686,145	)
Net realized gain (loss)		51,129,864
Net change in unrealized appreciation (depreciation) on:
Investments:
Unaffiliated issuers		695,558,896
Translation of other assets and liabilities denominated in foreign currencies		(15,549	)
Forward exchange contracts		(14,968,234	)
Futures contracts		(2,058,651	)
Securities sold short		(13,251,876	)
Change in deferred taxes on unrealized appreciation		1,170,447

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

FRANKLIN MUTUAL SERIES FUNDS

FINANCIAL STATEMENTS

Statement of Operations (continued)

for the year ended December 31, 2019

Franklin Mutual Beacon Fund

Net change in unrealized appreciation (depreciation)		666,435,033
Net realized and unrealized gain (loss)		717,564,897
Net increase (decrease) in net assets resulting from operations	$	790,299,404
*Foreign taxes withheld on dividends	$	3,724,597

^aIncludes unaffiliated reimbursement of legal fees incurred in connection with certain Fund holdings.

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

FRANKLIN MUTUAL SERIES FUNDS

FINANCIAL STATEMENTS

Statements of Changes in Net Assets

Franklin Mutual Beacon Fund

	Year Ended December 31,
	2019			2018
Increase (decrease) in net assets:
Operations:
Net investment income	$	72,734,507		$	63,233,210
Net realized gain (loss)		51,129,864			325,997,036
Net change in unrealized appreciation (depreciation)		666,435,033			(694,921,118	)
Net increase (decrease) in net assets resulting from operations		790,299,404			(305,690,872	)
Distributions to shareholders:
Class Z		(117,204,577	)		(221,433,179	)
Class A		(44,297,307	)		(83,941,345	)
Class C		(1,880,966	)		(5,683,570	)
Class R		(73,857	)		(157,769	)
Class R6		(4,118,811	)		(7,782,384	)
Total distributions to shareholders		(167,575,518	)		(318,998,247	)
Capital share transactions: (Note 2)
Class Z		(100,073,026	)		540,717
Class A		(29,105,095	)		72,748,807
Class C		(17,741,717	)		(185,991,052	)
Class R		(184,983	)		390,017
Class R6		(4,143,408	)		(12,575,413	)
Total capital share transactions		(151,248,229	)		(124,886,924	)
Net increase (decrease) in net assets		471,475,657			(749,576,043	)
Net assets:
Beginning of year		3,302,358,505			4,051,934,548
End of year	$	3,773,834,162		$	3,302,358,505

franklintempleton.com The accompanying notes are an integral part of these financial statements.  |  Annual Report         27

FRANKLIN MUTUAL SERIES FUNDS

Notes to Financial Statements

Franklin Mutual Beacon Fund

1.  Organization and Significant Accounting Policies

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

The following summarizes the Fund’s significant accounting policies.

a.  Financial Instrument Valuation

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

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

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

Debt securities generally trade in the OTC market rather than on a securities exchange. The Fund’s pricing services use multiple valuation techniques to determine fair value. In instances where sufficient market activity exists, the pricing services may utilize a market-based approach through which quotes from market makers are used to determine fair value. In instances where sufficient market activity may not exist or is limited, the pricing services also utilize proprietary valuation models which may consider market characteristics such as benchmark yield curves, credit spreads, estimated default rates, anticipated market interest rate volatility, coupon rates, anticipated timing of principal repayments, underlying collateral, and other unique security features in order to estimate the relevant cash flows, which are then discounted to calculate the fair value.

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

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

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

28         Annual Report franklintempleton.com

FRANKLIN MUTUAL SERIES FUNDS

NOTES TO FINANCIAL STATEMENTS

Franklin Mutual Beacon Fund (continued)

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

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

b.  Foreign Currency Translation

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

value. If such an event occurs, the foreign exchange rate will be valued at fair value using procedures established and approved by the Board.

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

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

c.  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

franklintempleton.com Annual Report         29

FRANKLIN MUTUAL SERIES FUNDS

NOTES TO FINANCIAL STATEMENTS

Franklin Mutual Beacon Fund (continued)

1. Organization and Significant Accounting

Policies (continued)

c.  Derivative Financial Instruments (continued)

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. At December 31, 2019, the Fund had OTC derivatives in a net liability position of $12,234,086 and the aggregate value of collateral pledged for such contracts was $9,300,101.

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 exposure to certain foreign currencies. A futures contract is an agreement between the Fund and a counterparty to buy or sell an asset at a specified price on a future date. Required initial margins are pledged by the Fund, and the daily change in fair value is accounted for as a variation margin payable or receivable in the Statement of Assets and Liabilities.

The Fund entered into OTC forward exchange contracts primarily to manage 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.

See Note 11 regarding other derivative information.

d.   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.

e.  Securities Lending

The Fund participates in an agency based securities lending program to earn additional income. The Fund receives cash collateral against the loaned securities in an amount equal to at least 102% of the fair value of the loaned securities. Collateral is maintained over the life of the loan in an amount

30         Annual Report franklintempleton.com

FRANKLIN MUTUAL SERIES FUNDS

NOTES TO FINANCIAL STATEMENTS

Franklin Mutual Beacon Fund (continued)

not less than 100% of the fair value of loaned securities, as determined at the close of Fund business each day; any additional collateral required due to changes in security values is delivered to the Fund on the next business day. The collateral is deposited into a joint cash account with other funds and is used to invest in a money market fund managed by Franklin Advisers, Inc., an affiliate of the Fund, and/or a joint repurchase agreement. The Fund may receive income from the investment 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 Statement of Operations. The Fund bears the market risk with respect to the collateral investment, securities loaned, and the risk that the agent may default on its obligations to the Fund. If the borrower defaults on its obligation 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. At December 31, 2019, the Fund had no securities on loan.

f.  Senior Floating Rate Interests

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

g.  Income and Deferred Taxes

It is the Fund’s policy to qualify as a regulated investment company under the Internal Revenue Code. The Fund intends to distribute to shareholders substantially all of its

taxable income and net realized gains to relieve it from federal income and excise taxes. As a result, no provision for U.S. federal income taxes is required.

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

As a result of several court cases, in certain countries across the European Union, the Fund filed additional tax reclaims for previously withheld taxes on dividends earned in those countries (EU reclaims). These additional filings are subject to various administrative proceedings by the local jurisdictions’ tax authorities within the European Union, as well as a number of related judicial proceedings. Income recognized, if any, for EU reclaims is reflected as other income in the Statement of Operations and any related receivable, if any, is reflected as European Union tax reclaims in the Statement of Assets and Liabilities. When uncertainty exists as to the ultimate resolution of these proceedings, the likelihood of receipt of these EU reclaims, and the potential timing of payment, no amounts are reflected in the financial statements. For U.S. income tax purposes, EU reclaims received by the Fund, if any, reduce the amounts of foreign taxes Fund shareholders can use as tax credits in their individual income tax returns.

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 December 31, 2019, the Fund has determined that no tax liability is required in its financial statements related to uncertain tax positions for any open tax years (or expected to be taken in future tax years). Open tax years are those that remain subject to examination and are based on the statute of limitations in each jurisdiction in which the Fund invests.

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FRANKLIN MUTUAL SERIES FUNDS

NOTES TO FINANCIAL STATEMENTS

Franklin Mutual Beacon Fund (continued)

1.  Organization and Significant Accounting

Policies (continued)

h.  Security Transactions, Investment Income, Expenses and Distributions

Security transactions are accounted for on trade date. Realized gains and losses on security transactions are determined on a specific identification basis. Interest income and estimated expenses are accrued daily. Amortization of premium and accretion of discount on debt securities are included in interest income. 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.

i.  Accounting Estimates

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

j.  Guarantees and Indemnifications

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

2.  Shares of Beneficial Interest

At December 31, 2019, there were an unlimited number of shares authorized (without par value). Transactions in the Fund’s shares were as follows:

	Year Ended December 31,
	2019						2018
	Shares			Amount			Shares			Amount
Class Z Shares:
Shares sold		6,417,333		$	99,580,274			8,257,116		$	133,575,147
Shares issued in reinvestment of distributions		6,936,116			109,259,281			15,183,241			206,770,472
Shares redeemed		(19,916,799	)		(308,912,581	)		(20,924,183	)		(339,804,902	)
Net increase (decrease)		(6,563,350	)	$	(100,073,026	)		2,516,174		$	540,717

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NOTES TO FINANCIAL STATEMENTS

Franklin Mutual Beacon Fund (continued)

	Year Ended December 31,
	2019						2018
	Shares			Amount			Shares			Amount
Class A Shares:
Shares solda		5,986,582		$	92,355,623			13,762,741		$	220,038,461
Shares issued in reinvestment of distributions		2,768,759			43,071,568			6,066,419			81,741,950
Shares redeemed		(10,754,960	)		(164,532,286	)		(14,199,056	)		(229,031,604	)
Net increase (decrease)		(1,999,619	)	$	(29,105,095	)		5,630,104		$	72,748,807
Class C Shares:
Shares sold		389,809		$	5,961,650			777,745		$	12,227,859
Shares issued in reinvestment of distributions		118,043			1,813,172			398,415			5,563,069
Shares redeemeda		(1,659,137	)		(25,516,539	)		(12,713,218	)		(203,781,980	)
Net increase (decrease)		(1,151,285	)	$	(17,741,717	)		(11,537,058	)	$	(185,991,052	)
Class R Shares:
Shares sold		11,975		$	176,283			27,604		$	454,716
Shares issued in reinvestment of distributions		4,826			73,857			11,829			157,768
Shares redeemed		(29,881	)		(435,123	)		(14,360	)		(222,467	)
Net increase (decrease)		(13,080	)	$	(184,983	)		25,073		$	390,017
Class R6 Shares:
Shares sold		1,239,238		$	19,145,578			1,125,287		$	18,530,681
Shares issued in reinvestment of distributions		260,098			4,098,079			570,780			7,773,465
Shares redeemed		(1,768,710	)		(27,387,065	)		(2,360,255	)		(38,879,559	)
Net increase (decrease)		(269,374	)	$	(4,143,408	)		(664,188	)	$	(12,575,413	)

^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 Fund are also officers and/or directors of the following subsidiaries:

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

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FRANKLIN MUTUAL SERIES FUNDS

NOTES TO FINANCIAL STATEMENTS

Franklin Mutual Beacon Fund (continued)

3.  Transactions with Affiliates (continued)

a.  Management Fees

The Fund pays an investment management fee to Franklin Mutual based on the average daily net assets of the Fund as follows:

Annualized Fee Rate	Net Assets
0.675%	Up to and including $5 billion
0.645%	Over $5 billion, up to and including $7 billion
0.625%	Over $7 billion, up to and including $10 billion
0.615%	In excess of $10 billion

b.  Administrative Fees

Under an agreement with Franklin Mutual, FT Services provides administrative services to the Fund. The fee is paid by Franklin Mutual 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 Z and Class R6 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	0.35	%
Class C	1.00	%
Class R	0.50	%

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

d.  Sales Charges/Underwriting Agreements

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

Sales charges retained net of commissions paid to unaffiliated brokers/dealers	$	68,377
CDSC retained	$	8,404

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NOTES TO FINANCIAL STATEMENTS

Franklin Mutual Beacon Fund (continued)

e.  Transfer Agent Fees

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

For the year ended December 31, 2019, the Fund paid transfer agent fees of $3,042,264, of which $1,522,842 was retained by Investor Services.

f.  Investments in Affiliated Management Investment Companies

The Fund invests in one or more affiliated management investment companies for purposes other than exercising a controlling influence over the management or policies. Management fees paid by the Fund are waived on assets invested in the affiliated management investment companies, as noted in the Statement of Operations, in an amount not to exceed the management and administrative fees paid directly or indirectly by each affiliate. During the year ended December 31, 2019, the Fund held investments in affiliated management investment companies as follows:

	Value at Beginning of Year		Purchases		Sales			Realized Gain (Loss)		Net Change in Unrealized Appreciation (Depreciation)		Value at End of Year			Number of Shares Held at End of Year		Income from securities loaned
Non-Controlled Affiliates
Institutional Fiduciary Trust Money Market Portfolio, 1.26%	$	—		$51,845,000		$(51,845,000	)		$    —		$    —		$—	a		—		$21,748

^aAs of December 31, 2019, no longer held by the Fund.    

g.  Waiver and Expense Reimbursements

Investor Services has contractually agreed in advance to waive or limit its fees so that the Class R6 transfer agent fees do not exceed 0.02% based on the average net assets of the class until April 30, 2020.

h.  Interfund Transactions

The Fund engaged in purchases and sales of investments with funds or other accounts that have common investment managers (or affiliated investment managers), directors, trustees or officers. During the year ended December 31, 2019, these purchase and sale transactions aggregated $10,152,941 and $5,196,414, respectively.

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 year ended December 31, 2019, the custodian fees were reduced as noted in the Statement of Operations.

5.  Independent Trustees’ Retirement Plan

On January 1, 1993, the Trust adopted an Independent Trustees’ Retirement Plan (Plan). The Plan is an unfunded defined benefit plan that provides benefit payments to Trustees whose length of service and retirement age meets the eligibility requirements of the Plan. Benefits under the Plan are based on years of service and fees paid to each trustee at the time of retirement. Effective in December 1996, the Plan was closed to new participants.

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FRANKLIN MUTUAL SERIES FUNDS

NOTES TO FINANCIAL STATEMENTS

Franklin Mutual Beacon Fund (continued)

5.  Independent Trustees’ Retirement Plan (continued)

During the year ended December 31, 2019, the Fund’s projected benefit obligation and benefit payments under the Plan were as follows:

aProjected benefit obligation at December 31, 2019	$	302,524
bIncrease in projected benefit obligation	$	29,884
Benefit payments made to retired trustees	$	(4,543	)

^aThe projected benefit obligation is included in trustees’ fees and expenses in the Statement of Assets and Liabilities.

^bThe increase in projected benefit obligation is included in trustees’ fees and expenses in the Statement of Operations.

6.  Income Taxes

The tax character of distributions paid during the years ended December 31, 2019 and 2018, was as follows:

	2019		2018
Distributions paid from:
Ordinary income	$	104,017,656	$	65,063,571
Long term capital gain		63,557,862		253,934,676
	$	167,575,518	$	318,998,247

At December 31, 2019, the cost of investments, net unrealized appreciation (depreciation), undistributed ordinary income and undistributed long term capital gains for income tax purposes were as follows:

Cost of investments	$	2,869,289,065
Unrealized appreciation	$	978,284,742
Unrealized depreciation		(109,679,492	)
Net unrealized appreciation (depreciation)	$	868,605,250
Distributable earnings:
Undistributed ordinary income	$	11,206,405
Undistributed long term capital gains		12,030,908
Total distributable earnings	$	23,237,313

Differences between income and/or capital gains as determined on a book basis and a tax basis are primarily due to differing treatment of foreign currency transactions.

The Fund utilized a tax accounting practice to treat a portion of the proceeds from capital shares redeemed as a distribution from realized capital gains.

7.  Investment Transactions

Purchases and sales of investments (excluding short term securities and securities sold short) for the year ended December 31, 2019, aggregated $1,048,561,695 and $1,223,172,180, respectively.

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NOTES TO FINANCIAL STATEMENTS

Franklin Mutual Beacon Fund (continued)

8.  Credit Risk and Defaulted Securities

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

At December 31, 2019, the Fund did not hold any distressed company securities for which interest recognition has been discontinued.

9.  Concentration of Risk

Investing in foreign securities may include certain risks and considerations not typically associated with investing in U.S. securities, such as fluctuating currency values and changing local, regional and global economic, political and social conditions, which may result in greater market volatility. Current political and financial uncertainty surrounding the European Union may increase market volatility and the economic risk of investing in securities in Europe. In addition, certain foreign securities may not be as liquid as U.S. securities.

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 December 31, 2019, investments in restricted securities, excluding securities exempt from registration under the 1933 Act, were as follows:

Shares	Issuer	Acquisition Date		Cost		Value
2,846,329	International Automotive Components Group Brazil LLC, (Value is 0.0%† of Net Assets)		4/13/06 -12/26/08	$	1,890,264	$	103,322

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

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FRANKLIN MUTUAL SERIES FUNDS

NOTES TO FINANCIAL STATEMENTS

Franklin Mutual Beacon Fund (continued)

11.  Other Derivative Information

At December 31, 2019, 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
Foreign exchange contracts	Variation margin on futures contracts	$	—	Variation margin on futures contracts	$	1,848,175	a
	Unrealized appreciation on OTC forward exchange contracts		281,737	Unrealized depreciation on OTC forward exchange contracts		12,515,823
Totals		$	281,737		$	14,363,998
aThis amount reflects the cumulative appreciation (depreciation) of futures contracts as reported in the Statement of Investments. Only the variation margin receivable/ payable at year end is separately reported within the Statement of Assets and Liabilities. Prior variation margin movements were recorded to cash upon receipt or payment.
For the year ended December 31, 2019, the effect of derivative contracts in the Statement of Operations was as follows:

Derivative Contracts Not Accounted for as Hedging Instruments	Statement of Operations Location	Net Realized Gain (Loss) for the Year		Statement of Operations Location	Net Change in Unrealized Appreciation (Depreciation) for the Year
	Net realized gain (loss) from:			Net change in unrealized appreciation (depreciation) on:
Foreign exchange contracts	Forward exchange contracts	$	22,896,380	Forward exchange contracts	$	(14,968,234	)
	Futures contracts		6,145,223	Futures contracts		(2,058,651	)
Totals		$	29,041,603		$	(17,026,885	)

For the year ended December 31, 2019, the average month end notional amount of futures contracts represented $215,135,753. The average month end contract value of forward exchange contracts was $447,054,197.

See Note 1(c) regarding derivative financial instruments.

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 billion (Global Credit Facility) which matured on February 7, 2020. This Global Credit Facility provides a source of funds to the Borrowers for temporary and emergency purposes, including the ability to meet future unanticipated or unusually large redemption requests. Effective February 7, 2020, the Borrowers renewed the Global Credit Facility for a one year term, maturing February 5, 2021, for a total of $2 billion.

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 year ended December 31, 2019, the Fund did not use the Global Credit Facility.

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FRANKLIN MUTUAL SERIES FUNDS

NOTES TO FINANCIAL STATEMENTS

Franklin Mutual Beacon 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 December 31, 2019, in valuing the Fund’s assets and liabilities carried at fair value, is as follows:

	Level 1		Level 2		Level 3		Total
Assets:
Investments in Securities:a
Equity Investments:b
Auto Components	$	—	$	—	$	103,322	$	103,322
Media		211,103,163		—		100,914		211,204,077
All Other Equity Investments		3,399,132,237		—		—		3,399,132,237
Corporate Notes and Senior Floating Rate Interests		—		60,269,906		—		60,269,906
Companies in Liquidation		—		—		25,456c		25,456
Short Term Investments		104,139,718		—		—		104,139,718
Total Investments in Securities	$	3,714,375,118	$	60,269,906	$	229,692	$	3,774,874,716
Other Financial Instruments:
Forward Exchange Contracts	$	—	$	281,737	$	—	$	281,737
Liabilities:
Other Financial Instruments:
Securities Sold Shorta	$	22,902,996	$	—	$	—	$	22,902,996
Futures Contracts		1,848,175		—		—		1,848,175
Forward Exchange Contracts		—		12,515,823		—		12,515,823
Total Other Financial Instruments	$	24,751,171	$	12,515,823	$	—	$	37,266,994

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

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

^cIncludes securities determined to have no value at December 31, 2019.

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

franklintempleton.com Annual Report         39

FRANKLIN MUTUAL SERIES FUNDS

NOTES TO FINANCIAL STATEMENTS

Franklin Mutual Beacon Fund (continued)

14. 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 other than those already disclosed in the financial statements.

Abbreviations

Counterparty		Currency		Selected Portfolio
BOFA	Bank of America Corp.	EUR	Euro	ADR	American Depositary Receipt
HSBK	HSBC Bank PLC	GBP	British Pound	LIBOR	London InterBank Offered Rate
SSBT	State Street Bank and Trust Co., N.A.	USD	United States Dollar
UBSW	UBS AG

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FRANKLIN MUTUAL SERIES FUNDS

Report of Independent Registered Public Accounting Firm

To the Board of Trustees of Franklin Mutual Series Funds and Shareholders of Franklin Mutual Beacon Fund:

Opinion on the Financial Statements

We have audited the accompanying statement of assets and liabilities of Franklin Mutual Beacon Fund (the “Fund”) (one of the funds constituting Franklin Mutual Series Funds), including the schedule of investments, as of December 31, 2019, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, the financial highlights for each of the five years in the period then ended and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of Franklin Mutual Beacon Fund (one of the funds constituting Franklin Mutual Series Funds) at December 31, 2019, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and its financial highlights for each of the five years in the period then ended, in conformity with U.S. generally accepted accounting principles.

Basis for Opinion

These financial statements are the responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Fund is not required to have, nor were we engaged to perform, an audit of the Fund’s internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Fund’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of December 31, 2019, by correspondence with the custodian and brokers or by other appropriate auditing procedures where replies from others were not received. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

We have served as the auditor of one or more Franklin investment companies since 1987.

Boston, Massachusetts

February 21, 2020

franklintempleton.com Annual Report         41

FRANKLIN MUTUAL SERIES FUNDS

Franklin Mutual Beacon Fund

Tax Information (unaudited)

Under Section 852(b)(3)(C) of the Internal Revenue Code, the Fund hereby reports the maximum amount allowable but no less than $68,396,529 as a long term capital gain dividend for the fiscal year ended December 31, 2019.

Under Section 871(k)(2)(C) of the Internal Revenue Code, the Fund hereby reports the maximum amount allowable but no less than $24,935,470 as a short term capital gain dividend for purposes of the tax imposed under Section 871(a)(1)(A) of the Internal Revenue Code for the fiscal year ended December 31, 2019.

Under Section 854(b)(1)(A) of the Internal Revenue Code, the Fund hereby reports 30.22% of the ordinary income dividends as income qualifying for the dividends received deduction for the fiscal year ended December 31, 2019.

Under Section 854(b)(1)(B) of the Internal Revenue Code, the Fund hereby reports the maximum amount allowable but no less than $67,686,024 as qualified dividends for purposes of the maximum rate under Section 1(h)(11) of the Internal Revenue Code for the fiscal year ended December 31, 2019. Distributions, including qualified dividend income, paid during calendar year 2019 will be reported to shareholders on Form 1099-DIV by mid-February 2020. Shareholders are advised to check with their tax advisors for information on the treatment of these amounts on their individual income tax returns.

Under Section 871(k)(1)(C) of the Internal Revenue Code, the Fund hereby reports the maximum amount allowable but no less than $8,721,730 as interest related dividends for purposes of the tax imposed under Section 871(a)(1)(A) of the Internal Revenue Code for the fiscal year ended December 31, 2019.

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Board Members and Officers

The name, year of birth and address of the officers and board members, as well as their affiliations, positions held with the Trust, principal occupations during at least the past five years and number of U.S. registered portfolios overseen in the Franklin Templeton fund complex, are shown below. Generally, each board member serves until that person’s successor is elected and qualified.

Independent Board Members

Name, Year of Birth and Address	Position	Length of Time Served	Number of Portfolios in Fund Complex Overseen by Board Member*	Other Directorships Held During at Least the Past 5 Years
Edward I. Altman, Ph.D. (1941)	Trustee	Since 1987	12	None
c/o Franklin Mutual Advisers, LLC
101 John F. Kennedy Parkway
Short Hills, NJ 07078-2716
Principal Occupation During at Least the Past 5 Years:
Max L. Heine Professor of Finance, Emeritus and Director of The Credit and Debt Markets Research Program, Salomon Center, Stern School of Business, New York University; editor and author of numerous financial publications; financial consultant; an adviser to numerous financial and publishing organizations; and formerly, Vice Director, Salomon Center, Stern School of Business, New York University.
Ann Torre Bates (1958) c/o Franklin Mutual Advisers, LLC 101 John F. Kennedy Parkway Short Hills, NJ 07078-2716	Trustee and Chairperson	Trustee since 1995 and Chairperson since January 2020	33	Ares Capital Corporation (specialty finance company) (2010-present), United Natural Foods, Inc. (distributor of natural, organic and specialty foods) (2013-present), Allied Capital Corporation (financial services) (2003-2010), SLM Corporation (Sallie Mae) (1997-2014) and Navient Corporation (loan management, servicing and asset recovery) (2014-2016).
Principal Occupation During at Least the Past 5 Years:
Director of various companies; and formerly, Executive Vice President and Chief Financial Officer, NHP Incorporated (manager of multifamily housing) (1995-1997); and Vice President and Treasurer, US Airways, Inc. (until 1995).
Burton J. Greenwald (1929) c/o Franklin Mutual Advisers, LLC 101 John F. Kennedy Parkway Short Hills, NJ 07078-2716	Trustee	Since 2002	12	Franklin Templeton Emerging Markets Debt Opportunities Fund PLC (1999-present) and Fiduciary International Ireland Limited (1999-2015).
Principal Occupation During at Least the Past 5 Years:
Managing Director, B.J. Greenwald Associates (management consultants to the financial services industry); and formerly, Chairman, Fiduciary Trust International Funds; Executive Vice President, L.F. Rothschild Fund Management, Inc.; President and Director, Merit Mutual Funds; President, Underwriting Division and Director, National Securities & Research Corporation; Governor, Investment Company Institute; and Chairman, ICI Public Information Committee.
Jan Hopkins Trachtman (1947) c/o Franklin Mutual Advisers, LLC 101 John F. Kennedy Parkway Short Hills, NJ 07078-2716	Trustee	Since 2009	12	FinTech Acquisition Corp. III (special purpose fintech acquisition company) (2018-present)
Principal Occupation During at Least the Past 5 Years:
President and Founder, The Jan Hopkins Group (communications consulting firm); serves on Alumni Advisory Board of Knight Bagehot Fellowship; and formerly, President, Economic Club of New York (2007-2015); Anchor/Correspondent, CNN Financial News (until 2003); Managing Director and Head of Client Communications, Citigroup Private Bank (until 2005); Off-Air reporter, ABC News’ World News Tonight; and Editor, CBS Network News.

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FRANKLIN MUTUAL SERIES FUNDS

Independent Board Members (continued)

Name, Year of Birth and Address	Position	Length of Time Served	Number of Portfolios in Fund Complex Overseen by Board Member*	Other Directorships Held During at Least the Past 5 Years
Keith Mitchell (1954)	Trustee	Since 2009	12	None
c/o Franklin Mutual Advisers, LLC
101 John F. Kennedy Parkway
Short Hills, NJ 07078-2716
Principal Occupation During at Least the Past 5 Years:
Director of various boards of asset management firms; and formerly, Managing Member, Mitchell, Hartley & Bechtel Advisers, LLC (formerly, Mitchell Advisers, LLC) (advisory firm) (2003-2015) and Managing Director, Putman Lovell NBF.
David W. Niemiec (1949) c/o Franklin Mutual Advisers, LLC 101 John F. Kennedy Parkway Short Hills, NJ 07078-2716	Trustee	Since 2015	33	Hess Midstream LP (oil and gas midstream infrastructure) (2017-present).
Principal Occupation During at Least the Past 5 Years:
Advisor, Saratoga Partners (private equity fund); and formerly, Managing Director, Saratoga Partners (1998-2001) and SBC Warburg Dillon Read (investment banking) (1997-1998); Vice Chairman, Dillon, Read & Co. Inc. (investment banking) (1991-1997); and Chief Financial Officer, Dillon, Read & Co. Inc. (1982-1997).
Charles Rubens II (1930)	Trustee	Since 1998	12	None
c/o Franklin Mutual Advisers, LLC
101 John F. Kennedy Parkway
Short Hills, NJ 07078-2716
Principal Occupation During at Least the Past 5 Years:
Private investor and president of non-profit organizations; and formerly, an executive of Time, Inc.; and Trustee of Colorado College.
Robert E. Wade (1946)	Trustee	Since 1991	33	El Oro Ltd (investments) (2003-2019).
c/o Franklin Mutual Advisers, LLC
101 John F. Kennedy Parkway
Short Hills, NJ 07078-2716
Principal Occupation During at Least the Past 5 Years:
Attorney at law engaged in private practice as a sole practitioner (1972-2008) and member of various boards.
Gregory H. Williams (1943)	Trustee	Since 2015	12	None
c/o Franklin Mutual Advisers, LLC
101 John F. Kennedy Parkway
Short Hills, NJ 07078-2716
Principal Occupation During at Least the Past 5 Years:
Private investor; Consultant; and formerly, President, University of Cincinnati (2009-2012); President, The City College of New York (2001-2009); Dean, College of Law, Ohio State University (1993-2001); and Associate Vice President, Academic Affairs and Professor of Law, University of Iowa (1977-1993).
Interested Board Members and Officers
Name,Year of Birth and Address	Position	Length of Time Served	Number of Portfolios in Fund Complex Overseen by Board Member*	Other Directorships Held During at Least the Past 5 Years
**Gregory E. Johnson (1961)	Trustee	Since 2007	144	None
One Franklin Parkway
San Mateo, CA 94403-1906
Principal Occupation During at Least the Past 5 Years:
Chairman of the Board, Member – Office of the Chairman, Director and Chief Executive Officer, Franklin Resources, Inc.; officer and/or director or trustee, as the case may be, of some of the other subsidiaries of Franklin Resources, Inc. and of 39 of the investment companies in Franklin Templeton; Vice Chairman, Investment Company Institute; and formerly, President, Franklin Resources, Inc. (1994-2015).

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Interested Board Members and Officers (continued)

Name, Year of Birth and Address	Position	Length of Time Served	Number of Portfolios in Fund Complex Overseen by Board Member*	Other Directorships Held During at Least the Past 5 Years
**Peter A. Langerman (1955) c/o Franklin Mutual Advisers, LLC 101 John F. Kennedy Parkway Short Hills, NJ 07078-2716	Trustee, President, and Chief Executive Officer – Investment Management	Trustee since 2007, President, and Chief Executive Officer – Investment Management since 2005	7	None
Principal Occupation During at Least the Past 5 Years:
Chairman of the Board, Chief Executive Officer and President, Franklin Mutual Advisers, LLC; and officer and/or director, as the case may be, of three of the investment companies in Franklin Templeton.
Alison E. Baur (1964) One Franklin Parkway San Mateo, CA 94403-1906	Vice President	Since 2012	Not Applicable	Not Applicable
Principal Occupation During at Least the Past 5 Years:
Deputy General Counsel, Franklin Templeton; and officer of some of the other subsidiaries of Franklin Resources, Inc. and of 41 of the investment companies in Franklin Templeton.
Breda M. Beckerle (1958) 280 Park Avenue New York, NY 10017	Interim Chief Compliance Officer	Since January 2020	Not Applicable	Not Applicable
Principal Occupation During at Least the Past 5 Years:
Chief Compliance Officer, Fiduciary Investment Management International, Inc., Franklin Advisers, Inc., Franklin Advisory Services, LLC, Franklin Mutual Advisers, LLC, Franklin Templeton Institutional, LLC; and officer of 41 of the investment companies in Franklin Templeton.
Steven J. Gray (1955) One Franklin Parkway San Mateo, CA 94403-1906	Vice President and Secretary	Vice President since 2009 and Secretary since 2005	Not Applicable	Not Applicable
Principal Occupation During at Least the Past 5 Years:
Senior Associate General Counsel, Franklin Templeton; Vice President, Franklin Templeton Distributors, Inc. and FASA, LLC; and officer of 41 of the investment companies in Franklin Templeton.
Matthew T. Hinkle (1971) One Franklin Parkway San Mateo, CA 94403-1906	Chief Executive Officer – Finance and Administration	Since 2017	Not Applicable	Not Applicable
Principal Occupation During at Least the Past 5 Years:
Senior Vice President, Franklin Templeton Services, LLC; officer of 41 of the investment companies in Franklin Templeton; and formerly, Vice President, Global Tax (2012-April 2017) and Treasurer/Assistant Treasurer, Franklin Templeton (2009-2017).
Robert G. Kubilis (1973) 300 S.E. 2nd Street Fort Lauderdale, FL 33301-1923	Chief Financial Officer, Chief Accounting Officer and Treasurer	Since 2012	Not Applicable	Not Applicable
Principal Occupation During at Least the Past 5 Years:
Treasurer, U.S. Fund Administration & Reporting; and officer of 15 of the investment companies in Franklin Templeton.

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FRANKLIN MUTUAL SERIES FUNDS

Interested Board Members and Officers (continued)

Name, Year of Birth and Address	Position	Length of Time Served	Number of Portfolios in Fund Complex Overseen by Board Member*	Other Directorships Held During at Least the Past 5 Years
Robert Lim (1948) One Franklin Parkway San Mateo, CA 94403-1906	Vice President – AML Compliance	Since 2016	Not Applicable	Not Applicable
Principal Occupation During at Least the Past 5 Years:
Vice President, Franklin Templeton Companies, LLC; Chief Compliance Officer, Franklin Templeton Distributors, Inc. and Franklin Templeton Investor Services, LLC; and officer of 44 of the investment companies in Franklin Templeton Investments.
Navid J. Tofigh (1972) One Franklin Parkway San Mateo, CA 94403-1906	Vice President	Since 2015	Not Applicable	Not Applicable
Principal Occupation During at Least the Past 5 Years:
Associate General Counsel; and officer of 41 of the investment companies in Franklin Templeton.
Craig S. Tyle (1960) One Franklin Parkway San Mateo, CA 94403-1906	Vice President	Since 2005	Not Applicable	Not Applicable
Principal Occupation During at Least the Past 5 Years:
General Counsel and Executive Vice President, Franklin Resources, Inc.; and officer of some of the other subsidiaries of Franklin Resources, Inc. and of 41 of the investment companies in Franklin Templeton.
Lori A. Weber (1964) 300 S.E. 2nd Street Fort Lauderdale, FL 33301-1923	Vice President	Since 2011	Not Applicable	Not Applicable
Principal Occupation During at Least the Past 5 Years:
Senior Associate General Counsel, Franklin Templeton; Assistant Secretary, Franklin Resources, Inc.; Vice President and Secretary, Templeton Investment Counsel, LLC; and officer of 41 of the investment companies in Franklin Templeton.

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*We base the number of portfolios on each separate series of the U.S. registered investment companies within the Franklin Templeton fund complex. These portfolios have a common investment manager or affiliated investment managers.

**Gregory E. Johnson is considered to be an interested person of the Fund under the federal securities laws due to his position as an officer and director of Franklin Resources, Inc. (Resources), which is the parent company of the Fund’s investment manager and distributor. Peter A. Langerman is considered to be an interested person of the Fund under the federal securities laws due to his position as an officer of Franklin Mutual Advisers, LLC, which is the Fund’s investment manager.

Note 1: Officer information is current as of the date of this report. It is possible that after this date, information about officers may change.

The Sarbanes-Oxley Act of 2002 and Rules adopted by the U.S. Securities and Exchange Commission require the Fund to disclose whether the Fund’s Audit Committee includes at least one member who is an audit committee financial expert within the meaning of such Act and Rules. The Fund’s Board has determined that there is at least one such financial expert on the Audit Committee and has designated each of Edward I. Altman, Ph.D., Ann Torre Bates and David W. Niemiec as an audit committee financial expert. The Board believes that Messrs. Altman and Niemiec and Ms. Bates qualify as such an expert in view of their extensive business background and experience. Mr. Altman has served as a member of the Fund Audit Committee since 1987. He currently serves as a Max L. Hine Professor of Finance, Emeritus and Director of The Credit and Debt Markets Research Program, Salomon Center, Stern School of Business, New York University. Ms. Bates has served as a member of the Fund Audit Committee since 1995. She currently serves as a director of Ares Capital Corporation (2010-present) and United Natural Foods, Inc. (2013-present) and was formerly a director of Navient Corporation from 2014 to 2016, SLM Corporation from 1997 to 2014 and Allied Capital Corporation from 2003 to 2010, Executive Vice President and Chief Financial Officer of NHP Incorporated from 1995 to 1997 and Vice President and Treasurer of US Airways, Inc. until 1995. Mr. Niemiec has served as a member of the Fund Audit Committee since 2015, currently serves as an Advisor to Saratoga Partners and was formerly its Managing Director from 1998 to 2001 and serves as a director of Hess Midstream LP (2017-present). Mr. Niemiec was formerly a director of Emeritus Corporation from 1999 to 2010 and OSI Pharmaceuticals, Inc. from 2006 to 2010, Managing Director of SBC Warburg Dillon Read from 1997 to 1998, and was Vice Chairman from 1991 to 1997 and Chief Financial Officer from 1982 to 1997 of Dillon, Read & Co. Inc. As a result of such background and experience, the Board believes that Messrs. Altman and Niemiec and Ms. Bates have each acquired an understanding of generally accepted accounting principles and financial statements, the general application of such principles in connection with the accounting estimates, accruals and reserves, and analyzing and evaluating financial statements that present a breadth and level of complexity of accounting issues generally comparable to those of the Fund, as well as an understanding of internal controls and procedures for financial reporting and an understanding of audit committee functions. Messrs. Altman and Niemiec and Ms. Bates are independent Board members as that term is defined under the applicable U.S. Securities and Exchange Commission Rules and Releases.

The Statement of Additional Information (SAI) includes additional information about the board members and is available, without charge, upon request. Shareholders may call (800) DIAL BEN/342-5236 to request the SAI.

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FRANKLIN MUTUAL SERIES FUNDS

FRANKLIN MUTUAL BEACON FUND

Shareholder Information

Proxy Voting Policies and Procedures

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

Quarterly Statement of Investments

The Trust, on behalf of the Fund, files a complete statement of investments with the U.S. Securities and Exchange Commission for the first and third quarters for each fiscal year 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 the Fund’s financial reports every six months as well as an annual updated summary prospectus (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 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.

48         Annual 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.

	Annual Report and Shareholder Letter Franklin Mutual Beacon Fund
	Investment Manager	Distributor	Shareholder Services
	Franklin Mutual Advisers, LLC	Franklin Templeton Distributors, Inc.	(800) 632-2301 - (Class A, C, R &
		(800) DIAL BEN® / 342-5236	R6)
		franklintempleton.com	(800) 448-FUND - (Class Z)

© 2020 Franklin Templeton Investments. All rights reserved. 476 A 02/20

Sign up for electronic delivery at franklintempleton.com/edelivery

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

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

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

FRANKLIN TEMPLETON

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

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

Dear Franklin Mutual Global Discovery Fund Shareholder:

As we enter 2020, the factors that lifted stocks to record highs in 2019—accommodative central bank monetary policies and progress on a proposed trade deal between the U.S. and China—continue to be sources of optimism for growth. The near-term threat of recession has eased, with the U.S. economy showing resilience as low unemployment and moderately rising wages have encouraged consumer spending, which has supported the expansion. In contrast, business investment and exports were weak in 2019, but there are nascent signs of increasing industrial activity.

Tariffs, trade battles and geopolitical conflict may continue to dominate headlines in 2020 and account for a disproportionate source of market volatility. The U.S. and China agreed in principle to a phase-one trade agreement in late 2019. However, a re-escalation of the tariff dispute between the world’s two largest economies is not out of the question, as negotiations on a phase-two trade agreement are scheduled to start after the anticipated phase-one signing ceremony in January. There was clarity on Brexit as British voters delivered a resounding election victory to Prime Minister Boris Johnson and his Conservative Party, which should pave the way for a conclusive exit agreement. The terms of U.K. departure, however, must still be finalized. Late in the period, tensions in the Middle East were on the rise, following the death of an American contractor in Iraq in late December and a retaliatory U.S. military strike two days later.

During the period, we took advantage of market turbulence to seek out a larger number of stocks whose risk/reward profiles turned more favorable. Subsequently, we used the market appreciation to exit from or trim select positions that reached or exceeded our estimates of intrinsic value. Market volatility continues to present occasional opportunities in

individual stocks, and in certain sectors, notably those considered to be economically sensitive. We continue to focus on situations in which company-specific actions are more important than economic improvement in driving shareholder value.

Valuation is an essential factor in our analysis, and we always ask ourselves if current and potential investments represent an attractive balance of risk and reward. Amid the all-time highs reached by the Standard & Poor’s^® 500 Index (S&P 500^®) during the period, we maintained our focus on individual securities and the prospects for each business in the context of its valuation and the backdrop of potential political and economic risks.

We continue to adhere to a bottom-up stock selection process that is disciplined, driven by rigorous fundamental analysis, and that attempts to limit downside risk. In our view, actively investing in underappreciated and misunderstood companies with identifiable catalysts for unlocking shareholder value can offer meaningful upside potential and a degree of downside protection in periods of financial market turbulence.

We recognize the important role of financial advisors in today’s markets and encourage investors to continue to seek their advice. Amid changing markets and economic conditions, we are confident investors with a well-diversified portfolio and a patient, long-term outlook will 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 12 months considering the

 Not FDIC Insured | May Lose Value | No Bank Guarantee 

franklintempleton.com Not part of the annual report         1

economic environment and other factors. Please remember all securities markets fluctuate, as do mutual fund share prices.

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

Sincerely,

Peter A. Langerman

Chairman, President and Chief Executive Officer

Franklin Mutual Advisers, LLC

This letter reflects our analysis and opinions as of December 31, 2019, unless otherwise indicated. The information is not a complete analysis of every aspect of any market, country, industry, security or fund. Statements of fact are from sources considered reliable.

 Contents

Annual Report
Franklin Mutual Global Discovery Fund	3
Performance Summary	9
Your Fund’s Expenses	12
Financial Highlights and Statement of Investments	13
Financial Statements	24
Notes to Financial Statements	29
Report of Independent Registered Public Accounting Firm	42
Tax Information	43
Board Members and Officers	44
Shareholder Information	49
Visit franklintempleton.com for fund updates, to access your account, or to find helpful financial planning tools.

2         Not part of the annual report franklintempleton.com

ANNUAL REPORT

Franklin Mutual Global Discovery Fund

This annual report for Franklin Mutual Global Discovery Fund covers the fiscal year ended December 31, 2019. The reorganization of Franklin Mutual International Fund into Franklin Mutual Global Discovery Fund, as approved by shareholders, was completed on February 21, 2020. Shares of Franklin Mutual International Fund share classes A, C, R, R6 and Z were exchanged for shares in Franklin Mutual Global Discovery Fund share classes A, C, R, R6 and Z, respectively. We welcome the former shareholders of Franklin Mutual International Fund that now own shares of Franklin Mutual Global Discovery Fund.

Your Fund’s Goal and Main Investments

The Fund seeks capital appreciation. Under normal market conditions, the Fund invests primarily in equity securities of U.S. and foreign companies that we believe are available at market prices less than their intrinsic value. The equity securities in which the Fund invests are primarily common stock, with a current focus on mid- and large cap companies. To a lesser extent, the Fund also invests in merger arbitrage securities and the debt and equity of distressed companies. The Fund may invest a substantial portion, potentially up to 100% of its assets, in foreign securities, which may include sovereign debt and participations in foreign government debt. The Geographic Composition bar chart on this page lists the leading countries where the Fund invests.

Performance Overview

The Fund’s Class Z shares posted a +24.70% cumulative total return for the 12 months ended December 31, 2019. For comparison, the Fund’s benchmark, the MSCI World Index (USD), which tracks stock performance in global developed markets, posted a +28.40% total return.¹ You can find more of the Fund’s performance data in the Performance Summary beginning on page 9.

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.

Geographic Composition*

Based on Total Net Assets as of 12/31/19

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

Economic and Market Overview

Global developed and emerging market stocks, as measured by the MSCI All Country World Index (USD), posted a +27.30% total return during the 12 months ended December 31, 2019.¹ Although global economic growth slowed from 2018, interest-rate cuts from many central banks and the easing of trade tensions near period-end contributed to the generally positive environment for equities worldwide. Reflecting investor optimism and slowing but resilient economic growth, stocks advanced in every major region of the globe.

In the U.S., solid economic growth also supported equities, as healthy consumer spending and a strong labor market kept the economy afloat. The unemployment rate fell during

1. Source: Morningstar.

The index is unmanaged and includes reinvestment of any income or distributions. It does not reflect any fees, expenses or sales charges. One cannot invest directly in an index, and an index is not representative of the Fund’s portfolio.

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 18.

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FRANKLIN MUTUAL GLOBAL DISCOVERY FUND

the year, reaching 3.5% in September, November and December 2019, the lowest recorded unemployment rate in 50 years.² Wages also grew, albeit at a moderate pace, and inflation remained persistently low. In addition, deficit spending by the U.S. government boosted current growth at the expense of long-term debt. Despite the strength in the consumer sector, some parts of the economy struggled, particularly heavy industry. Annual industrial production contracted late in the reporting period, manufacturing output stalled and capital spending declined.

The U.S. Federal Reserve (Fed) provided a substantial boost to equity markets early in the reporting period as it shifted to a more accommodative monetary policy. In January 2019, the Fed signaled the end of its tightening cycle and cut the federal funds rate three times thereafter, lowering it to a range of 1.50%–1.75%. Stocks responded positively to the interest-rate cuts and gained further in December 2019 after the Fed indicated it would likely leave interest rates unchanged in 2020.

Growth slowed overall in the eurozone, particularly in Germany and Italy. Germany, which is heavily reliant on exports, was adversely affected by the trade conflict between the U.S. and China and the resulting slowdown in global trade. In Italy, political uncertainty and budget concerns caused the country’s annual gross domestic product (GDP) growth to stall in 2019’s first quarter before modestly improving in the second and third quarters. Despite sluggish economic conditions, European developed market equities, as measured by the MSCI Europe Index-NR (Local Currency), posted a +23.75% total return for the 12-month period, as easing trade tensions buoyed investor optimism and an electoral victory by the Conservative Party in the U.K. alleviated uncertainty surrounding Brexit.³ Although the European Central Bank left its headline refinancing rate unchanged, it lowered the deposit rate and restarted its bond-buying stimulus program, further supporting stocks.

Economic growth in Asia was relatively solid overall, despite slowdowns in several large emerging market countries, such as China and India. Japan’s economy grew amid the Bank of Japan’s sizable stimulus program. The trade war between the U.S. and China provided the backdrop for Asian stocks, which rose and fell in sync with investor sentiment regarding a trade deal. A phase one trade agreement between the two countries reached in December 2019 propelled Asian developed and emerging market stocks, which ultimately

ended with a +19.23% total return over the 12-month period, as measured by the MSCI All Country Asia Index (USD).⁴

Emerging market stocks overall experienced several sharp selloffs and subsequent rebounds throughout the reporting period before ending with gains. In aggregate, economic growth slowed somewhat from 2018 but remained solid, although there was some variation among individual countries. Many central banks in emerging markets cut interest rates throughout the reporting period, which, along with resilient GDP growth, provided a supportive environment for equities. Russian stocks posted the highest returns among emerging markets as the threat of further sanctions receded and a solid fiscal environment reassured investors. Overall, global emerging markets, as measured by the MSCI Emerging Markets Index (USD), posted a +18.90% total return for the 12-month period.¹

Investment Strategy

At Franklin Mutual Series, we are committed to our distinctive value approach to investing, which we believe can generate above-average risk-adjusted returns over time for our shareholders. Our major investment strategy is investing in undervalued stocks. When selecting undervalued equities, we are attracted to what we believe are fundamentally strong companies with healthy balance sheets, high-quality assets, substantial free cash flow and shareholder-oriented management teams and whose stocks are trading at discounts to our assessment of the companies’ intrinsic or business value. We also look for asset-rich companies whose shares may be trading at depressed levels due to concerns over short-term earnings disappointments, litigation, management strategy or other perceived negatives. This strict value approach is not only intended to improve the likelihood of capital appreciation, but also reduces the risk of substantial declines, in our opinion. While the vast majority of our undervalued equity investments are made in publicly traded companies globally, we may invest occasionally in privately held companies as well.

To a lesser extent, we complement this more traditional investment strategy with two others. One is distressed investing, a highly specialized field that has proven quite profitable during certain periods over the years. Distressed investing is complex and can take many forms. The most common distressed investment the Fund undertakes is the purchase of financially troubled or bankrupt companies’ debt at a substantial discount to face value. After the financially

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

3. Source: Morningstar. Net Returns (NR) include income net of tax withholding when dividend are paid.

4. Source: MSCI.

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distressed company is reorganized, often in bankruptcy court, the old debt is typically replaced with new securities issued by the financially stronger company.

The other piece of our investment strategy is participating in arbitrage situations, another highly specialized field. When companies announce proposed mergers or takeovers, commonly referred to as deals, the target company may trade at a discount to the bid it ultimately accepts. One form of arbitrage involves purchasing the target company’s stock when it is trading below the value we believe it would receive in a deal. In keeping with our commitment to a relatively conservative investment approach, we typically focus our arbitrage efforts on announced deals, and avoid rumored deals or other situations we consider relatively risky. In addition, it is our practice to hedge the Fund’s currency exposure when we deem it advantageous for our shareholders.

What is meant by “hedge”?

To hedge an investment is to take a position intended to offset potential losses that may be incurred by a companion financial instrument. Hedging an investment may also offset potential gains.

Manager’s Discussion

The end of a decade is a natural time for reflection about the years that have just passed and to look ahead to what the next 10 might have in store. Across Wall Street, we see many prognostications, and while we are not in the forecasting business, we do allow ourselves to think about investment opportunities over such an extended time period. But experience has taught us that while trying to predict the exact course of markets and/or economic and political events that will drive them may be fun, it is not all that useful.

As 2010 began, the global economy was still recovering from the Global Financial Crisis. The U.S. government owned significant portions of the banking and automotive sectors. The Fed had already started quantitative easing (QE), with QE 2 and QE 3 still to come. In Europe, concerns about Greece’s finances were emerging, and in China the effects of 2009’s massive stimulus programs were starting to take hold.

Over the subsequent years we saw ongoing, global QE, culminating in trillions of dollars of debt yielding negative

Top 10 Sectors/Industries

Based on Equity Securities as of 12/31/19

	% of Total Net Assets
Banks	11.4%
Oil, Gas & Consumable Fuels	10.7%
Pharmaceuticals	10.2%
Insurance	9.5%
Technology Hardware, Storage & Peripherals	5.1%
Software	4.3%
Automobiles	3.8%
Tobacco	3.1%
Health Care Equipment & Supplies	3.0%
Media	2.9%

interest rates. The European Union (EU) was in continuous upheaval, with Greece threatening to leave, but eventually staying in the eurozone; the U.K. pursuing and achieving Brexit; and ongoing strain between core members Germany, France, Italy and Spain. In the U.S., average annual economic growth was restrained and finished the decade below 2%, trailing the minimum 3% expectation of prior decades. Strong corporate profits and lower corporate tax rates were bright spots.

Equity markets delivered a very good decade—one of the best in history—with the MSCI World Index (USD) and the S&P 500 posting average annual total returns of +10.08% and +13.56%, respectively.⁵ During the decade, Franklin Mutual Global Discovery Fund, Class Z posted an average annual total return of +8.07%, a solid absolute return that nonetheless lagged the MSCI World Index (USD), its benchmark. The Fund’s value strategy, which seeks to identify mispriced securities and limit downside risk, was out of favor in an environment that generally encouraged investors to assume more risk. Conversely, the Fund’s Class Z shares posted an average annual total return of +8.72% in the prior decade, compared with +0.23% for the MSCI World Index (USD).¹ Our active investment approach focusing on individual opportunities was more conducive to the prior decade’s greater volatility.

In our view, going forward we expect more political and monetary uncertainty and economic growth in unexpected places. Corporate profits will have good years and bad years. Some industries will be massively disrupted, while others will find a way to adjust and prosper, even within the

5. 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.

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context of artificial intelligence and machine learning. Recent events, such as the coronavirus outbreak, have caused, and may continue to cause, uncertainty and volatility in the Chinese economy, potentially leading to vulnerability in 2020 global growth expectations. As for investment positioning, we intend to avoid forecasts that would lead us to make the Fund’s success dependent on a specific set of outcomes. Rather, we will seek to continue with our time-tested value process and complement it with new tools that enhance our security evaluation and selection process. To that end, we have integrated risk and quantitative portfolio analysis tools that provide us with fresh insights about performance, and help us identify companies and securities that we believe satisfy our investors’ goals of risk-adjusted returns that are not wholly dependent on any one economic or political scenario.

Fund Performance

Turning to Fund performance, top positive contributors included U.S.-based companies Charter Communications, Citigroup and Walt Disney. Citigroup and Walt Disney are listed among the Fund’s largest positions in the Top 10 Equity Holdings table on this page.

Shares of cable operator Charter Communications surged after the company reported operating and financial results that were broadly ahead of consensus estimates. Capital expenditures were lower than expected and drove free cash flow, which was used during the period to buy back $3.1 billion of the company’s stock. The market was anticipating share repurchases totaling $2.25 billion. Revenue accelerated 5.1% compared with consensus forecasts of 4.5%. The increased revenue, however, did not reflect the impact of a broad-based increase in per subscriber fees implemented during the period, which could drive revenue growth and margin expansion in 2020. According to the company’s management, there has not been a meaningful decrease in customers as a result of the higher per subscriber fees.

Investors bid up shares of bank and financial services provider Citigroup following the release of third-quarter earnings that beat consensus expectations. Highlights included increases in deposits of 6% quarter-over-quarter and 11% year-over-year; growth in revenues and purchase volumes in the North America-branded credit cards division by 11% and 7% year-over-year, respectively; and strong results in the bank’s Asian operations across the board.

Top 10 Equity Holdings

12/31/19

Company Sector/Industry, Country	% of Total Net Assets
Novartis AG Pharmaceuticals, Switzerland	3.1%
GlaxoSmithKline PLC Pharmaceuticals, U.K.	3.1%
Medtronic PLC Health Care Equipment & Supplies, U.S.	3.0%
Samsung Electronics Co. Ltd. Technology Hardware, Storage & Peripherals, South Korea	2.6%
The Walt Disney Co. Entertainment, U.S.	2.5%
Volkswagen AG Automobiles, Germany	2.5%
British American Tobacco PLC Tobacco, U.K.	2.2%
Kinder Morgan Inc. Oil, Gas & Consumable Fuels, U.S.	2.2%
The Hartford Financial Services Group Inc. Insurance, U.S.	2.2%
Citigroup Inc. Banks, U.S.	2.1%

Management also repurchased 76 million, or 3.3%, of outstanding shares of the company during the period.

Shares of family entertainment and media enterprise Walt Disney surged in late 2019. The rally was kicked off by an earnings report characterized by across-the-board outperformance of Disney legacy assets and a better-than-expected outlook for fiscal-year 2020 earnings. The company’s stock continued to rise following the successful launch of Disney+, its subscription video on-demand streaming service, which reported more than 10 million subscribers on the first day of service, exceeding forecasts. The box office performance of Frozen II, which set a record for Thanksgiving-weekend receipts, also helped boost the stock’s performance.

During the period under review, Fund investments that detracted from performance included U.S.-based companies Occidental Petroleum (not held at period-end), Walgreens Boots Alliance and Clear Channel Outdoor Holdings.⁶

6. Clear Channel Outdoor Holdings is listed as Clear Channel Communications in the SOI. Clear Channel Communications is the prior name of iHeartMedia, the former parent company of Clear Channel Outdoor Holdings.

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

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The stock of Occidental Petroleum, a petroleum and chemical products company, traded lower in 2019 as investors struggled to accept its acquisition of Anadarko Petroleum, during a period in which energy stocks were under pressure from falling crude oil prices. The acquired Permian Basin assets complement Occidental’s existing portfolio, and we believe the considerable free cash flow generated from Anadarko’s Gulf of Mexico operations combined with the disposal of non-core assets, could help reduce debt and support the dividend. However, the company’s profile was riskier than it was pre-acquisition, and we exited the position.

Shares of drug store services provider Walgreens Boots Alliance began to sell off early in 2019, when the chief financial officer cited negative industry trends in drug prices and pharmacy benefit manager (PBM) reimbursement rates. Shares also fell in reaction to the company’s limited success in offsetting those challenges by increasing its volume of drug sales or renegotiating with PBMs. These pressures, and weakness in both its U.S. and U.K. stores, resulted in a cut to full-year guidance in April. However, Walgreens is reducing costs throughout the enterprise, and is attempting to reduce exposure to lower margin categories within the front of its stores, which we believe can help boost growth and profitability over the longer term. The company’s share price rallied in early November based on news that global investment firm KKR had approached the company about taking it private via a leveraged buyout that would likely be the largest in history. However, the stock retreated later when deal terms failed to materialize.

Shares of outdoor advertising company Clear Channel Outdoor Holdings weakened after the company sold 100 million shares of stock in July, shortly after emerging from bankruptcy and separating from mass media company iHeart Communications. Clear Channel Outdoor announced it is using the stock proceeds to repurchase the debt of Clear Channel Worldwide Holdings, a subsidiary. Following the equity issuance, which was dilutive and at a depressed price, Clear Channel Outdoor reported mixed earnings. The strength of domestic operations was overshadowed by significantly lower international results, driven primarily by a 51%-owned China joint venture. We believe the company’s assets represent compelling value relative to domestic and international peers.

During the period, the Fund held currency forwards and futures seeking to hedge most of the currency risk of the portfolio’s non-U.S. dollar investments. The hedges had a modestly positive overall impact on the Fund’s performance.

What is a currency forward?

A currency forward is a direct agreement between the Fund and a counterparty to buy or sell a foreign currency in exchange for another currency at a specific exchange rate on a future date.

What is a future?

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

As fellow shareholders, we found recent relative performance disappointing, but it is not uncommon for our strategy to lag the equity markets at times. We remain committed to our disciplined, value investment approach as we seek to generate attractive, long-term, risk-adjusted returns for shareholders.

Thank you for your participation in Franklin Mutual Global Discovery Fund. We look forward to continuing to serve your investment needs.

	Peter A. Langerman   Co-Portfolio Manager
	Timothy Rankin, CFA   Co-Portfolio Manager
	Christian Correa, CFA   Co-Portfolio Manager

CFA^® is a trademark owned by CFA Institute.

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The foregoing information reflects our analysis, opinions and portfolio holdings as of December 31, 2019, the end of the reporting period. The way we implement our main investment strategies and the resulting portfolio holdings may change depending on factors such as market and economic conditions. These opinions may not be relied upon as investment advice or an offer for a particular security. The information is not a complete analysis of every aspect of any market, country, industry, security or the Fund. Statements of fact are from sources considered reliable, but the investment manager makes no representation or warranty as to their completeness or accuracy. Although historical performance is no guarantee of future results, these insights may help you understand our investment management philosophy.

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Performance Summary as of December 31, 2019¹

The performance table and graphs do 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 12/31/19¹

Cumulative total return excludes sales charges. Average annual total return includes maximum sales charges. Sales charges will vary depending on the size of the investment and the class of share purchased. The maximum is 5.50% and the minimum is 0%. Class A: 5.50% maximum initial sales charge. For other share classes, visit franklintempleton.com.

Share Class	Cumulative   Total Return2		Average Annual   Total Return3
Z
1-Year		+24.70%		+24.70%
5-Year		+33.28%		+5.91%
10-Year		+117.24%		+8.07%
A4
1-Year		+24.37%		+17.54%
5-Year		+31.56%		+4.45%
10-Year		+111.35%		+7.16%

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 11 for Performance Summary footnotes.

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PERFORMANCE SUMMARY

Total Return Index Comparison for a Hypothetical $10,000 Investment¹

Total return represents the change in value of an investment over the periods shown. It includes any applicable maximum sales charge, Fund expenses, account fees and reinvested distributions. The unmanaged index includes reinvestment of any income or distributions. It differs from the Fund in composition and does not pay management fees or expenses. One cannot invest directly in an index.

Class Z (1/1/10–12/31/19)

    

Class A (1/1/10–12/31/19)

    

See page 11 for Performance Summary footnotes.

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PERFORMANCE SUMMARY

Distributions (1/1/19–12/31/19)

Share Class	Net Investment Income		Short-Term Capital Gain		Long-Term Capital Gain		Total
Z		$0.6965		$0.1084		$1.4426		$2.2475
A		$0.6178		$0.1084		$1.4426		$2.1688
C		$0.3366		$0.1084		$1.4426		$1.8876
R		$0.5279		$0.1084		$1.4426		$2.0789
R6		$0.7313		$0.1084		$1.4426		$2.2823

Total Annual Operating Expenses⁶

Share Class	With Fee Waiver		Without Fee Waiver
Z		0.98%		0.98%
A		1.23%		1.23%

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. Value securities may not increase in price as anticipated or may decline further in value. Special risks are associated with foreign investing, including currency fluctuations, economic instability and political developments. To the extent that the Fund focuses on particular countries, regions, industries, sectors or types of investment from time to time, the Fund may be subject to greater risks of adverse developments in such areas of focus than a fund that invests in a wider variety of countries, regions, industries, sectors or investments. Financial services companies are subject to extensive government regulation that may affect their profitability in many ways, including by limiting the amount and types of loans and other commitments they can make, and the interest rates and fees they can charge. Because the Fund may invest its assets in companies in a specific region, including Europe, it is subject to greater risks of adverse developments in that region and/or the surrounding regions than a fund that is more broadly diversified geographically. Current political and financial uncertainty surrounding the European Union may increase market volatility and the economic risk of investing in companies in Europe. Smaller-company stocks have exhibited greater price volatility than larger-company stocks, particularly over the short term. The Fund’s investments in companies engaged in mergers, reorganizations or liquidations also involve special risks as pending deals may not be completed on time or on favorable terms. The Fund may invest in lower-rated bonds, which entail higher credit risk. The Fund’s prospectus also includes a description of the main investment risks.

1. The Fund has a fee waiver associated with any investment it makes in a Franklin Templeton money fund and/or other Franklin Templeton fund, contractually guaranteed through 4/30/20. Fund investment results reflect the fee waiver; without this waiver, 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. Source: Morningstar. The MSCI World Index (USD) is a free float-adjusted, market capitalization-weighted index designed to measure equity market performance in global developed markets.

6. 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 MUTUAL GLOBAL DISCOVERY FUND

Your Fund’s Expenses

As a Fund shareholder, you can incur two types of costs: (1) transaction costs, including sales charges (loads) on Fund purchases and redemptions; and (2) ongoing Fund costs, including management fees, distribution and service (12b-1) fees, and other Fund expenses. All mutual funds have ongoing costs, sometimes referred to as operating expenses. The table below shows ongoing costs of investing in the Fund and can help you understand these costs and compare them with those of other mutual funds. The table assumes a $1,000 investment held for the six months indicated.

Actual Fund Expenses

The table below provides information about actual account values and actual expenses in the columns under the heading “Actual.” In these columns the Fund’s actual return, which includes the effect of Fund expenses, is used to calculate the “Ending Account Value” for each class of shares. You can estimate the expenses you paid during the period by following these steps (of course, your account value and expenses will differ from those in this illustration): Divide your account value by $1,000 (if your account had an $8,600 value, then $8,600 ÷ $1,000 = 8.6). Then multiply the result by the number in the row for your class of shares under the headings “Actual” and “Expenses Paid During Period” (if Actual Expenses Paid During Period were $7.50, then 8.6 x $7.50 = $64.50). In this illustration, the actual expenses paid this period are $64.50.

Hypothetical Example for Comparison with Other Funds

Under the heading “Hypothetical” in the table, information is provided about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. This information may not be used to estimate the actual ending account balance or expenses you paid for the period, but it can help you compare ongoing costs of investing in the Fund with those of other funds. To do so, compare this 5% hypothetical example for the class of shares you hold with the 5% hypothetical examples that appear in the shareholder reports of other funds.

Please note that expenses shown in the table are meant to highlight ongoing costs and do not reflect any transactional costs. Therefore, information under the heading “Hypothetical” is useful in comparing ongoing costs only, and will not help you compare total costs of owning different funds. In addition, if transactional costs were included, your total costs would have been higher.

		Actual (actual return after expenses)		Hypothetical (5% annual return before expenses)
Share Class	Beginning Account Value 7/1/19	Ending Account Value 12/31/19	Expenses Paid During Period 7/1/19–12/31/191, 2	Ending Account Value 12/31/19	Expenses Paid During Period 7/1/19–12/31/191, 2	Net Annualized Expense Ratio2
Z	$1,000	$1,084.30	$  5.20	$1,020.21	$  5.04	0.99%
A	$1,000	$1,083.20	$  6.51	$1,018.95	$  6.31	1.24%
C	$1,000	$1,079.00	$10.43	$1,015.17	$10.11	1.99%
R	$1,000	$1,081.80	$  7.82	$1,017.69	$  7.58	1.49%
R6	$1,000	$1,084.80	$  4.68	$1,020.72	$  4.53	0.89%

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 184/365 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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Financial Highlights

Franklin Mutual Global Discovery Fund

				Year Ended December 31,
	2019			2018			2017			2016			2015
Class Z
Per share operating performance (for a share outstanding throughout the year)
Net asset value, beginning of year		$26.86			$32.42			$31.12			$29.35			$33.32
Income from investment operationsa:
Net investment incomeb		0.67			0.58			0.76	c		0.67	d		0.53
Net realized and unrealized gains (losses)		5.91			(4.13	)		2.29			3.08			(1.71	)
Total from investment operations		6.58			(3.55	)		3.05			3.75			(1.18	)
Less distributions from:
Net investment income		(0.70	)		(0.64	)		(0.79	)		(0.69	)		(0.55	)
Net realized gains		(1.55	)		(1.37	)		(0.96	)		(1.29	)		(2.24	)
Total distributions		(2.25	)		(2.01	)		(1.75	)		(1.98	)		(2.79	)
Net asset value, end of year		$31.19			$26.86			$32.42			$31.12			$29.35
Total return		24.70%			(10.78)%			9.84%			12.86%			(3.36)%
Ratios to average net assets
Expensese,f		1.00%	g		0.97%	g		0.96%			0.99%	g		0.99%	g
Expenses incurred in connection with securities sold short		0.02%			—%	h		—%			0.01%			0.02%
Net investment income		2.20%			1.82%			2.30%	c		2.27%	d		1.56%
Supplemental data
Net assets, end of year (000’s)		$5,176,787			$5,114,274			$7,175,981			$8,354,865			$9,132,752
Portfolio turnover rate		14.08%			14.70%			17.50%			17.01%			21.79%

^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.

^cNet investment income per share includes approximately $0.20 per share related to income received in the form of special dividends in connection with certain Fund holdings. Excluding this amount, the ratio of net investment income to average net assets would have been 1.68%.

^dNet investment income per share includes approximately $0.10 per share related to income received in the form of special dividends in connection with certain Fund holdings. Excluding this amount, the ratio of net investment income to average net assets would have been 1.94%.

^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(d).

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

^gBenefit of waiver and payments by affiliates rounds to less than 0.01%.

^hRounds to less than 0.01%.

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FRANKLIN MUTUAL SERIES FUNDS

FINANCIAL HIGHLIGHTS

Franklin Mutual Global Discovery Fund (continued)

				Year Ended December 31,
	2019			2018			2017			2016			2015
Class A
Per share operating performance (for a share outstanding throughout the year)
Net asset value, beginning of year		$26.32			$31.80			$30.57			$28.86			$32.81
Income from investment operationsa:
Net investment incomeb		0.58			0.49			0.66	c		0.59	d		0.42
Net realized and unrealized gains (losses)		5.78			(4.04	)		2.25			3.01			(1.67	)
Total from investment operations		6.36			(3.55	)		2.91			3.60			(1.25	)
Less distributions from:
Net investment income		(0.62	)		(0.56	)		(0.72	)		(0.60	)		(0.46	)
Net realized gains		(1.55	)		(1.37	)		(0.96	)		(1.29	)		(2.24	)
Total distributions		(2.17	)		(1.93	)		(1.68	)		(1.89	)		(2.70	)
Net asset value, end of year		$30.51			$26.32			$31.80			$30.57			$28.86
Total returne		24.37%			(10.99)%			9.57%			12.56%			(3.63)%
Ratios to average net assets
Expensesf,g		1.25%	h		1.22%	h		1.21%			1.24%	h		1.27%	h
Expenses incurred in connection with securities sold short		0.02%			—%	i		—%			0.01%			0.02%
Net investment income		1.95%			1.57%			2.05%	c		2.02%	d		1.28%
Supplemental data
Net assets, end of year (000’s)		$7,683,644			$7,461,444			$9,589,033			$10,498,722			$11,274,721
Portfolio turnover rate		14.08%			14.70%			17.50%			17.01%			21.79%

^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.

^cNet investment income per share includes approximately $0.20 per share related to income received in the form of special dividends in connection with certain Fund holdings. Excluding this amount, the ratio of net investment income to average net assets would have been 1.43%.

^dNet investment income per share includes approximately $0.10 per share related to income received in the form of special dividends in connection with certain Fund holdings. Excluding this amount, the ratio of net investment income to average net assets would have been 1.69%.

^eTotal return does not reflect sales commissions or contingent deferred sales charges, if applicable.

^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(d).

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

^hBenefit of waiver and payments by affiliates rounds to less than 0.01%.

ⁱRounds to less than 0.01%.

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FINANCIAL HIGHLIGHTS

Franklin Mutual Global Discovery Fund (continued)

				Year Ended December 31,
	2019			2018			2017			2016			2015
Class C
Per share operating performance (for a share outstanding throughout the year)
Net asset value, beginning of year		$26.25			$31.44			$30.22			$28.55			$32.49
Income from investment operationsa:
Net investment incomeb		0.36			0.26			0.41	c		0.36	d		0.18
Net realized and unrealized gains (losses)		5.74			(3.98	)		2.23			2.97			(1.64	)
Total from investment operations		6.10			(3.72	)		2.64			3.33			(1.46	)
Less distributions from:
Net investment income		(0.34	)		(0.10	)		(0.46	)		(0.37	)		(0.24	)
Net realized gains		(1.55	)		(1.37	)		(0.96	)		(1.29	)		(2.24	)
Total distributions		(1.89	)		(1.47	)		(1.42	)		(1.66	)		(2.48	)
Net asset value, end of year		$30.46			$26.25			$31.44			$30.22			$28.55
Total returne		23.43%			(11.70)%			8.78%			11.70%			(4.33)%
Ratios to average net assets
Expensesf,g		2.00%	h		1.97%	h		1.96%			1.99%	h		1.99%	h
Expenses incurred in connection with securities sold short		0.02%			—%	i		—%			0.01%			0.02%
Net investment income		1.20%			0.82%			1.30%	c		1.27%	d		0.56%
Supplemental data
Net assets, end of year (000’s)		$872,717			$1,054,412			$2,438,507			$2,758,563			$2,983,216
Portfolio turnover rate		14.08%			14.70%			17.50%			17.01%			21.79%

^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.

^cNet investment income per share includes approximately $0.20 per share related to income received in the form of special dividends in connection with certain Fund holdings. Excluding this amount, the ratio of net investment income to average net assets would have been 0.68%.

^dNet investment income per share includes approximately $0.10 per share related to income received in the form of special dividends in connection with certain Fund holdings. Excluding this amount, the ratio of net investment income to average net assets would have been 0.94%.

^eTotal return does not reflect sales commissions or contingent deferred sales charges, if applicable.

^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(d).

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

^hBenefit of waiver and payments by affiliates rounds to less than 0.01%.

ⁱRounds to less than 0.01%.

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

FRANKLIN MUTUAL SERIES FUNDS

FINANCIAL HIGHLIGHTS

Franklin Mutual Global Discovery Fund (continued)

				Year Ended December 31,
	2019			2018			2017			2016			2015
Class R
Per share operating performance (for a share outstanding throughout the year)
Net asset value, beginning of year		$25.97			$31.37			$30.17			$28.51			$32.43
Income from investment operationsa:
Net investment incomeb		0.50			0.41			0.57	c		0.50	d		0.35
Net realized and unrealized gains (losses)		5.69			(3.97	)		2.22			2.98			(1.64	)
Total from investment operations		6.19			(3.56	)		2.79			3.48			(1.29	)
Less distributions from:
Net investment income		(0.53	)		(0.47	)		(0.63	)		(0.53	)		(0.39	)
Net realized gains		(1.55	)		(1.37	)		(0.96	)		(1.29	)		(2.24	)
Total distributions		(2.08	)		(1.84	)		(1.59	)		(1.82	)		(2.63	)
Net asset value, end of year		$30.08			$25.97			$31.37			$30.17			$28.51
Total return		24.09%			(11.24)%			9.31%			12.28%			(3.82)%
Ratios to average net assets
Expensese,f		1.50%	g		1.47%	g		1.46%			1.49%	g		1.49%	g
Expenses incurred in connection with securities sold short		0.02%			—%	h		—%			0.01%			0.02%
Net investment income		1.70%			1.32%			1.80%	c		1.77%	d		1.06%
Supplemental data
Net assets, end of year (000’s)		$251,089			$274,086			$398,692			$444,813			$468,425
Portfolio turnover rate		14.08%			14.70%			17.50%			17.01%			21.79%

^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.

^cNet investment income per share includes approximately $0.20 per share related to income received in the form of special dividends in connection with certain Fund holdings. Excluding this amount, the ratio of net investment income to average net assets would have been 1.18%.

^dNet investment income per share includes approximately $0.10 per share related to income received in the form of special dividends in connection with certain Fund holdings. Excluding this amount, the ratio of net investment income to average net assets would have been 1.44%.

^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(d).

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

^gBenefit of waiver and payments by affiliates rounds to less than 0.01%.

^hRounds to less than 0.01%.

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

FRANKLIN MUTUAL SERIES FUNDS

FINANCIAL HIGHLIGHTS

Franklin Mutual Global Discovery Fund (continued)

				Year Ended December 31,
	2019			2018			2017			2016			2015
Class R6
Per share operating performance (for a share outstanding throughout the year)
Net asset value, beginning of year		$26.85			$32.41			$31.13			$29.35			$33.33
Income from investment operationsa:
Net investment incomeb		0.70			0.62			0.75	c		0.61	d		0.55
Net realized and unrealized gains (losses)		5.90			(4.13	)		2.34			3.19			(1.69	)
Total from investment operations		6.60			(3.51	)		3.09			3.80			(1.14	)
Less distributions from:
Net investment income		(0.73	)		(0.68	)		(0.85	)		(0.73	)		(0.60	)
Net realized gains		(1.55	)		(1.37	)		(0.96	)		(1.29	)		(2.24	)
Total distributions		(2.28	)		(2.05	)		(1.81	)		(2.02	)		(2.84	)
Net asset value, end of year		$31.17			$26.85			$32.41			$31.13			$29.35
Total return		24.80%			(10.67)%			9.98%			13.02%			(3.23)%
Ratios to average net assets
Expenses before waiver and payments by affiliatese		0.90%			0.88%			0.84%			0.85%			0.84%
Expenses net of waiver and payments by affiliatese,f		0.89%			0.87%			0.84%			0.85%	g		0.84%	g
Expenses incurred in connection with securities sold short		0.02%			—%	h		—%			0.01%			0.02%
Net investment income		2.31%			1.92%			2.42%	c		2.41%	d		1.71%
Supplemental data
Net assets, end of year (000’s)		$1,295,457			$1,418,812			$2,221,338			$528,617			$229,765
Portfolio turnover rate		14.08%			14.70%			17.50%			17.01%			21.79%

^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.

^cNet investment income per share includes approximately $0.20 per share related to income received in the form of special dividends in connection with certain Fund holdings. Excluding this amount, the ratio of net investment income to average net assets would have been 1.80%.

^dNet investment income per share includes approximately $0.10 per share related to income received in the form of special dividends in connection with certain Fund holdings. Excluding this amount, the ratio of net investment income to average net assets would have been 2.08%.

^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(d).

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

^gBenefit of waiver and payments by affiliates rounds to less than 0.01%.

^hRounds to less than 0.01%.

franklintempleton.com The accompanying notes are an integral part of these financial statements.  |  Annual Report         17

FRANKLIN MUTUAL SERIES FUNDS

Statement of Investments, December 31, 2019

Franklin Mutual Global Discovery Fund

	Country		Shares/ Rights/ Units/ Warrants		Value
Common Stocks and Other Equity Interests 94.0%
Aerospace & Defense 1.1%
BAE Systems PLC		United Kingdom		21,584,405	$	161,462,001
Auto Components 0.0%†
a,b,c International Automotive Components Group Brazil LLC		Brazil		3,819,425		138,645
Automobiles 1.3%
General Motors Co.		United States		5,350,852		195,841,183
Banks 11.4%
CIT Group Inc.		United States		2,644,958		120,689,434
Citigroup Inc.		United States		3,933,740		314,266,489
Citizens Financial Group Inc.		United States		6,918,710		280,968,813
First Horizon National Corp.		United States		7,743,203		128,227,442
ING Groep NV		Netherlands		12,428,617		148,970,120
JPMorgan Chase & Co.		United States		1,676,856		233,753,726
Standard Chartered PLC		United Kingdom		21,632,144		204,107,535
Wells Fargo & Co.		United States		5,713,404		307,381,135
						1,738,364,694
Building Products 1.6%
Johnson Controls International PLC		United States		6,119,300		249,116,703
Capital Markets 2.0%
Credit Suisse Group AG		Switzerland		12,875,441		174,373,641
Deutsche Bank AG		Germany		6,644,039		51,538,274
Guotai Junan Securities Co. Ltd.		China		41,520,689		73,532,270
						299,444,185
Chemicals 1.5%
BASF SE		Germany		2,946,786		222,569,739
Communications Equipment 0.9%
Cisco Systems Inc.		United States		2,838,530		136,135,899
Construction Materials 1.3%
LafargeHolcim Ltd., B		Switzerland		3,691,245		204,846,646
Consumer Finance 1.5%
Capital One Financial Corp.		United States		2,190,465		225,420,753
Containers & Packaging 1.1%
International Paper Co.		United States		3,679,148		169,424,765
Diversified Financial Services 1.9%
a M&G PLC		United Kingdom		24,508,843		76,996,867
Voya Financial Inc.		United States		3,426,353		208,939,006
						285,935,873
Diversified Telecommunication Services 0.6%
Koninklijke KPN NV		Netherlands		33,853,948		99,887,257
Electric Utilities 1.5%
Enel SpA		Italy		29,478,178		233,788,319

18         Annual Report franklintempleton.com

FRANKLIN MUTUAL SERIES FUNDS

STATEMENT OF INVESTMENTS

Franklin Mutual Global Discovery Beacon Fund (continued)

	Country		Shares/ Rights/ Units/ Warrants		Value
Common Stocks and Other Equity Interests (continued)
Energy Equipment & Services 1.2%
Schlumberger Ltd.		United States		4,741,000	$	190,588,200
Entertainment 2.5%
The Walt Disney Co.		United States		2,621,361		379,127,441
Food & Staples Retailing 1.1%
Walgreens Boots Alliance Inc.		United States		2,833,972		167,090,989
Food Products 1.4%
The Kraft Heinz Co.		United States		6,492,200		208,594,386
Health Care Equipment & Supplies 3.0%
Medtronic PLC		United States		3,987,784		452,414,095
Health Care Providers & Services 1.9%
CVS Health Corp.		United States		3,993,966		296,711,734
Hotels, Restaurants & Leisure 2.6%
Accor SA		France		5,757,306		269,560,163
Sands China Ltd.		Macau		25,499,100		136,293,202
						405,853,365
Independent Power & Renewable Electricity Producers 0.1%
Vistra Energy Corp.		United States		865,902		19,907,087
Industrial Conglomerates 1.2%
General Electric Co.		United States		16,950,050		189,162,558
Insurance 9.5%
a Alleghany Corp.		United States		76,761		61,375,793
American International Group Inc.		United States		5,102,618		261,917,382
China Pacific Insurance Group Co. Ltd., H		China		44,491,587		175,287,363
Chubb Ltd.		United States		1,032,198		160,671,941
Everest Re Group Ltd.		United States		282,300		78,151,932
The Hartford Financial Services Group Inc.		United States		5,478,587		332,933,732
NN Group NV		Netherlands		7,550,480		286,370,371
RSA Insurance Group PLC		United Kingdom		13,308,282		99,693,526
						1,456,402,040
IT Services 1.4%
Cognizant Technology Solutions Corp., A		United States		3,420,390		212,132,588
Machinery 0.9%
CNH Industrial NV		United Kingdom		5,804,196		63,724,242
CNH Industrial NV, special voting		United Kingdom		7,338,645		80,570,951
						144,295,193
Media 2.9%
a Charter Communications Inc., A		United States		521,865		253,146,274
a DISH Network Corp., A.		United States		4,143,726		146,977,961
a iHeartMedia Inc., A		United States		2,634,302		44,519,704
a,b iHeartMedia Inc., B		United States		44,430		638,237

franklintempleton.com Annual Report         19

FRANKLIN MUTUAL SERIES FUNDS

STATEMENT OF INVESTMENTS

Franklin Mutual Global Discovery Fund (continued)

	Country		Shares/ Rights/ Units/ Warrants		Value
Common Stocks and Other Equity Interests (continued)
Media (continued)
a iHeartMedia Inc., wts., A, 5/01/39		United States		292	$	4,935
						445,287,111
Oil, Gas & Consumable Fuels 10.7%
BP PLC		United Kingdom		42,385,302		264,743,094
Caltex Australia Ltd.		Australia		3,375,504		80,407,940
Canadian Natural Resources Ltd.		Canada		7,822,700		253,005,852
Crescent Point Energy Corp.		Canada		19,234,400		85,759,415
JXTG Holdings Inc.		Japan		22,697,867		103,991,424
Kinder Morgan Inc.		United States		15,908,858		336,790,524
Plains All American Pipeline LP		United States		5,573,200		102,491,148
Royal Dutch Shell PLC, A (EUR Traded)		United Kingdom		2,415,625		70,881,055
Royal Dutch Shell PLC, A (GBP Traded)		United Kingdom		6,164,658		182,482,859
The Williams Cos. Inc.		United States		6,364,035		150,954,910
						1,631,508,221
Pharmaceuticals 10.2%
Allergan PLC		United States		739,800		141,427,566
a Bristol-Myers Squibb Co., rts., 2/01/49		United States		2,290,100		6,893,201
Eli Lilly & Co.		United States		1,984,017		260,759,354
GlaxoSmithKline PLC		United Kingdom		19,924,824		469,468,010
Merck & Co. Inc.		United States		2,179,073		198,186,689
Novartis AG, ADR		Switzerland		5,028,476		476,146,393
						1,552,881,213
Semiconductors & Semiconductor Equipment 1.1%
a Renesas Electronics Corp.		Japan		23,512,917		162,269,959
Software 4.3%
a Avaya Holdings Corp.		United States		537		7,250
a Avaya Holdings Corp., wts., 12/15/22		United States		401,411		481,693
a Check Point Software Technologies Ltd.		Israel		2,433,172		269,984,765
NortonLifeLock Inc.		United States		9,568,159		244,179,418
Oracle Corp.		United States		2,836,800		150,293,664
						664,946,790
Specialty Retail 0.7%
Dufry AG		Switzerland		1,124,346		111,568,959
Technology Hardware, Storage & Peripherals 5.1%
Hewlett Packard Enterprise Co.		United States		10,039,360		159,224,250
Samsung Electronics Co. Ltd.		South Korea		8,138,650		392,855,189
Western Digital Corp.		United States		3,527,471		223,888,584
						775,968,023
Textiles, Apparel & Luxury Goods 0.7%
Cie Financiere Richemont SA		Switzerland		1,357,307		106,688,131

20         Annual Report franklintempleton.com

FRANKLIN MUTUAL SERIES FUNDS

STATEMENT OF INVESTMENTS

Franklin Mutual Global Discovery Fund (continued)

	Country		Shares/ Rights/ Units/ Warrants		Value
Common Stocks and Other Equity Interests (continued)
Tobacco 3.1%
Altria Group Inc.		United States		2,606,727	$	130,101,745
British American Tobacco PLC		United Kingdom		5,783,513		247,532,050
British American Tobacco PLC, ADR		United Kingdom		2,178,905		92,516,306
						470,150,101
Wireless Telecommunication Services 0.7%
Vodafone Group PLC		United Kingdom		53,001,778		103,022,884
Total Common Stocks and Other Equity Interests (Cost $10,983,253,534)						14,368,947,730
Preferred Stocks (Cost $391,187,079) 2.5%
Automobiles 2.5%
d Volkswagen AG, 2.758%, pfd		Germany		1,896,164		374,766,100
			Principal         Amount
Corporate Notes 0.8%
Frontier Communications Corp.,
senior note, 10.50%, 9/15/22		United States	$	117,895,000		57,805,333
senior note, 11.00%, 9/15/25		United States		133,179,000		64,924,763
Total Corporate Notes (Cost $233,271,255)						122,730,096
			Shares
Companies in Liquidation 0.0%†
a,b,e Clear Channel Communications Inc., Contingent Distribution		United States		95,618,000		—
a,b,e iHeartCommunications Inc., Contingent Distribution		United States		155,900,649		—
a,b,e Tribune Media, Litigation Trust, Contingent Distribution		United States		1,292,117		—
a,b,e Vistra Energy Corp., Litigation Trust, Contingent Distribution		United States		142,325,613		78,279
a,b,e Walter Energy Inc., Litigation Trust, Contingent Distribution		United States		30,996,000		—
Total Companies in Liquidation (Cost $4,500,343)						78,279
Total Investments before Short Term Investments (Cost $11,612,212,211)						14,866,522,205

franklintempleton.com Annual Report         21

FRANKLIN MUTUAL SERIES FUNDS

STATEMENT OF INVESTMENTS

Franklin Mutual Global Discovery Fund (continued)

	Country		Principal Amount		Value
Short Term Investments 2.7%
U.S. Government and Agency Securities 2.7%
f FHLB, 1/02/20		United States	$	58,500,000	$	58,500,000
f U.S. Treasury Bill,
g 3/19/20 - 5/28/20		United States		147,000,000		146,317,914
1/02/20 - 6/25/20		United States		207,000,000		206,471,907
Total U.S. Government and Agency Securities (Cost $411,115,227)						411,289,821
Total Investments (Cost $12,023,327,438) 100.0%						15,277,812,026
Securities Sold Short (0.4)%						(56,724,656	)
Other Assets, less Liabilities 0.4%						58,606,826
Net Assets 100.0%					$	15,279,694,196
			Shares
h Securities Sold Short (Proceeds $46,496,765) (0.4)%
Common Stocks (0.4)%
Biotechnology (0.4)%
AbbVie Inc.		United States		640,667		(56,724,656	)

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

^aNon-income producing.

^bFair valued using significant unobservable inputs. See Note 15 regarding fair value measurements.

^cSee Note 10 regarding restricted securities.

^dVariable rate security. The rate shown represents the yield at period end.

^eContingent distributions represent the right to receive additional distributions, if any, during the reorganization of the underlying company. Shares represent total underlying principal of debt securities.

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

^gA portion or all of the security has been segregated as collateral for securities sold short and/or open forward exchange contracts. At December 31, 2019, the aggregate value of these securities pledged amounted to $57,795,263, representing 0.4% of net assets.

^hSee Note 1(d) regarding securities sold short.

At December 31, 2019, the Fund had the following futures contracts outstanding. See Note 1(c).

Futures Contracts

Description	Type		Number of Contracts		Notional  Amount*		Expiration Date		Value/ Unrealized Appreciation     (Depreciation)
Currency Contracts
EUR/USD		Short		6,716	$	947,123,900		3/16/20	$	(9,102,815	)
GBP/USD		Short		4,516		375,166,700		3/16/20		(2,868,036	)
Total Futures Contracts.									$	(11,970,851	)

*As of period end.

22         Annual Report   franklintempleton.com

FRANKLIN MUTUAL SERIES FUNDS

STATEMENT OF INVESTMENTS

Franklin Mutual Global Discovery Fund (continued)

At December 31, 2019, the Fund had the following forward exchange contracts outstanding. See Note 1(c).

Forward Exchange Contracts

Currency	Counterpartya		Type		Quantity		Contract Amount		Settlement Date		Unrealized Appreciation		Unrealized Depreciation
OTC Forward Exchange Contracts
Swiss Franc		HSBK		Sell		1,010,168	$	1,025,059		1/13/20	$	—	$	(19,869	)
Swiss Franc		UBSW		Sell		165,864,071		167,756,603		1/13/20		—		(3,814,826	)
Euro		BOFA		Sell		17,251,299		19,222,412		1/15/20		—		(142,681	)
Euro		HSBK		Buy		3,136,303		3,523,824		1/15/20		—		(3,232	)
Euro		HSBK		Sell		11,417,652		12,759,398		1/15/20		—		(57,254	)
Euro		SSBT		Sell		10,565,078		11,805,502		1/15/20		—		(54,108	)
Euro		SSBT		Sell		18,607,519		21,252,764		1/15/20		365,275		—
Euro		UBSW		Sell		18,607,519		21,252,857		1/15/20		365,368		—
Euro		UBSW		Sell		34,750,608		38,763,320		1/15/20		—		(245,263	)
British Pound		BOFA		Buy		4,452,866		5,468,134		1/16/20		432,268		—
British Pound		HSBK		Buy		1,589,771		1,982,508		1/16/20		124,066		—
British Pound		HSBK		Sell		107,887,669		136,390,754		1/16/20		—		(6,568,997	)
South Korean Won		HSBK		Sell		76,419,913,382		64,149,562		1/17/20		—		(1,980,570	)
South Korean Won		UBSW		Buy		16,464,488,950		13,975,460		1/17/20		272,120		—
South Korean Won		UBSW		Sell		169,693,662,365		143,511,124		1/17/20		—		(3,333,641	)
Australian Dollar		HSBK		Sell		9,283,731		6,395,826		2/14/20		—		(125,434	)
Australian Dollar		UBSW		Sell		103,664,903		71,604,164		2/14/20		—		(1,214,174	)
British Pound		HSBK		Sell		28,194,389		34,552,233		2/14/20		—		(2,837,426	)
British Pound		SSBT		Sell		25,703,449		31,309,114		2/14/20		—		(2,777,215	)
British Pound		UBSW		Sell		11,693,465		14,536,127		2/14/20		—		(971,026	)
Euro		BOFA		Sell		19,421,265		21,737,707		2/18/20		—		(109,309	)
Euro		HSBK		Sell		5,989,529		6,685,932		2/18/20		—		(51,701	)
Euro		SSBT		Sell		332,017,537		369,245,304		2/18/20		—		(4,241,835	)
Euro		HSBK		Sell		18,360,647		20,449,666		4/07/20		—		(268,595	)
Euro		SSBT		Sell		137,228,226		153,700,142		4/07/20		—		(1,148,986	)
Euro		UBSW		Sell		147,048,966		164,652,586		4/07/20		—		(1,278,322	)
British Pound		BOFA		Sell		20,981,128		27,137,747		4/24/20		—		(738,038	)
British Pound		HSBK		Sell		51,057,024		66,149,335		4/24/20		—		(1,685,653	)
South Korean Won		HSBK		Sell		134,167,316,764		115,638,972		5/15/20		—		(912,273	)
South Korean Won		UBSW		Sell		88,415,822,339		76,412,517		5/15/20		—		(394,372	)
Euro		BOFA		Sell		5,065,752		5,685,043		5/21/20		—		(46,858	)
Euro		SSBT		Sell		101,841,644		114,185,085		5/21/20		—		(1,048,794	)
Euro		UBSW		Sell		101,375,199		113,675,980		5/21/20		—		(1,030,117	)
British Pound		BOFA		Sell		4,246,361		5,703,292		5/22/20		57,398		—
British Pound		BOFA		Sell		28,418,163		37,227,870		5/22/20		—		(556,462	)
British Pound		HSBK		Sell		2,522,355		3,387,094		5/22/20		33,411		—
British Pound		HSBK		Sell		21,537,635		28,346,058		5/22/20		—		(290,036	)
British Pound		UBSW		Sell		4,246,361		5,707,075		5/22/20		61,182		—
Total Forward Exchange Contracts											$	1,711,088		$  (37,947,067	)
Net unrealized appreciation (depreciation)														$  (36,235,979	)

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

See Note 11 regarding other derivative information.

See Abbreviations on page 41.

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

FRANKLIN MUTUAL SERIES FUNDS

FINANCIAL STATEMENTS

Statement of Assets and Liabilities

December 31, 2019

Franklin Mutual Global Discovery Fund

Assets:
Investments in securities:
Cost - Unaffiliated issuers	$	12,023,327,438
Value - Unaffiliated issuers	$	15,277,812,026
Cash		281,389
Receivables:
Investment securities sold		19,224,518
Capital shares sold		5,247,674
Dividends and interest		47,475,384
European Union tax reclaims		8,492,372
Deposits with brokers for:
Securities sold short		57,847,053
Futures contracts		24,111,600
Unrealized appreciation on OTC forward exchange contracts		1,711,088
Other assets		2,874,819
Total assets		15,445,077,923
Liabilities:
Payables:
Investment securities purchased		21,391,186
Capital shares redeemed		23,529,183
Management fees		10,709,661
Distribution fees		2,464,068
Transfer agent fees		3,154,695
Trustees’ fees and expenses		1,158,979
Variation margin on futures contracts		6,346,273
Securities sold short, at value (proceeds $46,496,765)		56,724,656
Unrealized depreciation on OTC forward exchange contracts		37,947,067
Accrued expenses and other liabilities		1,957,959
Total liabilities		165,383,727
Net assets, at value	$	15,279,694,196
Net assets consist of:
Paid-in capital	$	11,962,720,902
Total distributable earnings (losses)		3,316,973,294
Net assets, at value	$	15,279,694,196

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

FRANKLIN MUTUAL SERIES FUNDS

FINANCIAL STATEMENTS

Statement of Assets and Liabilities (continued)

December 31, 2019

Franklin Mutual Global Discovery Fund

Class Z:
Net assets, at value	$	5,176,787,053
Shares outstanding		165,985,776
Net asset value and maximum offering price per share		$31.19
Class A:
Net assets, at value	$	7,683,643,814
Shares outstanding		251,848,370
Net asset value per sharea		$30.51
Maximum offering price per share (net asset value per share ÷ 94.50%)		$32.29
Class C:
Net assets, at value	$	872,716,964
Shares outstanding		28,646,905
Net asset value and maximum offering price per sharea		$30.46
Class R:
Net assets, at value	$	251,089,192
Shares outstanding		8,348,468
Net asset value and maximum offering price per share		$30.08
Class R6:
Net assets, at value	$	1,295,457,173
Shares outstanding		41,555,139
Net asset value and maximum offering price per share		$31.17

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

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

FRANKLIN MUTUAL SERIES FUNDS

FINANCIAL STATEMENTS

Statement of Operations

for the year ended December 31, 2019

Franklin Mutual Global Discovery Fund

Investment income:
Dividends: (net of foreign taxes)*
Unaffiliated issuers	$	446,808,092
Interest:
Unaffiliated issuers		49,202,150
Income from securities loaned:
Unaffiliated issuers (net of fees and rebates)		1,208,403
Non-controlled affiliates (Note 3f)		82,368
Other income (Note 1f)		1,746,322
Total investment income		499,047,335
Expenses:
Management fees (Note 3a)		129,605,427
Distribution fees: (Note 3c)
Class A		19,297,436
Class C		9,848,755
Class R		1,353,457
Transfer agent fees: (Note 3e)
Class Z		6,566,421
Class A		9,680,160
Class C		1,235,239
Class R		340,336
Class R6		385,223
Custodian fees (Note 4)		1,049,619
Reports to shareholders		1,332,538
Registration and filing fees		244,301
Professional feesa		(748,750	)
Trustees’ fees and expenses		972,477
Dividends on securities sold short		2,706,278
Other		498,843
Total expenses		184,367,760
Expense reductions (Note 4)		(125,757	)
Expenses waived/paid by affiliates (Note 3f and 3g)		(123,621	)
Net expenses		184,118,382
Net investment income		314,928,953
Realized and unrealized gains (losses):
Net realized gain (loss) from:
Investments:
Unaffiliated issuers		520,594,188
Non-controlled affiliates (Note 3f and 12)		(23,807,201	)
Foreign currency transactions		321,342
Forward exchange contracts		138,441,749
Futures contracts		58,028,854
Securities sold short		(16,081,292	)
Net realized gain (loss)		677,497,640
Net change in unrealized appreciation (depreciation) on:
Investments:
Unaffiliated issuers		2,526,183,500
Non-controlled affiliates (Note 3f and 12)		24,864,834
Translation of other assets and liabilities denominated in foreign currencies		109,714
Forward exchange contracts		(68,504,004	)

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

FRANKLIN MUTUAL SERIES FUNDS

FINANCIAL STATEMENTS

Statement of Operations (continued)

for the year ended December 31, 2019

Franklin Mutual Global Discovery Fund

Futures contracts		(12,957,028	)
Securities sold short		(44,940,557	)
Net change in unrealized appreciation (depreciation)		2,424,756,459
Net realized and unrealized gain (loss)		3,102,254,099
Net increase (decrease) in net assets resulting from operations	$	3,417,183,052
*Foreign taxes withheld on dividends	$	22,378,684

^aIncludes unaffiliated reimbursement of legal fees incurred in connection with certain Fund holdings.

franklintempleton.com The accompanying notes are an integral part of these financial statements.  |  Annual Report         27

FRANKLIN MUTUAL SERIES FUNDS

FINANCIAL STATEMENTS

Statements of Changes in Net Assets

Franklin Mutual Global Discovery Fund

	Year Ended December 31,
	2019			2018
Increase (decrease) in net assets:
Operations:
Net investment income	$	314,928,953		$	315,277,410
Net realized gain (loss)		677,497,640			1,263,045,185
Net change in unrealized appreciation (depreciation)		2,424,756,459			(3,569,979,292	)
Net increase (decrease) in net assets resulting from operations		3,417,183,052			(1,991,656,697	)
Distributions to shareholders:
Class Z		(361,251,360	)		(374,006,499	)
Class A		(528,196,610	)		(521,977,539	)
Class C		(53,529,898	)		(57,992,699	)
Class R		(17,206,023	)		(18,330,147	)
Class R6		(92,112,429	)		(102,685,299	)
Total distributions to shareholders		(1,052,296,320	)		(1,074,992,183	)
Capital share transactions: (Note 2)
Class Z		(733,602,714	)		(1,016,045,824	)
Class A		(931,107,368	)		(656,381,733	)
Class C		(339,610,836	)		(1,164,168,030	)
Class R		(64,450,784	)		(70,948,671	)
Class R6		(339,450,065	)		(526,328,702	)
Total capital share transactions		(2,408,221,767	)		(3,433,872,960	)
Net increase (decrease) in net assets		(43,335,035	)		(6,500,521,840	)
Net assets:
Beginning of year		15,323,029,231			21,823,551,071
End of year	$	15,279,694,196		$	15,323,029,231

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

FRANKLIN MUTUAL SERIES FUNDS

Notes to Financial Statements

Franklin Mutual Global Discovery Fund

1.   Organization and Significant Accounting Policies

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

The following summarizes the Fund’s significant accounting policies.

a.   Financial Instrument Valuation

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

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

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

Debt securities generally trade in the OTC market rather than on a securities exchange. The Fund’s pricing services use multiple valuation techniques to determine fair value. In instances where sufficient market activity exists, the pricing services may utilize a market-based approach through which quotes from market makers are used to determine fair value. In instances where sufficient market activity may not exist or is limited, the pricing services also utilize proprietary valuation models which may consider market characteristics such as benchmark yield curves, credit spreads, estimated default rates, anticipated market interest rate volatility, coupon rates, anticipated timing of principal repayments, underlying collateral, and other unique security features in order to estimate the relevant cash flows, which are then discounted to calculate the fair value.

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

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

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

franklintempleton.com Annual Report         29

FRANKLIN MUTUAL SERIES FUNDS

NOTES TO FINANCIAL STATEMENTS

Franklin Mutual Global Discovery Fund (continued)

1. Organization and Significant Accounting Policies (continued)

a.   Financial Instrument Valuation (continued)

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

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

b.   Foreign Currency Translation

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

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

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

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

c.   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

30         Annual Report franklintempleton.com

FRANKLIN MUTUAL SERIES FUNDS

NOTES TO FINANCIAL STATEMENTS

Franklin Mutual Global Discovery Fund (continued)

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. At December 31, 2019, the Fund had OTC derivatives in a net liability position of $36,235,979 and the aggregate value of collateral pledged for such contracts was $30,030,901.

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 exposure to certain foreign currencies. A futures contract is an agreement between the Fund and a counterparty to buy or sell an asset at a specified price on a future date. Required initial margins are pledged by the Fund, and the daily change in fair value is accounted for as a variation margin payable or receivable in the Statement of Assets and Liabilities.

The Fund entered into OTC forward exchange contracts primarily to manage 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.

See Note 11 regarding other derivative information.

d.   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.

e.   Securities Lending

The Fund participates in an agency based securities lending program to earn additional income. The Fund receives cash collateral against the loaned securities in an amount equal to at least 102% of the fair value of the loaned securities. Collateral is maintained over the life of the loan in an amount

franklintempleton.com Annual Report         31

FRANKLIN MUTUAL SERIES FUNDS

NOTES TO FINANCIAL STATEMENTS

Franklin Mutual Global Discovery Fund (continued)

1. Organization and Significant Accounting Policies (continued)

e.   Securities Lending (continued)

not less than 100% of the fair value of loaned securities, as determined at the close of Fund business each day; any additional collateral required due to changes in security values is delivered to the Fund on the next business day. The collateral is deposited into a joint cash account with other funds and is used to invest in a money market fund managed by Franklin Advisers, Inc., an affiliate of the Fund, and/or a joint repurchase agreement. The Fund may receive income from the investment 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 Statement of Operations. The Fund bears the market risk with respect to the collateral investment, securities loaned, and the risk that the agent may default on its obligations to the Fund. If the borrower defaults on its obligation 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. At December 31, 2019, the Fund had no securities on loan.

f.   Income and Deferred Taxes

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

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

As a result of several court cases, in certain countries across the European Union, the Fund filed additional tax reclaims for previously withheld taxes on dividends earned in those

countries (EU reclaims). These additional filings are subject to various administrative proceedings by the local jurisdictions’ tax authorities within the European Union, as well as a number of related judicial proceedings. Income recognized, if any, for EU reclaims is reflected as other income in the Statement of Operations and any related receivable, if any, is reflected as European Union tax reclaims in the Statement of Assets and Liabilities. When uncertainty exists as to the ultimate resolution of these proceedings, the likelihood of receipt of these EU reclaims, and the potential timing of payment, no amounts are reflected in the financial statements. For U.S. income tax purposes, EU reclaims received by the Fund, if any, reduce the amounts of foreign taxes Fund shareholders can use as tax credits in their individual income tax returns.

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 December 31, 2019, the Fund has determined that no tax liability is required in its financial statements related to uncertain tax positions for any open tax years (or expected to be taken in future tax years). Open tax years are those that remain subject to examination and are based on the statute of limitations in each jurisdiction in which the Fund invests.

g.   Security Transactions, Investment Income, Expenses and Distributions

Security transactions are accounted for on trade date. Realized gains and losses on security transactions are determined on a specific identification basis. Interest income and estimated expenses are accrued daily. Amortization of premium and accretion of discount on debt securities are included in interest income. Dividend income 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

32         Annual Report franklintempleton.com

FRANKLIN MUTUAL SERIES FUNDS

NOTES TO FINANCIAL STATEMENTS

Franklin Mutual Global Discovery Fund (continued)

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

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

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

h.  Accounting Estimates

The preparation of financial statements in accordance with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and

liabilities at the date of the financial statements and the amounts of income and expenses during the reporting period. Actual results could differ from those estimates.

i.  Guarantees and Indemnifications

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

2.  Shares of Beneficial Interest

At December 31, 2019, there were an unlimited number of shares authorized (without par value). Transactions in the Fund’s shares were as follows:

	Year Ended December 31,
	2019						2018
	Shares			Amount			Shares			Amount
Class Z Shares:
Shares sold		12,263,198		$	369,164,159			23,075,260		$	743,381,791
Shares issued in reinvestment of distributions		10,621,505			326,481,046			12,874,929			339,549,151
Shares redeemed		(47,272,140	)		(1,429,247,919	)		(66,928,248	)		(2,098,976,766	)
Net increase (decrease)		(24,387,437	)	$	(733,602,714	)		(30,978,059	)	$	(1,016,045,824	)
Class A Shares:
Shares solda		17,462,220		$	518,262,717			39,540,409		$	1,238,132,295
Shares issued in reinvestment of distributions		17,190,278			516,611,982			19,765,773			510,690,925
Shares redeemed		(66,274,047	)		(1,965,982,067	)		(77,371,791	)		(2,405,204,953	)
Net increase (decrease)		(31,621,549	)	$	(931,107,368	)		(18,065,609	)	$	(656,381,733	)

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FRANKLIN MUTUAL SERIES FUNDS

NOTES TO FINANCIAL STATEMENTS

Franklin Mutual Global Discovery Fund (continued)

2.  Shares of Beneficial Interest (continued)

	Year Ended December 31,
	2019						2018
	Shares			Amount			Shares			Amount
Class C Shares:
Shares sold		1,771,751		$	52,145,801			3,686,938		$	114,177,734
Shares issued in reinvestment of distributions		1,728,177			51,590,928			2,158,214			55,791,403
Shares redeemeda		(15,014,827	)		(443,347,565	)		(43,253,998	)		(1,334,137,167	)
Net increase (decrease)		(11,514,899	)	$	(339,610,836	)		(37,408,846	)	$	(1,164,168,030	)
Class R Shares:
Shares sold		673,375		$	19,591,339			952,638		$	29,475,566
Shares issued in reinvestment of distributions		571,874			16,917,190			699,971			17,846,355
Shares redeemed		(3,452,518	)		(100,959,313	)		(3,807,349	)		(118,270,592	)
Net increase (decrease)		(2,207,269	)	$	(64,450,784	)		(2,154,740	)	$	(70,948,671	)
Class R6 Shares:
Shares sold		5,767,180		$	173,953,547			12,000,653		$	384,806,245
Shares issued in reinvestment of distributions		2,704,420			83,110,071			3,572,465			94,139,840
Shares redeemed		(19,752,108	)		(596,513,683	)		(31,266,192	)		(1,005,274,787	)
Net increase (decrease)		(11,280,508	)	$	(339,450,065	)		(15,693,074	)	$	(526,328,702	)

^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 Fund are also officers and/or directors of the following subsidiaries:

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

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FRANKLIN MUTUAL SERIES FUNDS

NOTES TO FINANCIAL STATEMENTS

Franklin Mutual Global Discovery Fund (continued)

a.  Management Fees

The Fund pays an investment management fee to Franklin Mutual based on the average daily net assets of the Fund as follows:

Annualized Fee Rate	Net Assets
0.875%	Up to and including $4 billion
0.845%	Over $4 billion, up to and including $7 billion
0.825%	Over $7 billion, up to and including $10 billion
0.805%	Over $10 billion, up to and including $13 billion
0.785%	Over $13 billion, up to and including $16 billion
0.765%	Over $16 billion, up to and including $19 billion
0.745%	Over $19 billion, up to and including $22 billion
0.725%	Over $22 billion, up to and including $25 billion
0.705%	Over $25 billion, up to and including $28 billion
0.685%	In excess of $28 billion

For the year ended December 31, 2019, the gross effective investment management fee rate was 0.831% of the Fund’s average daily net assets.

b.  Administrative Fees

Under an agreement with Franklin Mutual, FT Services provides administrative services to the Fund. The fee is paid by Franklin Mutual 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 Z and Class R6 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	0.35	%
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 MUTUAL SERIES FUNDS

NOTES TO FINANCIAL STATEMENTS

Franklin Mutual Global Discovery 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 year:

Sales charges retained net of commissions paid to unaffiliated brokers/dealers	$	554,224
CDSC retained	$	48,615

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 year ended December 31, 2019, the Fund paid transfer agent fees of $18,207,379, of which $7,566,749 was retained by Investor Services.

f.   Investments in Affiliated Management Investment Companies

The Fund invests in one or more affiliated management investment companies for purposes other than exercising a controlling influence over the management or policies. Management fees paid by the Fund are waived on assets invested in the affiliated management investment companies, as noted in the Statement of Operations, in an amount not to exceed the management and administrative fees paid directly or indirectly by each affiliate. During the year ended December 31, 2019, the Fund held investments in affiliated management investment companies as follows:

	Value at Beginning of Year		Purchases		Sales			Realized Gain (Loss)		Net Change in Unrealized Appreciation (Depreciation)		Value at End of Year			Number of Shares Held at End of Year		Income from securities loaned
Non-Controlled Affiliates
Institutional Fiduciary Trust Money Market Portfolio, 1.26%	$	—	$	200,368,000	$	(200,368,000	)		$    —		$    —		$—	a		—		$82,368

^aAs of December 31, 2019, no longer held by the Fund.

g.   Waiver and Expense Reimbursements

Investor Services has contractually agreed in advance to waive or limit its fees so that the Class R6 transfer agent fees do not exceed 0.02% based on the average net assets of the class until April 30, 2020.

h.   Interfund Transactions

The Fund engaged in purchases and sales of investments with funds or other accounts that have common investment managers (or affiliated investment managers), directors, trustees or officers. During the year ended December 31, 2019, these purchase and sale transactions aggregated $0 and $36,197,808, respectively.

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NOTES TO FINANCIAL STATEMENTS

Franklin Mutual Global Discovery 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 year ended December 31, 2019, the custodian fees were reduced as noted in the Statement of Operations.

5. Independent Trustees’ Retirement Plan

On January 1, 1993, the Trust adopted an Independent Trustees’ Retirement Plan (Plan). The Plan is an unfunded defined benefit plan that provides benefit payments to Trustees whose length of service and retirement age meets the eligibility requirements of the Plan. Benefits under the Plan are based on years of service and fees paid to each trustee at the time of retirement. Effective in December 1996, the Plan was closed to new participants.

During the year ended December 31, 2019, the Fund’s projected benefit obligation and benefit payments under the Plan were as follows:

aProjected benefit obligation at December 31, 2019	$	1,158,979
bIncrease in projected benefit obligation	$	124,089
Benefit payments made to retired trustees	$	(20,192	)

^aThe projected benefit obligation is included in trustees’ fees and expenses in the Statement of Assets and Liabilities.

^bThe increase in projected benefit obligation is included in trustees’ fees and expenses in the Statement of Operations.

6. Income Taxes

The tax character of distributions paid during the years ended December 31, 2019 and 2018, was as follows:

	2019		2018
Distributions paid from:
Ordinary income	$	355,756,491	$	484,685,209
Long term capital gain		696,539,829		590,306,974
	$	1,052,296,320	$	1,074,992,183

At December 31, 2019, the cost of investments, net unrealized appreciation (depreciation), undistributed ordinary income and undistributed long term capital gains for income tax purposes were as follows:

Cost of investments	$	11,941,686,015
Unrealized appreciation	$	4,091,134,419
Unrealized depreciation		(859,912,150	)
Net unrealized appreciation (depreciation)	$	3,231,222,269
Distributable earnings:
Undistributed ordinary income	$	32,026,024
Undistributed long term capital gains		46,033,838
Total distributable earnings	$	78,059,862

Differences between income and/or capital gains as determined on a book basis and a tax basis are primarily due to differing treatment of foreign currency transactions.

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FRANKLIN MUTUAL SERIES FUNDS

NOTES TO FINANCIAL STATEMENTS

Franklin Mutual Global Discovery Fund (continued)

6.  Income Taxes (continued)

The Fund utilized a tax accounting practice to treat a portion of the proceeds from capital shares redeemed as a distribution from realized capital gains.

7.  Investment Transactions

Purchases and sales of investments (excluding short term securities and securities sold short) for the year ended December 31, 2019, aggregated $2,102,139,834 and $5,211,927,979, respectively.

8.  Credit Risk and Defaulted Securities

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

At December 31, 2019, the Fund did not hold any distressed company securities for which interest recognition has been discontinued.

9.  Concentration of Risk

Investing in foreign securities may include certain risks and considerations not typically associated with investing in U.S. securities, such as fluctuating currency values and changing local, regional and global economic, political and social conditions, which may result in greater market volatility. Current political and financial uncertainty surrounding the European Union may increase market volatility and the economic risk of investing in securities in Europe. In addition, certain foreign securities may not be as liquid as U.S. securities.

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 December 31, 2019, investments in restricted securities, excluding securities exempt from registration under the 1933 Act, were as follows:

Shares	Issuer	Acquisition Date		Cost		Value
3,819,425	International Automotive Components Group Brazil LLC, (Value is 0.0%† of Net Assets)		4/13/06 - 12/26/08	$	2,536,498	$	138,645

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

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NOTES TO FINANCIAL STATEMENTS

Franklin Mutual Global Discovery Fund (continued)

11. Other Derivative Information

At December 31, 2019, 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
Foreign exchange contracts	Variation margin on futures contracts	$	—	Variation margin on futures contracts	$	11,970,851	a
	Unrealized appreciation on OTC forward exchange contracts		1,711,088	Unrealized depreciation on OTC forward exchange contracts		37,947,067
Totals		$	1,711,088		$	49,917,918

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

For the year ended December 31, 2019, the effect of derivative contracts in the Statement of Operations was as follows:

Derivative Contracts Not Accounted for as Hedging Instruments	Statement of Operations Location	Net Realized Gain (Loss) for the Year		Statement of Operations Location	Net Change in Unrealized Appreciation (Depreciation) for the Year
	Net realized gain (loss) from:			Net change in unrealized appreciation (depreciation) on:
Foreign exchange contracts	Forward exchange contracts		$138,441,749	Forward exchange contracts		$(68,504,004	)
	Futures contracts		58,028,854	Futures contracts		(12,957,028	)
Totals			$196,470,603			$(81,461,032	)

For the year ended December 31, 2019, the average month end notional amount of futures contracts represented $1,408,222,955. The average month end contract value of forward exchange contracts was $2,158,919,843.

See Note 1(c) regarding derivative financial instruments.

12.   Holdings of 5% Voting Securities of Portfolio Companies

The 1940 Act defines “affiliated companies” to include investments in portfolio companies in which a fund owns 5% or more of the outstanding voting securities. During the year ended December 31, 2019, investments in “affiliated companies” were as follows:

Name of Issuer	Value at Beginning of Year		Purchases		Sales			Realized Gain (Loss)			Net Change in Unrealized Appreciation (Depreciation)		Value at End of Year			Number of Shares Held at End of Year		Dividend Income
Non-Controlled Affiliates
International Automotive Components Group North America LLC (Value is —% of Net Assets)		$4,230,537		$—		$(5,288,170	)		$(23,807,201	)		$24,864,834		$—	a		—		$—

^aAs of December 31, 2019, no longer held by the Fund.

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FRANKLIN MUTUAL SERIES FUNDS

NOTES TO FINANCIAL STATEMENTS

Franklin Mutual Global Discovery Fund (continued)

13.   Upcoming Acquisitions/Reorganization

On July 16, 2019, the Board approved a proposal to reorganize Franklin Mutual International Fund (Acquired Fund) with and into the Fund (Surviving Fund). On December 6, 2019, shareholders of the Acquired Fund approved the proposal. Upon completion of the reorganization on or about February 21, 2020, assets in the Acquired Fund will be transferred into the Surviving Fund.

14.   Credit Facility

The Fund, together with other U.S. registered and foreign investment funds (collectively, Borrowers), managed by Franklin Templeton, are borrowers in a joint syndicated senior unsecured credit facility totaling $2 billion (Global Credit Facility) which matured on February 7, 2020. This Global Credit Facility provides a source of funds to the Borrowers for temporary and emergency purposes, including the ability to meet future unanticipated or unusually large redemption requests. Effective February 7, 2020, the Borrowers renewed the Global Credit Facility for a one year term, maturing February 5, 2021, for a total of $2 billion.

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 year ended December 31, 2019, the Fund did not use the Global Credit Facility.

15.   Fair Value Measurements

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

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

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

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

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

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NOTES TO FINANCIAL STATEMENTS

Franklin Mutual Global Discovery Fund (continued)

A summary of inputs used as of December 31, 2019, in valuing the Fund’s assets and liabilities carried at fair value, is as follows:

	Level 1		Level 2		Level 3		Total
Assets:
Investments in Securities:a
Equity Investments:b
Auto Components	$	—	$	—	$	138,645	$	138,645
Machinery		63,724,242		80,570,951		—		144,295,193
Media		444,648,874		—		638,237		445,287,111
All Other Equity Investments		14,153,992,881		—		—		14,153,992,881
Corporate Notes		—		122,730,096		—		122,730,096
Companies in Liquidation		—		—		78,279c		78,279
Short Term Investments		352,789,821		58,500,000		—		411,289,821
Total Investments in Securities	$	15,015,155,818	$	261,801,047	$	855,161	$	15,277,812,026
Other Financial Instruments:
Forward Exchange Contracts	$	—	$	1,711,088	$	—	$	1,711,088
Liabilities:
Other Financial Instruments:
Securities Sold Shorta	$	56,724,656	$	—	$	—	$	56,724,656
Futures Contracts		11,970,851		—		—		11,970,851
Forward Exchange Contracts		—		37,947,067		—		37,947,067
Total Other Financial Instruments	$	68,695,507	$	37,947,067	$	—	$	106,642,574

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

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

^cIncludes securities determined to have no value at December 31, 2019.

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

16.   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 other than those already disclosed in the financial statements.

Abbreviations

Counterparty		Currency		Selected Portfolio
BOFA	Bank of America Corp.	EUR	Euro	ADR	American Depositary Receipt
HSBK	HSBC Bank PLC	GBP	British Pound	FHLB	Federal Home Loan Bank
SSBT	State Street Bank and Trust Co., N.A.	USD	United States Dollar
UBSW	UBS AG

franklintempleton.com Annual Report         41

FRANKLIN MUTUAL SERIES FUNDS

Report of Independent Registered Public Accounting Firm

To the Board of Trustees of Franklin Mutual Series Funds and Shareholders of Franklin Mutual Global Discovery Fund:

Opinion on the Financial Statements

We have audited the accompanying statement of assets and liabilities of Franklin Mutual Global Discovery Fund (the “Fund”) (one of the funds constituting Franklin Mutual Series Funds), including the schedule of investments, as of December 31, 2019, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, the financial highlights for each of the five years in the period then ended and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of Franklin Mutual Global Discovery Fund (one of the funds constituting Franklin Mutual Series Funds) at December 31, 2019, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and its financial highlights for each of the five years in the period then ended, in conformity with U.S. generally accepted accounting principles.

Basis for Opinion

These financial statements are the responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Fund is not required to have, nor were we engaged to perform, an audit of the Fund’s internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Fund’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of December 31, 2019, by correspondence with the custodian and brokers or by other appropriate auditing procedures where replies from others were not received. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

We have served as the auditor of one or more Franklin investment companies since 1987.

Boston, Massachusetts

February 21, 2020

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Franklin Mutual Global Discovery Fund

Tax Information (unaudited)

Under Section 852(b)(3)(C) of the Internal Revenue Code, the Fund hereby reports the maximum amount allowable but no less than $778,210,889 as a long term capital gain dividend for the fiscal year ended December 31, 2019.

Under Section 871(k)(2)(C) of the Internal Revenue Code, the Fund hereby reports the maximum amount allowable but no less than $51,805,373 as a short term capital gain dividend for purposes of the tax imposed under Section 871(a)(1)(A) of the Internal Revenue Code for the fiscal year ended December 31, 2019.

Under Section 854(b)(1)(A) of the Internal Revenue Code, the Fund hereby reports 49.26% of the ordinary income dividends as income qualifying for the dividends received deduction for the fiscal year ended December 31, 2019.

Under Section 854(b)(1)(B) of the Internal Revenue Code, the Fund hereby reports the maximum amount allowable but no less than $402,701,435 as qualified dividends for purposes of the maximum rate under Section 1(h)(11) of the Internal Revenue Code for the fiscal year ended December 31, 2019. Distributions, including qualified dividend income, paid during calendar year 2019 will be reported to shareholders on Form 1099-DIV by mid-February 2020. Shareholders are advised to check with their tax advisors for information on the treatment of these amounts on their individual income tax returns.

Under Section 871(k)(1)(C) of the Internal Revenue Code, the Fund hereby reports the maximum amount allowable but no less than $29,006,943 as interest related dividends for purposes of the tax imposed under Section 871(a)(1)(A) of the Internal Revenue Code for the fiscal year ended December 31, 2019.

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FRANKLIN MUTUAL SERIES FUNDS

Board Members and Officers

The name, year of birth and address of the officers and board members, as well as their affiliations, positions held with the Trust, principal occupations during at least the past five years and number of U.S. registered portfolios overseen in the Franklin Templeton fund complex, are shown below. Generally, each board member serves until that person’s successor is elected and qualified.

Independent Board Members

Name, Year of Birth and Address	Position	Length of Time Served	Number of Portfolios in Fund Complex Overseen by Board Member*	Other Directorships Held During at Least the Past 5 Years
Edward I. Altman, Ph.D. (1941) c/o Franklin Mutual Advisers, LLC 101 John F. Kennedy Parkway Short Hills, NJ 07078-2716	Trustee	Since 1987	12	None
Principal Occupation During at Least the Past 5 Years:
Max L. Heine Professor of Finance, Emeritus and Director of The Credit and Debt Markets Research Program, Salomon Center, Stern School of Business, New York University; editor and author of numerous financial publications; financial consultant; an adviser to numerous financial and publishing organizations; and formerly, Vice Director, Salomon Center, Stern School of Business, New York University.
Ann Torre Bates (1958) c/o Franklin Mutual Advisers, LLC 101 John F. Kennedy Parkway Short Hills, NJ 07078-2716	Trustee and Chairperson	Trustee since 1995 and Chairperson since January 2020	33	Ares Capital Corporation (specialty finance company) (2010-present), United Natural Foods, Inc. (distributor of natural, organic and specialty foods) (2013-present), Allied Capital Corporation (financial services) (2003-2010), SLM Corporation (Sallie Mae) (1997-2014) and Navient Corporation (loan management, servicing and asset recovery) (2014-2016).
Principal Occupation During at Least the Past 5 Years:
Director of various companies; and formerly, Executive Vice President and Chief Financial Officer, NHP Incorporated (manager of multifamily housing) (1995-1997); and Vice President and Treasurer, US Airways, Inc. (until 1995).
Burton J. Greenwald (1929) c/o Franklin Mutual Advisers, LLC 101 John F. Kennedy Parkway Short Hills, NJ 07078-2716	Trustee	Since 2002	12	Franklin Templeton Emerging Markets Debt Opportunities Fund PLC (1999-present) and Fiduciary International Ireland Limited (1999-2015).
Principal Occupation During at Least the Past 5 Years:
Managing Director, B.J. Greenwald Associates (management consultants to the financial services industry); and formerly, Chairman, Fiduciary Trust International Funds; Executive Vice President, L.F. Rothschild Fund Management, Inc.; President and Director, Merit Mutual Funds; President, Underwriting Division and Director, National Securities & Research Corporation; Governor, Investment Company Institute; and Chairman, ICI Public Information Committee.
Jan Hopkins Trachtman (1947) c/o Franklin Mutual Advisers, LLC 101 John F. Kennedy Parkway Short Hills, NJ 07078-2716	Trustee	Since 2009	12	FinTech Acquisition Corp. III (special purpose fintech acquisition company) (2018-present)
Principal Occupation During at Least the Past 5 Years:
President and Founder, The Jan Hopkins Group (communications consulting firm); serves on Alumni Advisory Board of Knight Bagehot Fellowship; and formerly, President, Economic Club of New York (2007-2015); Anchor/Correspondent, CNN Financial News (until 2003); Managing Director and Head of Client Communications, Citigroup Private Bank (until 2005); Off-Air reporter, ABC News’ World News Tonight; and Editor, CBS Network News.

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Independent Board Members (continued)

Name, Year of Birth and Address	Position	Length of Time Served	Number of Portfolios in Fund Complex Overseen         by Board Member*	Other Directorships Held During         at Least the Past 5 Years
Keith Mitchell (1954) c/o Franklin Mutual Advisers, LLC 101 John F. Kennedy Parkway Short Hills, NJ 07078-2716	Trustee	Since 2009	12	None
Principal Occupation During at Least the Past 5 Years:
Director of various boards of asset management firms; and formerly, Managing Member, Mitchell, Hartley & Bechtel Advisers, LLC (formerly, Mitchell Advisers, LLC) (advisory firm) (2003-2015) and Managing Director, Putman Lovell NBF.
David W. Niemiec (1949) c/o Franklin Mutual Advisers, LLC 101 John F. Kennedy Parkway Short Hills, NJ 07078-2716	Trustee	Since 2015	33	Hess Midstream LP (oil and gas midstream infrastructure) (2017-present).
Principal Occupation During at Least the Past 5 Years:
Advisor, Saratoga Partners (private equity fund); and formerly, Managing Director, Saratoga Partners (1998-2001) and SBC Warburg Dillon Read (investment banking) (1997-1998); Vice Chairman, Dillon, Read & Co. Inc. (investment banking) (1991-1997); and Chief Financial Officer, Dillon, Read & Co. Inc. (1982-1997).
Charles Rubens II (1930) c/o Franklin Mutual Advisers, LLC 101 John F. Kennedy Parkway Short Hills, NJ 07078-2716	Trustee	Since 1998	12	None
Principal Occupation During at Least the Past 5 Years:
Private investor and president of non-profit organizations; and formerly, an executive of Time, Inc.; and Trustee of Colorado College.
Robert E. Wade (1946) c/o Franklin Mutual Advisers, LLC 101 John F. Kennedy Parkway Short Hills, NJ 07078-2716	Trustee	Since 1991	33	El Oro Ltd (investments) (2003-2019).
Principal Occupation During at Least the Past 5 Years:
Attorney at law engaged in private practice as a sole practitioner (1972-2008) and member of various boards.
Gregory H. Williams (1943) c/o Franklin Mutual Advisers, LLC 101 John F. Kennedy Parkway Short Hills, NJ 07078-2716	Trustee	Since 2015	12	None
Principal Occupation During at Least the Past 5 Years:
Private investor; Consultant; and formerly, President, University of Cincinnati (2009-2012); President, The City College of New York (2001-2009); Dean, College of Law, Ohio State University (1993-2001); and Associate Vice President, Academic Affairs and Professor of Law, University of Iowa (1977-1993).
Interested Board Members and Officers
Name, Year of Birth and Address	Position	Length of Time Served	Number of Portfolios in Fund Complex Overseen by Board Member*	Other Directorships Held During at Least the Past 5 Years
**Gregory E. Johnson (1961) One Franklin Parkway San Mateo, CA 94403-1906	Trustee	Since 2007	144	None
Principal Occupation During at Least the Past 5 Years:
Chairman of the Board, Member – Office of the Chairman, Director and Chief Executive Officer, Franklin Resources, Inc.; officer and/or director or trustee, as the case may be, of some of the other subsidiaries of Franklin Resources, Inc. and of 39 of the investment companies in Franklin Templeton; Vice Chairman, Investment Company Institute; and formerly, President, Franklin Resources, Inc. (1994-2015).

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Interested Board Members and Officers (continued)

Name, Year of Birth and Address	Position	Length of Time Served	Number of Portfolios in Fund Complex Overseen         by Board Member*	Other Directorships Held During         at Least the Past 5 Years
**Peter A. Langerman (1955) c/o Franklin Mutual Advisers, LLC 101 John F. Kennedy Parkway Short Hills, NJ 07078-2716	Trustee, President, and Chief Executive Officer – Investment Management	Trustee since 2007, President, and Chief Executive Officer – Investment Management since 2005	7	None
Principal Occupation During at Least the Past 5 Years:
Chairman of the Board, Chief Executive Officer and President, Franklin Mutual Advisers, LLC; and officer and/or director, as the case may be, of three of the investment companies in Franklin Templeton.
Alison E. Baur (1964) One Franklin Parkway San Mateo, CA 94403-1906	Vice President	Since 2012	Not Applicable	Not Applicable
Principal Occupation During at Least the Past 5 Years:
Deputy General Counsel, Franklin Templeton; and officer of some of the other subsidiaries of Franklin Resources, Inc. and of 41 of the investment companies in Franklin Templeton.
Breda M. Beckerle (1958) 280 Park Avenue New York, NY 10017	Interim Chief Compliance Officer	Since January 2020	Not Applicable	Not Applicable
Principal Occupation During at Least the Past 5 Years:
Chief Compliance Officer, Fiduciary Investment Management International, Inc., Franklin Advisers, Inc., Franklin Advisory Services, LLC, Franklin Mutual Advisers, LLC, Franklin Templeton Institutional, LLC; and officer of 41 of the investment companies in Franklin Templeton.
Steven J. Gray (1955) One Franklin Parkway San Mateo, CA 94403-1906	Vice President and Secretary	Vice President since 2009 and Secretary since 2005	Not Applicable	Not Applicable
Principal Occupation During at Least the Past 5 Years:
Senior Associate General Counsel, Franklin Templeton; Vice President, Franklin Templeton Distributors, Inc. and FASA, LLC; and officer of 41 of the investment companies in Franklin Templeton.
Matthew T. Hinkle (1971) One Franklin Parkway San Mateo, CA 94403-1906	Chief Executive Officer – Finance and Administration	Since 2017	Not Applicable	Not Applicable
Principal Occupation During at Least the Past 5 Years:
Senior Vice President, Franklin Templeton Services, LLC; officer of 41 of the investment companies in Franklin Templeton; and formerly, Vice President, Global Tax (2012-April 2017) and Treasurer/Assistant Treasurer, Franklin Templeton (2009-2017).
Robert G. Kubilis (1973) 300 S.E. 2nd Street Fort Lauderdale, FL 33301-1923	Chief Financial Officer, Chief Accounting Officer and Treasurer	Since 2012	Not Applicable	Not Applicable
Principal Occupation During at Least the Past 5 Years:
Treasurer, U.S. Fund Administration & Reporting; and officer of 15 of the investment companies in Franklin Templeton.

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Interested Board Members and Officers (continued)

Name, Year of Birth and Address	Position	Length of Time Served	Number of Portfolios in Fund Complex Overseen         by Board Member*	Other Directorships Held During         at Least the Past 5 Years
Robert Lim (1948) One Franklin Parkway San Mateo, CA 94403-1906	Vice President – AML Compliance	Since 2016	Not Applicable	Not Applicable
Principal Occupation During at Least the Past 5 Years:
Vice President, Franklin Templeton Companies, LLC; Chief Compliance Officer, Franklin Templeton Distributors, Inc. and Franklin Templeton Investor Services, LLC; and officer of 44 of the investment companies in Franklin Templeton Investments.
Navid J. Tofigh (1972) One Franklin Parkway San Mateo, CA 94403-1906	Vice President	Since 2015	Not Applicable	Not Applicable
Principal Occupation During at Least the Past 5 Years:
Associate General Counsel; and officer of 41 of the investment companies in Franklin Templeton.
Craig S. Tyle (1960) One Franklin Parkway San Mateo, CA 94403-1906	Vice President	Since 2005	Not Applicable	Not Applicable
Principal Occupation During at Least the Past 5 Years:
General Counsel and Executive Vice President, Franklin Resources, Inc.; and officer of some of the other subsidiaries of Franklin Resources, Inc. and of 41 of the investment companies in Franklin Templeton.
Lori A. Weber (1964) 300 S.E. 2nd Street Fort Lauderdale, FL 33301-1923	Vice President	Since 2011	Not Applicable	Not Applicable
Principal Occupation During at Least the Past 5 Years:
Senior Associate General Counsel, Franklin Templeton; Assistant Secretary, Franklin Resources, Inc.; Vice President and Secretary, Templeton Investment Counsel, LLC; and officer of 41 of the investment companies in Franklin Templeton.

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FRANKLIN MUTUAL SERIES FUNDS

*We base the number of portfolios on each separate series of the U.S. registered investment companies within the Franklin Templeton fund complex. These portfolios have a common investment manager or affiliated investment managers.

**Gregory E. Johnson is considered to be an interested person of the Fund under the federal securities laws due to his position as an officer and director of Franklin Resources, Inc. (Resources), which is the parent company of the Fund’s investment manager and distributor. Peter A. Langerman is considered to be an interested person of the Fund under the federal securities laws due to his position as an officer of Franklin Mutual Advisers, LLC, which is the Fund’s investment manager.

Note 1: Officer information is current as of the date of this report. It is possible that after this date, information about officers may change.

The Sarbanes-Oxley Act of 2002 and Rules adopted by the U.S. Securities and Exchange Commission require the Fund to disclose whether the Fund’s Audit Committee includes at least one member who is an audit committee financial expert within the meaning of such Act and Rules. The Fund’s Board has determined that there is at least one such financial expert on the Audit Committee and has designated each of Edward I. Altman, Ph.D., Ann Torre Bates and David W. Niemiec as an audit committee financial expert. The Board believes that Messrs. Altman and Niemiec and Ms. Bates qualify as such an expert in view of their extensive business background and experience. Mr. Altman has served as a member of the Fund Audit Committee since 1987. He currently serves as a Max L. Hine Professor of Finance, Emeritus and Director of The Credit and Debt Markets Research Program, Salomon Center, Stern School of Business, New York University. Ms. Bates has served as a member of the Fund Audit Committee since 1995. She currently serves as a director of Ares Capital Corporation (2010-present) and United Natural Foods, Inc. (2013-present) and was formerly a director of Navient Corporation from 2014 to 2016, SLM Corporation from 1997 to 2014 and Allied Capital Corporation from 2003 to 2010, Executive Vice President and Chief Financial Officer of NHP Incorporated from 1995 to 1997 and Vice President and Treasurer of US Airways, Inc. until 1995. Mr. Niemiec has served as a member of the Fund Audit Committee since 2015, currently serves as an Advisor to Saratoga Partners and was formerly its Managing Director from 1998 to 2001 and serves as a director of Hess Midstream LP (2017-present). Mr. Niemiec was formerly a director of Emeritus Corporation from 1999 to 2010 and OSI Pharmaceuticals, Inc. from 2006 to 2010, Managing Director of SBC Warburg Dillon Read from 1997 to 1998, and was Vice Chairman from 1991 to 1997 and Chief Financial Officer from 1982 to 1997 of Dillon, Read & Co. Inc. As a result of such background and experience, the Board believes that Messrs. Altman and Niemiec and Ms. Bates have each acquired an understanding of generally accepted accounting principles and financial statements, the general application of such principles in connection with the accounting estimates, accruals and reserves, and analyzing and evaluating financial statements that present a breadth and level of complexity of accounting issues generally comparable to those of the Fund, as well as an understanding of internal controls and procedures for financial reporting and an understanding of audit committee functions. Messrs. Altman and Niemiec and Ms. Bates are independent Board members as that term is defined under the applicable U.S. Securities and Exchange Commission Rules and Releases.

The Statement of Additional Information (SAI) includes additional information about the board members and is available, without charge, upon request. Shareholders may call (800) DIAL BEN/342-5236 to request the SAI.

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FRANKLIN MUTUAL GLOBAL DISCOVERY FUND

Shareholder Information

Proxy Voting Policies and Procedures

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

Quarterly Statement of Investments

The Trust, on behalf of the Fund, files a complete statement of investments with the U.S. Securities and Exchange Commission for the first and third quarters for each fiscal year 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 the Fund’s financial reports every six months as well as an annual updated summary prospectus (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 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.

	Annual Report and Shareholder Letter Franklin Mutual Global Discovery Fund
	Investment Manager	Distributor	Shareholder Services
	Franklin Mutual Advisers, LLC	Franklin Templeton Distributors, Inc.	(800) 632-2301 - (Class A, C, R &
		(800) DIAL BEN® / 342-5236	R6)
		franklintempleton.com	(800) 448-FUND - (Class Z)

© 2020 Franklin Templeton Investments. All rights reserved. 477 A 02/20

    Sign up for electronic delivery at franklintempleton.com/edelivery

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

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

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

FRANKLIN TEMPLETON

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

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

Dear Franklin Mutual European Fund Shareholder:

As we enter 2020, the factors that lifted stocks to record highs in 2019—accommodative central bank monetary policies and progress on a proposed trade deal between the U.S. and China—continue to be sources of optimism for growth. The near-term threat of recession has eased, with the U.S. economy showing resilience as low unemployment and moderately rising wages have encouraged consumer spending, which has supported the expansion. In contrast, business investment and exports were weak in 2019, but there are nascent signs of increasing industrial activity.

Tariffs, trade battles and geopolitical conflict may continue to dominate headlines in 2020 and account for a disproportionate source of market volatility. The U.S. and China agreed in principle to a phase-one trade agreement in late 2019. However, a re-escalation of the tariff dispute between the world’s two largest economies is not out of the question, as negotiations on a phase-two trade agreement are scheduled to start after the anticipated phase-one signing ceremony in January. There was clarity on Brexit as British voters delivered a resounding election victory to Prime Minister Boris Johnson and his Conservative Party, which should pave the way for a conclusive exit agreement. The terms of U.K. departure, however, must still be finalized. Late in the period, tensions in the Middle East were on the rise, following the death of an American contractor in Iraq in late December and a retaliatory U.S. military strike two days later.

During the period, we took advantage of market turbulence to seek out a larger number of stocks whose risk/reward profiles turned more favorable. Subsequently, we used the market appreciation to exit from or trim select positions that reached or exceeded our estimates of intrinsic value. Market volatility continues to present occasional opportunities in

individual stocks, and in certain sectors, notably those considered to be economically sensitive. We continue to focus on situations in which company-specific actions are more important than economic improvement in driving shareholder value.

Valuation is an essential factor in our analysis, and we always ask ourselves if current and potential investments represent an attractive balance of risk and reward. Amid the all-time highs reached by the Standard & Poor’s^® 500 Index (S&P 500^®) during the period, we maintained our focus on individual securities and the prospects for each business in the context of its valuation and the backdrop of potential political and economic risks.

We continue to adhere to a bottom-up stock selection process that is disciplined, driven by rigorous fundamental analysis, and that attempts to limit downside risk. In our view, actively investing in underappreciated and misunderstood companies with identifiable catalysts for unlocking shareholder value can offer meaningful upside potential and a degree of downside protection in periods of financial market turbulence.

We recognize the important role of financial advisors in today’s markets and encourage investors to continue to seek their advice. Amid changing markets and economic conditions, we are confident investors with a well-diversified portfolio and a patient, long-term outlook will 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 12 months considering the

Not FDIC Insured | May Lose Value | No Bank  Guarantee

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economic environment and other factors. Please remember all securities markets fluctuate, as do mutual fund share prices.

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

Sincereiy,

Peter A. Langerman

Chairman, President and Chief Executive Officer

Franklin Mutual Advisers, LLC

This letter reflects our analysis and opinions as of December 31, 2019, unless otherwise indicated. The information is not a complete analysis of every aspect of any market, country, industry, security or fund. Statements of fact are from sources considered reliable.

Contents
Annual Report
Franklin Mutual European Fund	3
Performance Summary	7
Your Fund’s Expenses	10
Financial Highlights and Statement of Investments	11
Financial Statements	20
Notes to Financial Statements	24
Report of Independent Registered Public Accounting Firm	37
Tax Information	38
Board Members and Officers	39
Shareholder Information	44

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

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ANNUAL REPORT

Franklin Mutual European Fund

This annual report for Franklin Mutual European Fund covers the fiscal year ended December 31, 2019.

Your Fund’s Goal and Main Investments

The Fund seeks capital appreciation, which may occasionally be short term, with income as a secondary goal, by investing at least 80% of its total assets in securities of European companies that we believe are available at market prices less than their intrinsic value. The Fund invests primarily in equity securities, mainly common stocks, with a focus on mid- and large cap companies. To a lesser extent, the Fund also invests in merger arbitrage securities and the debt and equity of distressed companies. The Geographic Composition bar chart on this page lists the leading European countries where the Fund invests.

Performance Overview

The Fund’s Class Z shares posted a +22.28% cumulative total return for the 12 months ended December 31, 2019. For comparison, the Fund’s primary benchmark, the MSCI Europe Index-NR (Local Currency), which tracks equity performance in Europe’s developed markets, posted a +23.75% total return.¹ Also for comparison, the Fund’s secondary benchmark, the MSCI Europe Index-NR (USD), posted a +23.77% total return.¹ You can find more of the Fund’s performance data in the Performance Summary beginning on page 7.

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

Economic and Market Overview

Global developed and emerging market stocks, as measured by the MSCI All Country World Index (USD), posted a +27.30% total return during the 12 months ended December 31, 2019.1 Although global economic growth slowed from 2018, interest-rate cuts from many central banks and the easing of trade tensions near period-end

Geographic Composition*

Based on Total Net Assets as of 12/31/19

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

contributed to the generally positive environment for equities worldwide. Reflecting investor optimism and slowing but resilient economic growth, stocks advanced in every major region of the globe.

Growth slowed overall in the eurozone, particularly in Germany and Italy. Germany, which is heavily reliant on exports, was adversely affected by the trade conflict between the U.S. and China and the resulting slowdown in global trade. In Italy, political uncertainty and budget concerns caused the country’s annual gross domestic product (GDP) growth to stall in 2019’s first quarter before modestly improving in the second and third quarters. Despite sluggish economic conditions, European developed market equities, as measured by the MSCI Europe Index-NR (Local

1. Source: Morningstar.

The index is unmanaged and includes reinvestment of any income or distributions. It does not reflect any fees, expenses or sales charges. One cannot invest directly in an index, and an index is not representative of the Fund’s portfolio. Net Returns (NR) include income net of tax withholding when dividends are paid.

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 16.

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Currency), posted a +23.75% total return for the 12-month period, as easing trade tensions buoyed investor optimism and an electoral victory by the Conservative Party in the U.K. alleviated uncertainty surrounding Brexit.¹ Although the European Central Bank left its headline refinancing rate unchanged, it lowered the deposit rate and restarted its bond-buying stimulus program, further supporting stocks.

Investment Strategy

We follow a distinctive value investment approach that combines investments in what we believe are undervalued common stocks with, to a lesser extent, distressed debt investing and merger arbitrage. Our style aims to provide our shareholders with superior risk-adjusted results over time. We employ rigorous, fundamental analysis to find compelling situations. In our opinion, successful investing is as much about assessing risk and containing losses as it is about achieving profits. In choosing investments, we look at the market price of an individual company’s securities relative to our evaluation of its intrinsic value based on factors including book value, cash flow generation, long-term earnings potential and earnings multiples. We may invest in bankrupt or distressed companies if we believe the market overreacted to adverse developments or failed to appreciate positive changes, including restructuring. In addition, it is our practice to hedge the Fund’s currency exposure when we deem it advantageous for our shareholders.

What is meant by “hedge”?

To hedge an investment is to take a position intended to offset potential losses that may be incurred by a companion financial instrument. Hedging an investment may also offset potential gains.

Manager’s Discussion

The end of a decade is a natural time for reflection about the years that have just passed and to look ahead to what the next 10 might have in store. Across Wall Street, we see many prognostications, and while we are not in the forecasting business, we do allow ourselves to think about investment opportunities over such an extended time period. But experience has taught us that while trying to predict the exact course of markets and/or economic and political events that will drive them may be fun, it is not all that useful.

As 2010 began, the global economy was still recovering from the Global Financial Crisis. The U.S. government owned significant portions of the banking and automotive sectors. The Fed had already started quantitative easing (QE), with QE 2 and QE 3 still to come. In Europe, concerns about

Top 10 Sectors/Industries

Based on Equity Securities as of 12/31/19

	% of Total Net Assets
Insurance	11.2%
Banks	10.7%
Oil, Gas & Consumable Fuels	8.7%
Pharmaceuticals	6.8%
Diversified Telecommunication Services	6.0%
Construction Materials	5.9%
Trading Companies & Distributors	5.1%
Machinery	5.1%
Auto Components	4.8%
Automobiles	3.1%

Greece’s finances were emerging, and in China the effects of 2009’s massive stimulus programs were starting to take hold.

Over the subsequent years we saw ongoing, global QE, culminating in trillions of dollars of debt yielding negative interest rates. The European Union (EU) was in continuous upheaval, with Greece threatening to leave, but eventually staying in the eurozone; the U.K. pursuing and achieving Brexit; and ongoing strain between core members Germany, France, Italy and Spain. In the U.S., average annual economic growth was restrained and finished the decade below 2%, trailing the minimum 3% expectation of prior decades. Strong corporate profits and lower corporate tax rates were bright spots.

Equity markets delivered a very good decade—one of the best in history—with the MSCI Europe Index-NR (Local Currency) posting an average annual total return of +7.20%.1 During the decade, Franklin Mutual European Fund, Class Z posted an average annual total return of +5.89%, a solid absolute return that nonetheless lagged its benchmark above. The Fund’s value strategy, which seeks to identify mispriced securities and limit downside risk, was out of favor in an environment that generally encouraged investors to assume more risk. Conversely, in the prior decade, the Fund’s Class Z shares posted an average annual total return of +9.04%, compared with -0.45% for the MSCI Europe Index-NR (Local Currency).¹ Our active investment approach focusing on individual opportunities was more conducive to the prior decade’s greater volatility.

In our view, going forward we expect more political and monetary uncertainty and economic growth in unexpected places. Corporate profits will have good years and bad years. Some industries will be massively disrupted, while

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FRANKLIN MUTUAL EUROPEAN FUND

others will find a way to adjust and prosper, even within the context of artificial intelligence and machine learning. Recent events, such as the coronavirus outbreak, have caused, and may continue to cause, uncertainty and volatility in the Chinese economy, potentially leading to vulnerability in 2020 global growth expectations. As for investment positioning, we intend to avoid forecasts that would lead us to make the Fund’s success dependent on a specific set of outcomes. Rather, we will seek to continue with our time-tested value process and complement it with new tools that enhance our security evaluation and selection process. To that end, we have integrated risk and quantitative portfolio analysis tools that provide us with fresh insights about performance, and help us identify companies and securities that we believe satisfy our investors’ goals of risk-adjusted returns that are not wholly dependent on any one economic or political scenario.

Fund Performance

Turning to Fund performance, top positive contributors included LafargeHolcim, BE Semiconductor and Enel. LafargeHolcim is listed among the Fund’s largest positions in the Top 10 Equity Holdings table on this page.

Investors bid up shares of Switzerland-based LafargeHolcim, the world’s largest cement maker, as the company’s management made progress implementing the long-term strategic plan it presented in 2018, including growing sales, divestments in Asia and deleveraging. LafargeHolcim intends to grow by acquiring smaller cement companies in markets that it considers attractive, primarily Europe and North America, according to the plan. Also, some of the headwinds, notably rising energy costs and poor weather conditions, which hampered performance in 2018, abated in 2019.

The share price of Netherlands-based BE Semiconductor, a producer of integrated semiconductor assembly equipment, improved as a competitive dividend yield and an announcement of a stock buyback program earlier in the period attracted investors. The stock had sold off following the company’s warning about slowing growth and order cancellations, which our analysis indicated were transitory concerns. We closed the position by period-end as it approached our estimate of intrinsic value.

Shares of Italy-based utility Enel rose after the company’s management reported solid first-half financial results. The company expects organic growth to accelerate over the

Top 10 Equity Holdings

12/31/19

Company Sector/Industry, Country	% of Total Net Assets
LafargeHolcim Ltd. Construction Materials, Switzerland	3.9%
GlaxoSmithKline PLC Pharmaceuticals, U.K.	3.8%
Rexel SA Trading Companies & Distributors, France	3.6%
Hellenic Telecommunications Organization SA Diversified Telecommunication Services, Greece	3.4%
Standard Chartered PLC Banks, U.K.	3.3%
Volkswagen AG Automobiles, Germany	3.1%
Royal Dutch Shell PLC Oil, Gas & Consumable Fuels, U.K.	3.1%
Novartis AG Pharmaceuticals, Switzerland	3.0%
Direct Line Insurance Group PLC Insurance, U.K.	3.0%
Cie Generale des Etablissements Michelin SCA Auto Components, France	3.0%

medium term as its investments in renewable energy sources begin to pay off. Enel also expects to benefit from operational efficiencies and reduced costs after refinancing its debt at lower interest rates.

During the period under review, Fund investments that detracted from performance included Vossloh, Allied Irish Bank Group² and Saras.

Shares of Vossloh, a Germany-based railroad infrastructure manufacturer that supplies global rail markets, declined in April after the company announced its performance program aimed at improving profitability. The program called for a 5% workforce reduction and divestment from unprofitable businesses.

The stock of Ireland-based Allied Irish Bank Group declined after the company reported weaker-than-anticipated earnings and higher expenses. The bank has a strong capital ratio and has been reducing the number of non-performing loans on its balance sheet, both of which are positive for the stock, in our view.

2. Listed as AIB Group in the SOI.

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

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Shares of Saras, an Italy-based, diversified energy provider, after reaching a one-year low in June 2019, were lifted through October by stronger refinery margins and earnings. However, the company’s stock sold off late in 2019 on reports of weakening margins in its oil refining segment.

During the period, the Fund held currency forwards and futures seeking to hedge most of the currency risk of the portfolio’s non-U.S. dollar investments. The hedges had a modestly positive overall impact on the Fund’s performance.

What is a currency forward?

A currency forward is a direct agreement between the Fund and a counterparty to buy or sell a foreign currency in exchange for another currency at a specific exchange rate on a future date.

What is a future?

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

As fellow shareholders, we found recent relative performance disappointing, but it is not uncommon for our strategy to diverge from European equity market returns at times. We remain committed to our disciplined, value investment approach as we seek to generate attractive, long-term, risk-adjusted returns for shareholders.

Thank you for your participation in Franklin Mutual European Fund. We look forward to continuing to serve your investment needs.

	Katrina Dudley, CFA   Co-Portfolio Manager
	Mandana Hormozi   Co-Portfolio Manager
	Todd Ostrow   Co-Portfolio Manager

The foregoing information reflects our analysis, opinions and portfolio holdings as of December 31, 2019, the end of the reporting period. The way we implement our main investment strategies and the resulting portfolio holdings may change depending on factors such as market and economic conditions. These opinions may not be relied upon as investment advice or an offer for a particular security. The information is not a complete analysis of every aspect of any market, country, industry, security or the Fund. Statements of fact are from sources considered reliable, but the investment manager makes no representation or warranty as to their completeness or accuracy. Although historical performance is no guarantee of future results, these insights may help you understand our investment management philosophy.

CFA^® is a trademark owned by CFA Institute.

6         Annual Report franklintempleton.com

FRANKLIN MUTUAL EUROPEAN FUND

Performance Summary as of December 31, 2019

The performance table and graphs do 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 12/31/19

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. For other share classes, visit franklintempleton.com.

Share Class	Cumulative   Total Return1		Average Annual   Total Return2
Z
1-Year		+22.28%		+22.28%
5-Year		+23.94%		+4.39%
10-Year		+77.27%		+5.89%
A3
1-Year		+21.98%		+15.28%
5-Year		+22.40%		+2.96%
10-Year		+72.42%		+5.00%

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

See page 9 for Performance Summary footnotes.

franklintempleton.com Annual Report         7

FRANKLIN MUTUAL EUROPEAN FUND

PERFORMANCE SUMMARY

Total Return Index Comparison for a Hypothetical $10,000 Investment

Total return represents the change in value of an investment over the periods shown. It includes any applicable maximum sales charge, Fund expenses, account fees and reinvested distributions. The unmanaged indexes include reinvestment of any income or distributions. They differ from the Fund in composition and do not pay management fees or expenses. One cannot invest directly in an index.

Class Z (1/1/10–12/31/19)

    

Class A (1/1/10–12/31/19)

    

See page 9 for Performance Summary footnotes.

8         Annual Report franklintempleton.com

FRANKLIN MUTUAL EUROPEAN FUND

PERFORMANCE SUMMARY

Distributions (1/1/19–12/31/19)

Share Class	Net Investment Income
Z		$0.5770
A		$0.5186
C		$0.3306
R		$0.4797
R6		$0.5973

Total Annual Operating Expenses⁵

Share Class
Z	1.04	%
A	1.29	%

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. Value securities may not increase in price as anticipated or may decline further in value. Special risks are associated with foreign investing, including currency fluctuations, economic instability and political developments. Because the Fund may invest its assets in companies in a specific region, including Europe, it is subject to greater risks of adverse developments in that region and/or the surrounding regions than a fund that is more broadly diversified geographically. Current political and financial uncertainty surrounding the European Union may increase market volatility and the economic risk of investing in companies in Europe. The Fund’s investments in smaller-company stocks carry an increased risk of price fluctuation, especially over the short term. The Fund’s investments in companies engaged in mergers, reorganizations or liquidations also involve special risks as pending deals may not be completed on time or on favorable terms. The Fund’s prospectus also includes a description of the main investment risks.

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

2. 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.

3. 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%.

4. Source: Morningstar. The MSCI Europe Index-NR (Local Currency and USD) is a market capitalization-weighted index designed to measure equity market performance of developed markets in Europe. The NR or Net Dividends Index reflects the deduction of withholding taxes on reinvested dividends.

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.

franklintempleton.com Annual Report         9

FRANKLIN MUTUAL EUROPEAN FUND

Your Fund’s Expenses

As a Fund shareholder, you can incur two types of costs: (1) transaction costs, including sales charges (loads) on Fund purchases and redemptions; and (2) ongoing Fund costs, including management fees, distribution and service (12b-1) fees, and other Fund expenses. All mutual funds have ongoing costs, sometimes referred to as operating expenses. The table below shows ongoing costs of investing in the Fund and can help you understand these costs and compare them with those of other mutual funds. The table assumes a $1,000 investment held for the six months indicated.

Actual Fund Expenses

The table below provides information about actual account values and actual expenses in the columns under the heading “Actual.” In these columns the Fund’s actual return, which includes the effect of Fund expenses, is used to calculate the “Ending Account Value” for each class of shares. You can estimate the expenses you paid during the period by following these steps (of course, your account value and expenses will differ from those in this illustration): Divide your account value by $1,000 (if your account had an $8,600 value, then $8,600 ÷ $1,000 = 8.6). Then multiply the result by the number in the row for your class of shares under the headings “Actual” and “Expenses Paid During Period” (if Actual Expenses Paid During Period were $7.50, then 8.6 x $7.50 = $64.50). In this illustration, the actual expenses paid this period are $64.50.

Hypothetical Example for Comparison with Other Funds

Under the heading “Hypothetical” in the table, information is provided about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. This information may not be used to estimate the actual ending account balance or expenses you paid for the period, but it can help you compare ongoing costs of investing in the Fund with those of other funds. To do so, compare this 5% hypothetical example for the class of shares you hold with the 5% hypothetical examples that appear in the shareholder reports of other funds.

Please note that expenses shown in the table are meant to highlight ongoing costs and do not reflect any transactional costs. Therefore, information under the heading “Hypothetical” is useful in comparing ongoing costs only, and will not help you compare total costs of owning different funds. In addition, if transactional costs were included, your total costs would have been higher.

		Actual (actual return after expenses)		Hypothetical (5% annual return before expenses)
Share Class	Beginning Account Value 7/1/19	Ending Account Value 12/31/19	Expenses Paid During Period 7/1/19–12/31/191, 2	Ending Account Value 12/31/19	Expenses Paid During Period 7/1/19–12/31/191, 2	Net Annualized Expense Ratio2
Z	$1,000	$1,091.70	$  5.38	$1,020.06	$  5.19	1.02%
A	$1,000	$1,090.50	$  6.69	$1,018.80	$  6.46	1.27%
C	$1,000	$1,086.40	$10.62	$1,015.02	$10.26	2.02%
R	$1,000	$1,089.80	$  8.01	$1,017.54	$  7.73	1.52%
R6	$1,000	$1,092.20	$  4.90	$1,020.52	$  4.74	0.93%

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 184/365 to reflect the one-half year period.

2. Reflects expenses after fee waivers and expense reimbursements, for Class R6.

10         Annual Report franklintempleton.com

FRANKLIN MUTUAL SERIES FUNDS

Financial Highlights

Franklin Mutual European Fund

	Year Ended December 31,
	2019			2018			2017			2016			2015
Class Z
Per share operating performance (for a share outstanding throughout the year)
Net asset value, beginning of year		$17.89			$20.93			$19.20			$19.48			$20.86
Income from investment operationsa:
Net investment incomeb		0.54			0.49			0.35			0.63	c		0.42
Net realized and unrealized gains (losses)		3.46			(2.80	)		1.65			(0.17	)		(0.27	)
Total from investment operations		4.00			(2.31	)		2.00			0.46			0.15
Less distributions from:
Net investment income		(0.58	)		(0.73	)		(0.27	)		(0.47	)		(0.46	)
Net realized gains		—			—			—			(0.27	)		(1.07	)
Total distributions		(0.58	)		(0.73	)		(0.27	)		(0.74	)		(1.53	)
Net asset value, end of year		$21.31			$17.89			$20.93			$19.20			$19.48
Total return		22.28%			(11.12)%			10.45%			2.40%			0.82%
Ratios to average net assets
Expensesd		1.04%	e		1.04%	e,f		1.04%	e		1.06%	e,f		1.05%
Expenses incurred in connection with securities sold short		—%			—%	g		—%			—%			—%	g
Net investment income		2.77%			2.38%			1.75%			3.42%	c		1.93%
Supplemental data
Net assets, end of year (000’s)		$789,012			$958,149			$1,328,622			$1,175,972			$1,355,780
Portfolio turnover rate		12.16%			35.42%			17.33%			16.43%			32.59%

^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.

^cNet investment income per share includes approximately $0.17 per share related to a nonrecurring distribution. The amount, although initially recorded as dividend income, is subject to recharacterization once the issuer provides information regarding the actual composition of the distribution. Excluding this amount, the ratio of net investment income to average net assets would have been 2.50%.

^dIncludes 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(d).

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

^fBenefit of waiver and payments by affiliates rounds to less than 0.01%.

^gRounds to less than 0.01%.

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

FRANKLIN MUTUAL SERIES FUNDS

FINANCIAL HIGHLIGHTS

Franklin Mutual European Fund (continued)

	Year Ended December 31,
	2019			2018			2017			2016			2015
Class A
Per share operating performance (for a share outstanding throughout the year)
Net asset value, beginning of year		$17.37			$20.33			$18.66			$18.95			$20.33
Income from investment operationsa:
Net investment incomeb		0.49			0.41			0.31			0.57	c		0.35
Net realized and unrealized gains (losses)		3.33			(2.69	)		1.58			(0.18	)		(0.26	)
Total from investment operations		3.82			(2.28	)		1.89			0.39			0.09
Less distributions from:
Net investment income		(0.52	)		(0.68	)		(0.22	)		(0.41	)		(0.40	)
Net realized gains		—			—			—			(0.27	)		(1.07	)
Total distributions		(0.52	)		(0.68	)		(0.22	)		(0.68	)		(1.47	)
Net asset value, end of year		$20.67			$17.37			$20.33			$18.66			$18.95
Total returnd		21.98%			(11.29)%			10.14%			2.12%			0.57%
Ratios to average net assets
Expensese		1.29%	f		1.29%	f,g		1.29%	f		1.31%	f,g		1.33%
Expenses incurred in connection with securities sold short		—%			—%	h		—%			—%			—%	h
Net investment income		2.52%			2.13%			1.50%			3.17%	c		1.65%
Supplemental data
Net assets, end of year (000’s)		$512,218			$564,038			$714,915			$769,297			$1,033,307
Portfolio turnover rate		12.16%			35.42%			17.33%			16.43%			32.59%

^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.

^cNet investment income per share includes approximately $0.17 per share related to a nonrecurring distribution. The amount, although initially recorded as dividend income, is subject to recharacterization once the issuer provides information regarding the actual composition of the distribution. Excluding this amount, the ratio of net investment income to average net assets would have been 2.25%.

^dTotal return does not reflect sales commissions or contingent deferred sales charges, if applicable.

^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(d).

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

^gBenefit of waiver and payments by affiliates rounds to less than 0.01%.

^hRounds to less than 0.01%.

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

FRANKLIN MUTUAL SERIES FUNDS

FINANCIAL HIGHLIGHTS

Franklin Mutual European Fund (continued)

	Year Ended December 31,
	2019			2018			2017			2016			2015
Class C
Per share operating performance (for a share outstanding throughout the year)
Net asset value, beginning of year		$17.56			$20.38			$18.70			$18.97			$20.37
Income from investment operationsa:
Net investment incomeb		0.35			0.29			0.15			0.44	c		0.19
Net realized and unrealized gains (losses)		3.35			(2.72	)		1.60			(0.19	)		(0.25	)
Total from investment operations		3.70			(2.43	)		1.75			0.25			(0.06	)
Less distributions from:
Net investment income		(0.33	)		(0.39	)		(0.07	)		(0.25	)		(0.27	)
Net realized gains		—			—			—			(0.27	)		(1.07	)
Total distributions		(0.33	)		(0.39	)		(0.07	)		(0.52	)		(1.34	)
Net asset value, end of year		$20.93			$17.56			$20.38			$18.70			$18.97
Total returnd		21.01%			(11.96)%			9.37%			1.32%			(0.16)%
Ratios to average net assets
Expensese		2.04%	f		2.04%	f,g		2.04%	f		2.06%	f,g		2.05%
Expenses incurred in connection with securities sold short		—%			—%	h		—%			—%			—%	h
Net investment income		1.77%			1.38%			0.75%			2.42%	c		0.93%
Supplemental data
Net assets, end of year (000’s)		$61,743			$78,149			$179,123			$209,196			$291,752
Portfolio turnover rate		12.16%			35.42%			17.33%			16.43%			32.59%

^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.

^cNet investment income per share includes approximately $0.17 per share related to a nonrecurring distribution. The amount, although initially recorded as dividend income, is subject to recharacterization once the issuer provides information regarding the actual composition of the distribution. Excluding this amount, the ratio of net investment income to average net assets would have been 1.50%.

^dTotal return does not reflect sales commissions or contingent deferred sales charges, if applicable.

^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(d).

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

^gBenefit of waiver and payments by affiliates rounds to less than 0.01%.

^hRounds to less than 0.01%.

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

FRANKLIN MUTUAL SERIES FUNDS

FINANCIAL HIGHLIGHTS

Franklin Mutual European Fund (continued)

	Year Ended December 31,
	2019			2018			2017			2016			2015
Class R
Per share operating performance (for a share outstanding throughout the year)
Net asset value, beginning of year		$17.05			$19.97			$18.35			$18.62			$20.04
Income from investment operationsa:
Net investment incomeb		0.43			0.35			0.22			0.52	c		0.27
Net realized and unrealized gains (losses)		3.27			(2.64	)		1.60			(0.18	)		(0.23	)
Total from investment operations		3.70			(2.29	)		1.82			0.34			0.04
Less distributions from:
Net investment income		(0.48	)		(0.63	)		(0.20	)		(0.34	)		(0.39	)
Net realized gains		—			—			—			(0.27	)		(1.07	)
Total distributions		(0.48	)		(0.63	)		(0.20	)		(0.61	)		(1.46	)
Net asset value, end of year		$20.27			$17.05			$19.97			$18.35			$18.62
Total return		21.70%			(11.54)%			9.92%			1.86%			0.37%
Ratios to average net assets
Expensesd		1.54%	e		1.54%	e,f		1.54%	e		1.56%	e,f		1.55%
Expenses incurred in connection with securities sold short		—%			—%	g		—%			—%			—%	g
Net investment income		2.27%			1.88%			1.25%			2.92%	c		1.43%
Supplemental data
Net assets, end of year (000’s)		$733			$731			$821			$626			$997
Portfolio turnover rate		12.16%			35.42%			17.33%			16.43%			32.59%

^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.

^cNet investment income per share includes approximately $0.17 per share related to a nonrecurring distribution. The amount, although initially recorded as dividend income, is subject to recharacterization once the issuer provides information regarding the actual composition of the distribution. Excluding this amount, the ratio of net investment income to average net assets would have been 2.00%.

^dIncludes 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(d).

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

^fBenefit of waiver and payments by affiliates rounds to less than 0.01%.

^gRounds to less than 0.01%.

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

FRANKLIN MUTUAL SERIES FUNDS

FINANCIAL HIGHLIGHTS

Franklin Mutual European Fund (continued)

	Year Ended December 31,
	2019			2018			2017			2016			2015
Class R6
Per share operating performance (for a share outstanding throughout the year)
Net asset value, beginning of year		$17.87			$20.91			$19.19			$19.47			$20.85
Income from investment operationsa:
Net investment incomeb		0.69			0.56			0.41			0.66	c		0.46
Net realized and unrealized gains (losses)		3.33			(2.85	)		1.62			(0.17	)		(0.28	)
Total from investment operations		4.02			(2.29	)		2.03			0.49			0.18
Less distributions from:
Net investment income		(0.60	)		(0.75	)		(0.31	)		(0.50	)		(0.49	)
Net realized gains		—			—			—			(0.27	)		(1.07	)
Total distributions		(0.60	)		(0.75	)		(0.31	)		(0.77	)		(1.56	)
Net asset value, end of year		$21.29			$17.87			$20.91			$19.19			$19.47
Total return		22.35%			(10.94)%			10.63%			2.53%			0.98%
Ratios to average net assets
Expenses before waiver and payments by affiliatesd		0.94%			0.92%			0.88%			0.89%			0.89%
Expenses net of waiver and payments by affiliatesd		0.93%	e		0.91%	e		0.88%	e		0.89%	e,f		0.89%
Expenses incurred in connection with securities sold short		—%			—%	g		—%			—%			—%	g
Net investment income		2.88%			2.51%			1.91%			3.59%	c		2.09%
Supplemental data
Net assets, end of year (000’s)		$44,561			$149,796			$294,660			$311,784			$373,904
Portfolio turnover rate		12.16%			35.42%			17.33%			16.43%			32.59%

^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.

^cNet investment income per share includes approximately $0.17 per share related to a nonrecurring distribution. The amount, although initially recorded as dividend income, is subject to recharacterization once the issuer provides information regarding the actual composition of the distribution. Excluding this amount, the ratio of net investment income to average net assets would have been 2.67%.

^dIncludes 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(d).

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

^fBenefit of waiver and payments by affiliates rounds to less than 0.01%.

^gRounds to less than 0.01%.

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

FRANKLIN MUTUAL SERIES FUNDS

Statement of Investments, December 31, 2019

Franklin Mutual European Fund

	Country		Shares		Value
Common Stocks 90.7%
Aerospace & Defense 2.4%
BAE Systems PLC		United Kingdom		4,553,139	$	34,059,727
Auto Components 3.0%
Cie Generale des Etablissements Michelin SCA		France		342,111		41,857,348
Banks 10.7%
AIB Group PLC		Ireland		3,552,062		12,372,627
Barclays PLC		United Kingdom		9,589,788		22,816,426
ING Groep NV		Netherlands		3,059,161		36,667,280
Standard Chartered PLC		United Kingdom		4,960,260		46,801,946
UniCredit SpA		Italy		2,221,742		32,440,275
						151,098,554
Capital Markets 1.2%
Deutsche Bank AG		Germany		2,148,475		16,665,870
Chemicals 2.7%
BASF SE		Germany		497,440		37,571,473
Commercial Services & Supplies 1.7%
G4S PLC		United Kingdom		8,137,683		23,495,940
Construction Materials 5.9%
HeidelbergCement AG		Germany		389,156		28,349,778
LafargeHolcim Ltd., B		Switzerland		978,029		54,275,986
						82,625,764
Diversified Financial Services 0.5%
a M&G PLC		United Kingdom		2,288,985		7,191,065
Diversified Telecommunication Services 6.0%
Hellenic Telecommunications Organization SA		Greece		3,014,871		48,213,447
Koninklijke KPN NV		Netherlands		12,263,002		36,182,416
						84,395,863
Electric Utilities 0.8%
Enel SpA		Italy		1,374,926		10,904,393
Energy Equipment & Services 1.0%
Tenaris SA, ADR		Italy		635,416		14,385,818
Health Care Providers & Services 1.5%
Fresenius SE and Co. KGaA		Germany		368,256		20,723,371
Hotels, Restaurants & Leisure 2.8%
Accor SA		France		834,577		39,075,344
Household Durables 1.2%
Husqvarna AB, B		Sweden		2,085,623		16,705,114
Household Products 0.8%
Reckitt Benckiser Group PLC		United Kingdom		145,144		11,782,142
Insurance 11.2%
ASR Nederland NV		Netherlands		852,316		31,886,482
Direct Line Insurance Group PLC		United Kingdom		10,211,469		42,264,312
Lancashire Holdings Ltd		United Kingdom		1,165,903		11,843,862
NN Group NV		Netherlands		855,360		32,441,614

16         Annual Report franklintempleton.com

FRANKLIN MUTUAL SERIES FUNDS

STATEMENT OF INVESTMENTS

Franklin Mutual European Fund (continued)

	Country		Shares		Value
Common Stocks (continued)
Insurance (continued)
RSA Insurance Group PLC		United Kingdom		5,306,413	$	39,750,813
						158,187,083
Machinery 5.1%
CNH Industrial NV		United Kingdom		2,270,191		24,924,417
CNH Industrial NV, special voting		United Kingdom		833,461		9,150,565
Vossloh AG		Germany		500,980		20,787,489
Weir Group PLC		United Kingdom		848,675		16,967,196
						71,829,667
Oil, Gas & Consumable Fuels 8.7%
BP PLC		United Kingdom		5,184,495		32,382,906
a Cairn Energy PLC		United Kingdom		11,140,689		30,248,335
Royal Dutch Shell PLC, A (EUR Traded)		United Kingdom		370,119		10,860,305
Royal Dutch Shell PLC, A (GBP Traded)		United Kingdom		1,095,418		32,425,969
Saras SpA		Italy		10,256,302		16,493,768
						122,411,283
Pharmaceuticals 6.8%
GlaxoSmithKline PLC		United Kingdom		2,282,483		53,779,785
Novartis AG		Switzerland		447,966		42,544,386
						96,324,171
Road & Rail 0.0%
a,b,c,d Euro Wagon LP		Jersey Islands		16,127,149		—
Software 2.5%
Avast PLC.		United Kingdom		5,837,250		35,006,628
Specialty Retail 2.9%
Dufry AG		Switzerland		255,528		25,356,067
Hornbach Holding AG & Co. KGaA		Germany		213,786		15,463,895
						40,819,962
Textiles, Apparel & Luxury Goods 1.0%
Cie Financiere Richemont SA		Switzerland		173,203		13,614,241
Tobacco 2.7%
British American Tobacco PLC		United Kingdom		881,269		37,717,962
Trading Companies & Distributors 5.1%
Kloeckner & Co. SE		Germany		3,031,653		21,351,041
Rexel SA		France		3,855,030		51,208,581
						72,559,622
Wireless Telecommunication Services 2.5%
Vodafone Group PLC		United Kingdom		18,316,426		35,602,788
Total Common Stocks (Cost $1,257,538,969)						1,276,611,193
Preferred Stocks 4.9%
Auto Components 1.8%
e Schaeffler AG, 5.713%, pfd		Germany		2,355,532		25,433,435

franklintempleton.com Annual Report         17

FRANKLIN MUTUAL SERIES FUNDS

STATEMENT OF INVESTMENTS

Franklin Mutual European Fund (continued)

	Country		Shares		Value
Preferred Stocks (continued)
Automobiles 3.1%
e Volkswagen AG, 2.758%, pfd		Germany		221,849	$	43,847,201
Total Preferred Stocks (Cost $62,346,594)						69,280,636
Total Investments before Short Term Investments (Cost $1,319,885,563)						1,345,891,829
			Principal Amount
Short Term Investments 4.2%
U.S. Government and Agency Securities 4.2%
f FHLB, 1/02/20		United States	$	28,300,000		28,300,000
f U.S. Treasury Bill,
1/14/20 - 2/20/20		United States		15,000,000		14,983,420
g 1/02/20 - 5/28/20		United States		16,100,000		16,048,946
Total U.S. Government and Agency Securities (Cost $59,326,187)						59,332,366
Total Investments (Cost $1,379,211,750) 99.8%						1,405,224,195
Other Assets, less Liabilities 0.2%						3,043,173
Net Assets 100.0%					$	1,408,267,368

^aNon-income producing.

^bSee Note 11 regarding holdings of 5% voting securities.

^cFair valued using significant unobservable inputs. See Note 13 regarding fair value measurements.

^dSee Note 9 regarding restricted securities.

^eVariable rate security. The rate shown represents the yield at period end.

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

^gA portion or all of the security has been segregated as collateral for open forward exchange contracts. At December 31, 2019, the aggregate value of these securities pledged amounted to $12,467,874, representing 0.9% of net assets.

At December 31, 2019, the Fund had the following futures contracts outstanding. See Note 1(c).

Futures Contracts

Description	Type		Number of Contracts		Notional   Amount*		Expiration Date		Value/ Unrealized Appreciation (Depreciation)
Currency Contracts
EUR/USD		Short		2,580		$363,844,500		3/16/20		$(3,496,695	)
GBP/USD		Short		1,900		157,842,500		3/16/20		(1,188,506	)
Total Futures Contracts										$(4,685,201	)

^*As of period end.

18         Annual Report franklintempleton.com

FRANKLIN MUTUAL SERIES FUNDS

STATEMENT OF INVESTMENTS

Franklin Mutual European Fund (continued)

At December 31, 2019, the Fund had the following forward exchange contracts outstanding. See Note 1(c).

Forward Exchange Contracts

Currency	Counterpartya		Type		Quantity		Contract Amount		Settlement Date		Unrealized Appreciation		Unrealized Depreciation
OTC Forward Exchange Contracts
Swiss Franc		HSBK		Sell		293,124	$	297,176		1/13/20	$	—	$	(6,034	)
Swiss Franc		SSBT		Sell		4,489,599		4,558,130		1/13/20		—		(85,953	)
Swiss Franc		UBSW		Sell		48,091,670		48,633,356		1/13/20		—		(1,113,141	)
Euro		BOFA		Buy		6,331,857		7,057,786		1/15/20		49,910		—
Euro		BOFA		Sell		7,322,894		8,149,657		1/15/20		—		(70,508	)
Euro		BOFA		Sell		10,106,099		11,427,774		1/15/20		83,380		—
Euro		HSBK		Buy		2,461,274		2,765,389		1/15/20		—		(2,536	)
Euro		HSBK		Buy		9,955,315		11,062,400		1/15/20		112,734		—
Euro		HSBK		Sell		1,150,000		1,299,500		1/15/20		8,591		—
Euro		HSBK		Sell		5,999,414		6,706,468		1/15/20		—		(28,052	)
Euro		SSBT		Buy		14,546,655		16,212,922		1/15/20		116,128		—
Euro		SSBT		Sell		5,890,446		6,582,451		1/15/20		—		(29,748	)
Euro		SSBT		Sell		69,496,440		79,376,054		1/15/20		1,364,251		—
Euro		UBSW		Sell		11,971,400		13,365,150		1/15/20		—		(73,098	)
Euro		UBSW		Sell		73,851,016		84,353,944		1/15/20		1,454,001		—
British Pound		HSBK		Sell		14,381,140		18,183,586		1/16/20		—		(872,570	)
British Pound		HSBK		Sell		51,220,912		62,504,309		2/14/20		—		(5,421,706	)
British Pound		SSBT		Sell		48,750,912		59,382,998		2/14/20		—		(5,267,454	)
British Pound		UBSW		Sell		2,000,000		2,509,400		2/14/20		—		(142,877	)
Euro		BOFA		Sell		2,641,107		2,945,901		2/18/20		—		(25,085	)
Euro		HSBK		Sell		4,106,116		4,591,076		2/18/20		—		(27,900	)
Euro		SSBT		Sell		2,658,139		2,965,659		2/18/20		—		(24,486	)
Euro		UBSW		Sell		2,930,017		3,287,447		2/18/20		—		(8,535	)
Swedish Krona		SSBT		Sell		155,812,671		16,651,011		2/18/20		—		(24,165	)
Euro		SSBT		Sell		40,266,052		45,099,307		4/07/20		—		(337,140	)
Euro		UBSW		Sell		40,266,052		45,099,066		4/07/20		—		(337,382	)
British Pound		BOFA		Sell		5,134,163		6,648,541		4/24/20		—		(172,771	)
British Pound		HSBK		Sell		44,393,484		57,685,826		4/24/20		—		(1,295,903	)
Euro		SSBT		Sell		38,230,845		42,860,983		5/21/20		—		(397,241	)
Euro		UBSW		Sell		38,230,845		42,864,233		5/21/20		—		(393,991	)
British Pound		BOFA		Sell		2,725,656		3,660,831		5/22/20		36,843		—
British Pound		BOFA		Sell		21,115,377		27,618,891		5/22/20		—		(455,775	)
British Pound		HSBK		Sell		374,483		502,868		5/22/20		4,960		—
British Pound		HSBK		Sell		23,356,317		30,361,690		5/22/20		—		(692,494	)
British Pound		UBSW		Sell		2,725,656		3,663,260		5/22/20		39,271		—
Total Forward Exchange Contracts											$	3,270,069	$	(17,306,545	)
Net unrealized appreciation (depreciation)													$	(14,036,476	)

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

See Note 10 regarding other derivative information.

See Abbreviations on page 36.

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

FRANKLIN MUTUAL SERIES FUNDS

FINANCIAL STATEMENTS

Statement of Assets and Liabilities

December 31, 2019

Franklin Mutual European Fund

Assets:
Investments in securities:
Cost - Unaffiliated issuers	$1,372,929,241
Cost - Controlled affiliates (Note 11)	6,282,509
Value - Unaffiliated issuers	$1,405,224,195
Value - Controlled affiliates (Note 11)	—
Cash	101,337
Foreign currency, at value (cost $1,040,224)	1,050,036
Receivables:
Investment securities sold	209,439
Capital shares sold	868,056
Dividends	7,095,261
European Union tax reclaims	3,344,659
Deposits with brokers for:
Futures contracts	9,653,520
Unrealized appreciation on OTC forward exchange contracts	3,270,069
Other assets	550,982
Total assets	1,431,367,554
Liabilities:
Payables:
Capital shares redeemed	1,184,195
Management fees	1,038,006
Distribution fees	161,600
Transfer agent fees	358,087
Trustees’ fees and expenses	135,246
Variation margin on futures contracts	2,591,761
Unrealized depreciation on OTC forward exchange contracts	17,306,545
Accrued expenses and other liabilities	324,746
Total liabilities	23,100,186
Net assets, at value	$1,408,267,368
Net assets consist of:
Paid-in capital	$1,382,777,787
Total distributable earnings (losses)	25,489,581
Net assets, at value	$1,408,267,368

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

FRANKLIN MUTUAL SERIES FUNDS

FINANCIAL STATEMENTS

Statement of Assets and Liabilities (continued)

December 31, 2019

Franklin Mutual European Fund

Class Z:
Net assets, at value	$789,011,534
Shares outstanding	37,033,279
Net asset value and maximum offering price per share	$21.31
Class A:
Net assets, at value	$512,217,940
Shares outstanding	24,781,732
Net asset value per sharea	$20.67
Maximum offering price per share (net asset value per share ÷ 94.50%)	$21.87
Class C:
Net assets, at value	$  61,742,943
Shares outstanding	2,949,273
Net asset value and maximum offering price per sharea	$20.93
Class R:
Net assets, at value	$       733,489
Shares outstanding	36,193
Net asset value and maximum offering price per share	$20.27
Class R6:
Net assets, at value	$  44,561,462
Shares outstanding	2,093,536
Net asset value and maximum offering price per share	$21.29

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

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

FRANKLIN MUTUAL SERIES FUNDS

FINANCIAL STATEMENTS

Statement of Operations

for the year ended December 31, 2019

Franklin Mutual European Fund

Investment income:
Dividends: (net of foreign taxes)*
Unaffiliated issuers	$	58,413,551
Interest:
Unaffiliated issuers		2,094,156
Total investment income		60,507,707
Expenses:
Management fees (Note 3a)		13,707,046
Distribution fees: (Note 3c)
Class A		1,408,316
Class C		713,161
Class R		3,551
Transfer agent fees: (Note 3e)
Class Z		1,112,329
Class A		755,446
Class C		95,637
Class R		952
Class R6		34,485
Custodian fees (Note 4)		213,868
Reports to shareholders		113,844
Registration and filing fees		110,950
Professional fees		171,983
Trustees’ fees and expenses		102,639
Other		56,917
Total expenses		18,601,124
Expense reductions (Note 4)		(33,318	)
Expenses waived/paid by affiliates (Note 3f)		(10,369	)
Net expenses		18,557,437
Net investment income		41,950,270
Realized and unrealized gains (losses):
Net realized gain (loss) from:
Investments:
Unaffiliated issuers		(17,256,708	)
Foreign currency transactions		(592,668	)
Forward exchange contracts		51,052,918
Futures contracts		21,548,807
Securities sold short		709,734
Net realized gain (loss)		55,462,083
Net change in unrealized appreciation (depreciation) on:
Investments:
Unaffiliated issuers		256,539,918
Translation of other assets and liabilities denominated in foreign currencies		(151,482	)
Forward exchange contracts		(25,369,973	)
Futures contracts		(5,063,994	)
Securities sold short		(1,515,523	)
Net change in unrealized appreciation (depreciation)		224,438,946
Net realized and unrealized gain (loss)		279,901,029
Net increase (decrease) in net assets resulting from operations	$	321,851,299
*Foreign taxes withheld on dividends	$	5,081,832

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

FRANKLIN MUTUAL SERIES FUNDS

FINANCIAL STATEMENTS

Statements of Changes in Net Assets

Franklin Mutual European Fund

	Year Ended December 31,
	2019			2018
Increase (decrease) in net assets:
Operations:
Net investment income	$	41,950,270		$	51,748,479
Net realized gain (loss)		55,462,083			168,364,634
Net change in unrealized appreciation (depreciation)		224,438,946			(457,535,035	)
Net increase (decrease) in net assets resulting from operations		321,851,299			(237,421,922	)
Distributions to shareholders:
Class Z		(20,967,947	)		(39,537,213	)
Class A		(12,671,231	)		(21,635,584	)
Class C		(972,882	)		(2,285,511	)
Class R		(16,815	)		(26,901	)
Class R6		(1,222,857	)		(6,073,341	)
Total distributions to shareholders		(35,851,732	)		(69,558,550	)
Capital share transactions: (Note 2)
Class Z		(321,483,450	)		(197,936,001	)
Class A		(150,432,479	)		(56,127,793	)
Class C		(29,238,553	)		(84,206,336	)
Class R		(117,087	)		38,579
Class R6		(127,323,705	)		(122,065,613	)
Total capital share transactions		(628,595,274	)		(460,297,164	)
Net increase (decrease) in net assets		(342,595,707	)		(767,277,636	)
Net assets:
Beginning of year		1,750,863,075			2,518,140,711
End of year	$	1,408,267,368		$	1,750,863,075

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

FRANKLIN MUTUAL SERIES FUNDS

Notes to Financial Statements

Franklin Mutual European Fund

1. Organization and Significant Accounting Policies

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

The following summarizes the Fund’s significant accounting policies.

a.   Financial Instrument Valuation

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

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

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

Debt securities generally trade in the OTC market rather than on a securities exchange. The Fund’s pricing services use multiple valuation techniques to determine fair value. In instances where sufficient market activity exists, the pricing services may utilize a market-based approach through which quotes from market makers are used to determine fair value. In instances where sufficient market activity may not exist or is limited, the pricing services also utilize proprietary valuation models which may consider market characteristics such as benchmark yield curves, credit spreads, estimated default rates, anticipated market interest rate volatility, coupon rates, anticipated timing of principal repayments, underlying collateral, and other unique security features in order to estimate the relevant cash flows, which are then discounted to calculate the fair value.

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

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

Trading in securities on foreign securities stock exchanges and OTC markets may be completed before 4 p.m. Eastern time. In addition, trading in certain foreign markets may not take place on every Fund’s business day. Occasionally,

24         Annual Report franklintempleton.com

FRANKLIN MUTUAL SERIES FUNDS

NOTES TO FINANCIAL STATEMENTS

Franklin Mutual European Fund (continued)

events occur between the time at which trading in a foreign security is completed and 4 p.m. Eastern time that might call into question the reliability of the value of a portfolio security held by the Fund. As a result, differences may arise between the value of the Fund’s portfolio securities as determined at the foreign market close and the latest indications of value at 4 p.m. Eastern time. In order to minimize the potential for these differences, the VC monitors price movements following the close of trading in foreign stock markets through a series of country specific market proxies (such as baskets of American Depositary Receipts, futures contracts and exchange traded funds). These price movements are measured against established trigger thresholds for each specific market proxy to assist in determining if an event has occurred that may call into question the reliability of the values of the foreign securities held by the Fund. If such an event occurs, the securities may be valued using fair value procedures, which may include the use of independent pricing services.

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

b.  Foreign Currency Translation

Portfolio securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollars based on the exchange rate of such currencies against U.S. dollars on the date of valuation. The Fund may enter into foreign currency exchange contracts to facilitate transactions denominated in a foreign currency. Purchases and sales of securities, income and expense items denominated in foreign currencies are translated into U.S. dollars at the exchange rate in effect on the transaction date. Portfolio securities and assets and liabilities denominated in foreign currencies contain risks that those currencies will decline in value relative to the U.S. dollar. Occasionally, events may impact the availability or reliability of foreign exchange rates used to convert the U.S. dollar equivalent value. If such an event occurs, the foreign exchange rate will be valued at fair value using procedures established and approved by the Board.

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

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

c.  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

franklintempleton.com Annual Report         25

FRANKLIN MUTUAL SERIES FUNDS

NOTES TO FINANCIAL STATEMENTS

Franklin Mutual European Fund (continued)

1.  Organization and Significant Accounting Policies (continued)

c.  Derivative Financial Instruments (continued)

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 exposure to certain foreign currencies. A futures contract is an agreement between the Fund and a counterparty to buy or sell an asset at a specified price on a future date. Required initial margins are pledged by the Fund,

and the daily change in fair value is accounted for as a variation margin payable or receivable in the Statement of Assets and Liabilities.

The Fund entered into OTC forward exchange contracts primarily to manage 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.

See Note 10 regarding other derivative information.

d.  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. At December 31, 2019, the Fund had no securities sold short.

e.  Securities Lending

The Fund participates in an agency based securities lending program to earn additional income. The Fund receives cash collateral against the loaned securities in an amount equal to at least 102% of the fair value of the loaned securities. Collateral is maintained over the life of the loan in an amount not less than 100% of the fair value of loaned securities, as determined at the close of Fund business each day; any additional collateral required due to changes in security values is delivered to the Fund on the next business day. The

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Franklin Mutual European Fund (continued)

collateral is deposited into a joint cash account with other funds and is used to invest in a money market fund managed by Franklin Advisers, Inc., an affiliate of the Fund, and/or a joint repurchase agreement. The Fund may receive income from the investment 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 Statement of Operations. The Fund bears the market risk with respect to the collateral investment, securities loaned, and the risk that the agent may default on its obligations to the Fund. If the borrower defaults on its obligation 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. At December 31, 2019, the Fund had no securities on loan.

f.  Income and Deferred Taxes

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

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

As a result of several court cases, in certain countries across the European Union, the Fund filed additional tax reclaims for previously withheld taxes on dividends earned in those countries (EU reclaims). These additional filings are subject to various administrative proceedings by the local jurisdictions’ tax authorities within the European Union, as well as a number of related judicial proceedings. Income recognized, if any, for EU reclaims is reflected as other income in the Statement of Operations and any related receivable, if any, is reflected as European Union tax reclaims in the Statement of Assets and Liabilities. When uncertainty

exists as to the ultimate resolution of these proceedings, the likelihood of receipt of these EU reclaims, and the potential timing of payment, no amounts are reflected in the financial statements. For U.S. income tax purposes, EU reclaims received by the Fund, if any, reduce the amounts of foreign taxes Fund shareholders can use as tax credits in their individual income tax returns.

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 December 31, 2019, the Fund has determined that no tax liability is required in its financial statements related to uncertain tax positions for any open tax years (or expected to be taken in future tax years). Open tax years are those that remain subject to examination and are based on the statute of limitations in each jurisdiction in which the Fund invests.

g.  Security Transactions, Investment Income, Expenses and Distributions

Security transactions are accounted for on trade date. Realized gains and losses on security transactions are determined on a specific identification basis. Interest income and estimated expenses are accrued daily. Amortization of premium and accretion of discount on debt securities are included in interest income. Dividend income 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

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Franklin Mutual European Fund (continued)

1.  Organization and Significant Accounting Policies (continued)

g.  Security Transactions, Investment Income, Expenses and Distributions (continued)

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

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

h.  Accounting Estimates

The preparation of financial statements in accordance with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and

liabilities at the date of the financial statements and the amounts of income and expenses during the reporting period. Actual results could differ from those estimates.

i.  Guarantees and Indemnifications

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

2.  Shares of Beneficial Interest

At December 31, 2019, there were an unlimited number of shares authorized (without par value). Transactions in the Fund’s shares were as follows:

	Year Ended December 31,
	2019						2018
	Shares			Amount			Shares			Amount
Class Z Shares:
Shares sold		4,771,932		$	94,210,649			15,870,789		$	328,884,286
Shares issued in reinvestment of distributions		916,245			19,535,245			2,023,721			37,225,839
Shares redeemed		(22,203,969	)		(435,229,344	)		(27,834,376	)		(564,046,126	)
Net increase (decrease)		(16,515,792	)	$	(321,483,450	)		(9,939,866	)	$	(197,936,001	)
Class A Shares:
Shares solda		3,580,834		$	69,916,200			6,861,993		$	134,662,400
Shares issued in reinvestment of distributions		473,589			9,797,244			870,701			15,538,916
Shares redeemed		(11,746,709	)		(230,145,923	)		(10,421,209	)		(206,329,109	)
Net increase (decrease)		(7,692,286	)	$	(150,432,479	)		(2,688,515	)	$	(56,127,793	)
Class C Shares:
Shares sold		149,698		$	2,911,176			486,940		$	9,826,395
Shares issued in reinvestment of distributions		44,429			929,543			117,682			2,203,229
Shares redeemeda		(1,694,293	)		(33,079,272	)		(4,944,916	)		(96,235,960	)
Net increase (decrease)		(1,500,166	)	$	(29,238,553	)		(4,340,294	)	$	(84,206,336	)

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Franklin Mutual European Fund (continued)

	Year Ended December 31,
	2019						2018
	Shares			Amount			Shares			Amount
Class R Shares:
Shares sold		6,114		$	118,329			8,109		$	162,976
Shares issued in reinvestment of distributions		829			16,815			1,528			26,901
Shares redeemed		(13,638	)		(252,231	)		(7,860	)		(151,298	)
Net increase (decrease)		(6,695	)	$	(117,087	)		1,777		$	38,579
Class R6 Shares:
Shares sold		354,277		$	7,045,227			1,059,999		$	21,160,059
Shares issued in reinvestment of distributions		13,656			290,912			261,913			4,800,226
Shares redeemed		(6,655,454	)		(134,659,844	)		(7,032,513	)		(148,025,898	)
Net increase (decrease)		(6,287,521	)	$	(127,323,705	)		(5,710,601	)	$	(122,065,613	)

^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 Fund are also officers and/or directors of the following subsidiaries:

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

a.  Management Fees

The Fund pays an investment management fee to Franklin Mutual based on the average daily net assets of the Fund as follows:

Annualized Fee Rate	Net Assets
0.875%	Up to and including $1 billion
0.845%	Over $1 billion, up to and including $2 billion
0.825%	Over $2 billion, up to and including $5 billion
0.805%	In excess of $5 billion

For the year ended December 31, 2019, the gross effective investment management fee rate was 0.864% of the Fund’s average daily net assets.

b.  Administrative Fees

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

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Franklin Mutual European Fund (continued)

3. Transactions with Affiliates (continued)

c.   Distribution Fees

The Board has adopted distribution plans for each share class, with the exception of Class Z and Class R6 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	0.35	%
Class C	1.00	%
Class R	0.50	%

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

d.   Sales Charges/Underwriting Agreements

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

Sales charges retained net of commissions paid to unaffiliated brokers/dealers	$	14,005
CDSC retained	$	8,990

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 year ended December 31, 2019, the Fund paid transfer agent fees of $1,998,849, of which $703,150 was retained by Investor Services.

f.   Waiver and Expense Reimbursements

Investor Services has contractually agreed in advance to waive or limit its fees so that the Class R6 transfer agent fees do not exceed 0.02% based on the average net assets of the class until April 30, 2020.

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Franklin Mutual European Fund (continued)

g.   Interfund Transactions

The Fund engaged in purchases and sales of investments with funds or other accounts that have common investment managers (or affiliated investment managers), directors, trustees or officers. During the year ended December 31, 2019, these purchase and sale transactions aggregated $0 and $12,456,798, respectively.

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 year ended December 31, 2019, the custodian fees were reduced as noted in the Statement of Operations.

5. Independent Trustees’ Retirement Plan

On January 1, 1993, the Trust adopted an Independent Trustees’ Retirement Plan (Plan). The Plan is an unfunded defined benefit plan that provides benefit payments to Trustees whose length of service and retirement age meets the eligibility requirements of the Plan. Benefits under the Plan are based on years of service and fees paid to each trustee at the time of retirement. Effective in December 1996, the Plan was closed to new participants.

During the year ended December 31, 2019, the Fund’s projected benefit obligation and benefit payments under the Plan were as follows:

aProjected benefit obligation at December 31, 2019	$	135,246
bIncrease in projected benefit obligation	$	11,562
Benefit payments made to retired trustees	$	(2,102	)

^aThe projected benefit obligation is included in trustees’ fees and expenses in the Statement of Assets and Liabilities.

^bThe increase in projected benefit obligation is included in trustees’ fees and expenses in the Statement of Operations.

6. Income Taxes

For tax purposes, capital losses may be carried over to offset future capital gains.

At December 31, 2019, the capital loss carryforwards were as follows:

Capital loss carryforwards not subject to expiration:
Short term	$	11,726,704

During the year ended December 31, 2019, the Fund utilized $27,402,502 of capital loss carryforwards.

The tax character of distributions paid during the years ended December 31, 2019 and 2018, was as follows:

	2019		2018
Distributions paid from ordinary income	$	35,851,732	$	69,558,550

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Franklin Mutual European Fund (continued)

6. Income Taxes (continued)

At December 31, 2019, the cost of investments, net unrealized appreciation (depreciation) and undistributed ordinary income for income tax purposes were as follows:

Cost of investments	$	1,358,701,931
Unrealized appreciation	$	185,031,521
Unrealized depreciation		(171,256,344	)
Net unrealized appreciation (depreciation)	$	13,775,177
Distributable earnings:
Undistributed ordinary income	$	6,295,750

Differences between income and/or capital gains as determined on a book basis and a tax basis are primarily due to differing treatment of foreign currency transactions.

7. Investment Transactions

Purchases and sales of investments (excluding short term securities and securities sold short) for the year ended December 31, 2019, aggregated $178,687,099 and $746,768,210, respectively.

8. Concentration of Risk

Investing in foreign securities may include certain risks and considerations not typically associated with investing in U.S. securities, such as fluctuating currency values and changing local, regional and global economic, political and social conditions, which may result in greater market volatility. Current political and financial uncertainty surrounding the European Union may increase market volatility and the economic risk of investing in securities in Europe. In addition, certain foreign securities may not be as liquid as U.S. securities.

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 December 31, 2019, investments in restricted securities, excluding securities exempt from registration under the 1933 Act, were as follows:

		Acquisition
Shares	Issuer	Date	Cost		Value
16,127,149	Euro Wagon LP (Value is —% of Net Assets)	12/08/05 - 1/02/08		$6,282,509	$	—

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Franklin Mutual European Fund (continued)

10. Other Derivative Information

At December 31, 2019, 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
Foreign exchange contracts	Variation margin on futures contracts	$	—	Variation margin on futures contracts	$	4,685,201	a
	Unrealized appreciation on OTC forward exchange contracts		3,270,069	Unrealized depreciation on OTC forward exchange contracts		17,306,545
Totals		$	3,270,069		$	21,991,746

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

For the year ended December 31, 2019, the effect of derivative contracts in the Statement of Operations was as follows:

Derivative Contracts Not Accounted for as Hedging Instruments	Statement of Operations Location	Net Realized Gain (Loss) for the Year	Statement of Operations Location	Net Change in Unrealized Appreciation (Depreciation) for the Year
	Net realized gain (loss) from:		Net change in unrealized appreciation (depreciation) on:
Foreign exchange contracts	Forward exchange contracts	$51,052,918	Forward exchange contracts	$(25,369,973)
	Futures contracts	21,548,807	Futures contracts	(5,063,994)
Totals		$72,601,725		$(30,433,967)

For the year ended December 31, 2019, the average month end notional amount of futures contracts represented $541,926,607. The average month end contract value of forward exchange contracts was $874,813,396.

At December 31, 2019, OTC derivative assets and liabilities are as follows:

	Gross Amounts of Assets and Liabilities Presented in the Statement of Assets and  Liabilities
	Assetsa		Liabilitiesa
Derivatives
Forward exchange contracts		$3,270,069		$17,306,545

^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.

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Franklin Mutual European Fund (continued)

10. Other Derivative Information (continued)

At December 31, 2019, OTC derivative assets, which may be offset against OTC derivative liabilities and collateral received from the counterparty, are as follows:

			Amounts Not Offset in the Statement of Assets and Liabilities
	Gross Amounts of Assets Presented in the Statement of Assets and Liabilities		Financial Instruments Available for Offset			Financial Instruments Collateral Received		Cash Collateral Received		Net Amount (Not less than zero)
Counterparty
BOFA		$   170,133		$  (170,133	)		$  —		$  —		$  —
HSBK		126,285		(126,285	)		—		—		—
SSBT		1,480,379		(1,480,379	)		—		—		—
UBSW		1,493,272		(1,493,272	)		—		—		—
Total		$3,270,069		$(3,270,069	)		$  —		$  —		$  —

At December 31, 2019, OTC derivative liabilities, which may be offset against OTC derivative assets and collateral pledged to the counterparty, are as follows:

			Amounts Not Offset in the Statement of Assets and Liabilities
	Gross Amounts of Liabilities Presented in the Statement of Assets and Liabilities		Financial Instruments Available for Offset			Financial Instruments Collateral Pledgeda,b			Cash Collateral Pledged		Net Amount (Not less than zero)
Counterparty
BOFA		$      724,139		$   (170,133	)		$      (190,864	)		$  —		$   363,142
HSBK		8,347,195		(126,285	)		(8,220,910	)		—		—
SSBT		6,166,187		(1,480,379	)		(3,853,480	)		—		832,328
UBSW		2,069,024		(1,493,272	)		—			—		575,752
Total		$17,306,545		$(3,270,069	)		$(12,265,254	)		$  —		$1,771,222

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

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

See Note 1(c) regarding derivative financial instruments.

See Abbreviations on page 36.

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Franklin Mutual European Fund (continued)

11.  Holdings of 5% Voting Securities of Portfolio Companies

The 1940 Act defines “affiliated companies” to include investments in portfolio companies in which a fund owns 5% or more of the outstanding voting securities. During the year ended December 31, 2019, investments in “affiliated companies” were as follows:

Name of Issuer	Value at Beginning of Year		Purchases		Sales		Realized Gain (Loss)		Net Change in Unrealized Appreciation (Depreciation)		Value at End of Year		Number of Shares Held at End of Year		Dividend Income
Controlled Affiliatesa
Euro Wagon LP (Value is —% of Net Assets)		$ —		$ —		$ —		$ —		$ —		$ —		16,127,149		$ —

^aIssuer in which the Fund owns 25% or more of the outstanding voting securities.

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 billion (Global Credit Facility) which matured on February 7, 2020. This Global Credit Facility provides a source of funds to the Borrowers for temporary and emergency purposes, including the ability to meet future unanticipated or unusually large redemption requests. Effective February 7, 2020, the Borrowers renewed the Global Credit Facility for a one year term, maturing February 5, 2021, for a total of $2 billion.

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 year ended December 31, 2019, the Fund did not use the Global Credit Facility.

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.

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Franklin Mutual European Fund (continued)

13.  Fair Value Measurements (continued)

A summary of inputs used as of December 31, 2019, in valuing the Fund’s assets and liabilities carried at fair value, is as follows:

	Level 1		Level 2		Level 3			Total
Assets:
Investments in Securities:a
Equity Investments:b
Machinery	$	62,679,102	$	9,150,565	$	—		$	71,829,667
All Other Equity Investments		1,274,062,162		—		—	c		1,274,062,162
Short Term Investments		31,032,366		28,300,000		—			59,332,366
Total Investments in Securities	$	1,367,773,630	$	37,450,565	$	—		$	1,405,224,195
Other Financial Instruments:
Forward Exchange Contracts	$	—	$	3,270,069	$	—		$	3,270,069
Liabilities:
Other Financial Instruments:
Futures Contracts	$	4,685,201	$	—	$	—		$	4,685,201
Forward Exchange Contracts		—		17,306,545		—			17,306,545
Total Other Financial Instruments	$	4,685,201	$	17,306,545	$	—		$	21,991,746

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

^bIncludes common and preferred stocks.

^cIncludes securities determined to have no value at December 31, 2019.

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

14.  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 other than those already disclosed in the financial statements.

Abbreviations
Counterparty		Currency		Selected Portfolio
BOFA	Bank of America Corp.	EUR	Euro	ADR	American Depositary Receipt
HSBK	HSBC Bank PLC	GBP	British Pound	FHLB	Federal Home Loan Bank
SSBT	State Street Bank and Trust Co., N.A.	USD	United States Dollar
UBSW	UBS AG

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FRANKLIN MUTUAL SERIES FUNDS

Report of Independent Registered Public Accounting Firm

To the Board of Trustees of Franklin Mutual Series Funds and Shareholders of Franklin Mutual European Fund:

Opinion on the Financial Statements

We have audited the accompanying statement of assets and liabilities of Franklin Mutual European Fund (the “Fund”) (one of the funds constituting Franklin Mutual Series Funds), including the schedule of investments, as of December 31, 2019, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, the financial highlights for each of the five years in the period then ended and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of Franklin Mutual European Fund (one of the funds constituting Franklin Mutual Series Funds) at December 31, 2019, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and its financial highlights for each of the five years in the period then ended, in conformity with U.S. generally accepted accounting principles.

Basis for Opinion

These financial statements are the responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Fund is not required to have, nor were we engaged to perform, an audit of the Fund’s internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Fund’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of December 31, 2019, by correspondence with the custodian and brokers. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

We have served as the auditor of one or more Franklin investment companies since 1987.

Boston, Massachusetts

February 21, 2020

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FRANKLIN MUTUAL SERIES FUNDS

Franklin Mutual European Fund

Tax Information (unaudited)

Under Section 854(b)(1)(B) of the Internal Revenue Code, the Fund hereby reports the maximum amount allowable but no less than $56,246,676 as qualified dividends for purposes of the maximum rate under Section 1(h)(11) of the Internal Revenue Code for the fiscal year ended December 31, 2019. Distributions, including qualified dividend income, paid during calendar year 2019 will be reported to shareholders on Form 1099-DIV by mid-February 2020. Shareholders are advised to check with their tax advisors for information on the treatment of these amounts on their individual income tax returns.

At December 31, 2019, more than 50% of the Fund’s total assets were invested in securities of foreign issuers. In most instances, foreign taxes were withheld from income paid to the Fund on these investments. As shown in the table below, the Fund hereby reports to shareholders the foreign source income and foreign taxes paid, pursuant to Section 853 of the Internal Revenue Code. This written statement will allow shareholders of record on December 19, 2019, to treat their proportionate share of foreign taxes paid by the Fund as having been paid directly by them. The shareholder shall consider these amounts as foreign taxes paid in the tax year in which they receive the Fund distribution.

The following table provides a detailed analysis of foreign tax paid, foreign source income and foreign source qualified dividends as reported by the Fund to shareholders of record.

Class	Foreign Tax Paid Per Share		Foreign Source Income Per Share		Foreign Source Qualified Dividends Per Share
Class Z		$0.0721		$0.7313		$0.6398
Class A		$0.0721		$0.6749		$0.5905
Class C		$0.0721		$0.4937		$0.4320
Class R		$0.0721		$0.6368		$0.5571
Class R6		$0.0721		$0.7495		$0.6557

Foreign Tax Paid Per Share is the amount per share available to you, as a tax credit (assuming you held your shares in the Fund for a minimum of 16 days during the 31-day period beginning 15 days before the ex-dividend date of the Fund’s distribution to which the foreign taxes relate), or, as a tax deduction.

Foreign Source Income Per Share is the amount per share of income dividends attributable to foreign securities held by the Fund, plus any foreign taxes withheld on these dividends. The amounts reported include foreign source qualified dividends that have not been adjusted for the rate differential applicable to such dividend income.¹

Foreign Source Qualified Dividends Per Share is the amount per share of foreign source qualified dividends plus any foreign taxes withheld on these dividends. These amounts represent the portion of the Foreign Source Income Per Share that were derived from qualified foreign securities held by the Fund.¹

At the beginning of each calendar year, shareholders will receive Form 1099-DIV which will include their share of taxes paid and foreign source income distributed during the prior calendar year. The Foreign Source Income reported on Form 1099-DIV has not been adjusted for the rate differential on foreign source qualified dividend income. Shareholders are advised to check with their tax advisors for information on the treatment of these amounts on their individual income tax returns.

¹Qualified dividends are taxed at reduced long term capital gains tax rates. In determining the amount of foreign tax credit that may be applied against the U.S. tax liability of individuals receiving foreign source qualified dividends, adjustments may be required to the foreign tax credit limitation calculation to reflect the rate differential applicable to such dividend income. The rules however permit certain individuals to elect not to apply the rate differential adjustments for capital gains and/or dividends for any taxable year. Please consult your tax advisor and the instructions to Form 1116 for more information.

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Board Members and Officers

The name, year of birth and address of the officers and board members, as well as their affiliations, positions held with the Trust, principal occupations during at least the past five years and number of U.S. registered portfolios overseen in the Franklin Templeton fund complex, are shown below. Generally, each board member serves until that person’s successor is elected and qualified.

Independent Board Members

Name, Year of Birth and Address	Position	Length of Time Served	Number of Portfolios in Fund Complex Overseen by Board Member*	Other Directorships Held During at Least the Past 5 Years
Edward I. Altman, Ph.D. (1941)	Trustee	Since 1987	12	None
c/o Franklin Mutual Advisers, LLC 101 John F. Kennedy Parkway Short Hills, NJ 07078-2716
Principal Occupation During at Least the Past 5 Years: Max L. Heine Professor of Finance, Emeritus and Director of The Credit and Debt Markets Research Program, Salomon Center, Stern School of Business, New York University; editor and author of numerous financial publications; financial consultant; an adviser to numerous financial and publishing organizations; and formerly, Vice Director, Salomon Center, Stern School of Business, New York University.
Ann Torre Bates (1958) c/o Franklin Mutual Advisers, LLC 101 John F. Kennedy Parkway Short Hills, NJ 07078-2716	Trustee and Chairperson	Trustee since 1995 and Chairperson since January 2020	33	Ares Capital Corporation (specialty finance company) (2010-present), United Natural Foods, Inc. (distributor of natural, organic and specialty foods) (2013-present), Allied Capital Corporation (financial services) (2003-2010), SLM Corporation (Sallie Mae) (1997-2014) and Navient Corporation (loan management, servicing and asset recovery) (2014-2016).
Principal Occupation During at Least the Past 5 Years: Director of various companies; and formerly, Executive Vice President and Chief Financial Officer, NHP Incorporated (manager of multifamily housing) (1995-1997); and Vice President and Treasurer, US Airways, Inc. (until 1995).
Burton J. Greenwald (1929) c/o Franklin Mutual Advisers, LLC 101 John F. Kennedy Parkway Short Hills, NJ 07078-2716	Trustee	Since 2002	12	Franklin Templeton Emerging Markets Debt Opportunities Fund PLC (1999-present) and Fiduciary International Ireland Limited (1999-2015).
Principal Occupation During at Least the Past 5 Years: Managing Director, B.J. Greenwald Associates (management consultants to the financial services industry); and formerly, Chairman, Fiduciary Trust International Funds; Executive Vice President, L.F. Rothschild Fund Management, Inc.; President and Director, Merit Mutual Funds; President, Underwriting Division and Director, National Securities & Research Corporation; Governor, Investment Company Institute; and Chairman, ICI Public Information Committee.
Jan Hopkins Trachtman (1947) c/o Franklin Mutual Advisers, LLC 101 John F. Kennedy Parkway Short Hills, NJ 07078-2716	Trustee	Since 2009	12	FinTech Acquisition Corp. III (special purpose fintech acquisition company) (2018-present)
Principal Occupation During at Least the Past 5 Years: President and Founder, The Jan Hopkins Group (communications consulting firm); serves on Alumni Advisory Board of Knight Bagehot Fellowship; and formerly, President, Economic Club of New York (2007-2015); Anchor/Correspondent, CNN Financial News (until 2003); Managing Director and Head of Client Communications, Citigroup Private Bank (until 2005); Off-Air reporter, ABC News’ World News Tonight; and Editor, CBS Network News.

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FRANKLIN MUTUAL SERIES FUNDS

Independent Board Members (continued)

Name, Year of Birth and Address	Position	Length of Time Served	Number of Portfolios in Fund Complex Overseen by Board Member*	Other Directorships Held During at Least the Past 5 Years
Keith Mitchell (1954) c/o Franklin Mutual Advisers, LLC 101 John F. Kennedy Parkway Short Hills, NJ 07078-2716	Trustee	Since 2009	12	None
Principal Occupation During at Least the Past 5 Years:
Director of various boards of asset management firms; and formerly, Managing Member, Mitchell, Hartley & Bechtel Advisers, LLC (formerly, Mitchell Advisers, LLC) (advisory firm) (2003-2015) and Managing Director, Putman Lovell NBF.
David W. Niemiec (1949) c/o Franklin Mutual Advisers, LLC 101 John F. Kennedy Parkway Short Hills, NJ 07078-2716	Trustee	Since 2015	33	Hess Midstream LP (oil and gas midstream infrastructure) (2017-present).
Principal Occupation During at Least the Past 5 Years:
Advisor, Saratoga Partners (private equity fund); and formerly, Managing Director, Saratoga Partners (1998-2001) and SBC Warburg Dillon Read (investment banking) (1997-1998); Vice Chairman, Dillon, Read & Co. Inc. (investment banking) (1991-1997); and Chief Financial Officer, Dillon, Read & Co. Inc. (1982-1997).
Charles Rubens II (1930) c/o Franklin Mutual Advisers, LLC 101 John F. Kennedy Parkway Short Hills, NJ 07078-2716	Trustee	Since 1998	12	None
Principal Occupation During at Least the Past 5 Years:
Private investor and president of non-profit organizations; and formerly, an executive of Time, Inc.; and Trustee of Colorado College.
Robert E. Wade (1946) c/o Franklin Mutual Advisers, LLC 101 John F. Kennedy Parkway Short Hills, NJ 07078-2716	Trustee	Since 1991	33	El Oro Ltd (investments) (2003-2019).
Principal Occupation During at Least the Past 5 Years:
Attorney at law engaged in private practice as a sole practitioner (1972-2008) and member of various boards.
Gregory H. Williams (1943) c/o Franklin Mutual Advisers, LLC 101 John F. Kennedy Parkway Short Hills, NJ 07078-2716	Trustee	Since 2015	12	None
Principal Occupation During at Least the Past 5 Years:
Private investor; Consultant; and formerly, President, University of Cincinnati (2009-2012); President, The City College of New York (2001-2009); Dean, College of Law, Ohio State University (1993-2001); and Associate Vice President, Academic Affairs and Professor of Law, University of Iowa (1977-1993).

Interested Board Members and Officers

Name, Year of Birth and Address	Position	Length of Time Served	Number of Portfolios in Fund Complex Overseen by Board Member*	Other Directorships Held During at Least the Past 5 Years
**Gregory E. Johnson (1961) One Franklin Parkway San Mateo, CA 94403-1906	Trustee	Since 2007	144	None
Principal Occupation During at Least the Past 5 Years: Chairman of the Board, Member – Office of the Chairman, Director and Chief Executive Officer, Franklin Resources, Inc.; officer and/or director or trustee, as the case may be, of some of the other subsidiaries of Franklin Resources, Inc. and of 39 of the investment companies in Franklin Templeton; Vice Chairman, Investment Company Institute; and formerly, President, Franklin Resources, Inc. (1994-2015).

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Interested Board Members and Officers (continued)

Name, Year of Birth and Address	Position	Length of Time Served	Number of Portfolios in Fund Complex Overseen by Board Member*	Other Directorships Held During at Least the Past 5 Years
**Peter A. Langerman (1955) c/o Franklin Mutual Advisers, LLC 101 John F. Kennedy Parkway Short Hills, NJ 07078-2716	Trustee, President, and Chief Executive Officer – Investment Management	Trustee since 2007, President, and Chief Executive Officer – Investment Management since 2005	7	None
Principal Occupation During at Least the Past 5 Years: Chairman of the Board, Chief Executive Officer and President, Franklin Mutual Advisers, LLC; and officer and/or director, as the case may be, of three of the investment companies in Franklin Templeton.
Alison E. Baur (1964) One Franklin Parkway San Mateo, CA 94403-1906	Vice President	Since 2012	Not Applicable	Not Applicable
Principal Occupation During at Least the Past 5 Years: Deputy General Counsel, Franklin Templeton; and officer of some of the other subsidiaries of Franklin Resources, Inc. and of 41 of the investment companies in Franklin Templeton.
Breda M. Beckerle (1958) 280 Park Avenue New York, NY 10017	Interim Chief Compliance Officer	Since January 2020	Not Applicable	Not Applicable
Principal Occupation During at Least the Past 5 Years: Chief Compliance Officer, Fiduciary Investment Management International, Inc., Franklin Advisers, Inc., Franklin Advisory Services, LLC, Franklin Mutual Advisers, LLC, Franklin Templeton Institutional, LLC; and officer of 41 of the investment companies in Franklin Templeton.
Steven J. Gray (1955) One Franklin Parkway San Mateo, CA 94403-1906	Vice President and Secretary	Vice President since 2009 and Secretary since 2005	Not Applicable	Not Applicable
Principal Occupation During at Least the Past 5 Years: Senior Associate General Counsel, Franklin Templeton; Vice President, Franklin Templeton Distributors, Inc. and FASA, LLC; and officer of 41 of the investment companies in Franklin Templeton.
Matthew T. Hinkle (1971) One Franklin Parkway San Mateo, CA 94403-1906	Chief Executive Officer – Finance and Administration	Since 2017	Not Applicable	Not Applicable
Principal Occupation During at Least the Past 5 Years: Senior Vice President, Franklin Templeton Services, LLC; officer of 41 of the investment companies in Franklin Templeton; and formerly, Vice President, Global Tax (2012-April 2017) and Treasurer/Assistant Treasurer, Franklin Templeton (2009-2017).
Robert G. Kubilis (1973) 300 S.E. 2nd Street Fort Lauderdale, FL 33301-1923	Chief Financial Officer, Chief Accounting Officer and Treasurer	Since 2012	Not Applicable	Not Applicable
Principal Occupation During at Least the Past 5 Years: Treasurer, U.S. Fund Administration & Reporting; and officer of 15 of the investment companies in Franklin Templeton.

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FRANKLIN MUTUAL SERIES FUNDS

Interested Board Members and Officers (continued)

Name, Year of Birth and Address	Position	Length of Time Served	Number of Portfolios in Fund Complex Overseen by Board Member*	Other Directorships Held During at Least the Past 5 Years
Robert Lim (1948) One Franklin Parkway San Mateo, CA 94403-1906	Vice President – AML Compliance	Since 2016	Not Applicable	Not Applicable
Principal Occupation During at Least the Past 5 Years: Vice President, Franklin Templeton Companies, LLC; Chief Compliance Officer, Franklin Templeton Distributors, Inc. and Franklin Templeton Investor Services, LLC; and officer of 44 of the investment companies in Franklin Templeton Investments.
Navid J. Tofigh (1972) One Franklin Parkway San Mateo, CA 94403-1906	Vice President	Since 2015	Not Applicable	Not Applicable
Principal Occupation During at Least the Past 5 Years: Associate General Counsel; and officer of 41 of the investment companies in Franklin Templeton.
Craig S. Tyle (1960) One Franklin Parkway San Mateo, CA 94403-1906	Vice President	Since 2005	Not Applicable	Not Applicable
Principal Occupation During at Least the Past 5 Years: General Counsel and Executive Vice President, Franklin Resources, Inc.; and officer of some of the other subsidiaries of Franklin Resources, Inc. and of 41 of the investment companies in Franklin Templeton.
Lori A. Weber (1964) 300 S.E. 2nd Street Fort Lauderdale, FL 33301-1923	Vice President	Since 2011	Not Applicable	Not Applicable
Principal Occupation During at Least the Past 5 Years: Senior Associate General Counsel, Franklin Templeton; Assistant Secretary, Franklin Resources, Inc.; Vice President and Secretary, Templeton Investment Counsel, LLC; and officer of 41 of the investment companies in Franklin Templeton.

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FRANKLIN MUTUAL SERIES FUNDS

*We base the number of portfolios on each separate series of the U.S. registered investment companies within the Franklin Templeton Investments fund complex. These portfolios have a common investment manager or affiliated investment managers.

**Gregory E. Johnson is considered to be an interested person of the Fund under the federal securities laws due to his position as an officer and director of Franklin Resources, Inc. (Resources), which is the parent company of the Fund’s investment manager and distributor. Peter A. Langerman is considered to be an interested person of the Fund under the federal securities laws due to his position as an officer of Franklin Mutual Advisers, LLC, which is the Fund’s investment manager.

Note 1: Officer information is current as of the date of this report. It is possible that after this date, information about officers may change.

The Sarbanes-Oxley Act of 2002 and Rules adopted by the U.S. Securities and Exchange Commission require the Fund to disclose whether the Fund’s Audit Committee includes at least one member who is an audit committee financial expert within the meaning of such Act and Rules. The Fund’s Board has determined that there is at least one such financial expert on the Audit Committee and has designated each of Edward I. Altman, Ph.D., Ann Torre Bates and David W. Niemiec as an audit committee financial expert. The Board believes that Messrs. Altman and Niemiec and Ms. Bates qualify as such an expert in view of their extensive business background and experience. Mr. Altman has served as a member of the Fund Audit Committee since 1987. He currently serves as a Max L. Hine Professor of Finance, Emeritus and Director of The Credit and Debt Markets Research Program, Salomon Center, Stern School of Business, New York University. Ms. Bates has served as a member of the Fund Audit Committee since 1995. She currently serves as a director of Ares Capital Corporation (2010-present) and United Natural Foods, Inc. (2013-present) and was formerly a director of Navient Corporation from 2014 to 2016, SLM Corporation from 1997 to 2014 and Allied Capital Corporation from 2003 to 2010, Executive Vice President and Chief Financial Officer of NHP Incorporated from 1995 to 1997 and Vice President and Treasurer of US Airways, Inc. until 1995. Mr. Niemiec has served as a member of the Fund Audit Committee since 2015, currently serves as an Advisor to Saratoga Partners and was formerly its Managing Director from 1998 to 2001 and serves as a director of Hess Midstream LP (2017-present). Mr. Niemiec was formerly a director of Emeritus Corporation from 1999 to 2010 and OSI Pharmaceuticals, Inc. from 2006 to 2010, Managing Director of SBC Warburg Dillon Read from 1997 to 1998, and was Vice Chairman from 1991 to 1997 and Chief Financial Officer from 1982 to 1997 of Dillon, Read & Co. Inc. As a result of such background and experience, the Board believes that Messrs. Altman and Niemiec and Ms. Bates have each acquired an understanding of generally accepted accounting principles and financial statements, the general application of such principles in connection with the accounting estimates, accruals and reserves, and analyzing and evaluating financial statements that present a breadth and level of complexity of accounting issues generally comparable to those of the Fund, as well as an understanding of internal controls and procedures for financial reporting and an understanding of audit committee functions. Messrs. Altman and Niemiec and Ms. Bates are independent Board members as that term is defined under the applicable U.S. Securities and Exchange Commission Rules and Releases.

The Statement of Additional Information (SAI) includes additional information about the board members and is available, without charge, upon request. Shareholders may call (800) DIAL BEN/342-5236 to request the SAI.

franklintempleton.com Annual Report         43

FRANKLIN MUTUAL SERIES FUNDS

FRANKLIN MUTUAL EUROPEAN FUND

Shareholder Information

Proxy Voting Policies and Procedures

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

Quarterly Statement of Investments

The Trust, on behalf of the Fund, files a complete statement of investments with the U.S. Securities and Exchange Commission for the first and third quarters for each fiscal year 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 the Fund’s financial reports every six months as well as an annual updated summary prospectus (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 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.

44         Annual 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.

	Annual Report and Shareholder Letter Franklin Mutual European Fund
	Investment Manager	Distributor	Shareholder Services
	Franklin Mutual Advisers, LLC	Franklin Templeton Distributors, Inc.	(800) 632-2301 - (Class A, C, R &
		(800) DIAL BEN® / 342-5236	R6)
		franklintempleton.com	(800) 448-FUND - (Class Z)

© 2020 Franklin Templeton Investments. All rights reserved. 478 A 02/20

        Sign up for electronic delivery at franklintempleton.com/edelivery

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

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

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

FRANKLIN TEMPLETON

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

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

Dear Franklin Mutual Quest Fund Shareholder:

As we enter 2020, the factors that lifted stocks to record highs in 2019—accommodative central bank monetary policies and progress on a proposed trade deal between the U.S. and China—continue to be sources of optimism for growth. The near-term threat of recession has eased, with the U.S. economy showing resilience as low unemployment and moderately rising wages have encouraged consumer spending, which has supported the expansion. In contrast, business investment and exports were weak in 2019, but there are nascent signs of increasing industrial activity.

Tariffs, trade battles and geopolitical conflict may continue to dominate headlines in 2020 and account for a disproportionate source of market volatility. The U.S. and China agreed in principle to a phase-one trade agreement in late 2019. However, a re-escalation of the tariff dispute between the world’s two largest economies is not out of the question, as negotiations on a phase-two trade agreement are scheduled to start after the anticipated phase-one signing ceremony in January. There was clarity on Brexit as British voters delivered a resounding election victory to Prime Minister Boris Johnson and his Conservative Party, which should pave the way for a conclusive exit agreement. The terms of U.K. departure, however, must still be finalized. Late in the period, tensions in the Middle East were on the rise, following the death of an American contractor in Iraq in late December and a retaliatory U.S. military strike two days later.

During the period, we took advantage of market turbulence to seek out a larger number of stocks whose risk/reward profiles turned more favorable. Subsequently, we used the market appreciation to exit from or trim select positions that reached or exceeded our estimates of intrinsic value. Market volatility continues to present occasional opportunities in

individual stocks, and in certain sectors, notably those considered to be economically sensitive. We continue to focus on situations in which company-specific actions are more important than economic improvement in driving shareholder value.

Valuation is an essential factor in our analysis, and we always ask ourselves if current and potential investments represent an attractive balance of risk and reward. Amid the all-time highs reached by the Standard & Poor’s^® 500 Index (S&P 500^®) during the period, we maintained our focus on individual securities and the prospects for each business in the context of its valuation and the backdrop of potential political and economic risks.

We continue to adhere to a bottom-up stock selection process that is disciplined, driven by rigorous fundamental analysis, and that attempts to limit downside risk. In our view, actively investing in underappreciated and misunderstood companies with identifiable catalysts for unlocking shareholder value can offer meaningful upside potential and a degree of downside protection in periods of financial market turbulence.

We recognize the important role of financial advisors in today’s markets and encourage investors to continue to seek their advice. Amid changing markets and economic conditions, we are confident investors with a well-diversified portfolio and a patient, long-term outlook will 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 12 months considering the

Not FDIC Insured | May Lose Value | No Bank Guarantee 

franklintempleton.com Not part of the annual report         1

economic environment and other factors. Please remember all securities markets fluctuate, as do mutual fund share prices.

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

Sincerely,

Peter A. Langerman

Chairman, President and Chief Executive Officer

Franklin Mutual Advisers, LLC

This letter reflects our analysis and opinions as of December 31, 2019, unless otherwise indicated. The information is not a complete analysis of every aspect of any market, country, industry, security or fund. Statements of fact are from sources considered reliable.

Contents
Annual Report
Franklin Mutual Quest Fund	3
Performance Summary	9
Your Fund’s Expenses	12
Financial Highlights and Statement of Investments	13
Financial Statements	25
Notes to Financial Statements	30
Report of Independent Registered Public Accounting Firm	45
Tax Information	46
Board Members and Officers	47
Shareholder Information	52
Visit franklintempleton.com for fund updates, to access your account, or to find helpful financial planning tools.

2         Not part of the annual report franklintempleton.com

ANNUAL REPORT

Franklin Mutual Quest Fund

This annual report for Franklin Mutual Quest Fund covers the fiscal year ended December 31, 2019.

Your Fund’s Goal and Main Investments

The Fund seeks capital appreciation, which may occasionally be short term, with income as a secondary goal. Under normal market conditions, the Fund invests substantially to primarily in equity securities of U.S. and foreign companies that we believe are available at market prices less than their intrinsic value. The equity securities in which the Fund invests are primarily common stock, with a current focus on mid- and large-cap companies. To a lesser extent, the Fund also invests in merger arbitrage securities and the debt and equity of distressed companies. The Fund may invest a substantial portion, potentially up to 100% of its assets, in foreign securities, which may include sovereign debt and participations in foreign government debt. The Geographic Composition bar chart on this page lists the leading countries where the Fund invests.

Performance Overview

The Fund’s Class Z shares posted a +12.40% cumulative total return for the 12 months ended December 31, 2019. In comparison, the Fund’s benchmark, the MSCI World Index (USD), which tracks stock performance in global developed markets, posted a total return of +28.40%.¹ Also for comparison, the Fund’s secondary benchmark, the Bloomberg Barclays U.S. Corporate High Yield Index, which measures the U.S. corporate market of non-investment grade, fixed-rate corporate bonds, defined as the middle or lower ratings of Moody’s, Fitch and Standard & Poor’s, posted a +14.32% total return.¹ You can find more of the Fund’s performance data in the Performance Summary beginning on page 9.

Geographic Composition*

Based on Total Net Assets as of 12/31/19

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

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 stocks, as measured by the MSCI All Country World Index (USD), posted a +27.30% total return during the 12 months ended December 31, 2019.1 Although global economic growth slowed from 2018, interest-rate cuts from many central banks and the easing of trade tensions near period-end contributed to the generally positive environment for equities worldwide. Reflecting investor optimism and slowing but resilient economic growth, stocks advanced in every major region of the globe.

1. 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.

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 18.

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In the U.S., solid economic growth also supported equities, as healthy consumer spending and a strong labor market kept the economy afloat. The unemployment rate fell during the year, reaching 3.5% in September, November and December 2019, the lowest recorded unemployment rate in 50 years.² Wages also grew, albeit at a moderate pace, and inflation remained persistently low. In addition, deficit spending by the U.S. government boosted current growth at the expense of long-term debt. Despite the strength in the consumer sector, some parts of the economy struggled, particularly heavy industry. Annual industrial production contracted late in the reporting period, manufacturing output stalled and capital spending declined.

The U.S. Federal Reserve (Fed) provided a substantial boost to equity markets early in the reporting period as it shifted to a more accommodative monetary policy. In January 2019, the Fed signaled the end of its tightening cycle and cut the federal funds rate three times thereafter, lowering it to a range of 1.50%–1.75%. Stocks responded positively to the interest-rate cuts and gained further in December 2019 after the Fed indicated it would likely leave interest rates unchanged in 2020.

Growth slowed overall in the eurozone, particularly in Germany and Italy. Germany, which is heavily reliant on exports, was adversely affected by the trade conflict between the U.S. and China and the resulting slowdown in global trade. In Italy, political uncertainty and budget concerns caused the country’s annual gross domestic product (GDP) growth to stall in 2019’s first quarter before modestly improving in the second and third quarters. Despite sluggish economic conditions, European developed market equities, as measured by the MSCI Europe Index-NR (Local Currency), posted a +23.75% total return for the 12-month period, as easing trade tensions buoyed investor optimism and an electoral victory by the Conservative Party in the U.K. alleviated uncertainty surrounding Brexit.³ Although the European Central Bank left its headline refinancing rate unchanged, it lowered the deposit rate and restarted its bond-buying stimulus program, further supporting stocks.

Economic growth in Asia was relatively solid overall, despite slowdowns in several large emerging market countries, such as China and India. Japan’s economy grew amid the Bank of Japan’s sizable stimulus program. The trade war between the U.S. and China provided the backdrop for Asian stocks, which rose and fell in sync with investor sentiment regarding

a trade deal. A phase one trade agreement between the two countries reached in December 2019 propelled Asian developed and emerging market stocks, which ultimately ended with a +19.23% total return over the 12-month period, as measured by the MSCI All Country Asia Index (USD).⁴

Emerging market stocks overall experienced several sharp selloffs and subsequent rebounds throughout the reporting period before ending with gains. In aggregate, economic growth slowed somewhat from 2018 but remained solid, although there was some variation among individual countries. Many central banks in emerging markets cut interest rates throughout the reporting period, which, along with resilient GDP growth, provided a supportive environment for equities. Russian stocks posted the highest returns among emerging markets as the threat of further sanctions receded and a solid fiscal environment reassured investors. Overall, global emerging markets, as measured by the MSCI Emerging Markets Index (USD), posted a +18.90% total return for the 12-month period.¹

Investment Strategy

At Franklin Mutual Series, we are committed to our distinctive value approach to investing, which we believe can generate above-average risk-adjusted returns over time for our shareholders. Our major investment strategy is investing in undervalued stocks. When selecting undervalued equities, we are attracted to what we believe are fundamentally strong companies with healthy balance sheets, high-quality assets, substantial free cash flow and shareholder-oriented management teams and whose stocks are trading at discounts to our assessment of the companies’ intrinsic or business value. We also look for asset-rich companies whose shares may be trading at depressed levels due to concerns over short-term earnings disappointments, litigation, management strategy or other perceived negatives. This strict value approach is not only intended to improve the likelihood of capital appreciation, but also reduces the risk of substantial declines, in our opinion. While the vast majority of our undervalued equity investments are made in publicly traded companies globally, we may invest occasionally in privately held companies as well.

To a lesser extent, we complement this more traditional investment strategy with two others. One is distressed investing, a highly specialized field that has proven quite profitable during certain periods over the years. Distressed investing is complex and can take many forms. The most

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

3. Source: Morningstar. Net Returns (NR) include income net of withholding when dividends are paid.

4. Source: MSCI.

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common distressed investment the Fund undertakes is the purchase of financially troubled or bankrupt companies’ debt at a substantial discount to face value. After the financially distressed company is reorganized, often in bankruptcy court, the old debt is typically replaced with new securities issued by the financially stronger company.

The other piece of our investment strategy is participating in arbitrage situations, another highly specialized field. When companies announce proposed mergers or takeovers, commonly referred to as deals, the target company may trade at a discount to the bid it ultimately accepts. One form of arbitrage involves purchasing the target company’s stock when it is trading below the value we believe it would receive in a deal. In keeping with our commitment to a relatively conservative investment approach, we typically focus our arbitrage efforts on announced deals, and avoid rumored deals or other situations we consider relatively risky. The current percentages of the Fund’s assets devoted to these investment strategies are listed in the Asset Allocation bar chart on this page. In addition, it is our practice to hedge the Fund’s currency exposure when we deem it advantageous for our shareholders.

What is meant by “hedge”?

To hedge an investment is to take a position intended to offset potential losses that may be incurred by a companion financial instrument. Hedging an investment may also offset potential gains.

Manager’s Discussion

The end of a decade is a natural time for reflection about the years that have just passed and to look ahead to what the next 10 might have in store. Across Wall Street, we see many prognostications, and while we are not in the forecasting business, we do allow ourselves to think about investment opportunities over such an extended time period. But experience has taught us that while trying to predict the exact course of markets and/or economic and political events that will drive them may be fun, it is not all that useful.

As 2010 began, the global economy was still recovering from the Global Financial Crisis. The U.S. government owned significant portions of the banking and automotive sectors. The Fed had already started quantitative easing (QE), with QE 2 and QE 3 still to come. In Europe, concerns about

Asset Allocation*

Based on Total Net Assets as of 12/31/19

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

Greece’s finances were emerging, and in China the effects of 2009’s massive stimulus programs were starting to take hold.

Over the subsequent years we saw ongoing, global QE, culminating in trillions of dollars of debt yielding negative interest rates. The European Union (EU) was in continuous upheaval, with Greece threatening to leave, but eventually staying in the eurozone; the U.K. pursuing and achieving Brexit; and ongoing strain between core members Germany, France, Italy and Spain. In the U.S., average annual economic growth was restrained and finished the decade below 2%, trailing the minimum 3% expectation of prior decades. Strong corporate profits and lower corporate tax rates were bright spots.

Equity markets delivered a very good decade—one of the best in history—with the MSCI World Index (USD) and the S&P 500 posting average annual total returns of +10.08% and +13.56%, respectively.¹ During the decade, Franklin Mutual Quest Fund, Class Z posted an average annual total return of +6.91%, a solid absolute return that nonetheless lagged the MSCI World Index (USD), its benchmark. The Fund’s value strategy, which seeks to identify mispriced securities and limit downside risk, was out of favor in an environment that generally encouraged investors to assume more risk. Conversely, the Fund’s Class Z shares posted an average annual total return of +7.92% in the prior decade, compared with +0.23% for the MSCI World Index (USD).⁵ Our active investment approach focusing on individual opportunities was more conducive to the prior decade’s greater volatility.

5. Source: Morningstar.

The index is unmanaged and includes reinvestment of any income or distributions. It does not reflect any fees, expenses or sales charges. One cannot invest directly in an index, and an index is not representative of the Fund’s portfolio.

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

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In our view, going forward we expect more political and monetary uncertainty and economic growth in unexpected places. Corporate profits will have good years and bad years. Some industries will be massively disrupted, while others will find a way to adjust and prosper, even within the context of artificial intelligence and machine learning. Recent events, such as the coronavirus outbreak, have caused, and may continue to cause, uncertainty and volatility in the Chinese economy, potentially leading to vulnerability in 2020 global growth expectations. As for investment positioning, we intend to avoid forecasts that would lead us to make the Fund’s success dependent on a specific set of outcomes. Rather, we will seek to continue with our time-tested value process and complement it with new tools that enhance our security evaluation and selection process. To that end, we have integrated risk and quantitative portfolio analysis tools that provide us with fresh insights about performance, and help us identify companies and securities that we believe satisfy our investors’ goals of risk-adjusted returns that are not wholly dependent on any one economic or political scenario.

Fund Performance

Turning to Fund performance, top positive contributors included British American Tobacco, Charter Communications and Voya Financial. British American Tobacco and Voya Financial are listed among the Fund’s largest positions in the Top 10 Equity Holdings table on page 7.

Shares of U.K.-based British American Tobacco rebounded in November, lifted by management’s guidance that revenue and profit would be in the upper half of its target range. Sentiment also improved following decisions by U.S. regulators that reversed previous stances on nicotine. The U.S. Department of Health and Human Services dropped a proposal to cut the level of nicotine in cigarettes, and the U.S. Food and Drug Administration removed nicotine from its regulatory agenda.

Shares of U.S.-based cable operator Charter Communications surged after the company reported operating and financial results that were broadly ahead of consensus estimates. Capital expenditures were lower than expected and drove free cash flow, which was used during the period to buy back $3.1 billion of the company’s stock. The market was anticipating share repurchases totaling $2.25 billion. Revenue accelerated 5.1% compared with consensus forecasts of 4.5%. The increased revenue, however, did not reflect the impact of a broad-based increase in per subscriber fees implemented during the period, which could drive revenue growth and margin expansion in 2020. According to the company’s management, there has not

Top 10 Sectors/Industries

Based on Equity Securities as of 12/31/19

	% of Total Net Assets
Insurance		9.6%
Oil, Gas & Consumable Fuels		8.6%
Tobacco		7.8%
Media		7.8%
Pharmaceuticals		6.3%
Communications Equipment		3.5%
Diversified Financial Services		3.3%
Software		3.2%
Interactive Media & Services		2.4%
Aerospace & Defense		2.3%

been a meaningful decrease in customers as a result of the higher per subscriber fees.

Shares of U.S.-based investment and insurance company Voya Financial rallied in September after reporting earnings that beat consensus expectations, and the company expanded its stock buyback program. Voya’s shares also surged in December after the company announced that it was selling its individual life and other non-retirement annuities businesses to Resolution Life Group Holdings (not a Fund holding) for $1.7 billion. Voya’s management said it expects to use $600 million to $800 million of the proceeds to pay down debt and between $900 million and $1.1 billion for stock repurchases in 2020.

During the period under review, Fund investments that detracted from performance included Baidu, Envision Healthcare and Occidental Petroleum.

Shares of China-based internet search firm Baidu slid after the company posted a 2019 first-quarter loss, attributable to a weaker Chinese economy and increased governmental regulation that hindered advertising sales growth. Earnings improved in subsequent quarters, but the overhang from the U.S.-China trade dispute hampered the stock price. Management continues to invest heavily in its video-streaming platform and other initiatives, such as artificial intelligence. We believe these investments may help Baidu further diversify its business into new growth markets.

Our bond holdings of Envision Healthcare, a U.S.-based physician and ambulatory services company, declined in value following a rating agency downgrade of its senior secured and senior unsecured debt to B and CCC+, respectively. The move by Standard & Poor’s (S&P) follows a one-notch downgrade across the company’s ratings by Moody’s in September that dropped the unsecured rating to

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Caa2. S&P cited lower-than-expected cash flow as reason for the downgrade. Global investment firm KKR acquired Envision Healthcare in 2018 through a leveraged buyout. We maintain a position in Envision as it continues to offer an attractive yield.

The stock of Occidental Petroleum, a U.S.-based petroleum and chemical products company, traded lower in 2019 as investors struggled to accept its acquisition of Anadarko Petroleum, during a period in which energy stocks were under pressure from falling crude oil prices. We think the Anadarko deal should be highly beneficial to the company’s per share metrics, although the acquisition will make the company more dependent on oil prices, while significantly weakening its balance sheet. The acquired Permian Basin assets complement Occidental’s existing portfolio, and the considerable free cash flow generated from Anadarko’s Gulf of Mexico operations can help reduce debt and support its dividend. Occidental’s management is strengthening the company’s financial position by disposing of non-core assets, which is key to restoring investor confidence, in our view.

During the period, the Fund held currency forwards and futures seeking to hedge most of the currency risk of the portfolio’s non-U.S. dollar investments. The hedges had a modestly positive overall impact on the Fund’s performance.

What is a currency forward?

A currency forward is a direct agreement between the Fund and a counterparty to buy or sell a foreign currency in exchange for another currency at a specific exchange rate on a future date.

What is a future?

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

As fellow shareholders, we found recent relative performance disappointing, but it is not uncommon for our strategy to lag the equity markets at times. We remain committed to our disciplined, value investment approach as we seek to generate attractive, long-term, risk-adjusted returns for shareholders.

Top 10 Equity Holdings

12/31/19

Company Sector/Industry, Country	% of Total Net Assets
British American Tobacco PLC Tobacco, U.K.		4.3%
Sorenson Communications LLC Communications Equipment, U.S.		3.5%
Eli Lilly & Co. Pharmaceuticals, U.S.		2.4%
Baidu Inc. Interactive Media & Services, China		2.4%
Voya Financial Inc. Diversified Financial Services, U.S.		2.3%
Discovery Inc. Media, U.S.		2.3%
Everest Re Group Ltd. Insurance, U.S.		2.3%
JXTG Holdings Inc. Oil, Gas & Consumable Fuels, Japan		2.1%
Liberty Global PLC Media, U.K.		2.1%
Imperial Brands PLC Tobacco, U.K.		2.0%

Thank you for your participation in Franklin Mutual Quest Fund. We look forward to continuing to serve your investment needs.

	Shawn M. Tumulty Co-Portfolio Manager
	Keith Luh, CFA Co-Portfolio Manager

CFA^® is a trademark owned by CFA Institute.

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The foregoing information reflects our analysis, opinions and portfolio holdings as of December 31, 2019, the end of the reporting period. The way we implement our main investment strategies and the resulting portfolio holdings may change depending on factors such as market and economic conditions. These opinions may not be relied upon as investment advice or an offer for a particular security. The information is not a complete analysis of every aspect of any market, country, industry, security or the Fund. Statements of fact are from sources considered reliable, but the investment manager makes no representation or warranty as to their completeness or accuracy. Although historical performance is no guarantee of future results, these insights may help you understand our investment management philosophy.

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Performance Summary as of December 31, 2019

The performance table and graphs do 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 12/31/19

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. For other share classes, visit franklintempleton.com.

Share Class	Cumulative  Total Return1	Average Annual  Total Return2
Z
1-Year	+12.40%	+12.40%
5-Year	+22.93%	+4.21%
10-Year	+94.98%	+6.91%
A3
1-Year	+12.14%	+5.99%
5-Year	+21.40%	+2.79%
10-Year	+89.74%	+6.01%

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

See page 11 for Performance Summary footnotes.

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PERFORMANCE SUMMARY

Total Return Index Comparison for a Hypothetical $10,000 Investment

Total return represents the change in value of an investment over the periods shown. It includes any applicable maximum sales charge, Fund expenses, account fees and reinvested distributions. The unmanaged indexes include reinvestment of any income or distributions. They differ from the Fund in composition and do not pay management fees or expenses. One cannot invest directly in an index.

Class Z (1/1/10–12/31/19)

Class A (1/1/10–12/31/19)

See page 11 for Performance Summary footnotes.

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PERFORMANCE SUMMARY

Distributions (1/1/19–12/31/19)

Share Class	Net Investment Income
Z		$0.4954
A		$0.4582
C		$0.3334
R		$0.4192
R6		$0.5048

Total Annual Operating Expenses⁵

Share Class
Z	0.78	%
A	1.03	%

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. Value securities may not increase in price as anticipated or may decline further in value. Special risks are associated with foreign investing, including currency fluctuations, economic instability and political developments. Because the Fund may invest its assets in companies in a specific region, including Europe, it is subject to greater risks of adverse developments in that region and/or the surrounding regions than a fund that is more broadly diversified geographically. Current political and financial uncertainty surrounding the European Union may increase market volatility and the economic risk of investing in companies in Europe. Smaller-company stocks have exhibited greater price volatility than larger-company stocks, particularly over the short term. The Fund’s investments in companies engaged in mergers, reorganizations or liquidations also involve special risks as pending deals may not be completed on time or on favorable terms. The Fund may invest in lower-rated bonds, which entail higher credit risk. The Fund’s prospectus also includes a description of the main investment risks.

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

2. 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.

3. 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%..

4. Source: Morningstar. The MSCI World Index (USD) is a free float-adjusted, market capitalization-weighted index designed to measure equity market performance in global developed markets. The Bloomberg Barclays U.S. Corporate High Yield Index measures the U.S. corporate market of non-investment grade, fixed-rate corporate bonds, defined as the middle or lower ratings of Moody’s, Fitch and Standard & Poor’s (Ba1/BB+/BB+).

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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Your Fund’s Expenses

As a Fund shareholder, you can incur two types of costs: (1) transaction costs, including sales charges (loads) on Fund purchases and redemptions; and (2) ongoing Fund costs, including management fees, distribution and service (12b-1) fees, and other Fund expenses. All mutual funds have ongoing costs, sometimes referred to as operating expenses. The table below shows ongoing costs of investing in the Fund and can help you understand these costs and compare them with those of other mutual funds. The table assumes a $1,000 investment held for the six months indicated.

Actual Fund Expenses

The table below provides information about actual account values and actual expenses in the columns under the heading “Actual.” In these columns the Fund’s actual return, which includes the effect of Fund expenses, is used to calculate the “Ending Account Value” for each class of shares. You can estimate the expenses you paid during the period by following these steps (of course, your account value and expenses will differ from those in this illustration): Divide your account value by $1,000 (if your account had an $8,600 value, then $8,600 ÷ $1,000 = 8.6). Then multiply the result by the number in the row for your class of shares under the headings “Actual” and “Expenses Paid During Period” (if Actual Expenses Paid During Period were $7.50, then 8.6 x $7.50 = $64.50). In this illustration, the actual expenses paid this period are $64.50.

Hypothetical Example for Comparison with Other Funds

Under the heading “Hypothetical” in the table, information is provided about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. This information may not be used to estimate the actual ending account balance or expenses you paid for the period, but it can help you compare ongoing costs of investing in the Fund with those of other funds. To do so, compare this 5% hypothetical example for the class of shares you hold with the 5% hypothetical examples that appear in the shareholder reports of other funds.

Please note that expenses shown in the table are meant to highlight ongoing costs and do not reflect any transactional costs. Therefore, information under the heading “Hypothetical” is useful in comparing ongoing costs only, and will not help you compare total costs of owning different funds. In addition, if transactional costs were included, your total costs would have been higher.

		Actual (actual return after expenses)		Hypothetical (5% annual return before expenses)
Share Class	Beginning Account Value 7/1/19	Ending Account Value 12/31/19	Expenses Paid During Period 7/1/19–12/31/191,2	Ending Account Value 12/31/19	Expenses Paid During Period 7/1/19–12/31/191,2	Net Annualized Expense Ratio2
Z	$1,000	$1,044.20	$4.02	$1,021.27	$3.97	0.78%
A	$1,000	$1,042.90	$5.30	$1,020.01	$5.24	1.03%
C	$1,000	$1,039.40	$9.15	$1,016.23	$9.05	1.78%
R	$1,000	$1,041.50	$6.59	$1,018.75	$6.51	1.28%
R6	$1,000	$1,044.10	$3.71	$1,021.58	$3.67	0.72%

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 184/365 to reflect the one-half year period.

2. Reflects expenses after fee waivers and expense reimbursements, for Class R6.

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Financial Highlights

Franklin Mutual Quest Fund

			Year Ended December 31,
	2019		2018		2017		2016		2015
Class Z
Per share operating performance (for a share outstanding throughout the year)
Net asset value, beginning of year		$12.95		$15.83		$15.52		$14.47		$16.21
Income from investment operationsa:
Net investment incomeb		0.45		0.48		0.58		0.87c		0.54
Net realized and unrealized gains (losses)		1.16		(1.58)		0.49		1.47		(1.45)
Total from investment operations		1.61		(1.10)		1.07		2.34		(0.91)
Less distributions from:
Net investment income		(0.50)		(0.58)		(0.63)		(1.01)		(0.68)
Net realized gains		—		(1.20)		(0.13)		(0.28)		(0.15)
Total distributions		(0.50)		(1.78)		(0.76)		(1.29)		(0.83)
Net asset value, end of year		$14.06		$12.95		$15.83		$15.52		$14.47
Total return		12.40%		(6.85)%		6.92%		16.26%		(5.55)%
Ratios to average net assets
Expensesd,e		0.78%		0.78%		0.79%		0.79%f		0.82%f
Expenses incurred in connection with securities sold short		0.02%		—%g		—%		0.01%		0.03%
Net investment income		3.22%		2.96%		3.65%		5.74%c		3.35%
Supplemental data
Net assets, end of year (000’s)		$3,042,387		$3,054,792		$3,667,351		$3,683,095		$3,577,696
Portfolio turnover rate		60.96%		115.52%		32.90%		44.04%		30.51%

^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.

^cNet investment income per share includes approximately $0.05 per share related to income received in the form of special dividends in connection with certain Fund holdings. Excluding this amount, the ratio of net investment income to average net assets would have been 5.42%.

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

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

^fBenefit of waiver and payments by affiliates rounds to less than 0.01%.

^gRounds to less than 0.01%.

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FINANCIAL HIGHLIGHTS

Franklin Mutual Quest Fund (continued)

				Year Ended December 31,
	2019			2018			2017			2016			2015
Class A
Per share operating performance (for a share outstanding throughout the year)
Net asset value, beginning of year		$12.75			$15.60			$15.32			$14.29			$16.02
Income from investment operationsa:
Net investment incomeb		0.41			0.43			0.53			0.83c			0.49
Net realized and unrealized gains (losses)		1.14			(1.54)			0.46			1.45			(1.43	)
Total from investment operations		1.55			(1.11)			0.99			2.28			(0.94	)
Less distributions from:
Net investment income		(0.46	)		(0.54	)		(0.58	)		(0.97	)		(0.64	)
Net realized gains		—			(1.20	)		(0.13	)		(0.28	)		(0.15	)
Total distributions		(0.46)			(1.74)			(0.71)			(1.25)			(0.79	)
Net asset value, end of year		$13.84			$12.75			$15.60			$15.32			$14.29
Total returnd		12.14%			(7.00)%			6.54%			16.04%			(5.85)%
Ratios to average net assets
Expensese,f		1.03%			1.03%			1.04%			1.04%	g		1.10%	g
Expenses incurred in connection with securities sold short		0.02%			—%	h		—%			0.01%			0.03%
Net investment income		2.97%			2.71%			3.40%			5.49%c			3.07%
Supplemental data
Net assets, end of year (000’s)		$1,035,699			$1,067,382			$1,153,870			$1,216,085			$1,203,508
Portfolio turnover rate		60.96%			115.52%			32.90%			44.04%			30.51%

^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.

^cNet investment income per share includes approximately $0.05 per share related to income received in the form of special dividends in connection with certain Fund holdings. Excluding this amount, the ratio of net investment income to average net assets would have been 5.17%.

^dTotal return does not reflect sales commissions or contingent deferred sales charges, if applicable.

^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(e).

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

^gBenefit of waiver and payments by affiliates rounds to less than 0.01%.

^hRounds to less than 0.01%.

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

FRANKLIN MUTUAL SERIES FUNDS

FINANCIAL HIGHLIGHTS

Franklin Mutual Quest Fund (continued)

			Year Ended December 31,
	2019		2018			2017		2016			2015
Class C
Per share operating performance (for a share outstanding throughout the year)
Net asset value, beginning of year		$12.64		$15.35			$15.06		$14.08			$15.78
Income from investment operationsa:
Net investment incomeb		0.30		0.29			0.41		0.70c			0.36
Net realized and unrealized gains (losses)		1.12		(1.49)			0.47		1.41			(1.39	)
Total from investment operations		1.42		(1.20)			0.88		2.11			(1.03	)
Less distributions from:
Net investment income		(0.33)		(0.31)			(0.46)		(0.85)			(0.52	)
Net realized gains		—		(1.20)			(0.13)		(0.28)			(0.15	)
Total distributions		(0.33)		(1.51)			(0.59)		(1.13)			(0.67	)
Net asset value, end of year		$13.73		$12.64			$15.35		$15.06			$14.08
Total returnd		11.26%		(7.77)%			5.89%		15.10%			(6.49)%
Ratios to average net assets
Expensese,f		1.78%		1.78%			1.79%		1.79%	g		1.82%	g
Expenses incurred in connection with securities sold short		0.02%		—%	h		—%		0.01%			0.03%
Net investment income		2.22%		1.96%			2.65%		4.74%c			2.35%
Supplemental data
Net assets, end of year (000’s)		$112,751		$141,619			$309,160		$343,624			$337,974
Portfolio turnover rate		60.96%		115.52%			32.90%		44.04%			30.51%

^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.

^cNet investment income per share includes approximately $0.05 per share related to income received in the form of special dividends in connection with certain Fund holdings. Excluding this amount, the ratio of net investment income to average net assets would have been 4.42%.

^dTotal return does not reflect sales commissions or contingent deferred sales charges, if applicable.

^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(e).

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

^gBenefit of waiver and payments by affiliates rounds to less than 0.01%.

^hRounds to less than 0.01%.

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

FRANKLIN MUTUAL SERIES FUNDS

FINANCIAL HIGHLIGHTS

Franklin Mutual Quest Fund (continued)

	Year Ended December 31,
	2019			2018			2017			2016			2015
Class R
Per share operating performance (for a share outstanding throughout the year)
Net asset value, beginning of year		$12.54			$15.40			$15.14			$14.14			$15.87
Income from investment operationsa:
Net investment incomeb		0.37			0.39			0.50			0.78	c		0.44
Net realized and unrealized gains (losses)		1.12			(1.53	)		0.46			1.43			(1.40	)
Total from investment operations		1.49			(1.14	)		0.96			2.21			(0.96	)
Less distributions from:
Net investment income		(0.42	)		(0.52	)		(0.57	)		(0.93	)		(0.62	)
Net realized gains		—			(1.20	)		(0.13	)		(0.28	)		(0.15	)
Total distributions		(0.42	)		(1.72	)		(0.70	)		(1.21	)		(0.77	)
Net asset value, end of year		$13.61			$12.54			$15.40			$15.14			$14.14
Total return		11.88%			(7.31)%			6.38%			15.69%			(6.03)%
Ratios to average net assets
Expensesd,e		1.28%			1.28%			1.29%			1.29%	f		1.32%	f
Expenses incurred in connection with securities sold short		0.02%			—%	g		—%			0.01%			0.03%
Net investment income		2.72%			2.46%			3.15%			5.24%	c		2.85%
Supplemental data
Net assets, end of year (000’s)		$3,415			$2,929			$1,774			$880			$898
Portfolio turnover rate		60.96%			115.52%			32.90%			44.04%			30.51%

^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.

^cNet investment income per share includes approximately $0.05 per share related to income received in the form of special dividends in connection with certain Fund holdings. Excluding this amount, the ratio of net investment income to average net assets would have been 4.92%.

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

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

^fBenefit of waiver and payments by affiliates rounds to less than 0.01%.

^gRounds to less than 0.01%.

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

FRANKLIN MUTUAL SERIES FUNDS

FINANCIAL HIGHLIGHTS

Franklin Mutual Quest Fund (continued)

				Year Ended December 31,
	2019			2018			2017			2016			2015
Class R6
Per share operating performance (for a share outstanding throughout the year)
Net asset value, beginning of year		$12.94			$15.81			$15.51			$14.45			$16.19
Income from investment operationsa:
Net investment incomeb		0.46			0.49			0.64			0.88	c		0.55
Net realized and unrealized gains (losses)		1.15			(1.57	)		0.43			1.48			(1.44	)
Total from investment operations		1.61			(1.08	)		1.07			2.36			(0.89	)
Less distributions from:
Net investment income		(0.50	)		(0.59	)		(0.64	)		(1.02	)		(0.70	)
Net realized gains		—			(1.20	)		(0.13	)		(0.28	)		(0.15	)
Total distributions		(0.50	)		(1.79	)		(0.77	)		(1.30	)		(0.85	)
Net asset value, end of year		$14.05			$12.94			$15.81			$15.51			$14.45
Total return		12.40%			(6.73	)%		6.94%			16.44%			(5.54)%
Ratios to average net assets
Expenses before waiver and payments by affiliatesd		0.74%			0.74%			0.72%			0.71%			0.74%
Expenses net of waiver and payments by affiliatesd,e		0.72%			0.72%			0.72%			0.71%	f		0.74%	f
Expenses incurred in connection with securities sold short		0.02%			—%	g		—%			0.01%			0.03%
Net investment income		3.28%			3.02%			3.72%			5.82%	c		3.43%
Supplemental data
Net assets, end of year (000’s)		$107,723			$116,012			$123,863			$52,277			$41,408
Portfolio turnover rate		60.96%			115.52%			32.90%			44.04%			30.51%

^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.

^cNet investment income per share includes approximately $0.05 per share related to income received in the form of special dividends in connection with certain Fund holdings. Excluding this amount, the ratio of net investment income to average net assets would have been 5.50%.

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

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

^fBenefit of waiver and payments by affiliates rounds to less than 0.01%.

^gRounds to less than 0.01%.

franklintempleton.com The accompanying notes are an integral part of these financial statements.  |  Annual Report         17

FRANKLIN MUTUAL SERIES FUNDS

Statement of Investments, December 31, 2019

Franklin Mutual Quest Fund

	Country		Shares/ Rights/ Units/ Warrants		Value
Common Stocks and Other Equity Interests 67.0%
Aerospace & Defense 2.3%
BAE Systems PLC		United Kingdom		7,240,981	$	54,166,111
Huntington Ingalls Industries Inc.		United States		186,900		46,889,472
						101,055,583
Auto Components 0.0%†
a,b,c International Automotive Components Group Brazil LLC		Brazil		2,548,299		92,503
Banks 0.5%
BNP Paribas SA		France		180,324		10,683,512
Wells Fargo & Co.		United States		189,200		10,178,960
						20,862,472
Chemicals 0.4%
d Advanced Emissions Solutions Inc.		United States		1,724,209		18,104,195
Commercial Services & Supplies 0.7%
a Advanced Disposal Services Inc.		United States		865,200		28,439,124
Communications Equipment 3.5%
a,b,c,d Sorenson Communications LLC, Membership Interests		United States		224,279		152,057,986
Diversified Consumer Services 0.0%
a,b Affinion Group Holdings Inc., wts., 4/10/24		United States		48,381		—
Diversified Financial Services 3.3%
a M&G PLC		United Kingdom		13,937,492		43,785,960
Voya Financial Inc.		United States		1,638,886		99,939,268
						143,725,228
Diversified Telecommunication Services 1.0%
AT&T Inc.		United States		720,975		28,175,703
a Intelsat SA		United States		1,002,495		7,047,540
a Zayo Group Holdings Inc.		United States		199,800		6,923,070
						42,146,313
Energy Equipment & Services 0.1%
Baker Hughes Co., A		United States		162,400		4,162,312
Food Products 1.2%
Bunge Ltd.		United States		627,878		36,134,379
Conagra Brands Inc.		United States		509,612		17,449,115
						53,583,494
Health Care Equipment & Supplies 1.2%
Envista Holdings Corp.		United States		721,049		21,371,893
Medtronic PLC		United States		250,543		28,424,103
						49,795,996
Independent Power & Renewable Electricity Producers 1.3%
Vistra Energy Corp.		United States		2,401,437		55,209,037

18         Annual Report franklintempleton.com

FRANKLIN MUTUAL SERIES FUNDS

STATEMENT OF INVESTMENTS

Franklin Mutual Quest Fund (continued)

	Country		Shares/ Rights/ Units/ Warrants		Value
Common Stocks and Other Equity Interests (continued)
Insurance 9.6%
ASR Nederland NV		Netherlands		1,510,686	$	56,517,139
a Brighthouse Financial Inc.		United States		1,987,579		77,972,724
Everest Re Group Ltd.		United States		353,566		97,881,211
The Hartford Financial Services Group Inc.		United States		1,044,190		63,455,426
Lancashire Holdings Ltd.		United Kingdom		45,105		458,201
NN Group NV		Netherlands		1,223,210		46,393,223
RSA Insurance Group PLC		United Kingdom		9,614,692		72,024,514
						414,702,438
Interactive Media & Services 2.4%
a Baidu Inc., ADR		China		805,393		101,801,675
IT Services 1.6%
Cognizant Technology Solutions Corp., A		United States		1,124,900		69,766,298
Machinery 1.6%
a Navistar International Corp.		United States		2,355,409		68,165,537
Media 7.8%
a Charter Communications Inc., A		United States		93,270		45,243,412
a Clear Channel Outdoor Holdings Inc.		United States		16,963,460		48,515,496
a Discovery Inc., C		United States		3,223,884		98,296,223
Gannett Co. Inc.		United States		2,768,935		17,665,805
a iHeartMedia Inc., A		United States		1,623,513		27,437,370
a,b iHeartMedia Inc., B		United States		23,770		341,456
a iHeartMedia Inc., wts., A, 5/01/39		United States		1,872		31,635
a,d Lee Enterprises Inc./IA		United States		3,245,968		4,609,275
a,b,c,d Lee Enterprises Inc., wts., 12/31/22		United States		1,110,000		130,691
a Liberty Global PLC, C.		United Kingdom		4,194,789		91,425,426
						333,696,789
Oil, Gas & Consumable Fuels 8.6%
BP PLC		United Kingdom		9,261,430		57,847,875
Caltex Australia Ltd.		Australia		582,961		13,886,724
Canadian Natural Resources Ltd.		Canada		182,800		5,912,213
JXTG Holdings Inc.		Japan		20,035,237		91,792,450
Kinder Morgan Inc.		United States		415,470		8,795,500
Marathon Oil Corp.		United States		3,163,559		42,961,131
Occidental Petroleum Corp.		United States		1,229,030		50,648,326
Plains All American Pipeline LP		United States		199,100		3,661,449
Royal Dutch Shell PLC, A		United Kingdom		1,467,136		43,049,789
The Williams Cos. Inc.		United States		2,208,222		52,379,026
						370,934,483
Pharmaceuticals 6.4%
Allergan PLC		United States		202,983		38,804,260
a Bristol-Myers Squibb Co., rts., 2/01/49		United States		295,300		888,853
Eli Lilly & Co.		United States		796,911		104,738,013
Novartis AG, ADR		Switzerland		529,806		50,167,330

franklintempleton.com Annual Report         19

FRANKLIN MUTUAL SERIES FUNDS

STATEMENT OF INVESTMENTS

Franklin Mutual Quest Fund (continued)

	Country		Shares/ Rights/ Units/ Warrants		Value
Common Stocks and Other Equity Interests (continued)
Pharmaceuticals (continued)
Perrigo Co. PLC.		United States		1,564,842	$	80,839,738
						275,438,194
Software 3.2%
a Avaya Holdings Corp.		United States		168		2,268
a Avaya Holdings Corp., wts., 12/15/22		United States		338,090		405,708
a Check Point Software Technologies Ltd.		Israel		517,511		57,423,021
NortonLifeLock Inc.		United States		1,505,152		38,411,479
Oracle Corp.		United States		769,800		40,784,004
						137,026,480
Specialty Retail 1.2%
Dufry AG		Switzerland		30,278		3,004,489
Tiffany & Co.		United States		153,164		20,470,369
a,b,d TRU Kids Parent LLC		United States		7,104		26,506,829
a,b,d Wayne Services Legacy Inc.		United States		7,104		—
						49,981,687
Tobacco 7.8%
Altria Group Inc.		United States		1,356,100		67,682,951
British American Tobacco PLC		United Kingdom		4,311,835		184,544,818
Imperial Brands PLC		United Kingdom		3,434,804		85,025,036
						337,252,805
Wireless Telecommunication Services 1.3%
Vodafone Group PLC		United Kingdom		28,081,388		54,583,557
Total Common Stocks and Other Equity Interests (Cost $2,738,111,836)						2,882,584,186
Convertible Preferred Stocks (Cost $26,071,880) 0.7%
Multi-Utilities 0.7%
Sempra Energy, 6.00%, cvt. pfd., A		United States		245,650		29,482,913
Preferred Stocks 1.4%
Auto Components 0.3%
e Schaeffler AG, 5.713%, pfd		Germany		1,365,000		14,738,343
Technology Hardware, Storage & Peripherals 1.1%
e Samsung Electronics Co. Ltd., 3.119%, pfd		South Korea		1,162,517		45,656,339
Total Preferred Stocks (Cost $32,648,785)						60,394,682

20         Annual Report franklintempleton.com

FRANKLIN MUTUAL SERIES FUNDS

STATEMENT OF INVESTMENTS

Franklin Mutual Quest Fund (continued)

	Country		Principal Amount*		Value
Corporate Bonds, Notes and Senior Floating Rate Interests 16.5%
f,g Affinion Group Inc., Term Loan, 7.549%, (1-month USD LIBOR + 5.75%), 4/05/24		United States	$	18,650,677	$	16,055,118
h Banff Merger Sub Inc., senior note, 144A, 9.75%, 9/01/26		United States		50,000,000		50,751,250
Envision Healthcare Corp.,
h senior note, 144A, 8.75%, 10/15/26		United States		140,000,000		87,198,650
f,g Term Loan B, 5.549%, (1-month USD LIBOR + 3.75%), 10/11/25		United States		40,639,624		34,871,073
Frontier Communications Corp.,
h second lien, 144A, 8.50%, 4/01/26		United States		25,000,000		25,358,750
senior note, 8.875%, 9/15/20		United States		21,382,000		11,653,190
senior note, 10.50%, 9/15/22		United States		77,063,000		37,784,914
senior note, 11.00%, 9/15/25		United States		41,812,000		20,383,350
h senior secured note, first lien, 144A, 8.00%, 4/01/27		United States		20,000,000		20,937,000
h iHeartCommunications Inc., first lien, 144A, 4.75%, 1/15/28		United States		25,000,000		25,604,250
h Intelsat Connect Finance SA, senior note, 144A, 9.50%, 2/15/23		Luxembourg		47,845,000		33,596,759
Intelsat Jackson Holdings SA,
senior bond, 5.50%, 8/01/23		Luxembourg		39,750,000		34,320,945
f,g Term B-3 Loan, 5.682%, (3-month USD LIBOR + 3.75%), 11/27/23		Luxembourg		8,000,000		8,026,000
d Lee Enterprises Inc.,
g Second Lien Term Loan, 12.00%, 12/15/22		United States		34,317,486		34,210,244
h senior secured note, first lien, 144A, 9.50%, 3/15/22		United States		97,050,000		90,529,405
h Navistar International Corp., senior note, 144A, 6.625%, 11/01/25		United States		18,270,000		18,650,655
d,f,g Sorenson Communications LLC, Initial Term Loans, 8.445%, (3-month USD LIBOR + 6.50%), 3/14/24		United States		12,535,714		12,473,036
f,g Veritas U.S. Inc,
Term Loan B1, 6.299%, (1-month USD LIBOR + 4.50%), 1/27/23		United States		19,230,693		18,589,676
Term Loan B1, 6.445%, (3-month USD LIBOR + 4.50%), 1/27/23		United States		3,694,357		3,571,213
h Veritas U.S. Inc./Veritas Bermuda Ltd.,
senior note, 144A, 7.50%, 2/01/23		United States		3,682,000		3,683,528
senior note, 144A, 10.50%, 2/01/24		United States		30,222,000		28,043,447
f,g Windstream Services LLC,
i Revolving Commitment, 7.75%, (Prime + 3.00%), 4/24/20		United States		74,847,868		70,169,876
Term Loan B6, 9.75%, (Prime + 5.00%), 3/30/21		United States		12,922,000		12,398,194
h Zayo Group LLC/Zayo Capital Inc., senior note, 144A, 5.75%, 1/15/27		United States		9,923,000		10,112,505
Total Corporate Bonds, Notes and Senior Floating Rate Interests (Cost $839,443,742)						708,973,028
			Shares
Companies in Liquidation 0.0%†
a,b,j Clear Channel Communications Inc., Contingent Distribution		United States		72,867,000		—
a,b,j iHeartCommunications Inc., Contingent Distribution		United States		61,658,229		—
a,b,j Tribune Media, Litigation Trust, Contingent Distribution		United States		1,524,556		—
a,b,j Vistra Energy Corp., Litigation Trust, Contingent Distribution		United States		104,175,133		57,296
a,b,j Walter Energy Inc., Litigation Trust, Contingent Distribution		United States		7,443,000		—
Total Companies in Liquidation (Cost $3,234,626)						57,296

franklintempleton.com Annual Report         21

FRANKLIN MUTUAL SERIES FUNDS

STATEMENT OF INVESTMENTS

Franklin Mutual Quest Fund (continued)

		Number of Contracts		Notional Amount	#		Value
Options Purchased 0.0%†
Calls - Exchange-Traded
Tiffany & Co., January Strike Price $130.00, Expires 1/17/20		500		50,000		$	187,500
Puts - Exchange-Traded
Tiffany & Co., February Strike Price $100.00, Expires 2/21/20		500		50,000			—
Total Options Purchased (Cost $230,039)							187,500
Total Investments before Short Term Investments (Cost $3,639,740,908)							3,681,679,605
	Country		Principal Amount*
Short Term Investments 14.3%
U.S. Government and Agency Securities 14.3%
k FHLB, 1/02/20		United States	$	54,100,000			54,100,000
k U.S. Treasury Bill,
1/16/20		United States		50,000,000			49,972,923
1/21/20		United States		50,000,000			49,961,341
1/23/20		United States		50,000,000			49,957,271
l 2/06/20 - 2/20/20		United States		58,000,000			57,900,974
l3/05/20		United States		50,000,000			49,868,969
3/19/20		United States		50,000,000			49,842,079
5/21/20		United States		80,000,000			79,526,722
1/02/20 - 5/28/20		United States		125,000,000			124,781,971
6/25/20		United States		50,000,000			49,627,882
Total U.S. Government and Agency Securities (Cost $615,315,019)							615,540,132
Total Investments (Cost $4,255,055,927) 99.9%							4,297,219,737
Options Written (0.0)%†							(1,454,500	)
Securities Sold Short (0.8)%							(33,371,164	)
Other Assets, less Liabilities 0.9%							39,580,323
Net Assets 100.0%						$	4,301,974,396
	Number of Contracts		Notional Amount#
m Options Written (0.0)%†
Puts - Exchange-Traded
Allergan PLC, January Strike Price $150.00, Expires 1/17/20		500		50,000			(4,500	)
Intelsat SA, January Strike Price $10.00, Expires 1/17/20		5,000		500,000			(1,450,000	)
NortonLifeLock Inc., January Strike Price $20.00, Expires 1/17/20		354		35,400			—
Total Options Written (Premiums received $1,488,625)						$	(1,454,500	)

22         Annual Report franklintempleton.com

FRANKLIN MUTUAL SERIES FUNDS

STATEMENT OF INVESTMENTS

Franklin Mutual Quest Fund (continued)

	Country		Shares		Value
n Securities Sold Short (0.8)%
Common Stocks (0.8)%
Biotechnology (0.4)%
AbbVie Inc.		United States		185,248	$	(16,401,858	)
Equity Real Estate Investment Trusts (REITs) (0.2)%
Seritage Growth Properties, A		United States		176,850		(7,088,148	)
Internet & Direct Marketing Retail (0.1)%
Alibaba Group Holding Ltd., ADR.		China		32,000		(6,787,200	)
Pharmaceuticals (0.1)%
Bristol-Myers Squibb Co.		United States		48,200		(3,093,958	)
Total Securities Sold Short (Proceeds $27,549,135)					$	(33,371,164	)

^†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.

^bFair valued using significant unobservable inputs. See Note 14 regarding fair value measurements.

^cSee Note 10 regarding restricted securities.

^dSee Note 12 regarding holdings of 5% voting securities.

^eVariable rate security. The rate shown represents the yield at period end.

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

^gSee Note 1(f) regarding senior floating rate interests.

^hSecurity was purchased pursuant to Rule 144A under the Securities Act of 1933 and may be sold in transactions exempt from registration only to qualified institutional buyers or in a public offering registered under the Securities Act of 1933. At December 31, 2019, the aggregate value of these securities was $394,466,199, representing 9.2% of net assets.

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

^jContingent distributions represent the right to receive additional distributions, if any, during the reorganization of the underlying company. Shares represent total underlying principal of debt securities.

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

^lA portion or all of the security has been segregated as collateral for securities sold short, open forward exchange contracts and/or open written options contracts. At December 31, 2019, the aggregate value of these securities pledged amounted to $29,369,870, representing 0.7% of net assets.

^mSee Note 1(d) regarding written options.

ⁿSee Note 1(e) regarding securities sold short.

At December 31, 2019, the Fund had the following futures contracts outstanding. See Note 1(d).

Futures Contracts

Description	Type		Number of Contracts		Notional  Amount*		Expiration Date		Value/ Unrealized Appreciation (Depreciation)
Currency Contracts
EUR/USD		Short		456	$	64,307,400		3/16/20	$	(619,019	)
GBP/USD		Short		815		67,706,125		3/16/20		(470,278	)
Total Futures Contracts									$	(1,089,297	)

*As of period end.    

franklintempleton.com Annual Report         23

FRANKLIN MUTUAL SERIES FUNDS

STATEMENT OF INVESTMENTS

Franklin Mutual Quest Fund (continued)

At December 31, 2019, the Fund had the following forward exchange contracts outstanding. See Note 1(d).

Forward Exchange Contracts

Currency	Counterpartya		Type		Quantity		Contract Amount		Settlement Date		Unrealized Appreciation		Unrealized Depreciation
OTC Forward Exchange Contracts
Euro		BOFA		Buy		801,934	$	902,376		1/15/20	$	—	$	(2,182	)
Euro		BOFA		Buy		3,246,460		3,618,304		1/15/20		25,943		—
Euro		BOFA		Sell		1,207,142		1,343,499		1/15/20		—		(11,554	)
Euro		HSBK		Buy		1,960,830		2,204,104		1/15/20		—		(3,013	)
Euro		HSBK		Buy		4,540,126		5,044,531		1/15/20		51,895		—
Euro		HSBK		Sell		3,010,000		3,380,736		1/15/20		1,922		—
Euro		HSBK		Sell		3,953,824		4,425,495		1/15/20		—		(12,789	)
Euro		SSBT		Buy		3,967,769		4,409,380		1/15/20		44,557		—
Euro		SSBT		Sell		944,130		1,055,268		1/15/20		—		(4,545	)
Euro		SSBT		Sell		23,500,284		26,783,828		1/15/20		404,066		—
Euro		UBSW		Buy		1,300,000		1,456,221		1/15/20		3,067		—
Euro		UBSW		Sell		8,525,019		9,482,275		1/15/20		—		(87,309	)
Euro		UBSW		Sell		20,645,285		23,580,461		1/15/20		405,520		—
British Pound		BOFA		Buy		200,000		264,626		1/16/20		390		—
British Pound		BOFA		Sell		1,899,342		2,401,219		1/16/20		—		(115,561	)
British Pound		HSBK		Sell		7,998,000		10,079,853		1/16/20		—		(518,134	)
British Pound		SSBT		Sell		4,100,000		5,031,828		1/16/20		—		(400,999	)
South Korean Won		HSBK		Buy		488,257,140		421,547		1/17/20		967		—
South Korean Won		HSBK		Sell		6,691,185,784		5,605,906		1/17/20		—		(184,324	)
South Korean Won		UBSW		Buy		1,456,517,549		1,236,328		1/17/20		24,073		—
South Korean Won		UBSW		Sell		7,038,538,567		5,945,409		1/17/20		—		(145,405	)
Australian Dollar		HSBK		Sell		579,063		407,498		2/14/20		741		—
Australian Dollar		HSBK		Sell		1,756,404		1,225,445		2/14/20		—		(8,322	)
Australian Dollar		UBSW		Sell		16,201,776		11,171,682		2/14/20		—		(209,091	)
British Pound		BOFA		Sell		1,213,060		1,490,172		2/14/20		—		(118,514	)
British Pound		HSBK		Sell		35,153,784		42,820,156		2/14/20		—		(3,798,624	)
British Pound		SSBT		Sell		35,860,914		43,697,453		2/14/20		—		(3,859,079	)
British Pound		UBSW		Sell		2,540,286		3,158,337		2/14/20		—		(210,433	)
Euro		HSBK		Sell		360,085		401,235		4/07/20		—		(5,087	)
British Pound		BOFA		Sell		3,030,008		3,911,075		4/24/20		—		(114,632	)
British Pound		HSBK		Sell		82,126,841		106,700,323		4/24/20		—		(2,414,408	)
South Korean Won		HSBK		Sell		26,789,185,654		23,113,581		5/15/20		—		(158,203	)
South Korean Won		UBSW		Sell		13,913,507,234		12,025,494		5/15/20		—		(61,179	)
British Pound		BOFA		Sell		11,372,469		14,963,123		5/22/20		—		(157,530	)
British Pound		HSBK		Sell		50,106,954		65,195,089		5/22/20		—		(1,426,310	)
Total Forward Exchange Contracts											$	963,141	$	(14,027,227	)
Net unrealized appreciation (depreciation)													$	(13,064,086	)

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

See Note 11 regarding other derivative information.

See Abbreviations on page 44.

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

FRANKLIN MUTUAL SERIES FUNDS

FINANCIAL STATEMENTS

Statement of Assets and Liabilities

December 31, 2019

Franklin Mutual Quest Fund

Assets:
Investments in securities:
Cost - Unaffiliated issuers	$4,040,212,844
Cost - Non-controlled affiliates (Note 12)	214,843,083
Value - Unaffiliated issuers	$3,958,598,076
Value - Non-controlled affiliates (Note 12)	338,621,661
Cash	1,918,562
Foreign currency, at value (cost $11,000,061)	11,080,152
Receivables:
Investment securities sold	707,926
Capital shares sold	2,942,994
Dividends and interest	25,798,847
European Union tax reclaims	641,529
Deposits with brokers for:
Securities sold short	34,011,788
Futures contracts	2,800,620
Unrealized appreciation on OTC forward exchange contracts	963,141
Other assets	1,017,331
Total assets	4,379,102,627
Liabilities:
Payables:
Investment securities purchased	15,681,574
Capital shares redeemed	7,687,950
Management fees	2,458,686
Distribution fees	325,952
Transfer agent fees	489,363
Trustees’ fees and expenses	355,665
Variation margin on futures contracts.	904,327
Options written, at value (premiums received $1,488,625)	1,454,500
Securities sold short, at value (proceeds $27,549,135)	33,371,164
Unrealized depreciation on OTC forward exchange contracts	14,027,227
Accrued expenses and other liabilities.	371,823
Total liabilities	77,128,231
Net assets, at value	$4,301,974,396
Net assets consist of:
Paid-in capital	$4,585,790,989
Total distributable earnings (losses)	(283,816,593	)
Net assets, at value	$4,301,974,396

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

FRANKLIN MUTUAL SERIES FUNDS

FINANCIAL STATEMENTS

Statement of Assets and Liabilities (continued)

December 31, 2019

Franklin Mutual Quest Fund

Class Z:
Net assets, at value	$	3,042,386,632
Shares outstanding		216,327,127
Net asset value and maximum offering price per share		$14.06
Class A:
Net assets, at value	$	1,035,698,582
Shares outstanding		74,831,914
Net asset value per sharea		$13.84
Maximum offering price per share (net asset value per share ÷ 94.50%)		$14.65
Class C:
Net assets, at value	$	112,751,137
Shares outstanding		8,212,513
Net asset value and maximum offering price per sharea		$13.73
Class R:
Net assets, at value	$	3,415,358
Shares outstanding		250,970
Net asset value and maximum offering price per share		$13.61
Class R6:
Net assets, at value	$	107,722,687
Shares outstanding		7,669,500
Net asset value and maximum offering price per share		$14.05

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

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

FRANKLIN MUTUAL SERIES FUNDS

FINANCIAL STATEMENTS

Statement of Operations

for the year ended December 31, 2019

Franklin Mutual Quest Fund

Investment income:
Dividends: (net of foreign taxes)*
Unaffiliated issuers	$	71,115,859
Non-controlled affiliates (Note 12)		2,776,405
Interest:
Unaffiliated issuers		86,877,249
Non-controlled affiliates (Note 12)		18,774,687
Total investment income		179,544,200
Expenses:
Management fees (Note 3a)		30,247,305
Distribution fees: (Note 3c)
Class A		2,724,511
Class C		1,307,001
Class R		18,225
Transfer agent fees: (Note 3e)
Class Z		2,614,935
Class A		908,782
Class C		109,007
Class R		3,041
Class R6		52,810
Custodian fees (Note 4)		153,948
Reports to shareholders		237,532
Registration and filing fees		158,229
Professional feesa		(380,032	)
Trustees’ fees and expenses		278,109
Dividends on securities sold short		712,090
Other		121,359
Total expenses		39,266,852
Expense reductions (Note 4)		(48,450	)
Expenses waived/paid by affiliates (Note 3f)		(29,265	)
Net expenses		39,189,137
Net investment income		140,355,063
Realized and unrealized gains (losses):
Net realized gain (loss) from:
Investments:#
Unaffiliated issuers		(239,279,541	)
Non-controlled affiliates (Note 12)		3,315,774
Written options		3,551,588
Foreign currency transactions		(191,291	)
Forward exchange contracts		22,733,552
Futures contracts		4,034,394
Securities sold short		(32,152	)
Net realized gain (loss)		(205,867,676	)
Net change in unrealized appreciation (depreciation) on:
Investments:
Unaffiliated issuers		631,150,512
Non-controlled affiliates (Note 12)		(21,819,118	)
Translation of other assets and liabilities denominated in foreign currencies		157,456
Forward exchange contracts		(23,337,473	)
Written options		6,081,893

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FRANKLIN MUTUAL SERIES FUNDS

FINANCIAL STATEMENTS

Statement of Operations (continued)

for the year ended December 31, 2019

Franklin Mutual Quest Fund

Futures contracts		(1,240,706	)
Securities sold short		(7,162,287	)
Net change in unrealized appreciation (depreciation)		583,830,277
Net realized and unrealized gain (loss)		377,962,601
Net increase (decrease) in net assets resulting from operations	$	518,317,664

*Foreign taxes withheld on dividends	$	2,317,815
#Net of foreign taxes	$	392,774

^aIncludes unaffiliated reimbursement of legal fees incurred in connection with certain Fund holdings.

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

FRANKLIN MUTUAL SERIES FUNDS

FINANCIAL STATEMENTS

Statements of Changes in Net Assets

Franklin Mutual Quest Fund

	Year Ended December 31,
	2019			2018
Increase (decrease) in net assets:
Operations:
Net investment income	$	140,355,063		$	143,898,637
Net realized gain (loss)		(205,867,676	)		354,503,773
Net change in unrealized appreciation (depreciation)		583,830,277			(826,097,878	)
Net increase (decrease) in net assets resulting from operations		518,317,664			(327,695,468	)
Distributions to shareholders:
Class Z		(104,723,243	)		(375,929,219	)
Class A		(33,694,633	)		(130,844,029	)
Class C		(2,725,827	)		(15,959,447	)
Class R		(102,662	)		(352,629	)
Class R6		(3,763,980	)		(14,194,157	)
Total distributions to shareholders		(145,010,345	)		(537,279,481	)
Capital share transactions: (Note 2)
Class Z		(273,149,893	)		(10,462,191	)
Class A		(122,215,243	)		126,783,503
Class C		(40,715,515	)		(141,318,519	)
Class R		223,722			1,767,885
Class R6		(18,209,640	)		14,919,716
Total capital share transactions		(454,066,569	)		(8,309,606	)
Net increase (decrease) in net assets		(80,759,250	)		(873,284,555	)
Net assets:
Beginning of year		4,382,733,646			5,256,018,201
End of year	$	4,301,974,396		$	4,382,733,646

franklintempleton.com The accompanying notes are an integral part of these financial statements.  |  Annual Report         29

FRANKLIN MUTUAL SERIES FUNDS

Notes to Financial Statements

Franklin Mutual Quest Fund

1.  Organization and Significant Accounting Policies

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

The following summarizes the Fund’s significant accounting policies.

a.  Financial Instrument Valuation

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

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

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

Debt securities generally trade in the OTC market rather than on a securities exchange. The Fund’s pricing services use multiple valuation techniques to determine fair value. In instances where sufficient market activity exists, the pricing services may utilize a market-based approach through which quotes from market makers are used to determine fair value. In instances where sufficient market activity may not exist or is limited, the pricing services also utilize proprietary valuation models which may consider market characteristics such as benchmark yield curves, credit spreads, estimated default rates, anticipated market interest rate volatility, coupon rates, anticipated timing of principal repayments, underlying collateral, and other unique security features in order to estimate the relevant cash flows, which are then discounted to calculate the fair value.

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

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

Trading in securities on foreign securities stock exchanges and OTC markets may be completed before 4 p.m. Eastern time. In addition, trading in certain foreign markets may not take place on every Fund’s business day. Occasionally,

30         Annual Report franklintempleton.com

FRANKLIN MUTUAL SERIES FUNDS

NOTES TO FINANCIAL STATEMENTS

Franklin Mutual Quest Fund (continued)

events occur between the time at which trading in a foreign security is completed and 4 p.m. Eastern time that might call into question the reliability of the value of a portfolio security held by the Fund. As a result, differences may arise between the value of the Fund’s portfolio securities as determined at the foreign market close and the latest indications of value at 4 p.m. Eastern time. In order to minimize the potential for these differences, the VC monitors price movements following the close of trading in foreign stock markets through a series of country specific market proxies (such as baskets of American Depositary Receipts, futures contracts and exchange traded funds). These price movements are measured against established trigger thresholds for each specific market proxy to assist in determining if an event has occurred that may call into question the reliability of the values of the foreign securities held by the Fund. If such an event occurs, the securities may be valued using fair value procedures, which may include the use of independent pricing services.

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

b.  Foreign Currency Translation

Portfolio securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollars based on the exchange rate of such currencies against U.S. dollars on the date of valuation. The Fund may enter into foreign currency exchange contracts to facilitate transactions denominated in a foreign currency. Purchases and sales of securities, income and expense items denominated in foreign currencies are translated into U.S. dollars at the exchange rate in effect on the transaction date. Portfolio securities and assets and liabilities denominated in foreign currencies contain risks that those currencies will decline in value relative to the U.S. dollar. Occasionally, events may impact the availability or reliability of foreign exchange rates used to convert the U.S. dollar equivalent value. If such an event occurs, the foreign exchange rate will be valued at fair value using procedures established and approved by the Board.

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

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

c.  Securities Purchased on a Delayed Delivery Basis

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

d.  Derivative Financial Instruments

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

franklintempleton.com Annual Report         31

FRANKLIN MUTUAL SERIES FUNDS

NOTES TO FINANCIAL STATEMENTS

Franklin Mutual Quest Fund (continued)

1.  Organization and Significant Accounting Policies (continued)

d.  Derivative Financial Instruments (continued)

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. At December 31, 2019, the Fund had OTC derivatives in a net liability position of $13,064,086 and the aggregate value of collateral pledged for such contracts was $9,281,578.

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 exposure to certain foreign currencies. A futures contract is an agreement between the Fund and a counterparty to buy or sell an asset at a specified price on a future date. Required initial margins are pledged by the Fund, and the daily change in fair value is accounted for as a variation margin payable or receivable in the Statement of Assets and Liabilities.

The Fund entered into OTC forward exchange contracts primarily to manage 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 purchased or wrote exchange traded and/or OTC option contracts primarily to manage 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.

e.  Securities Sold Short

The Fund is engaged in selling securities short, which obligates the Fund to replace a borrowed security with the same security at current fair value. The Fund incurs a loss if the price of the security increases between the date of the short sale and the date on which the Fund replaces the borrowed security. The Fund realizes a gain if the price of the

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Franklin Mutual Quest Fund (continued)

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.

f.   Senior Floating Rate Interests

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

g.   Income and Deferred Taxes

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

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

As a result of several court cases, in certain countries across the European Union, the Fund filed additional tax reclaims for previously withheld taxes on dividends earned in those countries (EU reclaims). These additional filings are subject to various administrative proceedings by the local jurisdictions’ tax authorities within the European Union, as well as a number of related judicial proceedings. Income recognized, if any, for EU reclaims is reflected as other income in the Statement of Operations and any related receivable, if any, is reflected as European Union tax reclaims in the Statement of Assets and Liabilities. When uncertainty exists as to the ultimate resolution of these proceedings, the likelihood of receipt of these EU reclaims, and the potential timing of payment, no amounts are reflected in the financial statements. For U.S. income tax purposes, EU reclaims received by the Fund, if any, reduce the amounts of foreign taxes Fund shareholders can use as tax credits in their individual income tax returns.

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 December 31, 2019, the Fund has determined that no tax liability is required in its financial statements related to uncertain tax positions for any open tax years (or expected to be taken in future tax years). Open tax years are those that remain subject to examination and are based on the statute of limitations in each jurisdiction in which the Fund invests.

h.   Security Transactions, Investment Income, Expenses and Distributions

Security transactions are accounted for on trade date. Realized gains and losses on security transactions are determined on a specific identification basis. Interest income and estimated expenses are accrued daily. Amortization of

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Franklin Mutual Quest Fund (continued)

1. Organization and Significant Accounting Policies (continued)

h.   Security Transactions, Investment Income, Expenses and Distributions (continued)

premium and accretion of discount on debt securities are included in interest income. Dividend income and dividends declared on securities sold short are recorded on the ex-dividend date except for certain dividends from securities where the dividend rate is not available. In such cases, the dividend is recorded as soon as the information is received by the Fund. Distributions to shareholders are recorded on the ex-dividend date. Distributable earnings are determined according to income tax regulations (tax basis) and may differ from earnings recorded in accordance with U.S. GAAP. These differences may be permanent or temporary. Permanent differences are reclassified among capital accounts to reflect their tax character. These reclassifications have no impact on net assets or the results of operations. Temporary differences are not reclassified, as they may reverse in subsequent periods.

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

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

i.   Accounting Estimates

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

j.   Guarantees and Indemnifications

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

2. Shares of Beneficial Interest

At December 31, 2019, there were an unlimited number of shares authorized (without par value). Transactions in the Fund’s shares were as follows:

	Year Ended December 31,
	2019						2018
	Shares			Amount			Shares			Amount
Class Z Shares:
Shares sold		15,090,002		$	210,921,808			19,486,438		$	309,433,086
Shares issued in reinvestment of distributions		7,039,345			99,052,207			27,534,405			355,938,444
Shares redeemed		(41,662,846	)		(583,123,908	)		(42,815,519	)		(675,833,721	)
Net increase (decrease)		(19,533,499	)	$	(273,149,893	)		4,205,324		$	(10,462,191	)
Class A Shares:
Shares solda		8,918,707		$	122,459,568			18,112,061		$	282,062,168
Shares issued in reinvestment of distributions		2,357,320			32,648,125			10,086,321			128,317,894
Shares redeemed		(20,150,894	)		(277,322,936	)		(18,481,020	)		(283,596,559	)
Net increase (decrease)		(8,874,867	)	$	(122,215,243	)		9,717,362		$	126,783,503

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Franklin Mutual Quest Fund (continued)

	Year Ended December 31,
	2019						2018
	Shares			Amount			Shares			Amount
Class C Shares:
Shares sold		1,166,930		$	15,819,778			2,391,188		$	36,406,068
Shares issued in reinvestment of distributions		195,226			2,680,611			1,234,078			15,734,249
Shares redeemeda		(4,357,765	)		(59,215,904	)		(12,562,392	)		(193,458,836	)
Net increase (decrease)		(2,995,609	)	$	(40,715,515	)		(8,937,126	)	$	(141,318,519	)
Class R Shares:
Shares sold		96,194		$	1,289,422			121,081		$	1,898,376
Shares issued in reinvestment of distributions		7,540			102,662			28,180			352,629
Shares redeemed		(86,277	)		(1,168,362	)		(30,958	)		(483,120	)
Net increase (decrease)		17,457		$	223,722			118,303		$	1,767,885
Class R6 Shares:
Shares sold		1,870,657		$	26,089,722			2,288,195		$	36,596,048
Shares issued in reinvestment of distributions		264,636			3,718,560			1,096,020			14,150,067
Shares redeemed		(3,434,204	)		(48,017,922	)		(2,247,945	)		(35,826,399	)
Net increase (decrease)		(1,298,911	)	$	(18,209,640	)		1,136,270		$	14,919,716

^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 Fund are also officers and/or directors of the following subsidiaries:

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

a.  Management Fees

The Fund pays an investment management fee to Franklin Mutual based on the average daily net assets of the Fund as follows:

Annualized Fee Rate	Net Assets
0.675%	Up to and including $5 billion
0.645%	Over $5 billion, up to and including $7 billion
0.625%	Over $7 billion, up to and including $10 billion
0.615%	In excess of $10 billion

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Franklin Mutual Quest Fund (continued)

3.  Transactions with Affiliates (continued)

b.  Administrative Fees

Under an agreement with Franklin Mutual, FT Services provides administrative services to the Fund. The fee is paid by Franklin Mutual 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 Z and Class R6 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	0.35	%
Class C	1.00	%
Class R	0.50	%

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

d.  Sales Charges/Underwriting Agreements

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

Sales charges retained net of commissions paid to unaffiliated brokers/dealers	$	102,193
CDSC retained	$	12,902

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 year ended December 31, 2019, the Fund paid transfer agent fees of $3,688,575, of which $1,983,018 was retained by Investor Services.

f.  Waiver and Expense Reimbursements

Investor Services has contractually agreed in advance to waive or limit its fees so that the Class R6 transfer agent fees do not exceed 0.02% based on the average net assets of the class until April 30, 2020.

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Franklin Mutual Quest Fund (continued)

g.  Interfund Transactions

The Fund engaged in purchases and sales of investments with funds or other accounts that have common investment managers (or affiliated investment managers), directors, trustees or officers. During the year ended December 31, 2019, these purchase and sale transactions aggregated $99,609,496 and $0, respectively.

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 year ended December 31, 2019, the custodian fees were reduced as noted in the Statement of Operations.

5.  Independent Trustees’ Retirement Plan

On January 1, 1993, the Trust adopted an Independent Trustees’ Retirement Plan (Plan). The Plan is an unfunded defined benefit plan that provides benefit payments to Trustees whose length of service and retirement age meets the eligibility requirements of the Plan. Benefits under the Plan are based on years of service and fees paid to each trustee at the time of retirement. Effective in December 1996, the Plan was closed to new participants.

During the year ended December 31, 2019, the Fund’s projected benefit obligation and benefit payments under the Plan were as follows:

aProjected benefit obligation at December 31, 2019	$	355,665
bIncrease in projected benefit obligation	$	35,608
Benefit payments made to retired trustees	$	(5,782	)

^aThe projected benefit obligation is included in trustees’ fees and expenses in the Statement of Assets and Liabilities.

^bThe increase in projected benefit obligation is included in trustees’ fees and expenses in the Statement of Operations.

6.  Income Taxes

For tax purposes, capital losses may be carried over to offset future capital gains.

At December 31, 2019, the capital loss carryforwards were as follows:

Capital loss carryforwards not subject to expiration:
Long term	$	271,513,668

The tax character of distributions paid during the years ended December 31, 2019 and 2018, was as follows:

	2019		2018
Distributions paid from:
Ordinary income	$	145,010,345	$	242,783,398
Long term capital gain		—		294,496,083
	$	145,010,345	$	537,279,481

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Franklin Mutual Quest Fund (continued)

6.  Income Taxes (continued)

At December 31, 2019, the cost of investments, net unrealized appreciation (depreciation) and undistributed ordinary income for income tax purposes were as follows:

Cost of investments	$	4,263,203,026
Unrealized appreciation	$	440,494,770
Unrealized depreciation		(469,607,353	)
Net unrealized appreciation (depreciation)	$	(29,112,583	)
Distributable earnings:
Undistributed ordinary income	$	1,845,930

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

7.  Investment Transactions

Purchases and sales of investments (excluding short term securities and securities sold short) for the year ended December 31, 2019, aggregated $2,222,988,576 and $2,748,779,735, respectively.

8.  Credit Risk and Defaulted Securities

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

At December 31, 2019, the Fund did not hold any distressed company securities for which interest recognition has been discontinued.

9.  Concentration of Risk

Investing in foreign securities may include certain risks and considerations not typically associated with investing in U.S. securities, such as fluctuating currency values and changing local, regional and global economic, political and social conditions, which may result in greater market volatility. Current political and financial uncertainty surrounding the European Union may increase market volatility and the economic risk of investing in securities in Europe. In addition, certain foreign securities may not be as liquid as U.S. securities.

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.

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Franklin Mutual Quest Fund (continued)

At December 31, 2019, investments in restricted securities, excluding securities exempt from registration under the 1933 Act, were as follows:

Shares/ Warrants		Issuer	Acquisition Date		Cost		Value
	2,548,299	International Automotive Components Group Brazil LLC		4/13/06 - 12/26/08	$	1,692,334	$	92,503
	1,110,000	a Lee Enterprises Inc., wts., 12/31/22		3/31/14		1,490,026		130,691
	224,279	b Sorenson Communications LLC, Membership Interests		4/30/14		—		152,057,986
		Total Restricted Securities (Value is 3.5% of Net Assets)			$	3,182,360	$	152,281,180

^aThe Fund also invests in unrestricted securities or other investments in the issuer, valued at $129,348,924 as of December 31, 2019.

^bThe Fund also invests in unrestricted securities or other investments in the issuer, valued at $12,473,036 as of December 31, 2019.

11.  Other Derivative Information

At December 31, 2019, 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
Foreign exchange contracts	Variation margin on futures contracts	$	—		Variation margin on futures contracts	$	1,089,297	a
	Unrealized appreciation on OTC forward exchange contracts		963,141		Unrealized depreciation on OTC forward exchange contracts		14,027,227
Equity contracts	Investments in securities, at value		187,500	b	Options written, at value		1,454,500
Totals		$	1,150,641			$	16,571,024

^aThis amount reflects the cumulative appreciation (depreciation) of futures contracts as reported in the Statement of Investments. Only the variation margin receivable/ payable at year 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 year ended December 31, 2019, the effect of derivative contracts in the Statement of Operations was as follows:

Derivative Contracts Not Accounted for as Hedging Instruments	Statement of Operations Location	Net Realized Gain (Loss) for the Year			Statement of Operations Location	Net Change in Unrealized Appreciation (Depreciation) for the Year
	Net realized gain (loss) from:				Net change in unrealized appreciation (depreciation) on:
Foreign exchange contracts	Forward exchange contracts		$22,733,552		Forward exchange contracts		$(23,337,473)
	Futures contracts		4,034,394		Futures contracts		(1,240,706)
Equity contracts	Investments		(1,129,832)	a	Investments		870,984	a
	Written options		3,551,588		Written options		6,081,893
Totals			$29,189,702				$(17,625,302)

^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.

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NOTES TO FINANCIAL STATEMENTS

Franklin Mutual Quest Fund (continued)

11.   Other Derivative Information (continued)

For the year ended December 31, 2019, the average month end notional amount of futures contracts and options represented $144,793,454 and 993,546 shares, respectively. The average month end contract value of forward exchange contracts was $477,776,037.

See Note 1(d) regarding derivative financial instruments.

12.   Holdings of 5% Voting Securities of Portfolio Companies

The 1940 Act defines ‘‘affiliated companies” to include investments in portfolio companies in which a fund owns 5% or more of the outstanding voting securities. During the year ended December 31, 2019, investments in “affiliated companies” were as follows:

Name of Issuer	Value at Beginning of Year		Purchases			Sales			Realized Gain (Loss)		Net Change in Unrealized Appreciation (Depreciation)			Value at End of Year			Number of Shares/Units/ Warrants/ Principal Amount Held at End of Year			Investment Income
Non-Controlled Affiliates
																					Dividends
Advanced Emissions Solutions Inc.	$	18,190,405	$	—		$	—		$	—	$	(86,210	)	$	18,104,195			1,724,209		$	1,724,209
Gannett Co. Inc.		37,084,199		—			(5,996,577	)		119,111		—	a		—	a		—	a		1,052,196
Lee Enterprises Inc./IA		10,179,206		—			(5,444,799	)		438,041		(563,173	)		4,609,275			3,245,968			—
Lee Enterprises Inc., wts., 12/31/22		217,582		—			—			—		(86,891	)		130,691			1,110,000			—
Sorenson Communications LLC, Membership  Interests		155,100,344		—			—			—		(3,042,358	)		152,057,986			224,279			—
TRU Kids Parent LLC		—		34,810,099	b		—			—		(8,303,270	)		26,506,829			7,104			—
Wayne Services Legacy Inc.		—		2,484,752	b		(3,727,125	)b		1,242,373		—			—			7,104			—
	$	220,771,736	$	37,294,851		$	(15,168,501	)	$	1,799,525	$	(12,081,902	)	$	201,408,976					$	2,776,405
																					Interest
Lee Enterprises Inc., Second Lien Term Loan, 12.00%, 12/15/22		47,222,199		209,317	b		(12,427,697	)b		148,076		(941,651	)		34,210,244			34,317,486			2,445,712
Lee Enterprises Inc., senior secured note, first lien, 144A, 9.50%, 3/15/22		99,476,250		207,405	b		—			—		(9,154,250	)		90,529,405			97,050,000			9,194,140
Sorenson Communications LLC, Initial Term  Loan, 8.25%, 4/30/20		138,475,000		44,289	b		(139,170,854	)		120,026		531,539			—	c		—			2,758,168
Sorenson Communications LLC, Initial Term  Loans, 8.445%, 3/14/24		—		13,022,779	b		(964,285	)		34,649		379,893			12,473,036			12,535,714			796,367
Sorenson Communications LLC, secured note, second lien, 144A, PIK, 9.00%, 10/31/20		94,738,498		222,447	b		(96,671,937	)		1,144,350		566,642			—	c		—			2,875,990
Sorenson Holdings LLC/Finance Corp., senior note, 144A, PIK, 13.85%, 10/31/21		20,620,500		44,363	b		(19,614,622	)		69,148		(1,119,389	)		—	c		—			704,310
	$	400,532,447	$	13,750,600		$	(268,849,395	)	$	1,516,249	$	(9,737,216	)	$	137,212,685					$	18,774,687
Total Affiliated Securities (Value is 7.9% of Net Assets)	$	621,304,183	$	51,045,451		$	(284,017,896	)	$	3,315,774	$	(21,819,118	)	$	338,621,661					$	21,551,092

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NOTES TO FINANCIAL STATEMENTS

Franklin Mutual Quest Fund (continued)

^aAs of December 31, 2019, no longer an affiliate.

^bMay include accretion, amortization, partnership adjustments, and/or corporate actions.

^cAs of December 31, 2019, no longer held by the Fund.

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 billion (Global Credit Facility) which matured on February 7, 2020. This Global Credit Facility provides a source of funds to the Borrowers for temporary and emergency purposes, including the ability to meet future unanticipated or unusually large redemption requests. Effective February 7, 2020, the Borrowers renewed the Global Credit Facility for a one year term, maturing February 5, 2021, for a total of $2 billion.

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 year ended December 31, 2019, 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.

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FRANKLIN MUTUAL SERIES FUNDS

NOTES TO FINANCIAL STATEMENTS

Franklin Mutual Quest Fund (continued)

14. Fair Value Measurements (continued)

A summary of inputs used as of December 31, 2019, in valuing the Fund’s assets and liabilities carried at fair value, is as follows:

	Level 1		Level 2		Level 3		Total
Assets:
Investments in Securities:a
Equity Investments:b
Auto Components	$	14,738,343	$	—	$	92,503	$	14,830,846
Communications Equipment		—		—		152,057,986		152,057,986
Media		333,224,642		—		472,147		333,696,789
Specialty Retail		23,474,858		—		26,506,829c		49,981,687
All Other Equity Investments		2,421,894,473		—		—c		2,421,894,473
Corporate Bonds, Notes and Senior Floating Rate Interests		—		708,973,028		—		708,973,028
Companies in Liquidation		—		—		57,296c		57,296
Options Purchased		187,500		—		—		187,500
Short Term Investments		561,440,132		54,100,000		—		615,540,132
Total Investments in Securities	$	3,354,959,948	$	763,073,028	$	179,186,761	$	4,297,219,737
Other Financial Instruments:
Forward Exchange Contracts	$	—	$	963,141	$	—	$	963,141
Liabilities:
Other Financial Instruments:
Options Written	$	1,454,500	$	—	$	—	$	1,454,500
Securities Sold Shorta		33,371,164		—		—		33,371,164
Futures Contracts		1,089,297		—		—		1,089,297
Forward Exchange Contracts		—		14,027,227		—		14,027,227
Total Other Financial Instruments	$	35,914,961	$	14,027,227	$	—	$	49,942,188

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

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

^cIncludes securities determined to have no value at December 31, 2019.

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NOTES TO FINANCIAL STATEMENTS

Franklin Mutual Quest Fund (continued)

A reconciliation of assets in which Level 3 inputs are used in determining fair value is presented when there are significant Level 3 financial instruments at the beginning and/or end of the year. At December 31, 2019, the reconciliation of assets are as follows:

	Balance at Beginning of Year			Purchases		Sales			Transfer Into Level 3a		Transfer Out of Level 3		Cost Basis Adjustmentsb				Net Realized Gain (Loss)			Net Unrealized Appreciation (Depreciation)				Balance at End of Year			Net Change in Unrealized Appreciation (Depreciation) on Assets Held at Year End
Assets:
Investments in Securities:
Equity Investments:c
Auto Components	$	2,483,009		$	—	$	(2,968,774	)	$	—		$—		$	—		$	(13,337,171	)		$	13,915,439		$	92,503			$	(15,486	)
Chemicals		—	d		—		—			—		—			—			—				—			—				—
Communications Equipment		155,100,344			—		—			—		—			—			—				(3,042,358	)		152,057,986				(3,042,358	)
Diversified Consumer Services		3,664,436			—		—			—		—			—			—				(3,664,436	)		—	d			(3,664,436	)
Media		217,582			519,612		—			—		—			—			—				(265,047	)		472,147				(265,047	)
Specialty Retail		—			37,294,851		—			—		—			(3,727,125	)		1,242,373				(8,303,270	)		26,506,829	d			(8,303,270	)
Corporate Notes in Reorganization		3,563,602	d		—		(426,271	)		—		—			—			(17,289,374	)			14,152,043			—				—
Companies in Liquidation		—	d		—		—			57,296		—			(2,135	)		2,135				—			57,296	d			—
Total Investments in Securities	$	165,028,973		$	37,814,463	$	(3,395,045	)	$	57,296		$—		$	(3,729,260	)	$	(29,382,037	)		$	12,792,371		$	179,186,761			$	(15,290,597	)

^aThe investments were transferred into Level 3 as a result of its value being determined using a significant unobservable input.

^bMay include accretion, amortization, partnership adjustments, and/or other cost basis adjustments. May also include amounts related to a corporate action.

^cIncludes common stocks as well as other equity interests.

^dIncludes securities determined to have no value.

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NOTES TO FINANCIAL STATEMENTS

Franklin Mutual Quest Fund (continued)

14. Fair Value Measurements (continued)

Significant unobservable valuation inputs for material Level 3 financial instruments and impact to fair value as a result of changes in unobservable valuation inputs as of December 31, 2019, are as follows:

Description	Fair Value at End of Year			Valuation Technique		Unobservable Inputs	Amount		Impact to Fair Value if Input Increasesa
Assets:
Investments in Securities:
Equity Investments:
Communications Equipment	$	152,057,986			Market transaction	Transaction price weighting		50%	Increaseb
					Market comparables	EV / EBITDA multiple		4.8x	Increasec
Specialty Retail		26,506,829			Market comparables	Discount for lack of marketability		20%	Decreased
						EV / EBITDA multiple		9.3x	Increased
All Other Investmentse		621,946	f
Total	$	179,186,761

^aRepresents the directional change in the fair value of the Level 3 financial instruments that would result from a significant and reasonable increase in the corresponding input. A significant and reasonable decrease in the input would have the opposite effect. Significant impacts, if any, to fair value and/or net assets have been indicated.

^bRepresents a significant impact to fair value and net assets.

^cRepresents a significant impact to net assets but not fair value.

^dRepresents a significant impact to fair value but not net assets.

^eIncludes fair value of immaterial financial instruments developed using various valuation techniques and unobservable inputs. May also include financial instruments with values derived using private transaction prices or non-public third party pricing information which is unobservable.

^fIncludes securities determined to have no value at December 31, 2019.

Abbreviations List

EBITDA	Earnings before interest, taxes, depreciation and amortization
EV	Enterprise value

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 other than those already disclosed in the financial statements.

Abbreviations
Counterparty		Currency		Selected Portfolio
BOFA	Bank of America Corp.	EUR	Euro	ADR	American Depositary Receipt
HSBK	HSBC Bank PLC	GBP	British Pound	FHLB	Federal Home Loan Bank
SSBT	State Street Bank and Trust Co., N.A.	USD	United States Dollar	LIBOR	London InterBank Offered Rate
UBSW	UBS AG

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Report of Independent Registered Public Accounting Firm

To the Board of Trustees of Franklin Mutual Series Funds and Shareholders of Franklin Mutual Quest Fund:

Opinion on the Financial Statements

We have audited the accompanying statement of assets and liabilities of Franklin Mutual Quest Fund (the “Fund”) (one of the funds constituting Franklin Mutual Series Funds), including the schedule of investments, as of December 31, 2019, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, the financial highlights for each of the five years in the period then ended and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of Franklin Mutual Quest Fund (one of the funds constituting Franklin Mutual Series Funds) at December 31, 2019, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and its financial highlights for each of the five years in the period then ended, in conformity with U.S. generally accepted accounting principles.

Basis for Opinion

These financial statements are the responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Fund is not required to have, nor were we engaged to perform, an audit of the Fund’s internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Fund’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of December 31, 2019, by correspondence with the custodian and brokers or by other appropriate auditing procedures where replies from others were not received. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

We have served as the auditor of one or more Franklin investment companies since 1987.

Boston, Massachusetts

February 21, 2020

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Franklin Mutual Quest Fund

Tax Information (unaudited)

Under Section 854(b)(1)(A) of the Internal Revenue Code, the Fund hereby reports 14.95% of the ordinary income dividends as income qualifying for the dividends received deduction for the fiscal year ended December 31, 2019.

Under Section 854(b)(1)(B) of the Internal Revenue Code, the Fund hereby reports the maximum amount allowable but no less than $64,811,119 as qualified dividends for purposes of the maximum rate under Section 1(h)(11) of the Internal Revenue Code for the fiscal year ended December 31, 2019. Distributions, including qualified dividend income, paid during calendar year 2019 will be reported to shareholders on Form 1099-DIV by mid-February 2020. Shareholders are advised to check with their tax advisors for information on the treatment of these amounts on their individual income tax returns.

Under Section 871(k)(1)(C) of the Internal Revenue Code, the Fund hereby reports the maximum amount allowable but no less than $77,328,147 as interest related dividends for purposes of the tax imposed under Section 871(a)(1)(A) of the Internal Revenue Code for the fiscal year ended December 31, 2019.

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Board Members and Officers

The name, year of birth and address of the officers and board members, as well as their affiliations, positions held with the Trust, principal occupations during at least the past five years and number of U.S. registered portfolios overseen in the Franklin Templeton fund complex, are shown below. Generally, each board member serves until that person’s successor is elected and qualified.

Independent Board Members

Name, Year of Birth and Address	Position	Length of Time Served	Number of Portfolios in Fund Complex Overseen by Board Member*	Other Directorships Held During at Least the Past 5 Years
Edward I. Altman, Ph.D. (1941) c/o Franklin Mutual Advisers, LLC 101 John F. Kennedy Parkway Short Hills, NJ 07078-2716	Trustee	Since 1987	12	None
Principal Occupation During at Least the Past 5 Years:
Max L. Heine Professor of Finance, Emeritus and Director of The Credit and Debt Markets Research Program, Salomon Center, Stern School of Business, New York University; editor and author of numerous financial publications; financial consultant; an adviser to numerous financial and publishing organizations; and formerly, Vice Director, Salomon Center, Stern School of Business, New York University.
Ann Torre Bates (1958) c/o Franklin Mutual Advisers, LLC 101 John F. Kennedy Parkway Short Hills, NJ 07078-2716	Trustee and Chairperson	Trustee since 1995 and Chairperson since January 2020	33	Ares Capital Corporation (specialty finance company) (2010-present), United Natural Foods, Inc. (distributor of natural, organic and specialty foods) (2013-present), Allied Capital Corporation (financial services) (2003-2010), SLM Corporation (Sallie Mae) (1997-2014) and Navient Corporation (loan management, servicing and asset recovery) (2014-2016).
Principal Occupation During at Least the Past 5 Years:
Director of various companies; and formerly, Executive Vice President and Chief Financial Officer, NHP Incorporated (manager of multifamily housing) (1995-1997); and Vice President and Treasurer, US Airways, Inc. (until 1995).
Burton J. Greenwald (1929) c/o Franklin Mutual Advisers, LLC 101 John F. Kennedy Parkway Short Hills, NJ 07078-2716	Trustee	Since 2002	12	Franklin Templeton Emerging Markets Debt Opportunities Fund PLC (1999-present) and Fiduciary International Ireland Limited (1999-2015).
Principal Occupation During at Least the Past 5 Years:
Managing Director, B.J. Greenwald Associates (management consultants to the financial services industry); and formerly, Chairman, Fiduciary Trust International Funds; Executive Vice President, L.F. Rothschild Fund Management, Inc.; President and Director, Merit Mutual Funds; President, Underwriting Division and Director, National Securities & Research Corporation; Governor, Investment Company Institute; and Chairman, ICI Public Information Committee.
Jan Hopkins Trachtman (1947) c/o Franklin Mutual Advisers, LLC 101 John F. Kennedy Parkway Short Hills, NJ 07078-2716	Trustee	Since 2009	12	FinTech Acquisition Corp. III (special purpose fintech acquisition company) (2018-present)
Principal Occupation During at Least the Past 5 Years:
President and Founder, The Jan Hopkins Group (communications consulting firm); serves on Alumni Advisory Board of Knight Bagehot Fellowship; and formerly, President, Economic Club of New York (2007-2015); Anchor/Correspondent, CNN Financial News (until 2003); Managing Director and Head of Client Communications, Citigroup Private Bank (until 2005); Off-Air reporter, ABC News’ World News Tonight; and Editor, CBS Network News.

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Independent Board Members (continued)

Name, Year of Birth and Address	Position	Length of Time Served	Number of Portfolios in Fund Complex Overseen by Board Member*	Other Directorships Held During at Least the Past 5 Years
Keith Mitchell (1954) c/o Franklin Mutual Advisers, LLC 101 John F. Kennedy Parkway Short Hills, NJ 07078-2716	Trustee	Since 2009	12	None
Principal Occupation During at Least the Past 5 Years:
Director of various boards of asset management firms; and formerly, Managing Member, Mitchell, Hartley & Bechtel Advisers, LLC (formerly, Mitchell Advisers, LLC) (advisory firm) (2003-2015) and Managing Director, Putman Lovell NBF.
David W. Niemiec (1949) c/o Franklin Mutual Advisers, LLC 101 John F. Kennedy Parkway Short Hills, NJ 07078-2716	Trustee	Since 2015	33	Hess Midstream LP (oil and gas midstream infrastructure) (2017-present).
Principal Occupation During at Least the Past 5 Years:
Advisor, Saratoga Partners (private equity fund); and formerly, Managing Director, Saratoga Partners (1998-2001) and SBC Warburg Dillon Read (investment banking) (1997-1998); Vice Chairman, Dillon, Read & Co. Inc. (investment banking) (1991-1997); and Chief Financial Officer, Dillon, Read & Co. Inc. (1982-1997).
Charles Rubens II (1930) c/o Franklin Mutual Advisers, LLC 101 John F. Kennedy Parkway Short Hills, NJ 07078-2716	Trustee	Since 1998	12	None
Principal Occupation During at Least the Past 5 Years:
Private investor and president of non-profit organizations; and formerly, an executive of Time, Inc.; and Trustee of Colorado College.
Robert E. Wade (1946) c/o Franklin Mutual Advisers, LLC 101 John F. Kennedy Parkway Short Hills, NJ 07078-2716	Trustee	Since 1991	33	El Oro Ltd (investments) (2003-2019).
Principal Occupation During at Least the Past 5 Years:
Attorney at law engaged in private practice as a sole practitioner (1972-2008) and member of various boards.
Gregory H. Williams (1943) c/o Franklin Mutual Advisers, LLC 101 John F. Kennedy Parkway Short Hills, NJ 07078-2716	Trustee	Since 2015	12	None
Principal Occupation During at Least the Past 5 Years:
Private investor; Consultant; and formerly, President, University of Cincinnati (2009-2012); President, The City College of New York (2001-2009); Dean, College of Law, Ohio State University (1993-2001); and Associate Vice President, Academic Affairs and Professor of Law, University of Iowa (1977-1993).
Interested Board Members and Officers
Name, Year of Birth and Address	Position	Length of Time Served	Number of Portfolios in Fund Complex Overseen by Board Member*	Other Directorships Held During at Least the Past 5 Years
**Gregory E. Johnson (1961) One Franklin Parkway San Mateo, CA 94403-1906	Trustee	Since 2007	144	None
Principal Occupation During at Least the Past 5 Years:
Chairman of the Board, Member – Office of the Chairman, Director and Chief Executive Officer, Franklin Resources, Inc.; officer and/or director or trustee, as the case may be, of some of the other subsidiaries of Franklin Resources, Inc. and of 39 of the investment companies in Franklin Templeton; Vice Chairman, Investment Company Institute; and formerly, President, Franklin Resources, Inc. (1994-2015).

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Interested Board Members and Officers (continued)

Name, Year of Birth and Address	Position	Length of Time Served	Number of Portfolios in Fund Complex Overseen by Board Member*	Other Directorships Held During at Least the Past 5 Years
**Peter A. Langerman (1955) c/o Franklin Mutual Advisers, LLC 101 John F. Kennedy Parkway Short Hills, NJ 07078-2716	Trustee, President, and Chief Executive Officer – Investment Management	Trustee since 2007, President, and Chief Executive Officer – Investment Management since 2005	7	None
Principal Occupation During at Least the Past 5 Years:
Chairman of the Board, Chief Executive Officer and President, Franklin Mutual Advisers, LLC; and officer and/or director, as the case may be, of three of the investment companies in Franklin Templeton.
Alison E. Baur (1964) One Franklin Parkway San Mateo, CA 94403-1906	Vice President	Since 2012	Not Applicable	Not Applicable
Principal Occupation During at Least the Past 5 Years:
Deputy General Counsel, Franklin Templeton; and officer of some of the other subsidiaries of Franklin Resources, Inc. and of 41 of the investment companies in Franklin Templeton.
Breda M. Beckerle (1958) 280 Park Avenue New York, NY 10017	Interim Chief Compliance Officer	Since January 2020	Not Applicable	Not Applicable
Principal Occupation During at Least the Past 5 Years:
Chief Compliance Officer, Fiduciary Investment Management International, Inc., Franklin Advisers, Inc., Franklin Advisory Services, LLC, Franklin Mutual Advisers, LLC, Franklin Templeton Institutional, LLC; and officer of 41 of the investment companies in Franklin Templeton.
Steven J. Gray (1955) One Franklin Parkway San Mateo, CA 94403-1906	Vice President and Secretary	Vice President since 2009 and Secretary since 2005	Not Applicable	Not Applicable
Principal Occupation During at Least the Past 5 Years:
Senior Associate General Counsel, Franklin Templeton; Vice President, Franklin Templeton Distributors, Inc. and FASA, LLC; and officer of 41 of the investment companies in Franklin Templeton.
Matthew T. Hinkle (1971) One Franklin Parkway San Mateo, CA 94403-1906	Chief Executive Officer – Finance and Administration	Since 2017	Not Applicable	Not Applicable
Principal Occupation During at Least the Past 5 Years:
Senior Vice President, Franklin Templeton Services, LLC; officer of 41 of the investment companies in Franklin Templeton; and formerly, Vice President, Global Tax (2012-April 2017) and Treasurer/Assistant Treasurer, Franklin Templeton (2009-2017).
Robert G. Kubilis (1973) 300 S.E. 2nd Street Fort Lauderdale, FL 33301-1923	Chief Financial Officer, Chief Accounting Officer and Treasurer	Since 2012	Not Applicable	Not Applicable
Principal Occupation During at Least the Past 5 Years:
Treasurer, U.S. Fund Administration & Reporting; and officer of 15 of the investment companies in Franklin Templeton.

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Interested Board Members and Officers (continued)

Name, Year of Birth and Address	Position	Length of Time Served	Number of Portfolios in Fund Complex Overseen by Board Member*	Other Directorships Held During at Least the Past 5 Years
Robert Lim (1948) One Franklin Parkway San Mateo, CA 94403-1906	Vice President – AML Compliance	Since 2016	Not Applicable	Not Applicable
Principal Occupation During at Least the Past 5 Years:
Vice President, Franklin Templeton Companies, LLC; Chief Compliance Officer, Franklin Templeton Distributors, Inc. and Franklin Templeton Investor Services, LLC; and officer of 44 of the investment companies in Franklin Templeton Investments.
Navid J. Tofigh (1972) One Franklin Parkway San Mateo, CA 94403-1906	Vice President	Since 2015	Not Applicable	Not Applicable
Principal Occupation During at Least the Past 5 Years:
Associate General Counsel; and officer of 41 of the investment companies in Franklin Templeton.
Craig S. Tyle (1960) One Franklin Parkway San Mateo, CA 94403-1906	Vice President	Since 2005	Not Applicable	Not Applicable
Principal Occupation During at Least the Past 5 Years:
General Counsel and Executive Vice President, Franklin Resources, Inc.; and officer of some of the other subsidiaries of Franklin Resources, Inc. and of 41 of the investment companies in Franklin Templeton.
Lori A. Weber (1964) 300 S.E. 2nd Street Fort Lauderdale, FL 33301-1923	Vice President	Since 2011	Not Applicable	Not Applicable
Principal Occupation During at Least the Past 5 Years:
Senior Associate General Counsel, Franklin Templeton; Assistant Secretary, Franklin Resources, Inc.; Vice President and Secretary, Templeton Investment Counsel, LLC; and officer of 41 of the investment companies in Franklin Templeton.

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*We base the number of portfolios on each separate series of the U.S. registered investment companies within the Franklin Templeton Investments fund complex. These portfolios have a common investment manager or affiliated investment managers.

**Gregory E. Johnson is considered to be an interested person of the Fund under the federal securities laws due to his position as an officer and director of Franklin Resources, Inc. (Resources), which is the parent company of the Fund’s investment manager and distributor. Peter A. Langerman is considered to be an interested person of the Fund under the federal securities laws due to his position as an officer of Franklin Mutual Advisers, LLC, which is the Fund’s investment manager.

Note 1: Officer information is current as of the date of this report. It is possible that after this date, information about officers may change.

The Sarbanes-Oxley Act of 2002 and Rules adopted by the U.S. Securities and Exchange Commission require the Fund to disclose whether the Fund’s Audit Committee includes at least one member who is an audit committee financial expert within the meaning of such Act and Rules. The Fund’s Board has determined that there is at least one such financial expert on the Audit Committee and has designated each of Edward I. Altman, Ph.D., Ann Torre Bates and David W. Niemiec as an audit committee financial expert. The Board believes that Messrs. Altman and Niemiec and Ms. Bates qualify as such an expert in view of their extensive business background and experience. Mr. Altman has served as a member of the Fund Audit Committee since 1987. He currently serves as a Max L. Hine Professor of Finance, Emeritus and Director of The Credit and Debt Markets Research Program, Salomon Center, Stern School of Business, New York University. Ms. Bates has served as a member of the Fund Audit Committee since 1995. She currently serves as a director of Ares Capital Corporation (2010-present) and United Natural Foods, Inc. (2013-present) and was formerly a director of Navient Corporation from 2014 to 2016, SLM Corporation from 1997 to 2014 and Allied Capital Corporation from 2003 to 2010, Executive Vice President and Chief Financial Officer of NHP Incorporated from 1995 to 1997 and Vice President and Treasurer of US Airways, Inc. until 1995. Mr. Niemiec has served as a member of the Fund Audit Committee since 2015, currently serves as an Advisor to Saratoga Partners and was formerly its Managing Director from 1998 to 2001 and serves as a director of Hess Midstream LP (2017-present). Mr. Niemiec was formerly a director of Emeritus Corporation from 1999 to 2010 and OSI Pharmaceuticals, Inc. from 2006 to 2010, Managing Director of SBC Warburg Dillon Read from 1997 to 1998, and was Vice Chairman from 1991 to 1997 and Chief Financial Officer from 1982 to 1997 of Dillon, Read & Co. Inc. As a result of such background and experience, the Board believes that Messrs. Altman and Niemiec and Ms. Bates have each acquired an understanding of generally accepted accounting principles and financial statements, the general application of such principles in connection with the accounting estimates, accruals and reserves, and analyzing and evaluating financial statements that present a breadth and level of complexity of accounting issues generally comparable to those of the Fund, as well as an understanding of internal controls and procedures for financial reporting and an understanding of audit committee functions. Messrs. Altman and Niemiec and Ms. Bates are independent Board members as that term is defined under the applicable U.S. Securities and Exchange Commission Rules and Releases.

The Statement of Additional Information (SAI) includes additional information about the board members and is available, without charge, upon request. Shareholders may call (800) DIAL BEN/342-5236 to request the SAI.

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FRANKLIN MUTUAL QUEST FUND

Shareholder Information

Proxy Voting Policies and Procedures

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

Quarterly Statement of Investments

The Trust, on behalf of the Fund, files a complete statement of investments with the U.S. Securities and Exchange Commission for the first and third quarters for each fiscal year 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 the Fund’s financial reports every six months as well as an annual updated summary prospectus (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 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.

	Annual Report and Shareholder Letter
	Franklin Mutual Quest Fund
	Investment Manager	Distributor	Shareholder Services
	Franklin Mutual Advisers, LLC	Franklin Templeton Distributors, Inc. (800) DIAL BEN® / 342-5236	(800) 632-2301 - (Class A, C, R & R6)
		franklintempleton.com	(800) 448-FUND - (Class Z)

© 2020 Franklin Templeton Investments. All rights reserved. 475 A 02/20

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

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

FRANKLIN TEMPLETON

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

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

Dear Franklin Mutual Shares Fund Shareholder:

As we enter 2020, the factors that lifted stocks to record highs in 2019—accommodative central bank monetary policies and progress on a proposed trade deal between the U.S. and China—continue to be sources of optimism for growth. The near-term threat of recession has eased, with the U.S. economy showing resilience as low unemployment and moderately rising wages have encouraged consumer spending, which has supported the expansion. In contrast, business investment and exports were weak in 2019, but there are nascent signs of increasing industrial activity.

Tariffs, trade battles and geopolitical conflict may continue to dominate headlines in 2020 and account for a disproportionate source of market volatility. The U.S. and China agreed in principle to a phase-one trade agreement in late 2019. However, a re-escalation of the tariff dispute between the world’s two largest economies is not out of the question, as negotiations on a phase-two trade agreement are scheduled to start after the anticipated phase-one signing ceremony in January. There was clarity on Brexit as British voters delivered a resounding election victory to Prime Minister Boris Johnson and his Conservative Party, which should pave the way for a conclusive exit agreement. The terms of U.K. departure, however, must still be finalized. Late in the period, tensions in the Middle East were on the rise, following the death of an American contractor in Iraq in late December and a retaliatory U.S. military strike two days later.

During the period, we took advantage of market turbulence to seek out a larger number of stocks whose risk/reward profiles turned more favorable. Subsequently, we used the market appreciation to exit from or trim select positions that reached or exceeded our estimates of intrinsic value. Market volatility continues to present occasional opportunities in

individual stocks, and in certain sectors, notably those considered to be economically sensitive. We continue to focus on situations in which company-specific actions are more important than economic improvement in driving shareholder value.

Valuation is an essential factor in our analysis, and we always ask ourselves if current and potential investments represent an attractive balance of risk and reward. Amid the all-time highs reached by the Standard & Poor’s^® 500 Index (S&P 500^®) during the period, we maintained our focus on individual securities and the prospects for each business in the context of its valuation and the backdrop of potential political and economic risks.

We continue to adhere to a bottom-up stock selection process that is disciplined, driven by rigorous fundamental analysis, and that attempts to limit downside risk. In our view, actively investing in underappreciated and misunderstood companies with identifiable catalysts for unlocking shareholder value can offer meaningful upside potential and a degree of downside protection in periods of financial market turbulence.

We recognize the important role of financial advisors in today’s markets and encourage investors to continue to seek their advice. Amid changing markets and economic conditions, we are confident investors with a well-diversified portfolio and a patient, long-term outlook will 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 12 months considering the

Not FDIC Insured |  May Lose Value | No Bank Guarantee 

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economic environment and other factors. Please remember all securities markets fluctuate, as do mutual fund share prices.

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

Sincerely,

Peter A. Langerman

Chairman, President and Chief Executive Officer

Franklin Mutual Advisers, LLC

This letter reflects our analysis and opinions as of December 31, 2019, unless otherwise indicated. The information is not a complete analysis of every aspect of any market, country, industry, security or fund. Statements of fact are from sources considered reliable.

 Contents

Annual Report
Franklin Mutual Shares Fund	3
Performance Summary	9
Your Fund’s Expenses	12
Financial Highlights and Statement of Investments	13
Financial Statements	25
Notes to Financial Statements	30
Report of Independent Registered Public Accounting Firm	44
Tax Information	45
Board Members and Officers	46
Shareholder Information	51

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

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ANNUAL REPORT

Franklin Mutual Shares Fund

This annual report for Franklin Mutual Shares Fund covers the fiscal year ended December 31, 2019.

Your Fund’s Goal and Main Investments

The Fund seeks capital appreciation, which may occasionally be short term, with income as a secondary goal. Under normal market conditions, the Fund invests primarily in equity securities, primarily common stock, of U.S. and foreign companies that we believe are available at market prices less than their intrinsic value. To a lesser extent, the Fund also invests in merger arbitrage securities and the debt and equity of distressed companies. The Fund may invest up to 35% of its assets in foreign securities, which may include sovereign debt and participations in foreign government debt. The Geographic Composition bar chart on this page lists the leading countries where the Fund invests.

Performance Overview

The Fund’s Class Z shares posted a cumulative total return of +23.13% for the 12 months ended December 31, 2019. For comparison, the Fund’s benchmark, the Standard & Poor’s 500 Index (S&P 500), which is a broad measure of U.S. stock performance, posted a total return of +31.49%.¹ You can find more of the Fund’s performance data in the Performance Summary beginning on page 9.

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 stocks, as measured by the MSCI All Country World Index (USD), posted a +27.30% total return during the 12 months ended December 31, 2019.¹ Although global economic growth slowed from 2018, interest-rate cuts from many central banks and the easing of trade tensions near period-end

Geographic Composition*

Based on Total Net Assets as of 12/31/19

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

contributed to the generally positive environment for equities worldwide. Reflecting investor optimism and slowing but resilient economic growth, stocks advanced in every major region of the globe.

In the U.S., solid economic growth also supported equities, as healthy consumer spending and a strong labor market kept the economy afloat. The unemployment rate fell during the year, reaching 3.5% in September, November and December 2019, the lowest recorded unemployment rate in 50 years.² Wages also grew, albeit at a moderate pace, and inflation remained persistently low. In addition, deficit spending by the U.S. government boosted current growth at the expense of long-term debt. Despite the strength in the consumer sector, some parts of the economy struggled, particularly heavy industry. Annual industrial production contracted late in the reporting period, manufacturing output stalled and capital spending declined.

The U.S. Federal Reserve (Fed) provided a substantial boost to equity markets early in the reporting period as it shifted to a more accommodative monetary policy. In January 2019,

1. Source: Morningstar.

The index is unmanaged and includes reinvestment of any income or distributions. It does not reflect any fees, expenses or sales charges. One cannot invest directly in an index, and an index is not representative of the Fund’s portfolio.

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

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 18.

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the Fed signaled the end of its tightening cycle and cut the federal funds rate three times thereafter, lowering it to a range of 1.50%–1.75%. Stocks responded positively to the interest-rate cuts and gained further in December 2019 after the Fed indicated it would likely leave interest rates unchanged in 2020.

Growth slowed overall in the eurozone, particularly in Germany and Italy. Germany, which is heavily reliant on exports, was adversely affected by the trade conflict between the U.S. and China and the resulting slowdown in global trade. In Italy, political uncertainty and budget concerns caused the country’s annual gross domestic product (GDP) growth to stall in 2019’s first quarter before modestly improving in the second and third quarters. Despite sluggish economic conditions, European developed market equities, as measured by the MSCI Europe Index-NR (Local Currency), posted a +23.75% total return for the 12-month period, as easing trade tensions buoyed investor optimism and an electoral victory by the Conservative Party in the U.K. alleviated uncertainty surrounding Brexit.³ Although the European Central Bank left its headline refinancing rate unchanged, it lowered the deposit rate and restarted its bond-buying stimulus program, further supporting stocks.

Economic growth in Asia was relatively solid overall, despite slowdowns in several large emerging market countries, such as China and India. Japan’s economy grew amid the Bank of Japan’s sizable stimulus program. The trade war between the U.S. and China provided the backdrop for Asian stocks, which rose and fell in sync with investor sentiment regarding a trade deal. A phase one trade agreement between the two countries reached in December 2019 propelled Asian developed and emerging market stocks, which ultimately ended with a +19.23% total return over the 12-month period, as measured by the MSCI All Country Asia Index (USD).⁴

Emerging market stocks overall experienced several sharp selloffs and subsequent rebounds throughout the reporting period before ending with gains. In aggregate, economic growth slowed somewhat from 2018 but remained solid, although there was some variation among individual countries. Many central banks in emerging markets cut interest rates throughout the reporting period, which, along with resilient GDP growth, provided a supportive environment for equities. Russian stocks posted the highest returns among emerging markets as the threat of further sanctions receded and a solid fiscal environment reassured investors. Overall, global emerging markets, as measured by

the MSCI Emerging Markets Index (USD), posted a +18.90% total return for the 12-month period.¹

Investment Strategy

At Franklin Mutual Series, we are committed to our distinctive value approach to investing, which we believe can generate above-average risk-adjusted returns over time for our shareholders. Our major investment strategy is investing in undervalued stocks. When selecting undervalued equities, we are attracted to what we believe are fundamentally strong companies with healthy balance sheets, high-quality assets, substantial free cash flow and shareholder-oriented management teams and whose stocks are trading at discounts to our assessment of the companies’ intrinsic or business value. We also look for asset-rich companies whose shares may be trading at depressed levels due to concerns over short-term earnings disappointments, litigation, management strategy or other perceived negatives. This strict value approach is not only intended to improve the likelihood of capital appreciation, but also reduces the risk of substantial declines, in our opinion. While the vast majority of our undervalued equity investments are made in publicly traded companies globally, we may invest occasionally in privately held companies as well.

To a lesser extent, we complement this more traditional investment strategy with two others. One is distressed investing, a highly specialized field that has proven quite profitable during certain periods over the years. Distressed investing is complex and can take many forms. The most common distressed investment the Fund undertakes is the purchase of financially troubled or bankrupt companies’ debt at a substantial discount to face value. After the financially distressed company is reorganized, often in bankruptcy court, the old debt is typically replaced with new securities issued by the financially stronger company.

The other piece of our investment strategy is participating in arbitrage situations, another highly specialized field. When companies announce proposed mergers or takeovers, commonly referred to as deals, the target company may trade at a discount to the bid it ultimately accepts. One form of arbitrage involves purchasing the target company’s stock when it is trading below the value we believe it would receive in a deal. In keeping with our commitment to a relatively conservative investment approach, we typically focus our arbitrage efforts on announced deals, and avoid rumored deals or other situations we consider relatively risky. In

3. Source: Morningstar. Net Returns (NR) include income net of tax withholding when dividend are paid.

4. Source: MSCI.

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addition, it is our practice to hedge the Fund’s currency exposure when we deem it advantageous for our shareholders.

What is meant by “hedge”?

To hedge an investment is to take a position intended to offset potential losses that may be incurred by a companion financial instrument. Hedging an investment may also offset potential gains.

Manager’s Discussion

The end of a decade is a natural time for reflection about the years that have just passed and to look ahead to what the next 10 might have in store. Across Wall Street, we see many prognostications, and while we are not in the forecasting business, we do allow ourselves to think about investment opportunities over such an extended time period. But experience has taught us that while trying to predict the exact course of markets and/or economic and political events that will drive them may be fun, it is not all that useful.

As 2010 began, the global economy was still recovering from the Global Financial Crisis. The U.S. government owned significant portions of the banking and automotive sectors. The Fed had already started quantitative easing (QE), with QE 2 and QE 3 still to come. In Europe, concerns about Greece’s finances were emerging, and in China the effects of 2009’s massive stimulus programs were starting to take hold.

Over the subsequent years we saw ongoing, global QE, culminating in trillions of dollars of debt yielding negative interest rates. The European Union (EU) was in continuous upheaval, with Greece threatening to leave, but eventually staying in the eurozone; the U.K. pursuing and achieving Brexit; and ongoing strain between core members Germany, France, Italy and Spain. In the U.S., average annual economic growth was restrained and finished the decade below 2%, trailing the minimum 3% expectation of prior decades. Strong corporate profits and lower corporate tax rates were bright spots.

Equity markets delivered a very good decade—one of the best in history—with the S&P 500 and the MSCI World Index (USD) posting average annual total returns of +13.56% and +10.08%, respectively.⁵ During the decade, Franklin Mutual

Top 10 Sectors/Industries

Based on Equity Securities as of 12/31/19

	% of Total Net Assets
Pharmaceuticals	9.9%
Banks	9.7%
Insurance	8.2%
Oil, Gas & Consumable Fuels	7.7%
Media	6.1%
Technology Hardware, Storage & Peripherals	4.3%
Tobacco	3.1%
Food Products	3.1%
Health Care Equipment & Supplies	3.0%
Software	3.0%

Shares Fund, Class Z posted an average annual total return of +9.01%, a solid absolute return that nonetheless lagged the S&P 500, its benchmark. The Fund’s value strategy, which seeks to identify mispriced securities and limit downside risk, was out of favor in an environment that generally encouraged investors to assume more risk. Conversely, the Fund’s Class Z shares posted an average annual total return of +5.27% in the prior decade, compared with -0.95% for the S&P 500.1 Our active investment approach focusing on individual opportunities was more conducive to the prior decade’s greater volatility.

In our view, going forward we expect more political and monetary uncertainty and economic growth in unexpected places. Corporate profits will have good years and bad years. Some industries will be massively disrupted, while others will find a way to adjust and prosper, even within the context of artificial intelligence and machine learning. Recent events, such as the coronavirus outbreak, have caused, and may continue to cause, uncertainty and volatility in the Chinese economy, potentially leading to vulnerability in 2020 global growth expectations. As for investment positioning, we intend to avoid forecasts that would lead us to make the Fund’s success dependent on a specific set of outcomes. Rather, we will seek to continue with our time-tested value process and complement it with new tools that enhance our security evaluation and selection process. To that end, we have integrated risk and quantitative portfolio analysis tools that provide us with fresh insights about performance, and help us identify companies and securities that we believe

5. 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.

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

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satisfy our investors’ goals of risk-adjusted returns that are not wholly dependent on any one economic or political scenario.

Fund Performance

Turning to Fund performance, top positive contributors included U.S.-based companies Charter Communications, Citigroup and Walt Disney. These companies are listed among the Fund’s largest positions in the Top 10 Equity Holdings table on this page.

Shares of cable operator Charter Communications surged after the company reported operating and financial results that were broadly ahead of consensus estimates. Capital expenditures were lower than expected and drove free cash flow, which was used during the period to buy back $3.1 billion of the company’s stock. The market was anticipating share repurchases totaling $2.25 billion. Revenue accelerated 5.1% compared with consensus forecasts of 4.5%. The increased revenue, however, did not reflect the impact of a broad-based increase in per subscriber fees implemented during the period, which could drive revenue growth and margin expansion in 2020. According to the company’s management, there has not been a meaningful decrease in customers as a result of the higher per subscriber fees.

Investors bid up shares of bank and financial services provider Citigroup following the release of third-quarter earnings that beat consensus expectations. Highlights included increases in deposits of 6% quarter-over-quarter and 11% year-over-year; growth in revenues and purchase volumes in the North America-branded credit cards division by 11% and 7% year-over-year, respectively; and strong results in the bank’s Asian operations across the board. Management also repurchased 76 million, or 3.3%, of outstanding shares of the company during the period.

Shares of family entertainment and media enterprise Walt Disney surged in late 2019. The rally was kicked off by an earnings report characterized by across-the-board outperformance of Disney legacy assets and a better-than-expected outlook for fiscal-year 2020 earnings. The company’s stock continued to rise following the successful launch of Disney+, its subscription video on-demand streaming service, which reported more than 10 million subscribers on the first day of service, exceeding forecasts. The box office performance of Frozen II, which set a record for Thanksgiving-weekend receipts, also helped boost the stock’s performance.

Top 10 Equity Holdings

12/31/19

Company Sector/Industry, Country	% of Total Net Assets
Medtronic PLC Health Care Equipment & Supplies, U.S.	3.0%
Novartis AG Pharmaceuticals, Switzerland	2.4%
The Walt Disney Co. Entertainment, U.S.	2.3%
Charter Communications Inc. Media, U.S.	2.3%
GlaxoSmithKline PLC Pharmaceuticals, U.K.	2.3%
Alleghany Corp. Insurance, U.S.	2.2%
JPMorgan Chase & Co. Banks, U.S.	2.2%
American International Group Inc. Insurance, U.S.	2.2%
Citigroup Inc. Banks, U.S.	2.1%
Wells Fargo & Co. Banks, U.S.	2.1%

During the period under review, Fund investments that detracted from performance included U.S.-based companies Fluor (not held at period-end), Occidental Petroleum and Walgreens Boots Alliance.

The share price of Fluor, a global engineering and construction company, fell significantly during the period. The company withdrew 2019 guidance after reporting significant project charges and materially lower-than-expected earnings and revenues. Following these disappointing results, the company announced the return of the former chief executive officer (CEO) as executive chairman, promoted the general counsel to CEO, rehired the former chief financial officer and initiated a strategic review that recommends simplifying the company’s business model by divesting of non-core businesses.

The stock of Occidental Petroleum, a petroleum and chemical products company, traded lower in 2019 as investors struggled to accept its acquisition of Anadarko Petroleum, during a period in which energy stocks were under pressure from falling crude oil prices. We think the Anadarko deal should be highly beneficial to the company’s per share metrics, although the acquisition will make the company more dependent on oil prices, while significantly weakening its balance sheet. The acquired Permian Basin

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assets complement Occidental’s existing portfolio, and the considerable free cash flow generated from Anadarko’s Gulf of Mexico operations can help reduce debt and support its dividend. Occidental’s management is strengthening the company’s financial position by disposing of non-core assets, which is key to restoring investor confidence, in our view.

Shares of drug store services provider Walgreens Boots Alliance began to sell off early in 2019, when the chief financial officer cited negative industry trends in drug prices and pharmacy benefit manager (PBM) reimbursement rates. Shares also fell in reaction to the company’s limited success in offsetting those challenges by increasing its volume of drug sales or renegotiating with PBMs. These pressures, and weakness in both its U.S. and U.K. stores, resulted in a cut to full-year guidance in April. However, Walgreens is reducing costs throughout the enterprise, and is attempting to reduce exposure to lower margin categories within the front of its stores, which we believe can help boost growth and profitability over the longer term. The company’s share price rallied in early November based on news that global investment firm KKR had approached the company about taking it private via a leveraged buyout that would likely be the largest in history. However, the stock retreated later when deal terms failed to materialize.

During the period, the Fund held currency forwards and futures seeking to hedge most of the currency risk of the portfolio’s non-U.S. dollar investments. The hedges had a modestly positive overall impact on the Fund’s performance.

What is a currency forward?

A currency forward is a direct agreement between the Fund and a counterparty to buy or sell a foreign currency in exchange for another currency at a specific exchange rate on a future date.

What is a future?

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

As fellow shareholders, we found recent relative performance disappointing, but it is not uncommon for our strategy to lag the equity markets at times. We remain committed to our disciplined, value investment approach as we seek to generate attractive, long-term, risk-adjusted returns for shareholders.

Thank you for your participation in Franklin Mutual Shares Fund. We look forward to continuing to serve your investment needs.

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     Peter A. Langerman Co-Portfolio Manager

    F. David Segal, CFA  Co-Portfolio Manager

     Debbie A. Turner, CFA   Co-Portfolio Manager

The foregoing information reflects our analysis, opinions and portfolio holdings as of December 31, 2019, the end of the reporting period. The way we implement our main investment strategies and the resulting portfolio holdings may change depending on factors such as market and economic conditions. These opinions may not be relied upon as investment advice or an offer for a particular security. The information is not a complete analysis of every aspect of any market, country, industry, security or the Fund. Statements of fact are from sources considered reliable, but the investment manager makes no representation or warranty as to their completeness or accuracy. Although historical performance is no guarantee of future results, these insights may help you understand our investment management philosophy.

CFA^® is a trademark owned by CFA Institute.

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Performance Summary as of December 31, 2019

The performance table and graphs do 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 12/31/191

Cumulative total return excludes sales charges. Average annual total return includes maximum sales charges. Sales charges will vary depending on the size of the investment and the class of share purchased. The maximum is 5.50% and the minimum is 0%. Class A: 5.50% maximum initial sales charge. For other share classes, visit franklintempleton.com.

Share Class	Cumulative   Total Return2	Average Annual   Total Return3
Z
1-Year	+23.13%	+23.13%
5-Year	+35.59%	+6.28%
10-Year	+136.87%	+9.01%
A4
1-Year	+22.86%	+16.09%
5-Year	+33.88%	+4.82%
10-Year	+130.40%	+8.09%

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 11 for Performance Summary footnotes.

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PERFORMANCE SUMMARY

Total Return Index Comparison for a Hypothetical $10,000 Investment¹

Total return represents the change in value of an investment over the periods shown. It includes any applicable maximum sales charge, Fund expenses, account fees and reinvested distributions. The unmanaged index includes reinvestment of any income or distributions. It differs from the Fund in composition and does not pay management fees or expenses. One cannot invest directly in an index.

Class Z (1/1/10–12/31/19)

Class A (1/1/10–12/31/19)

See page 11 for Performance Summary footnotes.

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PERFORMANCE SUMMARY

Distributions (1/1/19–12/31/19)

Share Class	Net Investment Income		Short-Term             Capital Gain		Long-Term         Capital Gain		Total
Z		$0.7149		$0.0648		$1.4468		$2.2265
A		$0.6430		$0.0648		$1.4468		$2.1546
C		$0.4236		$0.0648		$1.4468		$1.9352
R		$0.5479		$0.0648		$1.4468		$2.0595
R6		$0.7317		$0.0648		$1.4468		$2.2433

Total Annual Operating Expenses⁶

Share Class	With Fee Waiver		Without Fee Waiver
Z		0.77%		0.77%
A		1.02%		1.02%

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. Value securities may not increase in price as anticipated or may decline further in value. Special risks are associated with foreign investing, including currency fluctuations, economic instability and political developments. The Fund’s investments in companies engaged in mergers, reorganizations or liquidations also involve special risks as pending deals may not be completed on time or on favorable terms. The Fund may invest in lower rated bonds, which entail higher credit risk. The Fund’s prospectus also includes a description of the main investment risks.

1. The Fund has a fee waiver associated with any investment it makes in a Franklin Templeton money fund and/or other Franklin Templeton fund, contractually guaranteed through 4/30/20. Fund investment results reflect the fee waiver; without this waiver, 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. Source: Morningstar. The S&P 500 is a market capitalization-weighted index of 500 stocks designed to measure total U.S. equity market performance.

6. 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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Your Fund’s Expenses

As a Fund shareholder, you can incur two types of costs: (1) transaction costs, including sales charges (loads) on Fund purchases and redemptions; and (2) ongoing Fund costs, including management fees, distribution and service (12b-1) fees, and other Fund expenses. All mutual funds have ongoing costs, sometimes referred to as operating expenses. The table below shows ongoing costs of investing in the Fund and can help you understand these costs and compare them with those of other mutual funds. The table assumes a $1,000 investment held for the six months indicated.

Actual Fund Expenses

The table below provides information about actual account values and actual expenses in the columns under the heading “Actual.” In these columns the Fund’s actual return, which includes the effect of Fund expenses, is used to calculate the “Ending Account Value” for each class of shares. You can estimate the expenses you paid during the period by following these steps (of course, your account value and expenses will differ from those in this illustration): Divide your account value by $1,000 (if your account had an $8,600 value, then $8,600 ÷ $1,000 = 8.6). Then multiply the result by the number in the row for your class of shares under the headings “Actual” and “Expenses Paid During Period” (if Actual Expenses Paid During Period were $7.50, then 8.6 x $7.50 = $64.50). In this illustration, the actual expenses paid this period are $64.50.

Hypothetical Example for Comparison with Other Funds

Under the heading “Hypothetical” in the table, information is provided about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. This information may not be used to estimate the actual ending account balance or expenses you paid for the period, but it can help you compare ongoing costs of investing in the Fund with those of other funds. To do so, compare this 5% hypothetical example for the class of shares you hold with the 5% hypothetical examples that appear in the shareholder reports of other funds.

Please note that expenses shown in the table are meant to highlight ongoing costs and do not reflect any transactional costs. Therefore, information under the heading “Hypothetical” is useful in comparing ongoing costs only, and will not help you compare total costs of owning different funds. In addition, if transactional costs were included, your total costs would have been higher.

		Actual		Hypothetical
		(actual return after expenses)		(5% annual return before expenses)
			Expenses		Expenses	Net
	Beginning	Ending	Paid During	Ending	Paid During	Annualized
Share	Account	Account	Period	Account	Period	Expense
Class	Value 7/1/19	Value 12/31/19	7/1/19–12/31/191, 2	Value 12/31/19	7/1/19–12/31/191, 2	Ratio2
Z	$1,000	$1,082.20	$4.09	$1,021.27	$3.97	0.78%
A	$1,000	$1,081.30	$5.40	$1,020.01	$5.24	1.03%
C	$1,000	$1,076.80	$9.32	$1,016.23	$9.05	1.78%
R	$1,000	$1,079.60	$6.71	$1,018.75	$6.51	1.28%
R6	$1,000	$1,082.90	$3.68	$1,021.68	$3.57	0.70%

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 184/365 to reflect the one-half year period.

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

12         Annual Report franklintempleton.com

FRANKLIN MUTUAL SERIES FUNDS

Financial Highlights

Franklin Mutual Shares Fund

				Year Ended December 31,
	2019			2018			2017			2016			2015
Class Z
Per share operating performance (for a share outstanding throughout the year)
Net asset value, beginning of year		$24.25			$28.63			$28.22			$26.00			$29.52
Income from investment operationsa:
Net investment incomeb		0.63			0.51			0.65	c		0.63	d		0.54
Net realized and unrealized gains (losses)		4.90			(3.11	)		1.73			3.48			(1.71	)
Total from investment operations		5.53			(2.60	)		2.38			4.11			(1.17	)
Less distributions from:
Net investment income		(0.71	)		(0.53	)		(0.68	)		(0.64	)		(0.59	)
Net realized gains		(1.51	)		(1.25	)		(1.29	)		(1.25	)		(1.76	)
Total distributions		(2.22	)		(1.78	)		(1.97	)		(1.89	)		(2.35	)
Net asset value, end of year		$27.56			$24.25			$28.63			$28.22			$26.00
Total return		23.13%			(8.95)%			8.49%			15.88%			(3.81)%
Ratios to average net assets
Expensese,f		0.78%	g		0.76%	g		0.78%			0.80%	g		0.81%	g
Expenses incurred in connection with securities sold short		0.02%			—%	h		—%			0.01%			0.02%
Net investment income		2.32%			1.77%			2.23%	c		2.33%	d		1.82%
Supplemental data
Net assets, end of year (000’s)		$5,472,276			$5,189,476			$6,229,996			$7,681,881			$6,770,056
Portfolio turnover rate		21.71%			20.72%			18.15%			20.56%			19.99%

^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.

^cNet investment income per share includes approximately $0.16 per share related to income received in the form of special dividends in connection with certain Fund holdings. Excluding this amount, the ratio of net investment income to average net assets would have been 1.69%.

^dNet investment income per share includes approximately $0.10 per share related to income received in the form of special dividends in connection with certain Fund holdings. Excluding this amount, the ratio of net investment income to average net assets would have been 1.96%.

^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(e).

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

^gBenefit of waiver and payments by affiliates rounds to less than 0.01%.

^hRounds to less than 0.01%.

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

FRANKLIN MUTUAL SERIES FUNDS

FINANCIAL HIGHLIGHTS

Franklin Mutual Shares Fund (continued)

				Year Ended December 31,
	2019			2018			2017			2016			2015
Class A
Per share operating performance (for a share outstanding throughout the year)
Net asset value, beginning of year		$24.00			$28.35			$27.97			$25.78			$29.29
Income from investment operationsa:
Net investment incomeb		0.56			0.43			0.58	c		0.56	d		0.45
Net realized and unrealized gains (losses)		4.85			(3.07	)		1.70			3.45			(1.69	)
Total from investment operations		5.41			(2.64	)		2.28			4.01			(1.24	)
Less distributions from:
Net investment income		(0.64	)		(0.46	)		(0.61	)		(0.57	)		(0.51	)
Net realized gains		(1.51	)		(1.25	)		(1.29	)		(1.25	)		(1.76	)
Total distributions		(2.15	)		(1.71	)		(1.90	)		(1.82	)		(2.27	)
Net asset value, end of year		$27.26			$24.00			$28.35			$27.97			$25.78
Total returne		22.86%			(9.18)%			8.21%			15.61%			(4.10)%
Ratios to average net assets
Expensesf,g		1.03%	h		1.01%	h		1.03%			1.05%	h		1.09%	h
Expenses incurred in connection with securities sold short		0.02%			—%	i		—%			0.01%			0.02%
Net investment income		2.07%			1.52%			1.98%	c		2.08%	d		1.54%
Supplemental data
Net assets, end of year (000’s)		$4,042,626			$3,852,134			$4,386,829			$4,737,576			$4,819,868
Portfolio turnover rate		21.71%			20.72%			18.15%			20.56%			19.99%

^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.

^cNet investment income per share includes approximately $0.16 per share related to income received in the form of special dividends in connection with certain Fund holdings. Excluding this amount, the ratio of net investment income to average net assets would have been 1.44%.

^dNet investment income per share includes approximately $0.10 per share related to income received in the form of special dividends in connection with certain Fund holdings. Excluding this amount, the ratio of net investment income to average net assets would have been 1.71%.

^eTotal return does not reflect sales commissions or contingent deferred sales charges, if applicable.

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

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

^hBenefit of waiver and payments by affiliates rounds to less than 0.01%.

ⁱRounds to less than 0.01%.

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

FRANKLIN MUTUAL SERIES FUNDS

FINANCIAL HIGHLIGHTS

Franklin Mutual Shares Fund (continued)

	Year Ended December 31,
	2019			2018			2017			2016			2015
Class C
Per share operating performance (for a share outstanding throughout the year)
Net asset value, beginning of year		$23.97			$28.04			$27.68			$25.54			$29.02
Income from investment operationsa:
Net investment incomeb		0.36			0.21			0.35	c		0.35	d		0.24
Net realized and unrealized gains (losses)		4.82			(3.00	)		1.67			3.40			(1.67	)
Total from investment operations		5.18			(2.79	)		2.02			3.75			(1.43	)
Less distributions from:
Net investment income		(0.42	)		(0.03	)		(0.37	)		(0.36	)		(0.29	)
Net realized gains		(1.51	)		(1.25	)		(1.29	)		(1.25	)		(1.76	)
Total distributions		(1.93	)		(1.28	)		(1.66	)		(1.61	)		(2.05	)
Net asset value, end of year		$27.22			$23.97			$28.04			$27.68			$25.54
Total returne		21.93%			(9.87)%			7.37%			14.77%			(4.79)%
Ratios to average net assets
Expensesf,g		1.78%	h		1.76%	h		1.78%			1.80%	h		1.81%	h
Expenses incurred in connection with securities sold short		0.02%			—%	i		—%			0.01%			0.02%
Net investment income		1.32%			0.77%			1.23%	c		1.33%	d		0.82%
Supplemental data
Net assets, end of year (000’s)		$302,296			$309,756			$995,665			$1,114,760			$1,101,302
Portfolio turnover rate		21.71%			20.72%			18.15%			20.56%			19.99%

^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.

^cNet investment income per share includes approximately $0.16 per share related to income received in the form of special dividends in connection with certain Fund holdings. Excluding this amount, the ratio of net investment income to average net assets would have been 0.69%.

^dNet investment income per share includes approximately $0.10 per share related to income received in the form of special dividends in connection with certain Fund holdings. Excluding this amount, the ratio of net investment income to average net assets would have been 0.96%.

^eTotal return does not reflect sales commissions or contingent deferred sales charges, if applicable.

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

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

^hBenefit of waiver and payments by affiliates rounds to less than 0.01%.

ⁱRounds to less than 0.01%.

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

FRANKLIN MUTUAL SERIES FUNDS

FINANCIAL HIGHLIGHTS

Franklin Mutual Shares Fund (continued)

	Year Ended December 31,
	2019			2018			2017			2016			2015
Class R
Per share operating performance (for a share outstanding throughout the year)
Net asset value, beginning of year		$23.91			$28.21			$27.83			$25.66			$29.14
Income from investment operationsa:
Net investment incomeb		0.49			0.36			0.50	c		0.49	d		0.38
Net realized and unrealized gains (losses)		4.83			(3.05	)		1.70			3.42			(1.67	)
Total from investment operations		5.32			(2.69	)		2.20			3.91			(1.29	)
Less distributions from:
Net investment income		(0.55	)		(0.36	)		(0.53	)		(0.49	)		(0.43	)
Net realized gains		(1.51	)		(1.25	)		(1.29	)		(1.25	)		(1.76	)
Total distributions		(2.06	)		(1.61	)		(1.82	)		(1.74	)		(2.19	)
Net asset value, end of year		$27.17			$23.91			$28.21			$27.83			$25.66
Total return		22.55%			(9.41)%			7.96%			15.31%			(4.32)%
Ratios to average net assets
Expensese,f		1.28%	g		1.26%	g		1.28%			1.30%	g		1.31%	g
Expenses incurred in connection with securities sold short		0.02%			—%	h		—%			0.01%			0.02%
Net investment income		1.82%			1.27%			1.73%	c		1.83%	d		1.32%
Supplemental data
Net assets, end of year (000’s)		$66,038			$74,345			$107,660			$123,013			$134,050
Portfolio turnover rate		21.71%			20.72%			18.15%			20.56%			19.99%

^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.

^cNet investment income per share includes approximately $0.16 per share related to income received in the form of special dividends in connection with certain Fund holdings. Excluding this amount, the ratio of net investment income to average net assets would have been 1.19%.

^dNet investment income per share includes approximately $0.10 per share related to income received in the form of special dividends in connection with certain Fund holdings. Excluding this amount, the ratio of net investment income to average net assets would have been 1.46%.

^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(e).

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

^gBenefit of waiver and payments by affiliates rounds to less than 0.01%.

^hRounds to less than 0.01%.

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

FRANKLIN MUTUAL SERIES FUNDS

FINANCIAL HIGHLIGHTS

Franklin Mutual Shares Fund (continued)

	Year Ended December 31,
	2019			2018			2017			2016			2015
Class R6
Per share operating performance (for a share outstanding throughout the year)
Net asset value, beginning of year		$24.23			$28.61			$28.21			$25.98			$29.51
Income from investment operationsa:
Net investment incomeb		0.64			0.53			0.70	c		0.66	d		0.57
Net realized and unrealized gains (losses)		4.92			(3.11	)		1.71			3.49			(1.71	)
Total from investment operations		5.56			(2.58	)		2.41			4.15			(1.14	)
Less distributions from:
Net investment income		(0.73	)		(0.55	)		(0.72	)		(0.67	)		(0.63	)
Net realized gains		(1.51	)		(1.25	)		(1.29	)		(1.25	)		(1.76	)
Total distributions		(2.24	)		(1.80	)		(2.01	)		(1.92	)		(2.39	)
Net asset value, end of year		$27.55			$24.23			$28.61			$28.21			$25.98
Total return		23.26%			(8.88)%			8.61%			16.05%			(3.71)%
Ratios to average net assets
Expensese,f		0.70%	g		0.69%	g		0.67%			0.68%	g		0.69%	g
Expenses incurred in connection with securities sold short		0.02%			—%	h		—%			0.01%			0.02%
Net investment income		2.40%			1.84%			2.34%	c		2.45%	d		1.94%
Supplemental data
Net assets, end of year (000’s)		$1,680,600			$3,160,186			$3,741,430			$1,896,497			$1,923,466
Portfolio turnover rate		21.71%			20.72%			18.15%			20.56%			19.99%

^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.

^cNet investment income per share includes approximately $0.16 per share related to income received in the form of special dividends in connection with certain Fund holdings. Excluding this amount, the ratio of net investment income to average net assets would have been 1.80%.

^dNet investment income per share includes approximately $0.10 per share related to income received in the form of special dividends in connection with certain Fund holdings. Excluding this amount, the ratio of net investment income to average net assets would have been 2.08%.

^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(e).

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

^gBenefit of waiver and payments by affiliates rounds to less than 0.01%.

^hRounds to less than 0.01%.

franklintempleton.com The accompanying notes are an integral part of these financial statements.  |  Annual Report         17

FRANKLIN MUTUAL SERIES FUNDS

Statement of Investments, December 31, 2019

Franklin Mutual Shares Fund

	Country		Shares/ Rights/ Units/ Warrants		Value
Common Stocks and Other Equity Interests 91.1%
Aerospace & Defense 2.3%
BAE Systems PLC		United Kingdom		15,590,083	$	116,621,514
Huntington Ingalls Industries Inc.		United States		609,698		152,961,034
						269,582,548
Auto Components 0.0%†
a,b,c,d International Automotive Components Group Brazil LLC		Brazil		7,234,813		262,624
Automobiles 1.2%
General Motors Co.		United States		3,805,294		139,273,760
Banks 9.7%
Cadence Bancorp		United States		1,604,557		29,090,619
CIT Group Inc.		United States		2,228,261		101,675,550
Citigroup Inc.		United States		3,077,706		245,877,932
Citizens Financial Group Inc.		United States		4,361,671		177,127,459
Columbia Banking System Inc.		United States		75,396		3,067,486
JPMorgan Chase & Co.		United States		1,827,190		254,710,286
Synovus Financial Corp.		United States		1,882,029		73,775,537
Wells Fargo & Co.		United States		4,450,830		239,454,654
						1,124,779,523
Building Products 1.2%
Johnson Controls International PLC		United States		3,293,400		134,074,314
Communications Equipment 0.8%
Cisco Systems Inc.		United States		2,020,910		96,922,844
Consumer Finance 1.5%
Capital One Financial Corp.		United States		1,731,205		178,158,307
Containers & Packaging 1.6%
International Paper Co.		United States		3,220,137		148,287,309
WestRock Co.		United States		968,212		41,545,977
						189,833,286
Diversified Financial Services 1.6%
Voya Financial Inc.		United States		2,937,130		179,106,187
Diversified Telecommunication Services 0.7%
Koninklijke KPN NV		Netherlands		26,172,465		77,222,773
Electrical Equipment 1.8%
a Sensata Technologies Holding PLC		United States		3,755,370		202,301,782
Electronic Equipment, Instruments & Components 1.0%
Corning Inc.		United States		4,042,414		117,674,671
Energy Equipment & Services 1.7%
Baker Hughes Co., A		United States		2,405,627		61,656,220
Schlumberger Ltd.		United States		3,224,000		129,604,800
						191,261,020
Entertainment 2.3%
The Walt Disney Co.		United States		1,853,574		268,082,408

18         Annual Report franklintempleton.com

FRANKLIN MUTUAL SERIES FUNDS

STATEMENT OF INVESTMENTS

Franklin Mutual Shares Fund (continued)

	Country		Shares/ Rights/ Units/ Warrants		Value
Common Stocks and Other Equity Interests (continued)
Equity Real Estate Investment Trusts (REITs) 1.7%
Alexander’s Inc.		United States		231,286	$	76,405,330
Vornado Realty Trust		United States		1,752,422		116,536,063
						192,941,393
Food & Staples Retailing 2.7%
The Kroger Co.		United States		6,370,986		184,694,884
Walgreens Boots Alliance Inc.		United States		2,104,829		124,100,718
						308,795,602
Food Products 3.1%
Archer-Daniels-Midland Co.		United States		2,402,500		111,355,875
Conagra Brands Inc.		United States		1,481,783		50,736,250
The Kraft Heinz Co.		United States		6,008,600		193,056,318
						355,148,443
Health Care Equipment & Supplies 3.0%
Medtronic PLC		United States		3,107,601		352,557,333
Health Care Providers & Services 1.7%
CVS Health Corp.		United States		2,595,215		192,798,522
Household Durables 3.0%
Lennar Corp., A		United States		2,046,900		114,196,551
Newell Brands Inc.		United States		8,492,195		163,219,988
Toll Brothers Inc.		United States		1,715,500		67,779,405
						345,195,944
Household Products 0.7%
Energizer Holdings Inc.		United States		1,538,433		77,260,105
Independent Power & Renewable Electricity Producers 0.1%
Vistra Energy Corp.		United States		658,165		15,131,213
Industrial Conglomerates 1.1%
General Electric Co.		United States		11,699,600		130,567,536
Insurance 8.2%
a Alleghany Corp.		United States		325,189		260,011,369
American International Group Inc.		United States		4,874,739		250,220,353
Chubb Ltd.		United States		195,858		30,487,256
Everest Re Group Ltd.		United States		444,994		123,192,139
The Hartford Financial Services Group Inc.		United States		3,214,299		195,332,950
MetLife Inc.		United States		1,833,830		93,470,315
						952,714,382
IT Services 1.5%
Cognizant Technology Solutions Corp., A		United States		2,857,050		177,194,241
Machinery 0.9%
CNH Industrial NV		United Kingdom		3,744,919		41,115,449
CNH Industrial NV, special voting		United Kingdom		5,296,616		58,151,524
						99,266,973

franklintempleton.com Annual Report         19

FRANKLIN MUTUAL SERIES FUNDS

STATEMENT OF INVESTMENTS

Franklin Mutual Shares Fund (continued)

	Country		Shares/ Rights/ Units/ Warrants		Value
Common Stocks and Other Equity Interests (continued)
Media 6.1%
a Charter Communications Inc., A		United States		543,329	$	263,558,031
Comcast Corp., A.		United States		4,398,700		197,809,539
a Discovery Inc., C		United States		4,106,800		125,216,332
a DISH Network Corp., A		United States		2,477,837		87,888,878
a iHeartMedia Inc., A		United States		1,795,072		30,336,717
a,c iHeartMedia Inc., B		United States		35,201		505,662
a iHeartMedia Inc., wts., A, 5/01/39		United States		1,786		30,182
						705,345,341
Oil, Gas & Consumable Fuels 7.7%
BP PLC		United Kingdom		26,357,264		164,630,268
Kinder Morgan Inc.		United States		9,925,540		210,123,682
Marathon Oil Corp.		United States		9,432,085		128,087,714
Occidental Petroleum Corp.		United States		1,825,516		75,229,514
Plains All American Pipeline LP		United States		3,323,700		61,122,843
Royal Dutch Shell PLC, A (EUR Traded)		United Kingdom		1,219,903		35,795,296
Royal Dutch Shell PLC, A (GBP Traded)		United Kingdom		2,719,064		80,488,256
The Williams Cos. Inc.		United States		5,465,884		129,650,769
						885,128,342
Pharmaceuticals 9.9%
Allergan PLC		United States		703,000		134,392,510
a Bristol-Myers Squibb Co., rts., 2/01/49		United States		1,368,343		4,118,712
Eli Lilly & Co.		United States		1,790,643		235,344,210
GlaxoSmithKline PLC		United Kingdom		11,072,484		260,889,483
Merck & Co. Inc.		United States		1,660,972		151,065,403
Novartis AG, ADR		Switzerland		2,881,641		272,862,586
Perrigo Co. PLC		United States		1,643,800		84,918,708
						1,143,591,612
Software 3.0%
a Avaya Holdings Corp.		United States		364		4,914
a Avaya Holdings Corp., wts., 12/15/22		United States		276,741		332,089
NortonLifeLock Inc.		United States		8,128,551		207,440,622
Oracle Corp.		United States		2,686,800		142,346,664
						350,124,289
Specialty Retail 0.2%
a,b,c TRU Kids Parent LLC		United States		7,469		27,867,828
a,b,c Wayne Services Legacy Inc.		United States		7,469		—
						27,867,828
Technology Hardware, Storage & Peripherals 4.3%
Hewlett Packard Enterprise Co.		United States		7,532,314		119,462,500
Samsung Electronics Co. Ltd.		South Korea		4,751,619		229,362,140
Western Digital Corp.		United States		2,337,857		148,383,784
						497,208,424

20         Annual Report franklintempleton.com

FRANKLIN MUTUAL SERIES FUNDS

STATEMENT OF INVESTMENTS

Franklin Mutual Shares Fund (continued)

	Country		Shares/ Rights/ Units/ Warrants		Value
Common Stocks and Other Equity Interests (continued)
Textiles, Apparel & Luxury Goods 1.2%
PVH Corp.		United States		1,285,900	$	135,212,385
Tobacco 3.1%
Altria Group Inc.		United States		2,023,360		100,985,898
British American Tobacco PLC		United Kingdom		3,767,740		161,257,769
British American Tobacco PLC, ADR		United Kingdom		1,424,588		60,488,007
Imperial Brands PLC		United Kingdom		1,507,727		37,322,229
						360,053,903
Wireless Telecommunication Services 0.5%
Vodafone Group PLC		United Kingdom		30,709,264		59,691,525
Total Common Stocks and Other Equity Interests (Cost $7,458,792,081)						10,532,331,383
			Principal Amount
Corporate Notes and Senior Floating Rate Interests 3.5%
e Banff Merger Sub Inc., senior note, 144A, 9.75%, 9/01/26		United States	$	59,688,000		60,584,812
Frontier Communications Corp.,
senior note, 10.50%, 9/15/22		United States		72,365,000		35,481,428
senior note, 11.00%, 9/15/25		United States		81,506,000		39,734,175
e senior secured note, first lien, 144A, 8.00%, 4/01/27		United States		19,878,000		20,809,284
f,g Veritas U.S. Inc,
Term Loan B1, 6.299%, (1-month USD LIBOR + 4.50%), 1/27/23		United States		48,688,224		47,065,300
Term Loan B1, 6.445%, (3-month USD LIBOR + 4.50%), 1/27/23		United States		9,353,364		9,041,589
e Veritas U.S. Inc./Veritas Bermuda Ltd.,
senior note, 144A, 7.50%, 2/01/23		United States		9,656,000		9,660,007
senior note, 144A, 10.50%, 2/01/24		United States		76,705,000		71,175,720
f,g Windstream Services LLC,
h Revolving Commitment, 7.75%, (Prime + 3.00%), 4/24/20		United States		91,322,291		85,614,648
Term Loan B6, 9.75%, (Prime + 5.00%), 3/30/21		United States		23,496,000		22,543,566
Total Corporate Notes and Senior Floating Rate Interests (Cost $466,961,562)						401,710,529
Corporate Notes in Reorganization (Cost $30,683,169) 0.0%†
e,i McDermott Technology Americas Inc., senior note, 144A, 10.625%, 5/01/24		United States		32,043,000		2,813,696
			Shares
Companies in Liquidation 0.0%†
a,c,j Clear Channel Communications Inc., Contingent Distribution		United States		74,295,000		—
a,c,j iHeartCommunications Inc., Contingent Distribution		United States		125,033,338		—
a,c,j Tribune Media, Litigation Trust, Contingent Distribution		United States		1,000,497		—
a,c,j Vistra Energy Corp., Litigation Trust, Contingent Distribution		United States		194,177,556		106,797

franklintempleton.com Annual Report         21

FRANKLIN MUTUAL SERIES FUNDS

STATEMENT OF INVESTMENTS

Franklin Mutual Shares Fund (continued)

	Country		Shares		Value
Companies in Liquidation (continued)
a,c,j Walter Energy Inc., Litigation Trust, Contingent Distribution		United States		20,046,000	$	—
Total Companies in Liquidation (Cost $6,071,371)						106,797
Total Investments before Short Term Investments (Cost $7,962,508,183)						10,936,962,405
			Principal Amount
Short Term Investments 5.6%
U.S. Government and Agency Securities 5.6%
k FHLB, 1/02/20		United States	$	16,300,000		16,300,000
k U.S. Treasury Bill,
l 2/06/20 - 3/19/20		United States		83,000,000		82,794,435
1/02/20 - 5/28/20		United States		550,000,000		548,666,202
Total U.S. Government and Agency Securities (Cost $647,476,582)						647,760,637
Total Investments (Cost $8,609,984,765) 100.2%						11,584,723,042
Securities Sold Short (0.5)%						(53,876,501	)
Other Assets, less Liabilities 0.3%						32,989,498
Net Assets 100.0%					$	11,563,836,039
			Shares
m Securities Sold Short (Proceeds $46,531,474) (0.5)%
Common Stocks (0.5)%
Biotechnology (0.5)%
AbbVie Inc.		United States		608,499		(53,876,501	)

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

^aNon-income producing.

^bSee Note 11 regarding holdings of 5% voting securities.

^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 under the Securities Act of 1933 and may be sold in transactions exempt from registration only to qualified institutional buyers or in a public offering registered under the Securities Act of 1933. At December 31, 2019, the aggregate value of these securities was $165,043,519, representing 1.4% of net assets.

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

^gSee Note 1(g) regarding senior floating rate interests.

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

ⁱSee Note 8 regarding credit risk and defaulted securities.

^jContingent distributions represent the right to receive additional distributions, if any, during the reorganization of the underlying company. Shares represent total underlying principal of debt securities.

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

^lA portion or all of the security has been segregated as collateral for securities sold short and/or open forward exchange contracts. At December 31, 2019, the aggregate value of these securities pledged amounted to $ 32,911,646, representing 0.3% of net assets.

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

22         Annual Report franklintempleton.com

FRANKLIN MUTUAL SERIES FUNDS

STATEMENT OF INVESTMENTS

Franklin Mutual Shares Fund (continued)

At December 31, 2019, the Fund had the following futures contracts outstanding. See Note 1(d).

Futures Contracts

Description	Type		Number of Contracts		Notional  Amount*	Expiration Date		Value/ Unrealized Appreciation (Depreciation)
Currency Contracts
EUR/USD		Short		728	$102,666,200		3/16/20	$	(986,062	)
GBP/USD		Short		1,814	150,698,050		3/16/20		(1,171,780	)
Total Futures Contracts.								$	(2,157,842	)

*As of period end.

At December 31, 2019, the Fund had the following forward exchange contracts outstanding. See Note 1(d).

Forward Exchange Contracts

Currency	Counterpartya		Type		Quantity		Contract Amount		Settlement Date		Unrealized Appreciation		Unrealized Depreciation
OTC Forward Exchange Contracts
Euro		BOFA		Buy		10,161,789	$	11,340,783		1/15/20	$	66,124	$	—
Euro		BOFA		Sell		1,218,207		1,354,210		1/15/20		—		(13,263	)
Euro		HSBK		Buy		1,110,000		1,247,152		1/15/20		—		(1,144	)
Euro		HSBK		Buy		2,961,420		3,298,217		1/15/20		26,065		—
Euro		HSBK		Sell		1,218,207		1,355,146		1/15/20		—		(12,328	)
Euro		SSBT		Sell		18,399,108		21,014,725		1/15/20		361,184		—
Euro		UBSW		Sell		18,399,108		21,014,817		1/15/20		361,276		—
British Pound		BOFA		Buy		418,966		548,451		1/16/20		6,712		—
British Pound		BOFA		Sell		7,030,724		8,843,987		1/16/20		—		(472,283	)
British Pound		HSBK		Sell		19,661,567		24,815,811		1/16/20		—		(1,237,331	)
South Korean Won		HSBK		Sell		72,308,874,616		60,555,797		1/17/20		—		(2,016,839	)
South Korean Won		UBSW		Buy		2,494,512,800		2,159,377		1/17/20		—		(746	)
South Korean Won		UBSW		Buy		9,612,263,500		8,159,124		1/17/20		158,869		—
South Korean Won		UBSW		Sell		44,474,572,809		37,585,034		1/17/20		—		(901,131	)
British Pound		HSBK		Sell		8,780,856		11,016,979		2/14/20		—		(627,650	)
British Pound		SSBT		Sell		4,975,490		6,060,595		2/14/20		—		(537,593	)
Euro		SSBT		Sell		15,316,719		17,033,110		2/18/20		—		(196,695	)
Euro		SSBT		Sell		4,202,801		4,707,276		4/07/20		—		(35,189	)
Euro		UBSW		Sell		4,202,802		4,707,251		4/07/20		—		(35,215	)
British Pound		BOFA		Sell		5,860,227		7,577,918		4/24/20		—		(208,052	)
British Pound		HSBK		Sell		11,856,261		15,358,325		4/24/20		—		(394,050	)
South Korean Won		HSBK		Sell		100,408,792,211		86,620,257		5/15/20		—		(604,932	)
South Korean Won		UBSW		Sell		58,942,998,018		50,943,023		5/15/20		—		(260,800	)
Euro		SSBT		Sell		12,813,030		14,364,816		5/21/20		—		(133,135	)
Euro		UBSW		Sell		12,813,030		14,365,905		5/21/20		—		(132,046	)
British Pound		BOFA		Sell		6,752,067		8,822,422		5/22/20		—		(155,018	)

franklintempleton.com Annual Report         23

FRANKLIN MUTUAL SERIES FUNDS

STATEMENT OF INVESTMENTS

Franklin Mutual Shares Fund (continued)

Forward Exchange Contracts (continued)

Currency	Counterpartya		Type		Quantity		Contract Amount		Settlement Date		Unrealized Appreciation		Unrealized Depreciation
OTC Forward Exchange Contracts (continued)
British Pound		HSBK		Sell		62,688,202	$	81,305,529		5/22/20	$	—	$	(2,043,695	)
Total Forward Exchange Contracts											$	980,230	$	(10,019,135	)
Net unrealized appreciation (depreciation)													$	(9,038,905	)

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

See Note 10 regarding other derivative information.

See Abbreviations on page 43.

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

FRANKLIN MUTUAL SERIES FUNDS

FINANCIAL STATEMENTS

Statement of Assets and Liabilities

December 31, 2019

Franklin Mutual Shares Fund

Assets:
Investments in securities:
Cost - Unaffiliated issuers	$	8,568,582,657
Cost - Non-controlled affiliates (Note 3f and 11)		41,402,108
Value - Unaffiliated issuers	$	11,556,592,590
Value - Non-controlled affiliates (Note 3f and 11)		28,130,452
Cash		1,113,363
Foreign currency, at value (cost $1,411,958)		1,437,774
Receivables:
Investment securities sold		17,702,299
Capital shares sold		2,350,436
Dividends and interest		38,443,445
European Union tax reclaims		7,226,216
Deposits with brokers for:
Securities sold short		54,941,618
Futures contracts.		6,001,320
Unrealized appreciation on OTC forward exchange contracts		980,230
Other assets		3,404,432
Total assets		11,718,324,175
Liabilities:
Payables:
Investment securities purchased		63,315,638
Capital shares redeemed		14,589,686
Management fees		6,380,412
Distribution fees		1,132,078
Transfer agent fees		1,466,901
Trustees’ fees and expenses		1,035,874
Variation margin on futures contracts		1,921,345
Securities sold short, at value (proceeds $46,531,474)		53,876,501
Unrealized depreciation on OTC forward exchange contracts		10,019,135
Accrued expenses and other liabilities		750,566
Total liabilities		154,488,136
Net assets, at value	$	11,563,836,039
Net assets consist of:
Paid-in capital	$	8,421,411,264
Total distributable earnings (losses)		3,142,424,775
Net assets, at value	$	11,563,836,039

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

FRANKLIN MUTUAL SERIES FUNDS

FINANCIAL STATEMENTS

Statement of Assets and Liabilities (continued)

December 31, 2019

Franklin Mutual Shares Fund

Class Z:
Net assets, at value	$5,472,276,431
Shares outstanding	198,525,310
Net asset value and maximum offering price per share	$27.56
Class A:
Net assets, at value	$4,042,625,849
Shares outstanding	148,318,618
Net asset value per sharea	$27.26
Maximum offering price per share (net asset value per share ÷ 94.50%)	$28.85
Class C:
Net assets, at value	$   302,296,402
Shares outstanding	11,105,781
Net asset value and maximum offering price per sharea	$27.22
Class R:
Net assets, at value	$ 66,037,699
Shares outstanding	2,430,462
Net asset value and maximum offering price per share	$27.17
Class R6:
Net assets, at value	$1,680,599,658
Shares outstanding	61,009,188
Net asset value and maximum offering price per share	$27.55

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

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

FRANKLIN MUTUAL SERIES FUNDS

FINANCIAL STATEMENTS

Statement of Operations

for the year ended December 31, 2019

Franklin Mutual Shares Fund

Investment income:
Dividends: (net of foreign taxes)*
Unaffiliated issuers	$	309,359,245
Non-controlled affiliates (Note 3f and 11)		4,162,293
Interest:
Unaffiliated issuers		82,188,646
Income from securities loaned:
Unaffiliated issuers (net of fees and rebates)		1,068,265
Non-controlled affiliates (Note 3f)		72,310
Other income (Note 1h)		793,071
Total investment income.		397,643,830
Expenses:
Management fees (Note 3a)		83,782,616
Distribution fees: (Note 3c)
Class A		10,168,543
Class C		3,090,467
Class R		379,992
Transfer agent fees: (Note 3e)
Class Z		5,200,484
Class A		3,951,134
Class C		300,191
Class R		74,246
Class R6		656,681
Custodian fees (Note 4)		507,645
Reports to shareholders		631,778
Registration and filing fees		203,710
Professional feesa		(893,326	)
Trustees’ fees and expenses		795,433
Dividends on securities sold short		2,140,623
Other.		295,205
Total expenses		111,285,422
Expense reductions (Note 4)		(52,940	)
Expenses waived/paid by affiliates (Note 3f and 3g)		(62,512	)
Net expenses		111,169,970
Net investment income		286,473,860
Realized and unrealized gains (losses):
Net realized gain (loss) from:
Investments:
Unaffiliated issuers		599,564,227
Non-controlled affiliates (Note 3f and 11)		(20,456,067	)
Foreign currency transactions		1,247,570
Forward exchange contracts		31,064,320
Futures contracts		5,392,979
Securities sold short		(27,564,705	)
Net realized gain (loss)		589,248,324
Net change in unrealized appreciation (depreciation) on:
Investments:
Unaffiliated issuers		1,754,817,383
Non-controlled affiliates (Note 3f and 11)		35,369,848
Translation of other assets and liabilities denominated in foreign currencies		(90,460	)

franklintempleton.com The accompanying notes are an integral part of these financial statements.  |  Annual Report         27

FRANKLIN MUTUAL SERIES FUNDS

FINANCIAL STATEMENTS

Statement of Operations (continued)

for the year ended December 31, 2019

Franklin Mutual Shares Fund

Forward exchange contracts		(16,802,196	)
Futures contracts		(2,622,855	)
Securities sold short		(32,850,352	)
Net change in unrealized appreciation (depreciation)		1,737,821,368
Net realized and unrealized gain (loss)		2,327,069,692
Net increase (decrease) in net assets resulting from operations	$	2,613,543,552

*Foreign taxes withheld on dividends $       5,327,021

^aIncludes unaffiliated reimbursement of legal fees incurred in connection with certain Fund holdings.

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

FRANKLIN MUTUAL SERIES FUNDS

FINANCIAL STATEMENTS

Statements of Changes in Net Assets

Franklin Mutual Shares Fund

	Year Ended December 31,
	2019			2018
Increase (decrease) in net assets:
Operations:
Net investment income	$	286,473,860		$	244,198,602
Net realized gain (loss)		589,248,324			1,079,036,473
Net change in unrealized appreciation (depreciation)		1,737,821,368			(2,582,054,169	)
Net increase (decrease) in net assets resulting from operations		2,613,543,552			(1,258,819,094	)
Distributions to shareholders:
Class Z		(424,957,060	)		(359,738,797	)
Class A		(310,738,396	)		(258,843,422	)
Class C		(20,683,973	)		(16,133,984	)
Class R		(5,167,516	)		(4,696,240	)
Class R6		(180,523,371	)		(218,275,931	)
Total distributions to shareholders		(942,070,316	)		(857,688,374	)
Capital share transactions: (Note 2)
Class Z		(407,966,163	)		(162,098,601	)
Class A		(326,358,495	)		114,605,103
Class C		(49,007,989	)		(631,170,380	)
Class R		(18,388,105	)		(21,048,937	)
Class R6		(1,891,813,271	)		(59,462,529	)
Total capital share transactions		(2,693,534,023	)		(759,175,344	)
Net increase (decrease) in net assets		(1,022,060,787	)		(2,875,682,812	)
Net assets:
Beginning of year		12,585,896,826			15,461,579,638
End of year	$	11,563,836,039		$	12,585,896,826

franklintempleton.com The accompanying notes are an integral part of these financial statements.  |  Annual Report         29

FRANKLIN MUTUAL SERIES FUNDS

Notes to Financial Statements

Franklin Mutual Shares Fund

1.  Organization and Significant Accounting Policies

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

The following summarizes the Fund’s significant accounting policies.

a.   Financial Instrument Valuation

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

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

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

Debt securities generally trade in the OTC market rather than on a securities exchange. The Fund’s pricing services use multiple valuation techniques to determine fair value. In instances where sufficient market activity exists, the pricing services may utilize a market-based approach through which quotes from market makers are used to determine fair value. In instances where sufficient market activity may not exist or is limited, the pricing services also utilize proprietary valuation models which may consider market characteristics such as benchmark yield curves, credit spreads, estimated default rates, anticipated market interest rate volatility, coupon rates, anticipated timing of principal repayments, underlying collateral, and other unique security features in order to estimate the relevant cash flows, which are then discounted to calculate the fair value.

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

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

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

30         Annual Report franklintempleton.com

FRANKLIN MUTUAL SERIES FUNDS

NOTES TO FINANCIAL STATEMENTS

Franklin Mutual Shares Fund (continued)

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

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

b.  Foreign Currency Translation

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

value. If such an event occurs, the foreign exchange rate will be valued at fair value using procedures established and approved by the Board.

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

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

c.  Securities Purchased on a Delayed Delivery Basis

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

d.  Derivative Financial Instruments

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

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FRANKLIN MUTUAL SERIES FUNDS

NOTES TO FINANCIAL STATEMENTS

Franklin Mutual Shares Fund (continued)

1.  Organization and Significant Accounting Policies (continued)

d.  Derivative Financial Instruments (continued)

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. At December 31, 2019, the Fund had OTC derivatives in a net liability position of $9,038,905 and the aggregate value of collateral pledged for such contracts was $6,335,838.

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 exposure to certain foreign currencies. A futures contract is an agreement between the Fund and a counterparty to buy or sell an asset at a specified price on a future date. Required initial margins are pledged by the Fund, and the daily change in fair value is accounted for as a variation margin payable or receivable in the Statement of Assets and Liabilities.

The Fund entered into OTC forward exchange contracts primarily to manage 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.

See Note 10 regarding other derivative information.

e.  Securities Sold Short

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

The Fund is required to establish a margin account with the broker lending the security sold short. While the short sale is outstanding, the broker retains the proceeds of the short sale to the extent necessary to meet margin requirements until the short position is closed out. A deposit must also be maintained with the Fund’s custodian/counterparty broker consisting of cash and/or securities having a value equal to a specified percentage of the value of the securities sold short.

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Franklin Mutual Shares Fund (continued)

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.

f.  Securities Lending

The Fund participates in an agency based securities lending program to earn additional income. The Fund receives cash collateral against the loaned securities in an amount equal to at least 102% of the fair value of the loaned securities. Collateral is maintained over the life of the loan in an amount not less than 100% of the fair value of loaned securities, as determined at the close of Fund business each day; any additional collateral required due to changes in security values is delivered to the Fund on the next business day. The collateral is deposited into a joint cash account with other funds and is used to invest in a money market fund managed by Franklin Advisers, Inc., an affiliate of the Fund, and/or a joint repurchase agreement. The Fund may receive income from the investment 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 Statement of Operations. The Fund bears the market risk with respect to the collateral investment, securities loaned, and the risk that the agent may default on its obligations to the Fund. If the borrower defaults on its obligation 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. At December 31, 2019, the Fund had no securities on loan.

g.  Senior Floating Rate Interests

The Fund invests in senior secured corporate loans that pay interest at rates which are periodically reset by reference to a base lending rate plus a spread. These base lending rates are generally the prime rate offered by a designated U.S. bank or the London InterBank Offered Rate (LIBOR). Senior secured corporate loans often require prepayment of principal from excess cash flows or at the discretion of the borrower. As a result, actual maturity may be substantially less than the stated maturity. Senior secured corporate loans in which the Fund invests are generally readily marketable, but may be subject to certain restrictions on resale. On July 27, 2017, the United Kingdom’s Financial Conduct

Authority announced its intention to cease sustaining LIBOR after 2021. There remains uncertainty regarding the future utilization of LIBOR and the nature of any replacement rate. As such, the potential effect of a transition away from LIBOR on the Fund or the Fund’s investments that use or may use a floating rate based on LIBOR cannot yet be determined.

h.  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.

As a result of several court cases, in certain countries across the European Union, the Fund filed additional tax reclaims for previously withheld taxes on dividends earned in those countries (EU reclaims). These additional filings are subject to various administrative proceedings by the local jurisdictions’ tax authorities within the European Union, as well as a number of related judicial proceedings. Income recognized, if any, for EU reclaims is reflected as other income in the Statement of Operations and any related receivable, if any, is reflected as European Union tax reclaims in the Statement of Assets and Liabilities. When uncertainty exists as to the ultimate resolution of these proceedings, the likelihood of receipt of these EU reclaims, and the potential timing of payment, no amounts are reflected in the financial statements. For U.S. income tax purposes, EU reclaims received by the Fund, if any, reduce the amounts of foreign taxes Fund shareholders can use as tax credits in their individual income tax returns.

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

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NOTES TO FINANCIAL STATEMENTS

Franklin Mutual Shares Fund (continued)

1. Organization and Significant Accounting Policies (continued)

h.  Income and Deferred Taxes (continued)

its technical merits. As of December 31, 2019, the Fund has determined that no tax liability is required in its financial statements related to uncertain tax positions for any open tax years (or expected to be taken in future tax years). Open tax years are those that remain subject to examination and are based on the statute of limitations in each jurisdiction in which the Fund invests.

i.  Security Transactions, Investment Income, Expenses and Distributions

Security transactions are accounted for on trade date. Realized gains and losses on security transactions are determined on a specific identification basis. Interest income and estimated expenses are accrued daily. Amortization of premium and accretion of discount on debt securities are included in interest income. Dividend income and dividends declared on securities sold short are recorded on the ex-dividend date except for certain dividends from securities where the dividend rate is not available. In such cases, the dividend is recorded as soon as the information is received by the Fund. Distributions to shareholders are recorded on the ex-dividend date. Distributable earnings are determined according to income tax regulations (tax basis) and may differ from earnings recorded in accordance with U.S. GAAP. These differences may be permanent or temporary. Permanent differences are reclassified among capital accounts to reflect their tax character. These reclassifications have no impact on net assets or the results of operations. Temporary differences are not reclassified, as they may reverse in subsequent periods.

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

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

j.  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.

k.  Guarantees and Indemnifications

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

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Franklin Mutual Shares Fund (continued)

2.  Shares of Beneficial Interest

At December 31, 2019, there were an unlimited number of shares authorized (without par value). Transactions in the Fund’s shares were as follows:

	Year Ended December 31,
	2019						2018
	Shares			Amount			Shares			Amount
Class Z Shares:
Shares sold		5,703,921		$	154,451,161			10,029,587		$	284,766,342
Shares issued in reinvestment of distributions		13,821,998			375,962,807			13,492,550			320,309,753
Shares redeemed		(35,007,575	)		(938,380,131	)		(27,123,733	)		(767,174,696	)
Net increase (decrease)		(15,481,656	)	$	(407,966,163	)		(3,601,596	)	$	(162,098,601	)
Class A Shares:
Shares solda		9,660,276		$	258,457,935			25,412,499		$	710,808,675
Shares issued in reinvestment of distributions		10,821,922			290,798,586			10,148,432			238,431,075
Shares redeemed		(32,673,689	)		(875,615,016	)		(29,787,083	)		(834,634,647	)
Net increase (decrease)		(12,191,491	)	$	(326,358,495	)		5,773,848		$	114,605,103
Class C Shares:
Shares sold		1,854,760		$	49,227,044			2,074,273		$	57,275,560
Shares issued in reinvestment of distributions		765,482			20,460,413			675,227			15,942,868
Shares redeemeda		(4,437,754	)		(118,695,446	)		(25,329,240	)		(704,388,808	)
Net increase (decrease)		(1,817,512	)	$	(49,007,989	)		(22,579,740	)	$	(631,170,380	)
Class R Shares:
Shares sold		246,671		$	6,553,429			347,792		$	9,776,448
Shares issued in reinvestment of distributions		193,343			5,163,831			199,115			4,662,921
Shares redeemed		(1,118,911	)		(30,105,365	)		(1,253,910	)		(35,488,306	)
Net increase (decrease)		(678,897	)	$	(18,388,105	)		(707,003	)	$	(21,048,937	)
Class R6 Shares:
Shares sold		7,406,299		$	199,310,809			14,420,824		$	412,295,163
Shares issued in reinvestment of distributions		6,673,123			180,428,324			9,195,249			218,103,352
Shares redeemed		(83,508,648	)		(2,271,552,404	)		(23,959,670	)		(689,861,044	)
Net increase (decrease)		(69,429,226	)	$	(1,891,813,271	)		(343,597	)	$	(59,462,529	)

^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 Fund are also officers and/or directors of the following subsidiaries:

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

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FRANKLIN MUTUAL SERIES FUNDS

NOTES TO FINANCIAL STATEMENTS

Franklin Mutual Shares Fund (continued)

3.  Transactions with Affiliates (continued)

a.  Management Fees

The Fund pays an investment management fee to Franklin Mutual based on the average daily net assets of the Fund as follows:

Annualized Fee Rate	Net Assets
0.675%	Up to and including $5 billion
0.645%	Over $5 billion, up to and including $10 billion
0.625%	Over $10 billion, up to and including $15 billion
0.595%	Over $15 billion, up to and including $20 billion
0.585%	Over $20 billion, up to and including $25 billion
0.565%	Over $25 billion, up to and including $30 billion
0.555%	Over $30 billion, up to and including $35 billion
0.545%	In excess of $35 billion

For the year ended December 31, 2019, the gross effective investment management fee rate was 0.652% of the Fund’s average daily net assets.

b.  Administrative Fees

Under an agreement with Franklin Mutual, FT Services provides administrative services to the Fund. The fee is paid by Franklin Mutual 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 Z and Class R6 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	0.35	%
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 Mutual Shares Fund (continued)

d.  Sales Charges/Underwriting Agreements

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

Sales charges retained net of commissions paid to unaffiliated brokers/dealers	$	218,747
CDSC retained	$	6,949

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 year ended December 31, 2019, the Fund paid transfer agent fees of $10,182,736, of which $5,367,848 was retained by Investor Services.

f.  Investments in Affiliated Management Investment Companies

The Fund invests in one or more affiliated management investment companies for purposes other than exercising a controlling influence over the management or policies. Management fees paid by the Fund are waived on assets invested in the affiliated management investment companies, as noted in the Statement of Operations, in an amount not to exceed the management and administrative fees paid directly or indirectly by each affiliate. During the year ended December 31, 2019, the Fund held investments in affiliated management investment companies as follows:

	Value at Beginning of Year		Purchases		Sales			Realized Gain (Loss)		Net Change in Unrealized Appreciation (Depreciation)		Value at End of Year			Number of Shares Held at End of Year		Income from securities loaned
Non-Controlled Affiliates
Institutional Fiduciary Trust Money Market Portfolio, 1.26%		$    —	$	176,535,000	$	(176,535,000	)		$    —		$    —		$—	a		—		$72,310

^aAs of December 31, 2019, no longer held by the Fund.

g.  Waiver and Expense Reimbursements

Investor Services has contractually agreed in advance to waive or limit its fees so that the Class R6 transfer agent fees do not exceed 0.02% based on the average net assets of the class until April 30, 2020.

h.  Other Affiliated Transactions

At December 31, 2019, one or more of the funds in Franklin Fund Allocator Series owned 13.0% of the Fund’s outstanding shares.

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FRANKLIN MUTUAL SERIES FUNDS

NOTES TO FINANCIAL STATEMENTS

Franklin Mutual Shares Fund (continued)

3.  Transactions with Affiliates (continued)

i.  Interfund Transactions

The Fund engaged in purchases and sales of investments with funds or other accounts that have common investment managers (or affiliated investment managers), directors, trustees or officers. During the year ended December 31, 2019, these purchase and sale transactions aggregated $0 and $39,927,317, respectively.

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 year ended December 31, 2019, the custodian fees were reduced as noted in the Statement of Operations.

5.  Independent Trustees’ Retirement Plan

On January 1, 1993, the Trust adopted an Independent Trustees’ Retirement Plan (Plan). The Plan is an unfunded defined benefit plan that provides benefit payments to Trustees whose length of service and retirement age meets the eligibility requirements of the Plan. Benefits under the Plan are based on years of service and fees paid to each trustee at the time of retirement. Effective in December 1996, the Plan was closed to new participants.

During the year ended December 31, 2019, the Fund’s projected benefit obligation and benefit payments under the Plan were as follows:

aProjected benefit obligation at December 31, 2019	$	1,035,874
bIncrease in projected benefit obligation	$	96,893
Benefit payments made to retired trustees	$	(16,724	)

^aThe projected benefit obligation is included in trustees’ fees and expenses in the Statement of Assets and Liabilities.

^bThe increase in projected benefit obligation is included in trustees’ fees and expenses in the Statement of Operations.

6.  Income Taxes

The tax character of distributions paid during the years ended December 31, 2019 and 2018, was as follows:

	2019		2018
Distributions paid from:
Ordinary income	$	304,453,606	$	273,584,591
Long term capital gain		637,616,710		584,103,783
	$	942,070,316	$	857,688,374

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Franklin Mutual Shares Fund (continued)

At December 31, 2019, the cost of investments, net unrealized appreciation (depreciation), undistributed ordinary income and undistributed long term capital gains for income tax purposes were as follows:

Cost of investments	$	8,555,810,833
Unrealized appreciation	$	3,304,897,841
Unrealized depreciation		(341,052,602	)
Net unrealized appreciation (depreciation)	$	2,963,845,239
Distributable earnings:
Undistributed ordinary income	$	45,344,212
Undistributed long term capital gains		126,870,225
Total distributable earnings	$	172,214,437

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, pass-through entity income and defaulted securities.

The Fund utilized a tax accounting practice to treat a portion of the proceeds from capital shares redeemed as a distribution from realized capital gains.

7.  Investment Transactions

Purchases and sales of investments (excluding short term securities and securities sold short) for the year ended December 31, 2019, aggregated $2,568,929,331 and $5,148,623,495, respectively.

8.  Credit Risk and Defaulted Securities

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

At December 31, 2019, the aggregate long value of distressed company securities for which interest recognition has been discontinued represents less than 0.1% of the Fund’s net assets. For information as to specific securities, see the accompanying Statement of Investments.

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.

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FRANKLIN MUTUAL SERIES FUNDS

NOTES TO FINANCIAL STATEMENTS

Franklin Mutual Shares Fund (continued)

9. Restricted Securities (continued)

At December 31, 2019, investments in restricted securities, excluding securities exempt from registration under the 1933 Act, were as follows:

Shares	Issuer	Acquisition Date		Cost		Value
7,234,813	International Automotive Components Group Brazil LLC, (Value is 0.0%† of Net Assets)		4/13/06 - 12/26/08	$	4,804,678	$	262,624

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

10. Other Derivative Information

At December 31, 2019, 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
Foreign exchange contracts	Variation margin on futures contracts	$	—	Variation margin on futures contracts	$	2,157,842	a
	Unrealized appreciation on OTC forward exchange contracts		980,230	Unrealized depreciation on OTC forward exchange contracts		10,019,135
Totals		$	980,230		$	12,176,977

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

For the year ended December 31, 2019, the effect of derivative contracts in the Statement of Operations was as follows:

Derivative Contracts Not Accounted for as Hedging Instruments	Statement of Operations Location	Net Realized Gain (Loss) for the Year		Statement of Operations Location	Net Change in Unrealized Appreciation (Depreciation) for the Year
	Net realized gain (loss) from:			Net change in unrealized appreciation (depreciation) on:
Foreign exchange contracts	Forward exchange contracts		$31,064,320	Forward exchange contracts		$(16,802,196)
	Futures contracts		5,392,979	Futures contracts		(2,622,855)
Totals			$36,457,299			$(19,425,051)

For the year ended December 31, 2019, the average month end notional amount of futures contracts represented $290,533,947. The average month end contract value of forward exchange contracts was $574,888,214.

See Note 1(d) regarding derivative financial instruments.

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Franklin Mutual Shares Fund (continued)

11.  Holdings of 5% Voting Securities of Portfolio Companies

The 1940 Act defines “affiliated companies” to include investments in portfolio companies in which a fund owns 5% or more of the outstanding voting securities. During the year ended December 31, 2019, investments in “affiliated companies” were as follows:

Name of Issuer	Value at Beginning of Year		Purchases			Sales			Realized Gain (Loss)			Net Change in Unrealized Appreciation (Depreciation)			Value at End of Year			Number of Shares/Units Held at End of Year			Dividend Income
Non-Controlled Affiliates
Alexander’s Inc.	$	99,550,939	$	—		$	(23,452,339	)	$	20,501,406			$              —	a	$	—	a		—	a $		4,162,293
International Automotive Components Group Brazil LLC		306,590		—			—			—			(43,966	)		262,624			7,234,813			—
International Automotive Components Group North America LLC		7,519,120		—			(9,398,900	)		(42,263,636	)		44,143,416			—	b		—			—
TRU Kids Parent LLC		—		36,597,430	c		—			—			(8,729,602	)		27,867,828			7,469			—
Wayne Services Legacy Inc.		—		2,612,332	c		(3,918,495	)c		1,306,163			—			—			7,469			—
Total Affiliated Securities (Value is 0.2% of Net Assets)	$	107,376,649	$	39,209,762		$	(36,769,734	)	$	(20,456,067	)		$35,369,848		$	28,130,452					$	4,162,293

^aAs of December 31, 2019, no longer an affiliate.

^bAs of December 31, 2019, no longer held by the Fund.

^cMay include accretion, amortization, partnership adjustments, and/or corporate actions.

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 billion (Global Credit Facility) which matured on February 7, 2020. This Global Credit Facility provides a source of funds to the Borrowers for temporary and emergency purposes, including the ability to meet future unanticipated or unusually large redemption requests. Effective February 7, 2020, the Borrowers renewed the Global Credit Facility for a one year term, maturing February 5, 2021, for a total of $2 billion.

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 year ended December 31, 2019, the Fund did not use the Global Credit Facility.

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

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NOTES TO FINANCIAL STATEMENTS

Franklin Mutual Shares Fund (continued)

13.  Fair Value Measurements (continued)

• 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 December 31, 2019, in valuing the Fund’s assets and liabilities carried at fair value, is as follows:

	Level 1		Level 2		Level 3			Total
Assets:
Investments in Securities:a
Equity Investments:b
Auto Components	$	—	$	—	$	262,624		$	262,624
Machinery		41,115,449		58,151,524		—			99,266,973
Media		704,839,679		—		505,662			705,345,341
Specialty Retail		—		—		27,867,828	c		27,867,828
All Other Equity Investments		9,699,588,617		—		—			9,699,588,617
Corporate Notes and Senior Floating Rate Interests		—		401,710,529		—			401,710,529
Corporate Notes in Reorganization		—		2,813,696		—			2,813,696
Companies in Liquidation		—		—		106,797	c		106,797
Short Term Investments		631,460,637		16,300,000		—			647,760,637
Total Investments in Securities	$	11,077,004,382	$	478,975,749	$	28,742,911		$	11,584,723,042
Other Financial Instruments:
Forward Exchange Contracts	$	—	$	980,230	$	—		$	980,230
Liabilities:
Other Financial Instruments:
Securities Sold Shorta	$	53,876,501	$	—	$	—		$	53,876,501
Futures Contracts		2,157,842		—		—			2,157,842
Forward Exchange Contracts		—		10,019,135		—			10,019,135
Total Other Financial Instruments	$	56,034,343	$	10,019,135	$	—		$	66,053,478

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

^bIncludes common stocks as well as other equity interests.

^cIncludes securities determined to have no value at December 31, 2019.

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

14.  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 other than those already disclosed in the financial statements.

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NOTES TO FINANCIAL STATEMENTS

Franklin Mutual Shares Fund (continued)

Abbreviations

Counterparty		Currency		Selected Portfolio
BOFA	Bank of America Corp.	EUR	Euro	ADR	American Depositary Receipt
HSBK	HSBC Bank PLC	GBP	British Pound	FHLB	Federal Home Loan Bank
SSBT	State Street Bank and Trust Co., N.A.	USD	United States Dollar	LIBOR	London InterBank Offered Rate
UBSW	UBS AG

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Report of Independent Registered Public Accounting Firm

To the Board of Trustees of Franklin Mutual Series Funds and Shareholders of Franklin Mutual Shares Fund:

Opinion on the Financial Statements

We have audited the accompanying statement of assets and liabilities of Franklin Mutual Shares Fund (the “Fund”) (one of the funds constituting Franklin Mutual Series Funds), including the schedule of investments, as of December 31, 2019, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, the financial highlights for each of the five years in the period then ended and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of Franklin Mutual Shares Fund (one of the funds constituting Franklin Mutual Series Funds) at December 31, 2019, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and its financial highlights for each of the five years in the period then ended, in conformity with U.S. generally accepted accounting principles.

Basis for Opinion

These financial statements are the responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Fund is not required to have, nor were we engaged to perform, an audit of the Fund’s internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Fund’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of December 31, 2019, by correspondence with the custodian or by other appropriate auditing procedures where replies from others were not received. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

We have served as the auditor of one or more Franklin investment companies since 1987.

Boston, Massachusetts

February 21, 2020

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Franklin Mutual Shares Fund

Tax Information (unaudited)

Under Section 852(b)(3)(C) of the Internal Revenue Code, the Fund hereby reports the maximum amount allowable but no less than $757,400,294 as a long term capital gain dividend for the fiscal year ended December 31, 2019.

Under Section 871(k)(2)(C) of the Internal Revenue Code, the Fund hereby reports the maximum amount allowable but no less than $26,825,217 as a short term capital gain dividend for purposes of the tax imposed under Section 871(a)(1)(A) of the Internal Revenue Code for the fiscal year ended December 31, 2019.

Under Section 854(b)(1)(A) of the Internal Revenue Code, the Fund hereby reports 62.80% of the ordinary income dividends as income qualifying for the dividends received deduction for the fiscal year ended December 31, 2019.

Under Section 854(b)(1)(B) of the Internal Revenue Code, the Fund hereby reports the maximum amount allowable but no less than $280,960,099 as qualified dividends for purposes of the maximum rate under Section 1(h)(11) of the Internal Revenue Code for the fiscal year ended December 31, 2019. Distributions, including qualified dividend income, paid during calendar year 2019 will be reported to shareholders on Form 1099-DIV by mid-February 2020. Shareholders are advised to check with their tax advisors for information on the treatment of these amounts on their individual income tax returns.

Under Section 871(k)(1)(C) of the Internal Revenue Code, the Fund hereby reports the maximum amount allowable but no less than $57,644,174 as interest related dividends for purposes of the tax imposed under Section 871(a)(1)(A) of the Internal Revenue Code for the fiscal year ended December 31, 2019.

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Board Members and Officers

The name, year of birth and address of the officers and board members, as well as their affiliations, positions held with the Trust, principal occupations during at least the past five years and number of U.S. registered portfolios overseen in the Franklin Templeton fund complex, are shown below. Generally, each board member serves until that person’s successor is elected and qualified.

Independent Board Members

Name, Year of Birth and Address	Position	Length of Time Served	Number of Portfolios in Fund Complex Overseen     by Board Member*	Other Directorships Held During at Least the Past 5 Years
Edward I. Altman, Ph.D. (1941)	Trustee	Since 1987	12	None
c/o Franklin Mutual Advisers, LLC
101 John F. Kennedy Parkway
Short Hills, NJ 07078-2716
Principal Occupation During at Least the Past 5 Years:
Max L. Heine Professor of Finance, Emeritus and Director of The Credit and Debt Markets Research Program, Salomon Center, Stern School of Business, New York University; editor and author of numerous financial publications; financial consultant; an adviser to numerous financial and publishing organizations; and formerly, Vice Director, Salomon Center, Stern School of Business, New York University.
Ann Torre Bates (1958) c/o Franklin Mutual Advisers, LLC 101 John F. Kennedy Parkway Short Hills, NJ 07078-2716	Trustee and Chairperson	Trustee since 1995 and Chairperson since January 2020	33	Ares Capital Corporation (specialty finance company) (2010-present), United Natural Foods, Inc. (distributor of natural, organic and specialty foods) (2013-present), Allied Capital Corporation (financial services) (2003-2010), SLM Corporation (Sallie Mae) (1997-2014) and Navient Corporation (loan management, servicing and asset recovery) (2014-2016).
Principal Occupation During at Least the Past 5 Years:
Director of various companies; and formerly, Executive Vice President and Chief Financial Officer, NHP Incorporated (manager of multifamily housing) (1995-1997); and Vice President and Treasurer, US Airways, Inc. (until 1995).
Burton J. Greenwald (1929) c/o Franklin Mutual Advisers, LLC 101 John F. Kennedy Parkway Short Hills, NJ 07078-2716	Trustee	Since 2002	12	Franklin Templeton Emerging Markets Debt Opportunities Fund PLC (1999-present) and Fiduciary International Ireland Limited (1999-2015).
Principal Occupation During at Least the Past 5 Years:
Managing Director, B.J. Greenwald Associates (management consultants to the financial services industry); and formerly, Chairman, Fiduciary Trust International Funds; Executive Vice President, L.F. Rothschild Fund Management, Inc.; President and Director, Merit Mutual Funds; President, Underwriting Division and Director, National Securities & Research Corporation; Governor, Investment Company Institute; and Chairman, ICI Public Information Committee.
Jan Hopkins Trachtman (1947) c/o Franklin Mutual Advisers, LLC 101 John F. Kennedy Parkway Short Hills, NJ 07078-2716	Trustee	Since 2009	12	FinTech Acquisition Corp. III (special purpose fintech acquisition company) (2018-present)
Principal Occupation During at Least the Past 5 Years:
President and Founder, The Jan Hopkins Group (communications consulting firm); serves on Alumni Advisory Board of Knight Bagehot Fellowship; and formerly, President, Economic Club of New York (2007-2015); Anchor/Correspondent, CNN Financial News (until 2003); Managing Director and Head of Client Communications, Citigroup Private Bank (until 2005); Off-Air reporter, ABC News’ World News Tonight; and Editor, CBS Network News.

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    -

Independent Board Members (continued)

Name, Year of Birth and Address	Position	Length of Time Served	Number of Portfolios in Fund Complex Overseen     by Board Member*	Other Directorships Held During at Least the Past 5 Years
Keith Mitchell (1954)	Trustee	Since 2009	12	None
c/o Franklin Mutual Advisers, LLC
101 John F. Kennedy Parkway
Short Hills, NJ 07078-2716
Principal Occupation During at Least the Past 5 Years:
Director of various boards of asset management firms; and formerly, Managing Member, Mitchell, Hartley & Bechtel Advisers, LLC (formerly, Mitchell Advisers, LLC) (advisory firm) (2003-2015) and Managing Director, Putman Lovell NBF.
David W. Niemiec (1949) c/o Franklin Mutual Advisers, LLC 101 John F. Kennedy Parkway Short Hills, NJ 07078-2716	Trustee	Since 2015	33	Hess Midstream LP (oil and gas midstream infrastructure) (2017-present).
Principal Occupation During at Least the Past 5 Years:
Advisor, Saratoga Partners (private equity fund); and formerly, Managing Director, Saratoga Partners (1998-2001) and SBC Warburg Dillon Read (investment banking) (1997-1998); Vice Chairman, Dillon, Read & Co. Inc. (investment banking) (1991-1997); and Chief Financial Officer, Dillon, Read & Co. Inc. (1982-1997).
Charles Rubens II (1930)	Trustee	Since 1998	12	None
c/o Franklin Mutual Advisers, LLC
101 John F. Kennedy Parkway
Short Hills, NJ 07078-2716
Principal Occupation During at Least the Past 5 Years:
Private investor and president of non-profit organizations; and formerly, an executive of Time, Inc.; and Trustee of Colorado College.
Robert E. Wade (1946)	Trustee	Since 1991	33	El Oro Ltd (investments) (2003-2019).
c/o Franklin Mutual Advisers, LLC
101 John F. Kennedy Parkway
Short Hills, NJ 07078-2716
Principal Occupation During at Least the Past 5 Years:
Attorney at law engaged in private practice as a sole practitioner (1972-2008) and member of various boards.
Gregory H. Williams (1943)	Trustee	Since 2015	12	None
c/o Franklin Mutual Advisers, LLC
101 John F. Kennedy Parkway
Short Hills, NJ 07078-2716
Principal Occupation During at Least the Past 5 Years:
Private investor; Consultant; and formerly, President, University of Cincinnati (2009-2012); President, The City College of New York (2001-2009); Dean, College of Law, Ohio State University (1993-2001); and Associate Vice President, Academic Affairs and Professor of Law, University of Iowa (1977-1993).
Interested Board Members and Officers
Name, Year of Birth and Address	Position	Length of Time Served	Number of Portfolios in Fund Complex Overseen by Board Member*	Other Directorships Held During at Least the Past 5 Years
**Gregory E. Johnson (1961)	Trustee	Since 2007	144	None
One Franklin Parkway
San Mateo, CA 94403-1906
Principal Occupation During at Least the Past 5 Years:
Chairman of the Board, Member – Office of the Chairman, Director and Chief Executive Officer, Franklin Resources, Inc.; officer and/or director or trustee, as the case may be, of some of the other subsidiaries of Franklin Resources, Inc. and of 39 of the investment companies in Franklin Templeton; Vice Chairman, Investment Company Institute; and formerly, President, Franklin Resources, Inc. (1994-2015).

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Interested Board Members and Officers (continued)

Name, Year of Birth and Address	Position	Length of Time Served	Number of Portfolios in Fund Complex Overseen     by Board Member*	Other Directorships Held During at Least the Past 5 Years
**Peter A. Langerman (1955) c/o Franklin Mutual Advisers, LLC 101 John F. Kennedy Parkway Short Hills, NJ 07078-2716	Trustee, President, and Chief Executive Officer – Investment Management	Trustee since 2007, President, and Chief Executive Officer – Investment Management since 2005	7	None
Principal Occupation During at Least the Past 5 Years:
Chairman of the Board, Chief Executive Officer and President, Franklin Mutual Advisers, LLC; and officer and/or director, as the case may be, of three of the investment companies in Franklin Templeton.
Alison E. Baur (1964) One Franklin Parkway San Mateo, CA 94403-1906	Vice President	Since 2012	Not Applicable	Not Applicable
Principal Occupation During at Least the Past 5 Years:
Deputy General Counsel, Franklin Templeton; and officer of some of the other subsidiaries of Franklin Resources, Inc. and of 41 of the investment companies in Franklin Templeton.
Breda M. Beckerle (1958) 280 Park Avenue New York, NY 10017	Interim Chief Compliance Officer	Since January 2020	Not Applicable	Not Applicable
Principal Occupation During at Least the Past 5 Years:
Chief Compliance Officer, Fiduciary Investment Management International, Inc., Franklin Advisers, Inc., Franklin Advisory Services, LLC, Franklin Mutual Advisers, LLC, Franklin Templeton Institutional, LLC; and officer of 41 of the investment companies in Franklin Templeton.
Steven J. Gray (1955) One Franklin Parkway San Mateo, CA 94403-1906	Vice President and Secretary	Vice President since 2009 and Secretary since 2005	Not Applicable	Not Applicable
Principal Occupation During at Least the Past 5 Years:
Senior Associate General Counsel, Franklin Templeton; Vice President, Franklin Templeton Distributors, Inc. and FASA, LLC; and officer of 41 of the investment companies in Franklin Templeton.
Matthew T. Hinkle (1971) One Franklin Parkway San Mateo, CA 94403-1906	Chief Executive Officer – Finance and Administration	Since 2017	Not Applicable	Not Applicable
Principal Occupation During at Least the Past 5 Years:
Senior Vice President, Franklin Templeton Services, LLC; officer of 41 of the investment companies in Franklin Templeton; and formerly,Vice President, Global Tax (2012-April 2017) and Treasurer/Assistant Treasurer, Franklin Templeton (2009-2017).
Robert G. Kubilis (1973) 300 S.E. 2nd Street Fort Lauderdale, FL 33301-1923	Chief Financial Officer, Chief Accounting Officer and Treasurer	Since 2012	Not Applicable	Not Applicable
Principal Occupation During at Least the Past 5 Years:
Treasurer, U.S. Fund Administration & Reporting; and officer of 15 of the investment companies in Franklin Templeton.

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    -

Interested Board Members and Officers (continued)

Name, Year of Birth and Address	Position	Length of Time Served	Number of Portfolios in Fund Complex Overseen     by Board Member*	Other Directorships Held During at Least the Past 5 Years
Robert Lim (1948) One Franklin Parkway San Mateo, CA 94403-1906	Vice President – AML Compliance	Since 2016	Not Applicable	Not Applicable
Principal Occupation During at Least the Past 5 Years:
Vice President, Franklin Templeton Companies, LLC; Chief Compliance Officer, Franklin Templeton Distributors, Inc. and Franklin Templeton Investor Services, LLC; and officer of 44 of the investment companies in Franklin Templeton Investments.
Navid J. Tofigh (1972) One Franklin Parkway San Mateo, CA 94403-1906	Vice President	Since 2015	Not Applicable	Not Applicable
Principal Occupation During at Least the Past 5 Years:
Associate General Counsel; and officer of 41 of the investment companies in Franklin Templeton.
Craig S. Tyle (1960) One Franklin Parkway San Mateo, CA 94403-1906	Vice President	Since 2005	Not Applicable	Not Applicable
Principal Occupation During at Least the Past 5 Years:
General Counsel and Executive Vice President, Franklin Resources, Inc.; and officer of some of the other subsidiaries of Franklin Resources, Inc. and of 41 of the investment companies in Franklin Templeton.
Lori A. Weber (1964) 300 S.E. 2nd Street Fort Lauderdale, FL 33301-1923	Vice President	Since 2011	Not Applicable	Not Applicable
Principal Occupation During at Least the Past 5 Years:
Senior Associate General Counsel, Franklin Templeton; Assistant Secretary, Franklin Resources, Inc.; Vice President and Secretary, Templeton Investment Counsel, LLC; and officer of 41 of the investment companies in Franklin Templeton.

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*We base the number of portfolios on each separate series of the U.S. registered investment companies within the Franklin Templeton Investments fund complex. These portfolios have a common investment manager or affiliated investment managers.

**Gregory E. Johnson is considered to be an interested person of the Fund under the federal securities laws due to his position as an officer and director of Franklin Resources, Inc. (Resources), which is the parent company of the Fund’s investment manager and distributor. Peter A. Langerman is considered to be an interested person of the Fund under the federal securities laws due to his position as an officer of Franklin Mutual Advisers, LLC, which is the Fund’s investment manager.

Note 1: Officer information is current as of the date of this report. It is possible that after this date, information about officers may change.

The Sarbanes-Oxley Act of 2002 and Rules adopted by the U.S. Securities and Exchange Commission require the Fund to disclose whether the Fund’s Audit Committee includes at least one member who is an audit committee financial expert within the meaning of such Act and Rules. The Fund’s Board has determined that there is at least one such financial expert on the Audit Committee and has designated each of Edward I. Altman, Ph.D., Ann Torre Bates and David W. Niemiec as an audit committee financial expert. The Board believes that Messrs. Altman and Niemiec and Ms. Bates qualify as such an expert in view of their extensive business background and experience. Mr. Altman has served as a member of the Fund Audit Committee since 1987. He currently serves as a Max L. Hine Professor of Finance, Emeritus and Director of The Credit and Debt Markets Research Program, Salomon Center, Stern School of Business, New York University. Ms. Bates has served as a member of the Fund Audit Committee since 1995. She currently serves as a director of Ares Capital Corporation (2010-present) and United Natural Foods, Inc. (2013-present) and was formerly a director of Navient Corporation from 2014 to 2016, SLM Corporation from 1997 to 2014 and Allied Capital Corporation from 2003 to 2010, Executive Vice President and Chief Financial Officer of NHP Incorporated from 1995 to 1997 and Vice President and Treasurer of US Airways, Inc. until 1995. Mr. Niemiec has served as a member of the Fund Audit Committee since 2015, currently serves as an Advisor to Saratoga Partners and was formerly its Managing Director from 1998 to 2001 and serves as a director of Hess Midstream LP (2017-present). Mr. Niemiec was formerly a director of Emeritus Corporation from 1999 to 2010 and OSI Pharmaceuticals, Inc. from 2006 to 2010, Managing Director of SBC Warburg Dillon Read from 1997 to 1998, and was Vice Chairman from 1991 to 1997 and Chief Financial Officer from 1982 to 1997 of Dillon, Read & Co. Inc. As a result of such background and experience, the Board believes that Messrs. Altman and Niemiec and Ms. Bates have each acquired an understanding of generally accepted accounting principles and financial statements, the general application of such principles in connection with the accounting estimates, accruals and reserves, and analyzing and evaluating financial statements that present a breadth and level of complexity of accounting issues generally comparable to those of the Fund, as well as an understanding of internal controls and procedures for financial reporting and an understanding of audit committee functions. Messrs. Altman and Niemiec and Ms. Bates are independent Board members as that term is defined under the applicable U.S. Securities and Exchange Commission Rules and Releases.

The Statement of Additional Information (SAI) includes additional information about the board members and is available, without charge, upon request. Shareholders may call (800) DIAL BEN/342-5236 to request the SAI.

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FRANKLIN MUTUAL SHARES FUND

Shareholder Information

Proxy Voting Policies and Procedures

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

Quarterly Statement of Investments

The Trust, on behalf of the Fund, files a complete statement of investments with the U.S. Securities and Exchange Commission for the first and third quarters for each fiscal year 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 the Fund’s financial reports every six months as well as an annual updated summary prospectus (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 and summary prospectus. This process, called “house-holding,” 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.

	Annual Report and Shareholder Letter Franklin Mutual Shares Fund
	Investment Manager	Distributor	Shareholder Services
	Franklin Mutual Advisers, LLC	Franklin Templeton Distributors, Inc.         (800) DIAL BEN® / 342-5236	(800) 632-2301 - (Class A, C, R & R6)
		franklintempleton.com	(800) 448-FUND - (Class Z)

© 2020 Franklin Templeton Investments. All rights reserved. 474 A 02/20

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

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

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

FRANKLIN TEMPLETON

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

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

Dear Franklin Mutual Financial Services Fund Shareholder:

As we enter 2020, the factors that lifted stocks to record highs in 2019—accommodative central bank monetary policies and progress on a proposed trade deal between the U.S. and China—continue to be sources of optimism for growth. The near-term threat of recession has eased, with the U.S. economy showing resilience as low unemployment and moderately rising wages have encouraged consumer spending, which has supported the expansion. In contrast, business investment and exports were weak in 2019, but there are nascent signs of increasing industrial activity.

Tariffs, trade battles and geopolitical conflict may continue to dominate headlines in 2020 and account for a disproportionate source of market volatility. The U.S. and China agreed in principle to a phase-one trade agreement in late 2019. However, a re-escalation of the tariff dispute between the world’s two largest economies is not out of the question, as negotiations on a phase-two trade agreement are scheduled to start after the anticipated phase-one signing ceremony in January. There was clarity on Brexit as British voters delivered a resounding election victory to Prime Minister Boris Johnson and his Conservative Party, which should pave the way for a conclusive exit agreement. The terms of U.K. departure, however, must still be finalized. Late in the period, tensions in the Middle East were on the rise, following the death of an American contractor in Iraq in late December and a retaliatory U.S. military strike two days later.

During the period, we took advantage of market turbulence to seek out a larger number of stocks whose risk/reward profiles turned more favorable. Subsequently, we used the market appreciation to exit from or trim select positions that reached or exceeded our estimates of intrinsic value. Market volatility continues to present occasional opportunities in

individual stocks, and in certain sectors, notably those considered to be economically sensitive. We continue to focus on situations in which company-specific actions are more important than economic improvement in driving shareholder value.

Valuation is an essential factor in our analysis, and we always ask ourselves if current and potential investments represent an attractive balance of risk and reward. Amid the all-time highs reached by the Standard & Poor’s^® 500 Index (S&P 500^®) during the period, we maintained our focus on individual securities and the prospects for each business in the context of its valuation and the backdrop of potential political and economic risks.

We continue to adhere to a bottom-up stock selection process that is disciplined, driven by rigorous fundamental analysis, and that attempts to limit downside risk. In our view, actively investing in underappreciated and misunderstood companies with identifiable catalysts for unlocking shareholder value can offer meaningful upside potential and a degree of downside protection in periods of financial market turbulence.

We recognize the important role of financial advisors in today’s markets and encourage investors to continue to seek their advice. Amid changing markets and economic conditions, we are confident investors with a well-diversified portfolio and a patient, long-term outlook will 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 12 months considering the

Not FDIC Insured | May Lose Value |  No Bank Guarantee

franklintempleton.com Not part of the annual report         1

economic environment and other factors. Please remember all securities markets fluctuate, as do mutual fund share prices.

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

Sincerely,

Peter A. Langerman

Chairman, President and Chief Executive Officer

Franklin Mutual Advisers, LLC

This letter reflects our analysis and opinions as of December 31, 2019, unless otherwise indicated. The information is not a complete analysis of every aspect of any market, country, industry, security or fund. Statements of fact are from sources considered reliable.

Contents

Annual Report
Franklin Mutual Financial Services Fund	3
Performance Summary	8
Your Fund’s Expenses	11
Financial Highlights and Statement of Investments	12
Financial Statements	20
Notes to Financial Statements	24
Report of Independent Registered Public Accounting Firm	35
Tax Information	36
Board Members and Officers	37
Shareholder Information	42

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

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ANNUAL REPORT

Franklin Mutual Financial Services Fund

This annual report for Franklin Mutual Financial Services Fund covers the fiscal year ended December 31, 2019.

Your Fund’s Goal and Main Investments

The Fund seeks capital appreciation, which may occasionally be short term, with income as a secondary goal. Under normal market conditions, the Fund invests at least 80% of its net assets in securities of financial services companies that we believe are available at market prices less than their intrinsic value. The Fund invests primarily in equity securities, mainly common stocks with a current focus on mid- and large cap companies. To a lesser extent, the Fund also invests in merger arbitrage securities and the debt and equity of distressed companies. The Fund may invest in foreign securities without limit. The Geographic Composition bar chart on this page lists the leading countries where the Fund invests.

Performance Overview

The Fund’s Class Z shares posted a cumulative total return of +19.32% for the 12 months ended December 31, 2019. For comparison, the Fund’s primary benchmark, the MSCI World Financials Index (USD), which captures large and midcap representation across developed markets countries, posted a +26.41% total return, while its secondary benchmark, the Standard & Poor’s 500 (S&P 500^®) Financials Index, which tracks financials stocks in the S&P 500 Index, posted a +32.13% total return.¹ You can find more of the Fund’s performance data in the Performance Summary beginning on page 8.

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

Economic and Market Overview

Global developed and emerging market stocks, as measured by the MSCI All Country World Index (USD), posted a +27.30% total return during the 12 months ended

Geographic Composition*

Based on Total Net Assets as of 12/31/19

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

December 31, 2019.¹ Although global economic growth slowed from 2018, interest-rate cuts from many central banks and the easing of trade tensions near period-end contributed to the generally positive environment for equities worldwide. Reflecting investor optimism and slowing but resilient economic growth, stocks advanced in every major region of the globe.

In the U.S., solid economic growth also supported equities, as healthy consumer spending and a strong labor market kept the economy afloat. The unemployment rate fell during the year, reaching 3.5% in September, November and December 2019, the lowest recorded unemployment rate in

1. 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.

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 16.

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50 years.² Wages also grew, albeit at a moderate pace, and inflation remained persistently low. In addition, deficit spending by the U.S. government boosted current growth at the expense of long-term debt. Despite the strength in the consumer sector, some parts of the economy struggled, particularly heavy industry. Annual industrial production contracted late in the reporting period, manufacturing output stalled and capital spending declined.

The U.S. Federal Reserve (Fed) provided a substantial boost to equity markets early in the reporting period as it shifted to a more accommodative monetary policy. In January 2019, the Fed signaled the end of its tightening cycle and cut the federal funds rate three times thereafter, lowering it to a range of 1.50%–1.75%. Stocks responded positively to the interest-rate cuts and gained further in December 2019 after the Fed indicated it would likely leave interest rates unchanged in 2020.

Growth slowed overall in the eurozone, particularly in Germany and Italy. Germany, which is heavily reliant on exports, was adversely affected by the trade conflict between the U.S. and China and the resulting slowdown in global trade. In Italy, political uncertainty and budget concerns caused the country’s annual gross domestic product (GDP) growth to stall in 2019’s first quarter before modestly improving in the second and third quarters. Despite sluggish economic conditions, European developed market equities, as measured by the MSCI Europe Index-NR (Local Currency), posted a +23.75% total return for the 12-month period, as easing trade tensions buoyed investor optimism and an electoral victory by the Conservative Party in the U.K. alleviated uncertainty surrounding Brexit.³ Although the European Central Bank left its headline refinancing rate unchanged, it lowered the deposit rate and restarted its bond-buying stimulus program, further supporting stocks.

Economic growth in Asia was relatively solid overall, despite slowdowns in several large emerging market countries, such as China and India. Japan’s economy grew amid the Bank of Japan’s sizable stimulus program. The trade war between the U.S. and China provided the backdrop for Asian stocks, which rose and fell in sync with investor sentiment regarding a trade deal. A phase one trade agreement between the two countries reached in December 2019 propelled Asian developed and emerging market stocks, which ultimately ended with a +19.23% total return over the 12-month period, as measured by the MSCI All Country Asia Index (USD).⁴

Emerging market stocks overall experienced several sharp selloffs and subsequent rebounds throughout the reporting period before ending with gains. In aggregate, economic growth slowed somewhat from 2018 but remained solid, although there was some variation among individual countries. Many central banks in emerging markets cut interest rates throughout the reporting period, which, along with resilient GDP growth, provided a supportive environment for equities. Russian stocks posted the highest returns among emerging markets as the threat of further sanctions receded and a solid fiscal environment reassured investors. Overall, global emerging markets, as measured by the MSCI Emerging Markets Index (USD), posted a +18.90% total return for the 12-month period.¹

Investment Strategy

We strive to provide investors with superior risk-adjusted returns over time through our distinctive, value investment style, which includes investments in undervalued common stocks, and to a significantly lesser extent, distressed debt and merger arbitrage. Rigorous fundamental analysis drives our investment process. We attempt to determine each investment’s intrinsic value as well as the price at which we would be willing to commit shareholder funds. While valuation remains our key consideration, we utilize numerous fundamental factors such as return on equity, financial leverage and long-term earnings power. We also consider factors such as management quality and competitive position. As always, our approach to investing is as much about assessing risk and containing losses as it is about achieving profits. In addition, it is our practice to hedge the Fund’s currency exposure when we deem it advantageous for our shareholders.

What is return on equity?

Return on equity is a measure of profitability, expressed as a percentage, calculated by dividing a company’s net income by total shareholder equity for a given period. Return on equity tells common shareholders how effectually their money is being employed. Comparing percentages for current and prior periods also reveals trends, and comparison with industry composites reveals how well a company is holding its own against its competitors.

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

3. Source: Morningstar. Net Returns (NR) include income net of tax withholding when dividends are paid.

4. Source: MSCI.

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What is meant by “hedge”?

To hedge an investment is to take a position intended to offset potential losses that may be incurred by a companion financial instrument. Hedging an investment may also offset potential gains.

Manager’s Discussion

The end of a decade is a natural time for reflection about the years that have just passed and to look ahead to what the next 10 might have in store. Across Wall Street, we see many prognostications, and while we are not in the forecasting business, we do allow ourselves to think about investment opportunities over such an extended time period. But experience has taught us that while trying to predict the exact course of markets and/or economic and political events that will drive them may be fun, it is not all that useful.

As 2010 began, the global economy was still recovering from the Global Financial Crisis. The U.S. government owned significant portions of the banking and automotive sectors. The Fed had already started quantitative easing (QE), with QE 2 and QE 3 still to come. In Europe, concerns about Greece’s finances were emerging, and in China the effects of 2009’s massive stimulus programs were starting to take hold.

Over the subsequent years we saw ongoing, global QE, culminating in trillions of dollars of debt yielding negative interest rates. The European Union (EU) was in continuous upheaval, with Greece threatening to leave, but eventually staying in the eurozone; the U.K. pursuing and achieving Brexit; and ongoing strain between core members Germany, France, Italy and Spain. In the U.S., average annual economic growth was restrained and finished the decade below 2%, trailing the minimum 3% expectation of prior decades. Strong corporate profits and lower corporate tax rates were bright spots.

Equity markets delivered a very good decade—one of the best in history—with the MSCI World Financials Index (USD) posting an average annual total return of +7.85%.1 During the decade, Franklin Mutual Financial Services Fund, Class Z posted an average annual total return of +8.94%, surpassing its benchmark above. In the prior decade, the Fund’s value strategy, which seeks to identify mispriced securities and limit downside risk, posted an average annual total return of +6.71%, compared with +0.15% for its benchmark.¹

In our view, going forward we expect more political and monetary uncertainty and economic growth in unexpected

Portfolio Composition*

Based on Total Net Assets as of 12/31/19

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

places. Corporate profits will have good years and bad years. Some industries will be massively disrupted, while others will find a way to adjust and prosper, even within the context of artificial intelligence and machine learning. Recent events, such as the coronavirus outbreak, have caused, and may continue to cause, uncertainty and volatility in the Chinese economy, potentially leading to vulnerability in 2020 global growth expectations. As for investment positioning, we intend to avoid forecasts that would lead us to make the Fund’s success dependent on a specific set of outcomes. Rather, we will seek to continue with our time-tested value process and complement it with new tools that enhance our security evaluation and selection process. To that end, we have integrated risk and quantitative portfolio analysis tools that provide us with fresh insights about performance, and help us identify companies and securities that we believe satisfy our investors’ goals of risk-adjusted returns that are not wholly dependent on any one economic or political scenario.

Fund Performance

Turning to Fund performance, top positive contributors included U.S.-based companies Voya Financial, Hartford Financial Services Group and JPMorgan Chase. Voya Financial and Harford Financial Services Group are listed among the Fund’s largest positions in the Top 10 Equity Holdings table on page 6.

Shares of U.S.-based investment and insurance company Voya Financial rallied in September after reporting earnings

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that beat consensus expectations, and the company expanded its stock buyback program. Voya’s shares also surged in December after the company announced that it was selling its individual life and other non-retirement annuities businesses to Resolution Life Group Holdings (not a Fund holding) for $1.7 billion. Voya’s management said it expects to use $600 million to $800 million of the proceeds to pay down debt and between $900 million and $1.1 billion for stock repurchases in 2020.

Shares of insurer and investment products firm Hartford Financial Services Group performed well after the company posted a solid set of quarterly results driven by strong group benefits results, improved market conditions in the property casualty markets and good cost controls. Going forward, we believe Hartford Financial can deliver higher returns through its franchise property/casualty, group benefits and asset management businesses.

The stock price of banking company JPMorgan Chase trended up during the year but rose sharply after it reported third-quarter earnings that beat consensus estimates. The results were broad based, with stronger-than-expected revenues from the company’s consumer and investment banking divisions. A reduction in net interest income, which declines when interest rates fall, was less than expected, mitigated by revenue from JPMorgan Chase’s diversified banking operation.

During the period under review, Fund investments that detracted from performance included Indiabulls Housing Finance, Yes Bank (not held at period-end) and Allied Irish Bank Group⁵.

Shares of Indiabulls Housing Finance, an India-based consumer finance company, declined beginning in June following an unsubstantiated allegation of fraudulent loans, which the company vigorously disputed. After declining dramatically, the company’s stock price recovered modestly in late 2019 after India’s Ministry of Corporate Affairs filed an affidavit in the Delhi High Court stating that the five loans which were the subject of the false claim were repaid or are standard accounts.

Shares of India-based Yes Bank slid after rating agencies downgraded the bonds of two financial services companies that the bank had exposure to. Additional price deterioration was attributable to an equity issuance that was very dilutive, and we liquidated our position ahead of this event. Yes Bank also posted a significant decline in profits, due to a material

Top 10 Equity Holdings

12/31/19

Company Sector/Industry, Country	% of Total Net Assets
Voya Financial Inc. Diversified Financial Services, U.S.	5.1%
Everest Re Group Ltd. Insurance, U.S.	4.9%
The Hartford Financial Services Group Inc. Insurance, U.S.	4.8%
American International Group Inc. Insurance, U.S.	4.4%
Citizens Financial Group Inc. Banks, U.S.	4.0%
Alleghany Corp. Insurance, U.S.	3.7%
Wells Fargo & Co. Banks, U.S.	3.6%
Capital One Financial Corp. Consumer Finance, U.S.	3.6%
ING Groep NV Banks, Netherlands	3.1%
Shinsei Bank Ltd. Banks, Japan	3.0%

rise in provisions for loan losses. The company’s new chief executive officer has initiated a strategic initiative to focus more on retail and digital banking in an effort to turn the bank around after recent weakness.

The stock of Ireland-based Allied Irish Bank Group declined after the company reported weaker-than-anticipated earnings and higher expenses. The bank has a strong capital ratio and has been reducing the number of non-performing loans on its balance sheet, both of which are positive for the stock, in our view.

During the period, the Fund held currency forwards and futures seeking to hedge most of the currency risk of the portfolio’s non-U.S. dollar investments. The hedges had a modestly positive overall impact on the Fund’s performance.

5. Listed as AIB Group in the SOI.

See www.franklintempletondatasources.com for additional provider information.

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FRANKLIN MUTUAL FINANCIAL SERVICES FUND

What is a currency forward?

A currency forward is a direct agreement between the Fund and a counterparty to buy or sell a foreign currency in exchange for another currency at a specific exchange rate on a future date.

What is a future?

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

As fellow shareholders, we found recent relative performance disappointing, but it is not uncommon for our strategy to lag the equity markets at times. We remain committed to our disciplined, value investment approach as we seek to generate attractive, long-term, risk-adjusted returns for shareholders.

Thank you for your participation in Franklin Mutual Financial Services Fund. We look forward to continuing to serve your investment needs.

	Andrew Sleeman, CFA
	Co-Portfolio Manager

	Andrew B. Dinnhaupt, CFA
	Co-Portfolio Manager

	Luis Hernandez
	Co-Portfolio Manager

CFA^® is a trademark owned by CFA Institute.

The foregoing information reflects our analysis, opinions and portfolio holdings as of December 31, 2019, the end of the reporting period. The way we implement our main investment strategies and the resulting portfolio holdings may change depending on factors such as market and economic conditions. These opinions may not be relied upon as investment advice or an offer for a particular security. The information is not a complete analysis of every aspect of any market, country, industry, security or the Fund. Statements of fact are from sources considered reliable, but the investment manager makes no representation or warranty as to their completeness or accuracy. Although historical performance is no guarantee of future results, these insights may help you understand our investment management philosophy.

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FRANKLIN MUTUAL FINANCIAL SERVICES FUND

Performance Summary as of December 31, 2019

The performance table and graphs do 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 12/31/19

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. For other share classes, visit franklintempleton.com.

Share Class	Cumulative   Total Return1	Average Annual   Total Return2
Z
1-Year	+19.32%	+19.32%
5-Year	+37.30%	+6.54%
10-Year	+135.43%	+8.94%
A3
1-Year	+19.06%	+12.49%
5-Year	+35.54%	+5.08%
10-Year	+128.80%	+8.02%

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 10 for Performance Summary footnotes.

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PERFORMANCE SUMMARY

Total Return Index Comparison for a Hypothetical $10,000 Investment

Total return represents the change in value of an investment over the periods shown. It includes any applicable maximum sales charge, Fund expenses, account fees and reinvested distributions. The unmanaged indexes include reinvestment of any income or distributions. They differ from the Fund in composition and do not pay management fees or expenses. One cannot invest directly in an index.

Class Z (1/1/10–12/31/19)

Class A (1/1/10–12/31/19)

See page 10 for Performance Summary footnotes.

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FRANKLIN MUTUAL FINANCIAL SERVICES FUND

PERFORMANCE SUMMARY

Distributions (1/1/19–12/31/19)

Share Class	Net Investment Income
Z	$0.4382
A	$0.3778
C	$0.1743
R6	$0.4680

Total Annual Operating Expenses⁵

Share Class
Z	1.09%
A	1.34%

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

All investments involve risks, including possible loss of principal. Value securities may not increase in price as anticipated or may decline further in value. Special risks are associated with foreign investing, including currency fluctuations, economic instability and political developments. Investing in a single-sector fund involves special risks, including greater sensitivity to economic, political or regulatory developments impacting the sector. Because the Fund may invest its assets in companies in a specific region, including Europe, it is subject to greater risks of adverse developments in that region and/or the surrounding regions than a fund that is more broadly diversified geographically. Current political and financial uncertainty surrounding the European Union may increase market volatility and the economic risk of investing in companies in Europe. Smaller-company stocks have exhibited greater price volatility than larger-company stocks, particularly over the short term. The Fund’s investments in companies engaged in mergers, reorganizations or liquidations also involve special risks as pending deals may not be completed on time or on favorable terms. The Fund may invest in lower-rated bonds, which entail higher credit risk. The Fund’s prospectus also includes a description of the main investment risks.

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

2. 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.

3. 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%.

4. Source: Morningstar. The MSCI World Financials Index (USD) captures large and midcap representation across developed markets countries. The S&P 500 Financials Index is market capitalization-weighted and consists of all financial stocks in the S&P 500. The S&P 500 is a market capitalization-weighted index of 500 stocks designed to measure total U.S. equity market performance.

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 MUTUAL FINANCIAL SERVICES FUND

Your Fund’s Expenses

As a Fund shareholder, you can incur two types of costs: (1) transaction costs, including sales charges (loads) on Fund purchases and redemptions; and (2) ongoing Fund costs, including management fees, distribution and service (12b-1) fees, and other Fund expenses. All mutual funds have ongoing costs, sometimes referred to as operating expenses. The table below shows ongoing costs of investing in the Fund and can help you understand these costs and compare them with those of other mutual funds. The table assumes a $1,000 investment held for the six months indicated.

Actual Fund Expenses

The table below provides information about actual account values and actual expenses in the columns under the heading “Actual.” In these columns the Fund’s actual return, which includes the effect of Fund expenses, is used to calculate the “Ending Account Value” for each class of shares. You can estimate the expenses you paid during the period by following these steps (of course, your account value and expenses will differ from those in this illustration): Divide your account value by $1,000 (if your account had an $8,600 value, then $8,600 ÷ $1,000 = 8.6). Then multiply the result by the number in the row for your class of shares under the headings “Actual” and “Expenses Paid During Period” (if Actual Expenses Paid During Period were $7.50, then 8.6 x $7.50 = $64.50). In this illustration, the actual expenses paid this period are $64.50.

Hypothetical Example for Comparison with Other Funds

Under the heading “Hypothetical” in the table, information is provided about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. This information may not be used to estimate the actual ending account balance or expenses you paid for the period, but it can help you compare ongoing costs of investing in the Fund with those of other funds. To do so, compare this 5% hypothetical example for the class of shares you hold with the 5% hypothetical examples that appear in the shareholder reports of other funds.

Please note that expenses shown in the table are meant to highlight ongoing costs and do not reflect any transactional costs. Therefore, information under the heading “Hypothetical” is useful in comparing ongoing costs only, and will not help you compare total costs of owning different funds. In addition, if transactional costs were included, your total costs would have been higher.

		Actual			Hypothetical
		(actual return after expenses)			(5% annual return before expenses)
Share Class	Beginning Account Value 7/1/19	Ending Account Value 12/31/19	Expenses Paid During Period 7/1/19–12/31/191, 2		Ending Account Value 12/31/19	Expenses Paid During Period 7/1/19–12/31/191, 2		Net Annualized Expense Ratio2
Z	$1,000	$1,075.50		$  5.65	$1,019.76		$  5.50	1.08%
A	$1,000	$1,074.40		$  6.95	$1,018.50		$  6.77	1.33%
C	$1,000	$1,070.10		$10.85	$1,014.72		$10.56	2.08%
R6	$1,000	$1,076.30		$  5.02	$1,020.37		$  4.89	0.96%

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 184/365 to reflect the one-half year period.

2. Reflects expenses after fee waivers and expense reimbursements, for Class R6.

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FRANKLIN MUTUAL SERIES FUNDS

Financial Highlights

Franklin Mutual Financial Services Fund

	Year Ended December 31,
	2019			2018			2017			2016			2015
Class Z
Per share operating performance
(for a share outstanding throughout the year)
Net asset value, beginning of year		$19.46			$24.14			$21.65			$19.63			$18.40
Income from investment operationsa:
Net investment incomeb		0.38			0.38	c		0.22			0.31	d		0.30	e
Net realized and unrealized gains (losses)		3.38			(4.37	)		2.76			2.00			1.23
Total from investment operations		3.76			(3.99	)		2.98			2.31			1.53
Less distributions from:
Net investment income		(0.44	)		(0.17	)		(0.49	)		(0.29	)		(0.30	)
Net realized gains		—			(0.52	)		—			—			—
Total distributions		(0.44	)		(0.69	)		(0.49	)		(0.29	)		(0.30	)
Net asset value, end of year		$22.78			$19.46			$24.14			$21.65			$19.63
Total return		19.32%			(16.49)%			13.77%			11.79%			8.34%
Ratios to average net assets
Expensesf		1.10%			1.09%	g		1.09%			1.13%	g		1.13%
Net investment income		1.80%			1.61%	c		0.95%			1.64%	d		1.53%	e
Supplemental data
Net assets, end of year (000’s)		$139,189			$142,212			$210,825			$162,687			$178,157
Portfolio turnover rate		17.06%			33.11%			67.89%			34.58%			25.43%

^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.

^cNet investment income per share includes approximately $0.08 per share related to income received in the form of special dividends in connection with certain Fund holdings. Excluding this amount, the ratio of net investment income to average net assets would have been 1.29%.

^dNet investment income per share includes approximately $0.05 per share related to income received in the form of special dividends in connection with certain Fund holdings. Excluding this amount, the ratio of net investment income to average net assets would have been 1.38%.

^eNet investment income per share includes approximately $0.14 per share related to income received in the form of special dividends in connection with certain Fund holdings. Excluding this amount, the ratio of net investment income to average net assets would have been 0.81%.

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

^gBenefit of waiver and payments by affiliates rounds to less than 0.01%.

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FRANKLIN MUTUAL SERIES FUNDS

FINANCIAL HIGHLIGHTS

Franklin Mutual Financial Services Fund (continued)

	Year Ended December 31,
	2019			2018			2017			2016			2015
Class A
Per share operating performance
(for a share outstanding throughout the year)
Net asset value, beginning of year		$19.52			$24.21			$21.70			$19.69			$18.46
Income from investment operationsa:
Net investment incomeb		0.33			0.31	c		0.16			0.26	d		0.25	e
Net realized and unrealized gains (losses)		3.38			(4.36	)		2.78			1.99			1.23
Total from investment operations		3.71			(4.05	)		2.94			2.25			1.48
Less distributions from:
Net investment income		(0.38	)		(0.12	)		(0.43	)		(0.24	)		(0.25	)
Net realized gains		—			(0.52	)		—			—			—
Total distributions		(0.38	)		(0.64	)		(0.43	)		(0.24	)		(0.25	)
Net asset value, end of year		$22.85			$19.52			$24.21			$21.70			$19.69
Total returnf		19.06%			(16.72)%			13.55%			11.46%			8.05%
Ratios to average net assets
Expensesg		1.35%			1.34%	h		1.34%			1.38%	h		1.41%
Net investment income		1.55%			1.36%	c		0.70%			1.39%	d		1.25%	e
Supplemental data
Net assets, end of year (000’s)		$278,968			$298,878			$368,850			$346,008			$360,278
Portfolio turnover rate		17.06%			33.11%			67.89%			34.58%			25.43%

^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.

^cNet investment income per share includes approximately $0.08 per share related to income received in the form of special dividends in connection with certain Fund holdings. Excluding this amount, the ratio of net investment income to average net assets would have been 1.04%.

^dNet investment income per share includes approximately $0.05 per share related to income received in the form of special dividends in connection with certain Fund holdings. Excluding this amount, the ratio of net investment income to average net assets would have been 1.13%.

^eNet investment income per share includes approximately $0.14 per share related to income received in the form of special dividends in connection with certain Fund holdings. Excluding this amount, the ratio of net investment income to average net assets would have been 0.53%.

^fTotal return does not reflect sales commissions or contingent deferred sales charges, if applicable.

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

^hBenefit of waiver and payments by affiliates rounds to less than 0.01%.

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

FRANKLIN MUTUAL SERIES FUNDS

FINANCIAL HIGHLIGHTS

Franklin Mutual Financial Services Fund (continued)

	Year Ended December 31,
	2019			2018			2017			2016			2015
Class C
Per share operating performance
(for a share outstanding throughout the year)
Net asset value, beginning of year		$19.32			$24.08			$21.60			$19.61			$18.41
Income from investment operationsa:
Net investment income (loss)b		0.18			0.15	c		(0.01	)		0.12	d		0.10	e
Net realized and unrealized gains (losses)		3.32			(4.33	)		2.74			1.96			1.24
Total from investment operations		3.50			(4.18	)		2.73			2.08			1.34
Less distributions from:
Net investment income		(0.17	)		(0.06	)		(0.25	)		(0.09	)		(0.14	)
Net realized gains		—			(0.52	)		—			—			—
Total distributions		(0.17	)		(0.58	)		(0.25	)		(0.09	)		(0.14	)
Net asset value, end of year		$22.65			$19.32			$24.08			$21.60			$19.61
Total returnf		18.15%			(17.35)%			12.66%			10.64%			7.30%
Ratios to average net assets
Expensesg		2.10%			2.09%	h		2.09%			2.13%	h		2.13%
Net investment income (loss)		0.80%			0.61%	c		(0.05)%			0.64%	d		0.53%	e
Supplemental data
Net assets, end of year (000’s)		$46,132			$58,610			$134,117			$128,766			$132,975
Portfolio turnover rate		17.06%			33.11%			67.89%			34.58%			25.43%

^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.

^cNet investment income per share includes approximately $0.08 per share related to income received in the form of special dividends in connection with certain Fund holdings. Excluding this amount, the ratio of net investment income to average net assets would have been 0.29%.

^dNet investment income per share includes approximately $0.05 per share related to income received in the form of special dividends in connection with certain Fund holdings. Excluding this amount, the ratio of net investment income to average net assets would have been 0.38%.

^eNet investment income per share includes approximately $0.14 per share related to income received in the form of special dividends in connection with certain Fund holdings. Excluding this amount, the ratio of net investment income to average net assets would have been (0.19)%.

^fTotal return does not reflect sales commissions or contingent deferred sales charges, if applicable.

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

^hBenefit of waiver and payments by affiliates rounds to less than 0.01%.

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

FRANKLIN MUTUAL SERIES FUNDS

FINANCIAL HIGHLIGHTS

Franklin Mutual Financial Services Fund(continued)

	Year Ended December 31,
	2019			2018			2017			2016			2015
Class R6
Per share operating performance
(for a share outstanding throughout the year)
Net asset value, beginning of year		$19.58			$24.30			$21.79			$19.76			$18.52
Income from investment operationsa:
Net investment incomeb		0.42			0.41	c		0.25			0.32	d		0.07	e
Net realized and unrealized gains (losses)		3.40			(4.41	)		2.78			2.03			1.49
Total from investment operations		3.82			(4.00	)		3.03			2.35			1.56
Less distributions from:
Net investment income		(0.47	)		(0.20	)		(0.52	)		(0.32	)		(0.32	)
Net realized gains		—			(0.52	)		—			—			—
Total distributions		(0.47	)		(0.72	)		(0.52	)		(0.32	)		(0.32	)
Net asset value, end of year		$22.93			$19.58			$24.30			$21.79			$19.76
Total return		19.51%			(16.41)%			13.92%			11.93%			8.55%
Ratios to average net assets
Expenses before waiver and payments by affiliates		1.05%			1.06%			0.97%			0.99%			1.16%
Expenses net of waiver and payments by affiliatesf		0.97%			0.97%			0.95%			0.96%			0.96%
Net investment income		1.93%			1.73%	c		1.09%			1.81%	d		1.70%	e
Supplemental data
Net assets, end of year (000’s)		$2,931			$3,371			$4,523			$2,601			$1,421
Portfolio turnover rate		17.06%			33.11%			67.89%			34.58%			25.43%

^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.

^cNet investment income per share includes approximately $0.08 per share related to income received in the form of special dividends in connection with certain Fund holdings. Excluding this amount, the ratio of net investment income to average net assets would have been 1.41%.

^dNet investment income per share includes approximately $0.05 per share related to income received in the form of special dividends in connection with certain Fund holdings. Excluding this amount, the ratio of net investment income to average net assets would have been 1.55%.

^eNet investment income per share includes approximately $0.14 per share related to income received in the form of special dividends in connection with certain Fund holdings. Excluding this amount, the ratio of net investment income to average net assets would have been 0.98%.

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

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

FRANKLIN MUTUAL SERIES FUNDS

Statement of Investments, December 31, 2019

Franklin Mutual Financial Services Fund

	Country		Shares		Value
Common Stocks 96.5%
Banks 36.5%
a AB&T Financial Corp.		United States		226,100	$	109,658
AIB Group PLC		Ireland		2,267,537		7,898,339
Barclays PLC		United Kingdom		4,160,905		9,899,800
b,c BAWAG Group AG, 144A		Austria		115,000		5,236,050
CIT Group Inc.		United States		88,130		4,021,372
Citigroup Inc.		United States		147,810		11,808,541
Citizens Financial Group Inc.		United States		455,400		18,493,794
b Credito Valtellinese SpA		Italy		117,345,631		9,369,725
First Horizon National Corp.		United States		553,729		9,169,752
ING Groep NV.		Netherlands		1,200,685		14,391,480
JPMorgan Chase & Co.		United States		67,580		9,420,652
Shinsei Bank Ltd		Japan		925,211		14,260,211
Southern National Bancorp of Virginia Inc.		United States		649,760		10,623,576
Standard Chartered PLC		United Kingdom		1,267,928		11,963,384
Synovus Financial Corp.		United States		300,311		11,772,191
UniCredit SpA		Italy		362,001		5,285,678
Wells Fargo & Co.		United States		313,670		16,875,446
						170,599,649
Capital Markets 5.8%
Credit Suisse Group AG		Switzerland		712,449		9,648,782
Deutsche Bank AG		Germany		991,436		7,690,638
Guotai Junan Securities Co. Ltd.		China		1,396,063		2,472,398
b Tiberius Acquisition Corp.		United States		683,955		7,133,651
						26,945,469
Consumer Finance 5.0%
Capital One Financial Corp.		United States		163,510		16,826,814
Sun Hung Kai & Co. Ltd.		Hong Kong		14,145,704		6,734,926
						23,561,740
Diversified Financial Services 6.7%
b M&G PLC		United Kingdom		2,364,966		7,429,766
Voya Financial Inc.		United States		388,650		23,699,877
						31,129,643
Equity Real Estate Investment Trusts (REITs) 1.7%
Brixmor Property Group Inc.		United States		361,000		7,801,210
Household Durables 1.6%
Cairn Homes PLC		Ireland		5,428,109		7,694,414
Insurance 36.8%
b Alleghany Corp		United States		21,947		17,548,163
American International Group Inc.		United States		398,758		20,468,248
ASR Nederland NV		Netherlands		340,115		12,724,237
b Brighthouse Financial Inc.		United States		86,800		3,405,164
China Pacific Insurance Group Co. Ltd., H		China		1,238,600		4,879,820
Chubb Ltd.		United States		14,450		2,249,287
Direct Line Insurance Group PLC.		United Kingdom		3,006,354		12,443,017
Everest Re Group Ltd.		United States		83,500		23,116,140

16         Annual Report franklintempleton.com

FRANKLIN MUTUAL SERIES FUNDS

STATEMENT OF INVESTMENTS

Franklin Mutual Financial Services Fund (continued)

	Country		Shares		Value
Common Stocks (continued)
Insurance (continued)
The Hartford Financial Services Group Inc.		United States		366,272	$	22,258,349
Lancashire Holdings Ltd.		United Kingdom		461,707		4,690,265
MetLife Inc.		United States		143,270		7,302,472
NN Group NV		Netherlands		352,791		13,380,459
RSA Insurance Group PLC		United Kingdom		1,866,729		13,983,833
Sabre Insurance Group PLC		United Kingdom		881,672		3,596,610
T&D Holdings Inc.		Japan		768,169		9,860,555
						171,906,619
Real Estate Management & Development 1.6%
b Dolphin Capital Investors Ltd.		Greece		3,979,650		226,646
Kenedix Inc.		Japan		1,350,600		7,071,465
						7,298,111
Thrifts & Mortgage Finance 0.8%
Indiabulls Housing Finance Ltd.		India		907,348		3,982,642
Total Common Stocks (Cost $435,713,823)						450,919,497
			Principal Amount
Short Term Investments 3.7%
U.S. Government and Agency Securities 3.7%
d FHLB, 1/02/20		United States	$	8,500,000		8,500,000
d U.S. Treasury Bill,
1/02/20 - 3/19/20		United States		5,700,000		5,693,529
e 3/26/20		United States		3,000,000		2,989,481
Total U.S. Government and Agency Securities (Cost $17,177,384)						17,183,010
Total Investments (Cost $452,891,207) 100.2%						468,102,507
Other Assets, less Liabilities (0.2)%						(882,688	)
Net Assets 100.0%					$	467,219,819

^aSee Note 10 regarding holdings of 5% voting securities.

^bNon-income producing.

^cSecurity was purchased pursuant to Rule 144A under the Securities Act of 1933 and may be sold in transactions exempt from registration only to qualified institutional buyers or in a public offering registered under the Securities Act of 1933. At December 31, 2019, the value of this security was $5,236,050, representing 1.1% of net assets.

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

^eA portion or all of the security has been segregated as collateral for open forward exchange contracts. At December 31, 2019, the value of this security pledged amounted to $2,238,126, representing 0.5% of net assets.

franklintempleton.com Annual Report         17

FRANKLIN MUTUAL SERIES FUNDS

STATEMENT OF INVESTMENTS

Franklin Mutual Financial Services Fund (continued)

At December 31, 2019, the Fund had the following futures contracts outstanding. See Note 1(c).

Futures Contracts

Description	Type		Number of Contracts		Notional   Amount*		Expiration Date		Value/ Unrealized Appreciation (Depreciation)
Currency Contracts
EUR/USD		Short		154	$	21,717,850		3/16/20		$(209,054	)
GBP/USD		Short		134		11,132,050		3/16/20		(81,712	)
Total Futures Contracts										$(290,766	)

*As of period end.

At December 31, 2019, the Fund had the following forward exchange contracts outstanding. See Note 1(c).

Forward Exchange Contracts

Currency	Counterpartya		Type		Quantity		Contract Amount		Settlement Date		Unrealized Appreciation		Unrealized Depreciation
OTC Forward Exchange Contracts
Swiss Franc		HSBK		Sell		55,928	$	56,752		1/13/20	$	—	$	(1,100	)
Swiss Franc		UBSW		Sell		9,177,586		9,282,301		1/13/20		—		(211,084	)
Euro		BOFA		Sell		2,020,390		2,247,368		1/15/20		—		(20,579	)
Euro		HSBK		Sell		1,273,672		1,421,370		1/15/20		—		(8,365	)
Euro		SSBT		Sell		1,069,676		1,195,678		1/15/20		—		(5,064	)
Euro		SSBT		Sell		13,244,866		15,127,757		1/15/20		260,004		—
Euro		UBSW		Sell		1,705,323		1,903,718		1/15/20		—		(10,558	)
Euro		UBSW		Sell		13,355,376		15,254,142		1/15/20		262,339		—
British Pound		HSBK		Buy		825,467		1,068,801		1/16/20		25,010		—
British Pound		HSBK		Sell		825,467		1,043,725		1/16/20		—		(50,085	)
British Pound		BOFA		Buy		398,298		527,972		2/14/20		226		—
British Pound		HSBK		Sell		13,616,046		16,650,938		2/14/20		—		(1,405,823	)
British Pound		SSBT		Sell		13,341,046		16,267,728		2/14/20		—		(1,424,345	)
British Pound		UBSW		Sell		500,000		627,335		2/14/20		—		(35,734	)
Euro		BOFA		Sell		177,447		197,925		2/18/20		—		(1,685	)
Euro		HSBK		Sell		786,853		881,417		2/18/20		—		(3,715	)
Euro		SSBT		Sell		178,591		199,252		2/18/20		—		(1,645	)
Japanese Yen		HSBK		Buy		29,922,796		276,048		2/18/20		59		—
Japanese Yen		SSBT		Sell		3,419,738,376		31,484,955		2/18/20		—		(70,107	)
Euro		HSBK		Sell		604,415		674,697		4/07/20		—		(7,329	)
Euro		SSBT		Sell		1,928,286		2,159,744		4/07/20		—		(16,145	)
Euro		UBSW		Sell		2,674,217		2,991,684		4/07/20		—		(25,918	)
British Pound		BOFA		Sell		55,773		72,221		4/24/20		—		(1,879	)
British Pound		HSBK		Sell		2,899,252		3,756,679		4/24/20		—		(95,303	)
Euro		BOFA		Sell		2,625,897		2,939,758		5/21/20		—		(31,446	)
Euro		HSBK		Sell		864,630		965,644		5/21/20		—		(12,685	)
Euro		SSBT		Sell		6,567,050		7,362,346		5/21/20		—		(68,276	)
Euro		UBSW		Sell		5,102,096		5,724,967		5/21/20		—		(48,058	)
British Pound		BOFA		Sell		335,350		450,410		5/22/20		4,533		—
British Pound		BOFA		Sell		3,461,831		4,567,646		5/22/20		—		(35,147	)

18         Annual Report franklintempleton.com

FRANKLIN MUTUAL SERIES FUNDS

STATEMENT OF INVESTMENTS

Franklin Mutual Financial Services Fund (continued)

Forward Exchange Contracts (continued)

Currency	Counterparty	a	Type	Quantity	Contract Amount	Settlement Date	Unrealized Appreciation		Unrealized Depreciation
OTC Forward Exchange Contracts (continued)
British Pound	HSBK		Sell	570,589	$751,035	5/22/20	$          —	$	(7,610	)
British Pound	HSBK		Sell	577,578	775,589	5/22/20	7,651		—
British Pound	UBSW		Sell	335,350	450,708	5/22/20	4,832		—
Total Forward Exchange Contracts							$564,654	$	(3,599,685	)
Net unrealized appreciation (depreciation)								$	(3,035,031	)

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

See Note 9 regarding other derivative information.

See Abbreviations on page 34.

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

FRANKLIN MUTUAL SERIES FUNDS

FINANCIAL STATEMENTS

Statement of Assets and Liabilities

December 31, 2019

Franklin Mutual Financial Services Fund

Assets:
Investments in securities:
Cost - Unaffiliated issuers	$450,664,452
Cost - Non-controlled affiliates (Note 10)	2,226,755
Value - Unaffiliated issuers	$467,992,849
Value - Non-controlled affiliates (Note 10)	109,658
Cash	83,393
Foreign currency, at value (cost $454,389)	456,006
Receivables:
Investment securities sold	329,062
Capital shares sold	390,109
Dividends	759,850
European Union tax reclaims	829,335
Deposits with brokers for:
Futures contracts	618,360
Unrealized appreciation on OTC forward exchange contracts	564,654
Other assets	382,330
Total assets	472,515,606
Liabilities:
Payables:
Capital shares redeemed	750,602
Management fees	346,656
Distribution fees	98,419
Transfer agent fees	107,534
Trustees’ fees and expenses	36,034
Variation margin on futures contracts	173,876
Unrealized depreciation on OTC forward exchange contracts	3,599,685
Accrued expenses and other liabilities	182,981
Total liabilities	5,295,787
Net assets, at value	$467,219,819
Net assets consist of:
Paid-in capital	$466,772,042
Total distributable earnings (losses)	447,777
Net assets, at value	$467,219,819

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

FRANKLIN MUTUAL SERIES FUNDS

FINANCIAL STATEMENTS

Statement of Assets and Liabilities (continued)

December 31, 2019

Franklin Mutual Financial Services Fund

Class Z:
Net assets, at value	$139,188,813
Shares outstanding	6,110,235
Net asset value and maximum offering price per share	$22.78
Class A:
Net assets, at value	$278,968,292
Shares outstanding	12,208,646
Net asset value per sharea	$22.85
Maximum offering price per share (net asset value per share ÷ 94.50%)	$24.18
Class C:
Net assets, at value	$  46,131,729
Shares outstanding	2,036,686
Net asset value and maximum offering price per sharea	$22.65
Class R6:
Net assets, at value	$    2,930,985
Shares outstanding	127,828
Net asset value and maximum offering price per share	$22.93

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

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

FRANKLIN MUTUAL SERIES FUNDS

FINANCIAL STATEMENTS

Statement of Operations

for the year ended December 31, 2019

Franklin Mutual Financial Services Fund

Investment income:
Dividends: (net of foreign taxes)*
Unaffiliated issuers	$	13,361,139
Non-controlled affiliates (Note 10)		861
Interest:
Unaffiliated issuers		715,675
Total investment income		14,077,675
Expenses:
Management fees (Note 3a)		4,249,976
Distribution fees: (Note 3c)
Class A		720,633
Class C		527,404
Transfer agent fees: (Note 3e)
Class Z		211,538
Class A		432,976
Class C		79,221
Class R6		3,696
Custodian fees (Note 4)		39,797
Reports to shareholders		71,432
Registration and filing fees		77,376
Professional fees		109,782
Trustees’ fees and expenses		30,389
Other		30,023
Total expenses		6,584,243
Expense reductions (Note 4)		(3,419	)
Expenses waived/paid by affiliates (Note 3f)		(2,859	)
Net expenses		6,577,965
Net investment income		7,499,710
Realized and unrealized gains (losses):
Net realized gain (loss) from:
Investments:
Unaffiliated issuers		(4,980,619	)
Foreign currency transactions		10,602
Forward exchange contracts		8,270,852
Futures contracts		1,158,767
Net realized gain (loss)		4,459,602
Net change in unrealized appreciation (depreciation) on:
Investments:
Unaffiliated issuers.		78,037,482
Non-controlled affiliates (Note 10)		(16,958	)
Translation of other assets and liabilities denominated in foreign currencies		(110,676	)
Forward exchange contracts		(4,607,388	)
Futures contracts		(317,435	)
Net change in unrealized appreciation (depreciation)		72,985,025
Net realized and unrealized gain (loss)		77,444,627
Net increase (decrease) in net assets resulting from operations	$	84,944,337
*Foreign taxes withheld on dividends	$	465,414

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

FRANKLIN MUTUAL SERIES FUNDS

FINANCIAL STATEMENTS

Statements of Changes in Net Assets

Franklin Mutual Financial Services Fund

	Year Ended December 31,
	2019			2018
Increase (decrease) in net assets:
Operations:
Net investment income	$	7,499,710		$	8,665,785
Net realized gain (loss)		4,459,602			9,412,447
Net change in unrealized appreciation (depreciation)		72,985,025			(127,980,059	)
Net increase (decrease) in net assets resulting from operations		84,944,337			(109,901,827	)
Distributions to shareholders:
Class Z		(2,651,907	)		(4,996,108	)
Class A		(4,583,542	)		(9,609,536	)
Class C		(357,699	)		(1,856,107	)
Class R6		(62,332	)		(115,264	)
Total distributions to shareholders		(7,655,480	)		(16,577,015	)
Capital share transactions: (Note 2)
Class Z		(25,248,222	)		(32,948,539	)
Class A		(65,850,270	)		734,715
Class C		(21,041,157	)		(56,197,465	)
Class R6		(1,001,103	)		(354,486	)
Total capital share transactions		(113,140,752	)		(88,765,775	)
Net increase (decrease) in net assets		(35,851,895	)		(215,244,617	)
Net assets:
Beginning of year		503,071,714			718,316,331
End of year	$	467,219,819		$	503,071,714

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

FRANKLIN MUTUAL SERIES FUNDS

Notes to Financial Statements

Franklin Mutual Financial Services Fund

1.   Organization and Significant Accounting Policies

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

The following summarizes the Fund’s significant accounting policies.

a.   Financial Instrument Valuation

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

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

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

Debt securities generally trade in the OTC market rather than on a securities exchange. The Fund’s pricing services use multiple valuation techniques to determine fair value. In instances where sufficient market activity exists, the pricing services may utilize a market-based approach through which quotes from market makers are used to determine fair value. In instances where sufficient market activity may not exist or is limited, the pricing services also utilize proprietary valuation models which may consider market characteristics such as benchmark yield curves, credit spreads, estimated default rates, anticipated market interest rate volatility, coupon rates, anticipated timing of principal repayments, underlying collateral, and other unique security features in order to estimate the relevant cash flows, which are then discounted to calculate the fair value.

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

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

Trading in securities on foreign securities stock exchanges and OTC markets may be completed before 4 p.m. Eastern time. In addition, trading in certain foreign markets may not take place on every Fund’s business day. Occasionally,

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NOTES TO FINANCIAL STATEMENTS

Franklin Mutual Financial Services Fund (continued)

events occur between the time at which trading in a foreign security is completed and 4 p.m. Eastern time that might call into question the reliability of the value of a portfolio security held by the Fund. As a result, differences may arise between the value of the Fund’s portfolio securities as determined at the foreign market close and the latest indications of value at 4 p.m. Eastern time. In order to minimize the potential for these differences, the VC monitors price movements following the close of trading in foreign stock markets through a series of country specific market proxies (such as baskets of American Depositary Receipts, futures contracts and exchange traded funds). These price movements are measured against established trigger thresholds for each specific market proxy to assist in determining if an event has occurred that may call into question the reliability of the values of the foreign securities held by the Fund. If such an event occurs, the securities may be valued using fair value procedures, which may include the use of independent pricing services.

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

b.   Foreign Currency Translation

Portfolio securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollars based on the exchange rate of such currencies against U.S. dollars on the date of valuation. The Fund may enter into foreign currency exchange contracts to facilitate transactions denominated in a foreign currency. Purchases and sales of securities, income and expense items denominated in foreign currencies are translated into U.S. dollars at the exchange rate in effect on the transaction date. Portfolio securities and assets and liabilities denominated in foreign currencies contain risks that those currencies will decline in value relative to the U.S. dollar. Occasionally, events may impact the availability or reliability of foreign exchange rates used to convert the U.S. dollar equivalent value. If such an event occurs, the foreign exchange rate will be valued at fair value using procedures established and approved by the Board.

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

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

c.   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

franklintempleton.com Annual Report         25

FRANKLIN MUTUAL SERIES FUNDS

NOTES TO FINANCIAL STATEMENTS

Franklin Mutual Financial Services Fund (continued)

1.   Organization and Significant Accounting Policies (continued)

c.   Derivative Financial Instruments (continued)

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. At December 31, 2019, the Fund had OTC derivatives in a net liability position of $3,035,031 and the aggregate value of collateral pledged for such contracts was $2,238,126.

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.

At December 31, 2019, the Fund received $105,817 in U.S. Treasury Bills, Bonds and Notes as collateral for derivatives.

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

The Fund entered into OTC forward exchange contracts primarily to manage 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.

See Note 9 regarding other derivative information.

d.   Securities Lending

The Fund participates in an agency based securities lending program to earn additional income. The Fund receives cash collateral against the loaned securities in an amount equal to at least 102% of the fair value of the loaned securities. Collateral is maintained over the life of the loan in an amount not less than 100% of the fair value of loaned securities, as determined at the close of Fund business each day; any additional collateral required due to changes in security values is delivered to the Fund on the next business day. The collateral is deposited into a joint cash account with other funds and is used to invest in a money market fund managed by Franklin Advisers, Inc., an affiliate of the Fund, and/or a joint repurchase agreement. The Fund may receive income from the investment 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 Statement of Operations. The Fund bears the market risk with respect to the collateral investment, securities loaned, and the risk that the agent may default on its obligations to the Fund. If the borrower defaults on its obligation 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. At December 31, 2019, the Fund had no securities on loan.

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Franklin Mutual Financial Services Fund (continued)

e.   Income and Deferred Taxes

It is the Fund’s policy to qualify as a regulated investment company under the Internal Revenue Code. The Fund intends to 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.

As a result of several court cases, in certain countries across the European Union, the Fund filed additional tax reclaims for previously withheld taxes on dividends earned in those countries (EU reclaims). These additional filings are subject to various administrative proceedings by the local jurisdictions’ tax authorities within the European Union, as well as a number of related judicial proceedings. Income recognized, if any, for EU reclaims is reflected as other income in the Statement of Operations and any related receivable, if any, is reflected as European Union tax reclaims in the Statement of Assets and Liabilities. When uncertainty exists as to the ultimate resolution of these proceedings, the likelihood of receipt of these EU reclaims, and the potential timing of payment, no amounts are reflected in the financial statements. For U.S. income tax purposes, EU reclaims received by the Fund, if any, reduce the amounts of foreign taxes Fund shareholders can use as tax credits in their individual income tax returns.

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 December 31, 2019, the Fund has determined that no tax liability is required in its financial statements related to uncertain tax positions for any open tax years (or expected to be taken in future tax years). Open tax years are those that remain subject to examination and are based on the statute of limitations in each jurisdiction in which the Fund invests.

f.   Security Transactions, Investment Income, Expenses and Distributions

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

g.   Accounting Estimates

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

h.   Guarantees and Indemnifications

Under the Trust’s organizational documents, its officers and trustees are indemnified by the Trust against certain liabilities arising out of the performance of their duties to the Trust.

franklintempleton.com Annual Report         27

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NOTES TO FINANCIAL STATEMENTS

Franklin Mutual Financial Services Fund (continued)

1.   Organization and Significant Accounting Policies (continued)

h.   Guarantees and Indemnifications (continued)

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 December 31, 2019, there were an unlimited number of shares authorized (without par value). Transactions in the Fund’s shares were as follows:

	Year Ended December 31,
	2019						2018
	Shares			Amount			Shares			Amount
Class Z Shares:
Shares sold		812,603		$	17,390,341			1,795,911		$	42,587,212
Shares issued in reinvestment of distributions		105,805			2,403,432			232,915			4,484,624
Shares redeemed		(2,116,626	)		(45,041,995	)		(3,453,297	)		(80,020,375	)
Net increase (decrease)		(1,198,218	)	$	(25,248,222	)		(1,424,471	)	$	(32,948,539	)
Class A Shares:
Shares solda		938,834		$	20,168,898			3,840,652		$	88,515,496
Shares issued in reinvestment of distributions		195,362			4,450,004			483,446			9,333,950
Shares redeemed		(4,240,433	)		(90,469,172	)		(4,247,680	)		(97,114,731	)
Net increase (decrease)		(3,106,237	)	$	(65,850,270	)		76,418		$	734,715
Class C Shares:
Shares sold		185,573		$	3,904,208			619,361		$	14,593,999
Shares issued in reinvestment of distributions		15,462			346,913			92,903			1,798,559
Shares redeemeda		(1,197,724	)		(25,292,278	)		(3,248,605	)		(72,590,023	)
Net increase (decrease)		(996,689	)	$	(21,041,157	)		(2,536,341	)	$	(56,197,465	)
Class R6 Shares:
Shares sold		82,219		$	1,781,383			79,359		$	1,851,756
Shares issued in reinvestment of distributions		2,727			62,332			5,949			115,264
Shares redeemed		(129,250	)		(2,844,818	)		(99,309	)		(2,321,506	)
Net increase (decrease)		(44,304	)	$	(1,001,103	)		(14,001	)	$	(354,486	)

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

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Franklin Mutual Financial Services Fund (continued)

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 Fund are also officers and/or directors of the following subsidiaries:

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

a.   Management Fees

The Fund pays an investment management fee to Franklin Mutual based on the average daily net assets of the Fund as follows:

Annualized Fee Rate	Net Assets
0.875%	Up to and including $1 billion
0.845%	Over $1 billion, up to and including $2 billion
0.825%	Over $2 billion, up to and including $5 billion
0.805%	In excess of $5 billion

b.   Administrative Fees

Under an agreement with Franklin Mutual, FT Services provides administrative services to the Fund. The fee is paid by Franklin Mutual 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 Z and Class R6 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 compensation distribution plan, 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. 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	0.35	%
Class C	1.00	%

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

franklintempleton.com Annual Report         29

FRANKLIN MUTUAL SERIES FUNDS

NOTES TO FINANCIAL STATEMENTS

Franklin Mutual Financial Services 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 year:

Sales charges retained net of commissions paid to unaffiliated brokers/dealers.	$	15,249
CDSC retained	$	5,567

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 year ended December 31, 2019, the Fund paid transfer agent fees of $727,431, of which $350,262 was retained by Investor Services.

f.   Waiver and Expense Reimbursements

Investor Services has contractually agreed in advance to waive or limit its fees so that the Class R6 transfer agent fees do not exceed 0.02% based on the average net assets of the class until April 30, 2020. Prior to May 1, 2019, the Class R6 transfer agent fees were limited to 0.03%.

g.   Interfund Transactions

The Fund engaged in purchases and sales of investments with funds or other accounts that have common investment managers (or affiliated investment managers), directors, trustees or officers. During the year ended December 31, 2019, these purchase and sale transactions aggregated $2,646,846 and $2,231,546, respectively.

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 year ended December 31, 2019, the custodian fees were reduced as noted in the Statement of Operations.

5.   Independent Trustees’ Retirement Plan

On January 1, 1993, the Trust adopted an Independent Trustees’ Retirement Plan (Plan). The Plan is an unfunded defined benefit plan that provides benefit payments to Trustees whose length of service and retirement age meets the eligibility requirements of the Plan. Benefits under the Plan are based on years of service and fees paid to each trustee at the time of retirement. Effective in December 1996, the Plan was closed to new participants.

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Franklin Mutual Financial Services Fund (continued)

During the year ended December 31, 2019, the Fund’s projected benefit obligation and benefit payments under the Plan were as follows:

aProjected benefit obligation at December 31, 2019	$	36,034
bIncrease in projected benefit obligation	$	3,753
Benefit payments made to retired trustees	$	(632	)

^aThe projected benefit obligation is included in trustees’ fees and expenses in the Statement of Assets and Liabilities.

^bThe increase in projected benefit obligation is included in trustees’ fees and expenses in the Statement of Operations.

6.   Income Taxes

For tax purposes, capital losses may be carried over to offset future capital gains.

At December 31, 2019, the capital loss carryforwards were as follows:

Capital loss carryforwards not subject to expiration:
Short term	$	5,515,313
Long term		5,361,458
Total capital loss carryforwards	$	10,876,771

The tax character of distributions paid during the years ended December 31, 2019 and 2018, was as follows:

	2019		2018
Distributions paid from:
Ordinary income	$	7,655,480	$	3,323,724
Long term capital gain		—		13,253,291
	$	7,655,480	$	16,577,015

At December 31, 2019, the cost of investments, net unrealized appreciation (depreciation) and undistributed ordinary income for income tax purposes were as follows:

Cost of investments	$454,251,359
Unrealized appreciation	$  66,323,839
Unrealized depreciation	(55,797,777)
Net unrealized appreciation (depreciation)	$  10,526,062
Distributable earnings:
Undistributed ordinary income	$         62,965

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 corporate actions.

7.   Investment Transactions

Purchases and sales of investments (excluding short term securities) for the year ended December 31, 2019, aggregated $76,742,800 and $156,785,193, respectively.

franklintempleton.com Annual Report         31

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Franklin Mutual Financial Services Fund (continued)

8.   Concentration of Risk

Investing in foreign securities may include certain risks and considerations not typically associated with investing in U.S. securities, such as fluctuating currency values and changing local, regional and global economic, political and social conditions, which may result in greater market volatility. Current political and financial uncertainty surrounding the European Union may increase market volatility and the economic risk of investing in securities in Europe. In addition, certain foreign securities may not be as liquid as U.S. securities.

9.   Other Derivative Information

At December 31, 2019, 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
Foreign exchange contracts	Variation margin on futures contracts	$	—	Variation margin on futures contracts	$	290,766	a
	Unrealized appreciation on OTC forward exchange contracts		564,654	Unrealized depreciation on OTC forward exchange contracts		3,599,685
Totals		$	564,654		$	3,890,451

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

For the year ended December 31, 2019, the effect of derivative contracts in the Statement of Operations was as follows:

Derivative Contracts Not Accounted for as Hedging Instruments	Statement of Operations Location	Net Realized Gain (Loss) for the Year		Statement of Operations Location	Net Change in Unrealized Appreciation (Depreciation) for the Year
	Net realized gain (loss) from:			Net change in unrealized appreciation (depreciation) on:
Foreign exchange contracts	Forward exchange contracts	$	8,270,852	Forward exchange contracts	$(4,607,388)
	Futures contracts		1,158,767	Futures contracts	(317,435)
Totals		$	9,429,619		$(4,924,823)

For the year ended December 31, 2019, the average month end notional amount of futures contracts represented $32,923,963. The average month end contract value of forward exchange contracts was $172,353,439.

See Note 1(c) regarding derivative financial instruments.

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Franklin Mutual Financial Services Fund (continued)

10.   Holdings of 5% Voting Securities of Portfolio Companies

The 1940 Act defines "affiliated companies" to include investments in portfolio companies in which a fund owns 5% or more of the outstanding voting securities. During the year ended December 31, 2019, investments in “affiliated companies” were as follows:

Name of Issuer	Value at Beginning of Year		Purchases		Sales		Realized Gain (Loss)		Net Change in Unrealized Appreciation (Depreciation)			Value at End of Year		Number of Shares Held at End of Year		Dividend Income
Non-Controlled Affiliates
AB&T Financial Corp. (Value is —%† of Net Assets)		$126,616		$  —		$  —		$  —		$(16,958	)		$109,658		226,100		$861

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

11.   Credit Facility

The Fund, together with other U.S. registered and foreign investment funds (collectively, Borrowers), managed by Franklin Templeton, are borrowers in a joint syndicated senior unsecured credit facility totaling $2 billion (Global Credit Facility) which matured on February 7, 2020. This Global Credit Facility provides a source of funds to the Borrowers for temporary and emergency purposes, including the ability to meet future unanticipated or unusually large redemption requests. Effective February 7, 2020, the Borrowers renewed the Global Credit Facility for a one year term, maturing February 5, 2021, for a total of $2 billion.

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 year ended December 31, 2019, the Fund did not use the Global Credit Facility.

12.   Fair Value Measurements

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

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

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

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

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

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FRANKLIN MUTUAL SERIES FUNDS

NOTES TO FINANCIAL STATEMENTS

Franklin Mutual Financial Services Fund (continued)

12.   Fair Value Measurements (continued)

A summary of inputs used as of December 31, 2019, in valuing the Fund’s assets and liabilities carried at fair value, is as follows:

	Level 1		Level 2		Level 3		Total
Assets:
Investments in Securities:a
Equity Investments	$	450,919,497	$	—	$	—	$	450,919,497
Short Term Investments		8,683,010		8,500,000		—		17,183,010
Total Investments in Securities	$	459,602,507	$	8,500,000	$	—	$	468,102,507
Other Financial Instruments:
Forward Exchange Contracts	$	—	$	564,654	$	—	$	564,654
Liabilities:
Other Financial Instruments:
Futures Contracts	$	290,766	$	—	$	—	$	290,766
Forward Exchange Contracts		—		3,599,685		—		3,599,685
Total Other Financial Instruments	$	290,766	$	3,599,685	$	—	$	3,890,451

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

13.   Subsequent Events

The Fund has evaluated subsequent events through the issuance of the financial statements and determined that no events have occurred that require disclosure other than those already disclosed in the financial statements.

Abbreviations

Counterparty		Currency		Selected Portfolio
BOFA	Bank of America Corp.	EUR	Euro	FHLB	Federal Home Loan Bank
HSBK	HSBC Bank PLC	GBP	British Pound
SSBT	State Street Bank and Trust Co., N.A.	USD	United States Dollar
UBSW	UBS AG

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Report of Independent Registered Public Accounting Firm

To the Board of Trustees of Franklin Mutual Series Funds and Shareholders of Franklin Mutual Financial Services Fund:

Opinion on the Financial Statements

We have audited the accompanying statement of assets and liabilities of Franklin Mutual Financial Services Fund (the “Fund”) (one of the funds constituting Franklin Mutual Series Funds), including the schedule of investments, as of December 31, 2019, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, the financial highlights for each of the five years in the period then ended and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of Franklin Mutual Financial Services Fund (one of the funds constituting Franklin Mutual Series Funds) at December 31, 2019, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and its financial highlights for each of the five years in the period then ended, in conformity with U.S. generally accepted accounting principles.

Basis for Opinion

These financial statements are the responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Fund is not required to have, nor were we engaged to perform, an audit of the Fund’s internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Fund’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of December 31, 2019, by correspondence with the custodian and brokers. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

We have served as the auditor of one or more Franklin investment companies since 1987.

Boston, Massachusetts

February 21, 2020

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Franklin Mutual Financial Services Fund

Tax Information (unaudited)

Under Section 854(b)(1)(A) of the Internal Revenue Code, the Fund hereby reports 62.47% of the ordinary income dividends as income qualifying for the dividends received deduction for the fiscal year ended December 31, 2019.

Under Section 854(b)(1)(B) of the Internal Revenue Code, the Fund hereby reports the maximum amount allowable but no less than $11,872,327 as qualified dividends for purposes of the maximum rate under Section 1(h)(11) of the Internal Revenue Code for the fiscal year ended December 31, 2019. Distributions, including qualified dividend income, paid during calendar year 2019 will be reported to shareholders on Form 1099-DIV by mid-February 2020. Shareholders are advised to check with their tax advisors for information on the treatment of these amounts on their individual income tax returns.

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Board Members and Officers

The name, year of birth and address of the officers and board members, as well as their affiliations, positions held with the Trust, principal occupations during at least the past five years and number of U.S. registered portfolios overseen in the Franklin Templeton fund complex, are shown below. Generally, each board member serves until that person’s successor is elected and qualified.

Independent Board Members

Name, Year of Birth and Address	Position	Length of Time Served	Number of Portfolios in Fund Complex Overseen by Board Member*	Other Directorships Held During at Least the Past 5 Years
Edward I. Altman, Ph.D. (1941) c/o Franklin Mutual Advisers, LLC 101 John F. Kennedy Parkway Short Hills, NJ 07078-2716	Trustee	Since 1987	12	None
Principal Occupation During at Least the Past 5 Years:
Max L. Heine Professor of Finance, Emeritus and Director of The Credit and Debt Markets Research Program, Salomon Center, Stern School of Business, New York University; editor and author of numerous financial publications; financial consultant; an adviser to numerous financial and publishing organizations; and formerly, Vice Director, Salomon Center, Stern School of Business, New York University.
Ann Torre Bates (1958) c/o Franklin Mutual Advisers, LLC 101 John F. Kennedy Parkway Short Hills, NJ 07078-2716	Trustee and Chairperson	Trustee since 1995 and Chairperson since January 2020	33	Ares Capital Corporation (specialty finance company) (2010-present), United Natural Foods, Inc. (distributor of natural, organic and specialty foods) (2013-present), Allied Capital Corporation (financial services) (2003-2010), SLM Corporation (Sallie Mae) (1997-2014) and Navient Corporation (loan management, servicing and asset recovery) (2014-2016).
Principal Occupation During at Least the Past 5 Years:
Director of various companies; and formerly, Executive Vice President and Chief Financial Officer, NHP Incorporated (manager of multifamily housing) (1995-1997); and Vice President and Treasurer, US Airways, Inc. (until 1995).
Burton J. Greenwald (1929) c/o Franklin Mutual Advisers, LLC 101 John F. Kennedy Parkway Short Hills, NJ 07078-2716	Trustee	Since 2002	12	Franklin Templeton Emerging Markets Debt Opportunities Fund PLC (1999-present) and Fiduciary International Ireland Limited (1999-2015).
Principal Occupation During at Least the Past 5 Years:
Managing Director, B.J. Greenwald Associates (management consultants to the financial services industry); and formerly, Chairman, Fiduciary Trust International Funds; Executive Vice President, L.F. Rothschild Fund Management, Inc.; President and Director, Merit Mutual Funds; President, Underwriting Division and Director, National Securities & Research Corporation; Governor, Investment Company Institute; and Chairman, ICI Public Information Committee.
Jan Hopkins Trachtman (1947) c/o Franklin Mutual Advisers, LLC 101 John F. Kennedy Parkway Short Hills, NJ 07078-2716	Trustee	Since 2009	12	FinTech Acquisition Corp. III (special purpose fintech acquisition company) (2018-present)
Principal Occupation During at Least the Past 5 Years:
President and Founder, The Jan Hopkins Group (communications consulting firm); serves on Alumni Advisory Board of Knight Bagehot Fellowship; and formerly, President, Economic Club of New York (2007-2015); Anchor/Correspondent, CNN Financial News (until 2003); Managing Director and Head of Client Communications, Citigroup Private Bank (until 2005); Off-Air reporter, ABC News’ World News Tonight; and Editor, CBS Network News.

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Independent Board Members (continued)

Name, Year of Birth and Address	Position	Length of Time Served	Number of Portfolios in Fund Complex Overseen by Board Member*	Other Directorships Held During at Least the Past 5 Years
Keith Mitchell (1954) c/o Franklin Mutual Advisers, LLC 101 John F. Kennedy Parkway Short Hills, NJ 07078-2716	Trustee	Since 2009	12	None
Principal Occupation During at Least the Past 5 Years:
Director of various boards of asset management firms; and formerly, Managing Member, Mitchell, Hartley & Bechtel Advisers, LLC (formerly, Mitchell Advisers, LLC) (advisory firm) (2003-2015) and Managing Director, Putman Lovell NBF.
David W. Niemiec (1949) c/o Franklin Mutual Advisers, LLC 101 John F. Kennedy Parkway Short Hills, NJ 07078-2716	Trustee	Since 2015	33	Hess Midstream LP (oil and gas midstream infrastructure) (2017-present).
Principal Occupation During at Least the Past 5 Years:
Advisor, Saratoga Partners (private equity fund); and formerly, Managing Director, Saratoga Partners (1998-2001) and SBC Warburg Dillon Read (investment banking) (1997-1998); Vice Chairman, Dillon, Read & Co. Inc. (investment banking) (1991-1997); and Chief Financial Officer, Dillon, Read & Co. Inc. (1982-1997).
Charles Rubens II (1930) c/o Franklin Mutual Advisers, LLC 101 John F. Kennedy Parkway Short Hills, NJ 07078-2716	Trustee	Since 1998	12	None
Principal Occupation During at Least the Past 5 Years:
Private investor and president of non-profit organizations; and formerly, an executive of Time, Inc.; and Trustee of Colorado College.
Robert E. Wade (1946) c/o Franklin Mutual Advisers, LLC 101 John F. Kennedy Parkway Short Hills, NJ 07078-2716	Trustee	Since 1991	33	El Oro Ltd (investments) (2003-2019).
Principal Occupation During at Least the Past 5 Years:
Attorney at law engaged in private practice as a sole practitioner (1972-2008) and member of various boards.
Gregory H. Williams (1943) c/o Franklin Mutual Advisers, LLC 101 John F. Kennedy Parkway Short Hills, NJ 07078-2716	Trustee	Since 2015	12	None
Principal Occupation During at Least the Past 5 Years:
Private investor; Consultant; and formerly, President, University of Cincinnati (2009-2012); President, The City College of New York (2001-2009); Dean, College of Law, Ohio State University (1993-2001); and Associate Vice President, Academic Affairs and Professor of Law, University of Iowa (1977-1993).
Interested Board Members and Officers
Name, Year of Birth and Address	Position	Length of Time Served	Number of Portfolios in Fund Complex Overseen by Board Member*	Other Directorships Held During at Least the Past 5 Years
**Gregory E. Johnson (1961) One Franklin Parkway San Mateo, CA 94403-1906	Trustee	Since 2007	144	None
Principal Occupation During at Least the Past 5 Years:
Chairman of the Board, Member – Office of the Chairman, Director and Chief Executive Officer, Franklin Resources, Inc.; officer and/or director or trustee, as the case may be, of some of the other subsidiaries of Franklin Resources, Inc. and of 39 of the investment companies in Franklin Templeton; Vice Chairman, Investment Company Institute; and formerly, President, Franklin Resources, Inc. (1994-2015).

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Interested Board Members and Officers (continued)

Name, Year of Birth and Address	Position	Length of Time Served	Number of Portfolios in Fund Complex Overseen by Board Member*	Other Directorships Held During at Least the Past 5 Years
**Peter A. Langerman (1955) c/o Franklin Mutual Advisers, LLC 101 John F. Kennedy Parkway Short Hills, NJ 07078-2716	Trustee, President, and Chief Executive Officer – Investment Management	Trustee since 2007, President, and Chief Executive Officer – Investment Management since 2005	7	None
Principal Occupation During at Least the Past 5 Years:
Chairman of the Board, Chief Executive Officer and President, Franklin Mutual Advisers, LLC; and officer and/or director, as the case may be, of three of the investment companies in Franklin Templeton.
Alison E. Baur (1964) One Franklin Parkway San Mateo, CA 94403-1906	Vice President	Since 2012	Not Applicable	Not Applicable
Principal Occupation During at Least the Past 5 Years:
Deputy General Counsel, Franklin Templeton; and officer of some of the other subsidiaries of Franklin Resources, Inc. and of 41 of the investment companies in Franklin Templeton.
Breda M. Beckerle (1958) 280 Park Avenue New York, NY 10017	Interim Chief Compliance Officer	Since January 2020	Not Applicable	Not Applicable
Principal Occupation During at Least the Past 5 Years:
Chief Compliance Officer, Fiduciary Investment Management International, Inc., Franklin Advisers, Inc., Franklin Advisory Services, LLC, Franklin Mutual Advisers, LLC, Franklin Templeton Institutional, LLC; and officer of 41 of the investment companies in Franklin Templeton.
Steven J. Gray (1955) One Franklin Parkway San Mateo, CA 94403-1906	Vice President and Secretary	Vice President since 2009 and Secretary since 2005	Not Applicable	Not Applicable
Principal Occupation During at Least the Past 5 Years:
Senior Associate General Counsel, Franklin Templeton; Vice President, Franklin Templeton Distributors, Inc. and FASA, LLC; and officer of 41 of the investment companies in Franklin Templeton.
Matthew T. Hinkle (1971) One Franklin Parkway San Mateo, CA 94403-1906	Chief Executive Officer – Finance and Administration	Since 2017	Not Applicable	Not Applicable
Principal Occupation During at Least the Past 5 Years:
Senior Vice President, Franklin Templeton Services, LLC; officer of 41 of the investment companies in Franklin Templeton; and formerly, Vice President, Global Tax (2012-April 2017) and Treasurer/Assistant Treasurer, Franklin Templeton (2009-2017).
Robert G. Kubilis (1973) 300 S.E. 2nd Street Fort Lauderdale, FL 33301-1923	Chief Financial Officer, Chief Accounting Officer and Treasurer	Since 2012	Not Applicable	Not Applicable
Principal Occupation During at Least the Past 5 Years:
Treasurer, U.S. Fund Administration & Reporting; and officer of 15 of the investment companies in Franklin Templeton.

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FRANKLIN MUTUAL SERIES FUNDS

Interested Board Members and Officers (continued)

Name, Year of Birth and Address	Position	Length of Time Served	Number of Portfolios in Fund Complex Overseen by Board Member*	Other Directorships Held During at Least the Past 5 Years
Robert Lim (1948) One Franklin Parkway San Mateo, CA 94403-1906	Vice President – AML Compliance	Since 2016	Not Applicable	Not Applicable
Principal Occupation During at Least the Past 5 Years:
Vice President, Franklin Templeton Companies, LLC; Chief Compliance Officer, Franklin Templeton Distributors, Inc. and Franklin Templeton Investor Services, LLC; and officer of 44 of the investment companies in Franklin Templeton Investments.
Navid J. Tofigh (1972) One Franklin Parkway San Mateo, CA 94403-1906	Vice President	Since 2015	Not Applicable	Not Applicable
Principal Occupation During at Least the Past 5 Years:
Associate General Counsel; and officer of 41 of the investment companies in Franklin Templeton.
Craig S. Tyle (1960) One Franklin Parkway San Mateo, CA 94403-1906	Vice President	Since 2005	Not Applicable	Not Applicable
Principal Occupation During at Least the Past 5 Years:
General Counsel and Executive Vice President, Franklin Resources, Inc.; and officer of some of the other subsidiaries of Franklin Resources, Inc. and of 41 of the investment companies in Franklin Templeton.
Lori A. Weber (1964) 300 S.E. 2nd Street Fort Lauderdale, FL 33301-1923	Vice President	Since 2011	Not Applicable	Not Applicable
Principal Occupation During at Least the Past 5 Years:
Senior Associate General Counsel, Franklin Templeton; Assistant Secretary, Franklin Resources, Inc.; Vice President and Secretary, Templeton Investment Counsel, LLC; and officer of 41 of the investment companies in Franklin Templeton.

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*We base the number of portfolios on each separate series of the U.S. registered investment companies within the Franklin Templeton Investments fund complex. These portfolios have a common investment manager or affiliated investment managers.

**Gregory E. Johnson is considered to be an interested person of the Fund under the federal securities laws due to his position as an officer and director of Franklin Resources, Inc. (Resources), which is the parent company of the Fund’s investment manager and distributor. Peter A. Langerman is considered to be an interested person of the Fund under the federal securities laws due to his position as an officer of Franklin Mutual Advisers, LLC, which is the Fund’s investment manager.

Note 1: Officer information is current as of the date of this report. It is possible that after this date, information about officers may change.

The Sarbanes-Oxley Act of 2002 and Rules adopted by the U.S. Securities and Exchange Commission require the Fund to disclose whether the Fund’s Audit Committee includes at least one member who is an audit committee financial expert within the meaning of such Act and Rules. The Fund’s Board has determined that there is at least one such financial expert on the Audit Committee and has designated each of Edward I. Altman, Ph.D., Ann Torre Bates and David W. Niemiec as an audit committee financial expert. The Board believes that Messrs. Altman and Niemiec and Ms. Bates qualify as such an expert in view of their extensive business background and experience. Mr. Altman has served as a member of the Fund Audit Committee since 1987. He currently serves as a Max L. Hine Professor of Finance, Emeritus and Director of The Credit and Debt Markets Research Program, Salomon Center, Stern School of Business, New York University. Ms. Bates has served as a member of the Fund Audit Committee since 1995. She currently serves as a director of Ares Capital Corporation (2010-present) and United Natural Foods, Inc. (2013-present) and was formerly a director of Navient Corporation from 2014 to 2016, SLM Corporation from 1997 to 2014 and Allied Capital Corporation from 2003 to 2010, Executive Vice President and Chief Financial Officer of NHP Incorporated from 1995 to 1997 and Vice President and Treasurer of US Airways, Inc. until 1995. Mr. Niemiec has served as a member of the Fund Audit Committee since 2015, currently serves as an Advisor to Saratoga Partners and was formerly its Managing Director from 1998 to 2001 and serves as a director of Hess Midstream LP (2017-present). Mr. Niemiec was formerly a director of Emeritus Corporation from 1999 to 2010 and OSI Pharmaceuticals, Inc. from 2006 to 2010, Managing Director of SBC Warburg Dillon Read from 1997 to 1998, and was Vice Chairman from 1991 to 1997 and Chief Financial Officer from 1982 to 1997 of Dillon, Read & Co. Inc. As a result of such background and experience, the Board believes that Messrs. Altman and Niemiec and Ms. Bates have each acquired an understanding of generally accepted accounting principles and financial statements, the general application of such principles in connection with the accounting estimates, accruals and reserves, and analyzing and evaluating financial statements that present a breadth and level of complexity of accounting issues generally comparable to those of the Fund, as well as an understanding of internal controls and procedures for financial reporting and an understanding of audit committee functions. Messrs. Altman and Niemiec and Ms. Bates are independent Board members as that term is defined under the applicable U.S. Securities and Exchange Commission Rules and Releases.

The Statement of Additional Information (SAI) includes additional information about the board members and is available, without charge, upon request. Shareholders may call (800) DIAL BEN/342-5236 to request the SAI.

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FRANKLIN MUTUAL FINANCIAL SERVICES FUND

Shareholder Information

Proxy Voting Policies and Procedures

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

Quarterly Statement of Investments

The Trust, on behalf of the Fund, files a complete statement of investments with the U.S. Securities and Exchange Commission for the first and third quarters for each fiscal year 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 the Fund’s financial reports every six months as well as an annual updated summary prospectus (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 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.

	Annual Report and Shareholder Letter
	Franklin Mutual Financial Services Fund
	Investment Manager Franklin Mutual Advisers, LLC	Distributor Franklin Templeton Distributors, Inc. (800) DIAL BEN® / 342-5236 franklintempleton.com	Shareholder Services (800) 632-2301 - (Class A, C & R6) (800) 448-FUND - (Class Z)

© 2020 Franklin Templeton Investments. All rights reserved. 479 A 02/20

Sign up for electronic delivery at franklintempleton.com/edelivery

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

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

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

FRANKLIN TEMPLETON

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

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

Dear Franklin Mutual International Fund Shareholder:

As we enter 2020, the factors that lifted stocks to record highs in 2019—accommodative central bank monetary policies and progress on a proposed trade deal between the U.S. and China—continue to be sources of optimism for growth. The near-term threat of recession has eased, with the U.S. economy showing resilience as low unemployment and moderately rising wages have encouraged consumer spending, which has supported the expansion. In contrast, business investment and exports were weak in 2019, but there are nascent signs of increasing industrial activity.

Tariffs, trade battles and geopolitical conflict may continue to dominate headlines in 2020 and account for a disproportionate source of market volatility. The U.S. and China agreed in principle to a phase-one trade agreement in late 2019. However, a re-escalation of the tariff dispute between the world’s two largest economies is not out of the question, as negotiations on a phase-two trade agreement are scheduled to start after the anticipated phase-one signing ceremony in January. There was clarity on Brexit as British voters delivered a resounding election victory to Prime Minister Boris Johnson and his Conservative Party, which should pave the way for a conclusive exit agreement. The terms of U.K. departure, however, must still be finalized. Late in the period, tensions in the Middle East were on the rise, following the death of an American contractor in Iraq in late December and a retaliatory U.S. military strike two days later.

During the period, we took advantage of market turbulence to seek out a larger number of stocks whose risk/reward profiles turned more favorable. Subsequently, we used the market appreciation to exit from or trim select positions that reached or exceeded our estimates of intrinsic value. Market volatility continues to present occasional opportunities in

individual stocks, and in certain sectors, notably those considered to be economically sensitive. We continue to focus on situations in which company-specific actions are more important than economic improvement in driving shareholder value.

Valuation is an essential factor in our analysis, and we always ask ourselves if current and potential investments represent an attractive balance of risk and reward. Amid the all-time highs reached by the Standard & Poor’s^® 500 Index (S&P 500^®) during the period, we maintained our focus on individual securities and the prospects for each business in the context of its valuation and the backdrop of potential political and economic risks.

We continue to adhere to a bottom-up stock selection process that is disciplined, driven by rigorous fundamental analysis, and that attempts to limit downside risk. In our view, actively investing in underappreciated and misunderstood companies with identifiable catalysts for unlocking shareholder value can offer meaningful upside potential and a degree of downside protection in periods of financial market turbulence.

We recognize the important role of financial advisors in today’s markets and encourage investors to continue to seek their advice. Amid changing markets and economic conditions, we are confident investors with a well-diversified portfolio and a patient, long-term outlook will 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 12 months considering the

Not FDIC  Insured | May Lose Value | No Bank Guarantee 

franklintempleton.com Not part of the annual report         1

economic environment and other factors. Please remember all securities markets fluctuate, as do mutual fund share prices.

The reorganization of Franklin Mutual International Fund into Franklin Mutual Global Discovery Fund, as approved by shareholders, was completed on February 21, 2020. Shares of Franklin Mutual International Fund share classes A, C, R, R6 and Z were exchanged for shares in Franklin Mutual Global Discovery Fund share classes A, C, R, R6 and Z, respectively.

We thank you for investing with Franklin Templeton, welcome your questions and comments, and look forward to continuing to serve your investment needs in the years ahead. We appreciate your trust and participation in Franklin Mutual International Fund. It has been our privilege to serve you.

Sincerely,

Peter A. Langerman

Chairman, President and Chief Executive Officer

Franklin Mutual Advisers, LLC

This letter reflects our analysis and opinions as of December 31, 2019, unless otherwise indicated. The information is not a complete analysis of every aspect of any market, country, industry, security or fund. Statements of fact are from sources considered reliable.

Contents
Annual Report
Franklin Mutual International Fund	3
Performance Summary	8
Your Fund’s Expenses	11
Financial Highlights and Statement of Investments	12
Financial Statements	21
Notes to Financial Statements	25
Report of Independent Registered Public Accounting Firm	36
Tax Information	37
Board Members and Officers	38
Shareholder Information	43
Visit franklintempleton.com for fund updates, to access your account, or to find helpful financial planning tools.

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ANNUAL REPORT

Franklin Mutual International Fund

This annual report for Franklin Mutual International Fund covers the fiscal year ended December 31, 2019. The reorganization of Franklin Mutual International Fund into Franklin Mutual Global Discovery Fund, as approved by shareholders, was completed on February 21, 2020. Shares of Franklin Mutual International Fund share classes A, C, R, R6 and Z were exchanged for shares in Franklin Mutual Global Discovery Fund share classes A, C, R, R6 and Z, respectively.

Your Fund’s Goal and Main Investments

The Fund seeks capital appreciation, which may occasionally be short term, with income as a secondary goal. Under normal market conditions, the Fund invests at least 80% of its net assets in securities of non-U.S. issuers, primarily Asian and European companies. We focus the Fund’s investments on securities believed to be available at market prices less than their intrinsic value. The Fund invests primarily in equity securities, mainly common stocks, with a current focus on mid- and large-cap companies. To a lesser extent, the Fund also invests in merger arbitrage securities and the debt and equity of distressed companies. The Geographic Composition bar chart on page 4 lists the leading countries where the Fund invests.

Performance Overview

The Fund’s Class Z shares posted a +14.78% cumulative total return for the 12 months ended December 31, 2019. In comparison, the Fund’s benchmark, the MSCI All Country World Index (ACWI) ex USA Index-NR (Local Currency), which is a free float-adjusted, market capitalization-weighted index designed to measure equity market performance in global developed and emerging markets, posted a +20.75% total return.¹ Also for comparison, the Fund’s secondary benchmark, the MSCI ACWI ex USA Index-NR (USD) posted a +21.51% total return.¹ You can find more of the Fund’s performance data in the Performance Summary beginning on page 8.

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

Economic and Market Overview

Global developed and emerging market stocks, as measured by the MSCI All Country World Index (USD), posted a +27.30% total return during the 12 months ended December 31, 2019.¹ Although global economic growth slowed from 2018, interest-rate cuts from many central banks and the easing of trade tensions near period-end contributed to the generally positive environment for equities worldwide. Reflecting investor optimism and slowing but resilient economic growth, stocks advanced in every major region of the globe.

In the U.S., solid economic growth also supported equities, as healthy consumer spending and a strong labor market kept the economy afloat. The unemployment rate fell during the year, reaching 3.5% in September, November and December 2019, the lowest recorded unemployment rate in 50 years.² Wages also grew, albeit at a moderate pace, and inflation remained persistently low. In addition, deficit spending by the U.S. government boosted current growth at the expense of long-term debt. Despite the strength in the consumer sector, some parts of the economy struggled, particularly heavy industry. Annual industrial production contracted late in the reporting period, manufacturing output stalled and capital spending declined.

The U.S. Federal Reserve (Fed) provided a substantial boost to equity markets early in the reporting period as it shifted to a more accommodative monetary policy. In January 2019, the Fed signaled the end of its tightening cycle and cut the federal funds rate three times thereafter, lowering it to a range of 1.50%–1.75%. Stocks responded positively to the interest-rate cuts and gained further in December 2019 after the Fed indicated it would likely leave interest rates unchanged in 2020.

1. Source: Morningstar.

The index is unmanaged and includes reinvestment of any income or distributions. It does not reflect any fees, expenses or sales charges. One cannot invest directly in an index, and an index is not representative of the Fund’s portfolio. Net Returns (NR) include income net of tax withholding when dividends are paid.

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

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 17.

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Growth slowed overall in the eurozone, particularly in Germany and Italy. Germany, which is heavily reliant on exports, was adversely affected by the trade conflict between the U.S. and China and the resulting slowdown in global trade. In Italy, political uncertainty and budget concerns caused the country’s annual gross domestic product (GDP) growth to stall in 2019’s first quarter before modestly improving in the second and third quarters. Despite sluggish economic conditions, European developed market equities, as measured by the MSCI Europe Index-NR (Local Currency), posted a +23.75% total return for the 12-month period, as easing trade tensions buoyed investor optimism and an electoral victory by the Conservative Party in the U.K. alleviated uncertainty surrounding Brexit.¹ Although the European Central Bank left its headline refinancing rate unchanged, it lowered the deposit rate and restarted its bond-buying stimulus program, further supporting stocks.

Economic growth in Asia was relatively solid overall, despite slowdowns in several large emerging market countries, such as China and India. Japan’s economy grew amid the Bank of Japan’s sizable stimulus program. The trade war between the U.S. and China provided the backdrop for Asian stocks, which rose and fell in sync with investor sentiment regarding a trade deal. A phase one trade agreement between the two countries reached in December 2019 propelled Asian developed and emerging market stocks, which ultimately ended with a +19.23% total return over the 12-month period, as measured by the MSCI All Country Asia Index (USD).³

Emerging market stocks overall experienced several sharp selloffs and subsequent rebounds throughout the reporting period before ending with gains. In aggregate, economic growth slowed somewhat from 2018 but remained solid, although there was some variation among individual countries. Many central banks in emerging markets cut interest rates throughout the reporting period, which, along with resilient GDP growth, provided a supportive environment for equities. Russian stocks posted the highest returns among emerging markets as the threat of further sanctions receded and a solid fiscal environment reassured investors. Overall, global emerging markets, as measured by the MSCI Emerging Markets Index (USD), posted a +18.90% total return for the 12-month period.¹

Investment Strategy

At Franklin Mutual Series, we are committed to our distinctive value approach to investing, which we believe can generate

Geographic Composition*

Based on Total Net Assets as of 12/31/19

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

above-average risk-adjusted returns over time for our shareholders. Our major investment strategy is investing in undervalued stocks in Asia and Europe. We have the ability to invest in emerging markets, although this is unlikely to be a significant focus of our strategy. When selecting undervalued equities, we are attracted to what we believe are fundamentally strong companies with healthy balance sheets, high-quality assets, substantial free cash flow and shareholder-oriented management teams and whose stocks are trading at discounts to our assessment of the

3. Source: MSCI.

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

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companies’ intrinsic or business value. We also look for asset-rich companies whose shares may be trading at depressed levels due to concerns over short-term earnings disappointments, litigation, management strategy or other perceived negatives. This strict value approach is not only intended to improve the likelihood of capital appreciation, but also reduces the risk of substantial declines, in our opinion. While the vast majority of our undervalued equity investments are made in publicly traded companies internationally, we may invest occasionally in privately held companies as well.

To a significantly lesser extent, we complement this more traditional investment strategy with two others. One is distressed investing, a highly specialized field that has proven quite profitable during certain periods over the years. Distressed investing is complex and can take many forms. The most common distressed investment the Fund undertakes is the purchase of financially troubled or bankrupt companies’ debt at a substantial discount to face value. After the financially distressed company is reorganized, the old debt is typically replaced with new securities issued by the financially stronger company.

The other piece of our investment strategy is participating in arbitrage situations, another highly specialized field. When companies announce proposed mergers or takeovers, commonly referred to as deals, the target company may trade at a discount to the bid it ultimately accepts. One form of arbitrage involves purchasing the target company’s stock when it is trading below the value we believe it would receive in a deal. In keeping with our commitment to a relatively conservative investment approach, we typically focus our arbitrage efforts on announced deals, and avoid rumored deals or other situations we consider relatively risky. In addition, it is our practice to hedge the Fund’s currency exposure when we deem it advantageous for our shareholders.

What is meant by “hedge”?

To hedge an investment is to take a position intended to offset potential losses that may be incurred by a companion financial instrument. Hedging an investment may also offset potential gains.

Manager’s Discussion

The end of a decade is a natural time for reflection about the years that have just passed and to look ahead to what the next 10 might have in store. Across Wall Street, we see many prognostications, and while we are not in the forecasting business, we do allow ourselves to think about

Top 10 Sectors/Industries

Based on Equity Securities as of 12/31/19

	% of Total Net Assets
Insurance		16.5%
Oil, Gas & Consumable Fuels		16.1%
Banks		11.3%
Pharmaceuticals		6.2%
Hotels, Restaurants & Leisure		3.7%
Capital Markets		3.7%
Technology Hardware, Storage & Peripherals		3.6%
Tobacco		3.4%
Semiconductors & Semiconductor Equipment		3.2%
Chemicals		2.6%

investment opportunities over such an extended time period. But experience has taught us that while trying to predict the exact course of markets and/or economic and political events that will drive them may be fun, it is not all that useful.

As 2010 began, the global economy was still recovering from the Global Financial Crisis. The U.S. government owned significant portions of the banking and automotive sectors. The Fed had already started quantitative easing (QE), with QE 2 and QE 3 still to come. In Europe, concerns about Greece’s finances were emerging, and in China the effects of 2009’s massive stimulus programs were starting to take hold.

Over the subsequent years we saw ongoing, global QE, culminating in trillions of dollars of debt yielding negative interest rates. The European Union (EU) was in continuous upheaval, with Greece threatening to leave, but eventually staying in the eurozone; the U.K. pursuing and achieving Brexit; and ongoing strain between core members Germany, France, Italy and Spain. In the U.S., average annual economic growth was restrained and finished the decade below 2%, trailing the minimum 3% expectation of prior decades. Strong corporate profits and lower corporate tax rates were bright spots.

Equity markets delivered a very good decade—one of the best in history—with the MSCI ACWI ex-USA Index-NR (Local Currency) posting an average annual total return of +6.89%.¹ During the decade, Franklin Mutual International Fund, Class Z posted an average annual total return of +4.59%, a solid absolute return that nonetheless lagged its benchmark above. The Fund’s value strategy, which seeks to identify mispriced securities and limit downside risk, was out of favor in an environment that generally encouraged investors to assume more risk. However, the Fund launched

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on May 1, 2009, and through the end of 2009, its Class Z shares posted a cumulative total return of +28.27%, compared with +27.41% for the MSCI ACWI ex-USA Index-NR (Local Currency).¹

In our view, going forward we expect more political and monetary uncertainty and economic growth in unexpected places. Corporate profits will have good years and bad years. Some industries will be massively disrupted, while others will find a way to adjust and prosper, even within the context of artificial intelligence and machine learning. Recent events, such as the coronavirus outbreak, have caused, and may continue to cause, uncertainty and volatility in the Chinese economy, potentially leading to vulnerability in 2020 global growth expectations. As for investment positioning, we intend to avoid forecasts that would lead us to make the Fund’s success dependent on a specific set of outcomes. Rather, we will seek to continue with our time-tested value process and complement it with new tools that enhance our security evaluation and selection process. To that end, we have integrated risk and quantitative portfolio analysis tools that provide us with fresh insights about performance, and help us identify companies and securities that we believe satisfy our investors’ goals of risk-adjusted returns that are not wholly dependent on any one economic or political scenario.

Fund Performance

Turning to Fund performance, top positive contributors included Samsung Electronics, Renesas Electronics and Novartis. These companies are listed among the Fund’s largest positions in the Top 10 Equity Holdings table on this page.

The stock price of electronics and computer peripherals manufacturer Samsung Electronics rose based on improved investor sentiment that the market for semiconductor chips was approaching a bottom, and that prices may begin rising in 2020. A glut in the market for dynamic random access memory (DRAM) chips has weighed on the company, the world’s largest manufacturer of DRAMs.

Similarly, shares of Japanese semiconductor company Renesas Electronics rallied as the broader semiconductor industry bounced back, beginning in mid-summer 2019. The stock had been under pressure due to weakness in the company’s end-markets, such as automobiles.

The market responded positively to Novartis’ announcement of the official process and dates for its tax-free spinoff of Alcon, its eye care device and consumer products business. In addition, the Switzerland-based drug maker made good

Top 10 Equity Holdings

12/31/19

Company Sector/Industry, Country	% of Total Net Assets
Samsung Electronics Co. Ltd. Technology Hardware, Storage & Peripherals, South Korea		3.6%
British American Tobacco PLC Tobacco, U.K.		3.4%
NN Group NV Insurance, Netherlands		3.3%
GlaxoSmithKline PLC Pharmaceuticals, U.K.		3.3%
RSA Insurance Group PLC Insurance, U.K.		3.2%
JXTG Holdings Inc. Oil, Gas & Consumable Fuels, Japan		3.2%
Renesas Electronics Corp. Semiconductors & Semiconductor Equipment, Japan		3.2%
BP PLC Oil, Gas & Consumable Fuels, U.K.		3.1%
ING Groep NV Banks, Netherlands		3.0%
Novartis AG Pharmaceuticals, Switzerland		3.0%

progress on its pipeline and delivered solid operational results. The company’s share price pulled back later in the period due to concerns about pharmaceutical drug pricing and fallout from a subsidiary’s data manipulation regarding gene therapy Zolgensma. Zolgensma remains on the market, although the U.S. Food and Drug Administration was critical of the delay in informing them of the issue. We believe Novartis’ innovative product pipeline remains underappreciated and that the company’s management has room to further improve operating margins.

During the period under review, Fund investments that detracted from performance included Indiabulls Housing Finance (not held at period-end), Yes Bank (not held at period-end) and Baidu.

Shares of Indiabulls Housing Finance, an India-based consumer finance company, declined beginning in June following an unsubstantiated allegation of fraudulent loans, which the company vigorously disputed. After declining dramatically, the company’s stock price recovered modestly in late 2019 after India’s Ministry of Corporate Affairs filed an affidavit in the Delhi High Court stating that the five loans which were the subject of the false claim were repaid or are standard accounts.

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Shares of India-based Yes Bank slid after rating agencies downgraded the bonds of two financial services companies that the bank had exposure to. Additional price deterioration was attributable to an equity issuance that was very dilutive, and we liquidated our position ahead of this event. Yes Bank also posted a significant decline in profits, due to a material rise in provisions for loan losses. The company’s new chief executive officer has initiated a strategic initiative to focus more on retail and digital banking in an effort to turn the bank around after recent weakness.

Shares of China-based internet search firm Baidu slid after the company posted a 2019 first-quarter loss, attributable to a weaker Chinese economy and increased governmental regulation that hindered advertising sales growth. Earnings improved in subsequent quarters, but the overhang from the U.S.-China trade dispute hampered the stock price. Management continues to invest heavily in its video-streaming platform and other initiatives, such as artificial intelligence. We believe these investments may help Baidu further diversify its business into new growth markets.

During the period, the Fund held currency forwards and futures seeking to hedge most of the currency risk of the portfolio’s non-U.S. dollar investments. The hedges had a modestly positive overall impact on the Fund’s performance.

What is a currency forward?

A currency forward is a direct agreement between the Fund and a counterparty to buy or sell a foreign currency in exchange for another currency at a specific exchange rate on a future date.

What is a future?

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

As fellow shareholders, we found recent relative performance disappointing, but it is not uncommon for our strategy to lag the equity markets at times. We remain committed to our disciplined, value investment approach as we seek to generate attractive, long-term, risk-adjusted returns for shareholders.

Thank you for your participation in Franklin Mutual International Fund. It has been our privilege to serve your investment needs.

  Andrew Sleeman, CFA Co-Portfolio Manager

  Timothy Rankin, CFA Co-Portfolio Manager

The foregoing information reflects our analysis, opinions and portfolio holdings as of December 31, 2019, the end of the reporting period. The way we implement our main investment strategies and the resulting portfolio holdings may change depending on factors such as market and economic conditions. These opinions may not be relied upon as investment advice or an offer for a particular security. The information is not a complete analysis of every aspect of any market, country, industry, security or the Fund. Statements of fact are from sources considered reliable, but the investment manager makes no representation or warranty as to their completeness or accuracy. Although historical performance is no guarantee of future results, these insights may help you understand our investment management philosophy.

CFA^® is a trademark owned by CFA Institute.

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FRANKLIN MUTUAL INTERNATIONAL FUND

Performance Summary as of December 31, 2019

The performance table and graphs do 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 12/31/19¹

Cumulative total return excludes sales charges. Average annual total return includes maximum sales charges. Sales charges will vary depending on the size of the investment and the class of share purchased. The maximum is 5.50% and the minimum is 0%. Class A: 5.50% maximum initial sales charge. For other share classes, visit franklintempleton.com.

Share Class	Cumulative   Total Return2		Average Annual   Total Return3
Z
1-Year		+14.78%		+14.78%
5-Year		+11.68%		+2.23%
10-Year		+56.68%		+4.59%
A4
1-Year		+14.49%		+8.22%
5-Year		+10.20%		+0.81%
10-Year		+52.34%		+3.71%

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 10 for Performance Summary footnotes.

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PERFORMANCE SUMMARY

Total Return Index Comparison for a Hypothetical $10,000 Investment¹

Total return represents the change in value of an investment over the periods shown. It includes any applicable maximum sales charge, Fund expenses, account fees and reinvested distributions. The unmanaged indexes include reinvestment of any income or distributions. They differ from the Fund in composition and do not pay management fees or expenses. One cannot invest directly in an index.

Class Z (5/1/09–12/31/19)

Class A (5/1/09–12/31/19)

See page 10 for Performance Summary footnotes.

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PERFORMANCE SUMMARY

Distributions (1/1/19–12/31/19)

Share Class	Net Investment Income		Long-Term                  Capital Gain		Total
Z		$0.4345		$0.0346		$0.4691
A		$0.3997		$0.0346		$0.4343
C		$0.2770		$0.0346		$0.3116
R		$0.3561		$0.0346		$0.3907
R6		$0.4577		$0.0346		$0.4923
Total Annual Operating Expenses6
Share Class	With Fee Waiver		Without Fee Waiver
Z		0.97%		1.21%
A		1.22%		1.46%

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. Value securities may not increase in price as anticipated or may decline further in value. Special risks are associated with foreign investing, including currency fluctuations, economic instability and political developments; investments in emerging markets involve heightened risks related to the same factors. Because the Fund may invest its assets in companies in a specific region, including Europe, it is subject to greater risks of adverse developments in that region and/or the surrounding regions than a fund that is more broadly diversified geographically. Current political and financial uncertainty surrounding the European Union may increase market volatility and the economic risk of investing in companies in Europe. Smaller and midsize company stocks have exhibited greater price volatility than larger-company stocks, particularly over the short term. The Fund’s investments in companies engaged in mergers, reorganizations or liquidations also involve special risks as pending deals may not be completed on time or on favorable terms. The Fund may invest in lower-rated bonds, which entail higher credit risk. The Fund’s prospectus also includes a description of the main investment risks.

1. The Fund has an expense reduction contractually guaranteed through 4/30/20. Fund investment results reflect the expense reduction; without this reduction, the results would have been lower.

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

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

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

5. Source: Morningstar. the MSCI ACWI ex USA Index-NR (Local Currency and USD) is a free float-adjusted, market capitalization-weighted index designed to measure equity market performance in global developed and emerging markets. The NR or Net Dividends Index reflects the deduction of withholding taxes on reinvested dividends.

6. 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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Your Fund’s Expenses

As a Fund shareholder, you can incur two types of costs: (1) transaction costs, including sales charges (loads) on Fund purchases and redemptions; and (2) ongoing Fund costs, including management fees, distribution and service (12b-1) fees, and other Fund expenses. All mutual funds have ongoing costs, sometimes referred to as operating expenses. The table below shows ongoing costs of investing in the Fund and can help you understand these costs and compare them with those of other mutual funds. The table assumes a $1,000 investment held for the six months indicated.

Actual Fund Expenses

The table below provides information about actual account values and actual expenses in the columns under the heading “Actual.” In these columns the Fund’s actual return, which includes the effect of Fund expenses, is used to calculate the “Ending Account Value” for each class of shares. You can estimate the expenses you paid during the period by following these steps (of course, your account value and expenses will differ from those in this illustration): Divide your account value by $1,000 (if your account had an $8,600 value, then $8,600 ÷ $1,000 = 8.6). Then multiply the result by the number in the row for your class of shares under the headings “Actual” and “Expenses Paid During Period” (if Actual Expenses Paid During Period were $7.50, then 8.6 x $7.50 = $64.50). In this illustration, the actual expenses paid this period are $64.50.

Hypothetical Example for Comparison with Other Funds

Under the heading “Hypothetical” in the table, information is provided about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. This information may not be used to estimate the actual ending account balance or expenses you paid for the period, but it can help you compare ongoing costs of investing in the Fund with those of other funds. To do so, compare this 5% hypothetical example for the class of shares you hold with the 5% hypothetical examples that appear in the shareholder reports of other funds.

Please note that expenses shown in the table are meant to highlight ongoing costs and do not reflect any transactional costs. Therefore, information under the heading “Hypothetical” is useful in comparing ongoing costs only, and will not help you compare total costs of owning different funds. In addition, if transactional costs were included, your total costs would have been higher.

		Actual (actual return after expenses)		Hypothetical (5% annual return before expenses)
Share Class	Beginning Account Value 7/1/19	Ending Account Value 12/31/19	Expenses Paid During Period 7/1/19–12/31/191, 2	Ending Account Value 12/31/19	Expenses Paid During Period 7/1/19–12/31/191, 2	Net Annualized Expense Ratio2
Z	$1,000	$1,069.40	$  5.06	$1,020.32	$4.94	0.97%
A	$1,000	$1,068.00	$  6.36	$1,019.06	$6.21	1.22%
C	$1,000	$1,063.30	$10.19	$1,015.32	$9.96	1.96%
R	$1,000	$1,066.00	$  7.65	$1,017.80	$7.48	1.47%
R6	$1,000	$1,069.60	$  4.23	$1,021.12	$4.13	0.81%

1. Expenses are equal to the annualized expense ratio for the six-month period as indicated above—in the far right column—multiplied by the simple average account value over the period indicated, and then multiplied by 184/365 to reflect the one-half year period.

2. Reflects expenses after fee waivers and expense reimbursements.

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Financial Highlights

Franklin Mutual International Fund

				Year Ended December 31,
	2019			2018			2017			2016			2015
Class Z
Per share operating performance (for a share outstanding throughout the year)
Net asset value, beginning of year		$12.82			$15.96			$14.32			$14.17			$14.59
Income from investment operationsa:
Net investment incomeb		0.37			0.31			0.21			0.27	c		0.18	d
Net realized and unrealized gains (losses)		1.51			(3.11	)		1.78			0.20			(0.17	)
Total from investment operations		1.88			(2.80	)		1.99			0.47			0.01
Less distributions from:
Net investment income		(0.43	)		(0.25	)		(0.35	)		(0.27	)		(0.16	)
Net realized gains		(0.03	)		(0.09	)		—			(0.05	)		(0.27	)
Total distributions		(0.46	)		(0.34	)		(0.35	)		(0.32	)		(0.43	)
Net asset value, end of year		$14.24			$12.82			$15.96			$14.32			$14.17
Total return		14.78%			(17.52)%			13.99%			3.34%			0.15%
Ratios to average net assets
Expenses before waiver and payments by affiliates		1.31%			1.21%			1.17%			1.22%			1.24%
Expenses net of waiver and payments by affiliatese		0.97%			0.99%			1.16%			1.17%			1.15%
Net investment income		2.70%			2.00%			1.41%			2.07%	c		1.26%	d
Supplemental data
Net assets, end of year (000’s)		$37,986			$52,271			$86,274			$40,875			$49,963
Portfolio turnover rate		10.66%			28.75%			38.77%			24.87%			28.64%

^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.

^cNet investment income per share includes approximately $0.06 per share related to income received in the form of special dividends in connection with certain Fund holdings. Excluding this amount, the ratio of net investment income to average net assets would have been 1.63%.

^dNet investment income per share includes approximately $0.08 per share related to income received in the form of special dividends in connection with certain Fund holdings. Excluding this amount, the ratio of net investment income to average net assets would have been 0.71%.

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

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FINANCIAL HIGHLIGHTS

Franklin Mutual International Fund (continued)

				Year Ended December 31,
	2019			2018			2017			2016			2015
Class A
Per share operating performance (for a share outstanding throughout the year)
Net asset value, beginning of year		$12.77			$15.90			$14.25			$14.10			$14.54
Income from investment operationsa:
Net investment incomeb		0.33			0.27			0.18			0.24	c		0.15	d
Net realized and unrealized gains (losses)		1.51			(3.10	)		1.78			0.19			(0.19	)
Total from investment operations		1.84			(2.83	)		1.96			0.43			(0.04	)
Less distributions from:
Net investment income		(0.40	)		(0.21	)		(0.31	)		(0.23	)		(0.13	)
Net realized gains		(0.03	)		(0.09	)		—			(0.05	)		(0.27	)
Total distributions		(0.43	)		(0.30	)		(0.31	)		(0.28	)		(0.40	)
Net asset value, end of year		$14.18			$12.77			$15.90			$14.25			$14.10
Total returne		14.49%			(17.73)%			13.67%			3.14%			(0.20)%
Ratios to average net assets
Expenses before waiver and payments by affiliates		1.56%			1.46%			1.42%			1.47%			1.52%
Expenses net of waiver and payments by affiliatesf		1.22%			1.24%			1.41%			1.42%			1.43%
Net investment income		2.45%			1.75%			1.16%			1.82%	c		0.98%	d
Supplemental data
Net assets, end of year (000’s)		$44,178			$53,082			$82,965			$82,626			$110,591
Portfolio turnover rate		10.66%			28.75%			38.77%			24.87%			28.64%

^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.

^cNet investment income per share includes approximately $0.06 per share related to income received in the form of special dividends in connection with certain Fund holdings. Excluding this amount, the ratio of net investment income to average net assets would have been 1.38%.

^dNet investment income per share includes approximately $0.08 per share related to income received in the form of special dividends in connection with certain Fund holdings. Excluding this amount, the ratio of net investment income to average net assets would have been 0.43%.

^eTotal return does not reflect sales commissions or contingent deferred sales charges, if applicable.

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

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

FRANKLIN MUTUAL SERIES FUNDS

FINANCIAL HIGHLIGHTS

Franklin Mutual International Fund (continued)

				Year Ended December 31,
	2019			2018			2017			2016			2015
Class C
Per share operating performance (for a share outstanding throughout the year)
Net asset value, beginning of year		$12.68			$15.69			$14.08			$13.92		$14.38
Income from investment operationsa:
Net investment incomeb		0.22			0.16			0.08			0.15	c	0.04d
Net realized and unrealized gains (losses)		1.51			(3.04	)		1.72			0.18		(0.18)
Total from investment operations		1.73			(2.88	)		1.80			0.33		(0.14)
Less distributions from:
Net investment income		(0.28	)		(0.04	)		(0.19	)		(0.12	)	(0.05)
Net realized gains		(0.03	)		(0.09	)		—			(0.05	)	(0.27)
Total distributions		(0.31	)		(0.13	)		(0.19	)		(0.17	)	(0.32)
Net asset value, end of year		$14.10			$12.68			$15.69			$14.08		$13.92
Total returne		13.62%			(18.39)%			12.79%			2.44%		(0.93)%
Ratios to average net assets
Expenses before waiver and payments by affiliates		2.30%			2.21%			2.17%			2.22%		2.24%
Expenses net of waiver and payments by affiliatesf		1.96%			1.99%			2.16%			2.17%		2.15%
Net investment income		1.71%			1.00%			0.41%			1.07%	c	0.26%d
Supplemental data
Net assets, end of year (000’s)		$11,074			$13,685			$29,109			$25,860		$34,611
Portfolio turnover rate		10.66%			28.75%			38.77%			24.87%		28.64%

^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.

^cNet investment income per share includes approximately $0.06 per share related to income received in the form of special dividends in connection with certain Fund holdings. Excluding this amount, the ratio of net investment income to average net assets would have been 0.63%.

^dNet investment income per share includes approximately $0.08 per share related to income received in the form of special dividends in connection with certain Fund holdings. Excluding this amount, the ratio of net investment income to average net assets would have been (0.29)%.

^eTotal return does not reflect sales commissions or contingent deferred sales charges, if applicable.

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

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

FRANKLIN MUTUAL SERIES FUNDS

FINANCIAL HIGHLIGHTS

Franklin Mutual International Fund (continued)

				Year Ended December 31,
	2019			2018			2017			2016			2015
Class R
Per share operating performance (for a share outstanding throughout the year)
Net asset value, beginning of year		$12.69			$15.80			$14.19			$14.05		$14.51
Income from investment operationsa:
Net investment incomeb		0.30			0.23			0.10			0.20	c	0.04d
Net realized and unrealized gains (losses)		1.49			(3.07	)		1.80			0.20		(0.10)
Total from investment operations		1.79			(2.84	)		1.90			0.40		(0.06)
Less distributions from:
Net investment income		(0.36	)		(0.18	)		(0.29	)		(0.21	)	(0.13)
Net realized gains		(0.03	)		(0.09	)		—			(0.05	)	(0.27)
Total distributions		(0.39	)		(0.27	)		(0.29	)		(0.26	)	(0.40)
Net asset value, end of year		$14.09			$12.69			$15.80			$14.19		$14.05
Total return		14.16%			(17.96)%			13.43%			2.90%		(0.38)%
Ratios to average net assets
Expenses before waiver and payments by affiliates		1.81%			1.71%			1.64%			1.72%		1.74%
Expenses net of waiver and payments by affiliatese		1.47%			1.49%			1.63%			1.67%		1.65%
Net investment income		2.20%			1.50%			0.94%			1.57%	c	0.76%d
Supplemental data
Net assets, end of year (000’s)		$1,452			$1,673			$1,867			$694		$662
Portfolio turnover rate		10.66%			28.75%			38.77%			24.87%		28.64%

^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.

^cNet investment income per share includes approximately $0.06 per share related to income received in the form of special dividends in connection with certain Fund holdings. Excluding this amount, the ratio of net investment income to average net assets would have been 1.13%.

^dNet investment income per share includes approximately $0.08 per share related to income received in the form of special dividends in connection with certain Fund holdings. Excluding this amount, the ratio of net investment income to average net assets would have been 0.21%.

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

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

FRANKLIN MUTUAL SERIES FUNDS

FINANCIAL HIGHLIGHTS

Franklin Mutual International Fund (continued)

				Year Ended December 31,
	2019			2018			2017			2016			2015
Class R6
Per share operating performance (for a share outstanding throughout the year)
Net asset value, beginning of year		$12.82			$15.97			$14.32			$14.17		$14.59
Income from investment operationsa:
Net investment incomeb		0.45			0.33			0.24			0.33	c	0.22d
Net realized and unrealized gains (losses)		1.45			(3.11	)		1.78			0.17		(0.20)
Total from investment operations		1.90			(2.78	)		2.02			0.50		0.02
Less distributions from:
Net investment income		(0.46	)		(0.28	)		(0.37	)		(0.30	)	(0.17)
Net realized gains		(0.03	)		(0.09	)		—			(0.05	)	(0.27)
Total distributions		(0.49	)		(0.37	)		(0.37	)		(0.35	)	(0.44)
Net asset value, end of year		$14.23			$12.82			$15.97			$14.32		$14.17
Total return		14.89%			(17.40)%			14.11%			3.58%		0.23%
Ratios to average net assets
Expenses before waiver and payments by affiliates		1.22%			1.11%			1.03%			1.06%		1.06%
Expenses net of waiver and payments by affiliatese		0.81%			0.85%			1.01%			1.00%		1.02%
Net investment income		2.86%			2.14%			1.56%			2.24%	c	1.39%d
Supplemental data
Net assets, end of year (000’s)		$5,314			$20,128			$25,697			$16,687		$23,793
Portfolio turnover rate		10.66%			28.75%			38.77%			24.87%		28.64%

^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.

^cNet investment income per share includes approximately $0.06 per share related to income received in the form of special dividends in connection with certain Fund holdings. Excluding this amount, the ratio of net investment income to average net assets would have been 1.80%.

^dNet investment income per share includes approximately $0.08 per share related to income received in the form of special dividends in connection with certain Fund holdings. Excluding this amount, the ratio of net investment income to average net assets would have been 0.84%.

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

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

FRANKLIN MUTUAL SERIES FUNDS

Statement of Investments, December 31, 2019

Franklin Mutual International Fund

	Country		Shares		Value
Common Stocks 91.2%
Aerospace & Defense 1.7%
BAE Systems PLC		United Kingdom		229,000	$	1,713,033
Auto Components 1.6%
Cie Generale des Etablissements Michelin SCA		France		12,904		1,578,807
Banks 11.3%
AIB Group PLC		Ireland		516,975		1,800,740
a Credito Valtellinese SpA		Italy		25,464,429		2,033,264
ING Groep NV		Netherlands		252,834		3,030,483
Shinsei Bank Ltd.		Japan		162,827		2,509,641
Standard Chartered PLC		United Kingdom		198,100		1,869,149
						11,243,277
Capital Markets 3.7%
Credit Suisse Group AG		Switzerland		129,527		1,754,200
Deutsche Bank AG		Germany		254,188		1,971,754
						3,725,954
Chemicals 2.6%
BASF SE		Germany		34,111		2,576,392
Construction Materials 1.9%
LafargeHolcim Ltd., B		Switzerland		34,929		1,938,394
Consumer Finance 0.8%
Sun Hung Kai & Co. Ltd.		Hong Kong		1,735,748		826,409
Diversified Financial Services 2.3%
Metro Pacific Investments Corp.		Philippines		33,698,700		2,313,960
Diversified Telecommunication Services 1.6%
Koninklijke KPN NV		Netherlands		555,623		1,639,385
Hotels, Restaurants & Leisure 3.7%
Accor SA		France		44,182		2,068,625
Sands China Ltd.		Macau		312,200		1,668,715
						3,737,340
Household Durables 2.0%
Cairn Homes PLC		Ireland		1,397,177		1,980,516
Insurance 16.5%
ASR Nederland NV		Netherlands		51,344		1,920,860
China Pacific Insurance Group Co. Ltd., H		China		608,045		2,395,567
Direct Line Insurance Group PLC		United Kingdom		668,514		2,766,917
NN Group NV		Netherlands		86,936		3,297,260
RSA Insurance Group PLC		United Kingdom		425,931		3,190,687
T&D Holdings Inc.		Japan		225,033		2,888,622
						16,459,913
Interactive Media & Services 2.0%
a Baidu Inc., ADR		China		16,131		2,038,958

franklintempleton.com Annual Report         17

FRANKLIN MUTUAL SERIES FUNDS

STATEMENT OF INVESTMENTS

Franklin Mutual International Fund (continued)

	Country		Shares		Value
Common Stocks (continued)
Oil, Gas & Consumable Fuels 16.1%
BP PLC		United Kingdom		495,900	$	3,097,444
Caltex Australia Ltd.		Australia		30,065		716,179
Canadian Natural Resources Ltd.		Canada		84,900		2,745,880
Crescent Point Energy Corp.		Canada		585,600		2,610,984
JXTG Holdings Inc.		Japan		693,300		3,176,389
Royal Dutch Shell PLC, B		United Kingdom		79,534		2,359,063
Saras SpA		Italy		877,091		1,410,502
						16,116,441
Pharmaceuticals 6.2%
GlaxoSmithKline PLC		United Kingdom		138,343		3,259,633
Novartis AG		Switzerland		31,288		2,971,495
						6,231,128
Real Estate Management & Development 1.3%
Kenedix Inc.		Japan		243,134		1,273,000
Semiconductors & Semiconductor Equipment 3.2%
a Renesas Electronics Corp.		Japan		459,862		3,173,651
Specialty Retail 1.7%
Dufry AG		Switzerland		17,401		1,726,703
Technology Hardware, Storage & Peripherals 3.6%
Samsung Electronics Co. Ltd.		South Korea		74,519		3,597,056
Tobacco 3.4%
British American Tobacco PLC		United Kingdom		78,471		3,358,527
Trading Companies & Distributors 1.4%
Rexel SA		France		101,939		1,354,114
Wireless Telecommunication Services 2.6%
Vodafone Group PLC		United Kingdom		1,324,860		2,575,214
Total Common Stocks (Cost $97,237,877)						91,178,172
Preferred Stocks (Cost $1,084,080) 1.6%
Automobiles 1.6%
b Volkswagen AG, 2.758%, pfd.		Germany		8,416		1,663,375
Total Investments before Short Term Investments (Cost $98,321,957)						92,841,547

18         Annual Report franklintempleton.com

FRANKLIN MUTUAL SERIES FUNDS

STATEMENT OF INVESTMENTS

Franklin Mutual International Fund (continued)

	Country		Principal Amount		Value
Short Term Investments 6.5%
U.S. Government and Agency Securities 6.5%
c FHLB, 1/02/20		United States	$	5,600,000	$	5,600,000
c U.S. Treasury Bill, 1/02/20 - 1/23/20		United States		900,000		899,573
Total U.S. Government and Agency Securities (Cost $6,499,099)						6,499,573
Total Investments (Cost $104,821,056) 99.3%						99,341,120
Other Assets, less Liabilities 0.7%						663,526
Net Assets 100.0%					$	100,004,646

^aNon-income producing.

^bVariable rate security. The rate shown represents the yield at period end.

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

At December 31, 2019, the Fund had the following futures contracts outstanding. See Note 1(c).

Futures Contracts

Description	Type		Number of Contracts		Notional   Amount*		Expiration Date		Value/ Unrealized Appreciation (Depreciation)
Currency Contracts
EUR/USD		Short		118		$16,640,950		3/16/20		$(160,042	)
GBP/USD		Short		66		5,482,950		3/16/20		(38,019	)
Total Futures Contracts										$(198,061	)

*As of period end.

franklintempleton.com Annual Report         19

FRANKLIN MUTUAL SERIES FUNDS

STATEMENT OF INVESTMENTS

Franklin Mutual International Fund (continued)

At December 31, 2019, the Fund had the following forward exchange contracts outstanding. See Note 1(c).

Forward Exchange Contracts

Currency	Counterpartya		Type		Quantity		Contract Amount		Settlement Date		Unrealized   Appreciation		Unrealized Depreciation
OTC Forward Exchange Contracts
Swiss Franc		UBSW		Sell		1,678,781	$	1,708,648		1/13/20	$	—	$	(27,900	)
Euro		BOFA		Buy		594,410		657,404		1/15/20		9,841		—
Euro		BOFA		Buy		702,856		794,907		1/15/20		—		(5,930	)
Euro		HSBK		Buy		1,199,036		1,353,687		1/15/20		—		(7,733	)
Euro		HSBK		Buy		1,353,471		1,504,874		1/15/20		14,436		—
Euro		SSBT		Buy		159,177		178,778		1/15/20		—		(97	)
Euro		SSBT		Buy		1,550,000		1,722,864		1/15/20		17,057		—
Euro		SSBT		Sell		7,929,191		9,056,405		1/15/20		155,654		—
Euro		UBSW		Sell		8,185,413		9,349,322		1/15/20		160,954		—
Australian Dollar		UBSW		Sell		1,015,897		701,395		1/16/20		—		(11,704	)
British Pound		BOFA		Buy		91,879		121,694		1/16/20		52		—
British Pound		HSBK		Buy		146,913		196,638		1/16/20		—		(1,966	)
British Pound		HSBK		Sell		12,856,251		16,876,642		1/16/20		—		(158,915	)
Japanese Yen		HSBK		Buy		11,877,336		109,377		1/16/20		14		—
Japanese Yen		SSBT		Buy		12,349,401		113,002		1/16/20		737		—
Japanese Yen		SSBT		Sell		1,094,420,313		10,057,808		1/16/20		—		(21,894	)
Philippine Peso		BONY		Buy		15,838,389		311,902		1/16/20		468		—
Philippine Peso		BONY		Sell		130,413,969		2,563,919		1/16/20		—		(8,147	)
South Korean Won		HSBK		Sell		1,595,420,211		1,349,868		1/17/20		—		(30,732	)
South Korean Won		UBSW		Buy		512,453,000		430,816		1/17/20		12,636		—
South Korean Won		UBSW		Sell		3,057,755,543		2,581,910		1/17/20		—		(64,126	)
Total Forward Exchange Contracts											$	371,849	$	(339,144	)
Net unrealized appreciation (depreciation)											$	32,705

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

See Note 9 regarding other derivative information.

See Abbreviations on page 35.

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

FRANKLIN MUTUAL SERIES FUNDS

FINANCIAL STATEMENTS

Statement of Assets and Liabilities

December 31, 2019

Franklin Mutual International Fund

Assets:
Investments in securities:
Cost - Unaffiliated issuers	$104,821,056
Value - Unaffiliated issuers	$  99,341,120
Cash	31,062
Receivables:
Investment securities sold	156,488
Capital shares sold	38,745
Dividends	424,598
European Union tax reclaims	47,531
Affiliates	2,577
Deposits with brokers for:
Futures contracts	375,840
Unrealized appreciation on OTC forward exchange contracts	371,849
Other assets	19
Total assets	100,789,829
Liabilities:
Payables:
Capital shares redeemed	189,561
Management fees	36,051
Distribution fees	19,391
Trustees’ fees and expenses	3,627
Variation margin on futures contracts	99,076
Unrealized depreciation on OTC forward exchange contracts	339,144
Accrued expenses and other liabilities	98,333
Total liabilities	785,183
Net assets, at value	$100,004,646
Net assets consist of:
Paid-in capital	$114,685,487
Total distributable earnings (losses)	(14,680,841	)
Net assets, at value	$100,004,646

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

FRANKLIN MUTUAL SERIES FUNDS

FINANCIAL STATEMENTS

Statement of Assets and Liabilities (continued)

December 31, 2019

Franklin Mutual International Fund

Class Z:
Net assets, at value	$37,986,457
Shares outstanding	2,667,971
Net asset value and maximum offering price per share	$14.24
Class A:
Net assets, at value	$44,178,026
Shares outstanding	3,115,136
Net asset value per sharea	$14.18
Maximum offering price per share (net asset value per share ÷ 94.50%)	$15.01
Class C:
Net assets, at value	$11,074,186
Shares outstanding	785,669
Net asset value and maximum offering price per sharea	$14.10
Class R:
Net assets, at value	$  1,452,392
Shares outstanding	103,059
Net asset value and maximum offering price per share	$14.09
Class R6:
Net assets, at value	$  5,313,585
Shares outstanding	373,334
Net asset value and maximum offering price per share	$14.23

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

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

FRANKLIN MUTUAL SERIES FUNDS

FINANCIAL STATEMENTS

Statement of Operations

for the year ended December 31, 2019

Franklin Mutual International Fund

Investment income:
Dividends: (net of foreign taxes)*
Unaffiliated issuers	$	4,527,752
Interest:
Unaffiliated issuers		166,386
Total investment income		4,694,138
Expenses:
Management fees (Note 3a)		1,119,858
Distribution fees: (Note 3c)
Class A		121,988
Class C		124,319
Class R		8,240
Transfer agent fees: (Note 3e)
Class Z		102,497
Class A		99,817
Class C		25,583
Class R		3,372
Class R6		16,506
Custodian fees (Note 4)		25,180
Reports to shareholders		35,516
Registration and filing fees		83,776
Professional fees		100,446
Trustees’ fees and expenses		8,385
Other		53,390
Total expenses		1,928,873
Expense reductions (Note 4)		(3,009	)
Expenses waived/paid by affiliates (Note 3f)		(453,083	)
Net expenses		1,472,781
Net investment income		3,221,357
Realized and unrealized gains (losses):
Net realized gain (loss) from:
Investments:
Unaffiliated issuers		(8,916,433	)
Foreign currency transactions		13,698
Forward exchange contracts		1,922,383
Futures contracts		1,001,804
Net realized gain (loss)		(5,978,548	)
Net change in unrealized appreciation (depreciation) on:
Investments:
Unaffiliated issuers		20,585,867
Translation of other assets and liabilities denominated in foreign currencies		555
Forward exchange contracts		(857,492	)
Futures contracts		(212,193	)
Net change in unrealized appreciation (depreciation)		19,516,737
Net realized and unrealized gain (loss)		13,538,189
Net increase (decrease) in net assets resulting from operations	$	16,759,546
*Foreign taxes withheld on dividends	$	355,011

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

FRANKLIN MUTUAL SERIES FUNDS

FINANCIAL STATEMENTS

Statements of Changes in Net Assets

Franklin Mutual International Fund

	Year Ended December 31,
	2019			2018
Increase (decrease) in net assets:
Operations:
Net investment income	$	3,221,357		$	3,528,615
Net realized gain (loss)		(5,978,548	)		9,920,269
Net change in unrealized appreciation (depreciation)		19,516,737			(46,528,018	)
Net increase (decrease) in net assets resulting from operations		16,759,546			(33,079,134	)
Distributions to shareholders:
Class Z		(1,312,058	)		(1,369,385	)
Class A		(1,347,125	)		(1,270,437	)
Class C		(245,479	)		(150,699	)
Class R		(39,723	)		(35,634	)
Class R6		(180,611	)		(566,278	)
Total distributions to shareholders		(3,124,996	)		(3,392,433	)
Capital share transactions: (Note 2)
Class Z		(19,496,686	)		(20,389,727	)
Class A		(14,221,831	)		(16,207,014	)
Class C		(3,971,113	)		(11,485,192	)
Class R		(386,368	)		206,051
Class R6		(16,392,849	)		(724,964	)
Total capital share transactions		(54,468,847	)		(48,600,846	)
Net increase (decrease) in net assets		(40,834,297	)		(85,072,413	)
Net assets:
Beginning of year		140,838,943			225,911,356
End of year	$	100,004,646		$	140,838,943

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

FRANKLIN MUTUAL SERIES FUNDS

Notes to Financial Statements

Franklin Mutual International Fund

1.  Organization and Significant Accounting Policies

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

The following summarizes the Fund’s significant accounting policies.

a.  Financial Instrument Valuation

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

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

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

Debt securities generally trade in the OTC market rather than on a securities exchange. The Fund’s pricing services use multiple valuation techniques to determine fair value. In instances where sufficient market activity exists, the pricing services may utilize a market-based approach through which quotes from market makers are used to determine fair value. In instances where sufficient market activity may not exist or is limited, the pricing services also utilize proprietary valuation models which may consider market characteristics such as benchmark yield curves, credit spreads, estimated default rates, anticipated market interest rate volatility, coupon rates, anticipated timing of principal repayments, underlying collateral, and other unique security features in order to estimate the relevant cash flows, which are then discounted to calculate the fair value.

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

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

Trading in securities on foreign securities stock exchanges and OTC markets may be completed before 4 p.m. Eastern time. In addition, trading in certain foreign markets may not take place on every Fund’s business day. Occasionally,

franklintempleton.com Annual Report         25

FRANKLIN MUTUAL SERIES FUNDS

NOTES TO FINANCIAL STATEMENTS

Franklin Mutual International Fund (continued)

1.  Organization and Significant Accounting Policies (continued)

a.  Financial Instrument Valuation (continued)

events occur between the time at which trading in a foreign security is completed and 4 p.m. Eastern time that might call into question the reliability of the value of a portfolio security held by the Fund. As a result, differences may arise between the value of the Fund’s portfolio securities as determined at the foreign market close and the latest indications of value at 4 p.m. Eastern time. In order to minimize the potential for these differences, the VC monitors price movements following the close of trading in foreign stock markets through a series of country specific market proxies (such as baskets of American Depositary Receipts, futures contracts and exchange traded funds). These price movements are measured against established trigger thresholds for each specific market proxy to assist in determining if an event has occurred that may call into question the reliability of the values of the foreign securities held by the Fund. If such an event occurs, the securities may be valued using fair value procedures, which may include the use of independent pricing services.

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

b.  Foreign Currency Translation

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

value. If such an event occurs, the foreign exchange rate will be valued at fair value using procedures established and approved by the Board.

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

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

c.  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

26         Annual Report franklintempleton.com

FRANKLIN MUTUAL SERIES FUNDS

NOTES TO FINANCIAL STATEMENTS

Franklin Mutual International Fund (continued)

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. At December 31, 2019, the Fund had OTC derivatives in a net liability position of $192,575.

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.

At December 31, 2019, the Fund received $486,227 in U.S. Treasury Bills, Bonds and Notes as collateral for derivatives.

The Fund entered into exchange traded futures contracts primarily to manage exposure to certain foreign currencies. A futures contract is an agreement between the Fund and a counterparty to buy or sell an asset at a specified price on a

future date. Required initial margins are pledged by the Fund, and the daily change in fair value is accounted for as a variation margin payable or receivable in the Statement of Assets and Liabilities.

The Fund entered into OTC forward exchange contracts primarily to manage 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.

See Note 9 regarding other derivative information.

d.  Securities Lending

The Fund participates in an agency based securities lending program to earn additional income. The Fund receives cash collateral against the loaned securities in an amount equal to at least 102% of the fair value of the loaned securities. Collateral is maintained over the life of the loan in an amount not less than 100% of the fair value of loaned securities, as determined at the close of Fund business each day; any additional collateral required due to changes in security values is delivered to the Fund on the next business day. The collateral is deposited into a joint cash account with other funds and is used to invest in a money market fund managed by Franklin Advisers, Inc., an affiliate of the Fund, and/or a joint repurchase agreement. The Fund may receive income from the investment 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 Statement of Operations. The Fund bears the market risk with respect to the collateral investment, securities loaned, and the risk that the agent may default on its obligations to the Fund. If the borrower defaults on its obligation 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. At December 31, 2019, the Fund had no securities on loan.

e.  Income and Deferred Taxes

It is the Fund’s policy to qualify as a regulated investment company under the Internal Revenue Code. The Fund intends to 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.

franklintempleton.com Annual Report         27

FRANKLIN MUTUAL SERIES FUNDS

NOTES TO FINANCIAL STATEMENTS

Franklin Mutual International Fund (continued)

1.  Organization and Significant Accounting Policies (continued)

e.  Income and Deferred Taxes (continued)

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.

As a result of several court cases, in certain countries across the European Union, the Fund filed additional tax reclaims for previously withheld taxes on dividends earned in those countries (EU reclaims). These additional filings are subject to various administrative proceedings by the local jurisdictions’ tax authorities within the European Union, as well as a number of related judicial proceedings. Income recognized, if any, for EU reclaims is reflected as other income in the Statement of Operations and any related receivable, if any, is reflected as European Union tax reclaims in the Statement of Assets and Liabilities. When uncertainty exists as to the ultimate resolution of these proceedings, the likelihood of receipt of these EU reclaims, and the potential timing of payment, no amounts are reflected in the financial statements. For U.S. income tax purposes, EU reclaims received by the Fund, if any, reduce the amounts of foreign taxes Fund shareholders can use as tax credits in their individual income tax returns.

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 December 31, 2019, the Fund has determined that no tax liability is required in its financial statements related to uncertain tax positions for any open tax years (or expected to be taken in future tax years). Open tax years are those that remain subject to examination and are based on the statute of limitations in each jurisdiction in which the Fund invests.

f.  Security Transactions, Investment Income, Expenses and Distributions

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

g.  Accounting Estimates

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

h.  Guarantees and Indemnifications

Under the Trust’s organizational documents, its officers and trustees are indemnified by the Trust against certain liabilities arising out of the performance of their duties to the Trust.

28         Annual Report franklintempleton.com

FRANKLIN MUTUAL SERIES FUNDS

NOTES TO FINANCIAL STATEMENTS

Franklin Mutual International Fund (continued)

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 December 31, 2019, there were an unlimited number of shares authorized (without par value). Transactions in the Fund’s shares were as follows:

	Year Ended December 31,
	2019						2018
	Shares			Amount			Shares			Amount
Class Z Shares:
Shares sold		594,641		$	8,171,934			2,069,714		$29,602,759
Shares issued in reinvestment of distributions		89,276			1,257,074			104,086		1,342,966
Shares redeemed		(2,093,240	)		(28,925,694	)		(3,501,255	)	(51,335,452)
Net increase (decrease)		(1,409,323	)	$	(19,496,686	)		(1,327,455	)	$(20,389,727)
Class A Shares:
Shares solda		311,163		$	4,237,738			1,021,682		$15,233,084
Shares issued in reinvestment of distributions		95,181			1,335,417			97,868		1,258,830
Shares redeemed		(1,447,114	)		(19,794,986	)		(2,182,962	)	(32,698,928)
Net increase (decrease)		(1,040,770	)	$	(14,221,831	)		(1,063,412	)	$(16,207,014)
Class C Shares:
Shares sold		63,396		$	859,057			222,976		$3,422,701
Shares issued in reinvestment of distributions		17,649			244,848			11,409		150,533
Shares redeemeda		(374,326	)		(5,075,018	)		(1,010,609	)	(15,058,426)
Net increase (decrease)		(293,281	)	$	(3,971,113	)		(776,224	)	$(11,485,192)
Class R Shares:
Shares sold		23,758		$	321,122			50,432		$776,090
Shares issued in reinvestment of distributions		2,853			39,723			2,782		35,634
Shares redeemed		(55,438	)		(747,213	)		(39,495	)	(605,673)
Net increase (decrease)		(28,827	)	$	(386,368	)		13,719		$206,051
Class R6 Shares:
Shares sold		170,009		$	2,342,662			360,960		$5,502,994
Shares issued in reinvestment of distributions		12,811			180,611			44,003		566,278
Shares redeemed		(1,379,626	)		(18,916,122	)		(443,682	)	(6,794,236)
Net increase (decrease)		(1,196,806	)	$	(16,392,849	)		(38,719	)	$(724,964)

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

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FRANKLIN MUTUAL SERIES FUNDS

NOTES TO FINANCIAL STATEMENTS

Franklin Mutual International Fund (continued)

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 Fund are also officers and/or directors of the following subsidiaries:

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

a.  Management Fees

The Fund pays an investment management fee to Franklin Mutual of 0.875% per year of the average daily net assets of the Fund.

b.  Administrative Fees

Under an agreement with Franklin Mutual, FT Services provides administrative services to the Fund. The fee is paid by Franklin Mutual 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 Z and Class R6 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	0.35	%
Class C	1.00	%
Class R	0.50	%

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

d.  Sales Charges/Underwriting Agreements

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

Sales charges retained net of commissions paid to unaffiliated brokers/dealers	$	3,307
CDSC retained	$	(1,150	)

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FRANKLIN MUTUAL SERIES FUNDS

NOTES TO FINANCIAL STATEMENTS

Franklin Mutual International Fund (continued)

e.  Transfer Agent Fees

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

For the year ended December 31, 2019, the Fund paid transfer agent fees of $247,775, of which $136,007 was retained by Investor Services.

f.  Waiver and Expense Reimbursements

Franklin Mutual and Investor Services have contractually agreed in advance to waive or limit their respective fees and to assume as their own expense certain expenses otherwise payable by the Fund so that the expenses (excluding distribution fees, acquired fund fees and expenses and certain non-routine expenses or costs, including those relating to litigation, indemnification, reorganizations, and liquidations) for each class of the Fund do not exceed 0.97%, and Class R6 does not exceed 0.81%, based on the average net assets of each class until April 30, 2020. Total expenses waived or paid are not subject to recapture subsequent to the Fund’s fiscal year end.

Prior to May 1, 2019, the expenses (excluding certain fees and expenses as previously disclosed) for Class R6 were limited to 0.83% based on the average net assets of the class.

4.  Expense Offset Arrangement

The Fund has entered into an arrangement with its custodian whereby credits realized as a result of uninvested cash balances are used to reduce a portion of the Fund’s custodian expenses. During the year ended December 31, 2019, the custodian fees were reduced as noted in the Statement of Operations.

5.  Independent Trustees’ Retirement Plan

On January 1, 1993, the Trust adopted an Independent Trustees’ Retirement Plan (Plan). The Plan is an unfunded defined benefit plan that provides benefit payments to Trustees whose length of service and retirement age meets the eligibility requirements of the Plan. Benefits under the Plan are based on years of service and fees paid to each trustee at the time of retirement. Effective in December 1996, the Plan was closed to new participants.

During the year ended December 31, 2019, the Fund’s projected benefit obligation and benefit payments under the Plan were as follows:

aProjected benefit obligation at December 31, 2019	$	3,627
bIncrease in projected benefit obligation	$	899
Benefit payments made to retired trustees	$	(171	)

^aThe projected benefit obligation is included in trustees’ fees and expenses in the Statement of Assets and Liabilities.

^bThe increase in projected benefit obligation is included in trustees’ fees and expenses in the Statement of Operations.

franklintempleton.com Annual Report         31

FRANKLIN MUTUAL SERIES FUNDS

NOTES TO FINANCIAL STATEMENTS

Franklin Mutual International Fund (continued)

6.  Income Taxes

For tax purposes, capital losses may be carried over to offset future capital gains.

At December 31, 2019, the capital loss carryforwards were as follows:

Capital loss carryforwards not subject to expiration:
Short term	$	380,285
Long term		8,303,435
Total capital loss carryforwards	$	8,683,720

For tax purposes, the Fund may elect to defer any portion of a post-October capital loss or late-year ordinary loss to the first day of the following fiscal year. At December 31, 2019, the Fund deferred late-year ordinary losses of $40,094.

The tax character of distributions paid during the years ended December 31, 2019 and 2018, was as follows:

	2019		2018
Distributions paid from:
Ordinary income	$	2,846,811	$	2,390,052
Long term capital gain		278,185		1,002,381
	$	3,124,996	$	3,392,433

At December 31, 2019, the cost of investments and net unrealized appreciation (depreciation) for income tax purposes were as follows:

Cost of investments	$	105,179,827
Unrealized appreciation	$	9,082,492
Unrealized depreciation		(15,086,101)
Net unrealized appreciation (depreciation)	$	(6,003,609)

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 passive foreign investment company shares.

7.  Investment Transactions

Purchases and sales of investments (excluding short term securities) for the year ended December 31, 2019, aggregated $12,569,736 and $60,806,629, respectively.

8.  Concentration of Risk

Investing in foreign securities may include certain risks and considerations not typically associated with investing in U.S. securities, such as fluctuating currency values and changing local, regional and global economic, political and social conditions, which may result in greater market volatility. Current political and financial uncertainty surrounding the European Union may increase market volatility and the economic risk of investing in securities in Europe. In addition, certain foreign securities may not be as liquid as U.S. securities.

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Franklin Mutual International Fund (continued)

9.  Other Derivative Information

At December 31, 2019, 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
Foreign exchange contracts	Variation margin on futures contracts	$          —	Variation margin on futures contracts		$198,061	a
	Unrealized appreciation on OTC forward exchange contracts	371,849	Unrealized depreciation on OTC forward exchange contracts		339,144
Totals		$371,849			$537,205

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

For the year ended December 31, 2019, the effect of derivative contracts in the Statement of Operations was as follows:

Derivative Contracts Not Accounted for as Hedging Instruments	Statement of Operations Location	Net Realized Gain (Loss) for the Year	Statement of Operations Location	Net Change in Unrealized Appreciation (Depreciation) for the Year
	Net realized gain (loss) from:		Net change in unrealized appreciation (depreciation) on:
Foreign exchange contracts	Forward exchange contracts	$1,922,383	Forward exchange contracts		$   (857,492)
	Futures contracts	1,001,804	Futures contracts		(212,193)
Totals		$2,924,187			$(1,069,685)

For the year ended December 31, 2019, the average month end notional amount of futures contracts represented $23,331,352. The average month end contract value of forward exchange contracts was $71,605,661.

See Note 1(c) regarding derivative financial instruments.

10.  Upcoming Acquisitions/Reorganization

On July 16, 2019, the Board approved a proposal to reorganize the Fund with and into Franklin Mutual Global Discovery Fund (Surviving Fund). On December 6, 2019, shareholders of the Fund approved the proposal. Upon completion of the reorganization on or about February 21, 2020, assets in the Fund will be transferred into the Surviving Fund.

11.  Credit Facility

The Fund, together with other U.S. registered and foreign investment funds (collectively, Borrowers), managed by Franklin Templeton, are borrowers in a joint syndicated senior unsecured credit facility totaling $2 billion (Global Credit Facility) which matured on February 7, 2020. This Global Credit Facility provides a source of funds to the Borrowers for temporary and emergency purposes, including the ability to meet future unanticipated or unusually large redemption requests. Effective February 7, 2020, the Borrowers renewed the Global Credit Facility for a one year term, maturing February 5, 2021, for a total of $2 billion.

franklintempleton.com Annual Report         33

FRANKLIN MUTUAL SERIES FUNDS

NOTES TO FINANCIAL STATEMENTS

Franklin Mutual International Fund (continued)

11.  Credit Facility (continued)

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 year ended December 31, 2019, the Fund did not use the Global Credit Facility.

12.  Fair Value Measurements

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

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

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

• 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 December 31, 2019, in valuing the Fund’s assets and liabilities carried at fair value, is as follows:

	Level 1		Level 2		Level 3		Total
Assets:
Investments in Securities:a
Equity Investmentsb	$	92,841,547	$	—	$	—	$	92,841,547
Short Term Investments		899,573		5,600,000		—		6,499,573
Total Investments in Securities	$	93,741,120	$	5,600,000	$	—	$	99,341,120
Other Financial Instruments:
Forward Exchange Contracts	$	—	$	371,849	$	—	$	371,849
Liabilities:
Other Financial Instruments:
Futures Contracts	$	198,061	$	—	$	—	$	198,061
Forward Exchange Contracts		—		339,144		—		339,144
Total Other Financial Instruments	$	198,061	$	339,144	$	—	$	537,205

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

^bIncludes common and preferred stocks.

13.  Subsequent Events

The Fund has evaluated subsequent events through the issuance of the financial statements and determined that no events have occurred that require disclosure other than those already disclosed in the financial statements.

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NOTES TO FINANCIAL STATEMENTS

Franklin Mutual International Fund (continued)

Abbreviations

Counterparty		Currency		Selected Portfolio
BOFA	Bank of America Corp.	EUR	Euro	ADR	American Depositary Receipt
BONY	The Bank of New York Mellon Corp.	GBP	British Pound	FHLB	Federal Home Loan Bank
HSBK	HSBC Bank PLC	USD	United States Dollar
SSBT	State Street Bank and Trust Co., N.A.
UBSW	UBS AG

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Report of Independent Registered Public Accounting Firm

To the Board of Trustees of Franklin Mutual Series Funds and Shareholders of Franklin Mutual International Fund:

Opinion on the Financial Statements

We have audited the accompanying statement of assets and liabilities of Franklin Mutual International Fund (the “Fund”) (one of the funds constituting Franklin Mutual Series Funds), including the schedule of investments, as of December 31, 2019, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, the financial highlights for each of the five years in the period then ended and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of Franklin Mutual International Fund (one of the funds constituting Franklin Mutual Series Funds) at December 31, 2019, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and its financial highlights for each of the five years in the period then ended, in conformity with U.S. generally accepted accounting principles.

Basis for Opinion

These financial statements are the responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (‘‘PCAOB’’) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Fund is not required to have, nor were we engaged to perform, an audit of the Fund’s internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Fund’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of December 31, 2019, by correspondence with the custodian and brokers. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

We have served as the auditor of one or more Franklin investment companies since 1987.

Boston, Massachusetts

February 21, 2020

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Franklin Mutual International Fund

Tax Information (unaudited)

Under Section 852(b)(3)(C) of the Internal Revenue Code, the Fund hereby reports the maximum amount allowable but no less than $278,185 as a long term capital gain dividend for the fiscal year ended December 31, 2019.

Under Section 854(b)(1)(B) of the Internal Revenue Code, the Fund hereby reports the maximum amount allowable but no less than $3,992,580 as qualified dividends for purposes of the maximum rate under Section 1(h)(11) of the Internal Revenue Code for the fiscal year ended December 31, 2019. Distributions, including qualified dividend income, paid during calendar year 2019 will be reported to shareholders on Form 1099-DIV by mid-February 2020. Shareholders are advised to check with their tax advisors for information on the treatment of these amounts on their individual income tax returns.

At December 31, 2019, more than 50% of the Fund’s total assets were invested in securities of foreign issuers. In most instances, foreign taxes were withheld from income paid to the Fund on these investments. As shown in the table below, the Fund hereby reports to shareholders the foreign source income and foreign taxes paid, pursuant to Section 853 of the Internal Revenue Code. This written statement will allow shareholders of record on December 19, 2019, to treat their proportionate share of foreign taxes paid by the Fund as having been paid directly by them. The shareholder shall consider these amounts as foreign taxes paid in the tax year in which they receive the Fund distribution.

The following table provides a detailed analysis of foreign tax paid, foreign source income and foreign source qualified dividends as reported by the Fund, to Class Z, Class A, Class C, Class R and Class R6 shareholders of record.

Class	Foreign Tax Paid Per Share		Foreign Source Income Per Share		Foreign Source Qualified Dividends Per Share
Class Z		$0.0593		$0.5288		$0.4324
Class A		$0.0593		$0.4955		$0.4052
Class C		$0.0593		$0.3794		$0.3102
Class R		$0.0593		$0.4538		$0.3709
Class R6		$0.0593		$0.5504		$0.4499

Foreign Tax Paid Per Share is the amount per share available to you, as a tax credit (assuming you held your shares in the Fund for a minimum of 16 days during the 31-day period beginning 15 days before the ex-dividend date of the Fund’s distribution to which the foreign taxes relate), or, as a tax deduction.

Foreign Source Income Per Share is the amount per share of income dividends attributable to foreign securities held by the Fund, plus any foreign taxes withheld on these dividends. The amounts reported include foreign source qualified dividends that have not been adjusted for the rate differential applicable to such dividend income.¹

Foreign Source Qualified Dividends Per Share is the amount per share of foreign source qualified dividends plus any foreign taxes withheld on these dividends. These amounts represent the portion of the Foreign Source Income Per Share that were derived from qualified foreign securities held by the Fund.¹

At the beginning of each calendar year, shareholders will receive Form 1099-DIV which will include their share of taxes paid and foreign source income distributed during the prior calendar year. The Foreign Source Income reported on Form 1099-DIV has not been adjusted for the rate differential on foreign source qualified dividend income. Shareholders are advised to check with their tax advisors for information on the treatment of these amounts on their individual income tax returns.

¹Qualified dividends are taxed at reduced long term capital gains tax rates. In determining the amount of foreign tax credit that may be applied against the U.S. tax liability of individuals receiving foreign source qualified dividends, adjustments may be required to the foreign tax credit limitation calculation to reflect the rate differential applicable to such dividend income. The rules however permit certain individuals to elect not to apply the rate differential adjustments for capital gains and/or dividends for any taxable year. Please consult your tax advisor and the instructions to Form 1116 for more information.

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Board Members and Officers

The name, year of birth and address of the officers and board members, as well as their affiliations, positions held with the Trust, principal occupations during at least the past five years and number of U.S. registered portfolios overseen in the Franklin Templeton fund complex, are shown below. Generally, each board member serves until that person’s successor is elected and qualified.

Independent Board Members

Name, Year of Birth and Address	Position	Length of Time Served	Number of Portfolios in Fund Complex Overseen by Board Member*	Other Directorships Held During at Least the Past 5 Years
Edward I. Altman, Ph.D. (1941) c/o Franklin Mutual Advisers, LLC 101 John F. Kennedy Parkway Short Hills, NJ 07078-2716	Trustee	Since 1987	12	None
Principal Occupation During at Least the Past 5 Years:
Max L. Heine Professor of Finance, Emeritus and Director of The Credit and Debt Markets Research Program, Salomon Center, Stern School of Business, New York University; editor and author of numerous financial publications; financial consultant; an adviser to numerous financial and publishing organizations; and formerly, Vice Director, Salomon Center, Stern School of Business, New York University.
Ann Torre Bates (1958) c/o Franklin Mutual Advisers, LLC 101 John F. Kennedy Parkway Short Hills, NJ 07078-2716	Trustee and Chairperson	Trustee since 1995 and Chairperson since January 2020	33	Ares Capital Corporation (specialty finance company) (2010-present), United Natural Foods, Inc. (distributor of natural, organic and specialty foods) (2013-present), Allied Capital Corporation (financial services) (2003-2010), SLM Corporation (Sallie Mae) (1997-2014) and Navient Corporation (loan management, servicing and asset recovery) (2014-2016).
Principal Occupation During at Least the Past 5 Years:
Director of various companies; and formerly, Executive Vice President and Chief Financial Officer, NHP Incorporated (manager of multifamily housing) (1995-1997); and Vice President and Treasurer, US Airways, Inc. (until 1995).
Burton J. Greenwald (1929) c/o Franklin Mutual Advisers, LLC 101 John F. Kennedy Parkway Short Hills, NJ 07078-2716	Trustee	Since 2002	12	Franklin Templeton Emerging Markets Debt Opportunities Fund PLC (1999-present) and Fiduciary International Ireland Limited (1999-2015).
Principal Occupation During at Least the Past 5 Years:
Managing Director, B.J. Greenwald Associates (management consultants to the financial services industry); and formerly, Chairman, Fiduciary Trust International Funds; Executive Vice President, L.F. Rothschild Fund Management, Inc.; President and Director, Merit Mutual Funds; President, Underwriting Division and Director, National Securities & Research Corporation; Governor, Investment Company Institute; and Chairman, ICI Public Information Committee.
Jan Hopkins Trachtman (1947) c/o Franklin Mutual Advisers, LLC 101 John F. Kennedy Parkway Short Hills, NJ 07078-2716	Trustee	Since 2009	12	FinTech Acquisition Corp. III (special purpose fintech acquisition company) (2018-present)
Principal Occupation During at Least the Past 5 Years:
President and Founder, The Jan Hopkins Group (communications consulting firm); serves on Alumni Advisory Board of Knight Bagehot Fellowship; and formerly, President, Economic Club of New York (2007-2015); Anchor/Correspondent, CNN Financial News (until 2003); Managing Director and Head of Client Communications, Citigroup Private Bank (until 2005); Off-Air reporter, ABC News’ World News Tonight; and Editor, CBS Network News.

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Independent Board Members (continued)

Name, Year of Birth and Address	Position	Length of Time Served	Number of Portfolios in         Fund Complex Overseen          by Board Member*		Other Directorships Held During at Least the Past 5 Years
Keith Mitchell (1954) c/o Franklin Mutual Advisers, LLC 101 John F. Kennedy Parkway Short Hills, NJ 07078-2716	Trustee	Since 2009		12	None
Principal Occupation During at Least the Past 5 Years:
Director of various boards of asset management firms; and formerly, Managing Member, Mitchell, Hartley & Bechtel Advisers, LLC (formerly, Mitchell Advisers, LLC) (advisory firm) (2003-2015) and Managing Director, Putman Lovell NBF.
David W. Niemiec (1949) c/o Franklin Mutual Advisers, LLC 101 John F. Kennedy Parkway Short Hills, NJ 07078-2716	Trustee	Since 2015		33	Hess Midstream LP (oil and gas midstream infrastructure) (2017-present).
Principal Occupation During at Least the Past 5 Years:
Advisor, Saratoga Partners (private equity fund); and formerly, Managing Director, Saratoga Partners (1998-2001) and SBC Warburg Dillon Read (investment banking) (1997-1998); Vice Chairman, Dillon, Read & Co. Inc. (investment banking) (1991-1997); and Chief Financial Officer, Dillon, Read & Co. Inc. (1982-1997).
Charles Rubens II (1930) c/o Franklin Mutual Advisers, LLC 101 John F. Kennedy Parkway Short Hills, NJ 07078-2716	Trustee	Since 1998		12	None
Principal Occupation During at Least the Past 5 Years:
Private investor and president of non-profit organizations; and formerly, an executive of Time, Inc.; and Trustee of Colorado College.
Robert E. Wade (1946) c/o Franklin Mutual Advisers, LLC 101 John F. Kennedy Parkway Short Hills, NJ 07078-2716	Trustee	Since 1991		33	El Oro Ltd (investments) (2003-2019).
Principal Occupation During at Least the Past 5 Years:
Attorney at law engaged in private practice as a sole practitioner (1972-2008) and member of various boards.
Gregory H. Williams (1943) c/o Franklin Mutual Advisers, LLC 101 John F. Kennedy Parkway Short Hills, NJ 07078-2716	Trustee	Since 2015		12	None
Principal Occupation During at Least the Past 5 Years:
Private investor; Consultant; and formerly, President, University of Cincinnati (2009-2012); President, The City College of New York (2001-2009); Dean, College of Law, Ohio State University (1993-2001); and Associate Vice President, Academic Affairs and Professor of Law, University of Iowa (1977-1993).
Interested Board Members and Officers
Name, Year of Birth and Address	Position	Length of Time Served	Number of Portfolios in         Fund Complex Overseen         by Board Member*		Other Directorships Held During at Least the Past 5 Years
**Gregory E. Johnson (1961) One Franklin Parkway San Mateo, CA 94403-1906	Trustee	Since 2007		144	None
Principal Occupation During at Least the Past 5 Years:
Chairman of the Board, Member – Office of the Chairman, Director and Chief Executive Officer, Franklin Resources, Inc.; officer and/or director or trustee, as the case may be, of some of the other subsidiaries of Franklin Resources, Inc. and of 39 of the investment companies in Franklin Templeton; Vice Chairman, Investment Company Institute; and formerly, President, Franklin Resources, Inc. (1994-2015).

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Interested Board Members and Officers (continued)

Name, Year of Birth and Address	Position	Length of Time Served	Number of Portfolios in Fund Complex Overseen by Board Member*	Other Directorships Held During at Least the Past 5 Years
**Peter A. Langerman (1955) c/o Franklin Mutual Advisers, LLC 101 John F. Kennedy Parkway Short Hills, NJ 07078-2716	Trustee, President, and Chief Executive Officer – Investment Management	Trustee since 2007, President, and Chief Executive Officer – Investment Management since 2005	7	None
Principal Occupation During at Least the Past 5 Years:
Chairman of the Board, Chief Executive Officer and President, Franklin Mutual Advisers, LLC; and officer and/or director, as the case may be, of three of the investment companies in Franklin Templeton.
Alison E. Baur (1964) One Franklin Parkway San Mateo, CA 94403-1906	Vice President	Since 2012	Not Applicable	Not Applicable
Principal Occupation During at Least the Past 5 Years:
Deputy General Counsel, Franklin Templeton; and officer of some of the other subsidiaries of Franklin Resources, Inc. and of 41 of the investment companies in Franklin Templeton.
Breda M. Beckerle (1958) 280 Park Avenue New York, NY 10017	Interim Chief Compliance Officer	Since January 2020	Not Applicable	Not Applicable
Principal Occupation During at Least the Past 5 Years:
Chief Compliance Officer, Fiduciary Investment Management International, Inc., Franklin Advisers, Inc., Franklin Advisory Services, LLC, Franklin Mutual Advisers, LLC, Franklin Templeton Institutional, LLC; and officer of 41 of the investment companies in Franklin Templeton.
Steven J. Gray (1955) One Franklin Parkway San Mateo, CA 94403-1906	Vice President and Secretary	Vice President since 2009 and Secretary since 2005	Not Applicable	Not Applicable
Principal Occupation During at Least the Past 5 Years:
Senior Associate General Counsel, Franklin Templeton; Vice President, Franklin Templeton Distributors, Inc. and FASA, LLC; and officer of 41 of the investment companies in Franklin Templeton.
Matthew T. Hinkle (1971) One Franklin Parkway San Mateo, CA 94403-1906	Chief Executive Officer – Finance and Administration	Since 2017	Not Applicable	Not Applicable
Principal Occupation During at Least the Past 5 Years:
Senior Vice President, Franklin Templeton Services, LLC; officer of 41 of the investment companies in Franklin Templeton; and formerly,Vice President, Global Tax (2012-April 2017) and Treasurer/Assistant Treasurer, Franklin Templeton (2009-2017).
Robert G. Kubilis (1973) 300 S.E. 2nd Street Fort Lauderdale, FL 33301-1923	Chief Financial Officer, Chief Accounting Officer and Treasurer	Since 2012	Not Applicable	Not Applicable
Principal Occupation During at Least the Past 5 Years:
Treasurer, U.S. Fund Administration & Reporting; and officer of 15 of the investment companies in Franklin Templeton.

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Interested Board Members and Officers (continued)

Name, Year of Birth and Address	Position	Length of Time Served	Number of Portfolios in Fund Complex Overseen by Board Member*	Other Directorships Held During at Least the Past 5 Years
Robert Lim (1948) One Franklin Parkway San Mateo, CA 94403-1906	Vice President – AML Compliance	Since 2016	Not Applicable	Not Applicable
Principal Occupation During at Least the Past 5 Years:
Vice President, Franklin Templeton Companies, LLC; Chief Compliance Officer, Franklin Templeton Distributors, Inc. and Franklin Templeton Investor Services, LLC; and officer of 44 of the investment companies in Franklin Templeton Investments.
Navid J. Tofigh (1972) One Franklin Parkway San Mateo, CA 94403-1906	Vice President	Since 2015	Not Applicable	Not Applicable
Principal Occupation During at Least the Past 5 Years:
Associate General Counsel; and officer of 41 of the investment companies in Franklin Templeton.
Craig S. Tyle (1960) One Franklin Parkway San Mateo, CA 94403-1906	Vice President	Since 2005	Not Applicable	Not Applicable
Principal Occupation During at Least the Past 5 Years:
General Counsel and Executive Vice President, Franklin Resources, Inc.; and officer of some of the other subsidiaries of Franklin Resources, Inc. and of 41 of the investment companies in Franklin Templeton.
Lori A. Weber (1964) 300 S.E. 2nd Street Fort Lauderdale, FL 33301-1923	Vice President	Since 2011	Not Applicable	Not Applicable
Principal Occupation During at Least the Past 5 Years:
Senior Associate General Counsel, Franklin Templeton; Assistant Secretary, Franklin Resources, Inc.; Vice President and Secretary, Templeton Investment Counsel, LLC; and officer of 41 of the investment companies in Franklin Templeton.

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*We base the number of portfolios on each separate series of the U.S. registered investment companies within the Franklin Templeton Investments fund complex. These portfolios have a common investment manager or affiliated investment managers.

**Gregory E. Johnson is considered to be an interested person of the Fund under the federal securities laws due to his position as an officer and director of Franklin Resources, Inc. (Resources), which is the parent company of the Fund’s investment manager and distributor. Peter A. Langerman is considered to be an interested person of the Fund under the federal securities laws due to his position as an officer of Franklin Mutual Advisers, LLC, which is the Fund’s investment manager.

Note 1: Officer information is current as of the date of this report. It is possible that after this date, information about officers may change.

The Sarbanes-Oxley Act of 2002 and Rules adopted by the U.S. Securities and Exchange Commission require the Fund to disclose whether the Fund’s Audit Committee includes at least one member who is an audit committee financial expert within the meaning of such Act and Rules. The Fund’s Board has determined that there is at least one such financial expert on the Audit Committee and has designated each of Edward I. Altman, Ph.D., Ann Torre Bates and David W. Niemiec as an audit committee financial expert. The Board believes that Messrs. Altman and Niemiec and Ms. Bates qualify as such an expert in view of their extensive business background and experience. Mr. Altman has served as a member of the Fund Audit Committee since 1987. He currently serves as a Max L. Hine Professor of Finance, Emeritus and Director of The Credit and Debt Markets Research Program, Salomon Center, Stern School of Business, New York University. Ms. Bates has served as a member of the Fund Audit Committee since 1995. She currently serves as a director of Ares Capital Corporation (2010-present) and United Natural Foods, Inc. (2013-present) and was formerly a director of Navient Corporation from 2014 to 2016, SLM Corporation from 1997 to 2014 and Allied Capital Corporation from 2003 to 2010, Executive Vice President and Chief Financial Officer of NHP Incorporated from 1995 to 1997 and Vice President and Treasurer of US Airways, Inc. until 1995. Mr. Niemiec has served as a member of the Fund Audit Committee since 2015, currently serves as an Advisor to Saratoga Partners and was formerly its Managing Director from 1998 to 2001 and serves as a director of Hess Midstream LP (2017-present). Mr. Niemiec was formerly a director of Emeritus Corporation from 1999 to 2010 and OSI Pharmaceuticals, Inc. from 2006 to 2010, Managing Director of SBC Warburg Dillon Read from 1997 to 1998, and was Vice Chairman from 1991 to 1997 and Chief Financial Officer from 1982 to 1997 of Dillon, Read & Co. Inc. As a result of such background and experience, the Board believes that Messrs. Altman and Niemiec and Ms. Bates have each acquired an understanding of generally accepted accounting principles and financial statements, the general application of such principles in connection with the accounting estimates, accruals and reserves, and analyzing and evaluating financial statements that present a breadth and level of complexity of accounting issues generally comparable to those of the Fund, as well as an understanding of internal controls and procedures for financial reporting and an understanding of audit committee functions. Messrs. Altman and Niemiec and Ms. Bates are independent Board members as that term is defined under the applicable U.S. Securities and Exchange Commission Rules and Releases.

The Statement of Additional Information (SAI) includes additional information about the board members and is available, without charge, upon request. Shareholders may call (800) DIAL BEN/342-5236 to request the SAI.

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FRANKLIN MUTUAL INTERNATIONAL FUND

Shareholder Information

Proxy Voting Policies and Procedures

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

Quarterly Statement of Investments

The Trust, on behalf of the Fund, files a complete statement of investments with the U.S. Securities and Exchange Commission for the first and third quarters for each fiscal year 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 the Fund’s financial reports every six months as well as an annual updated summary prospectus (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 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.

	Annual Report and Shareholder Letter Franklin Mutual International Fund
	Investment Manager	Distributor	Shareholder Services
	Franklin Mutual Advisers, LLC	Franklin Templeton Distributors, Inc. (800) DIAL BEN® / 342-5236 franklintempleton.com	(800) 632-2301 - (Class A, C, R & R6) (800) 448-FUND - (Class Z)

© 2020 Franklin Templeton Investments. All rights reserved. 373 A 02/20

Item 2. Code of Ethics.

(a) The Registrant has adopted a code of ethics that applies to its principal executive officers and principal financial and accounting officer.

(c) N/A

(d) N/A

(f) Pursuant to Item 13(a)(1), the Registrant is attaching as an exhibit a copy of its code of ethics that applies to its principal executive officers and principal financial and accounting officer.

Item 3. Audit Committee Financial Expert.

(a)(1) The Registrant has an audit committee financial expert serving on its audit committee.

(2) The audit committee financial experts are Edward I. Altman, Ann Torre Bates and David W. Niemiec and they are “independent” as defined under the relevant Securities and Exchange Commission Rules and Releases.

Item 4. Principal Accountant Fees and Services.

(a)    Audit Fees

The aggregate fees paid to the principal accountant for professional services rendered by the principal accountant for the audit of the registrant’s annual financial statements or for services that are normally provided by the principal accountant in connection with statutory and regulatory filings or engagements were $466,362 for the fiscal year ended December 31, 2019 and $457,217 for the fiscal year ended December 31, 2018.

(b)    Audit-Related Fees

There were no fees paid to the principal accountant for assurance and related services rendered by the principal accountant to the registrant that are reasonably related to the performance of the audit of the registrant’s financial statements and are not reported under paragraph (a) of Item 4.

There were no fees paid to the principal accountant for assurance and related services rendered by the principal accountant to the registrant’s investment adviser and any entity controlling, controlled by or under common control with the investment adviser that provides ongoing services to the registrant that are reasonably related to the performance of the audit of their financial statements.

(c)    Tax Fees

The aggregate fees paid to the principal accountant for professional services rendered by the principal accountant to the registrant for tax compliance, tax advice and tax planning were $22,310 the fiscal year ended December 31, 2019 and $20,026 for the fiscal year ended December 31, 2018. The services for which these fees were paid included identifying passive foreign investment companies to manage exposure to tax liabilities and India tax compliance services.

The aggregate fees paid to the principal accountant for professional services rendered by the principal accountant to the registrant’s investment adviser and any entity controlling, controlled by or under common control with the investment adviser that provides ongoing services to the registrant for tax compliance, tax advice and tax planning were $70,000 for the fiscal year ended December 31, 2019 and $70,000 for the fiscal year ended December 31, 2018. The services for which these fees were paid included technical tax consultation for withholding tax report to foreign governments, application of local country tax laws and tax advice.

(d)    All Other Fees

The aggregate fees paid to the principal accountant for products and services rendered by the principal accountant to the registrant not reported in paragraphs (a)-(c) of Item 4 were $0 for the fiscal year ended December 31, 2019 and $25,000 for the fiscal year ended December 31, 2018. The services for which these fees were paid included additional procedures performed as a result of a material weakness identified during the 2017 audit.

There were no fees paid to the principal accountant for products and services rendered by the principal accountant to the registrant’s investment adviser and any entity controlling, controlled by or under

common control with the investment adviser that provides ongoing services to the registrant other than the services reported in paragraphs (a)-(c) of Item 4.    

(e) (1) The registrant’s audit committee is directly responsible for approving the services to be provided by the auditors, including:

(i)    pre-approval of all audit and audit related services;

(ii)    pre-approval of all non-audit related services to be provided to the Fund by the auditors;

(iii)    pre-approval of all non-audit related services to be provided to the registrant by the auditors to the registrant’s investment adviser or to any entity that controls, is controlled by or is under common control with the registrant’s investment adviser and that provides ongoing services to the registrant where the non-audit services relate directly to the operations or financial reporting of the registrant; and

(iv)    establishment by the audit committee, if deemed necessary or appropriate, as an alternative to committee pre-approval of services to be provided by the auditors, as required by paragraphs (ii) and (iii) above, of policies and procedures to permit such services to be pre-approved by other means, such as through establishment of guidelines or by action of a designated member or members of the committee; provided the policies and procedures are detailed as to the particular service and the committee is informed of each service and such policies and procedures do not include delegation of audit committee responsibilities, as contemplated under the Securities Exchange Act of 1934, to management; subject, in the case of (ii) through (iv), to any waivers, exceptions or exemptions that may be available under applicable law or rules.

(e) (2) None of the services provided to the registrant described in paragraphs (b)-(d) of Item 4 were approved by the audit committee pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of regulation S-X.

(f)     No disclosures are required by this Item 4(f).

(g) The aggregate non-audit fees paid to the principal accountant for services rendered by the principal accountant to the registrant and the registrant’s investment adviser and any entity controlling, controlled by or under common control with the investment adviser that provides ongoing services to the registrant were $92,310 for the fiscal year ended December 31, 2019 and $115,026 for the fiscal year ended December 31, 2018.

(h) The registrant’s audit committee of the board has considered whether the provision of non-audit services that were rendered to the registrant’s investment adviser (not including any sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser), and any entity controlling, controlled by, or under common control with the investment adviser that provides ongoing services to the registrant that were not pre-approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X is compatible with maintaining the principal accountant’s independence.

Item 5. Audit Committee of Listed Registrants.        N/A

Item 6. Schedule of Investments.        N/A

Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies.        N/A

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

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

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

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

Item 11. Controls and Procedures.

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

Within 90 days prior to the filing date of this Shareholder Report on Form N-CSR, the Registrant had carried out an evaluation, under the supervision and with the participation of the Registrant’s management, including the Registrant’s principal executive officer and the Registrant’s principal financial officer, of the effectiveness of the design and operation of the Registrant’s disclosure controls and procedures. Based on such evaluation, the Registrant’s principal executive officer and principal financial officer concluded that the Registrant’s disclosure controls and procedures are effective.

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

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

Item 13. Exhibits.

(a)(1) Code of Ethics

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

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

SIGNATURES

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

FRANKLIN MUTUAL SERIES FUNDS
By	S\MATTHEW T. HINKLE
	Matthew T. Hinkle
	Chief Executive Officer – Finance and Administration
Date	February 28, 2020

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

By	S\MATTHEW T. HINKLE
	Matthew T. Hinkle
	Chief Executive Officer – Finance and Administration
Date	February 28, 2020
By	S\ROBERT G. KUBILIS
	Robert G. Kubilis
	Chief Financial Officer and Chief Accounting Officer
Date	February 28, 2020