N-CSR 1 primary-document.htm
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:  12/31/20
 
Item 1. Reports to Stockholders.
 
a.)
 
The following is a copy of the report transmitted to shareholders pursuant to Rule30e-1 under the Investment Company Act of 1940, as amended (the “1940 Act”) (17 CFR 270.30e-1.)


b.)
 
A copy of the notice transmitted to shareholders in reliance on Rule 30e-3 under the 1940 Act that contains disclosures specified by paragraph (c)(3) of that rule is included in the Annual Report. Not Applicable.
 
 
Annual
Report
and
Shareholder
Letter
Franklin
Mutual
European
Fund
A
Series
of
Franklin
Mutual
Series
Funds
December
31,
2020
Sign
up
for
electronic
delivery
at
franklintempleton.com/edelivery
Not
FDIC
Insured
May
Lose
Value
No
Bank
Guarantee
franklintempleton.com
Not
part
of
the
annual
report
1
SHAREHOLDER
LETTER
Dear
Franklin
Mutual
European
Fund
Shareholder:
2020
was
a
year
that
felt
like
it
contained
several
different
years
within
it.
There
were
periods
of
stability
and
dramatic
moves
down
and
up
in
financial
markets.
For
those
of
us
who
lived
through
it,
2020
was
chaotic
and
memorable.
The
year
ended
with
surging
stock
prices
despite
an
ongoing
pandemic.
If
one
had
gone
to
sleep
on
December
31,
2019,
and
woke
up
on
December
31,
2020,
a
quick
glance
at
the
MSCI
World
Index
(USD),
which
was
up
+16.50%
for
the
12
months,
might
cause
one
to
think
this
was
just
another
good
year
in
a
long
bull
market.
1
Much
of
this
performance
was
driven
by
a
few
mega
capitalization
U.S.
technology
stocks.
However,
U.S.
technology
stocks
are
not
a
large
part
of
European
equity
markets,
which
produced
a
range
of
positive
to
slightly
negative
returns
for
the
year,
according
to
MSCI
indices.
The
year
began
with
a
continuation
of
trends
from
2019.
Accommodative
central
bank
policy
was
supporting
a
resilient
economy,
which
displayed
modest
growth.
Then
COVID-19
exploded
from
a
regional
issue
into
a
global
pandemic.
The
response
to
the
spread
of
the
virus
was
lockdown
and
physical
distancing
measures
in
attempts
to
flatten
the
curve
of
the
contagion.
Consumer
and
business
spending
fell,
and
manufacturing
and
other
activity
came
to
a
virtual
halt.
This
led
to
a
dramatic
share
price
plunge
in
equity
markets.
In
response,
governments
acted
directly
through
fiscal
policy
and
central
banks,
using
a
whatever-it-takes
approach
to
stabilize
economies.
The
efforts
worked
and
were
reflected
by
market
stabilization
and
the
beginning
of
a
recovery
in
prices.
Markets
continued
to
rally
in
the
second
half
of
the
year
on
signs
of
global
economic
resilience
despite
widespread
shutdowns.
Investor
sentiment
was
buoyed
by
hopes
for
continued
stimulus
measures
and
very
positive
developments
on
the
vaccine
front.
Valuations
were
also
supported
by
investors’
willingness
to
look
through
the
current
situation
to
2021
and
beyond,
when
widespread
vaccinations
are
expected
to
become
available
and
reignite
global
economies.
During
the
year,
there
was
significant
market
volatility
and
continued
variance
between
the
performance
of
growth
equities
and
value
equities.
Many
growth
stocks
benefited
from
the
changes
in
work
and
life
caused
by
the
pandemic
and
continued
to
grow
during
the
year.
As
a
result,
the
MSCI
Europe
Growth
Index
(USD)
ended
the
year
up
+15.88%,
while
the
MSCI
Europe
Value
Index
(USD)
recovered
from
the
spring
selloff,
but
trailed
its
growth
counterpart,
ending
the
year
down
-4.47%
for
the
12
months
ended
December
31,
2020.
1
Market
volatility
and
economic
uncertainty
can
often
present
what
we
consider
opportunities.
During
periods
of
market
fluctuation,
we
used
our
bottom-up,
fundamentally
driven
investment
process
to
add
select
positions
to
the
portfolio
that
historically
had
not
met
our
investment
criteria.
However,
given
the
decline
in
price,
these
stocks
were
now,
in
our
opinion,
attractively
valued.
We
also
moved
capital
between
existing
positions
to
reflect
market
shifts.
We
were
encouraged
to
see
value
equities
do
quite
well
in
the
fourth
quarter
on
both
an
absolute
and
relative
basis.
Our
expectation
is
that
earnings
will
continue
to
improve
for
the
overall
market
as
2021
progresses
and
COVID
vaccinations
allow
for
accelerated
reopening
of
the
global
economy.
We
would
expect
many
of
our
value
holdings
to
benefit
from
such
a
scenario.
It
is
important
to
remember
that
the
market
historically
rewards
investors
who
take
a
long-term
perspective.
To
that
end,
we
recognize
the
importance
of
financial
advisors
in
today’s
markets
and
encourage
investors
to
continue
to
seek
their
advice.
Amid
changing
markets
and
economic
conditions,
we
are
confident
investors
with
a
well-diversified
portfolio
and
a
patient,
long-term
outlook
should
be
well-positioned
for
the
years
ahead.
This
is
my
first
letter
to
you
as
president
and
chief
investment
officer
of
Franklin
Mutual
Series.
I
have
been
director
of
research
and
a
portfolio
manager
for
Franklin
Mutual
Series
since
January
2010
and
have
worked
with
Peter
Langerman,
chairman
and
chief
executive
officer
of
Franklin
Mutual
Series,
to
steward
the
platform.
I
want
to
thank
Peter
for
his
significant
contributions
and
30+
years
of
dedicated
service
and
leadership.
I
look
forward
to
working
with
Peter
through
mid-2021
to
complete
the
leadership
transition,
and
I
wish
him
the
very
best
in
his
well-deserved
retirement.
1.
Source:
Morningstar.
See
www.franklintempletondatasources.com
for
additional
data
provider
information.
franklintempleton.com
Not
part
of
the
annual
report
2
On
the
following
pages,
the
portfolio
management
team
reviews
investment
decisions
that
pertain
to
performance
during
the
past
12
months
considering
the
economic
environment
and
other
factors.
Please
remember
all
securities
markets
fluctuate,
as
do
mutual
fund
share
prices.
We
thank
you
for
investing
with
Franklin
Templeton,
welcome
your
questions
and
comments,
and
look
forward
to
continuing
to
serve
your
investment
needs
in
the
years
ahead.
Sincerely,
Christian
Correa,
CFA
President
and
Chief
Investment
Officer
Franklin
Mutual
Advisers,
LLC
This
letter
reflects
our
analysis
and
opinions
as
of
December
31,
2020
,
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
21
Notes
to
Financial
Statements
25
Report
of
Independent
Registered
Public
Accounting
Firm
40
Tax
Information
41
Board
Members
and
Officers
42
Shareholder
Information
47
Visit
franklintempleton.com
for
fund
updates,
to
access
your
account,
or
to
find
helpful
financial
planning
tools.
CFA
®
is
a
trademark
owned
by
CFA
Institute.
3
franklintempleton.com
Annual
Report
ANNUAL
REPORT
Franklin
Mutual
European
Fund
This
annual
report
for
Franklin
Mutual
European
Fund
covers
the
fiscal
year
ended
December
31,
2020
.
Your
Fund’s
Goal
and
Main
Investments
The
Fund
seeks
capital
appreciation,
which
may
occasionally
be
short
term.
Its
secondary
goal
is
income.
The
Fund
normally
invests
at
least
80%
of
its
net
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
table
on
this
page
lists
the
leading
European
countries
where
the
Fund
invests.
Performance
Overview
The
Fund’s
Class
Z
shares
posted
a
-6.23%
cumulative
total
return
for
the
12
months
ended
December
31,
2020.
For
comparison,
the
Fund’s
new
primary
benchmark,
the
MSCI
Europe
Value
Index-NR
(Local
Currency),
which
tracks
value
equity
performance
in
Europe’s
developed
markets,
posted
a
-11.37%
total
return,
and
the
Fund’s
new
secondary
benchmark,
the
MSCI
Europe
Value
Index-
NR
(USD),
which
tracks
equity
performance
in
Europe’s
developed
markets,
posted
a
-5.07%
total
return.
1
Also
for
comparison,
the
Fund’s
former
primary
benchmark,
the
MSCI
Europe
Index-NR
(Local
Currency),
posted
a
-2.21%
total
return,
and
the
Fund’s
former
secondary
benchmark,
the
MSCI
Europe
Index-NR
(USD),
posted
a
+5.38%
total
return.
1
The
MSCI
Europe
Value
Index-NR
(Local
Currency)
is
replacing
the
MSCI
Europe
Index-NR
(Local
Currency)
as
the
Fund's
primary
benchmark,
and
the
MSCI
Europe
Value
Index-NR
(USD)
is
replacing
the
MSCI
Europe
Index-NR
(USD)
as
the
Fund's
secondary
benchmark.
The
investment
manager
believes
the
composition
of
the
MSCI
Europe
Value
Index-NR
(Local
Currency)
and
the
MSCI
Europe
Value
Index-NR
(USD)
more
accurately
reflects
the
Fund's
current
investment
strategy
and
portfolio
characteristics.
You
can
find
more
of
the
Fund’s
performance
data
in
the
Performance
Summary
on
page
7
.
Performance
data
represent
past
performance,
which
does
not
guarantee
future
results.
Investment
return
and
principal
value
will
fluctuate,
and
you
may
have
a
gain
or
loss
when
you
sell
your
shares.
Current
performance
may
differ
from
figures
shown.
For
most
recent
month-end
performance,
go
to
franklintempleton.com
or
call
(800)
342-5236
.
Economic
and
Market
Overview
Global
developed
and
emerging
market
equities,
as
measured
by
the
MSCI
All
Country
World
Index
(USD),
posted
a
+16.82%
total
return
for
the
12
months
ended
December
31,
2020.
1
Stocks
fell
sharply
in
early
2020
as
many
investors
sold
equities
amid
fears
of
a
global
economic
slowdown
due
to
the
novel
coronavirus
(COVID-19)
pandemic.
Global
equities
began
to
rebound
in
late
March
2020
amid
optimism
about
economic
stimulus
measures,
easing
lockdown
restrictions,
and
vaccine
and
treatment
development.
Despite
declines
in
September
and
October
due
to
geopolitical
tensions
and
rising
infection
rates,
markets
rebounded
in
November
and
December,
as
positive
sentiment
about
successful
trials
of
COVID-19
vaccines,
the
beginning
of
vaccination
programs
in
some
countries
and
apparent
resolution
of
political
uncertainty
supported
markets.
Geographic
Composition
12/31/20
%
of
Total
Net
Assets
Germany
25.0%
United
Kingdom
24.3%
France
12.3%
Netherlands
11.2%
Switzerland
9.4%
Greece
3.2%
Belgium
2.9%
United
States
2.0%
Spain
1.5%
Sweden
1.5%
Other
0.9%
Short-Term
Investments
&
Other
Net
Assets
5.8%
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.
Net
Returns
(NR)
include
income
net
of
tax
withholding
when
dividends
are
paid.
See
www.franklintempletondatasources.com
for
additional
data
provider
information.
The
dollar
value,
number
of
shares
or
principal
amount,
and
names
of
all
portfolio
holdings
are
listed
in
the
Fund’s
Statement
of
Investments
(SOI).
The
SOI
begins
on
page
16
.
Franklin
Mutual
European
Fund
4
franklintempleton.com
Annual
Report
In
the
eurozone,
the
economy
contracted
again
in
the
fourth
quarter
of
2020,
following
quarter-on-quarter
expansion
in
the
third
quarter
and
contractions
in
the
first
and
second
quarters.
After
several
months
of
gains
due
to
easing
restrictions
and
robust
stimulus
measures,
European
developed
market
equities,
as
measured
by
the
MSCI
Europe
Index
(USD),
declined
in
September
and
October
as
rising
infection
rates
heightened
investor
concerns
that
the
nascent
economic
revival
could
stall.
Nevertheless,
successful
vaccine
development
and
a
Brexit
resolution
supported
European
developed
market
equities,
as
measured
by
the
MSCI
Europe
Index
(USD),
to
post
a
+5.93%
total
return
for
the
period.
1
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.
Our
portfolio
selection
process
generally
includes
an
assessment
of
the
potential
impacts
of
any
material
environmental,
social
and
governance
(ESG)
factors
on
the
long-term
risk
and
return
profile
of
a
company.
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.
Manager’s
Discussion
A
year
ago,
we
reflected
on
a
decade
of
overall
equity
market
strength
and
solid,
but
weaker,
returns
for
our
value
equity
investing
strategy.
2020
turned
out
to
be
an
amplification
of
this
performance
gap,
rather
than
a
correction.
The
year
started
with
a
continuation
of
strong
performance
from
market-darling
growth
stocks.
The
gap
extended
as
COVID-19
led
to
lockdowns
and
people
working
from
home.
The
market
leaders
often
benefited
from
these
changes,
with
technology
tools
being
adopted
more
quickly
than
before.
Meanwhile,
the
lockdowns
and
disruption
severely
impacted
many
companies
thought
of
as
value
stocks.
The
European
Central
Bank
implemented
supportive
monetary
policies
and
automatic
stabilizers
providing
fiscal
support.
Despite
these
measures,
the
recovery
came
slowly
and
only
accelerated
when
the
prospects
of
an
effective
vaccine
helped
markets
understand
when
the
health
crisis
might
be
over.
By
the
end
of
2020,
the
MSCI
Europe
Value
Index
(USD)
was
down
-4.47%
and
the
MSCI
Europe
Growth
Index
(USD)
ended
the
year
up
+15.88%.
1
Despite
the
U.K.
departing
the
European
Union
on
December
31,
2020,
cohesion
in
the
region
improved
throughout
the
year.
Citizens
generally
approve
of
how
their
governments
have
handled
the
pandemic
and
the
European
Recovery
Fund
was
established
to
provide
loans
and
grants
to
countries
hardest
hit
by
the
pandemic.
This
fund
also
enables
common
bond
issuances
by
the
European
Union,
another
step
towards
integration.
As
we
step
back
and
look
at
the
European
region,
we
have
increasingly
seen
signs
of
Europe
taking
a
leadership
position
in
terms
of
its
approach
to
data
privacy
and
protection
of
its
citizens,
the
green
economy
and
its
regulation
of
technology
companies
in
a
drive
to
create
more
competitive,
less
monopolistic
markets.
In
our
opinion,
Europe’s
"man
on
the
moon"
moment
has
finally
arrived.
Our
traditional
value
equity
investment
approach
is
complemented
with
two
other
strategies,
distressed
investing
and
merger
arbitrage.
We
were
active
in
the
latter
strategy
in
2020.
Within
merger
arbitrage,
which
involves
trading
the
stocks
of
companies
involved
in
a
merger
or
acquisition
(M&A),
activity
has
climbed
in
tandem
with
increasing
confidence
about
an
end
to
the
pandemic
crisis.
Significant
new
deals
have
been
announced
and
some
Top
10
Industries
12/31/20
%
of
Total
Net
Assets
a
Insurance
9.1%
Pharmaceuticals
6.8%
Oil,
Gas
&
Consumable
Fuels
6.3%
Diversified
Telecommunication
Services
6.2%
Chemicals
6.2%
Trading
Companies
&
Distributors
6.1%
Construction
Materials
6.0%
Banks
6.0%
Beverages
4.8%
Auto
Components
3.1%
Franklin
Mutual
European
Fund
5
franklintempleton.com
Annual
Report
present
attractive
investment
opportunities.
We
have
seen
an
increase
in
contested
deals,
including
our
investment
in
U.K.-based
security
services
provider
G4S.
We
initially
invested
in
the
stock
as
a
value
equity,
with
the
company
focused
on
restructuring
following
many
legacy
missteps.
Having
put
legacy
issues
behind
it,
the
company
was
able
to
deleverage
its
balance
sheet
following
a
sale
of
the
majority
of
its
cash
solutions
business.
With
a
new
strategy
in
place
to
drive
profitable
growth,
the
company
received
takeover
bids
from
private
companies
Allied
Universal
and
GardaWorld.
Initially,
the
bidders
appeared
to
be
taking
advantage
of
the
company’s
pandemic-related
depressed
stock
price
but
have
subsequently
increased
their
offers.
We
expect
an
ongoing
acceleration
of
M&A
activity
given
a
recovering
economy,
strong
equity
markets,
and
the
hope
for
increasing
regulatory
and
trade
predictability
under
the
incoming
U.S.
administration.
Fund
Performance
Turning
to
Fund
performance,
top
positive
contributors
included
Covestro,
Siemens
and
Anheuser-Busch
Inbev.
Covestro
is
listed
among
the
Fund’s
largest
positions
in
the
Top
10
Holdings
table
on
this
page.
The
stock
price
of
Germany-based
polymer
manufacturer
Covestro
posted
strong
returns
for
the
year,
despite
weakness
related
to
the
company’s
lockdown-induced
price
decline
in
March.
Covestro
cut
its
dividend
in
half
in
May,
in
solidarity
with
employee
pay
cuts,
but
by
summer,
expectations
had
clearly
bottomed
and
began
to
increase.
The
company’s
EBITDA
(earnings
before
interest,
taxes,
depreciation
and
amortization)
guidance
given
in
April
bottomed
at
€700-1200M,
with
consensus
near
the
low
end,
before
increasing
through
the
last
half
of
the
year
to
€1,440-
1500M
as
of
early
December.
Robust
demand
recovery,
strong
cost
control,
and
multiple
industry
outages
drove
the
improved
results.
Despite
an
acquisition
which
required
equity
financing
and
received
mixed
reviews,
a
strong
balance
sheet
and
robust
recovery
from
a
cyclical
bottom
drove
the
company’s
shares
to
more
than
double
from
the
bottom.
Shares
of
Germany-based
industrial
company
Siemens
declined
early
in
the
year
due
to
the
company’s
direct
and
indirect
exposure
to
China’s
economy.
The
shares
rebounded
strongly
as
the
Chinese
economy,
the
first
to
be
shut
down
in
response
to
COVID-19,
led
other
countries
out
of
lockdown.
Siemens’
share
price
also
benefited
from
company
specific
actions
including
the
spinoff
to
shareholders
of
its
energy
division,
a
change
in
chief
executive
officer
and
the
sale
of
one
of
its
portfolio
companies.
Siemens
has
now
completed
a
multi-year
restructuring
that
has
seen
it
spin
off
its
health
care
and
energy
businesses,
reduce
the
size
of
its
corporate
overhead,
and
become
a
focused
industrial
company
with
exposure
to
digital
industries,
smart
infrastructure
and
mobility.
The
price
of
Belgium-based
beverages
company
Anheuser-
Busch
Inbev
fluctuated
early
in
the
year.
After
reporting
fourth-quarter
revenue
growth
which
was
below
consensus,
the
stock
began
a
downward
trend
that
lasted
through
the
March
COVID-related
downturn.
While
the
price
quickly
recovered
off
its
bottom,
first-quarter
results
inspired
additional
price
variation
after
earnings
per
share
fell
short
of
consensus
expectations.
However,
things
began
to
change
as
widespread
lockdowns
went
into
effect.
Demand
for
the
company’s
products
rose,
bringing
sales
volumes
and
earnings
per
share
with
it.
The
second
quarter
brought
above-expected
earnings,
propelling
the
stock
price
upward
after
the
July
announcement.
A
positive
earnings
surprise
again
in
late
October
helped
support
the
stock
price.
The
beverages
company
outperformed
the
broader
market
for
the
year
and
was
among
the
leading
contributors
to
returns.
During
the
period
under
review,
Fund
investments
that
detracted
from
performance
included
Barclays,
Standard
Chartered
and
BP.
After
the
March
decline,
the
stock
of
U.K.-based
banking
company
Barclays
continued
to
fluctuate
throughout
the
remainder
of
2020.
Continued
investor
concerns
over
Brexit
and
pandemic-related
economic
effects
provided
a
headwind
for
the
stock,
as
did
the
industry-wide
suspension
of
dividends
in
April.
Results
for
the
first
half
of
2020
were
Top
10
Holdings
12/31/20
Company
Industry
,
Country
%
of
Total
Net
Assets
a
a
Rexel
SA
3.5%
Trading
Companies
&
Distributors,
France
Novartis
AG
3.5%
Pharmaceuticals,
Switzerland
Covestro
AG
3.4%
Chemicals,
Germany
GlaxoSmithKline
plc
3.3%
Pharmaceuticals,
United
Kingdom
LafargeHolcim
Ltd.
3.2%
Construction
Materials,
Switzerland
Hellenic
Telecommunications
Organization
SA
3.2%
Diversified
Telecommunication
Services,
Greece
Cie
Generale
des
Etablissements
Michelin
SCA
3.1%
Auto
Components,
France
Deutsche
Telekom
AG
3.0%
Diversified
Telecommunication
Services,
Germany
Vossloh
AG
2.9%
Machinery,
Germany
ASR
Nederland
NV
2.9%
Insurance,
Netherlands
Franklin
Mutual
European
Fund
6
franklintempleton.com
Annual
Report
far
less
favorable
than
the
prior
year.
Earnings
per
share
fell
year-over-year,
largely
due
to
elevated
credit
reserves
to
account
for
potential
losses
as
a
result
of
the
COVID-19
pandemic.
With
our
expectations
for
continued
difficulties
given
the
low
interest-rate
environment,
ongoing
pandemic,
and
Brexit,
we
exited
our
position
in
Barclays.
The
stock
of
London-based
banking
and
financial
services
company
Standard
Chartered
fell
in
early
January,
as
COVID-19
began
to
spread
across
parts
of
Asia
and
Europe.
The
uncertain
operating
environment
brought
on
by
the
pandemic,
combined
with
a
low
interest-rate
environment,
created
a
headwind
for
Standard
Chartered’s
operating
profits
during
the
year.
In
addition,
geopolitical
tension
between
the
U.S.
and
China,
pertaining
to
the
Hong
Kong
national
security
law
passed
at
the
end
of
June
and
supported
by
the
business
community,
was
a
source
of
concern.
We
have
also
exited
our
position
in
Standard
Chartered.
U.K.-based
oil
and
gas
company
BP
began
the
year
on
a
positive
note
by
reporting
positive
fourth-quarter
results
and
increasing
its
dividend.
However,
the
stock
price
slid
during
March,
due
in
part
to
cratering
gasoline
demand
caused
by
reduced
commuter
and
business
travel.
The
COVID-19
pandemic
brought
travel
to
a
halt
for
several
months
during
the
period,
putting
downward
pressure
on
the
price
of
oil.
A
pricing
disagreement
between
Russia
and
Saudi
Arabia
exacerbated
the
issue.
BP
responded
to
the
crisis
by
substantially
reducing
its
capital
expenditures.
The
belt-
tightening
continued
as
the
company
cut
jobs
significantly
in
June,
then
cut
its
dividend
in
half.
In
our
opinion,
the
company
used
the
downturn
to
accelerate
changes
already
underway,
positioning
the
company
to
be
a
leader
in
the
energy
transition,
with
ambitious
goals
toward
zero
carbon
emissions.
Nevertheless,
it
may
take
time
to
convince
investors
of
their
ability
to
execute
on
this
transition,
and
the
share
price
continues
to
show
very
little
positive
expectation.
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
negative
overall
impact
on
the
Fund’s
performance
as
the
U.S.
dollar
fell
against
most
currencies
during
the
period.
As
fellow
shareholders,
we
found
recent
absolute
performance
disappointing,
but
our
strategy
of
seeking
undervalued
stocks
can
lag
the
European
growth
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
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,
2020
,
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.
Performance
Summary
as
of
December
31,
2020
Franklin
Mutual
European
Fund
7
franklintempleton.com
Annual
Report
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
12/31/20
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
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
.
Share
Class
Cumulative
Total
Return
1
Average
Annual
Total
Return
2
–
Z
1-Year
-6.23%
-6.23%
5-Year
+15.28%
+2.88%
10-Year
+53.06%
+4.35%
A
3
1-Year
-6.50%
-11.63%
5-Year
+13.79%
+1.47%
10-Year
+48.92%
+3.47%
See
page
9
for
Performance
Summary
footnotes.
Franklin
Mutual
European
Fund
Performance
Summary
8
franklintempleton.com
Annual
Report
See
page
9
for
Performance
Summary
footnotes.
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
(1/1/11–
12/31/20
)
Class
A
(1/1/11–
12/31/20
)
Franklin
Mutual
European
Fund
Performance
Summary
9
franklintempleton.com
Annual
Report
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
uncertainty
concerning
the
economic
consequences
of
the
departure
of
the
U.K.
from
the
European
Union
may
increase
market
volatility.
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.
Unexpected
events
and
their
aftermaths,
such
as
the
spread
of
deadly
diseases;
natural,
environmen-
tal
or
man-made
disasters;
financial,
political
or
social
disruptions;
terrorism
and
war;
and
other
tragedies
or
catastrophes,
can
cause
investor
fear
and
panic,
which
can
adversely
affect
the
economies
of
many
companies,
sectors,
nations,
regions
and
the
market
in
general,
in
ways
that
cannot
necessarily
be
foreseen.
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
MSCI
Europe
Value
Index-NR
(Local
Currency
and
USD)
is
a
market
capitalization-weighted
index
designed
to
measure
the
performance
of
stocks
exhibiting
overall
value
style
characteristics
in
European
developed
markets.
Net
Returns
(NR)
include
income
net
of
tax
withholding
when
dividends
are
paid.
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.
Distributions
(1/1/20–12/31/20)
Share
Class
Net
Investment
Income
Z
$0.4604
A
$0.3933
C
$0.2403
R
$0.3875
R6
$0.4883
Total
Annual
Operating
Expenses
5
Share
Class
Z
1.04%
A
1.29%
Your
Fund’s
Expenses
Franklin
Mutual
European
Fund
10
franklintempleton.com
Annual
Report
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.
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
184/366
to
reflect
the
one-half
year
period.
2.
Reflects
expenses
after
fee
waivers
and
expense
reimbursements.
Does
not
include
acquired
fund
fees
and
expenses.
Actual
(actual
return
after
expenses)
Hypothetical
(5%
annual
return
before
expenses)
Share
Class
Beginning
Account
Value
7/1/20
Ending
Account
Value
12/31/20
Expenses
Paid
During
Period
7/1/20–12/31/20
1,
2
Ending
Account
Value
12/31/20
Expenses
Paid
During
Period
7/1/20–12/31/20
1,
2
a
Net
Annualized
Expense
Ratio
2
Z
$1,000
$1,179.76
$5.99
$1,019.64
$5.55
1.09%
A
$1,000
$1,178.41
$7.37
$1,018.37
$6.83
1.35%
C
$1,000
$1,174.19
$11.45
$1,014.61
$10.61
2.09%
R
$1,000
$1,176.84
$8.75
$1,017.10
$8.11
1.60%
R6
$1,000
$1,180.93
$5.40
$1,020.18
$5.01
0.99%
Franklin
Mutual
Series
Funds
Financial
Highlights
Franklin
Mutual
European
Fund
franklintempleton.com
The
accompanying
notes
are
an
integral
part
of
these
financial
statements.
Annual
Report
11
a
Year
Ended
December
31,
2020
2019
2018
2017
2016
Class
Z
Per
share
operating
performance
(for
a
share
outstanding
throughout
the
year)
Net
asset
value,
beginning
of
year
...................
$21.31
$17.89
$20.93
$19.20
$19.48
Income
from
investment
operations
a
:
Net
investment
income
b
.........................
0.56
c
0.54
0.49
0.35
0.63
d
Net
realized
and
unrealized
gains
(losses)
...........
(1.92)
3.46
(2.80)
1.65
(0.17)
Total
from
investment
operations
....................
(1.36)
4.00
(2.31)
2.00
0.46
Less
distributions
from:
Net
investment
income
..........................
(0.46)
(0.58)
(0.73)
(0.27)
(0.47)
Net
realized
gains
.............................
—
—
—
—
(0.27)
Total
distributions
...............................
(0.46)
(0.58)
(0.73)
(0.27)
(0.74)
Net
asset
value,
end
of
year
.......................
$19.49
$21.31
$17.89
$20.93
$19.20
Total
return
....................................
(6.23)%
22.28%
(11.12)%
10.45%
2.40%
Ratios
to
average
net
assets
Expenses
e
,f
....................................
1.08%
g
1.04%
1.04%
g
1.04%
1.06%
g
Expenses
-
incurred
in
connection
with
securities
sold
short
—%
—%
—%
h
—%
—%
Net
investment
income
...........................
3.19%
c
2.77%
2.38%
1.75%
3.42%
d
Supplemental
data
Net
assets,
end
of
year
(000’s)
.....................
$450,864
$789,012
$958,149
$1,328,622
$1,175,972
Portfolio
turnover
rate
............................
24.04%
12.16%
35.42%
17.33%
16.43%
a
The
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
repurchas-
es
of
the
Fund’s
shares
in
relation
to
income
earned
and/or
fluctuating
fair
value
of
the
investments
of
the
Fund.
b
Based
on
average
daily
shares
outstanding.
c
Net
investment
income
per
share
includes
approximately
$0.30
per
share
related
to
income
received
in
the
form
of
special
dividends
and
an
adjustment
for
EU
reclaims
in
connection
with
certain
Fund
holdings.
Excluding
this
amount,
the
ratio
of
net
investment
income
to
average
net
assets
would
have
been
1.48%.
d
Net
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%.
e
Includes
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).
f
Benefit
of
expense
reduction
rounds
to
less
than
0.01%.
g
Benefit
of
waiver
and
payments
by
affiliates
rounds
to
less
than
0.01%.
h
Rounds
to
less
than
0.01%.
Franklin
Mutual
Series
Funds
Financial
Highlights
Franklin
Mutual
European
Fund
(continued)
franklintempleton.com
Annual
Report
The
accompanying
notes
are
an
integral
part
of
these
financial
statements.
12
a
Year
Ended
December
31,
2020
2019
2018
2017
2016
Class
A
Per
share
operating
performance
(for
a
share
outstanding
throughout
the
year)
Net
asset
value,
beginning
of
year
...................
$20.67
$17.37
$20.33
$18.66
$18.95
Income
from
investment
operations
a
:
Net
investment
income
b
.........................
0.54
c
0.49
0.41
0.31
0.57
d
Net
realized
and
unrealized
gains
(losses)
...........
(1.91)
3.33
(2.69)
1.58
(0.18)
Total
from
investment
operations
....................
(1.37)
3.82
(2.28)
1.89
0.39
Less
distributions
from:
Net
investment
income
..........................
(0.39)
(0.52)
(0.68)
(0.22)
(0.41)
Net
realized
gains
.............................
—
—
—
—
(0.27)
Total
distributions
...............................
(0.39)
(0.52)
(0.68)
(0.22)
(0.68)
Net
asset
value,
end
of
year
.......................
$18.91
$20.67
$17.37
$20.33
$18.66
Total
return
e
...................................
(6.50)%
21.98%
(11.29)%
10.14%
2.12%
Ratios
to
average
net
assets
Expenses
f
,g
....................................
1.33%
h
1.29%
1.29%
h
1.29%
1.31%
h
Expenses
-
incurred
in
connection
with
securities
sold
short
—%
—%
—%
i
—%
—%
Net
investment
income
...........................
3.14%
c
2.52%
2.13%
1.50%
3.17%
d
Supplemental
data
Net
assets,
end
of
year
(000’s)
.....................
$272,579
$512,218
$564,038
$714,915
$769,297
Portfolio
turnover
rate
............................
24.04%
12.16%
35.42%
17.33%
16.43%
a
The
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
repurchas-
es
of
the
Fund’s
shares
in
relation
to
income
earned
and/or
fluctuating
fair
value
of
the
investments
of
the
Fund.
b
Based
on
average
daily
shares
outstanding.
c
Net
investment
income
per
share
includes
approximately
$0.29
per
share
related
to
income
received
in
the
form
of
special
dividends
and
an
adjustment
for
EU
reclaims
in
connection
with
certain
Fund
holdings.
Excluding
this
amount,
the
ratio
of
net
investment
income
to
average
net
assets
would
have
been
1.44%.
d
Net
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%.
e
Total
return
does
not
reflect
sales
commissions
or
contingent
deferred
sales
charges,
if
applicable.
f
Includes
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).
g
Benefit
of
expense
reduction
rounds
to
less
than
0.01%.
h
Benefit
of
waiver
and
payments
by
affiliates
rounds
to
less
than
0.01%.
i
Rounds
to
less
than
0.01%.
Franklin
Mutual
Series
Funds
Financial
Highlights
Franklin
Mutual
European
Fund
(continued)
franklintempleton.com
The
accompanying
notes
are
an
integral
part
of
these
financial
statements.
Annual
Report
13
a
Year
Ended
December
31,
2020
2019
2018
2017
2016
Class
C
Per
share
operating
performance
(for
a
share
outstanding
throughout
the
year)
Net
asset
value,
beginning
of
year
...................
$20.93
$17.56
$20.38
$18.70
$18.97
Income
from
investment
operations
a
:
Net
investment
income
b
.........................
0.38
c
0.35
0.29
0.15
0.44
d
Net
realized
and
unrealized
gains
(losses)
...........
(1.90)
3.35
(2.72)
1.60
(0.19)
Total
from
investment
operations
....................
(1.52)
3.70
(2.43)
1.75
0.25
Less
distributions
from:
Net
investment
income
..........................
(0.24)
(0.33)
(0.39)
(0.07)
(0.25)
Net
realized
gains
.............................
—
—
—
—
(0.27)
Total
distributions
...............................
(0.24)
(0.33)
(0.39)
(0.07)
(0.52)
Net
asset
value,
end
of
year
.......................
$19.17
$20.93
$17.56
$20.38
$18.70
Total
return
e
...................................
(7.15)%
21.01%
(11.96)%
9.37%
1.32%
Ratios
to
average
net
assets
Expenses
f
,g
....................................
2.08%
h
2.04%
2.04%
h
2.04%
2.06%
h
Expenses
-
incurred
in
connection
with
securities
sold
short
—%
—%
—%
i
—%
—%
Net
investment
income
...........................
2.18%
c
1.77%
1.38%
0.75%
2.42%
d
Supplemental
data
Net
assets,
end
of
year
(000’s)
.....................
$34,693
$61,743
$78,149
$179,123
$209,196
Portfolio
turnover
rate
............................
24.04%
12.16%
35.42%
17.33%
16.43%
a
The
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
repurchas-
es
of
the
Fund’s
shares
in
relation
to
income
earned
and/or
fluctuating
fair
value
of
the
investments
of
the
Fund.
b
Based
on
average
daily
shares
outstanding.
c
Net
investment
income
per
share
includes
approximately
$0.29
per
share
related
to
income
received
in
the
form
of
special
dividends
and
an
adjustment
for
EU
reclaims
in
connection
with
certain
Fund
holdings.
Excluding
this
amount,
the
ratio
of
net
investment
income
to
average
net
assets
would
have
been
0.47%.
d
Net
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%.
e
Total
return
does
not
reflect
sales
commissions
or
contingent
deferred
sales
charges,
if
applicable.
f
Includes
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).
g
Benefit
of
expense
reduction
rounds
to
less
than
0.01%.
h
Benefit
of
waiver
and
payments
by
affiliates
rounds
to
less
than
0.01%.
i
Rounds
to
less
than
0.01%.
Franklin
Mutual
Series
Funds
Financial
Highlights
Franklin
Mutual
European
Fund
(continued)
franklintempleton.com
Annual
Report
The
accompanying
notes
are
an
integral
part
of
these
financial
statements.
14
a
Year
Ended
December
31,
2020
2019
2018
2017
2016
Class
R
Per
share
operating
performance
(for
a
share
outstanding
throughout
the
year)
Net
asset
value,
beginning
of
year
...................
$20.27
$17.05
$19.97
$18.35
$18.62
Income
from
investment
operations
a
:
Net
investment
income
b
.........................
0.53
c
0.43
0.35
0.22
0.52
d
Net
realized
and
unrealized
gains
(losses)
...........
(1.92)
3.27
(2.64)
1.60
(0.18)
Total
from
investment
operations
....................
(1.39)
3.70
(2.29)
1.82
0.34
Less
distributions
from:
Net
investment
income
..........................
(0.39)
(0.48)
(0.63)
(0.20)
(0.34)
Net
realized
gains
.............................
—
—
—
—
(0.27)
Total
distributions
...............................
(0.39)
(0.48)
(0.63)
(0.20)
(0.61)
Net
asset
value,
end
of
year
.......................
$18.49
$20.27
$17.05
$19.97
$18.35
Total
return
....................................
(6.76)%
21.70%
(11.54)%
9.92%
1.86%
Ratios
to
average
net
assets
Expenses
e
,f
....................................
1.58%
g
1.54%
1.54%
g
1.54%
1.56%
g
Expenses
-
incurred
in
connection
with
securities
sold
short
—%
—%
—%
h
—%
—%
Net
investment
income
...........................
3.19%
c
2.27%
1.88%
1.25%
2.92%
d
Supplemental
data
Net
assets,
end
of
year
(000’s)
.....................
$714
$733
$731
$821
$626
Portfolio
turnover
rate
............................
24.04%
12.16%
35.42%
17.33%
16.43%
a
The
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
repurchas-
es
of
the
Fund’s
shares
in
relation
to
income
earned
and/or
fluctuating
fair
value
of
the
investments
of
the
Fund.
b
Based
on
average
daily
shares
outstanding.
c
Net
investment
income
per
share
includes
approximately
$0.29
per
share
related
to
income
received
in
the
form
of
special
dividends
and
an
adjustment
for
EU
reclaims
in
connection
with
certain
Fund
holdings.
Excluding
this
amount,
the
ratio
of
net
investment
income
to
average
net
assets
would
have
been
1.48%.
d
Net
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%.
e
Includes
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).
f
Benefit
of
expense
reduction
rounds
to
less
than
0.01%.
g
Benefit
of
waiver
and
payments
by
affiliates
rounds
to
less
than
0.01%.
h
Rounds
to
less
than
0.01%.
Franklin
Mutual
Series
Funds
Financial
Highlights
Franklin
Mutual
European
Fund
(continued)
franklintempleton.com
The
accompanying
notes
are
an
integral
part
of
these
financial
statements.
Annual
Report
15
a
Year
Ended
December
31,
2020
2019
2018
2017
2016
Class
R6
Per
share
operating
performance
(for
a
share
outstanding
throughout
the
year)
Net
asset
value,
beginning
of
year
...................
$21.29
$17.87
$20.91
$19.19
$19.47
Income
from
investment
operations
a
:
Net
investment
income
b
.........................
0.64
c
0.69
0.56
0.41
0.66
d
Net
realized
and
unrealized
gains
(losses)
...........
(1.97)
3.33
(2.85)
1.62
(0.17)
Total
from
investment
operations
....................
(1.33)
4.02
(2.29)
2.03
0.49
Less
distributions
from:
Net
investment
income
..........................
(0.49)
(0.60)
(0.75)
(0.31)
(0.50)
Net
realized
gains
.............................
—
—
—
—
(0.27)
Total
distributions
...............................
(0.49)
(0.60)
(0.75)
(0.31)
(0.77)
Net
asset
value,
end
of
year
.......................
$19.47
$21.29
$17.87
$20.91
$19.19
Total
return
....................................
(6.10)%
22.35%
(10.94)%
10.63%
2.53%
Ratios
to
average
net
assets
Expenses
before
waiver
and
payments
by
affiliates
e
.....
1.00%
0.94%
0.92%
0.88%
0.89%
Expenses
net
of
waiver
and
payments
by
affiliates
e
,f
.....
0.97%
0.93%
0.91%
0.88%
0.89%
g
Expenses
-
incurred
in
connection
with
securities
sold
short
—%
—%
—%
h
—%
—%
Net
investment
income
...........................
3.61%
c
2.88%
2.51%
1.91%
3.59%
d
Supplemental
data
Net
assets,
end
of
year
(000’s)
.....................
$33,407
$44,561
$149,796
$294,660
$311,784
Portfolio
turnover
rate
............................
24.04%
12.16%
35.42%
17.33%
16.43%
a
The
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
repurchas-
es
of
the
Fund’s
shares
in
relation
to
income
earned
and/or
fluctuating
fair
value
of
the
investments
of
the
Fund.
b
Based
on
average
daily
shares
outstanding.
c
Net
investment
income
per
share
includes
approximately
$0.30
per
share
related
to
income
received
in
the
form
of
special
dividends
and
an
adjustment
for
EU
reclaims
in
connection
with
certain
Fund
holdings.
Excluding
this
amount,
the
ratio
of
net
investment
income
to
average
net
assets
would
have
been
1.91%.
d
Net
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%.
e
Includes
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).
f
Benefit
of
expense
reduction
rounds
to
less
than
0.01%.
g
Benefit
of
waiver
and
payments
by
affiliates
rounds
to
less
than
0.01%.
h
Rounds
to
less
than
0.01%.
Franklin
Mutual
Series
Funds
Statement
of
Investments,
December
31,
2020
Franklin
Mutual
European
Fund
franklintempleton.com
Annual
Report
The
accompanying
notes
are
an
integral
part
of
these
financial
statements.
16
a
a
Country
Shares
a
Value
a
a
a
a
a
a
Common
Stocks
91.4%
Aerospace
&
Defense
1.9%
BAE
Systems
plc
.....................................
United
Kingdom
2,234,016
$
14,899,237
Auto
Components
3.1%
Cie
Generale
des
Etablissements
Michelin
SCA
..............
France
188,454
24,265,734
Banks
6.0%
a
BNP
Paribas
SA
......................................
France
257,709
13,605,578
CaixaBank
SA
........................................
Spain
4,563,741
11,730,559
a
ING
Groep
NV
.......................................
Netherlands
1,612,920
14,997,294
a
UniCredit
SpA
........................................
Italy
771,574
7,229,481
47,562,912
Beverages
4.8%
Anheuser-Busch
InBev
SA/NV
...........................
Belgium
323,438
22,566,141
Heineken
NV
........................................
Netherlands
138,418
15,425,782
37,991,923
Chemicals
6.2%
BASF
SE
...........................................
Germany
275,615
21,786,239
b
Covestro
AG,
144A,
Reg
S
..............................
Germany
438,428
27,014,164
48,800,403
Commercial
Services
&
Supplies
2.5%
a
G4S
plc
............................................
United
Kingdom
5,780,207
20,079,155
Construction
&
Engineering
1.2%
Vinci
SA
............................................
France
98,960
9,857,750
Construction
Materials
6.0%
HeidelbergCement
AG
.................................
Germany
299,418
22,294,240
a
LafargeHolcim
Ltd.
....................................
Switzerland
467,999
25,687,439
47,981,679
Diversified
Telecommunication
Services
6.2%
Deutsche
Telekom
AG
..................................
Germany
1,286,312
23,479,499
Hellenic
Telecommunications
Organization
SA
................
Greece
1,576,585
25,353,483
48,832,982
Electrical
Equipment
0.3%
a
Siemens
Energy
AG
...................................
Germany
64,972
2,381,289
Energy
Equipment
&
Services
1.0%
Tenaris
SA,
ADR
......................................
United
States
506,016
8,070,955
Health
Care
Providers
&
Services
2.4%
Fresenius
SE
&
Co.
KGaA
...............................
Germany
414,080
19,148,597
Hotels,
Restaurants
&
Leisure
2.8%
a
Accor
SA
...........................................
France
605,170
21,956,948
Household
Durables
2.2%
Berkeley
Group
Holdings
plc
.............................
United
Kingdom
27,829
1,800,322
Husqvarna
AB,
B
.....................................
Sweden
897,871
11,654,076
Persimmon
plc
.......................................
United
Kingdom
57,576
2,173,238
a
Taylor
Wimpey
plc
.....................................
United
Kingdom
899,076
2,033,824
17,661,460
Household
Products
2.5%
Reckitt
Benckiser
Group
plc
.............................
United
Kingdom
218,547
19,507,666
Franklin
Mutual
Series
Funds
Statement
of
Investments
Franklin
Mutual
European
Fund
(continued)
franklintempleton.com
The
accompanying
notes
are
an
integral
part
of
these
financial
statements.
Annual
Report
17
a
a
Country
Shares
a
Value
a
a
a
a
a
a
Common
Stocks
(continued)
Industrial
Conglomerates
2.0%
Siemens
AG
.........................................
Germany
111,048
$
15,996,727
Insurance
9.1%
ASR
Nederland
NV
....................................
Netherlands
566,900
22,683,208
a
Conduit
Holdings
Ltd.
..................................
United
States
1,190,000
8,193,367
Direct
Line
Insurance
Group
plc
..........................
United
Kingdom
4,185,514
18,307,549
NN
Group
NV
........................................
Netherlands
523,042
22,612,154
71,796,278
Machinery
2.9%
a
Vossloh
AG
..........................................
Germany
451,563
22,977,933
Oil,
Gas
&
Consumable
Fuels
6.3%
BP
plc
..............................................
United
Kingdom
4,474,679
15,442,095
a
Cairn
Energy
plc
......................................
United
Kingdom
7,532,242
21,599,025
Royal
Dutch
Shell
plc,
A
................................
Netherlands
726,387
12,739,141
49,780,261
Pharmaceuticals
6.8%
GlaxoSmithKline
plc
...................................
United
Kingdom
1,437,929
26,313,097
Novartis
AG
.........................................
Switzerland
292,890
27,577,923
53,891,020
Road
&
Rail
0.0%
a,c,d,e
Euro
Wagon
LP
.......................................
Jersey
16,127,149
—
Software
2.3%
b
Avast
plc,
144A,
Reg
S
.................................
United
Kingdom
2,474,452
18,170,666
Textiles,
Apparel
&
Luxury
Goods
2.7%
Cie
Financiere
Richemont
SA
............................
Switzerland
236,443
21,360,740
Tobacco
2.5%
British
American
Tobacco
plc
.............................
United
Kingdom
541,864
20,124,603
Trading
Companies
&
Distributors
6.1%
a
Kloeckner
&
Co.
SE
...................................
Germany
2,101,070
20,549,097
a
Rexel
SA
...........................................
France
1,769,660
27,932,302
48,481,399
Wireless
Telecommunication
Services
1.6%
Vodafone
Group
plc
...................................
United
Kingdom
7,772,597
12,767,330
Total
Common
Stocks
(Cost
$673,925,156)
.....................................
724,345,647
Preferred
Stocks
2.8%
Automobiles
2.8%
f
Volkswagen
AG,
3.18%
.................................
Germany
118,072
22,066,658
Total
Preferred
Stocks
(Cost
$15,239,772)
......................................
22,066,658
Warrants
Warrants
0.0%
†
Textiles,
Apparel
&
Luxury
Goods
0.0%
†
a
Cie
Financiere
Richemont
SA,
11/22/23
.....................
Switzerland
472,886
122,855
Total
Warrants
(Cost
$—)
.....................................................
122,855
Total
Long
Term
Investments
(Cost
$689,164,928)
...............................
746,535,160
a
Franklin
Mutual
Series
Funds
Statement
of
Investments
Franklin
Mutual
European
Fund
(continued)
franklintempleton.com
Annual
Report
The
accompanying
notes
are
an
integral
part
of
these
financial
statements.
18
Short
Term
Investments
3.1%
a
a
Country
Principal
Amount
*
a
Value
a
a
a
a
a
a
U.S.
Government
and
Agency
Securities
3.1%
g
FHLB,
1/04/21
.......................................
United
States
2,000,000
$
2,000,000
g
U.S.
Treasury
Bills
,
1/05/21
...........................................
United
States
4,500,000
4,500,000
h
1/14/21
...........................................
United
States
3,000,000
2,999,971
h
1/21/21
...........................................
United
States
2,500,000
2,499,959
h
1/28/21
...........................................
United
States
2,500,000
2,499,921
h
4/01/21
...........................................
United
States
3,400,000
3,399,425
h
7/01/21
...........................................
United
States
7,000,000
6,997,398
22,896,674
Total
U.S.
Government
and
Agency
Securities
(Cost
$24,895,965)
.................
24,896,674
Total
Short
Term
Investments
(Cost
$24,895,965
)
................................
24,896,674
a
Total
Investments
(Cost
$714,060,893)
97.3%
...................................
$771,431,834
Other
Assets,
less
Liabilities
2.7%
.............................................
20,825,742
Net
Assets
100.0%
...........................................................
$792,257,576
*
The
principal
amount
is
stated
in
U.S.
dollars
unless
otherwise
indicated.
†
Rounds
to
less
than
0.1%
of
net
assets.
a
Non-income
producing.
b
Security
was
purchased
pursuant
to
Rule
144A
or
Regulation
S
under
the
Securities
Act
of
1933.
144A
securities
may
be
sold
in
transactions
exempt
from
registration
only
to
qualified
institutional
buyers
or
in
a
public
offering
registered
under
the
Securities
Act
of
1933.
Regulation
S
securities
cannot
be
sold
in
the
United
States
without
either
an
effective
registration
statement
filed
pursuant
to
the
Securities
Act
of
1933,
or
pursuant
to
an
exemption
from
registration.
At
December
31,
2020,
the
aggregate
value
of
these
securities
was
$45,184,830,
representing
5.7%
of
net
assets.
c
Fair
valued
using
significant
unobservable
inputs.
See
Note
14
regarding
fair
value
measurements.
d
See
Note
10
regarding
restricted
securities.
e
See
Note
12
regarding
holdings
of
5%
voting
securities.
f
Variable
rate
security.
The
rate
shown
represents
the
yield
at
period
end.
g
The
security
was
issued
on
a
discount
basis
with
no
stated
coupon
rate.
h
A
portion
or
all
of
the
security
has
been
segregated
as
collateral
for
open
forward
exchange
contracts.
At
December
31,
2020,
the
aggregate
value
of
these
securities
pledged
amounted
to
$16,460,253,
representing
2.1%
of
net
assets.
Franklin
Mutual
Series
Funds
Statement
of
Investments
Franklin
Mutual
European
Fund
(continued)
franklintempleton.com
The
accompanying
notes
are
an
integral
part
of
these
financial
statements.
Annual
Report
19
At
December
31,
2020,
the
Fund
had
the
following futures
contracts
outstanding.
See
Note
1(c). 
At
December
31,
2020,
the
Fund
had
the
following
forward
exchange
contracts
outstanding.
See
Note
1
(
c
). 
Futures
Contracts
Description
Type
Number
of
Contracts
Notional
Amount
*
Expiration
Date
Value/
Unrealized
Appreciation
(Depreciation)
Foreign
exchange
contracts
Foreign
Exchange
EUR/USD
...................
Short
1,104
$
168,994,800
3/15/21
$
(996,167)
Foreign
Exchange
GBP/USD
...................
Short
1,347
114,991,706
3/15/21
(1,707,880)
Total
Futures
Contracts
......................................................................
$(2,704,047)
*
As
of
period
end.
Forward
Exchange
Contracts
Currency
Counter-
party
a
Type
Quantity
Contract
Amount
*
Settlement
Date
Unrealized
Appreciation
Unrealized
Depreciation
a
a
a
a
a
a
a
a
OTC
Forward
Exchange
Contracts
Euro
.............
HSBK
Buy
3,875,941
4,722,951
1/15/21
$
13,462
$
—
Euro
.............
HSBK
Sell
8,095,563
9,327,310
1/15/21
—
(565,496)
Euro
.............
SSBT
Sell
53,697,503
61,260,858
1/15/21
—
(4,357,669)
Euro
.............
UBSW
Buy
2,857,621
2,325,998
1/15/21
—
(15,244)
Euro
.............
UBSW
Sell
55,679,367
63,556,608
1/15/21
—
(4,483,761)
British
Pound
......
BNY
Buy
110,356
147,253
1/19/21
3,690
—
British
Pound
......
BOFA
Buy
991,591
1,292,281
1/19/21
63,993
—
British
Pound
......
HSBK
Buy
5,899,533
7,774,548
1/19/21
294,687
—
British
Pound
......
SSBT
Sell
13,886,988
17,395,007
1/19/21
—
(1,599,267)
British
Pound
......
UBSW
Buy
1,067,724
1,387,044
1/19/21
73,362
—
British
Pound
......
HSBK
Sell
35,813,013
46,710,600
2/16/21
—
(2,283,429)
British
Pound
......
UBSW
Sell
459,531
597,776
2/16/21
—
(30,886)
Swedish
Krona
.....
HSBK
Buy
18,775,621
2,301,494
2/16/21
—
(17,999)
Swedish
Krona
.....
HSBK
Sell
13,528,735
1,631,608
2/16/21
1,205
(14,966)
Swedish
Krona
.....
UBSW
Sell
100,870,147
11,915,101
2/16/21
—
(352,749)
Swiss
Franc
.......
HSBK
Sell
20,806,503
23,444,819
2/16/21
—
(87,321)
Swiss
Franc
.......
UBSW
Sell
20,806,503
23,438,005
2/16/21
—
(94,135)
Euro
.............
UBSW
Sell
32,729,195
38,795,879
2/23/21
—
(1,234,707)
Euro
.............
BNY
Sell
1,429,790
1,682,239
4/07/21
—
(68,229)
Euro
.............
BOFA
Sell
1,000,000
1,185,710
4/07/21
—
(38,574)
Euro
.............
HSBK
Sell
2,172,997
2,577,196
4/07/21
—
(83,168)
Euro
.............
SSBT
Sell
2,326,093
2,758,979
4/07/21
—
(88,818)
Euro
.............
UBSW
Sell
19,722,042
23,348,201
4/07/21
—
(797,170)
British
Pound
......
HSBK
Sell
1,865,691
2,543,328
4/23/21
—
(9,931)
Total
Forward
Exchange
Contracts
...................................................
$450,399
$(16,223,519)
Net
unrealized
appreciation
(depreciation)
............................................
$(15,773,120)
*
In
U.S.
dollars
unless
otherwise
indicated.
a
May
be
comprised
of
multiple
contracts
with
the
same
counterparty,
currency
and
settlement
date.
Franklin
Mutual
Series
Funds
Statement
of
Investments
Franklin
Mutual
European
Fund
(continued)
franklintempleton.com
Annual
Report
The
accompanying
notes
are
an
integral
part
of
these
financial
statements.
20
See
Note
11
regarding
other
derivative
information.
See
Abbreviations
on
page
39
.
Franklin
Mutual
Series
Funds
Financial
Statements
Statement
of
Assets
and
Liabilities
December
31,
2020
franklintempleton.com
The
accompanying
notes
are
an
integral
part
of
these
financial
statements.
Annual
Report
21
Franklin
Mutual
European
Fund
Assets:
Investments
in
securities:
Cost
-
Unaffiliated
issuers
...................................................................
$707,778,384
Cost
-
Controlled
affiliates
(Note
3
f
and
12
)
......................................................
6,282,509
Value
-
Unaffiliated
issuers
..................................................................
$771,431,834
Value
-
Controlled
affiliates
(Note
3
f
and
12
)
.....................................................
—
Cash
....................................................................................
5,359,136
Receivables:
Investment
securities
sold
...................................................................
3,998,494
Capital
shares
sold
........................................................................
789,411
Dividends
...............................................................................
6,292,276
European
Union
tax
reclaims
(Note
1
f
)
.........................................................
26,410,621
Deposits
with
brokers
for:
Futures
contracts
........................................................................
6,431,710
Variation
margin
on
futures
contracts
...........................................................
517,336
Unrealized
appreciation
on
OTC
forward
exchange
contracts
..........................................
450,399
Other
assets
..............................................................................
327,766
Total
assets
..........................................................................
822,008,983
Liabilities:
Payables:
Capital
shares
redeemed
...................................................................
1,966,759
Management
fees
.........................................................................
589,253
Distribution
fees
..........................................................................
87,937
Transfer
agent
fees
........................................................................
162,767
Trustees'
fees
and
expenses
.................................................................
134,175
IRS
closing
agreement
fees
for
European
Union
tax
reclaims
(Note
1
f
)
.................................
8,912,801
Unrealized
depreciation
on
OTC
forward
exchange
contracts
..........................................
16,223,519
Accrued
expenses
and
other
liabilities
...........................................................
1,674,196
Total
liabilities
.........................................................................
29,751,407
Net
assets,
at
value
.................................................................
$792,257,576
Net
assets
consist
of:
Paid-in
capital
.............................................................................
$943,775,378
Total
distributable
earnings
(losses)
.............................................................
(151,517,802)
Net
assets,
at
value
.................................................................
$792,257,576
Franklin
Mutual
Series
Funds
Financial
Statements
Statement
of
Assets
and
Liabilities
(continued)
December
31,
2020
franklintempleton.com
Annual
Report
The
accompanying
notes
are
an
integral
part
of
these
financial
statements.
22
Franklin
Mutual
European
Fund
Class
Z:
Net
assets,
at
value
.......................................................................
$450,863,878
Shares
outstanding
........................................................................
23,134,391
Net
asset
value
and
maximum
offering
price
per
share
.............................................
$19.49
Class
A:
Net
assets,
at
value
.......................................................................
$272,579,294
Shares
outstanding
........................................................................
14,412,175
Net
asset
value
per
share
a
..................................................................
$18.91
Maximum
offering
price
per
share
(net
asset
value
per
share
÷
94.50%)
................................
$20.01
Class
C:
Net
assets,
at
value
.......................................................................
$34,692,897
Shares
outstanding
........................................................................
1,809,839
Net
asset
value
and
maximum
offering
price
per
share
a
.............................................
$19.17
Class
R:
Net
assets,
at
value
.......................................................................
$714,135
Shares
outstanding
........................................................................
38,615
Net
asset
value
and
maximum
offering
price
per
share
.............................................
$18.49
Class
R6:
Net
assets,
at
value
.......................................................................
$33,407,372
Shares
outstanding
........................................................................
1,716,199
Net
asset
value
and
maximum
offering
price
per
share
.............................................
$19.47
a
Redemption
price
is
equal
to
net
asset
value
less
contingent
deferred
sales
charges,
if
applicable.
Franklin
Mutual
Series
Funds
Financial
Statements
Statement
of
Operations
for
the
year
ended
December
31,
2020
franklintempleton.com
The
accompanying
notes
are
an
integral
part
of
these
financial
statements.
Annual
Report
23
Franklin
Mutual
European
Fund
Investment
income:
Dividends:
(net
of
foreign
taxes
of
$1,553,519)
Unaffiliated
issuers
........................................................................
$25,808,579
Interest:
Unaffiliated
issuers
........................................................................
252,682
Income
from
securities
loaned:
Unaffiliated
entities
(net
of
fees
and
rebates)
.....................................................
503
Other
income
(Note
1
f
)
.......................................................................
24,008,404
Less:
IRS
closing
agreement
fees
for
European
Union
tax
reclaims
(Note
1
f
)
..............................
(8,912,801)
Total
investment
income
...................................................................
41,157,367
Expenses:
Management
fees
(Note
3
a
)
...................................................................
8,257,435
Distribution
fees:
(Note
3c
)
    Class
A
................................................................................
906,512
    Class
C
................................................................................
402,020
    Class
R
................................................................................
3,060
Transfer
agent
fees:
(Note
3e
)
    Class
Z
................................................................................
675,418
    Class
A
................................................................................
485,198
    Class
C
................................................................................
53,472
    Class
R
................................................................................
822
    Class
R6
...............................................................................
16,585
Custodian
fees
(Note
4
)
......................................................................
132,727
Reports
to
shareholders
......................................................................
108,936
Registration
and
filing
fees
....................................................................
96,573
Professional
fees
...........................................................................
178,380
Trustees'
fees
and
expenses
..................................................................
70,142
Other
....................................................................................
108,663
Total
expenses
.........................................................................
11,495,943
Expense
reductions
(Note
4
)
...............................................................
(10,983)
Expenses
waived/paid
by
affiliates
(Note
3
f
and
3
g
)
..............................................
(9,914)
Net
expenses
.........................................................................
11,475,046
Net
investment
income
................................................................
29,682,321
Realized
and
unrealized
gains
(losses):
Net
realized
gain
(loss)
from:
Investments:
Unaffiliated
issuers
......................................................................
(187,330,918)
Foreign
currency
transactions
................................................................
(53,967)
Forward
exchange
contracts
.................................................................
(17,513,396)
Futures
contracts
.........................................................................
(16,033,919)
Net
realized
gain
(loss)
..................................................................
(220,932,200)
Net
change
in
unrealized
appreciation
(depreciation)
on:
Investments:
Unaffiliated
issuers
......................................................................
31,358,496
Translation
of
other
assets
and
liabilities
denominated
in
foreign
currencies
..............................
1,351,422
Forward
exchange
contracts
.................................................................
(1,736,644)
Futures
contracts
.........................................................................
1,981,154
Net
change
in
unrealized
appreciation
(depreciation)
............................................
32,954,428
Net
realized
and
unrealized
gain
(loss)
............................................................
(187,977,772)
Net
increase
(decrease)
in
net
assets
resulting
from
operations
..........................................
$(158,295,451)
Franklin
Mutual
Series
Funds
Financial
Statements
Statements
of
Changes
in
Net
Assets
franklintempleton.com
Annual
Report
The
accompanying
notes
are
an
integral
part
of
these
financial
statements.
24
Franklin
Mutual
European
Fund
Year
Ended
December
31,
2020
Year
Ended
December
31,
2019
Increase
(decrease)
in
net
assets:
Operations:
Net
investment
income
.................................................
$29,682,321
$41,950,270
Net
realized
gain
(loss)
.................................................
(220,932,200)
55,462,083
Net
change
in
unrealized
appreciation
(depreciation)
...........................
32,954,428
224,438,946
Net
increase
(decrease)
in
net
assets
resulting
from
operations
................
(158,295,451)
321,851,299
Distributions
to
shareholders:
Class
Z
.............................................................
(10,843,330)
(20,967,947)
Class
A
.............................................................
(6,539,024)
(12,671,231)
Class
C
.............................................................
(465,752)
(972,882)
Class
R
.............................................................
(14,566)
(16,815)
Class
R6
............................................................
(851,982)
(1,222,857)
Total
distributions
to
shareholders
..........................................
(18,714,654)
(35,851,732)
Capital
share
transactions:
(Note
2
)
Class
Z
.............................................................
(227,283,400)
(321,483,450)
Class
A
.............................................................
(185,469,446)
(150,432,479)
Class
C
.............................................................
(19,544,155)
(29,238,553)
Class
R
.............................................................
50,875
(117,087)
Class
R6
............................................................
(6,753,561)
(127,323,705)
Total
capital
share
transactions
............................................
(438,999,687)
(628,595,274)
Net
increase
(decrease)
in
net
assets
...................................
(616,009,792)
(342,595,707)
Net
assets:
Beginning
of
year
.......................................................
1,408,267,368
1,750,863,075
End
of
year
...........................................................
$792,257,576
$1,408,267,368
Franklin
Mutual
Series
Funds
25
franklintempleton.com
Annual
Report
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 six 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.
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.
Franklin
Mutual
Series
Funds
Notes
to
Financial
Statements
26
franklintempleton.com
Annual
Report
Franklin
Mutual
European
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. Events
can occur
between
the
time
at
which
trading
in
a
foreign
security
is
completed
and
4
p.m.
Eastern
time
that
might
call
into
question
the
reliability
of
the
value
of
a
portfolio
security
held
by
the
Fund.
As
a
result,
differences
may
arise
between
the
value
of
the
Fund's
portfolio
securities
as
determined
at
the
foreign
market
close
and
the
latest
indications
of
value
at
4
p.m.
Eastern
time. In
order
to
minimize
the
potential
for
these
differences,
an
independent
pricing
service
may
be
used
to
adjust
the
value
of
the
Fund's
portfolio
securities
to
the
latest
indications
of
fair
value
at
4
p.m.
Eastern
time.
At
December
31,
2020,
certain
securities
may
have
been
fair
valued
using
these
procedures,
in
which
case
the
securities
were
categorized
as
Level
2
inputs
within
the
fair
value
hierarchy.
See
the
Fair
Value
Measurements
note
for
more
information.
When
the
last
day
of
the
reporting
period
is
a
non-business
day,
certain
foreign
markets
may
be
open
on
those
days
that
the
Fund's
NAV
is
not
calculated,
which
could
result
in
differences
between
the
value
of
the
Fund's
portfolio
securities
on
the
last
business
day
and
the
last
calendar
day
of
the
reporting
period.
Any
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.
1.
Organization
and
Significant
Accounting
Policies
(continued)
a.
Financial
Instrument
Valuation 
(continued)
Franklin
Mutual
Series
Funds
Notes
to
Financial
Statements
27
franklintempleton.com
Annual
Report
Franklin
Mutual
European
Fund
(continued)
Termination
events
applicable
to
the
counterparty
include
certain
deteriorations
in
the
credit
quality
of
the
counterparty.
Termination
events
applicable
to
the Fund
include
failure
of
the
Fund
to
maintain
certain
net
asset
levels
and/or
limit
the
decline
in
net
assets
over
various
periods
of
time.
In
the
event
of
default
or
early
termination,
the
ISDA
master
agreement
gives
the
non-defaulting
party
the
right
to
net
and
close-out
all
transactions
traded,
whether
or
not
arising
under
the
ISDA
agreement,
to
one
net
amount
payable
by
one
counterparty
to
the
other.
However,
absent
an
event
of
default
or
early
termination,
OTC
derivative
assets
and
liabilities
are
presented
gross
and
not
offset
in
the
Statement
of
Assets
and
Liabilities.
Early
termination
by
the
counterparty
may
result
in
an
immediate
payment
by
the
Fund
of
any
net
liability
owed
to
that
counterparty
under
the
ISDA
agreement.
Collateral
requirements
differ
by
type
of
derivative.
Collateral
or
initial
margin
requirements
are
set
by
the
broker
or
exchange
clearing
house
for
exchange
traded
and
centrally
cleared
derivatives.
Initial
margin
deposited
is
held
at
the
exchange
and
can
be
in
the
form
of
cash
and/or
securities.
For
OTC
derivatives
traded
under
an
ISDA
master
agreement,
posting
of
collateral
is
required
by
either
the
Fund
or
the
applicable
counterparty
if
the
total
net
exposure
of
all
OTC
derivatives
with
the
applicable
counterparty
exceeds
the
minimum
transfer
amount,
which
typically
ranges
from
$100,000
to
$250,000,
and
can
vary
depending
on
the
counterparty
and
the
type
of
the
agreement.
Generally,
collateral
is
determined
at
the
close
of
Fund
business
each
day
and
any
additional
collateral
required
due
to
changes
in
derivative
values
may
be
delivered
by
the
Fund
or
the
counterparty
the
next
business
day,
or
within
a
few
business
days.
Collateral
pledged
and/or
received
by
the
Fund
for
OTC
derivatives,
if
any,
is
held
in
segregated
accounts
with
the
Fund's
custodian/counterparty
broker
and
can
be
in
the
form
of
cash
and/or
securities.
Unrestricted
cash
may
be
invested
according
to
the
Fund's
investment
objectives.
To
the
extent
that
the
amounts
due
to
the
Fund
from
its
counterparties
are
not
subject
to
collateralization
or
are
not
fully
collateralized,
the
Fund
bears
the
risk
of
loss
from
counterparty
non-performance.
The
Fund
entered
into
exchange
traded
futures
contracts
primarily
to
manage
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.
At
December
31,
2020,
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
collateral
in
the
form
of
cash
and/or
U.S.
Government
and
Agency
securities
against
the
loaned
securities
in
an
amount
equal
to
at
least
102%
of
the
fair
value
of
the
loaned
1.
Organization
and
Significant
Accounting
Policies
(continued)
c.
Derivative
Financial
Instruments
(continued)
Franklin
Mutual
Series
Funds
Notes
to
Financial
Statements
28
franklintempleton.com
Annual
Report
Franklin
Mutual
European
Fund
(continued)
securities.
Collateral
is
maintained
over
the
life
of
the
loan
in
an
amount
not
less
than
100%
of
the
fair
value
of
loaned
securities,
as
determined
at
the
close
of
Fund
business
each
day;
any
additional
collateral
required
due
to
changes
in
security
values
is
delivered
to
the
Fund
on
the
next
business
day.
Any
cash
collateral
received
is
deposited
into
a
joint
cash
account
with
other
funds
and
is
used
to
invest
in
a
money
market
fund
managed
by
Franklin
Advisers,
Inc.,
an
affiliate
of
the Fund,
and/or
a
joint
repurchase
agreement.
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 any
cash 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,
2020,
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.
In
the
event
that
EU
reclaims
received
by
the Fund
during
the
fiscal
year
exceed
foreign
withholding
taxes
paid,
and
the
Fund previously
passed
foreign
tax
credit
on
to
its
shareholders,
the Fund
will enter
into
a
closing
agreement
with
the
Internal
Revenue
Service
(IRS)
in
order
to
pay
the
associated
tax
liability
on
behalf
of
the Fund's
shareholders.
During
the
fiscal
year
ended
December
31,
2020,
the Fund
received
EU
reclaims
in
excess
of
the
foreign
taxes
paid
during
the
year.
The
Fund
determined
to
enter
into
a
closing
agreement
with
the
IRS
and
recorded
the
estimated
fees
as
a
reduction
to
income,
as
reflected
in
the
Statement
of
Operations.
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,
2020,
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
1.
Organization
and
Significant
Accounting
Policies
(continued)
e.
Securities
Lending
(continued)
Franklin
Mutual
Series
Funds
Notes
to
Financial
Statements
29
franklintempleton.com
Annual
Report
Franklin
Mutual
European
Fund
(continued)
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.
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,
2020,
there
were
an
unlimited
number
of
shares
authorized
(without
par
value).
Transactions
in
the
Fund’s
shares
were
as
follows:
Year
Ended
December
31,
2020
Year
Ended
December
31,
2019
Shares
Amount
Shares
Amount
Class
Z
Shares:
Shares
sold
...................................
3,375,088
$58,616,261
4,771,932
$94,210,649
Shares
issued
in
reinvestment
of
distributions
..........
537,877
10,019,489
916,245
19,535,245
Shares
redeemed
...............................
(17,811,853)
(295,919,150)
(22,203,969)
(435,229,344)
Net
increase
(decrease)
..........................
(13,898,888)
$(227,283,400)
(16,515,792)
$(321,483,450)
1.
Organization
and
Significant
Accounting
Policies
(continued)
g.
Security
Transactions,
Investment
Income,
Expenses
and
Distributions
(continued)
Franklin
Mutual
Series
Funds
Notes
to
Financial
Statements
30
franklintempleton.com
Annual
Report
Franklin
Mutual
European
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:
Year
Ended
December
31,
2020
Year
Ended
December
31,
2019
Shares
Amount
Shares
Amount
Class
A
Shares:
Shares
sold
a
...................................
3,581,794
$56,839,029
3,580,834
$69,916,200
Shares
issued
in
reinvestment
of
distributions
..........
308,074
5,527,258
473,589
9,797,244
Shares
redeemed
...............................
(14,259,425)
(247,835,733)
(11,746,709)
(230,145,923)
Net
increase
(decrease)
..........................
(10,369,557)
$(185,469,446)
(7,692,286)
$(150,432,479)
Class
C
Shares:
Shares
sold
...................................
106,324
$1,854,156
149,698
$2,911,176
Shares
issued
in
reinvestment
of
distributions
..........
25,992
455,449
44,429
929,543
Shares
redeemed
a
..............................
(1,271,750)
(21,853,760)
(1,694,293)
(33,079,272)
Net
increase
(decrease)
..........................
(1,139,434)
$(19,544,155)
(1,500,166)
$(29,238,553)
Class
R
Shares:
Shares
sold
...................................
9,455
$165,585
6,114
$118,329
Shares
issued
in
reinvestment
of
distributions
..........
829
14,566
829
16,815
Shares
redeemed
...............................
(7,862)
(129,276)
(13,638)
(252,231)
Net
increase
(decrease)
..........................
2,422
$50,875
(6,695)
$(117,087)
Class
R6
Shares:
Shares
sold
...................................
386,102
$6,622,641
354,277
$7,045,227
Shares
issued
in
reinvestment
of
distributions
..........
9,215
171,502
13,656
290,912
Shares
redeemed
...............................
(772,654)
(13,547,704)
(6,655,454)
(134,659,844)
Net
increase
(decrease)
..........................
(377,337)
$(6,753,561)
(6,287,521)
$(127,323,705)
a
May
include
a
portion
of
Class
C
shares
that
were
automatically
converted
to
Class
A.
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
2.
Shares
of
Beneficial
Interest
(continued)
Franklin
Mutual
Series
Funds
Notes
to
Financial
Statements
31
franklintempleton.com
Annual
Report
Franklin
Mutual
European
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:
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:
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:
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
Class
A
....................................................................................
0.35%
Class
C
....................................................................................
1.00%
Class
R
....................................................................................
0.50%
Sales
charges
retained
net
of
commissions
paid
to
unaffiliated
brokers/dealers
..............................
$9,765
CDSC
retained
..............................................................................
$5,880
3.
Transactions
with
Affiliates
(continued)
Franklin
Mutual
Series
Funds
Notes
to
Financial
Statements
32
franklintempleton.com
Annual
Report
Franklin
Mutual
European
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,
2020,
the
Fund
paid
transfer
agent
fees
of
$1,231,495,
of
which $446,390
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,
2020,
the
Fund
held
investments
in
affiliated
management
investment
companies
as
follows:
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,
2021.
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,
2020,
the
custodian
fees
were
reduced
as
noted
in
the
Statement
of
Operations. 
    aa
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
Investment
Income
a      
a  
a  
a  
a  
a  
a  
a  
Franklin
Mutual
European
Fund
Non-Controlled
Affiliates
Income
from
securities
loaned
Institutional
Fiduciary
Trust
-
Money
Market
Portfolio,
0%
.........
$—
$4,493,000
$(4,493,000)
$
—
$
—
$—
a
—
$—
Total
Affiliated
Securities
....
$—
$4,493,000
$(4,493,000)
$—
$—
$—
$—
a
As
of
December
31,
2020,
no
longer
held
by
the
Fund.
3.
Transactions
with
Affiliates
(continued)
Franklin
Mutual
Series
Funds
Notes
to
Financial
Statements
33
franklintempleton.com
Annual
Report
Franklin
Mutual
European
Fund
(continued)
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,
2020,
the
Fund’s
projected
benefit
obligation
and
benefit
payments
under
the
Plan
were
as
follows:
6.
Income
Taxes
For
tax
purposes,
capital
losses
may
be
carried
over
to
offset
future
capital
gains.
At
December
31,
2020,
the
capital
loss
carryforwards
were
as
follows:
The
tax
character
of
distributions
paid
during
the
years
ended
December
31,
2020
and
2019,
was
as
follows:
At
December
31,
2020,
the
cost
of
investments,
net
unrealized
appreciation
(depreciation)
and
undistributed
ordinary
income
for
income
tax
purposes
were
as
follows:
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,
EU
reclaims,
corporate
actions,
futures
contracts,
pass-through
entity
income
and
wash
sales.
a
Projected
benefit
obligation
at
December
31,
2020
......
$134,175
b
Decrease
in
projected
benefit
obligation
..............
$(70)
Benefit
payments
made
to
retired
trustees
.............
$(1,001)
a
The
projected
benefit
obligation
is
included
in
trustees’
fees
and
expenses
in
the
Statement
of
Assets
and
Liabilities.
b
The
decrease
in
projected
benefit
obligation
is
included
in
trustees’
fees
and
expenses
in
the
Statement
of
Operations.
Capital
loss
carryforwards
not
subject
to
expiration:
Short
term
................................................................................
$43,265,381
Long
term
................................................................................
188,159,242
Total
capital
loss
carryforwards
...............................................................
$231,424,623
2020
2019
Distributions
paid
from:
Ordinary
income
..........................................................
$18,714,654
$35,851,732
Cost
of
investments
..........................................................................
$697,876,044
Unrealized
appreciation
........................................................................
$155,749,171
Unrealized
depreciation
........................................................................
(100,670,548)
Net
unrealized
appreciation
(depreciation)
..........................................................
$55,078,623
Distributable
earnings:
Undistributed
ordinary
income
...................................................................
$7,294,752
Franklin
Mutual
Series
Funds
Notes
to
Financial
Statements
34
franklintempleton.com
Annual
Report
Franklin
Mutual
European
Fund
(continued)
7.
Investment
Transactions
Purchases
and
sales
of
investments
(excluding
short
term
securities)
for
the
year
ended
December
31,
2020,
aggregated
$213,229,419
and
$665,004,475,
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.
Novel
Coronavirus
Pandemic 
The
global
outbreak
of
the
novel
coronavirus
disease,
known
as
COVID-19, has
caused
adverse
effects
on
many
companies,
sectors,
nations,
regions
and
the
markets
in
general, and
may
continue for
an unpredictable duration.
The
effects
of
this
pandemic
may
materially
impact
the
value
and
performance
of
the Fund, its ability
to
buy
and
sell
fund
investments
at
appropriate
valuations
and its ability
to
achieve its investment
objectives.
10.
Restricted
Securities
The
Fund
invests
in
securities
that
are
restricted
under
the
Securities
Act
of
1933
(1933
Act).
Restricted
securities
are
often
purchased
in
private
placement
transactions,
and
cannot
be
sold
without
prior
registration
unless
the
sale
is
pursuant
to
an
exemption
under
the
1933
Act.
Disposal
of
these
securities
may
require
greater
effort
and
expense,
and
prompt
sale
at
an
acceptable
price
may
be
difficult.
The Fund
may
have
registration
rights
for
restricted
securities.
The
issuer
generally
incurs
all
registration
costs.
At
December
31,
2020,
investments
in
restricted
securities,
excluding
securities
exempt
from
registration
under
the
1933
Act,
were
as
follows:
11.
Other
Derivative
Information
At
December
31,
2020,
investments
in
derivative
contracts
are
reflected
in
the
Statement of
Assets
and
Liabilities
as
follows:
Shares
Issuer
Acquisition
Date
Cost
Value
Franklin
Mutual
European
Fund
16,127,149
Euro
Wagon
LP
.............................
12/08/05
-
1/02/08
$
6,282,509
$
—
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
Franklin
Mutual
European
Fund
Foreign
exchange
contracts
..
Variation
margin
on
futures
contracts
$
—
Variation
margin
on
futures
contracts
$
2,704,047
a
Unrealized
appreciation
on
OTC
forward
exchange
contracts
450,399
Unrealized
depreciation
on
OTC
forward
exchange
contracts
16,223,519
Total
....................
$450,399
$18,927,566
Franklin
Mutual
Series
Funds
Notes
to
Financial
Statements
35
franklintempleton.com
Annual
Report
Franklin
Mutual
European
Fund
(continued)
For
the
year
ended
December
31,
2020,
the
effect
of
derivative
contracts
in
the
Statement
of
Operations
was
as
follows:
For
the
year
ended
December
31,
2020,
the
average
month
end
notional
amount
of
futures
contracts
represented
$357,501,728.
The
average
month
end
contract
value
of
forward
exchange
contracts
was
$609,574,392.
At
December
31,
2020,
the
Fund's
OTC
derivative
assets
and
liabilities
are
as
follows:
a
This
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.
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:
Franklin
Mutual
European
Fund
Foreign
exchange
contracts
..
Futures
contracts
$(16,033,919)
Futures
contracts
$1,981,154
Forward
exchange
contracts
(17,513,396)
Forward
exchange
contracts
(1,736,644)
Total
....................
$(33,547,315)
$244,510
Gross
Amounts
of
Assets
and
Liabilities
Presented
in
the
Statement
of
Assets
and
Liabilities
Assets
a
Liabilities
a
Franklin
Mutual
European
Fund
Derivatives
Forward
exchange
contracts
.............................
$
450,399
$
16,223,519
Total
.............................................
$450,399
$16,223,519
a
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.
11.
Other
Derivative
Information
(continued)
Franklin
Mutual
Series
Funds
Notes
to
Financial
Statements
36
franklintempleton.com
Annual
Report
Franklin
Mutual
European
Fund
(continued)
At
December
31,
2020,
OTC
derivative
assets,
which
ma
y
be
offset
against
OTC
derivative
liabilities
and
collateral
received
from
the
counterparty,
are
as
follows:
At
December
31,
2020,
OTC
derivative
liabilities,
which
may
be
offset
against
OTC
derivative
assets
and
collateral
pledged
to
the
counterparty,
are
as
follows:
See
Note
1(c)
regarding
derivative
financial
instruments. 
See
Abbreviations
on
page
39
.
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)
Franklin
Mutual
European
Fund
Counterparty
BNY.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
$3,690
$(3,690)
$—
$—
$—
BOFA
....................
63,992
(38,574)
—
—
25,418
HSBK
...................
309,355
(309,355)
—
—
—
SSBT
....................
—
—
—
—
—
UBSW
...................
73,362
(73,362)
—
—
—
Total
...................
$450,399
$(424,981)
$
—
$—
$25,418
1
Amounts
Not
Offset
in
the
Statement
of
Assets
and
Liabilities
Gross
Amounts
of
Liabilities
Presented
in
the
Statement
of
Assets
and
Liabilities
Financial
Instruments
Available
for
Offset
Financial
Instruments
Collateral
Pledged
a,b
Cash
Collateral
Pledged
Net
Amount
(Not
less
than
zero)
Franklin
Mutual
European
Fund
Counterparty
BNY.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
$68,229
$(3,690)
$—
$—
$64,539
BOFA
....................
38,574
(38,574)
—
—
—
HSBK
...................
3,062,310
(309,355)
(2,174,798)
—
578,157
SSBT
....................
6,045,754
—
(6,045,754)
—
—
UBSW
...................
7,008,652
(73,362)
(6,935,290)
—
—
Total
...................
$16,223,519
$(424,981)
$(15,155,842)
$—
$642,696
a
In
some
instances,
the
collateral
amounts
disclosed
in
the
table
above
were
adjusted
due
to
the
requirement
to
limit
the
collateral
amounts
to
avoid
the
effect
of
over
collateralization.
Actual
collateral
received
and/or
pledged
may
be
more
than
the
amounts
disclosed
herein.
b
See
the
accompanying
Statement
of
Investments
for
securities
pledged
as
collateral
for
derivatives.
11.
Other
Derivative
Information
(continued)
Franklin
Mutual
Series
Funds
Notes
to
Financial
Statements
37
franklintempleton.com
Annual
Report
Franklin
Mutual
European
Fund
(continued)
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,
2020,
investments
in
“affiliated
companies”
were
as
follows:
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
5,
2021.
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
5,
2021,
the
Borrowers
renewed
the
Global
Credit
Facility
for
a
one
year
term,
maturing
February
4,
2022,
for
a
total
of
$2.675
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,
2020,
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)
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
Investment
Income
Franklin
Mutual
European
Fund
Controlled
Affiliates
a
Dividends
Euro
Wagon
LP
..........
$
—
$
—
$
—
$
—
$
—
$
—
16,127,149
$
—
Total
Affiliated
Securities
(Value
is
—%
of
Net
Assets)
$—
$—
$—
$—
$—
$—
$—
a
Issuer
in
which
the
Fund
owns
25%
or
more
of
the
outstanding
voting
securities.
Franklin
Mutual
Series
Funds
Notes
to
Financial
Statements
38
franklintempleton.com
Annual
Report
Franklin
Mutual
European
Fund
(continued)
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,
2020,
in
valuing
the
Fund's
assets
and
liabilities
carried
at
fair
value,
is
as
follows:
A
reconciliation
in
which
Level
3
inputs
are
used
in
determining
fair
value
is
presented
when
there
are
significant
Level
3
assets
and/or
liabilities
at
the
beginning
and/or
end
of
the
yea
r
.
Level
1
Level
2
Level
3
Total
Franklin
Mutual
European
Fund
Assets:
Investments
in
Securities:
Common
Stocks
:
Aerospace
&
Defense
...................
$
—
$
14,899,237
$
—
$
14,899,237
Auto
Components
......................
—
24,265,734
—
24,265,734
Banks
...............................
—
47,562,912
—
47,562,912
Beverages
...........................
15,425,782
22,566,141
—
37,991,923
Chemicals
...........................
—
48,800,403
—
48,800,403
Commercial
Services
&
Supplies
...........
—
20,079,155
—
20,079,155
Construction
&
Engineering
...............
—
9,857,750
—
9,857,750
Construction
Materials
..................
—
47,981,679
—
47,981,679
Diversified
Telecommunication
Services
.....
—
48,832,982
—
48,832,982
Electrical
Equipment
....................
2,381,289
—
—
2,381,289
Energy
Equipment
&
Services
.............
8,070,955
—
—
8,070,955
Health
Care
Providers
&
Services
..........
—
19,148,597
—
19,148,597
Hotels,
Restaurants
&
Leisure
.............
—
21,956,948
—
21,956,948
Household
Durables
....................
—
17,661,460
—
17,661,460
Household
Products
....................
—
19,507,666
—
19,507,666
Industrial
Conglomerates
................
—
15,996,727
—
15,996,727
Insurance
............................
8,193,367
63,602,911
—
71,796,278
Machinery
............................
—
22,977,933
—
22,977,933
Oil,
Gas
&
Consumable
Fuels
.............
—
49,780,261
—
49,780,261
Pharmaceuticals
.......................
—
53,891,020
—
53,891,020
Road
&
Rail
..........................
—
—
—
a
—
Software
.............................
—
18,170,666
—
18,170,666
Textiles,
Apparel
&
Luxury
Goods
..........
—
21,360,740
—
21,360,740
Tobacco
.............................
—
20,124,603
—
20,124,603
Trading
Companies
&
Distributors
..........
—
48,481,399
—
48,481,399
Wireless
Telecommunication
Services
.......
—
12,767,330
—
12,767,330
Preferred
Stocks
........................
—
22,066,658
—
22,066,658
Warrants
..............................
122,855
—
—
122,855
Short
Term
Investments
...................
22,896,674
2,000,000
—
24,896,674
Total
Investments
in
Securities
...........
$57,090,922
$714,340,912
$—
$771,431,834
Other
Financial
Instruments:
Forward
exchange
contracts
...............
$
—
$
450,399
$
—
$
450,399
Total
Other
Financial
Instruments
.........
$—
$450,399
$—
$450,399
Liabilities:
Other
Financial
Instruments:
Forward
exchange
contracts
................
$
—
$
16,223,519
$
—
$
16,223,519
Futures
contracts
........................
2,704,047
—
—
2,704,047
Total
Other
Financial
Instruments
.........
$2,704,047
$16,223,519
$—
$18,927,566
a
Includes
securities
determined
to
have
no
value
at
December
31,
2020.
14.
Fair
Value
Measurements
(continued)
Franklin
Mutual
Series
Funds
Notes
to
Financial
Statements
39
franklintempleton.com
Annual
Report
Franklin
Mutual
European
Fund
(continued)
15.
New
Accounting
Pronouncements
In
March
2020,
the
Financial
Accounting
Standards
Board
issued
Accounting
Standards
Update
(ASU)
No.
2020-04,
Reference
Rate
Reform
(Topic
848)
–
Facilitation
of
the
Effects
of
Reference
Rate
Reform
on
Financial
Reporting.
The
amendments
in
the
ASU
provides
optional
temporary
financial
reporting
relief
from
the
effect
of
certain
types
of
contract
modifications
due
to
the
planned
discontinuation
of
the
London
Interbank
Offered
Rate
(LIBOR)
and
other
interbank-offered
based
reference
rates
as
of
the
end
of
2021.
The
ASU
is
effective
for
certain
reference
rate-related
contract
modifications
that
occur
during
the
period
March
12,
2020
through
December
31,
2022. Management
has
reviewed
the
requirements
and
believes
the
adoption
of
this
ASU
will
not
have
a
material
impact
on
the
financial
statements.
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
BNY
Bank
of
New
York
Mellon
(The)
BOFA
Bank
of
America
NA
HSBK
HSBC
Bank
plc
SSBT
State
Street
Bank
and
Trust
Co.
UBSW
UBS
AG
Currency
EUR
Euro
GBP
British
Pound
USD
United
States
Dollar
Selected
Portfolio
ADR
American
Depositary
Receipt
FHLB
Federal
Home
Loan
Banks
Franklin
Mutual
Series
Funds
Report
of
Independent
Registered
Public
Accounting
Firm
40
franklintempleton.com
Annual
Report
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,
2020,
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,
2020,
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,
2020,
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
23,
2021
Franklin
Mutual
Series
Funds
Tax
Information
(unaudited)
41
franklintempleton.com
Annual
Report
1.
Qualified
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.
Franklin
Mutual
European
Fund
Under
Section
854(b)(1)(B)
of
the
Internal
Revenue
Code,
the
Fund
hereby
reports
the
maximum
amount
allowable
but
no
less
than
$26,866,183
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,
2020.
Distributions,
including
qualified
dividend
income,
paid
during
calendar
year
2020
will
be
reported
to
shareholders
on
Form
1099-DIV
by
mid-February
2021.
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,
2020,
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
17,
2020,
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.
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
during
the
prior
calendar
year. Shareholders
are
advised
to
check
with
their
tax
advisors
for
information
on
the
treatment
of
these
amounts
on
their
income
tax
returns.
Class
Foreign
Tax
Paid
Per
Share
Foreign
Source
Income
Per
Share
Foreign
Source
Qualified
Dividends
Per
Share
Class
Z
...........................................
$0.0034
$0.4387
$0.3808
Class
A
...........................................
$0.0034
$0.3755
$0.3260
Class
C
...........................................
$0.0034
$0.2314
$0.2009
Class
R
...........................................
$0.0034
$0.3700
$0.3212
Class
R6
..........................................
$0.0034
$0.4650
$0.4037
Franklin
Mutual
Series
Funds
Board
Members
and
Officers
42
franklintempleton.com
Annual
Report
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
11
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)
Trustee
and
Chairperson
Trustee
since
1995
and
Chairperson
since
2020
30
Ares
Capital
Corporation
(specialty
finance
company)
(2010-present),
United
Natural
Foods,
Inc.
(distributor
of
natural,
organic
and
specialty
foods)
(2013-present),
formerly
,
Allied
Capital
Corporation
(financial
services)
(2003-
2010),
SLM
Corporation
(Sallie
Mae)
(1997-2014)
and
Navient
Corporation
(loan
management,
servicing
and
asset
recovery)
(2014-2016).
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
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)
Trustee
Since
2002
11
Franklin
Templeton
Emerging
Markets
Debt
Opportunities
Fund
PLC
(1999-present)
and
formerly
,
Fiduciary
International
Ireland
Limited
(1999-2015).
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:
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.
Franklin
Mutual
Series
Funds
43
franklintempleton.com
Annual
Report
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
Jan
Hopkins
Trachtman
(1947)
Trustee
Since
2009
11
FinTech
Acquisition
Corp.
III
(special
purpose
fintech
acquisition
company)
(2018-present)
and
FTAC
Olympus
Acquisition
Corp.
(special
purpose
fintech
acquisition
company)
(August
2020-present).
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:
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.
Keith
Mitchell
(1954)
Trustee
Since
2009
11
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)
Trustee
Since
2015
30
Hess
Midstream
LP
(oil
and
gas
midstream
infrastructure)
(2017-present).
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:
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).
Robert
E.
Wade
(1946)
Trustee
Since
1991
30
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
11
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).
Independent
Board
Members
(continued)
Franklin
Mutual
Series
Funds
44
franklintempleton.com
Annual
Report
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
136
None
One
Franklin
Parkway
San
Mateo,
CA
94403-1906
Principal
Occupation
During
at
Least
the
Past
5
Years:
Executive
Chairman,
Chairman
of
the
Board
and
Director,
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
,
Chief
Executive
Officer
(2013-2020)
and
President
(1994-2015),
Franklin
Resources,
Inc.
**Peter
A.
Langerman
(1955)
Trustee,
President,
and
Chief
Executive
Officer
–
Investment
Management
Trustee
since
2007,
President,
and
Chief
Executive
Officer
–
Investment
Management
since
2005
6
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:
Executive
Vice
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
Vice
President
Since
2012
Not
Applicable
Not
Applicable
One
Franklin
Parkway
San
Mateo,
CA
94403-1906
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)
Chief
Compliance
Officer
Since
October
2020
Not
Applicable
Not
Applicable
280
Park
Avenue
New
York,
NY
10017
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)
Vice
President
and
Secretary
Vice
President
since
2009
and
Secretary
since
2005
Not
Applicable
Not
Applicable
One
Franklin
Parkway
San
Mateo,
CA
94403-1906
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)
Chief
Executive
Officer
–
Finance
and
Administration
Since
2017
Not
Applicable
Not
Applicable
One
Franklin
Parkway
San
Mateo,
CA
94403-1906
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).
Franklin
Mutual
Series
Funds
45
franklintempleton.com
Annual
Report
*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.
Note
2:
Effective
October
17,
2020,
Charles
Rubens,
II
ceased
to
be
a
trustee
of
the
Trust.
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
Ann
Torre
Bates
and
David
W.
Niemiec
as
an
audit
committee
financial
expert.
The
Board
believes
that
Ms.
Bates
and
Mr.
Niemiec
qualify
as
such
an
expert
in
view
of
their
extensive
business
background
and
experience.
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
Partners
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
Ms.
Bates
and
Mr.
Niemiec
have
each
acquired
an
understanding
of
generally
accepted
accounting
principles
and
financial
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
G.
Kubilis
(1973)
Chief
Financial
Officer,
Chief
Accounting
Officer
and
Treasurer
Since
2012
Not
Applicable
Not
Applicable
300
S.E.
2nd
Street
Fort
Lauderdale,
FL
33301-
1923
Principal
Occupation
During
at
Least
the
Past
5
Years:
Treasurer,
U.S.
Fund
Administration
&
Reporting
and
officer
of
39
of
the
investment
companies
in
Franklin
Templeton.
Robert
Lim
(1948)
Vice
President
–
AML
Compliance
Since
2016
Not
Applicable
Not
Applicable
One
Franklin
Parkway
San
Mateo,
CA
94403-1906
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
41
of
the
investment
companies
in
Franklin
Templeton.
Navid
J.
Tofigh
(1972)
Vice
President
Since
2015
Not
Applicable
Not
Applicable
One
Franklin
Parkway
San
Mateo,
CA
94403-1906
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)
Vice
President
Since
2005
Not
Applicable
Not
Applicable
One
Franklin
Parkway
San
Mateo,
CA
94403-1906
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)
Vice
President
Since
2011
Not
Applicable
Not
Applicable
300
S.E.
2nd
Street
Fort
Lauderdale,
FL
33301-
1923
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.
Interested
Board
Members
and
Officers
(continued)
Franklin
Mutual
Series
Funds
46
franklintempleton.com
Annual
Report
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.
Ms.
Bates
and
Mr.
Niemiec
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.
Interested
Board
Members
and
Officers
(continued)
Franklin
Mutual
Series
Funds
Shareholder
Information
47
franklintempleton.com
Annual
Report
Proxy
Voting
Policies
and
Procedures
The
Fund’s
investment
manager
has
established
Proxy
Voting
Policies
and
Procedures
(Policies)
that
the
Fund
uses
to
determine
how
to
vote
proxies
relating
to
portfolio
securities.
Shareholders
may
view
the
Fund’s
complete
Policies
online
at
franklintempleton.com.
Alternatively,
shareholders
may
request
copies
of
the
Policies
free
of
charge
by
calling
the
Proxy
Group
collect
at
(954)
527-
7678
or
by
sending
a
written
request
to:
Franklin
Templeton
Companies,
LLC,
300
S.E.
2nd
Street,
Fort
Lauderdale,
FL
33301,
Attention:
Proxy
Group.
Copies
of
the
Fund’s
proxy
voting
records
are
also
made
available
online
at
franklintempleton.com
and
posted
on
the
U.S.
Securities
and
Exchange
Commission’s
website
at
sec.gov
and
reflect
the
most
recent
12-month
period
ended
June
30.
Quarterly
Statement
of
Investments
The
Trust,
on
behalf
of
the
Fund,
files
a
complete
statement
of
investments
with
the
U.S.
Securities
and
Exchange
Commission
for
the
first
and
third
quarters
for
each
fiscal
year
as
an
exhibit
to
its
report
on
Form
N-PORT.
Shareholders
may
view
the
filed
Form
N-PORT
by
visiting
the
Commission’s
website
at
sec.gov.
The
filed
form
may
also
be
viewed
and
copied
at
the
Commission’s
Public
Reference
Room
in
Washington,
DC.
Information
regarding
the
operations
of
the
Public
Reference
Room
may
be
obtained
by
calling
(800)
SEC-0330.
Householding
of
Reports
and
Prospectuses
You
will
receive,
or
receive
notice
of
the
availability
of,
the
Fund's
financial
reports
every
six
months.
In
addition,
you
will
receive
an
annual
updated
summary
prospectus
(detail
prospectus
available
upon
request).
To
reduce
Fund
expenses,
we
try
to
identify
related
shareholders
in
a
household
and
send
only
one
copy
of
the
financial
reports
(to
the
extent
received
by
mail)
and
summary
prospectus.
This
process,
called
“householding,”
will
continue
indefinitely
unless
you
instruct
us
otherwise.
If
you
prefer
not
to
have
these
documents
householded,
please
call
us
at
(800)
632-2301.
At
any
time
you
may
view
current
prospectuses/
summary
prospectuses
and
financial
reports
on
our
website.
If
you
choose,
you
may
receive
these
documents
through
electronic
delivery.
478
A
02/21
©
2021
Franklin
Templeton
Investments.
All
rights
reserved.
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)
DIAL
BEN
®
/
342-5236
franklintempleton.com
(800)
632-2301
-
(Class
A,
C,
R
&
R6)
(800)
448-FUND
-
(Class
Z)
Annual
Report
and
Shareholder
Letter
Franklin
Mutual
Financial
Services
Fund
A
Series
of
Franklin
Mutual
Series
Funds
December
31,
2020
Sign
up
for
electronic
delivery
at
franklintempleton.com/edelivery
Not
FDIC
Insured
May
Lose
Value
No
Bank
Guarantee
franklintempleton.com
Not
part
of
the
annual
report
1
SHAREHOLDER
LETTER
Dear
Franklin
Mutual
Financial
Services
Fund
Shareholder:
2020
was
a
year
that
felt
like
it
contained
several
different
years
within
it.
There
were
periods
of
stability
and
dramatic
moves
down
and
up
in
financial
markets.
The
year
ended
with
surging
stock
prices
despite
an
ongoing
pandemic.
If
one
had
gone
to
sleep
on
December
31,
2019,
and
woke
up
on
December
31,
2020,
a
quick
glance
at
the
MSCI
World
Index
(USD),
which
was
up
+16.50%
for
the
12
months,
might
cause
one
to
think
this
was
just
another
good
year
in
a
long
bull
market.
1
But
for
those
of
us
who
lived
through
it,
2020
was
chaotic
and
memorable.
The
year
began
with
a
continuation
of
trends
from
2019.
Accommodative
central
bank
policy
was
supporting
a
resilient
economy,
which
displayed
modest
growth.
Then
COVID-19
exploded
from
a
regional
issue
into
a
global
pandemic.
The
response
to
the
spread
of
the
virus
was
lockdown
and
physical
distancing
measures
in
attempts
to
flatten
the
curve
of
the
contagion.
Consumer
and
business
spending
fell,
and
manufacturing
and
other
activity
came
to
a
virtual
halt.
This
led
to
a
dramatic
share
price
plunge
in
equity
markets.
In
response,
governments
acted
directly
through
fiscal
policy
and
central
banks,
using
a
whatever-it-takes
approach
to
stabilize
economies.
The
efforts
worked
and
were
reflected
by
market
stabilization
and
the
beginning
of
a
recovery
in
prices.
Markets
continued
to
rally
in
the
second
half
of
the
year
on
signs
of
global
economic
resilience
despite
widespread
shutdowns.
Investor
sentiment
was
buoyed
by
hopes
for
continued
stimulus
measures,
very
positive
developments
on
the
vaccine
front
and
U.S.
presidential
election
results.
Valuations
were
also
supported
by
investors’
willingness
to
look
through
the
current
situation
to
2021
and
beyond,
when
widespread
vaccinations
are
expected
to
become
available
and
reignite
global
economies.
During
the
year,
there
was
significant
market
volatility
and
continued
variance
between
the
performance
of
growth
equities
and
value
equities.
Many
growth
stocks
benefited
from
the
changes
in
work
and
life
caused
by
the
pandemic
and
continued
to
grow
during
the
year.
As
a
result,
the
MSCI
World
Growth
Index
(USD)
ended
the
year
up
+34.18%,
while
the
MSCI
World
Value
Index
(USD)
recovered
from
the
spring
selloff,
but
trailed
its
growth
counterpart,
ending
the
year
down
-0.38%
for
the
12
months
ended
December
31,
2020.
1
Market
volatility
and
economic
uncertainty
can
often
present
what
we
consider
opportunities.
During
periods
of
market
fluctuation,
we
used
our
bottom-up,
fundamentally
driven
investment
process
to
add
select
positions
to
the
portfolio
that
historically
had
not
met
our
investment
criteria.
However,
given
the
decline
in
price,
these
stocks
were
now,
in
our
opinion,
attractively
valued.
We
also
moved
capital
between
existing
positions
to
reflect
market
shifts.
We
were
encouraged
to
see
value
equities
do
quite
well
in
the
fourth
quarter
on
both
an
absolute
and
relative
basis.
Our
expectation
is
that
earnings
will
continue
to
improve
for
the
overall
market
as
2021
progresses
and
COVID
vaccinations
allow
for
accelerated
reopening
of
the
global
economy.
We
would
expect
many
of
our
value
holdings
to
benefit
from
such
a
scenario.
It
is
important
to
remember
that
the
market
historically
rewards
investors
who
take
a
long-term
perspective.
To
that
end,
we
recognize
the
importance
of
financial
advisors
in
today’s
markets
and
encourage
investors
to
continue
to
seek
their
advice.
Amid
changing
markets
and
economic
conditions,
we
are
confident
investors
with
a
well-diversified
portfolio
and
a
patient,
long-term
outlook
should
be
well-positioned
for
the
years
ahead.
This
is
my
first
letter
to
you
as
president
and
chief
investment
officer
of
Franklin
Mutual
Series.
I
have
been
director
of
research
and
a
portfolio
manager
for
Franklin
Mutual
Series
since
January
2010
and
have
worked
with
Peter
Langerman,
chairman
and
chief
executive
officer
of
Franklin
Mutual
Series,
to
steward
the
platform.
I
want
to
thank
Peter
for
his
significant
contributions
and
30+
years
of
dedicated
service
and
leadership.
I
look
forward
to
working
with
Peter
through
mid-2021
to
complete
the
leadership
transition,
and
I
wish
him
the
very
best
in
his
well-deserved
retirement.
On
the
following
pages,
the
portfolio
management
team
reviews
investment
decisions
that
pertain
to
performance
during
the
past
12
months
considering
the
economic
environment
and
other
factors.
Please
remember
all
securities
markets
fluctuate,
as
do
mutual
fund
share
prices.
1.
Source:
Morningstar.
See
www.franklintempletondatasources.com
for
additional
data
provider
information.
franklintempleton.com
Not
part
of
the
annual
report
2
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,
Christian
Correa,
CFA
President
and
Chief
Investment
Officer
Franklin
Mutual
Advisers,
LLC
This
letter
reflects
our
analysis
and
opinions
as
of
December
31,
2020
,
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
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.
CFA
®
is
a
trademark
owned
by
CFA
Institute.
3
franklintempleton.com
Annual
Report
ANNUAL
REPORT
Franklin
Mutual
Financial
Services
Fund
This
annual
report
for
Franklin
Mutual
Financial
Services
Fund
covers
the
fiscal
year
ended
December
31,
2020
.
Your
Fund’s
Goal
and
Main
Investments
The
Fund
seeks
capital
appreciation,
which
may
occasionally
be
short
term.
Its
secondary
goal
is
income.
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
undervalued
equity
securities,
mainly
common
stocks
with
a
current
focus
on
mid-
and
large
cap
companies.
To
a
significantly
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
table
on
this
page
lists
the
leading
countries
where
the
Fund
invests.
Performance
Overview
The
Fund’s
Class
Z
shares
posted
a
-6.70%
cumulative
total
return
for
the
12
months
ended
December
31,
2020.
For
comparison,
the
Fund’s
new
primary
benchmark,
the
MSCI
World
Financials
Index-NR
(USD),
which
captures
large
and
midcap
representation
across
developed
market
countries,
posted
a
-2.84%
total
return,
while
its
former
primary
benchmark,
the
MSCI
World
Financials
Index
(USD),
posted
a
-2.17%
total
return.
1
Also
for
comparison,
the
Standard
&
Poor’s
500
(S&P
500
®
)
Financials
Index,
which
tracks
financials
stocks
in
the
S&P
500,
posted
a
-1.69%
total
return.
1
The
MSCI
World
Financials
Index-NR
(USD)
is
replacing
the
MSCI
World
Financials
Index
(USD)
as
the
Fund’s
primary
benchmark.
The
investment
manager
believes
that
the
actual
tax
withholding
rates
for
the
Fund
are
closer
to
the
assumptions
of
the
MSCI
World
Financials
Index-NR
(USD;
net
of
taxes
on
dividends)
than
the
MSCI
World
Financials
Index
(USD;
gross
of
taxes
on
dividends).
You
can
find
more
of
the
Fund’s
performance
data
in
the
Performance
Summary
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
equities,
as
measured
by
the
MSCI
All
Country
World
Index
(USD),
posted
a
+16.82%
total
return
for
the
12
months
ended
December
31,
2020.
1
Stocks
fell
sharply
in
early
2020
as
many
investors
sold
equities
amid
fears
of
a
global
economic
slowdown
due
to
the
novel
coronavirus
(COVID-19)
pandemic.
Global
equities
began
to
rebound
in
late
March
2020
amid
optimism
about
economic
stimulus
measures,
easing
lockdown
restrictions,
and
vaccine
and
treatment
development.
Despite
declines
in
September
and
October
due
to
geopolitical
tensions
and
rising
infection
rates,
markets
rebounded
in
November
and
December,
as
positive
sentiment
about
successful
trials
of
COVID-19
vaccines,
Geographic
Composition
12/31/20
%
of
Total
Net
Assets
United
States
44.4%
Netherlands
10.3%
United
Kingdom
10.0%
Italy
7.3%
Germany
3.6%
France
3.2%
Austria
3.0%
Japan
3.0%
Switzerland
2.6%
Jordan
2.5%
Spain
2.3%
Ireland
2.3%
China
2.0%
India
1.1%
Short-Term
Investments
&
Other
Net
Assets
2.4%
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.
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
.
Franklin
Mutual
Financial
Services
Fund
4
franklintempleton.com
Annual
Report
the
beginning
of
vaccination
programs
in
some
countries
and
apparent
resolution
of
political
uncertainty
supported
markets.
In
the
U.S.,
pandemic-related
restrictions
caused
stiff
economic
headwinds,
including
mass
layoffs
that
drove
the
unemployment
rate
to
14.8%
in
April
2020.
2
According
to
the
National
Bureau
of
Economic
Research,
the
longest
U.S.
economic
expansion
in
history
ended
in
February,
and
the
country
slipped
into
a
deep
recession.
Equities
began
to
rebound
in
the
spring
amid
the
government’s
fiscal
and
monetary
stimulus
measures,
declining
jobless
claims,
rising
retail
sales
and
optimism
about
treatments
and
potential
vaccines
for
COVID-19.
Following
a
record
annualized
decline
in
second-quarter
gross
domestic
product
(GDP),
resilient
consumer
spending
helped
drive
third-quarter
GDP
to
expand
at
a
record
annualized
rate,
although
growth
slowed
in
the
fourth
quarter.
Equities
continued
to
rise
during
the
summer
but
declined
in
the
fall
due
to
concerns
about
possible
new
restrictions
amid
rising
COVID-19
infection
rates
and
uncertainties
about
additional
fiscal
stimulus
and
the
U.S.
presidential
election.
Despite
signs
that
the
economic
recovery
was
stalling
as
the
unemployment
rate
remained
relatively
high
(6.7%
at
period-end)
and
consumer
spending
declined,
stocks
rallied
in
November
and
December,
buoyed
by
the
outcome
of
the
U.S.
presidential
election,
the
start
of
COVID-19
vaccination
programs
and
the
passage
of
a
new
U.S.
stimulus
bill.
2
In
an
effort
to
support
the
economy,
the
U.S.
Federal
Reserve
(Fed)
lowered
the
federal
funds
target
rate
to
a
range
of
0.00%–0.25%
in
March
2020.
The
Fed
also
enacted
quantitative
easing
measures
aimed
at
ensuring
credit
flows
to
borrowers
and
supporting
credit
markets
with
open-
ended
bond
purchasing.
Furthermore,
the
Fed
signaled
that
interest
rates
would
potentially
remain
low,
even
if
inflation
moderately
exceeded
its
2%
target.
In
the
eurozone,
the
economy
contracted
again
in
the
fourth
quarter
of
2020,
following
quarter-on-quarter
expansion
in
the
third
quarter
and
contractions
in
the
first
and
second
quarters.
After
several
months
of
gains
due
to
easing
restrictions
and
robust
stimulus
measures,
European
developed
market
equities,
as
measured
by
the
MSCI
Europe
Index
(USD),
declined
in
September
and
October
as
rising
infection
rates
heightened
investor
concerns
that
the
nascent
economic
revival
could
stall.
Nevertheless,
successful
vaccine
development
and
a
Brexit
resolution
supported
European
developed
market
equities,
as
measured
by
the
MSCI
Europe
Index
(USD),
to
post
a
+5.93%
total
return
for
the
period.
1
Asian
developed
and
emerging
market
equities,
as
measured
by
the
MSCI
All
Country
Asia
Index
(USD),
posted
a
+21.30%
total
return
for
the
12
months
under
review.
1
Although
pandemic-related
lockdowns
derailed
economic
growth
in
early
2020,
sharp
market
declines
were
followed
by
rebounds
as
China’s
economy,
a
key
driver
of
the
region’s
economic
activity,
recovered
from
the
contraction
in
the
first
quarter
and
expanded
during
the
rest
of
2020.
Asian
stocks
rose
as
the
region’s
economies
reopened,
aided
by
robust
stimulus
measures
and
optimism
that
economic
revitalization
would
be
further
spurred
by
COVID-19
vaccines.
Global
emerging
market
stocks,
as
measured
by
the
MSCI
Emerging
Markets
Index
(USD),
posted
a
+18.69%
total
return
for
the
period,
despite
steep
pandemic-related
declines
in
early
2020,
benefiting
from
improving
economic
activity,
stabilizing
oil
prices
and
U.S.
dollar
weakness.
1
In
spite
of
higher
COVID-19
cases
in
some
countries,
emerging
market
stocks
rallied
near
the
end
of
2020,
bolstered
by
easing
political
uncertainty,
commencement
of
COVID-19
vaccinations
and
rising
commodity
prices.
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
Portfolio
Composition
12/31/20
%
of
Total
Net
Assets
Banks
41.4%
Insurance
35.8%
Diversified
Financial
Services
6.9%
Capital
Markets
6.8%
Consumer
Finance
3.3%
Household
Durables
2.3%
Thrifts
&
Mortgage
Finance
1.1%
Other
0.0%
*
Short-Term
Investments
&
Other
Net
Assets
2.4%
*
Rounds
to
less
than
0.1%
2.
Source:
U.S.
Bureau
of
Labor
Statistics.
See
www.franklintempletondatasources.com
for
additional
data
provider
information.
Franklin
Mutual
Financial
Services
Fund
5
franklintempleton.com
Annual
Report
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.
Our
portfolio
selection
process
generally
includes
an
assessment
of
the
potential
impacts
of
any
material
environmental,
social
and
governance
(ESG)
factors
on
the
long-term
risk
and
return
profile
of
a
company.
In
addition,
it
is
our
practice
to
hedge
the
Fund’s
currency
exposure
when
we
deem
it
advantageous
for
our
shareholders.
Manager’s
Discussion
A
year
ago,
we
reflected
on
a
decade
of
overall
equity
market
strength
and
solid,
but
weaker,
returns
for
our
value
equity
investing
strategy.
2020
turned
out
to
be
an
amplification
of
this
performance
gap,
rather
than
a
correction.
The
year
started
with
a
continuation
of
strong
performance
from
market-darling
growth
stocks.
The
gap
exploded
as
COVID-19
led
to
lockdowns
and
people
working
from
home.
The
market
leaders
often
benefited
from
these
changes,
with
technology
tools
being
adopted
more
quickly
than
before.
Meanwhile,
the
lockdowns
and
disruption
severely
impacted
many
companies
thought
of
as
value
stocks.
Even
as
central
banks
and
governments
across
the
globe
acted
through
fiscal
and
monetary
stimulus
measures,
the
recovery
came
slowly
and
only
accelerated
when
the
prospects
of
an
effective
vaccine
helped
markets
understand
when
the
health
crisis
might
be
over.
By
the
end
of
2020,
the
MSCI
World
Value
Index
(USD)
had
recovered
to
be
almost
flat,
with
a
-0.38%
return.
1
However,
growth
stocks
advanced
substantially
further,
as
evidenced
by
the
MSCI
World
Growth
Index
(USD),
ending
the
year
up
+34.18%.
1
Many
signs
of
increased
speculation
in
the
market
have
appeared,
with
a
surge
in
the
number
of
IPOs
not
seen
since
the
tech
bubble
and
a
boom
in
special
purpose
acquisition
companies
(SPACs),
a
type
of
company
which
raises
money
in
anticipation
of
finding
profitable
investment
opportunities.
There
is
no
guarantee
that
some
speculation
will
not
be
profitable,
but
we
try
to
look
past
the
speculation
and
continue
to
see
attractive
values
in
various
parts
of
the
market.
Our
traditional
value
equity
investment
approach
is
complemented
with
two
other
strategies,
distressed
investing
and
merger
arbitrage.
We
were
active
in
both
during
2020.
Within
merger
arbitrage,
which
involves
trading
the
stocks
of
companies
involved
in
a
merger
or
acquisition
(M&A),
activity
has
climbed
in
tandem
with
increasing
confidence
about
an
end
to
the
pandemic
crisis.
Significant
new
deals
have
been
announced
and
some
present
attractive
investment
opportunities.
In
addition,
the
deals
which
were
impacted
by
the
emergence
of
the
coronavirus
have
seen
renegotiated
terms
and
moved
toward
amicable
resolution.
We
expect
an
ongoing
acceleration
of
M&A
activity
given
a
recovering
economy,
strong
markets,
and
the
hope
for
increasing
regulatory
and
trade
predictability
under
the
incoming
U.S.
administration.
Within
our
distressed
credit
strategy,
we
targeted
companies
and
industries
directly
impacted
by
the
coronavirus
pandemic.
The
robust
government
fiscal
and
monetary
interventions
have
limited
the
number
of
attractive
options,
but
we
found
opportunities
in
the
energy
sector
and
the
retail
and
travel
industries.
As
the
vaccine
news
arrived
and
liquidity
remained
strong,
the
opportunities
have
become
more
limited.
We
expect
to
see
fewer
new
distressed
debt
opportunities
than
the
merger
arbitrage
opportunities
discussed
above.
Fund
Performance
Turning
to
Fund
performance,
top
positive
contributors
included
Credito
Valtellinese,
BRP
Group
and
Deutche
Bank.
Credito
Valtellinese
and
Deutche
Bank
are
listed
among
the
Fund’s
largest
positions
in
the
Top
10
Holdings
table
on
this
page.
The
stock
of
Italy-based
lender
Credito
Valtellinese
contributed
to
performance
during
the
period.
The
year
began
on
a
positive
note,
with
management
adjusting
2019
full-year
profit
figures
upward
in
February
and
alluding
to
the
possibility
of
restarting
dividend
payments
in
the
near
future.
Top
10
Holdings
12/31/20
Issuer
Industry
,
Country
%
of
Total
Net
Assets
a
a
Credito
Valtellinese
SpA
5.5%
Banks,
Italy
Voya
Financial
Inc
4.9%
Diversified
Financial
Services
Hartford
Financial
Services
Group
Inc
/The
4.7%
Insurance
ASR
Nederland
NV
4.2%
Insurance,
Netherlands
NN
Group
NV
4.0%
Insurance,
Netherlands
Alleghany
Corp
3.8%
Insurance
Everest
Re
Group
Ltd
3.7%
Insurance
Deutsche
Bank
AG
3.7%
Capital
Markets,
Germany
Capital
One
Financial
Corp
3.3%
Consumer
Finance
Citizens
Financial
Group
Inc
3.2%
Banks
Franklin
Mutual
Financial
Services
Fund
6
franklintempleton.com
Annual
Report
However,
the
stock
slid
in
March
during
the
market-wide
COVID-19
decline.
First-quarter
results
helped
to
support
the
stock
price.
The
company
reported
gains
on
the
sale
of
its
pawn
loan
business
and
flat
consumer
loan
figures.
As
the
economies
in
China
and
Europe
reopened
over
the
summer,
European
banks
rallied.
In
November,
the
lender’s
stock
price
increased
further
as
investors
reacted
positively
to
the
news
that
France-based
Credit
Agricole
had
offered
to
purchase
Credito
Valtellinese.
The
Fund
acquired
its
shares
of
U.S.-based
BRP
Group
in
a
secondary
offering
in
June
2020.
The
company
is
an
independent
distributor
of
insurance
products
focusing
on
niche
products
in
select
geographies
across
the
U.S.
The
new
equity
was
used
to
finance
a
string
of
acquisitions
in
the
second
half
of
2020,
which
we
expect
to
drive
future
revenue
and
earnings
growth.
Germany-based
Deutsche
Bank,
which
specializes
in
corporate
banking
and
investment
services,
experienced
price
fluctuation
during
the
period
but
rallied
to
outperform
for
the
year.
The
COVID-19
downturn
in
February
and
March
put
downward
pressure
on
the
stock
price,
but
the
bank
quickly
came
off
the
March
floor,
buoyed
by
first-quarter
results
that
beat
expectations.
The
company
saw
healthy
year-over-year
net
revenue
increases
in
both
its
investment
banking
and
corporate
banking
divisions.
Deutsche
Bank
returned
to
profitability
in
the
third
quarter,
bolstered
by
its
investment
banking
division,
and
the
stock
price
rallied
during
the
last
several
months
of
the
year.
During
the
period
under
review,
Fund
investments
that
detracted
from
performance
included
American
International
Group
(AIG),
Wells
Fargo
and
AIB
Group.
The
stock
price
of
U.S.-based
insurer
AIG
fell
from
mid-
February
through
late
March.
The
declining
valuation
was
fueled
by
investor
concerns
regarding
the
coronavirus
outbreak
and
operating
shortfalls
in
fourth-quarter
earnings.
An
uncertain
environment
and
changes
in
leadership
and
business
strategy
continued
to
affect
the
company
throughout
the
remainder
of
the
year,
culminating
in
the
announcement
of
the
spinoff
of
its
life
insurance
business
and
a
change
in
leadership.
We
have
since
exited
the
position.
The
performance
of
U.S.-based
diversified
financial
services
company
Wells
Fargo
was
affected
by
the
regulatory
restrictions
placed
on
it
following
the
account
opening
scandal,
particularly
the
ability
to
grow
the
size
of
its
balance
sheet
freely.
These
limits
negatively
impacted
the
company
in
March
when
a
flurry
of
companies
rushed
to
draw
on
their
credit
lines
to
strengthen
their
liquidity
positions
as
the
effects
of
the
pandemic
became
more
tangible.
After
the
March
downturn,
COVID-related
uncertainty
and
interest-
rate
declines
continued
to
hinder
the
organization,
leading
management
to
revise
its
forward
guidance
several
times
throughout
the
year.
First-quarter
earnings
fell
short
of
expectations,
and
Wells
Fargo
posted
a
second-quarter
loss,
although
much
of
it
was
due
to
the
bank’s
massive
contribution
to
its
loan
loss
reserves.
The
company
also
drastically
cut
its
dividend.
During
the
third
quarter,
headline
earnings
fell
short
of
expectations,
but
many
of
the
costs
incurred
during
the
quarter
were
associated
with
restructuring,
which
management
expects
will
reduce
costs
in
2021.
In
addition
to
shedding
its
student
loan
business
in
2020,
the
company
looks
forward
to
streamlining
its
business
model
further
in
the
year
ahead.
AIB
Group,
a
large,
Ireland-based
financial
services
provider,
also
known
as
Allied
Irish
Banks,
faced
considerable
uncertainty
during
the
period,
which
created
headwinds
for
the
stock
price.
Initially,
the
stock
fell
early
in
the
year
based
on
investor
concerns
regarding
the
COVID-19
pandemic
and
the
related
economic
effects.
The
continued
low
interest-rate
environment,
combined
with
the
threat
of
a
disorderly
Brexit,
provided
additional
sources
of
investor
anxiety.
AIB
Group
beat
consensus
expectations
in
the
first
quarter,
but
its
outlook
for
growth
prospects
has
been
severely
diminished
by
the
economic
environment.
We
have
sold
our
position.
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
negative
overall
impact
on
the
Fund’s
performance
as
the
U.S.
dollar
fell
against
most
currencies
during
the
period.
As
fellow
shareholders,
we
found
recent
absolute
and
relative
performance
disappointing,
but
our
strategy
of
seeking
undervalued
stocks
can
lag
the
growth
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.
Franklin
Mutual
Financial
Services
Fund
7
franklintempleton.com
Annual
Report
Thank
you
for
your
participation
in
Franklin
Mutual
Financial
Services
Fund.
We
look
forward
to
continuing
to
serve
your
investment
needs.
Andrew
B.
Dinnhaupt,
CFA
Co-Portfolio
Manager
Luis
Hernandez
Co-Portfolio
Manager
The
foregoing
information
reflects
our
analysis,
opinions
and
portfolio
holdings
as
of
December
31,
2020
,
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.
Performance
Summary
as
of
December
31,
2020
Franklin
Mutual
Financial
Services
Fund
8
franklintempleton.com
Annual
Report
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
12/31/20
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
.
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
.
Share
Class
Cumulative
Total
Return
1
Average
Annual
Total
Return
2
–
Z
1-Year
-6.70%
-6.70%
5-Year
+18.23%
+3.41%
10-Year
+94.65%
+6.89%
A
3
1-Year
-6.95%
-12.06%
5-Year
+16.73%
+1.98%
10-Year
+89.33%
+5.99%
See
page
10
for
Performance
Summary
footnotes.
Franklin
Mutual
Financial
Services
Fund
Performance
Summary
9
franklintempleton.com
Annual
Report
See
page
10
for
Performance
Summary
footnotes.
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
(1/1/11–
12/31/20
)
Class
A
(1/1/11–
12/31/20
)
Franklin
Mutual
Financial
Services
Fund
Performance
Summary
10
franklintempleton.com
Annual
Report
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
uncertainty
concerning
the
economic
consequences
of
the
departure
of
the
U.K.
from
the
European
Union
may
increase
market
volatility.
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.
Unexpected
events
and
their
after-
maths,
such
as
the
spread
of
deadly
diseases;
natural,
environmental
or
man-made
disasters;
financial,
political
or
social
disruptions;
terrorism
and
war;
and
other
tragedies
or
catastrophes,
can
cause
investor
fear
and
panic,
which
can
adversely
affect
the
economies
of
many
companies,
sectors,
nations,
regions
and
the
market
in
general,
in
ways
that
cannot
necessarily
be
foreseen.
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
market
countries.
Net
Returns
(NR)
include
income
net
of
tax
withholding
when
dividends
are
paid.
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.
Distributions
(1/1/20–12/31/20)
Share
Class
Net
Investment
Income
Z
$0.3528
A
$0.3037
C
$0.1284
R6
$0.3820
Total
Annual
Operating
Expenses
5
Share
Class
Z
1.10%
A
1.35%
Your
Fund’s
Expenses
Franklin
Mutual
Financial
Services
Fund
11
franklintempleton.com
Annual
Report
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.
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
184/366
to
reflect
the
one-half
year
period.
2.
Reflects
expenses
after
fee
waivers
and
expense
reimbursements.
Does
not
include
acquired
fund
fees
and
expenses.
Actual
(actual
return
after
expenses)
Hypothetical
(5%
annual
return
before
expenses)
Share
Class
Beginning
Account
Value
7/1/20
Ending
Account
Value
12/31/20
Expenses
Paid
During
Period
7/1/20–12/31/20
1,
2
Ending
Account
Value
12/31/20
Expenses
Paid
During
Period
7/1/20–12/31/20
1,
2
a
Net
Annualized
Expense
Ratio
2
Z
$1,000
$1,291.19
$6.62
$1,019.41
$5.84
1.15%
A
$1,000
$1,288.66
$8.05
$1,018.15
$7.10
1.40%
C
$1,000
$1,283.88
$12.34
$1,014.38
$10.89
2.15%
R6
$1,000
$1,292.09
$5.87
$1,020.06
$5.18
1.02%
Franklin
Mutual
Series
Funds
Financial
Highlights
Franklin
Mutual
Financial
Services
Fund
franklintempleton.com
Annual
Report
The
accompanying
notes
are
an
integral
part
of
these
financial
statements.
12
a
Year
Ended
December
31,
2020
2019
2018
2017
2016
Class
Z
Per
share
operating
performance
(for
a
share
outstanding
throughout
the
year)
Net
asset
value,
beginning
of
year
...................
$22.78
$19.46
$24.14
$21.65
$19.63
Income
from
investment
operations
a
:
Net
investment
income
b
.........................
0.18
0.38
0.38
c
0.22
0.31
d
Net
realized
and
unrealized
gains
(losses)
...........
(1.72)
3.38
(4.37)
2.76
2.00
Total
from
investment
operations
....................
(1.54)
3.76
(3.99)
2.98
2.31
Less
distributions
from:
Net
investment
income
..........................
(0.35)
(0.44)
(0.17)
(0.49)
(0.29)
Net
realized
gains
.............................
—
—
(0.52)
—
—
Total
distributions
...............................
(0.35)
(0.44)
(0.69)
(0.49)
(0.29)
Net
asset
value,
end
of
year
.......................
$20.89
$22.78
$19.46
$24.14
$21.65
Total
return
....................................
(6.70)%
19.32%
(16.49)%
13.77%
11.79%
Ratios
to
average
net
assets
Expenses
e
....................................
1.14%
f
1.10%
1.09%
f
1.09%
1.13%
f
Net
investment
income
...........................
0.99%
1.80%
1.61%
c
0.95%
1.64%
d
Supplemental
data
Net
assets,
end
of
year
(000’s)
.....................
$104,183
$139,189
$142,212
$210,825
$162,687
Portfolio
turnover
rate
............................
28.18%
17.06%
33.11%
67.89%
34.58%
a
The
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
repurchas-
es
of
the
Fund’s
shares
in
relation
to
income
earned
and/or
fluctuating
fair
value
of
the
investments
of
the
Fund.
b
Based
on
average
daily
shares
outstanding.
c
Net
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
hold-
ings.
Excluding
this
amount,
the
ratio
of
net
investment
income
to
average
net
assets
would
have
been
1.29%.
d
Net
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
hold-
ings.
Excluding
this
amount,
the
ratio
of
net
investment
income
to
average
net
assets
would
have
been
1.38%.
e
Benefit
of
expense
reduction
rounds
to
less
than
0.01%.
f
Benefit
of
waiver
and
payments
by
affiliates
rounds
to
less
than
0.01%.
Franklin
Mutual
Series
Funds
Financial
Highlights
Franklin
Mutual
Financial
Services
Fund
(continued)
franklintempleton.com
The
accompanying
notes
are
an
integral
part
of
these
financial
statements.
Annual
Report
13
a
Year
Ended
December
31,
2020
2019
2018
2017
2016
Class
A
Per
share
operating
performance
(for
a
share
outstanding
throughout
the
year)
Net
asset
value,
beginning
of
year
...................
$22.85
$19.52
$24.21
$21.70
$19.69
Income
from
investment
operations
a
:
Net
investment
income
b
.........................
0.26
0.33
0.31
c
0.16
0.26
d
Net
realized
and
unrealized
gains
(losses)
...........
(1.86)
3.38
(4.36)
2.78
1.99
Total
from
investment
operations
....................
(1.60)
3.71
(4.05)
2.94
2.25
Less
distributions
from:
Net
investment
income
..........................
(0.30)
(0.38)
(0.12)
(0.43)
(0.24)
Net
realized
gains
.............................
—
—
(0.52)
—
—
Total
distributions
...............................
(0.30)
(0.38)
(0.64)
(0.43)
(0.24)
Net
asset
value,
end
of
year
.......................
$20.95
$22.85
$19.52
$24.21
$21.70
Total
return
e
...................................
(6.95)%
19.06%
(16.72)%
13.55%
11.46%
Ratios
to
average
net
assets
Expenses
f
.....................................
1.39%
g
1.35%
1.34%
g
1.34%
1.38%
g
Net
investment
income
...........................
1.42%
1.55%
1.36%
c
0.70%
1.39%
d
Supplemental
data
Net
assets,
end
of
year
(000’s)
.....................
$209,222
$278,968
$298,878
$368,850
$346,008
Portfolio
turnover
rate
............................
28.18%
17.06%
33.11%
67.89%
34.58%
a
The
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
repurchas-
es
of
the
Fund’s
shares
in
relation
to
income
earned
and/or
fluctuating
fair
value
of
the
investments
of
the
Fund.
b
Based
on
average
daily
shares
outstanding.
c
Net
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
hold-
ings.
Excluding
this
amount,
the
ratio
of
net
investment
income
to
average
net
assets
would
have
been
1.04%.
d
Net
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
hold-
ings.
Excluding
this
amount,
the
ratio
of
net
investment
income
to
average
net
assets
would
have
been
1.13%.
e
Total
return
does
not
reflect
sales
commissions
or
contingent
deferred
sales
charges,
if
applicable.
f
Benefit
of
expense
reduction
rounds
to
less
than
0.01%.
g
Benefit
of
waiver
and
payments
by
affiliates
rounds
to
less
than
0.01%.
Franklin
Mutual
Series
Funds
Financial
Highlights
Franklin
Mutual
Financial
Services
Fund
(continued)
franklintempleton.com
Annual
Report
The
accompanying
notes
are
an
integral
part
of
these
financial
statements.
14
a
Year
Ended
December
31,
2020
2019
2018
2017
2016
Class
C
Per
share
operating
performance
(for
a
share
outstanding
throughout
the
year)
Net
asset
value,
beginning
of
year
...................
$22.65
$19.32
$24.08
$21.60
$19.61
Income
from
investment
operations
a
:
Net
investment
income
(loss)
b
....................
0.12
0.18
0.15
c
(0.01)
0.12
d
Net
realized
and
unrealized
gains
(losses)
...........
(1.86)
3.32
(4.33)
2.74
1.96
Total
from
investment
operations
....................
(1.74)
3.50
(4.18)
2.73
2.08
Less
distributions
from:
Net
investment
income
..........................
(0.13)
(0.17)
(0.06)
(0.25)
(0.09)
Net
realized
gains
.............................
—
—
(0.52)
—
—
Total
distributions
...............................
(0.13)
(0.17)
(0.58)
(0.25)
(0.09)
Net
asset
value,
end
of
year
.......................
$20.78
$22.65
$19.32
$24.08
$21.60
Total
return
e
...................................
(7.66)%
18.15%
(17.35)%
12.66%
10.64%
Ratios
to
average
net
assets
Expenses
f
.....................................
2.14%
g
2.10%
2.09%
g
2.09%
2.13%
g
Net
investment
income
(loss)
......................
0.69%
0.80%
0.61%
c
(0.05)%
0.64%
d
Supplemental
data
Net
assets,
end
of
year
(000’s)
.....................
$27,498
$46,132
$58,610
$134,117
$128,766
Portfolio
turnover
rate
............................
28.18%
17.06%
33.11%
67.89%
34.58%
a
The
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
repurchas-
es
of
the
Fund’s
shares
in
relation
to
income
earned
and/or
fluctuating
fair
value
of
the
investments
of
the
Fund.
b
Based
on
average
daily
shares
outstanding.
c
Net
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
hold-
ings.
Excluding
this
amount,
the
ratio
of
net
investment
income
to
average
net
assets
would
have
been
0.29%.
d
Net
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
hold-
ings.
Excluding
this
amount,
the
ratio
of
net
investment
income
to
average
net
assets
would
have
been
0.38%.
e
Total
return
does
not
reflect
sales
commissions
or
contingent
deferred
sales
charges,
if
applicable.
f
Benefit
of
expense
reduction
rounds
to
less
than
0.01%.
g
Benefit
of
waiver
and
payments
by
affiliates
rounds
to
less
than
0.01%.
Franklin
Mutual
Series
Funds
Financial
Highlights
Franklin
Mutual
Financial
Services
Fund
(continued)
franklintempleton.com
The
accompanying
notes
are
an
integral
part
of
these
financial
statements.
Annual
Report
15
a
Year
Ended
December
31,
2020
2019
2018
2017
2016
Class
R6
Per
share
operating
performance
(for
a
share
outstanding
throughout
the
year)
Net
asset
value,
beginning
of
year
...................
$22.93
$19.58
$24.30
$21.79
$19.76
Income
from
investment
operations
a
:
Net
investment
income
b
.........................
0.33
0.42
0.41
c
0.25
0.32
d
Net
realized
and
unrealized
gains
(losses)
...........
(1.85)
3.40
(4.41)
2.78
2.03
Total
from
investment
operations
....................
(1.52)
3.82
(4.00)
3.03
2.35
Less
distributions
from:
Net
investment
income
..........................
(0.38)
(0.47)
(0.20)
(0.52)
(0.32)
Net
realized
gains
.............................
—
—
(0.52)
—
—
Total
distributions
...............................
(0.38)
(0.47)
(0.72)
(0.52)
(0.32)
Net
asset
value,
end
of
year
.......................
$21.03
$22.93
$19.58
$24.30
$21.79
Total
return
....................................
(6.57)%
19.51%
(16.41)%
13.92%
11.93%
Ratios
to
average
net
assets
Expenses
before
waiver
and
payments
by
affiliates
......
1.16%
1.05%
1.06%
0.97%
0.99%
Expenses
net
of
waiver
and
payments
by
affiliates
e
......
1.02%
0.97%
0.97%
0.95%
0.96%
Net
investment
income
...........................
1.83%
1.93%
1.73%
c
1.09%
1.81%
d
Supplemental
data
Net
assets,
end
of
year
(000’s)
.....................
$2,191
$2,931
$3,371
$4,523
$2,601
Portfolio
turnover
rate
............................
28.18%
17.06%
33.11%
67.89%
34.58%
a
The
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
repurchas-
es
of
the
Fund’s
shares
in
relation
to
income
earned
and/or
fluctuating
fair
value
of
the
investments
of
the
Fund.
b
Based
on
average
daily
shares
outstanding.
c
Net
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
hold-
ings.
Excluding
this
amount,
the
ratio
of
net
investment
income
to
average
net
assets
would
have
been
1.41%.
d
Net
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
hold-
ings.
Excluding
this
amount,
the
ratio
of
net
investment
income
to
average
net
assets
would
have
been
1.55%.
e
Benefit
of
expense
reduction
rounds
to
less
than
0.01%.
Franklin
Mutual
Series
Funds
Statement
of
Investments,
December
31,
2020
Franklin
Mutual
Financial
Services
Fund
franklintempleton.com
Annual
Report
The
accompanying
notes
are
an
integral
part
of
these
financial
statements.
16
a
a
Country
Shares
a
Value
a
a
a
a
a
a
Common
Stocks
97.6%
Banks
41.4%
a
AB&T
Financial
Corp.
..................................
United
States
226,100
$
146,965
Bank
of
America
Corp.
.................................
United
States
177,900
5,392,149
b
Barclays
plc
.........................................
United
Kingdom
5,293,941
10,620,919
c
BAWAG
Group
AG,
144A,
Reg
S
..........................
Austria
220,031
10,234,699
b
BNP
Paribas
SA
......................................
France
207,416
10,950,392
CaixaBank
SA
........................................
Spain
3,048,869
7,836,759
Citizens
Financial
Group,
Inc.
............................
United
States
306,300
10,953,288
b
Credito
Valtellinese
SpA
................................
Italy
1,326,719
18,900,606
First
Horizon
Corp.
....................................
United
States
688,929
8,790,734
b
ING
Groep
NV
.......................................
Netherlands
774,367
7,200,239
JPMorgan
Chase
&
Co.
.................................
United
States
40,780
5,181,915
PNC
Financial
Services
Group,
Inc.
(The)
...................
United
States
29,600
4,410,400
Shinsei
Bank
Ltd.
.....................................
Japan
271,911
3,359,148
Southern
National
Bancorp
of
Virginia,
Inc.
..................
United
States
649,760
7,868,593
b
Standard
Chartered
plc
.................................
United
Kingdom
1,058,417
6,721,379
Synovus
Financial
Corp.
................................
United
States
278,511
9,015,401
b
UniCredit
SpA
........................................
Italy
663,877
6,220,383
Wells
Fargo
&
Co.
.....................................
United
States
273,370
8,250,307
142,054,276
Capital
Markets
6.8%
Credit
Suisse
Group
AG
................................
Switzerland
683,381
8,823,049
b
Deutsche
Bank
AG
....................................
Germany
1,140,770
12,547,827
c
Guotai
Junan
Securities
Co.
Ltd.,
H,
144A,
Reg
S
.............
China
1,396,063
2,034,306
23,405,182
Consumer
Finance
3.3%
Capital
One
Financial
Corp.
.............................
United
States
113,510
11,220,464
Diversified
Financial
Services
6.9%
M&G
plc
............................................
United
Kingdom
2,499,279
6,746,476
Voya
Financial,
Inc.
....................................
United
States
288,250
16,951,983
23,698,459
Household
Durables
2.3%
b
Cairn
Homes
plc
......................................
Ireland
6,659,782
7,786,950
Insurance
35.8%
Alleghany
Corp.
......................................
United
States
21,447
12,947,339
ASR
Nederland
NV
....................................
Netherlands
356,410
14,260,932
b
Brighthouse
Financial,
Inc.
..............................
United
States
50,400
1,824,732
b
BRP
Group,
Inc.,
A
....................................
United
States
141,661
4,245,580
China
Pacific
Insurance
Group
Co.
Ltd.,
H
...................
China
1,238,600
4,842,896
b
Conduit
Holdings
Ltd.
..................................
United
States
1,295,000
8,916,311
Direct
Line
Insurance
Group
plc
..........................
United
Kingdom
2,378,533
10,403,767
Everest
Re
Group
Ltd.
.................................
United
States
54,700
12,804,723
Hartford
Financial
Services
Group,
Inc.
(The)
................
United
States
326,172
15,975,905
International
General
Insurance
Holdings
Ltd.
................
Jordan
1,062,755
8,587,060
MetLife,
Inc.
.........................................
United
States
162,770
7,642,051
NN
Group
NV
........................................
Netherlands
317,106
13,709,128
T&D
Holdings,
Inc.
....................................
Japan
563,469
6,665,192
122,825,616
Real
Estate
Management
&
Development
0.0%
†
b
Dolphin
Capital
Investors
Ltd.
............................
United
Kingdom
3,979,650
182,527
Franklin
Mutual
Series
Funds
Statement
of
Investments
Franklin
Mutual
Financial
Services
Fund
(continued)
franklintempleton.com
The
accompanying
notes
are
an
integral
part
of
these
financial
statements.
Annual
Report
17
a
a
Country
Shares
a
Value
a
a
a
a
a
a
Common
Stocks
(continued)
Thrifts
&
Mortgage
Finance
1.1%
Indiabulls
Housing
Finance
Ltd.
...........................
India
1,200,419
$
3,623,343
Total
Common
Stocks
(Cost
$322,619,542)
.....................................
334,796,817
Short
Term
Investments
2.3%
a
a
Country
Principal
Amount
*
a
Value
a
a
a
a
a
a
U.S.
Government
and
Agency
Securities
2.3%
d
FHLB,
1/04/21
.......................................
United
States
1,000,000
1,000,000
d
U.S.
Treasury
Bills
,
e
1/14/21
...........................................
United
States
1,500,000
1,499,985
e
1/28/21
...........................................
United
States
1,000,000
999,968
e
2/04/21
...........................................
United
States
400,000
399,985
e
4/01/21
...........................................
United
States
2,000,000
1,999,662
7/01/21
...........................................
United
States
2,000,000
1,999,257
6,898,857
Total
U.S.
Government
and
Agency
Securities
(Cost
$7,898,619)
..................
7,898,857
Total
Short
Term
Investments
(Cost
$7,898,619
)
.................................
7,898,857
a
Total
Investments
(Cost
$330,518,161)
99.9%
...................................
$342,695,674
Other
Assets,
less
Liabilities
0.1%
.............................................
397,992
Net
Assets
100.0%
...........................................................
$343,093,666
*
The
principal
amount
is
stated
in
U.S.
dollars
unless
otherwise
indicated.
†
Rounds
to
less
than
0.1%
of
net
assets.
a
See
Note
11
regarding
holdings
of
5%
voting
securities.
b
Non-income
producing.
c
Security
was
purchased
pursuant
to
Rule
144A
or
Regulation
S
under
the
Securities
Act
of
1933.
144A
securities
may
be
sold
in
transactions
exempt
from
registration
only
to
qualified
institutional
buyers
or
in
a
public
offering
registered
under
the
Securities
Act
of
1933.
Regulation
S
securities
cannot
be
sold
in
the
United
States
without
either
an
effective
registration
statement
filed
pursuant
to
the
Securities
Act
of
1933,
or
pursuant
to
an
exemption
from
registration.
At
December
31,
2020,
the
aggregate
value
of
these
securities
was
$12,269,005,
representing
3.6%
of
net
assets.
d
The
security
was
issued
on
a
discount
basis
with
no
stated
coupon
rate.
e
A
portion
or
all
of
the
security
has
been
segregated
as
collateral
for
open
forward
exchange
contracts.
At
December
31,
2020,
the
aggregate
value
of
these
securities
pledged
amounted
to
$3,706,733,
representing
1.1%
of
net
assets.
Franklin
Mutual
Series
Funds
Statement
of
Investments
Franklin
Mutual
Financial
Services
Fund
(continued)
franklintempleton.com
Annual
Report
The
accompanying
notes
are
an
integral
part
of
these
financial
statements.
18
At
December
31,
2020,
the
Fund
had
the
following futures
contracts
outstanding.
See
Note
1(c). 
At
December
31,
2020,
the
Fund
had
the
following
forward
exchange
contracts
outstanding.
See
Note
1
(
c
). 
Futures
Contracts
Description
Type
Number
of
Contracts
Notional
Amount
*
Expiration
Date
Value/
Unrealized
Appreciation
(Depreciation)
Foreign
exchange
contracts
Foreign
Exchange
EUR/USD
...................
Short
62
$
9,490,650
3/15/21
$
(55,933)
Foreign
Exchange
GBP/USD
...................
Short
112
9,561,300
3/15/21
(142,014)
Total
Futures
Contracts
......................................................................
$(197,947)
*
As
of
period
end.
Forward
Exchange
Contracts
Currency
Counter-
party
a
Type
Quantity
Contract
Amount
*
Settlement
Date
Unrealized
Appreciation
Unrealized
Depreciation
a
a
a
a
a
a
a
a
OTC
Forward
Exchange
Contracts
Euro
.............
HSBK
Sell
332,182
382,787
1/15/21
$
—
$
(23,141)
Euro
.............
SSBT
Sell
12,996,447
14,823,487
1/15/21
—
(1,058,215)
Euro
.............
UBSW
Sell
12,996,447
14,824,397
1/15/21
—
(1,057,304)
British
Pound
......
SSBT
Sell
2,359,738
2,959,105
1/19/21
—
(268,486)
British
Pound
......
UBSW
Buy
2,526,264
3,363,135
1/19/21
92,227
—
British
Pound
......
UBSW
Sell
166,526
210,895
1/19/21
—
(16,875)
British
Pound
......
BNY
Buy
1,395,928
1,862,998
2/16/21
46,702
—
British
Pound
......
BNY
Sell
2,682,768
3,536,291
2/16/21
—
(133,873)
British
Pound
......
HSBK
Buy
118,935
157,352
2/16/21
5,358
—
British
Pound
......
HSBK
Sell
14,908,208
19,454,989
2/16/21
—
(940,200)
British
Pound
......
SSBT
Sell
146,491
194,322
2/16/21
—
(6,085)
British
Pound
......
UBSW
Buy
3,453,736
4,627,501
2/16/21
97,385
—
British
Pound
......
UBSW
Sell
145,066
188,707
2/16/21
—
(9,750)
Japanese
Yen
......
BNY
Buy
7,521,567
72,638
2/16/21
242
—
Japanese
Yen
......
HSBK
Sell
1,017,820,545
9,795,401
2/16/21
—
(66,810)
Swiss
Franc
.......
HSBK
Sell
3,707,936
4,178,111
2/16/21
—
(15,562)
Swiss
Franc
.......
UBSW
Sell
3,707,936
4,176,897
2/16/21
—
(16,776)
Euro
.............
HSBK
Sell
240,000
292,291
2/23/21
—
(1,249)
Euro
.............
SSBT
Sell
1,852,979
2,213,513
2/23/21
—
(52,838)
Euro
.............
UBSW
Sell
8,208,444
9,737,572
2/23/21
—
(302,052)
Euro
.............
BOFA
Sell
30,406
36,086
4/07/21
—
(1,139)
Euro
.............
HSBK
Sell
1,186,785
1,410,687
4/07/21
—
(42,275)
Euro
.............
SSBT
Sell
369,471
438,229
4/07/21
—
(14,108)
Euro
.............
UBSW
Sell
8,014,287
9,495,916
4/07/21
—
(315,843)
British
Pound
......
HSBK
Sell
1,352,619
1,806,456
4/23/21
—
(44,648)
British
Pound
......
SSBT
Sell
45,604
61,103
4/23/21
—
(1,308)
British
Pound
......
UBSW
Sell
1,041,049
1,392,209
4/23/21
—
(32,500)
Total
Forward
Exchange
Contracts
...................................................
$241,914
$(4,421,037)
Net
unrealized
appreciation
(depreciation)
............................................
$(4,179,123)
*
In
U.S.
dollars
unless
otherwise
indicated.
Franklin
Mutual
Series
Funds
Statement
of
Investments
Franklin
Mutual
Financial
Services
Fund
(continued)
franklintempleton.com
The
accompanying
notes
are
an
integral
part
of
these
financial
statements.
Annual
Report
19
See
Note 10
regarding
other
derivative
information.
a
May
be
comprised
of
multiple
contracts
with
the
same
counterparty,
currency
and
settlement
date.
See
Abbreviations
on
page
36
.
Franklin
Mutual
Series
Funds
Financial
Statements
Statement
of
Assets
and
Liabilities
December
31,
2020
franklintempleton.com
Annual
Report
The
accompanying
notes
are
an
integral
part
of
these
financial
statements.
20
Franklin
Mutual
Financial
Services
Fund
Assets:
Investments
in
securities:
Cost
-
Unaffiliated
issuers
...................................................................
$328,291,406
Cost
-
Non-controlled
affiliates
(Note
3
f
and
11
)
...................................................
2,226,755
Value
-
Unaffiliated
issuers
..................................................................
$342,548,709
Value
-
Non-controlled
affiliates
(Note
3
f
and
11
)
..................................................
146,965
Cash
....................................................................................
4,467,370
Receivables:
Capital
shares
sold
........................................................................
149,808
Dividends
...............................................................................
539,426
European
Union
tax
reclaims
(Note
1
e
)
.........................................................
382,642
Deposits
with
brokers
for:
Futures
contracts
........................................................................
457,830
Variation
margin
on
futures
contracts
...........................................................
19,738
Unrealized
appreciation
on
OTC
forward
exchange
contracts
..........................................
241,914
Other
assets
..............................................................................
269,221
Total
assets
..........................................................................
349,223,623
Liabilities:
Payables:
Capital
shares
redeemed
...................................................................
359,762
Management
fees
.........................................................................
253,006
Distribution
fees
..........................................................................
67,437
Transfer
agent
fees
........................................................................
60,706
Trustees'
fees
and
expenses
.................................................................
35,674
IRS
closing
agreement
fees
for
European
Union
tax
reclaims
(Note
1
e
)
.................................
733,967
Unrealized
depreciation
on
OTC
forward
exchange
contracts
..........................................
4,421,037
Accrued
expenses
and
other
liabilities
...........................................................
198,368
Total
liabilities
.........................................................................
6,129,957
Net
assets,
at
value
.................................................................
$343,093,666
Net
assets
consist
of:
Paid-in
capital
.............................................................................
$395,242,734
Total
distributable
earnings
(losses)
.............................................................
(52,149,068)
Net
assets,
at
value
.................................................................
$343,093,666
Franklin
Mutual
Series
Funds
Financial
Statements
Statement
of
Assets
and
Liabilities
(continued)
December
31,
2020
franklintempleton.com
The
accompanying
notes
are
an
integral
part
of
these
financial
statements.
Annual
Report
21
Franklin
Mutual
Financial
Services
Fund
Class
Z:
Net
assets,
at
value
.......................................................................
$104,183,188
Shares
outstanding
........................................................................
4,987,386
Net
asset
value
and
maximum
offering
price
per
share
.............................................
$20.89
Class
A:
Net
assets,
at
value
.......................................................................
$209,221,682
Shares
outstanding
........................................................................
9,984,597
Net
asset
value
per
share
a
..................................................................
$20.95
Maximum
offering
price
per
share
(net
asset
value
per
share
÷
94.50%)
................................
$22.17
Class
C:
Net
assets,
at
value
.......................................................................
$27,497,803
Shares
outstanding
........................................................................
1,322,967
Net
asset
value
and
maximum
offering
price
per
share
a
.............................................
$20.78
Class
R6:
Net
assets,
at
value
.......................................................................
$2,190,993
Shares
outstanding
........................................................................
104,182
Net
asset
value
and
maximum
offering
price
per
share
.............................................
$21.03
a
Redemption
price
is
equal
to
net
asset
value
less
contingent
deferred
sales
charges,
if
applicable.
Franklin
Mutual
Series
Funds
Financial
Statements
Statement
of
Operations
for
the
year
ended
December
31,
2020
franklintempleton.com
Annual
Report
The
accompanying
notes
are
an
integral
part
of
these
financial
statements.
22
Franklin
Mutual
Financial
Services
Fund
Investment
income:
Dividends:
(net
of
foreign
taxes
of
$385,577)
Unaffiliated
issuers
........................................................................
$8,757,973
Non-controlled
affiliates
(Note
3
f
and
11
)
........................................................
1,150
Interest:
Unaffiliated
issuers
........................................................................
72,120
Income
from
securities
loaned:
Unaffiliated
entities
(net
of
fees
and
rebates)
.....................................................
710
Other
income
(Note
1
e
)
......................................................................
419,699
Less:
IRS
closing
agreement
fees
for
European
Union
tax
reclaims
(Note
1
e
)
..............................
(733,967)
Total
investment
income
...................................................................
8,517,685
Expenses:
Management
fees
(Note
3
a
)
...................................................................
2,859,244
Distribution
fees:
(Note
3c
)
    Class
A
................................................................................
493,011
    Class
C
................................................................................
293,811
Transfer
agent
fees:
(Note
3e
)
    Class
Z
................................................................................
154,740
    Class
A
................................................................................
310,486
    Class
C
................................................................................
45,786
    Class
R6
...............................................................................
3,416
Custodian
fees
(Note
4
)
......................................................................
5,305
Reports
to
shareholders
......................................................................
72,434
Registration
and
filing
fees
....................................................................
67,384
Professional
fees
...........................................................................
135,188
Trustees'
fees
and
expenses
..................................................................
23,230
Other
....................................................................................
51,922
Total
expenses
.........................................................................
4,515,957
Expense
reductions
(Note
4
)
...............................................................
(1,692)
Expenses
waived/paid
by
affiliates
(Note
3
f
and
3
g
)
..............................................
(2,894)
Net
expenses
.........................................................................
4,511,371
Net
investment
income
................................................................
4,006,314
Realized
and
unrealized
gains
(losses):
Net
realized
gain
(loss)
from:
Investments:
Unaffiliated
issuers
......................................................................
(40,642,329)
Foreign
currency
transactions
................................................................
13,511
Forward
exchange
contracts
.................................................................
(5,603,660)
Futures
contracts
.........................................................................
(1,429,523)
Net
realized
gain
(loss)
..................................................................
(47,662,001)
Net
change
in
unrealized
appreciation
(depreciation)
on:
Investments:
Unaffiliated
issuers
......................................................................
(3,071,094)
Non-controlled
affiliates
(Note
3
f
and
11
)
......................................................
37,307
Translation
of
other
assets
and
liabilities
denominated
in
foreign
currencies
..............................
120,740
Forward
exchange
contracts
.................................................................
(1,144,092)
Futures
contracts
.........................................................................
92,819
Net
change
in
unrealized
appreciation
(depreciation)
............................................
(3,964,320)
Net
realized
and
unrealized
gain
(loss)
............................................................
(51,626,321)
Net
increase
(decrease)
in
net
assets
resulting
from
operations
..........................................
$(47,620,007)
Franklin
Mutual
Series
Funds
Financial
Statements
Statements
of
Changes
in
Net
Assets
franklintempleton.com
The
accompanying
notes
are
an
integral
part
of
these
financial
statements.
Annual
Report
23
Franklin
Mutual
Financial
Services
Fund
Year
Ended
December
31,
2020
Year
Ended
December
31,
2019
Increase
(decrease)
in
net
assets:
Operations:
Net
investment
income
.................................................
$4,006,314
$7,499,710
Net
realized
gain
(loss)
.................................................
(47,662,001)
4,459,602
Net
change
in
unrealized
appreciation
(depreciation)
...........................
(3,964,320)
72,985,025
Net
increase
(decrease)
in
net
assets
resulting
from
operations
................
(47,620,007)
84,944,337
Distributions
to
shareholders:
Class
Z
.............................................................
(1,737,034)
(2,651,907)
Class
A
.............................................................
(3,028,717)
(4,583,542)
Class
C
.............................................................
(172,058)
(357,699)
Class
R6
............................................................
(39,029)
(62,332)
Total
distributions
to
shareholders
..........................................
(4,976,838)
(7,655,480)
Capital
share
transactions:
(Note
2
)
Class
Z
.............................................................
(19,671,087)
(25,248,222)
Class
A
.............................................................
(38,992,744)
(65,850,270)
Class
C
.............................................................
(12,372,390)
(21,041,157)
Class
R6
............................................................
(493,087)
(1,001,103)
Total
capital
share
transactions
............................................
(71,529,308)
(113,140,752)
Net
increase
(decrease)
in
net
assets
...................................
(124,126,153)
(35,851,895)
Net
assets:
Beginning
of
year
.......................................................
467,219,819
503,071,714
End
of
year
...........................................................
$343,093,666
$467,219,819
Franklin
Mutual
Series
Funds
Notes
to
Financial
Statements
Franklin
Mutual
Financial
Services
Fund
24
franklintempleton.com
Annual
Report
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 six 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.
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.
Franklin
Mutual
Series
Funds
Notes
to
Financial
Statements
25
franklintempleton.com
Annual
Report
Franklin
Mutual
Financial
Services
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. Events
can occur
between
the
time
at
which
trading
in
a
foreign
security
is
completed
and
4
p.m.
Eastern
time
that
might
call
into
question
the
reliability
of
the
value
of
a
portfolio
security
held
by
the
Fund.
As
a
result,
differences
may
arise
between
the
value
of
the
Fund's
portfolio
securities
as
determined
at
the
foreign
market
close
and
the
latest
indications
of
value
at
4
p.m.
Eastern
time. In
order
to
minimize
the
potential
for
these
differences,
an
independent
pricing
service
may
be
used
to
adjust
the
value
of
the
Fund's
portfolio
securities
to
the
latest
indications
of
fair
value
at
4
p.m.
Eastern
time.
At
December
31,
2020,
certain
securities
may
have
been
fair
valued
using
these
procedures,
in
which
case
the
securities
were
categorized
as
Level
2
inputs
within
the
fair
value
hierarchy.
See
the
Fair
Value
Measurements
note
for
more
information.
When
the
last
day
of
the
reporting
period
is
a
non-business
day,
certain
foreign
markets
may
be
open
on
those
days
that
the
Fund's
NAV
is
not
calculated,
which
could
result
in
differences
between
the
value
of
the
Fund's
portfolio
securities
on
the
last
business
day
and
the
last
calendar
day
of
the
reporting
period.
Any
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.
1.
Organization
and
Significant
Accounting
Policies
(continued)
a.
Financial
Instrument
Valuation 
(continued)
Franklin
Mutual
Series
Funds
Notes
to
Financial
Statements
26
franklintempleton.com
Annual
Report
Franklin
Mutual
Financial
Services
Fund
(continued)
Termination
events
applicable
to
the
counterparty
include
certain
deteriorations
in
the
credit
quality
of
the
counterparty.
Termination
events
applicable
to
the Fund
include
failure
of
the
Fund
to
maintain
certain
net
asset
levels
and/or
limit
the
decline
in
net
assets
over
various
periods
of
time.
In
the
event
of
default
or
early
termination,
the
ISDA
master
agreement
gives
the
non-defaulting
party
the
right
to
net
and
close-out
all
transactions
traded,
whether
or
not
arising
under
the
ISDA
agreement,
to
one
net
amount
payable
by
one
counterparty
to
the
other.
However,
absent
an
event
of
default
or
early
termination,
OTC
derivative
assets
and
liabilities
are
presented
gross
and
not
offset
in
the
Statement
of
Assets
and
Liabilities.
Early
termination
by
the
counterparty
may
result
in
an
immediate
payment
by
the
Fund
of
any
net
liability
owed
to
that
counterparty
under
the
ISDA
agreement.
Collateral
requirements
differ
by
type
of
derivative.
Collateral
or
initial
margin
requirements
are
set
by
the
broker
or
exchange
clearing
house
for
exchange
traded
and
centrally
cleared
derivatives.
Initial
margin
deposited
is
held
at
the
exchange
and
can
be
in
the
form
of
cash
and/or
securities.
For
OTC
derivatives
traded
under
an
ISDA
master
agreement,
posting
of
collateral
is
required
by
either
the
Fund
or
the
applicable
counterparty
if
the
total
net
exposure
of
all
OTC
derivatives
with
the
applicable
counterparty
exceeds
the
minimum
transfer
amount,
which
typically
ranges
from
$100,000
to
$250,000,
and
can
vary
depending
on
the
counterparty
and
the
type
of
the
agreement.
Generally,
collateral
is
determined
at
the
close
of
Fund
business
each
day
and
any
additional
collateral
required
due
to
changes
in
derivative
values
may
be
delivered
by
the
Fund
or
the
counterparty
the
next
business
day,
or
within
a
few
business
days.
Collateral
pledged
and/or
received
by
the
Fund
for
OTC
derivatives,
if
any,
is
held
in
segregated
accounts
with
the
Fund's
custodian/counterparty
broker
and
can
be
in
the
form
of
cash
and/or
securities.
Unrestricted
cash
may
be
invested
according
to
the
Fund's
investment
objectives.
To
the
extent
that
the
amounts
due
to
the
Fund
from
its
counterparties
are
not
subject
to
collateralization
or
are
not
fully
collateralized,
the
Fund
bears
the
risk
of
loss
from
counterparty
non-performance.
The
Fund
entered
into
exchange
traded
futures
contracts
primarily
to
manage
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
Lending
The
Fund
participates
in
an
agency
based
securities
lending
program
to
earn
additional
income.
The
Fund
receives
collateral
in
the
form
of
cash
and/or
U.S.
Government
and
Agency
securities
against
the
loaned
securities
in
an
amount
equal
to
at
least
102%
of
the
fair
value
of
the
loaned
securities.
Collateral
is
maintained
over
the
life
of
the
loan
in
an
amount
not
less
than
100%
of
the
fair
value
of
loaned
securities,
as
determined
at
the
close
of
Fund
business
each
day;
any
additional
collateral
required
due
to
changes
in
security
values
is
delivered
to
the
Fund
on
the
next
business
day.
Any
cash
collateral
received
is
deposited
into
a
joint
cash
account
with
other
funds
and
is
used
to
invest
in
a
money
market
fund
managed
by
Franklin
Advisers,
Inc.,
an
affiliate
of
the Fund,
and/or
a
joint
repurchase
agreement.
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 any
cash 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,
2020,
the Fund
had
no
securities
on
loan.
1.
Organization
and
Significant
Accounting
Policies
(continued)
c.
Derivative
Financial
Instruments
(continued)
Franklin
Mutual
Series
Funds
Notes
to
Financial
Statements
27
franklintempleton.com
Annual
Report
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.
In
the
event
that
EU
reclaims
received
by
the Fund
during
the
fiscal
year
exceed
foreign
withholding
taxes
paid,
and
the
Fund previously
passed
foreign
tax
credit
on
to
its
shareholders,
the Fund
will enter
into
a
closing
agreement
with
the
Internal
Revenue
Service
(IRS)
in
order
to
pay
the
associated
tax
liability
on
behalf
of
the Fund's
shareholders.
During
the
fiscal
year
ended
December
31,
2020,
the Fund
received
EU
reclaims
in
excess
of
the
foreign
taxes
paid
during
the
year.
The
Fund
determined
to
enter
into
a
closing
agreement
with
the
IRS
and
recorded
the
estimated
fees
as
a
reduction
to
income,
as
reflected
in
the
Statement
of
Operations.
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,
2020,
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
1.
Organization
and
Significant
Accounting
Policies
(continued)
Franklin
Mutual
Series
Funds
Notes
to
Financial
Statements
28
franklintempleton.com
Annual
Report
Franklin
Mutual
Financial
Services
Fund
(continued)
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.
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,
2020,
there
were
an
unlimited
number
of
shares
authorized
(without
par
value)
.
Transactions
in
the
Fund’s
shares
were
as
follows:
Year
Ended
December
31,
2020
Year
Ended
December
31,
2019
Shares
Amount
Shares
Amount
Class
Z
Shares:
Shares
sold
...................................
885,209
$15,601,988
812,603
$17,390,341
Shares
issued
in
reinvestment
of
distributions
..........
78,955
1,603,385
105,805
2,403,432
Shares
redeemed
...............................
(2,087,013)
(36,876,460)
(2,116,626)
(45,041,995)
Net
increase
(decrease)
..........................
(1,122,849)
$(19,671,087)
(1,198,218)
$(25,248,222)
Class
A
Shares:
Shares
sold
a
...................................
1,404,069
$23,829,027
938,834
$20,168,898
Shares
issued
in
reinvestment
of
distributions
..........
143,965
2,928,431
195,362
4,450,004
Shares
redeemed
...............................
(3,772,083)
(65,750,202)
(4,240,433)
(90,469,172)
Net
increase
(decrease)
..........................
(2,224,049)
$(38,992,744)
(3,106,237)
$(65,850,270)
Class
C
Shares:
Shares
sold
...................................
164,610
$2,798,831
185,573
$3,904,208
Shares
issued
in
reinvestment
of
distributions
..........
8,558
169,668
15,462
346,913
Shares
redeemed
a
..............................
(886,887)
(15,340,889)
(1,197,724)
(25,292,278)
Net
increase
(decrease)
..........................
(713,719)
$(12,372,390)
(996,689)
$(21,041,157)
Class
R6
Shares:
Shares
sold
...................................
68,045
$1,147,174
82,219
$1,781,383
Shares
issued
in
reinvestment
of
distributions
..........
1,907
39,029
2,727
62,332
Shares
redeemed
...............................
(93,598)
(1,679,290)
(129,250)
(2,844,818)
Net
increase
(decrease)
..........................
(23,646)
$(493,087)
(4,304)
$(1,001,103)
a
May
include
a
portion
of
Class
C
shares
that
were
automatically
converted
to
Class
A.
1.
Organization
and
Significant
Accounting
Policies
(continued)
f.
Security
Transactions,
Investment
Income,
Expenses
and
Distributions
(continued)
Franklin
Mutual
Series
Funds
Notes
to
Financial
Statements
29
franklintempleton.com
Annual
Report
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:
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:
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:
 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:
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
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
Class
A
....................................................................................
0.35%
Class
C
....................................................................................
1.00%
Franklin
Mutual
Series
Funds
Notes
to
Financial
Statements
30
franklintempleton.com
Annual
Report
Franklin
Mutual
Financial
Services
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,
2020,
the
Fund
paid
transfer
agent
fees
of
$514,428
of
which $242,443
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,
2020,
the
Fund
held
investments
in
affiliated
management
investment
companies
as
follows:
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
0.03%
based
on
the
average
net
assets
of
the
class
until
April
30,
2021.
Prior
to
May
1,
2020,
the
Class
R6
transfer
agent
fees
were
limited
to
0.02%.
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,
2020,
these
purchase
and
sale
transactions
aggregated
$1,233,191
and
$1,580,612,
respectively.
Sales
charges
retained
net
of
commissions
paid
to
unaffiliated
brokers/dealers
..............................
$27,533
CDSC
retained
..............................................................................
$2,796
    aa
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
Investment
Income
a      
a  
a  
a  
a  
a  
a  
a  
Franklin
Mutual
Financial
Services
Fund
Non-Controlled
Affiliates
Income
from
securities
loaned
Institutional
Fiduciary
Trust
-
Money
Market
Portfolio,
0%
.........
$—
$2,064,000
$(2,064,000)
$
—
$
—
$—
a
—
$—
Total
Affiliated
Securities
....
$—
$2,064,000
$(2,064,000)
$—
$—
$—
$—
a
As
of
December
31,
2020,
no
longer
held
by
the
Fund.
3.
Transactions
with
Affiliates
(continued)
d.
Sales
Charges/Underwriting
Agreements
(continued)
Franklin
Mutual
Series
Funds
Notes
to
Financial
Statements
31
franklintempleton.com
Annual
Report
Franklin
Mutual
Financial
Services
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,
2020,
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,
2020,
the
Fund’s
projected
benefit
obligation
and
benefit
payments
under
the
Plan
were
as
follows:
6.
Income
Taxes
For
tax
purposes,
capital
losses
may
be
carried
over
to
offset
future
capital
gains.
At
December
31,
2020,
the
capital
loss
carryforwards
were
as
follows:
The
tax
character
of
distributions
paid
during
the
years
ended
December
31,
2020
and
2019,
was
as
follows:
At
December
31,
2020,
the
cost
of
investments,
net
unrealized
appreciation
(depreciation)
and
undistributed
ordinary
income
for
income
tax
purposes
were
as
follows:
a
Projected
benefit
obligation
at
December
31,
2020
......
$35,674
b
Decrease
in
projected
benefit
obligation
..............
$(25)
Benefit
payments
made
to
retired
trustees
.............
$(335)
a
The
projected
benefit
obligation
is
included
in
trustees’
fees
and
expenses
in
the
Statement
of
Assets
and
Liabilities.
b
The
decrease
in
projected
benefit
obligation
is
included
in
trustees’
fees
and
expenses
in
the
Statement
of
Operations.
Capital
loss
carryforwards
not
subject
to
expiration:
Short
term
................................................................................
$11,141,755
Long
term
................................................................................
47,458,165
Total
capital
loss
carryforwards
...............................................................
$58,599,920
2020
2019
Distributions
paid
from:
Ordinary
income
..........................................................
$4,976,838
$7,655,480
Cost
of
investments
..........................................................................
$332,171,957
Unrealized
appreciation
........................................................................
$49,736,333
Unrealized
depreciation
........................................................................
(43,589,686)
Net
unrealized
appreciation
(depreciation)
..........................................................
$6,146,647
Distributable
earnings:
Undistributed
ordinary
income
...................................................................
$412,284
Franklin
Mutual
Series
Funds
Notes
to
Financial
Statements
32
franklintempleton.com
Annual
Report
Franklin
Mutual
Financial
Services
Fund
(continued)
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,
passive
foreign
investment
company
shares,
corporate
actions,
futures
contracts
and
wash
sales.
7.
Investment
Transactions
Purchases
and
sales
of
investments
(excluding
short
term
securities)
for
the
year
ended
December
31,
2020,
aggregated
$88,335,782
and
$160,718,861,
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.
Novel
Coronavirus
Pandemic 
The
global
outbreak
of
the
novel
coronavirus
disease,
known
as
COVID-19, has
caused
adverse
effects
on
many
companies,
sectors,
nations,
regions
and
the
markets
in
general, and
may
continue for
an unpredictable duration.
The
effects
of
this
pandemic
may
materially
impact
the
value
and
performance
of
the Fund, its ability
to
buy
and
sell
fund
investments
at
appropriate
valuations
and its ability
to
achieve its investment
objectives.
10.
Other
Derivative
Information
At
December
31,
2020,
investments
in
derivative
contracts
are
reflected
in
the
Statement of
Assets
and
Liabilities
as
follows:
For
the
year
ended
December
31,
2020,
the
effect
of
derivative
contracts
in
the
Statement
of
Operations
was
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
Franklin
Mutual
Financial
Services
Fund
Foreign
exchange
contracts
..
Variation
margin
on
futures
contracts
$
—
Variation
margin
on
futures
contracts
$
197,947
a
Unrealized
appreciation
on
OTC
forward
exchange
contracts
241,914
Unrealized
depreciation
on
OTC
forward
exchange
contracts
4,421,037
Total
....................
$241,914
$4,618,984
a
This
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.
6.
Income
Taxes
(continued)
Franklin
Mutual
Series
Funds
Notes
to
Financial
Statements
33
franklintempleton.com
Annual
Report
Franklin
Mutual
Financial
Services
Fund
(continued)
For
the
year
ended
December
31,
2020,
the
average
month
end
notional
amount
of
futures
contracts
represented
$25,771,851.
The
average
month
end
contract
value
of
forward
exchange
contracts
was
$151,959,645.
At
December
31,
2020,
the
Fund's
OTC
derivative
assets
and
liabilities
are
as
follows:
At
December
31,
2020,
OTC
derivative
asset
s,
which
may
be
offset
against
OTC
derivative
liabilities
and
collateral
received
from
the
counterparty,
are
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:
Franklin
Mutual
Financial
Services
Fund
Foreign
exchange
contracts
..
Futures
contracts
$(1,429,523)
Futures
contracts
$92,819
Forward
exchange
contracts
(5,603,660)
Forward
exchange
contracts
(1,144,092)
Total
....................
$(7,033,183)
$(1,051,273)
Gross
Amounts
of
Assets
and
Liabilities
Presented
in
the
Statement
of
Assets
and
Liabilities
Assets
a
Liabilities
a
Franklin
Mutual
Financial
Services
Fund
Derivatives
Forward
exchange
contracts
.............................
$
241,914
$
4,421,037
Total
.............................................
$241,914
$4,421,037
a
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.
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)
Franklin
Mutual
Financial
Services
Fund
Counterparty
BNY
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
$46,944
$(46,944)
$—
$—
$—
BOFA
....................
—
—
—
—
—
HSBK
...................
5,358
(5,358)
—
—
—
SSBT
....................
—
—
—
—
—
UBSW
...................
189,612
(189,612)
—
—
—
Total
...................
$241,914
$(241,914)
$
—
$—
$—
1
10.
Other
Derivative
Information
(continued)
Franklin
Mutual
Series
Funds
Notes
to
Financial
Statements
34
franklintempleton.com
Annual
Report
Franklin
Mutual
Financial
Services
Fund
(continued)
At
December
31,
2020,
OTC
derivative
liabilities,
which
may
be
offset
against
OTC
derivative
assets
and
collateral
pledged
to
the
counterparty,
are
as
follows:
See
Note
1(c)
regarding
derivative
financial
instruments. 
See
Abbreviations
on
page
36
.
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,
2020,
investments
in
“affiliated
companies”
were
as
follows:
Amounts
Not
Offset
in
the
Statement
of
Assets
and
Liabilities
Gross
Amounts
of
Liabilities
Presented
in
the
Statement
of
Assets
and
Liabilities
Financial
Instruments
Available
for
Offset
Financial
Instruments
Collateral
Pledged
a,b
Cash
Collateral
Pledged
Net
Amount
(Not
less
than
zero)
Franklin
Mutual
Financial
Services
Fund
Counterparty
BNY.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
$133,873
$(46,944)
$—
$—
$86,929
BOFA
....................
1,139
—
—
—
1,139
HSBK
...................
1,133,885
(5,358)
(825,898)
—
302,629
SSBT
....................
1,401,040
—
(1,263,914)
—
137,126
UBSW
...................
1,751,100
(189,612)
(1,561,488)
—
—
Total
...................
$4,421,037
$(241,914)
$(3,651,300)
$—
$527,823
a
In
some
instances,
the
collateral
amounts
disclosed
in
the
table
above
were
adjusted
due
to
the
requirement
to
limit
the
collateral
amounts
to
avoid
the
effect
of
over
collateralization. Actual
collateral
received
and/or
pledged
may
be
more
than
the
amounts
disclosed
herein.
b
See
the
accompanying
Statement
of
Investments
for
securities
pledged
as
collateral
for
derivatives.
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
Investment
Income
Franklin
Mutual
Financial
Services
Fund
Non-Controlled
Affiliates
Dividends
AB&T
Financial
Corp.
......
$
109,658
$
—
$
—
$
—
$
37,307
$
146,965
226,100
$
1,150
Total
Affiliated
Securities
(Value
is
0.0%
†
of
Net
Assets)
..............
$109,658
$—
$—
$
—
$
37,307
$146,965
$1,150
†
Rounds
to
less
than
0.1%
of
net
assets.
10.
Other
Derivative
Information
(continued)
Franklin
Mutual
Series
Funds
Notes
to
Financial
Statements
35
franklintempleton.com
Annual
Report
Franklin
Mutual
Financial
Services
Fund
(continued)
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
5,
2021.
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
5,
2021,
the
Borrowers
renewed
the
Global
Credit
Facility
for
a
one
year
term,
maturing
February
4,
2022,
for
a
total
of
$2.675
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,
2020,
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.
A
summary
of
inputs
used
as
of
December
31,
2020,
in
valuing
the
Fund's
assets
and
liabilities
carried
at
fair
value,
is
as
follows:
Level
1
Level
2
Level
3
Total
Franklin
Mutual
Financial
Services
Fund
Assets:
Investments
in
Securities:
Common
Stocks
:
Banks
...............................
$
60,009,752
$
82,044,524
$
—
$
142,054,276
Capital
Markets
........................
—
23,405,182
—
23,405,182
Consumer
Finance
.....................
11,220,464
—
—
11,220,464
Diversified
Financial
Services
.............
16,951,983
6,746,476
—
23,698,459
Household
Durables
....................
—
7,786,950
—
7,786,950
Insurance
............................
72,943,701
49,881,915
—
122,825,616
Real
Estate
Management
&
Development
....
—
182,527
—
182,527
Thrifts
&
Mortgage
Finance
...............
—
3,623,343
—
3,623,343
Short
Term
Investments
...................
6,898,857
1,000,000
—
7,898,857
Total
Investments
in
Securities
...........
$168,024,757
$174,670,917
$—
$342,695,674
Other
Financial
Instruments:
Forward
exchange
contracts
...............
$
—
$
241,914
$
—
$
241,914
Total
Other
Financial
Instruments
.........
$—
$241,914
$—
$241,914
Franklin
Mutual
Series
Funds
Notes
to
Financial
Statements
36
franklintempleton.com
Annual
Report
Franklin
Mutual
Financial
Services
Fund
(continued)
14.
New
Accounting
Pronouncements
In
March
2020,
the
Financial
Accounting
Standards
Board
issued
Accounting
Standards
Update
(ASU)
No.
2020-04,
Reference
Rate
Reform
(Topic
848)
–
Facilitation
of
the
Effects
of
Reference
Rate
Reform
on
Financial
Reporting.
The
amendments
in
the
ASU
provides
optional
temporary
financial
reporting
relief
from
the
effect
of
certain
types
of
contract
modifications
due
to
the
planned
discontinuation
of
the
London
Interbank
Offered
Rate
(LIBOR)
and
other
interbank-offered
based
reference
rates
as
of
the
end
of
2021.
The
ASU
is
effective
for
certain
reference
rate-related
contract
modifications
that
occur
during
the
period
March
12,
2020
through
December
31,
2022. Management
has
reviewed
the
requirements
and
believes
the
adoption
of
this
ASU
will
not
have
a
material
impact
on
the
financial
statements.
15.
Subsequent
Events
The
Fund
has
evaluated
subsequent
events
through
the
issuance
of
the financial
statements
and
determined
that
no
events
have
occurred
that
require
disclosure
other
than
those
already
disclosed
in
the
financial
statements.
Abbreviations
Level
1
Level
2
Level
3
Total
Franklin
Mutual
Financial
Services
Fund
(continued)
Liabilities:
Other
Financial
Instruments:
Forward
exchange
contracts
................
$
—
$
4,421,037
$
—
$
4,421,037
Futures
contracts
........................
197,947
—
—
197,947
Total
Other
Financial
Instruments
.........
$197,947
$4,421,037
$—
$4,618,984
Counterparty
BNY
Bank
of
New
York
Mellon
(The)
BOFA
Bank
of
America
NA
HSBK
HSBC
Bank
plc
SSBT
State
Street
Bank
and
Trust
Co.
UBSW
UBS
AG
Currency
EUR
Euro
GBP
British
Pound
USD
United
States
Dollar
Selected
Portfolio
FHLB
Federal
Home
Loan
Banks
13.
Fair
Value
Measurements
(continued)
Franklin
Mutual
Series
Funds
Report
of
Independent
Registered
Public
Accounting
Firm
37
franklintempleton.com
Annual
Report
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,
2020,
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,
2020,
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,
2020,
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
23,
2021
Franklin
Mutual
Series
Funds
Tax
Information
(unaudited)
38
franklintempleton.com
Annual
Report
Franklin
Mutual
Financial
Services
Fund
Under
Section
854(b)(1)(A)
of
the
Internal
Revenue
Code,
the
Fund
hereby
reports
76.48%
of
the
ordinary
income
dividends
as
income
qualifying
for
the
dividends
received
deduction
for
the
fiscal
year
ended
December
31,
2020.
Under
Section
854(b)(1)(B)
of
the
Internal
Revenue
Code,
the
Fund
hereby
reports
the
maximum
amount
allowable
but
no
less
than
$8,110,011
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,
2020.
Distributions,
including
qualified
dividend
income,
paid
during
calendar
year
2020
will
be
reported
to
shareholders
on
Form
1099-DIV
by
mid-February
2021.
Shareholders
are
advised
to
check
with
their
tax
advisors
for
information
on
the
treatment
of
these
amounts
on
their
individual
income
tax
returns.
Franklin
Mutual
Series
Funds
Board
Members
and
Officers
39
franklintempleton.com
Annual
Report
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
11
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)
Trustee
and
Chairperson
Trustee
since
1995
and
Chairperson
since
2020
30
Ares
Capital
Corporation
(specialty
finance
company)
(2010-present),
United
Natural
Foods,
Inc.
(distributor
of
natural,
organic
and
specialty
foods)
(2013-present),
formerly
,
Allied
Capital
Corporation
(financial
services)
(2003-
2010),
SLM
Corporation
(Sallie
Mae)
(1997-2014)
and
Navient
Corporation
(loan
management,
servicing
and
asset
recovery)
(2014-2016).
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
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)
Trustee
Since
2002
11
Franklin
Templeton
Emerging
Markets
Debt
Opportunities
Fund
PLC
(1999-present)
and
formerly
,
Fiduciary
International
Ireland
Limited
(1999-2015).
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:
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.
Franklin
Mutual
Series
Funds
40
franklintempleton.com
Annual
Report
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
Jan
Hopkins
Trachtman
(1947)
Trustee
Since
2009
11
FinTech
Acquisition
Corp.
III
(special
purpose
fintech
acquisition
company)
(2018-present)
and
FTAC
Olympus
Acquisition
Corp.
(special
purpose
fintech
acquisition
company)
(August
2020-present).
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:
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.
Keith
Mitchell
(1954)
Trustee
Since
2009
11
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)
Trustee
Since
2015
30
Hess
Midstream
LP
(oil
and
gas
midstream
infrastructure)
(2017-present).
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:
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).
Robert
E.
Wade
(1946)
Trustee
Since
1991
30
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
11
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).
Independent
Board
Members
(continued)
Franklin
Mutual
Series
Funds
41
franklintempleton.com
Annual
Report
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
136
None
One
Franklin
Parkway
San
Mateo,
CA
94403-1906
Principal
Occupation
During
at
Least
the
Past
5
Years:
Executive
Chairman,
Chairman
of
the
Board
and
Director,
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
,
Chief
Executive
Officer
(2013-2020)
and
President
(1994-2015),
Franklin
Resources,
Inc.
**Peter
A.
Langerman
(1955)
Trustee,
President,
and
Chief
Executive
Officer
–
Investment
Management
Trustee
since
2007,
President,
and
Chief
Executive
Officer
–
Investment
Management
since
2005
6
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:
Executive
Vice
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
Vice
President
Since
2012
Not
Applicable
Not
Applicable
One
Franklin
Parkway
San
Mateo,
CA
94403-1906
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)
Chief
Compliance
Officer
Since
October
2020
Not
Applicable
Not
Applicable
280
Park
Avenue
New
York,
NY
10017
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)
Vice
President
and
Secretary
Vice
President
since
2009
and
Secretary
since
2005
Not
Applicable
Not
Applicable
One
Franklin
Parkway
San
Mateo,
CA
94403-1906
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)
Chief
Executive
Officer
–
Finance
and
Administration
Since
2017
Not
Applicable
Not
Applicable
One
Franklin
Parkway
San
Mateo,
CA
94403-1906
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).
Franklin
Mutual
Series
Funds
42
franklintempleton.com
Annual
Report
*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.
Note
2:
Effective
October
17,
2020,
Charles
Rubens,
II
ceased
to
be
a
trustee
of
the
Trust.
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
Ann
Torre
Bates
and
David
W.
Niemiec
as
an
audit
committee
financial
expert.
The
Board
believes
that
Ms.
Bates
and
Mr.
Niemiec
qualify
as
such
an
expert
in
view
of
their
extensive
business
background
and
experience.
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
Partners
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
Ms.
Bates
and
Mr.
Niemiec
have
each
acquired
an
understanding
of
generally
accepted
accounting
principles
and
financial
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
G.
Kubilis
(1973)
Chief
Financial
Officer,
Chief
Accounting
Officer
and
Treasurer
Since
2012
Not
Applicable
Not
Applicable
300
S.E.
2nd
Street
Fort
Lauderdale,
FL
33301-
1923
Principal
Occupation
During
at
Least
the
Past
5
Years:
Treasurer,
U.S.
Fund
Administration
&
Reporting
and
officer
of
39
of
the
investment
companies
in
Franklin
Templeton.
Robert
Lim
(1948)
Vice
President
–
AML
Compliance
Since
2016
Not
Applicable
Not
Applicable
One
Franklin
Parkway
San
Mateo,
CA
94403-1906
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
41
of
the
investment
companies
in
Franklin
Templeton.
Navid
J.
Tofigh
(1972)
Vice
President
Since
2015
Not
Applicable
Not
Applicable
One
Franklin
Parkway
San
Mateo,
CA
94403-1906
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)
Vice
President
Since
2005
Not
Applicable
Not
Applicable
One
Franklin
Parkway
San
Mateo,
CA
94403-1906
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)
Vice
President
Since
2011
Not
Applicable
Not
Applicable
300
S.E.
2nd
Street
Fort
Lauderdale,
FL
33301-
1923
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.
Interested
Board
Members
and
Officers
(continued)
Franklin
Mutual
Series
Funds
43
franklintempleton.com
Annual
Report
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.
Ms.
Bates
and
Mr.
Niemiec
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.
Interested
Board
Members
and
Officers
(continued)
Franklin
Mutual
Series
Funds
Shareholder
Information
44
franklintempleton.com
Annual
Report
Proxy
Voting
Policies
and
Procedures
The
Fund’s
investment
manager
has
established
Proxy
Voting
Policies
and
Procedures
(Policies)
that
the
Fund
uses
to
determine
how
to
vote
proxies
relating
to
portfolio
securities.
Shareholders
may
view
the
Fund’s
complete
Policies
online
at
franklintempleton.com.
Alternatively,
shareholders
may
request
copies
of
the
Policies
free
of
charge
by
calling
the
Proxy
Group
collect
at
(954)
527-
7678
or
by
sending
a
written
request
to:
Franklin
Templeton
Companies,
LLC,
300
S.E.
2nd
Street,
Fort
Lauderdale,
FL
33301,
Attention:
Proxy
Group.
Copies
of
the
Fund’s
proxy
voting
records
are
also
made
available
online
at
franklintempleton.com
and
posted
on
the
U.S.
Securities
and
Exchange
Commission’s
website
at
sec.gov
and
reflect
the
most
recent
12-month
period
ended
June
30.
Quarterly
Statement
of
Investments
The
Trust,
on
behalf
of
the
Fund,
files
a
complete
statement
of
investments
with
the
U.S.
Securities
and
Exchange
Commission
for
the
first
and
third
quarters
for
each
fiscal
year
as
an
exhibit
to
its
report
on
Form
N-PORT.
Shareholders
may
view
the
filed
Form
N-PORT
by
visiting
the
Commission’s
website
at
sec.gov.
The
filed
form
may
also
be
viewed
and
copied
at
the
Commission’s
Public
Reference
Room
in
Washington,
DC.
Information
regarding
the
operations
of
the
Public
Reference
Room
may
be
obtained
by
calling
(800)
SEC-0330.
Householding
of
Reports
and
Prospectuses
You
will
receive,
or
receive
notice
of
the
availability
of,
the
Fund’s
financial
reports
every
six
months.
In
addition,
you
will
receive
an
annual
updated
summary
prospectus
(detail
prospectus
available
upon
request).
To
reduce
Fund
expenses,
we
try
to
identify
related
shareholders
in
a
household
and
send
only
one
copy
of
the
financial
reports
(to
the
extent
received
by
mail)
and
summary
prospectus.
This
process,
called
“householding,”
will
continue
indefinitely
unless
you
instruct
us
otherwise.
If
you
prefer
not
to
have
these
documents
householded,
please
call
us
at
(800)
632-2301.
At
any
time
you
may
view
current
prospectuses/
summary
prospectuses
and
financial
reports
on
our
website.
If
you
choose,
you
may
receive
these
documents
through
electronic
delivery.
479
A
02/21
©
2021
Franklin
Templeton
Investments.
All
rights
reserved.
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
Distributor
Shareholder
Services
Franklin
Mutual
Advisers,
LLC
Franklin
Templeton
Distributors,
Inc.
(800)
DIAL
BEN
®
/
342-5236
franklintempleton.com
(800)
632-2301
-
(Class
A,
C
&
R6)
(800)
448-FUND
-
(Class
Z)
Annual
Report
and
Shareholder
Letter
Franklin
Mutual
Shares
Fund
A
Series
of
Franklin
Mutual
Series
Funds
December
31,
2020
Sign
up
for
electronic
delivery
at
franklintempleton.com/edelivery
Not
FDIC
Insured
May
Lose
Value
No
Bank
Guarantee
franklintempleton.com
Not
part
of
the
annual
report
1
SHAREHOLDER
LETTER
Dear
Franklin
Mutual
Shares
Fund
Shareholder:
2020
was
a
year
that
felt
like
it
contained
several
different
years
within
it.
There
were
periods
of
stability
and
dramatic
moves
down
and
up
in
financial
markets.
The
year
ended
with
surging
stock
prices
despite
an
ongoing
pandemic.
If
one
had
gone
to
sleep
on
December
31,
2019,
and
woke
up
on
December
31,
2020,
a
quick
glance
at
the
MSCI
World
Index
(USD),
which
was
up
+16.50%
for
the
12
months,
might
cause
one
to
think
this
was
just
another
good
year
in
a
long
bull
market.
1
But
for
those
of
us
who
lived
through
it,
2020
was
chaotic
and
memorable.
The
year
began
with
a
continuation
of
trends
from
2019.
Accommodative
central
bank
policy
was
supporting
a
resilient
economy,
which
displayed
modest
growth.
Then
COVID-19
exploded
from
a
regional
issue
into
a
global
pandemic.
The
response
to
the
spread
of
the
virus
was
lockdown
and
physical
distancing
measures
in
attempts
to
flatten
the
curve
of
the
contagion.
Consumer
and
business
spending
fell,
and
manufacturing
and
other
activity
came
to
a
virtual
halt.
This
led
to
a
dramatic
share
price
plunge
in
equity
markets.
In
response,
governments
acted
directly
through
fiscal
policy
and
central
banks,
using
a
whatever-it-takes
approach
to
stabilize
economies.
The
efforts
worked
and
were
reflected
by
market
stabilization
and
the
beginning
of
a
recovery
in
prices.
Markets
continued
to
rally
in
the
second
half
of
the
year
on
signs
of
global
economic
resilience
despite
widespread
shutdowns.
Investor
sentiment
was
buoyed
by
hopes
for
continued
stimulus
measures,
very
positive
developments
on
the
vaccine
front
and
U.S.
presidential
election
results.
Valuations
were
also
supported
by
investors’
willingness
to
look
through
the
current
situation
to
2021
and
beyond,
when
widespread
vaccinations
are
expected
to
become
available
and
reignite
global
economies.
During
the
year,
there
was
significant
market
volatility
and
continued
variance
between
the
performance
of
growth
equities
and
value
equities.
Many
growth
stocks
benefited
from
the
changes
in
work
and
life
caused
by
the
pandemic
and
continued
to
grow
during
the
year.
As
a
result,
the
MSCI
World
Growth
Index
(USD)
ended
the
year
up
+34.18%,
while
the
MSCI
World
Value
Index
(USD)
recovered
from
the
spring
selloff,
but
trailed
its
growth
counterpart,
ending
the
year
down
-0.38%
for
the
12
months
ended
December
31,
2020.
1
Market
volatility
and
economic
uncertainty
can
often
present
what
we
consider
opportunities.
During
periods
of
market
fluctuation,
we
used
our
bottom-up,
fundamentally
driven
investment
process
to
add
select
positions
to
the
portfolio
that
historically
had
not
met
our
investment
criteria.
However,
given
the
decline
in
price,
these
stocks
were
now,
in
our
opinion,
attractively
valued.
We
also
moved
capital
between
existing
positions
to
reflect
market
shifts.
We
were
encouraged
to
see
value
equities
do
quite
well
in
the
fourth
quarter
on
both
an
absolute
and
relative
basis.
Our
expectation
is
that
earnings
will
continue
to
improve
for
the
overall
market
as
2021
progresses
and
COVID
vaccinations
allow
for
accelerated
reopening
of
the
global
economy.
We
would
expect
many
of
our
value
holdings
to
benefit
from
such
a
scenario.
It
is
important
to
remember
that
the
market
historically
rewards
investors
who
take
a
long-term
perspective.
To
that
end,
we
recognize
the
importance
of
financial
advisors
in
today’s
markets
and
encourage
investors
to
continue
to
seek
their
advice.
Amid
changing
markets
and
economic
conditions,
we
are
confident
investors
with
a
well-diversified
portfolio
and
a
patient,
long-term
outlook
should
be
well-positioned
for
the
years
ahead.
This
is
my
first
letter
to
you
as
president
and
chief
investment
officer
of
Franklin
Mutual
Series.
I
have
been
director
of
research
and
a
portfolio
manager
for
Franklin
Mutual
Series
since
January
2010
and
have
worked
with
Peter
Langerman,
chairman
and
chief
executive
officer
of
Franklin
Mutual
Series,
to
steward
the
platform.
I
want
to
thank
Peter
for
his
significant
contributions
and
30+
years
of
dedicated
service
and
leadership.
I
look
forward
to
working
with
Peter
through
mid-2021
to
complete
the
leadership
transition,
and
I
wish
him
the
very
best
in
his
well-deserved
retirement.
On
the
following
pages,
the
portfolio
management
team
reviews
investment
decisions
that
pertain
to
performance
during
the
past
12
months
considering
the
economic
environment
and
other
factors.
Please
remember
all
securities
markets
fluctuate,
as
do
mutual
fund
share
prices.
1.
Source:
Morningstar.
See
www.franklintempletondatasources.com
for
additional
data
provider
information.
franklintempleton.com
Not
part
of
the
annual
report
2
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,
Christian
Correa,
CFA
President
and
Chief
Investment
Officer
Franklin
Mutual
Advisers,
LLC
This
letter
reflects
our
analysis
and
opinions
as
of
December
31,
2020
,
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
8
Your
Fund’s
Expenses
11
Financial
Highlights
and
Statement
of
Investments
12
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.
CFA
®
is
a
trademark
owned
by
CFA
Institute.
3
franklintempleton.com
Annual
Report
ANNUAL
REPORT
Franklin
Mutual
Shares
Fund
This
annual
report
for
Franklin
Mutual
Shares
Fund
covers
the
fiscal
year
ended
December
31,
2020
.
Your
Fund’s
Goal
and
Main
Investments
The
Fund
seeks
capital
appreciation,
which
may
occasionally
be
short
term.
The
secondary
goal
is
income.
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
companies
with
market
capitalizations
greater
than
$5
billion.
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
and
participations
in
foreign
government
debt.
The
Geographic
Composition
table
on
this
page
lists
the
leading
countries
where
the
Fund
invests.
*The
Fund
held
13.8%
of
total
net
assets
in
foreign
securities.
Performance
Overview
The
Fund’s
Class
Z
shares
posted
a
-4.34%
cumulative
total
return
for
the
12
months
ended
December
31,
2020.
For
comparison,
the
Fund’s
new
benchmark,
the
Russell
1000
®
Value
Index,
which
measures
the
performance
of
the
large-cap
value
segment
of
the
U.S.
equity
universe,
posted
a
+2.80%
total
return
for
the
period
under
review.
1,2
Also
for
comparison,
the
Fund’s
prior
benchmark,
the
Standard
&
Poor’s
®
500
Index
(S&P
500
®
),
which
is
a
broad
measure
of
U.S.
stock
performance,
posted
a
+18.40%
total
return
for
the
same
period.
2
The
Russell
1000
®
Value
Index
is
replacing
the
S&P
500
as
the
Fund’s
benchmark.
The
investment
manager
believes
the
composition
of
the
Russell
1000
®
Value
Index
more
accurately
reflects
the
Fund’s
current
investment
strategy
and
portfolio
characteristics.
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
equities,
as
measured
by
the
MSCI
All
Country
World
Index
(USD),
posted
a
+16.82%
total
return
for
the
12
months
ended
December
31,
2020.
2
Stocks
fell
sharply
in
early
2020
as
many
investors
sold
equities
amid
fears
of
a
global
economic
slowdown
due
to
the
novel
coronavirus
(COVID-19)
pandemic.
Global
equities
began
to
rebound
in
late
March
2020
amid
optimism
about
economic
stimulus
measures,
easing
lockdown
restrictions,
and
vaccine
and
treatment
development.
Despite
declines
in
September
and
October
due
to
geopolitical
tensions
and
rising
infection
rates,
markets
rebounded
in
November
and
December,
as
positive
sentiment
about
successful
trials
of
COVID-19
vaccines,
the
beginning
of
vaccination
programs
in
some
countries
and
apparent
resolution
of
political
uncertainty
supported
markets.
In
the
U.S.,
pandemic-related
restrictions
caused
stiff
economic
headwinds,
including
mass
layoffs
that
drove
the
unemployment
rate
to
14.8%
in
April
2020.
3
According
to
the
National
Bureau
of
Economic
Research,
the
longest
U.S.
economic
expansion
in
history
ended
in
February,
and
the
country
slipped
into
a
deep
recession.
Equities
began
to
rebound
in
the
spring
amid
the
government’s
fiscal
and
Geographic
Composition*
12/31/20
%
of
Total
Net
Assets
United
States
82.1%
United
Kingdom
7.0%
Switzerland
3.4%
South
Korea
2.8%
Other
0.6%
Short-Term
Investments
&
Other
Net
Assets
4.1%
1.
Frank
Russell
Company
is
the
source
and
owner
of
the
trademarks,
service
marks
and
copyrights
related
to
the
Russell
Indexes.
Russell
®
is
a
trademark
of
Frank
Russell
Company.
2.
Source:
Morningstar.
The
indexes
are
unmanaged
and
include
reinvestment
of
any
income
or
distributions.
They
do
not
reflect
any
fees,
expenses
or
sales
charges.
One
cannot
invest
directly
in
an
index,
and
an
index
is
not
representative
of
the
Fund’s
portfolio.
3.
Source:
U.S.
Bureau
of
Labor
Statistics.
See
www.franklintempletondatasources.com
for
additional
data
provider
information.
The
dollar
value,
number
of
shares
or
principal
amount,
and
names
of
all
portfolio
holdings
are
listed
in
the
Fund’s
Statement
of
Investments
(SOI).
The
SOI
begins
on
page
17
.
Franklin
Mutual
Shares
Fund
4
franklintempleton.com
Annual
Report
monetary
stimulus
measures,
declining
jobless
claims,
rising
retail
sales
and
optimism
about
treatments
and
potential
vaccines
for
COVID-19.
Following
a
record
annualized
decline
in
second-quarter
gross
domestic
product
(GDP),
resilient
consumer
spending
helped
drive
third-quarter
GDP
to
expand
at
a
record
annualized
rate,
although
growth
slowed
in
the
fourth
quarter.
Equities
continued
to
rise
during
the
summer
but
declined
in
the
fall
due
to
concerns
about
possible
new
restrictions
amid
rising
COVID-19
infection
rates
and
uncertainties
about
additional
fiscal
stimulus
and
the
U.S.
presidential
election.
Despite
signs
that
the
economic
recovery
was
stalling
as
the
unemployment
rate
remained
relatively
high
(6.7%
at
period-end)
and
consumer
spending
declined,
stocks
rallied
in
November
and
December,
buoyed
by
the
outcome
of
the
U.S.
presidential
election,
the
start
of
COVID-19
vaccination
programs
and
the
passage
of
a
new
U.S.
stimulus
bill.
3
In
an
effort
to
support
the
economy,
the
U.S.
Federal
Reserve
(Fed)
lowered
the
federal
funds
target
rate
to
a
range
of
0.00%–0.25%
in
March
2020.
The
Fed
also
enacted
quantitative
easing
measures
aimed
at
ensuring
credit
flows
to
borrowers
and
supporting
credit
markets
with
open-
ended
bond
purchasing.
Furthermore,
the
Fed
signaled
that
interest
rates
would
potentially
remain
low,
even
if
inflation
moderately
exceeded
its
2%
target.
In
the
eurozone,
the
economy
contracted
again
in
the
fourth
quarter
of
2020,
following
quarter-on-quarter
expansion
in
the
third
quarter
and
contractions
in
the
first
and
second
quarters.
After
several
months
of
gains
due
to
easing
restrictions
and
robust
stimulus
measures,
European
developed
market
equities,
as
measured
by
the
MSCI
Europe
Index
(USD),
declined
in
September
and
October
as
rising
infection
rates
heightened
investor
concerns
that
the
nascent
economic
revival
could
stall.
Nevertheless,
successful
vaccine
development
and
a
Brexit
resolution
supported
European
developed
market
equities,
as
measured
by
the
MSCI
Europe
Index
(USD),
to
post
a
+5.93%
total
return
for
the
period.
2
Asian
developed
and
emerging
market
equities,
as
measured
by
the
MSCI
All
Country
Asia
Index
(USD),
posted
a
+21.30%
total
return
for
the
12
months
under
review.
2
Although
pandemic-related
lockdowns
derailed
economic
growth
in
early
2020,
sharp
market
declines
were
followed
by
rebounds
as
China’s
economy,
a
key
driver
of
the
region’s
economic
activity,
recovered
from
the
contraction
in
the
first
quarter
and
expanded
during
the
rest
of
2020.
Asian
stocks
rose
as
the
region’s
economies
reopened,
aided
by
robust
stimulus
measures
and
optimism
that
economic
revitalization
would
be
further
spurred
by
COVID-19
vaccines.
Global
emerging
market
stocks,
as
measured
by
the
MSCI
Emerging
Markets
Index
(USD),
posted
a
+18.69%
total
return
for
the
period,
despite
steep
pandemic-related
declines
in
early
2020,
benefiting
from
improving
economic
activity,
stabilizing
oil
prices
and
U.S.
dollar
weakness.
2
In
spite
of
higher
COVID-19
cases
in
some
countries,
emerging
market
stocks
rallied
near
the
end
of
2020,
bolstered
by
easing
political
uncertainty,
commencement
of
COVID-19
vaccinations
and
rising
commodity
prices.
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.
Our
portfolio
selection
process
generally
includes
an
assessment
of
the
potential
impacts
of
any
material
environmental,
social
and
governance
(ESG)
factors
on
the
long-term
risk
and
return
profile
of
a
company.
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.
Franklin
Mutual
Shares
Fund
5
franklintempleton.com
Annual
Report
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.
Manager’s
Discussion
A
year
ago,
we
reflected
on
a
decade
of
overall
equity
market
strength
and
solid,
but
weaker,
returns
for
our
value
equity
investing
strategy.
2020
turned
out
to
be
an
amplification
of
this
performance
gap,
rather
than
a
correction.
The
year
started
with
a
continuation
of
strong
performance
from
market-darling
growth
stocks.
The
gap
exploded
as
COVID-19
led
to
lockdowns
and
people
working
from
home.
The
market
leaders
often
benefited
from
these
changes,
with
technology
tools
being
adopted
more
quickly
than
before.
Meanwhile,
the
lockdowns
and
disruption
severely
impacted
many
companies
thought
of
as
value
stocks.
Even
as
central
banks
and
governments
across
the
globe
acted
through
fiscal
and
monetary
stimulus
measures,
the
recovery
came
slowly
and
only
accelerated
when
the
prospects
of
an
effective
vaccine
helped
markets
understand
when
the
health
crisis
might
be
over.
By
the
end
of
2020,
the
MSCI
World
Value
Index
(USD)
had
recovered
to
be
almost
flat,
with
a
-0.38%
return.
2
However,
growth
stocks
advanced
substantially
further,
as
evidenced
by
the
MSCI
World
Growth
Index
(USD),
ending
the
year
up
+34.18%.
2
Many
signs
of
increased
speculation
in
the
market
have
appeared,
with
a
surge
in
the
number
of
IPOs
not
seen
since
the
tech
bubble
and
a
boom
in
special
purpose
acquisition
companies
(SPACs),
a
type
of
company
which
raises
money
in
anticipation
of
finding
profitable
investment
opportunities.
There
is
no
guarantee
that
some
speculation
will
not
be
profitable,
but
we
try
to
look
past
the
speculation
and
continue
to
see
attractive
values
in
various
parts
of
the
market.
Our
traditional
value
equity
investment
approach
is
complemented
with
two
other
strategies,
distressed
investing
and
merger
arbitrage.
We
were
active
in
both
during
2020.
Merger
arbitrage
activity
has
climbed
in
tandem
with
increasing
confidence
about
an
end
to
the
pandemic
crisis.
Significant
new
deals
have
been
announced
and
some
present
attractive
investment
opportunities.
In
addition,
the
deals
which
were
impacted
by
the
emergence
of
the
coronavirus
have
seen
renegotiated
terms
and
moved
toward
amicable
resolution.
This
includes
deals
such
as
Tiffany’s
acquisition
by
LVMH
Moet
Hennessy
Louis
Vuitton
and
Taubman’s
acquisition
by
Simon
Property
Group.
We
expect
an
ongoing
acceleration
of
merger
and
acquisition
activity
given
a
recovering
economy,
strong
markets
and
the
hope
for
increasing
regulatory
and
trade
predictability
under
the
incoming
U.S.
administration.
Within
our
distressed
credit
strategy,
we
targeted
companies
and
industries
directly
impacted
by
the
coronavirus
pandemic.
The
robust
government
fiscal
and
monetary
interventions
have
limited
the
number
of
attractive
options,
but
we
found
opportunities
in
the
energy
sector
and
the
retail
and
travel
industries.
As
the
vaccine
news
arrived
and
liquidity
remained
strong,
the
opportunities
have
become
more
limited.
We
expect
to
see
fewer
new
distressed
debt
opportunities
than
the
merger
arbitrage
opportunities
discussed
above.
Fund
Performance
Turning
to
Fund
performance,
top
positive
contributors
included
Charter
Communications,
Samsung
Electronics
and
Cognizant
Technologies.
Charter
Communications
and
Samsung
Electronics
are
listed
among
the
Fund’s
largest
positions
in
the
Top
10
Holdings
table
on
page
6.
Shares
of
U.S.-based
cable
operator
Charter
Communications
rallied
throughout
much
of
2020’s
second
half,
lifted
by
second-quarter
earnings
that
exceeded
consensus
expectations.
The
stay-at-home
economy
emerging
in
the
wake
of
the
coronavirus
pandemic
led
to
an
Top
10
Industries
12/31/20
%
of
Total
Net
Assets
a
Pharmaceuticals
10.0%
Banks
8.1%
Insurance
6.2%
Media
5.8%
Software
4.8%
Oil,
Gas
&
Consumable
Fuels
4.7%
Technology
Hardware,
Storage
&
Peripherals
4.3%
Food
Products
4.2%
Health
Care
Providers
&
Services
3.8%
Health
Care
Equipment
&
Supplies
3.3%
Franklin
Mutual
Shares
Fund
6
franklintempleton.com
Annual
Report
increase
in
the
number
of
high-speed
data
subscribers
and
lower
turnover
among
the
existing
customer
base.
These
factors
drove
higher
margins
and
increased
free
cash
flow,
which
management
used
to
buy
back
stock.
Third-quarter
results
were
also
strong,
with
high-speed
data
net
subscriber
additions
and
residential
video
growth
soundly
beating
expectations.
The
company’s
financials
also
continued
to
improve.
After
experiencing
COVID-related
volatility
during
the
first
few
months
of
the
year,
the
stock
price
of
South
Korea-
based
electronics
and
computer
peripherals
manufacturer
Samsung
Electronics
started
to
recover
in
April
and
continued
an
upward
trajectory
for
the
remainder
of
the
year,
making
it
a
leading
contributor
to
portfolio
performance.
The
company
posted
strong
first-quarter
results,
with
revenue
and
operating
profit
rising
year-over-year,
propelled
by
sales
of
its
memory
chips.
Demand
for
memory
chips
increased
during
the
lockdown,
driven
by
hyperscale
data
center
spending
and
spending
to
enable
working
from
home
and
online
learning.
Investors
are
optimistic
that
strength
in
memory
prices
can
continue
and
Samsung
is
expected
to
announce
a
new
capital
return
program
in
early
2021,
which
may
include
a
special
dividend.
Shares
of
U.S.-based
Cognizant
Technology
Solutions
Group,
a
provider
of
information
technology
(IT),
consulting
and
business
process
outsourcing
services,
rose
in
February
largely
due
to
fourth-quarter
2019
financial
results
that
beat
expectations.
After
price
fluctuation
in
March
due
to
uncertainty
around
the
impact
of
COVID-19,
the
stock
continued
its
rally
after
first-quarter
2020
results
announced
in
May
were
also
better
than
expected,
despite
softer-
than-expected
margins
and
pandemic-related
expenses.
Second-quarter
financial
results
similarly
beat
expectations.
Shares
of
Cognizant
rallied
as
management’s
turnaround
initiatives
contributed
to
positive
investor
sentiment.
The
pandemic
has
also
accelerated
digital
transformation
across
industries,
which
resulted
in
solid
growth
for
IT
services
vendors
such
as
Cognizant.
Growth
in
the
company’s
digital
practice
segments—which
were
up
by
half—drove
second-
quarter
results.
Cognizant
continued
to
ramp
up
its
digital
strategy
by
acquiring
seven
companies
that
it
merged
into
existing
divisions
during
2020’s
first
three
quarters.
A
strong
third-quarter
announcement
and
broader
recovery
in
IT
services
demand
continued
to
support
the
stock
price,
which
generally
rose
throughout
the
remainder
of
the
period.
During
the
period
under
review,
Fund
investments
that
detracted
from
performance
included
American
International
Group
(AIG),
Wells
Fargo
and
Citizens
Financial
Group.
The
stock
price
of
U.S.-based
insurer
AIG
fell
from
mid-
February
through
late
March.
The
declining
valuation
was
fueled
by
investor
concerns
regarding
the
coronavirus
outbreak
and
operating
shortfalls
in
fourth-quarter
earnings.
An
uncertain
environment
and
changes
in
leadership
and
business
strategy
continued
to
affect
the
company
throughout
the
remainder
of
the
year,
culminating
in
the
announcement
of
the
spinoff
of
its
life
insurance
business
and
a
change
in
leadership.
We
have
since
exited
the
position.
The
performance
of
U.S.-based
diversified
financial
services
company
Wells
Fargo
was
affected
by
the
regulatory
restrictions
placed
on
it
following
the
account
opening
scandal,
particularly
the
ability
to
grow
the
size
of
its
balance
sheet
freely.
These
limits
negatively
impacted
the
company
in
March
when
a
flurry
of
companies
rushed
to
draw
on
their
credit
lines
to
strengthen
their
liquidity
positions
as
the
effects
of
the
pandemic
became
more
tangible.
After
the
March
downturn,
COVID-related
uncertainty
and
interest-
rate
declines
continued
to
hinder
the
organization,
leading
management
to
revise
its
forward
guidance
several
times
throughout
the
year.
First-quarter
earnings
fell
short
of
expectations,
and
Wells
Fargo
posted
a
second-quarter
loss,
although
much
of
it
was
due
to
the
bank’s
massive
contribution
to
its
loan
loss
reserves.
The
company
also
drastically
cut
its
dividend.
During
the
third
quarter,
headline
earnings
fell
short
of
expectations,
but
many
of
the
costs
incurred
during
the
quarter
were
associated
with
restructuring,
which
management
expects
will
reduce
costs
Top
10
Holdings
12/31/20
Issuer
Industry
,
Country
%
of
Total
Net
Assets
a
a
Medtronic
PLC
3.3%
Health
Care
Equipment
&
Supplies
,
United
States
Charter
Communications
Inc
3.2%
Media
,
United
States
Samsung
Electronics
Co
Ltd
2.8%
Technology
Hardware,
Storage
&
Peripherals
,
South
Korea
CVS
Health
Corp
2.5%
Health
Care
Providers
&
Services
,
United
States
Merck
&
Co
Inc
2.5%
Pharmaceuticals
,
United
States
Walt
Disney
Co/The
2.4%
Entertainment
,
United
States
Oracle
Corp
2.4%
Software
,
United
States
Kraft
Heinz
Co/The
2.3%
Food
Products
,
United
States
Eli
Lilly
and
Co
2.3%
Pharmaceuticals
,
United
States
JPMorgan
Chase
&
Co
2.3%
Banks
,
United
States
Franklin
Mutual
Shares
Fund
7
franklintempleton.com
Annual
Report
in
2021.
In
addition
to
shedding
its
student
loan
business
in
2020,
the
company
looks
forward
to
streamlining
its
business
model
further
in
the
year
ahead.
The
stock
price
of
U.S.-based
banking
services
company
Citizens
Financial
Group
declined
from
mid-February
through
late
March.
The
valuation
reduction
was
fueled
by
investor
concern
regarding
the
coronavirus
outbreak
and
its
economic
effects,
including
increased
borrower
defaults
and
a
falling
interest-rate
environment,
which
decreases
the
profitability
of
lending
products.
However,
the
price
stabilized
as
the
broader
market
calmed
down.
In
April,
the
bank
posted
decent
first-quarter
financial
results
amid
a
deteriorating
economic
environment.
Management
reported
modest
increases
in
revenue,
loans
and
net
interest
margin,
and
broadly
stable
credit
performance
in
the
loan
portfolio.
However,
in
June,
bank
stocks
retreated
based
on
concerns
about
potential
dividend
cuts
resulting
from
the
Federal
Reserve
Board’s
stress
tests
of
large
banks.
The
company’s
stock
price
was
bolstered
in
July
by
favorable
second-
quarter
earnings,
but
continued
to
experience
volatility
toward
period-end
as
third-quarter
results
fell
short
of
consensus,
due
in
part
to
large
payments
into
reserves.
We
have
since
exited
the
stock.
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
negative
overall
impact
on
the
Fund’s
performance
as
the
U.S.
dollar
fell
against
most
currencies
during
the
period.
As
fellow
shareholders,
we
found
recent
absolute
and
relative
performance
disappointing,
but
our
strategy
of
seeking
undervalued
stocks
can
lag
the
growth
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.
Peter
A.
Langerman
Co-Portfolio
Manager
Christian
Correa,
CFA
Co-Portfolio
Manager
Grace
Hoefig
Co-Portfolio
Manager
Debbie
A.
Turner,
CFA
Co-Portfolio
Manager
The
foregoing
information
reflects
our
analysis,
opinions
and
portfolio
holdings
as
of
December
31,
2020
,
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.
Performance
Summary
as
of
December
31,
2020
Franklin
Mutual
Shares
Fund
8
franklintempleton.com
Annual
Report
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
12/31/20
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
.
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
.
Share
Class
Cumulative
Total
Return
1
Average
Annual
Total
Return
2
–
Z
1-Year
-4.34%
-4.34%
5-Year
+34.84%
+6.16%
10-Year
+102.76%
+7.32%
A
3
1-Year
-4.60%
-9.86%
5-Year
+33.18%
+4.71%
10-Year
+97.30%
+6.43%
See
page
10
for
Performance
Summary
footnotes.
Franklin
Mutual
Shares
Fund
Performance
Summary
9
franklintempleton.com
Annual
Report
See
page
10
for
Performance
Summary
footnotes.
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
(1/1/11–
12/31/20
)
Class
A
(1/1/11–
12/31/20
)
Franklin
Mutual
Shares
Fund
Performance
Summary
10
franklintempleton.com
Annual
Report
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.
Spe-
cial
risks
are
associated
with
foreign
investing,
including
currency
fluctuations,
economic
instability
and
political
developments.
The
Fund’s
investments
in
com-
panies
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.
Unexpected
events
and
their
aftermaths,
such
as
the
spread
of
deadly
diseases;
natural,
environmental
or
man-made
disasters;
financial,
political
or
social
disruptions;
terrorism
and
war;
and
other
tragedies
or
catastrophes,
can
cause
investor
fear
and
panic,
which
can
adversely
affect
the
economies
of
many
companies,
sectors,
nations,
regions
and
the
market
in
general,
in
ways
that
cannot
necessarily
be
foreseen.
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
S&P
500
is
a
market
capitalization-weighted
index
of
500
stocks
designed
to
measure
total
U.S.
equity
market
performance.
The
Russell
1000
Value
Index
measures
the
performance
of
the
large-cap
value
segment
of
the
U.S.
equity
universe.
It
includes
those
Russell
1000
companies
with
lower
price-to-book
ratios
and
lower
expected
and
historical
growth
rates.
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.
Distributions
(1/1/20–12/31/20)
Share
Class
Net
Investment
Income
Short-Term
Capital
Gain
Long-Term
Capital
Gain
Total
Z
$0.5247
$0.0853
$0.3372
$0.9472
A
$0.4581
$0.0853
$0.3372
$0.8806
C
$0.2560
$0.0853
$0.3372
$0.6785
R
$0.3981
$0.0853
$0.3372
$0.8206
R6
$0.5437
$0.0853
$0.3372
$0.9662
Total
Annual
Operating
Expenses
5
Share
Class
Z
0.79%
A
1.04%
Your
Fund’s
Expenses
Franklin
Mutual
Shares
Fund
11
franklintempleton.com
Annual
Report
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.
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
184/366
to
reflect
the
one-half
year
period.
2.
Reflects
expenses
after
fee
waivers
and
expense
reimbursements.
Does
not
include
acquired
fund
fees
and
expenses.
Actual
(actual
return
after
expenses)
Hypothetical
(5%
annual
return
before
expenses)
Share
Class
Beginning
Account
Value
7/1/20
Ending
Account
Value
12/31/20
Expenses
Paid
During
Period
7/1/20–12/31/20
1,
2
Ending
Account
Value
12/31/20
Expenses
Paid
During
Period
7/1/20–12/31/20
1,
2
a
Net
Annualized
Expense
Ratio
2
Z
$1,000
$1,207.71
$4.29
$1,021.25
$3.93
0.77%
A
$1,000
$1,206.24
$5.67
$1,019.99
$5.20
1.02%
C
$1,000
$1,201.91
$9.81
$1,016.22
$8.99
1.77%
R
$1,000
$1,204.73
$7.03
$1,018.76
$6.44
1.27%
R6
$1,000
$1,208.16
$3.93
$1,021.58
$3.60
0.71%
Franklin
Mutual
Series
Funds
Financial
Highlights
Franklin
Mutual
Shares
Fund
franklintempleton.com
Annual
Report
The
accompanying
notes
are
an
integral
part
of
these
financial
statements.
12
n
a
Year
Ended
December
31,
2020
2019
2018
2017
2016
Class
Z
Per
share
operating
performance
(for
a
share
outstanding
throughout
the
year)
Net
asset
value,
beginning
of
year
...................
$27.56
$24.25
$28.63
$28.22
$26.00
Income
from
investment
operations
a
:
Net
investment
income
b
.........................
0.83
c
0.63
0.51
0.65
d
0.63
e
Net
realized
and
unrealized
gains
(losses)
...........
(2.11)
4.90
(3.11)
1.73
3.48
Total
from
investment
operations
....................
(1.28)
5.53
(2.60)
2.38
4.11
Less
distributions
from:
Net
investment
income
..........................
(0.53)
(0.71)
(0.53)
(0.68)
(0.64)
Net
realized
gains
.............................
(0.42)
(1.51)
(1.25)
(1.29)
(1.25)
Total
distributions
...............................
(0.95)
(2.22)
(1.78)
(1.97)
(1.89)
Net
asset
value,
end
of
year
.......................
$25.33
$27.56
$24.25
$28.63
$28.22
Total
return
....................................
(4.34)%
23.13%
(8.95)%
8.49%
15.88%
Ratios
to
average
net
assets
Expenses
f
,g
....................................
0.80%
h
0.78%
h
0.76%
h
0.78%
0.80%
h
Expenses
-
incurred
in
connection
with
securities
sold
short
0.02%
0.02%
—%
i
—%
0.01%
Net
investment
income
...........................
3.56%
c
2.32%
1.77%
2.23%
d
2.33%
e
Supplemental
data
Net
assets,
end
of
year
(000’s)
.....................
$4,376,135
$5,472,276
$5,189,476
$6,229,996
$7,681,881
Portfolio
turnover
rate
............................
21.35%
21.71%
20.72%
18.15%
20.56%
a
The
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
repurchas-
es
of
the
Fund’s
shares
in
relation
to
income
earned
and/or
fluctuating
fair
value
of
the
investments
of
the
Fund.
b
Based
on
average
daily
shares
outstanding.
c
Net
investment
income
per
share
includes
approximately
$0.29
per
share
related
to
income
received
in
the
form
of
special
dividends
and
an
adjustment
for
EU
reclaims
in
connection
with
certain
Fund
holdings.
Excluding
this
amount,
the
ratio
of
net
investment
income
to
average
net
assets
would
have
been
2.30%.
d
Net
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
hold-
ings.
Excluding
this
amount,
the
ratio
of
net
investment
income
to
average
net
assets
would
have
been
1.69%.
e
Net
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
hold-
ings.
Excluding
this
amount,
the
ratio
of
net
investment
income
to
average
net
assets
would
have
been
1.96%.
f
Includes
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).
g
Benefit
of
expense
reduction
rounds
to
less
than
0.01%.
h
Benefit
of
waiver
and
payments
by
affiliates
rounds
to
less
than
0.01%.
i
Rounds
to
less
than
0.01%.
Franklin
Mutual
Series
Funds
Financial
Highlights
Franklin
Mutual
Shares
Fund
(continued)
franklintempleton.com
The
accompanying
notes
are
an
integral
part
of
these
financial
statements.
Annual
Report
13
a
Year
Ended
December
31,
2020
2019
2018
2017
2016
Class
A
Per
share
operating
performance
(for
a
share
outstanding
throughout
the
year)
Net
asset
value,
beginning
of
year
...................
$27.26
$24.00
$28.35
$27.97
$25.78
Income
from
investment
operations
a
:
Net
investment
income
b
.........................
0.76
c
0.56
0.43
0.58
d
0.56
e
Net
realized
and
unrealized
gains
(losses)
...........
(2.10)
4.85
(3.07)
1.70
3.45
Total
from
investment
operations
....................
(1.34)
5.41
(2.64)
2.28
4.01
Less
distributions
from:
Net
investment
income
..........................
(0.46)
(0.64)
(0.46)
(0.61)
(0.57)
Net
realized
gains
.............................
(0.42)
(1.51)
(1.25)
(1.29)
(1.25)
Total
distributions
...............................
(0.88)
(2.15)
(1.71)
(1.90)
(1.82)
Net
asset
value,
end
of
year
.......................
$25.04
$27.26
$24.00
$28.35
$27.97
Total
return
f
....................................
(4.60)%
22.86%
(9.18)%
8.21%
15.61%
Ratios
to
average
net
assets
Expenses
g
,h
....................................
1.05%
i
1.03%
i
1.01%
i
1.03%
1.05%
i
Expenses
-
incurred
in
connection
with
securities
sold
short
0.02%
0.02%
—%
j
—%
0.01%
Net
investment
income
...........................
3.32%
c
2.07%
1.52%
1.98%
d
2.08%
e
Supplemental
data
Net
assets,
end
of
year
(000’s)
.....................
$2,965,127
$4,042,626
$3,852,134
$4,386,829
$4,737,576
Portfolio
turnover
rate
............................
21.35%
21.71%
20.72%
18.15%
20.56%
a
The
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
repurchas-
es
of
the
Fund’s
shares
in
relation
to
income
earned
and/or
fluctuating
fair
value
of
the
investments
of
the
Fund.
b
Based
on
average
daily
shares
outstanding.
c
Net
investment
income
per
share
includes
approximately
$0.29
per
share
related
to
income
received
in
the
form
of
special
dividends
and
an
adjustment
for
EU
reclaims
in
connection
with
certain
Fund
holdings.
Excluding
this
amount,
the
ratio
of
net
investment
income
to
average
net
assets
would
have
been
2.07%.
d
Net
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
hold-
ings.
Excluding
this
amount,
the
ratio
of
net
investment
income
to
average
net
assets
would
have
been
1.44%.
e
Net
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
hold-
ings.
Excluding
this
amount,
the
ratio
of
net
investment
income
to
average
net
assets
would
have
been
1.71%.
f
Total
return
does
not
reflect
sales
commissions
or
contingent
deferred
sales
charges,
if
applicable.
g
Includes
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).
h
Benefit
of
expense
reduction
rounds
to
less
than
0.01%.
i
Benefit
of
waiver
and
payments
by
affiliates
rounds
to
less
than
0.01%.
j
Rounds
to
less
than
0.01%.
Franklin
Mutual
Series
Funds
Financial
Highlights
Franklin
Mutual
Shares
Fund
(continued)
franklintempleton.com
Annual
Report
The
accompanying
notes
are
an
integral
part
of
these
financial
statements.
14
a
Year
Ended
December
31,
2020
2019
2018
2017
2016
Class
C
Per
share
operating
performance
(for
a
share
outstanding
throughout
the
year)
Net
asset
value,
beginning
of
year
...................
$27.22
$23.97
$28.04
$27.68
$25.54
Income
from
investment
operations
a
:
Net
investment
income
b
.........................
0.60
c
0.36
0.21
0.35
d
0.35
e
Net
realized
and
unrealized
gains
(losses)
...........
(2.12)
4.82
(3.00)
1.67
3.40
Total
from
investment
operations
....................
(1.52)
5.18
(2.79)
2.02
3.75
Less
distributions
from:
Net
investment
income
..........................
(0.26)
(0.42)
(0.03)
(0.37)
(0.36)
Net
realized
gains
.............................
(0.42)
(1.51)
(1.25)
(1.29)
(1.25)
Total
distributions
...............................
(0.68)
(1.93)
(1.28)
(1.66)
(1.61)
Net
asset
value,
end
of
year
.......................
$25.02
$27.22
$23.97
$28.04
$27.68
Total
return
f
....................................
(5.29)%
21.93%
(9.87)%
7.37%
14.77%
Ratios
to
average
net
assets
Expenses
g
,h
....................................
1.80%
i
1.78%
i
1.76%
i
1.78%
1.80%
i
Expenses
-
incurred
in
connection
with
securities
sold
short
0.02%
0.02%
—%
j
—%
0.01%
Net
investment
income
...........................
2.63%
c
1.32%
0.77%
1.23%
d
1.33%
e
Supplemental
data
Net
assets,
end
of
year
(000’s)
.....................
$206,196
$302,296
$309,756
$995,665
$1,114,760
Portfolio
turnover
rate
............................
21.35%
21.71%
20.72%
18.15%
20.56%
a
The
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
repurchas-
es
of
the
Fund’s
shares
in
relation
to
income
earned
and/or
fluctuating
fair
value
of
the
investments
of
the
Fund.
b
Based
on
average
daily
shares
outstanding.
c
Net
investment
income
per
share
includes
approximately
$0.29
per
share
related
to
income
received
in
the
form
of
special
dividends
and
an
adjustment
for
EU
reclaims
in
connection
with
certain
Fund
holdings.
Excluding
this
amount,
the
ratio
of
net
investment
income
to
average
net
assets
would
have
been
1.37%.
d
Net
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
hold-
ings.
Excluding
this
amount,
the
ratio
of
net
investment
income
to
average
net
assets
would
have
been
0.69%.
e
Net
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
hold-
ings.
Excluding
this
amount,
the
ratio
of
net
investment
income
to
average
net
assets
would
have
been
0.96%.
f
Total
return
does
not
reflect
sales
commissions
or
contingent
deferred
sales
charges,
if
applicable.
g
Includes
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).
h
Benefit
of
expense
reduction
rounds
to
less
than
0.01%.
i
Benefit
of
waiver
and
payments
by
affiliates
rounds
to
less
than
0.01%.
j
Rounds
to
less
than
0.01%.
Franklin
Mutual
Series
Funds
Financial
Highlights
Franklin
Mutual
Shares
Fund
(continued)
franklintempleton.com
The
accompanying
notes
are
an
integral
part
of
these
financial
statements.
Annual
Report
15
a
Year
Ended
December
31,
2020
2019
2018
2017
2016
Class
R
Per
share
operating
performance
(for
a
share
outstanding
throughout
the
year)
Net
asset
value,
beginning
of
year
...................
$27.17
$23.91
$28.21
$27.83
$25.66
Income
from
investment
operations
a
:
Net
investment
income
b
.........................
0.70
c
0.49
0.36
0.50
d
0.49
e
Net
realized
and
unrealized
gains
(losses)
...........
(2.09)
4.83
(3.05)
1.70
3.42
Total
from
investment
operations
....................
(1.39)
5.32
(2.69)
2.20
3.91
Less
distributions
from:
Net
investment
income
..........................
(0.40)
(0.55)
(0.36)
(0.53)
(0.49)
Net
realized
gains
.............................
(0.42)
(1.51)
(1.25)
(1.29)
(1.25)
Total
distributions
...............................
(0.82)
(2.06)
(1.61)
(1.82)
(1.74)
Net
asset
value,
end
of
year
.......................
$24.96
$27.17
$23.91
$28.21
$27.83
Total
return
....................................
(4.80)%
22.55%
(9.41)%
7.96%
15.31%
Ratios
to
average
net
assets
Expenses
f
,g
....................................
1.30
%
h
1.28%
h
1.26%
h
1.28%
1.30%
h
Expenses
-
incurred
in
connection
with
securities
sold
short
0.02%
0.02%
—%
i
—%
0.01%
Net
investment
income
...........................
3.06%
c
1.82%
1.27%
1.73%
d
1.83%
e
Supplemental
data
Net
assets,
end
of
year
(000’s)
.....................
$48,216
$66,038
$74,345
$107,660
$123,013
Portfolio
turnover
rate
............................
21.35%
21.71%
20.72%
18.15%
20.56%
a
The
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
repurchas-
es
of
the
Fund’s
shares
in
relation
to
income
earned
and/or
fluctuating
fair
value
of
the
investments
of
the
Fund.
b
Based
on
average
daily
shares
outstanding.
c
Net
investment
income
per
share
includes
approximately
$0.29
per
share
related
to
income
received
in
the
form
of
special
dividends
and
an
adjustment
for
EU
reclaims
in
connection
with
certain
Fund
holdings.
Excluding
this
amount,
the
ratio
of
net
investment
income
to
average
net
assets
would
have
been
1.80%.
d
Net
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
hold-
ings.
Excluding
this
amount,
the
ratio
of
net
investment
income
to
average
net
assets
would
have
been
1.19%.
e
Net
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
hold-
ings.
Excluding
this
amount,
the
ratio
of
net
investment
income
to
average
net
assets
would
have
been
1.46%.
f
Includes
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).
g
Benefit
of
expense
reduction
rounds
to
less
than
0.01%.
h
Benefit
of
waiver
and
payments
by
affiliates
rounds
to
less
than
0.01%.
i
Rounds
to
less
than
0.01%.
Franklin
Mutual
Series
Funds
Financial
Highlights
Franklin
Mutual
Shares
Fund
(continued)
franklintempleton.com
Annual
Report
The
accompanying
notes
are
an
integral
part
of
these
financial
statements.
16
a
Year
Ended
December
31,
2020
2019
2018
2017
2016
Class
R6
Per
share
operating
performance
(for
a
share
outstanding
throughout
the
year)
Net
asset
value,
beginning
of
year
...................
$27.55
$24.23
$28.61
$28.21
$25.98
Income
from
investment
operations
a
:
Net
investment
income
b
.........................
0.83
c
0.64
0.53
0.70
d
0.66
e
Net
realized
and
unrealized
gains
(losses)
...........
(2.09)
4.92
(3.11)
1.71
3.49
Total
from
investment
operations
....................
(1.26)
5.56
(2.58)
2.41
4.15
Less
distributions
from:
Net
investment
income
..........................
(0.55)
(0.73)
(0.55)
(0.72)
(0.67)
Net
realized
gains
.............................
(0.42)
(1.51)
(1.25)
(1.29)
(1.25)
Total
distributions
...............................
(0.97)
(2.24)
(1.80)
(2.01)
(1.92)
Net
asset
value,
end
of
year
.......................
$25.32
$27.55
$24.23
$28.61
$28.21
Total
return
....................................
(4.27)%
23.26%
(8.88)%
8.61%
16.05%
Ratios
to
average
net
assets
Expenses
f
,g
....................................
0.72%
h
0.70%
h
0.69%
h
0.67%
0.68%
h
Expenses
-
incurred
in
connection
with
securities
sold
short
0.02%
0.02%
—%
i
—%
0.01%
Net
investment
income
...........................
3.57%
c
2.40%
1.84%
2.34%
d
2.45%
e
Supplemental
data
Net
assets,
end
of
year
(000’s)
.....................
$1,449,696
$1,680,600
$3,160,186
$3,741,430
$1,896,497
Portfolio
turnover
rate
............................
21.35%
21.71%
20.72%
18.15%
20.56%
a
The
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
repurchas-
es
of
the
Fund’s
shares
in
relation
to
income
earned
and/or
fluctuating
fair
value
of
the
investments
of
the
Fund.
b
Based
on
average
daily
shares
outstanding.
c
Net
investment
income
per
share
includes
approximately
$0.29
per
share
related
to
income
received
in
the
form
of
special
dividends
and
an
adjustment
for
EU
reclaims
in
connection
with
certain
Fund
holdings.
Excluding
this
amount,
the
ratio
of
net
investment
income
to
average
net
assets
would
have
been
2.31%.
d
Net
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
hold-
ings.
Excluding
this
amount,
the
ratio
of
net
investment
income
to
average
net
assets
would
have
been
1.80%.
e
Net
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
hold-
ings.
Excluding
this
amount,
the
ratio
of
net
investment
income
to
average
net
assets
would
have
been
2.08%.
f
Includes
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).
g
Benefit
of
expense
reduction
rounds
to
less
than
0.01%.
h
Benefit
of
waiver
and
payments
by
affiliates
rounds
to
less
than
0.01%.
i
Rounds
to
less
than
0.01%.
Franklin
Mutual
Series
Funds
Statement
of
Investments,
December
31,
2020
Franklin
Mutual
Shares
Fund
franklintempleton.com
The
accompanying
notes
are
an
integral
part
of
these
financial
statements.
Annual
Report
17
a
a
Country
Shares
a
Value
a
a
a
a
a
a
Common
Stocks
93.6%
Aerospace
&
Defense
2.3%
BAE
Systems
plc
.....................................
United
Kingdom
15,590,083
$
103,974,340
Huntington
Ingalls
Industries,
Inc.
.........................
United
States
632,084
107,757,680
211,732,020
Auto
Components
0.0%
†
a,b,c,d
International
Automotive
Components
Group
Brazil
LLC
........
Belgium
7,234,813
153,856
Automobiles
0.9%
General
Motors
Co.
....................................
United
States
1,926,706
80,228,038
Banks
8.1%
Bank
of
America
Corp.
.................................
United
States
3,751,300
113,701,903
Citigroup,
Inc.
........................................
United
States
3,077,706
189,771,352
JPMorgan
Chase
&
Co.
.................................
United
States
1,644,490
208,965,344
Synovus
Financial
Corp.
................................
United
States
2,934,440
94,987,823
Wells
Fargo
&
Co.
.....................................
United
States
4,234,603
127,800,319
735,226,741
Beverages
0.6%
Heineken
NV
........................................
Netherlands
495,798
55,253,450
Biotechnology
0.3%
b
Alexion
Pharmaceuticals,
Inc.
............................
United
States
186,960
29,210,630
Building
Products
1.7%
Johnson
Controls
International
plc
.........................
United
States
3,293,400
153,439,506
Capital
Markets
1.2%
Credit
Suisse
Group
AG
................................
Switzerland
8,506,542
109,826,933
Communications
Equipment
1.0%
Cisco
Systems,
Inc.
...................................
United
States
2,020,910
90,435,722
Consumer
Finance
1.9%
Capital
One
Financial
Corp.
.............................
United
States
1,731,205
171,129,614
Containers
&
Packaging
1.5%
International
Paper
Co.
.................................
United
States
2,647,937
131,655,428
Diversified
Financial
Services
2.4%
b
Berkshire
Hathaway,
Inc.,
B
..............................
United
States
197,900
45,887,073
Voya
Financial,
Inc.
....................................
United
States
2,937,130
172,732,615
218,619,688
Diversified
Telecommunication
Services
0.3%
a,c
Windstream
Holdings,
Inc.
...............................
United
States
2,123,740
28,116,194
Electric
Utilities
1.0%
Pinnacle
West
Capital
Corp.
.............................
United
States
1,141,200
91,238,940
Electrical
Equipment
2.2%
b
Sensata
Technologies
Holding
plc
.........................
United
States
3,755,370
198,058,214
Electronic
Equipment,
Instruments
&
Components
0.7%
Corning,
Inc.
.........................................
United
States
1,760,788
63,388,368
Energy
Equipment
&
Services
0.8%
Schlumberger
NV
.....................................
United
States
3,224,000
70,379,920
Entertainment
2.4%
b
Walt
Disney
Co.
(The)
..................................
United
States
1,186,274
214,929,123
Franklin
Mutual
Series
Funds
Statement
of
Investments
Franklin
Mutual
Shares
Fund
(continued)
franklintempleton.com
Annual
Report
The
accompanying
notes
are
an
integral
part
of
these
financial
statements.
18
a
a
Country
Shares
a
Value
a
a
a
a
a
a
Common
Stocks
(continued)
Equity
Real
Estate
Investment
Trusts
(REITs)
1.7%
Alexander's,
Inc.
......................................
United
States
231,286
$
64,147,172
Uniti
Group,
Inc.
......................................
United
States
1,804,810
21,170,421
Vornado
Realty
Trust
...................................
United
States
1,752,422
65,435,438
150,753,031
Food
&
Staples
Retailing
1.7%
Kroger
Co.
(The)
......................................
United
States
4,854,578
154,181,397
Food
Products
4.2%
Archer-Daniels-Midland
Co.
.............................
United
States
2,004,447
101,044,173
Conagra
Brands,
Inc.
..................................
United
States
1,929,383
69,959,428
Kraft
Heinz
Co.
(The)
..................................
United
States
6,008,600
208,258,076
379,261,677
Health
Care
Equipment
&
Supplies
3.3%
Medtronic
plc
........................................
United
States
2,533,754
296,803,944
Health
Care
Providers
&
Services
3.8%
Anthem,
Inc.
.........................................
United
States
391,272
125,633,526
CVS
Health
Corp.
.....................................
United
States
3,247,315
221,791,615
347,425,141
Household
Durables
2.6%
Lennar
Corp.,
A
.......................................
United
States
1,219,786
92,984,287
Newell
Brands,
Inc.
....................................
United
States
6,793,795
144,232,268
237,216,555
Household
Products
0.7%
Energizer
Holdings,
Inc.
................................
United
States
1,538,433
64,891,104
Industrial
Conglomerates
1.4%
General
Electric
Co.
...................................
United
States
11,699,600
126,355,680
Insurance
6.9%
Alleghany
Corp.
......................................
United
States
325,189
196,313,347
Everest
Re
Group
Ltd.
.................................
United
States
444,994
104,168,645
Hartford
Financial
Services
Group,
Inc.
(The)
................
United
States
3,214,299
157,436,365
MetLife,
Inc.
.........................................
United
States
2,277,830
106,944,119
Willis
Towers
Watson
plc
................................
United
States
298,039
62,790,857
627,653,333
IT
Services
2.1%
Cognizant
Technology
Solutions
Corp.,
A
....................
United
States
2,285,650
187,309,018
Media
5.8%
b
Charter
Communications,
Inc.,
A
..........................
United
States
440,129
291,167,340
Comcast
Corp.,
A
.....................................
United
States
3,958,800
207,441,120
b
iHeartMedia
,
Inc.,
A
....................................
United
States
1,795,072
23,300,035
a,b
iHeartMedia
,
Inc.,
B
...................................
United
States
35,201
424,925
522,333,420
Oil,
Gas
&
Consumable
Fuels
4.7%
BP
plc
..............................................
United
Kingdom
43,649,147
150,632,989
Kinder
Morgan,
Inc.
....................................
United
States
5,693,740
77,833,426
Williams
Cos.,
Inc.
(The)
................................
United
States
9,628,984
193,061,129
421,527,544
Pharmaceuticals
10.2%
b
Elanco
Animal
Health,
Inc.
...............................
United
States
1,054,483
32,340,994
Franklin
Mutual
Series
Funds
Statement
of
Investments
Franklin
Mutual
Shares
Fund
(continued)
franklintempleton.com
The
accompanying
notes
are
an
integral
part
of
these
financial
statements.
Annual
Report
19
a
a
Country
Shares
a
Value
a
a
a
a
a
a
Common
Stocks
(continued)
Pharmaceuticals
(continued)
Eli
Lilly
and
Co.
.......................................
United
States
1,206,110
$
203,639,612
GlaxoSmithKline
plc
...................................
United
Kingdom
9,979,574
182,619,237
Merck
&
Co.,
Inc.
.....................................
United
States
2,797,172
228,808,669
Novartis
AG,
ADR
.....................................
Switzerland
2,151,041
203,122,802
Perrigo
Co.
plc
.......................................
United
States
1,643,800
73,510,736
924,042,050
Semiconductors
&
Semiconductor
Equipment
1.0%
b
Inphi
Corp.
..........................................
United
States
149,300
23,958,171
Xilinx,
Inc.
...........................................
United
States
458,600
65,015,722
88,973,893
Software
3.2%
b
Avaya
Holdings
Corp.
..................................
United
States
364
6,970
NortonLifeLock
,
Inc.
...................................
United
States
3,170,681
65,886,751
Oracle
Corp.
.........................................
United
States
3,378,327
218,543,974
284,437,695
Specialty
Retail
1.1%
Tiffany
&
Co.
.........................................
United
States
651,800
85,679,110
a,b,d
TRU
Kids
Parent
LLC
..................................
United
States
7,469
17,051,583
a,b,d
Wayne
Services
Legacy,
Inc.
.............................
United
States
7,469
—
102,730,693
Technology
Hardware,
Storage
&
Peripherals
4.3%
Samsung
Electronics
Co.
Ltd.
............................
South
Korea
3,420,571
255,046,698
Western
Digital
Corp.
..................................
United
States
2,461,412
136,337,611
391,384,309
Textiles,
Apparel
&
Luxury
Goods
1.3%
PVH
Corp.
..........................................
United
States
1,285,900
120,733,151
Tobacco
3.0%
Altria
Group,
Inc.
......................................
United
States
2,023,360
82,957,760
British
American
Tobacco
plc
.............................
United
Kingdom
3,767,740
139,932,291
British
American
Tobacco
plc,
ADR
........................
United
Kingdom
1,176,079
44,091,202
266,981,253
Wireless
Telecommunication
Services
1.3%
b
T-Mobile
US,
Inc.
.....................................
United
States
689,100
92,925,135
Vodafone
Group
plc
...................................
United
Kingdom
16,374,202
26,896,395
119,821,530
Total
Common
Stocks
(Cost
$6,260,056,190)
....................................
8,467,838,803
Warrants
Warrants
0.1%
Diversified
Telecommunication
Services
0.1%
a,b
Windstream
Holdings,
Inc.,
9/21/55
........................
United
States
119,757
1,585,463
Media
0.0%
†
b
iHeartMedia
,
Inc.,
5/01/39
...............................
United
States
1,786
23,180
Software
0.0%
†
b
Avaya
Holdings
Corp.,
12/15/22
..........................
United
States
276,741
899,408
Total
Warrants
(Cost
$1,561,519)
..............................................
2,508,051
Franklin
Mutual
Series
Funds
Statement
of
Investments
Franklin
Mutual
Shares
Fund
(continued)
franklintempleton.com
Annual
Report
The
accompanying
notes
are
an
integral
part
of
these
financial
statements.
20
a
a
Country
Principal
Amount
*
a
Value
a
a
a
a
a
a
Corporate
Bonds
3.8%
Airlines
1.3%
e
American
Airlines,
Inc.
,
Senior
Secured
Note
,
144A,
11.75
%
,
7/15/25
United
States
64,192,000
$
74,125,712
e
Mileage
Plus
Holdings
LLC
/
Mileage
Plus
Intellectual
Property
Assets
Ltd.
,
Senior
Secured
Note
,
144A,
6.5
%
,
6/20/27
.......
United
States
39,492,000
42,527,948
116,653,660
Diversified
Telecommunication
Services
0.9%
f
Frontier
Communications
Corp.
,
Senior
Note,
10.5%,
9/15/22
...........................
United
States
72,365,000
37,884,163
Senior
Note,
11%,
9/15/25
.............................
United
States
81,506,000
42,943,474
80,827,637
Machinery
0.2%
e
Navistar
International
Corp.
,
Senior
Secured
Note
,
144A,
9.5
%
,
5/01/25
...........................................
United
States
18,060,400
20,306,662
Multiline
Retail
0.2%
e
Macy's,
Inc.
,
Senior
Secured
Note
,
144A,
8.375
%
,
6/15/25
......
United
States
16,039,000
17,828,952
Software
1.2%
e
Veritas
US,
Inc.
/
Veritas
Bermuda
Ltd.
,
Senior
Note,
144A,
10.5%,
2/01/24
......................
United
States
76,705,000
78,290,109
Senior
Secured
Note,
144A,
7.5%,
2/01/23
................
United
States
9,656,000
9,697,279
Senior
Secured
Note,
144A,
7.5%,
9/01/25
................
United
States
22,622,000
23,244,105
111,231,493
Total
Corporate
Bonds
(Cost
$380,600,017)
.....................................
346,848,404
g
Senior
Floating
Rate
Interests
0.4%
Software
0.4%
h
Veritas
US,
Inc.,
Term
Loan,
B,
6.5%,
(3-month
USD
LIBOR
+
5.5%),
9/01/25
...........................................
United
States
35,102,025
35,053,760
Total
Senior
Floating
Rate
Interests
(Cost
$34,450,067)
..........................
35,053,760
Shares
Companies
in
Liquidation
0.0%
†
a,b,i
Bosgen
Liquidating
Trust
c/o
Verdolino
and
Lowey
P.C.,
Contingent
Distribution
........................................
Netherlands
555,154
—
a,b,i
Tribune
Media,
Litigation
Trust,
Contingent
Distribution
.........
United
States
1,005,034
—
a,b,i
Vistra
Energy
Corp.,
Litigation
Trust,
Contingent
Distribution
.....
United
States
194,177,556
291,266
a,b,i
Walter
Energy,
Inc.,
Litigation
Trust,
Contingent
Distribution
......
United
States
20,046,000
—
Total
Companies
in
Liquidation
(Cost
$6,071,371)
...............................
291,266
Total
Long
Term
Investments
(Cost
$6,682,739,164)
.............................
8,852,540,284
a
Short
Term
Investments
1.7%
a
a
Country
Principal
Amount
*
a
Value
a
a
a
a
a
a
U.S.
Government
and
Agency
Securities
1.7%
j
FHLB,
1/04/21
.......................................
United
States
5,000,000
5,000,000
j
U.S.
Treasury
Bills
,
1/05/21
...........................................
United
States
34,500,000
34,500,005
k
1/14/21
...........................................
United
States
5,000,000
4,999,952
Franklin
Mutual
Series
Funds
Statement
of
Investments
Franklin
Mutual
Shares
Fund
(continued)
franklintempleton.com
The
accompanying
notes
are
an
integral
part
of
these
financial
statements.
Annual
Report
21
Short
Term
Investments
(continued)
a
a
Country
Principal
Amount
*
a
Value
a
a
a
a
a
a
U.S.
Government
and
Agency
Securities
(continued)
j
U.S.
Treasury
Bills,
(continued)
k
1/21/21
...........................................
United
States
25,000,000
$
24,999,587
k
2/04/21
...........................................
United
States
25,000,000
24,999,031
k
2/11/21
...........................................
United
States
10,000,000
9,999,472
k
6/10/21
...........................................
United
States
25,000,000
24,992,068
k
6/17/21
...........................................
United
States
10,000,000
9,996,697
k
6/24/21
...........................................
United
States
10,000,000
9,996,556
k
7/01/21
...........................................
United
States
2,000,000
1,999,257
146,482,625
Total
U.S.
Government
and
Agency
Securities
(Cost
$151,475,336)
................
151,482,625
Total
Short
Term
Investments
(Cost
$151,475,336
)
...............................
151,482,625
a
Total
Investments
(Cost
$6,834,214,500)
99.6%
..................................
$9,004,022,909
Securities
Sold
Short
(2.0)%
..................................................
(176,829,022)
Other
Assets,
less
Liabilities
2.4%
.............................................
218,175,776
Net
Assets
100.0%
...........................................................
$9,045,369,663
Shares
Securities
Sold
Short
(2.0)%
Common
Stocks
(2.0)%
Insurance
(0.8)%
l
Aon
plc,
A
...........................................
United
States
321,881
(68,003,799)
Pharmaceuticals
(0.2)%
l
AstraZeneca
plc,
ADR
..................................
United
Kingdom
397,160
(19,854,028)
l
Semiconductors
&
Semiconductor
Equipment
(1.0)%
Advanced
Micro
Devices,
Inc.
............................
United
States
790,352
(72,483,182)
Marvell
Technology
Group
Ltd.
...........................
United
States
346,824
(16,488,013)
(88,971,195)
Total
Common
Stocks
(Proceeds
$174,857,095)
.................................
(176,829,022)
Total
Securities
Sold
Short
(Proceeds
$174,857,095)
.............................
$(176,829,022)
*
The
principal
amount
is
stated
in
U.S.
dollars
unless
otherwise
indicated.
†
Rounds
to
less
than
0.1%
of
net
assets.
a
Fair
valued
using
significant
unobservable
inputs.
See
Note
14
regarding
fair
value
measurements.
b
Non-income
producing.
c
See
Note
10
regarding
restricted
securities.
d
See
Note
12
regarding
holdings
of
5%
voting
securities.
e
Security
was
purchased
pursuant
to
Rule
144A
or
Regulation
S
under
the
Securities
Act
of
1933.
144A
securities
may
be
sold
in
transactions
exempt
from
registration
only
to
qualified
institutional
buyers
or
in
a
public
offering
registered
under
the
Securities
Act
of
1933.
Regulation
S
securities
cannot
be
sold
in
the
United
States
without
either
an
effective
registration
statement
filed
pursuant
to
the
Securities
Act
of
1933,
or
pursuant
to
an
exemption
from
registration.
At
December
31,
2020,
the
aggregate
value
of
these
securities
was
$266,020,767,
representing
2.9%
of
net
assets.
f
See
Note
8
regarding
credit
risk
and
defaulted
securities.
g
See
Note
1(f)
regarding
senior
floating
rate
interests.
h
The
coupon
rate
shown
represents
the
rate
at
period
end.
i
Contingent
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.
j
The
security
was
issued
on
a
discount
basis
with
no
stated
coupon
rate.
Franklin
Mutual
Series
Funds
Statement
of
Investments
Franklin
Mutual
Shares
Fund
(continued)
franklintempleton.com
Annual
Report
The
accompanying
notes
are
an
integral
part
of
these
financial
statements.
22
k
A
portion
or
all
of
the
security
has
been
segregated
as
collateral
for
securities
sold
short
and/or
open
forward
exchange
contracts.
At
December
31,
2020,
the
aggregate
value
of
these
securities
pledged
amounted
to
$99,326,979,
representing
1.1%
of
net
assets.
l
See
Note
1(d)
regarding
securities
sold
short.
Franklin
Mutual
Series
Funds
Statement
of
Investments
Franklin
Mutual
Shares
Fund
(continued)
franklintempleton.com
The
accompanying
notes
are
an
integral
part
of
these
financial
statements.
Annual
Report
23
At
December
31,
2020,
the
Fund
had
the
following futures
contracts
outstanding.
See
Note
1(c). 
At
December
31,
2020,
the
Fund
had
the
following
forward
exchange
contracts
outstanding.
See
Note
1
(
c
). 
Futures
Contracts
Description
Type
Number
of
Contracts
Notional
Amount
*
Expiration
Date
Value/
Unrealized
Appreciation
(Depreciation)
Foreign
exchange
contracts
Foreign
Exchange
EUR/USD
...................
Short
52
$
7,959,900
3/15/21
$
(46,969)
Foreign
Exchange
GBP/USD
...................
Short
1,369
116,869,819
3/15/21
(1,735,628)
Total
Futures
Contracts
......................................................................
$(1,782,597)
*
As
of
period
end.
Forward
Exchange
Contracts
Currency
Counter-
party
a
Type
Quantity
Contract
Amount
*
Settlement
Date
Unrealized
Appreciation
Unrealized
Depreciation
a
a
a
a
a
a
a
a
OTC
Forward
Exchange
Contracts
Euro
.............
HSBK
Buy
345,149
402,900
1/15/21
$
18,874
$
—
Euro
.............
HSBK
Sell
345,820
398,503
1/15/21
—
(24,091)
Euro
.............
SSBT
Sell
9,172,257
10,461,693
1/15/21
—
(746,835)
Euro
.............
UBSW
Buy
679,456
794,174
1/15/21
36,123
—
Euro
.............
UBSW
Sell
9,172,257
10,462,335
1/15/21
—
(746,193)
British
Pound
......
BNY
Buy
2,285,330
3,108,332
1/19/21
17,485
—
British
Pound
......
HSBK
Buy
11,662,208
15,767,021
1/19/21
184,257
—
British
Pound
......
SSBT
Sell
38,533,728
48,267,810
1/19/21
—
(4,437,660)
British
Pound
......
UBSW
Buy
8,062,625
10,898,815
1/19/21
129,042
—
British
Pound
......
BOFA
Sell
500,000
663,455
2/16/21
—
(20,571)
British
Pound
......
HSBK
Sell
15,626,880
20,466,389
2/16/21
—
(911,980)
British
Pound
......
SSBT
Sell
1,307,152
1,733,950
2/16/21
—
(54,300)
Swiss
Franc
.......
HSBK
Sell
46,155,423
52,008,044
2/16/21
—
(193,706)
Swiss
Franc
.......
UBSW
Sell
46,155,423
51,992,929
2/16/21
—
(208,821)
Euro
.............
BOFA
Sell
295,000
358,425
2/23/21
—
(2,385)
Euro
.............
HSBK
Sell
875,000
1,064,123
2/23/21
—
(6,077)
Euro
.............
HSBK
Sell
620,554
735,983
4/07/21
—
(23,751)
Euro
.............
SSBT
Sell
664,274
787,896
4/07/21
—
(25,364)
Euro
.............
UBSW
Sell
1,854,994
2,199,497
4/07/21
—
(71,541)
British
Pound
......
BOFA
Sell
3,347,709
4,452,018
4/23/21
—
(129,432)
British
Pound
......
HSBK
Sell
23,363,074
31,141,852
4/23/21
—
(831,286)
British
Pound
......
SSBT
Sell
577,853
774,243
4/23/21
—
(16,569)
British
Pound
......
UBSW
Sell
2,750,000
3,693,248
4/23/21
—
(70,218)
South
Korean
Won
..
HSBK
Buy
5,412,101,211
4,987,192
5/14/21
—
(14,061)
South
Korean
Won
..
HSBK
Sell
123,344,857,123
110,260,523
5/14/21
—
(3,079,954)
South
Korean
Won
..
UBSW
Buy
59,314,683,600
53,617,793
5/14/21
885,936
—
South
Korean
Won
..
UBSW
Sell
61,526,168,481
54,948,574
5/14/21
—
(1,587,269)
South
Korean
Won
..
HSBK
Sell
117,096,677,745
106,015,066
6/18/21
—
(1,577,812)
South
Korean
Won
..
UBSW
Sell
25,972,019,912
23,456,061
6/18/21
—
(408,018)
Total
Forward
Exchange
Contracts
...................................................
$1,271,717
$(15,187,894)
Net
unrealized
appreciation
(depreciation)
............................................
$(13,916,177)
Franklin
Mutual
Series
Funds
Statement
of
Investments
Franklin
Mutual
Shares
Fund
(continued)
franklintempleton.com
Annual
Report
The
accompanying
notes
are
an
integral
part
of
these
financial
statements.
24
*
In
U.S.
dollars
unless
otherwise
indicated.
a
May
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
.
Franklin
Mutual
Series
Funds
Financial
Statements
Statement
of
Assets
and
Liabilities
December
31,
2020
franklintempleton.com
The
accompanying
notes
are
an
integral
part
of
these
financial
statements.
Annual
Report
25
Franklin
Mutual
Shares
Fund
Assets:
Investments
in
securities:
Cost
-
Unaffiliated
issuers
...................................................................
$6,792,812,392
Cost
-
Non-controlled
affiliates
(Note
3
f
and
12
)
...................................................
41,402,108
Value
-
Unaffiliated
issuers
..................................................................
$8,986,817,470
Value
-
Non-controlled
affiliates
(Note
3
f
and
12
)
..................................................
17,205,439
Cash
....................................................................................
331,466
Receivables:
Investment
securities
sold
...................................................................
24,601,055
Capital
shares
sold
........................................................................
1,085,861
Dividends
and
interest
.....................................................................
29,205,256
European
Union
tax
reclaims
(Note
1
g
)
.........................................................
19,599,198
Deposits
with
brokers
for:
Securities
sold
short
.....................................................................
178,751,131
Futures
contracts
........................................................................
4,054,799
Unrealized
appreciation
on
OTC
forward
exchange
contracts
..........................................
1,271,717
Other
assets
..............................................................................
2,192,140
Total
assets
..........................................................................
9,265,115,532
Liabilities:
Payables:
Investment
securities
purchased
..............................................................
8,106,908
Capital
shares
redeemed
...................................................................
10,822,648
Management
fees
.........................................................................
5,042,571
Distribution
fees
..........................................................................
817,690
Transfer
agent
fees
........................................................................
767,388
Trustees'
fees
and
expenses
.................................................................
1,026,314
Variation
margin
on
futures
contracts
...........................................................
310,181
Securities
sold
short,
at
value
(proceeds
$174,857,095)
..............................................
176,829,022
Unrealized
depreciation
on
OTC
forward
exchange
contracts
..........................................
15,187,894
Accrued
expenses
and
other
liabilities
...........................................................
835,253
Total
liabilities
.........................................................................
219,745,869
Net
assets,
at
value
.................................................................
$9,045,369,663
Net
assets
consist
of:
Paid-in
capital
.............................................................................
$6,989,478,995
Total
distributable
earnings
(losses)
.............................................................
2,055,890,668
Net
assets,
at
value
.................................................................
$9,045,369,663
Franklin
Mutual
Series
Funds
Financial
Statements
Statement
of
Assets
and
Liabilities
(continued)
December
31,
2020
franklintempleton.com
Annual
Report
The
accompanying
notes
are
an
integral
part
of
these
financial
statements.
26
Franklin
Mutual
Shares
Fund
Class
Z:
Net
assets,
at
value
.......................................................................
$4,376,134,738
Shares
outstanding
........................................................................
172,741,210
Net
asset
value
and
maximum
offering
price
per
share
.............................................
$25.33
Class
A:
Net
assets,
at
value
.......................................................................
$2,965,127,375
Shares
outstanding
........................................................................
118,410,686
Net
asset
value
per
share
a
..................................................................
$25.04
Maximum
offering
price
per
share
(net
asset
value
per
share
÷
94.50%)
................................
$26.50
Class
C:
Net
assets,
at
value
.......................................................................
$206,195,944
Shares
outstanding
........................................................................
8,242,354
Net
asset
value
and
maximum
offering
price
per
share
a
.............................................
$25.02
Class
R:
Net
assets,
at
value
.......................................................................
$48,215,971
Shares
outstanding
........................................................................
1,932,042
Net
asset
value
and
maximum
offering
price
per
share
.............................................
$24.96
Class
R6:
Net
assets,
at
value
.......................................................................
$1,449,695,635
Shares
outstanding
........................................................................
57,265,441
Net
asset
value
and
maximum
offering
price
per
share
.............................................
$25.32
a
Redemption
price
is
equal
to
net
asset
value
less
contingent
deferred
sales
charges,
if
applicable.
Franklin
Mutual
Series
Funds
Financial
Statements
Statement
of
Operations
for
the
year
ended
December
31,
2020
franklintempleton.com
The
accompanying
notes
are
an
integral
part
of
these
financial
statements.
Annual
Report
27
Franklin
Mutual
Shares
Fund
Investment
income:
Dividends:
(net
of
foreign
taxes
of
$1,480,745)
Unaffiliated
issuers
........................................................................
$338,179,488
Interest:
Unaffiliated
issuers
........................................................................
44,999,482
Adjustment
for
uncollectible
interest
(Note
8
)
(8,097,948)
Income
from
securities
loaned:
Unaffiliated
entities
(net
of
fees
and
rebates)
.....................................................
6,687
Non-controlled
affiliates
(Note
3
f
)
.............................................................
62
Other
income
(Note
1
g
)
......................................................................
15,174,814
Total
investment
income
...................................................................
390,262,585
Expenses:
Management
fees
(Note
3
a
)
...................................................................
59,382,443
Distribution
fees:
(Note
3c
)
    Class
A
................................................................................
7,686,245
    Class
C
................................................................................
2,176,565
    Class
R
................................................................................
241,121
Transfer
agent
fees:
(Note
3e
)
    Class
Z
................................................................................
3,946,006
    Class
A
................................................................................
2,848,252
    Class
C
................................................................................
201,482
    Class
R
................................................................................
44,998
    Class
R6
...............................................................................
305,425
Custodian
fees
(Note
4
)
......................................................................
143,570
Reports
to
shareholders
......................................................................
664,113
Registration
and
filing
fees
....................................................................
146,437
Professional
fees
...........................................................................
301,120
Trustees'
fees
and
expenses
..................................................................
620,659
Dividends
on
securities
sold
short
..............................................................
1,456,867
Other
....................................................................................
375,136
Total
expenses
.........................................................................
80,540,439
Expense
reductions
(Note
4
)
...............................................................
(46,526)
Expenses
waived/paid
by
affiliates
(Note
3
f
and
3
g
)
..............................................
(796)
Net
expenses
.........................................................................
80,493,117
Net
investment
income
................................................................
309,769,468
Franklin
Mutual
Series
Funds
Financial
Statements
Statement
of
Operations
(continued)
for
the
year
ended
December
31,
2020
franklintempleton.com
Annual
Report
The
accompanying
notes
are
an
integral
part
of
these
financial
statements.
28
Franklin
Mutual
Shares
Fund
Realized
and
unrealized
gains
(losses):
Net
realized
gain
(loss)
from:
Investments:
Unaffiliated
issuers
......................................................................
(230,933,220)
Non-controlled
affiliates
(Note
3
f
and
12
)
......................................................
718,391
Written
options
...........................................................................
(959,764)
Foreign
currency
transactions
................................................................
79,518
Forward
exchange
contracts
.................................................................
(19,764,704)
Futures
contracts
.........................................................................
(2,898,805)
Securities
sold
short
.......................................................................
(5,239,621)
Net
realized
gain
(loss)
..................................................................
(258,998,205)
Net
change
in
unrealized
appreciation
(depreciation)
on:
Investments:
Unaffiliated
issuers
......................................................................
(794,004,855)
Non-controlled
affiliates
(Note
3
f
and
12
)
......................................................
(10,925,013)
Translation
of
other
assets
and
liabilities
denominated
in
foreign
currencies
..............................
1,446,047
Forward
exchange
contracts
.................................................................
(4,877,272)
Futures
contracts
.........................................................................
375,245
Securities
sold
short
.......................................................................
5,373,100
Net
change
in
unrealized
appreciation
(depreciation)
............................................
(802,612,748)
Net
realized
and
unrealized
gain
(loss)
............................................................
(1,061,610,953)
Net
increase
(decrease)
in
net
assets
resulting
from
operations
..........................................
$(751,841,485)
Franklin
Mutual
Series
Funds
Financial
Statements
Statements
of
Changes
in
Net
Assets
franklintempleton.com
The
accompanying
notes
are
an
integral
part
of
these
financial
statements.
Annual
Report
29
Franklin
Mutual
Shares
Fund
Year
Ended
December
31,
2020
Year
Ended
December
31,
2019
Increase
(decrease)
in
net
assets:
Operations:
Net
investment
income
.................................................
$309,769,468
$286,473,860
Net
realized
gain
(loss)
.................................................
(258,998,205)
589,248,324
Net
change
in
unrealized
appreciation
(depreciation)
...........................
(802,612,748)
1,737,821,368
Net
increase
(decrease)
in
net
assets
resulting
from
operations
................
(751,841,485)
2,613,543,552
Distributions
to
shareholders:
Class
Z
.............................................................
(164,290,286)
(424,957,060)
Class
A
.............................................................
(107,633,936)
(310,738,396)
Class
C
.............................................................
(5,681,043)
(20,683,973)
Class
R
.............................................................
(1,617,401)
(5,167,516)
Class
R6
............................................................
(55,414,182)
(180,523,371)
Total
distributions
to
shareholders
..........................................
(334,636,848)
(942,070,316)
Capital
share
transactions:
(Note
2
)
Class
Z
.............................................................
(581,646,646)
(407,966,163)
Class
A
.............................................................
(679,006,313)
(326,358,495)
Class
C
.............................................................
(63,162,723)
(49,007,989)
Class
R
.............................................................
(11,810,447)
(18,388,105)
Class
R6
............................................................
(96,361,914)
(1,891,813,271)
Total
capital
share
transactions
............................................
(1,431,988,043)
(2,693,534,023)
Net
increase
(decrease)
in
net
assets
...................................
(2,518,466,376)
(1,022,060,787)
Net
assets:
Beginning
of
year
.......................................................
11,563,836,039
12,585,896,826
End
of
year
...........................................................
$9,045,369,663
$11,563,836,039
Franklin
Mutual
Series
Funds
Notes
to
Financial
Statements
Franklin
Mutual
Shares
Fund
30
franklintempleton.com
Annual
Report
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 six 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.
Franklin
Mutual
Series
Funds
Notes
to
Financial
Statements
31
franklintempleton.com
Annual
Report
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. Events
can occur
between
the
time
at
which
trading
in
a
foreign
security
is
completed
and
4
p.m.
Eastern
time
that
might
call
into
question
the
reliability
of
the
value
of
a
portfolio
security
held
by
the
Fund.
As
a
result,
differences
may
arise
between
the
value
of
the
Fund's
portfolio
securities
as
determined
at
the
foreign
market
close
and
the
latest
indications
of
value
at
4
p.m.
Eastern
time. In
order
to
minimize
the
potential
for
these
differences,
an
independent
pricing
service
may
be
used
to
adjust
the
value
of
the
Fund's
portfolio
securities
to
the
latest
indications
of
fair
value
at
4
p.m.
Eastern
time.
At
December
31,
2020,
certain
securities
may
have
been
fair
valued
using
these
procedures,
in
which
case
the
securities
were
categorized
as
Level
2
inputs
within
the
fair
value
hierarchy.
See
the
Fair
Value
Measurements
note
for
more
information.
When
the
last
day
of
the
reporting
period
is
a
non-business
day,
certain
foreign
markets
may
be
open
on
those
days
that
the
Fund's
NAV
is
not
calculated,
which
could
result
in
differences
between
the
value
of
the
Fund's
portfolio
securities
on
the
last
business
day
and
the
last
calendar
day
of
the
reporting
period.
Any
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.
1.
Organization
and
Significant
Accounting
Policies
(continued)
a.
Financial
Instrument
Valuation 
(continued)
Franklin
Mutual
Series
Funds
Notes
to
Financial
Statements
32
franklintempleton.com
Annual
Report
Franklin
Mutual
Shares
Fund
(continued)
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,
2020,
the
Fund
had
OTC
derivatives
in
a
net
liability
position
of
$13,933,662
and
the
aggregate
value
of
collateral
pledged
for
such
contracts
was
$13,733,767.  
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.
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
1.
Organization
and
Significant
Accounting
Policies
(continued)
c.
Derivative
Financial
Instruments
(continued)
Franklin
Mutual
Series
Funds
Notes
to
Financial
Statements
33
franklintempleton.com
Annual
Report
Franklin
Mutual
Shares
Fund
(continued)
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
collateral
in
the
form
of
cash
and/or
U.S.
Government
and
Agency
securities
against
the
loaned
securities
in
an
amount
equal
to
at
least
102%
of
the
fair
value
of
the
loaned
securities.
Collateral
is
maintained
over
the
life
of
the
loan
in
an
amount
not
less
than
100%
of
the
fair
value
of
loaned
securities,
as
determined
at
the
close
of
Fund
business
each
day;
any
additional
collateral
required
due
to
changes
in
security
values
is
delivered
to
the
Fund
on
the
next
business
day.
Any
cash
collateral
received
is
deposited
into
a
joint
cash
account
with
other
funds
and
is
used
to
invest
in
a
money
market
fund
managed
by
Franklin
Advisers,
Inc.,
an
affiliate
of
the Fund,
and/or
a
joint
repurchase
agreement.
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 any
cash 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,
2020,
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.
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
1.
Organization
and
Significant
Accounting
Policies
(continued)
d.
Securities
Sold
Short
(continued)
Franklin
Mutual
Series
Funds
Notes
to
Financial
Statements
34
franklintempleton.com
Annual
Report
Franklin
Mutual
Shares
Fund
(continued)
sustained
upon
examination
by
the
tax
authorities
based
on
its
technical
merits.
As
of
December
31,
2020,
the
Fund
has
determined
that
no
tax
liability
is
required
in
its
financial
statements
related
to
uncertain
tax
positions
for
any
open
tax
years
(or
expected
to
be
taken
in
future
tax
years).
Open
tax
years
are
those
that
remain
subject
to
examination
and
are
based
on
the
statute
of
limitations
in
each
jurisdiction
in
which
the
Fund
invests. 
h.
Security
Transactions,
Investment
Income,
Expenses
and
Distributions
Security
transactions
are
accounted
for
on
trade
date.
Realized
gains
and
losses
on
security
transactions
are
determined
on
a
specific
identification
basis.
Interest
income
and
estimated
expenses
are
accrued
daily.
Amortization
of
premium
and
accretion
of
discount
on
debt
securities
are
included
in
interest
income.
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.
1.
Organization
and
Significant
Accounting
Policies
(continued)
g.
Income
and
Deferred
Taxes
(continued)
Franklin
Mutual
Series
Funds
Notes
to
Financial
Statements
35
franklintempleton.com
Annual
Report
Franklin
Mutual
Shares
Fund
(continued)
2.
Shares
of
Beneficial
Interest
At
December
31,
2020,
there
were
an
unlimited
number
of
shares
authorized
(without
par
value)
.
Transactions
in
the
Fund’s
shares
were
as
follows:
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:
Year
Ended
December
31,
2020
Year
Ended
December
31,
2019
Shares
Amount
Shares
Amount
Class
Z
Shares:
Shares
sold
...................................
6,418,611
$148,599,302
5,703,921
$154,451,161
Shares
issued
in
reinvestment
of
distributions
..........
6,211,305
145,377,724
13,821,998
375,962,807
Shares
redeemed
...............................
(38,414,016)
(875,623,672)
(35,007,575)
(938,380,131)
Net
increase
(decrease)
..........................
(25,784,100)
$(581,646,646)
(15,481,656)
$(407,966,163)
Class
A
Shares:
Shares
sold
a
...................................
8,640,892
$191,690,060
9,660,276
$258,457,935
Shares
issued
in
reinvestment
of
distributions
..........
4,451,003
102,359,470
10,821,922
290,798,586
Shares
redeemed
...............................
(42,999,827)
(973,055,843)
(32,673,689)
(875,615,016)
Net
increase
(decrease)
..........................
(29,907,932)
$(679,006,313)
(12,191,491)
$(326,358,495)
Class
C
Shares:
Shares
sold
...................................
1,584,225
$36,733,855
1,854,760
$49,227,044
Shares
issued
in
reinvestment
of
distributions
..........
252,555
5,661,915
765,482
20,460,413
Shares
redeemed
a
..............................
(4,700,207)
(105,558,493)
(4,437,754)
(118,695,446)
Net
increase
(decrease)
..........................
(2,863,427)
$(63,162,723)
(1,817,512)
$(49,007,989)
Class
R
Shares:
Shares
sold
...................................
342,269
$7,791,511
246,671
$6,553,429
Shares
issued
in
reinvestment
of
distributions
..........
71,017
1,617,370
193,343
5,163,831
Shares
redeemed
...............................
(911,706)
(21,219,328)
(1,118,911)
(30,105,365)
Net
increase
(decrease)
..........................
(498,420)
$(11,810,447)
(678,897)
$(18,388,105)
Class
R6
Shares:
Shares
sold
...................................
2,685,472
$57,438,893
7,406,299
$199,310,809
Shares
issued
in
reinvestment
of
distributions
..........
2,365,014
55,401,352
6,673,123
180,428,324
Shares
redeemed
...............................
(8,794,233)
(209,202,159)
(83,508,648)
(2,271,552,404)
Net
increase
(decrease)
..........................
(3,743,747)
$(96,361,914)
(69,429,226)
$(1,891,813,271)
a
May
include
a
portion
of
Class
C
shares
that
were
automatically
converted
to
Class
A.
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
Franklin
Mutual
Series
Funds
Notes
to
Financial
Statements
36
franklintempleton.com
Annual
Report
Franklin
Mutual
Shares
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:
For
the
year
ended
December
31,
2020,
the
gross
effective
investment
management
fee
rate
was
0.662%
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:
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
:
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
Class
A
....................................................................................
0.35%
Class
C
....................................................................................
1.00%
Class
R
....................................................................................
0.50%
Sales
charges
retained
net
of
commissions
paid
to
unaffiliated
brokers/dealers
..............................
$148,955
3.
Transactions
with
Affiliates
(continued)
Franklin
Mutual
Series
Funds
Notes
to
Financial
Statements
37
franklintempleton.com
Annual
Report
Franklin
Mutual
Shares
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,
2020,
the
Fund
paid
transfer
agent
fees
of
$7,346,163,
of
which $3,777,580
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,
2020,
the
Fund
held
investments
in
affiliated
management
investment
companies
as
follows:
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
0.03%
based
on
the
average
net
assets
of
the
class
until
April
30,
2021.
Prior
to
May
1,
2020,
the
Class
R6
transfer
agent
fees
were
limited
to
0.02%.
h.
Other
Affiliated
Transactions
At
December
31,
2020,
the
Franklin
Founding
Funds
Allocation
Fund
(Allocation
Fund)
owned
14.7%
of
the
Fund's
outstanding
shares.
On
January
21,
2021,
the
Allocation
Fund
repositioned
to
a
direct
investment
fund
and
subsequently
fully
redeemed
out
of
the
Fund.
As
a
result,
on
January
29,
2021,
the
Fund
delivered
portfolio
securities
and
cash
that
were
transferred
in-kind
to
the
Allocation
Fund
(valued
at
$1,065,296,437).
CDSC
retained
..............................................................................
$9,269
    aa
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
Investment
Income
a      
a  
a  
a  
a  
a  
a  
a  
Franklin
Mutual
Shares
Fund
Non-Controlled
Affiliates
Income
from
securities
loaned
Institutional
Fiduciary
Trust
-
Money
Market
Portfolio,
0%
.........
$—
$15,926,000
$(15,926,000)
$
—
$
—
$—
a
—
$62
Total
Affiliated
Securities
....
$—
$15,926,000
$(15,926,000)
$—
$—
$—
$62
a
As
of
December
31,
2020,
no
longer
held
by
the
Fund.
3.
Transactions
with
Affiliates
(continued)
d.
Sales
Charges/Underwriting
Agreements
(continued)
Franklin
Mutual
Series
Funds
Notes
to
Financial
Statements
38
franklintempleton.com
Annual
Report
Franklin
Mutual
Shares
Fund
(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,
2020,
these
purchase
and
sale
transactions
aggregated
$0
and
$6,515,609,
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,
2020,
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,
2020,
the
Fund’s
projected
benefit
obligation
and
benefit
payments
under
the
Plan
were
as
follows:
6.
Income
Taxes
For
tax
purposes,
capital
losses
may
be
carried
over
to
offset
future
capital
gains.
At
December
31,
2020,
the
capital
loss
carryforwards
were
as
follows:
The
tax
character
of
distributions
paid
during
the
years
ended
December
31,
2020
and
2019,
was
as
follows:
At
December
31,
2020,
the
cost
of
investments,
net
unrealized
appreciation
(depreciation)
and
undistributed
ordinary
income
for
income
tax
purposes
were
as
follows:
a
Projected
benefit
obligation
at
December
31,
2020
......
$1,026,314
b
Decrease
in
projected
benefit
obligation
..............
$(725)
Benefit
payments
made
to
retired
trustees
.............
$(8,835)
a
The
projected
benefit
obligation
is
included
in
trustees’
fees
and
expenses
in
the
Statement
of
Assets
and
Liabilities.
b
The
decrease
in
projected
benefit
obligation
is
included
in
trustees’
fees
and
expenses
in
the
Statement
of
Operations.
Capital
loss
carryforwards
not
subject
to
expiration:
Short
term
................................................................................
$52,919,948
Long
term
................................................................................
193,093,674
Total
capital
loss
carryforwards
...............................................................
$246,013,622
2020
2019
Distributions
paid
from:
Ordinary
income
..........................................................
$209,885,626
$304,453,606
Long
term
capital
gain
......................................................
124,751,222
637,616,710
$334,636,848
$942,070,316
3.
Transactions
with
Affiliates
(continued)
Franklin
Mutual
Series
Funds
Notes
to
Financial
Statements
39
franklintempleton.com
Annual
Report
Franklin
Mutual
Shares
Fund
(continued)
Differences
between
income
and/or
capital
gains
as
determined
on
a
book
basis
and
a
tax
basis
are
primarily
due
to
differing
treatments
of
defaulted
securities,
foreign
currency
transactions,
EU
reclaims
and
pass-through
entity
income.
7.
Investment
Transactions
Purchases
and
sales
of
investments
(excluding
short
term
securities
and
securities
sold
short)
for
the
year
ended
December
31,
2020,
aggregated
$1,847,823,285
and
$2,844,821,056,
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.
For
the
year
ended
December
31,
2020,
the
Fund
recorded
an
adjustment
for
uncollectible
interest
of
$8,097,948,
as
noted
in
the
Statement
of
Operations.
At
December
31,
2020,
the
aggregate
long
value
of
distressed
company
securities
for
which
interest
recognition
has
been
discontinued
was
$80,827,637,
representing
0.9%
of
the
Fund's
net
assets.
For
information
as
to
specific
securities,
see
the
accompanying
Statement
of
Investments.
9.
Novel
Coronavirus
Pandemic 
The
global
outbreak
of
the
novel
coronavirus
disease,
known
as
COVID-19, has
caused
adverse
effects
on
many
companies,
sectors,
nations,
regions
and
the
markets
in
general, and
may
continue for
an unpredictable duration.
The
effects
of
this
pandemic
may
materially
impact
the
value
and
performance
of
the Fund, its ability
to
buy
and
sell
fund
investments
at
appropriate
valuations
and its ability
to
achieve its investment
objectives.
10.
Restricted
Securities
The
Fund
invests
in
securities
that
are
restricted
under
the
Securities
Act
of
1933
(1933
Act).
Restricted
securities
are
often
purchased
in
private
placement
transactions,
and
cannot
be
sold
without
prior
registration
unless
the
sale
is
pursuant
to
an
exemption
under
the
1933
Act.
Disposal
of
these
securities
may
require
greater
effort
and
expense,
and
prompt
sale
at
an
acceptable
price
may
be
difficult.
The Fund
may
have
registration
rights
for
restricted
securities.
The
issuer
generally
incurs
all
registration
costs.
At
December
31,
2020,
investments
in
restricted
securities,
excluding
securities
exempt
from
registration
under
the
1933
Act,
were
as
follows:
Cost
of
investments
..........................................................................
$6,663,275,421
Unrealized
appreciation
........................................................................
$2,676,153,377
Unrealized
depreciation
........................................................................
(527,933,685)
Net
unrealized
appreciation
(depreciation)
..........................................................
$2,148,219,692
Distributable
earnings:
Undistributed
ordinary
income
...................................................................
$134,687,729
6.
Income
Taxes
(continued)
Franklin
Mutual
Series
Funds
Notes
to
Financial
Statements
40
franklintempleton.com
Annual
Report
Franklin
Mutual
Shares
Fund
(continued)
11.
Other
Derivative
Information
At
December
31,
2020,
investments
in
derivative
contracts
are
reflected
in
the
Statement of
Assets
and
Liabilities
as
follows:
For
the
year
ended
December
31,
2020,
the
effect
of
derivative
contracts
in
the
Statement
of
Operations
was
as
follows:
6
For
the
year
ended
December
31,
2020,
the
average
month
end
notional
amount
of
futures
contracts
and
options
represented
$162,646,931
and
3,231
shares,
respectively.
The
average
month
end
contract
value
of
forward
exchange
contracts
was
$611,504,319.
Shares
Issuer
Acquisition
Date
Cost
Value
Franklin
Mutual
Shares
Fund
7,234,813
International
Automotive
Components
Group
Brazil
LLC
4/13/06
-
12/26/08
$
4,804,678
$
153,856
2,123,740
a
Windstream
Holdings,
Inc.
.....................
9/21/20
16,822,436
28,116,194
Total
Restricted
Securities
(Value
is
0.31%
of
Net
Assets)
.............
$21,627,114
$28,270,050
a
The
Fund
also
invests
in
unrestricted
securities
of
the
issuer,
valued
at
$1,585,463
as
of
December
31,
2020.
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
Franklin
Mutual
Shares
Fund
Foreign
exchange
contracts
..
Variation
margin
on
futures
contracts
$
—
Variation
margin
on
futures
contracts
$
1,782,597
a
Unrealized
appreciation
on
OTC
forward
exchange
contracts
1,271,717
Unrealized
depreciation
on
OTC
forward
exchange
contracts
15,187,894
Total
....................
$1,271,717
$16,970,491
a
This
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.
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:
Franklin
Mutual
Shares
Fund
Foreign
exchange
contracts
..
Futures
contracts
$(2,898,805)
Futures
contracts
$375,245
Forward
exchange
contracts
(19,764,704)
Forward
exchange
contracts
(4,877,272)
Equity
Contracts
...........
Written
options
(959,764)
Written
options
—
Total
....................
$(23,623,273)
$(4,502,027)
10.
Restricted
Securities
(continued)
Franklin
Mutual
Series
Funds
Notes
to
Financial
Statements
41
franklintempleton.com
Annual
Report
Franklin
Mutual
Shares
Fund
(continued)
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,
2020,
investments
in
“affiliated
companies”
were
as
follows:
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
5,
2021.
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
5,
2021,
the
Borrowers
renewed
the
Global
Credit
Facility
for
a
one
year
term,
maturing
February
4,
2022,
for
a
total
of
$2.675
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,
2020,
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
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
Investment
Income
Franklin
Mutual
Shares
Fund
Non-Controlled
Affiliates
Dividends
International
Automotive
Components
Group
Brazil
LLC
................
$
262,624
$
—
$
—
$
—
$
(108,768)
$
153,856
7,234,813
$
—
Tru
Kids
Parent
LLC
.......
27,867,828
—
—
—
(10,816,245)
17,051,583
7,469
—
Wayne
Services
Legacy,
Inc.
.
—
—
(718,391)
a
718,391
—
—
7,469
—
Total
Affiliated
Securities
(Value
is
0.2%
of
Net
Assets)
$28,130,452
$—
$(718,391)
$
718,391
$
(10,925,013)
$17,205,439
$—
a
May
include
accretion,
amortization,
partnership
adjustments,
and/or
corporate
actions.
11.
Other
Derivative
Information
(continued)
Franklin
Mutual
Series
Funds
Notes
to
Financial
Statements
42
franklintempleton.com
Annual
Report
Franklin
Mutual
Shares
Fund
(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,
2020,
in
valuing
the
Fund's
assets
and
liabilities
carried
at
fair
value,
is
as
follows:
Level
1
Level
2
Level
3
Total
Franklin
Mutual
Shares
Fund
Assets:
Investments
in
Securities:
Common
Stocks
:
Aerospace
&
Defense
...................
$
107,757,680
$
103,974,340
$
—
$
211,732,020
Auto
Components
......................
—
—
153,856
153,856
Automobiles
..........................
80,228,038
—
—
80,228,038
Banks
...............................
735,226,741
—
—
735,226,741
Beverages
...........................
55,253,450
—
—
55,253,450
Biotechnology
.........................
29,210,630
—
—
29,210,630
Building
Products
......................
153,439,506
—
—
153,439,506
Capital
Markets
........................
—
109,826,933
—
109,826,933
Communications
Equipment
..............
90,435,722
—
—
90,435,722
Consumer
Finance
.....................
171,129,614
—
—
171,129,614
Containers
&
Packaging
.................
131,655,428
—
—
131,655,428
Diversified
Financial
Services
.............
218,619,688
—
—
218,619,688
Diversified
Telecommunication
Services
.....
—
—
28,116,194
28,116,194
Electric
Utilities
........................
91,238,940
—
—
91,238,940
Electrical
Equipment
....................
198,058,214
—
—
198,058,214
Electronic
Equipment,
Instruments
&
Components
........................
63,388,368
—
—
63,388,368
Energy
Equipment
&
Services
.............
70,379,920
—
—
70,379,920
Entertainment
.........................
214,929,123
—
—
214,929,123
Equity
Real
Estate
Investment
Trusts
(REITs)
.
150,753,031
—
—
150,753,031
Food
&
Staples
Retailing
.................
154,181,397
—
—
154,181,397
Food
Products
........................
379,261,677
—
—
379,261,677
Health
Care
Equipment
&
Supplies
.........
296,803,944
—
—
296,803,944
Health
Care
Providers
&
Services
..........
347,425,141
—
—
347,425,141
Household
Durables
....................
237,216,555
—
—
237,216,555
Household
Products
....................
64,891,104
—
—
64,891,104
Industrial
Conglomerates
................
126,355,680
—
—
126,355,680
Insurance
............................
627,653,333
—
—
627,653,333
IT
Services
...........................
187,309,018
—
—
187,309,018
Media
...............................
521,908,495
—
424,925
522,333,420
Oil,
Gas
&
Consumable
Fuels
.............
270,894,555
150,632,989
—
421,527,544
Pharmaceuticals
.......................
741,422,813
182,619,237
—
924,042,050
Semiconductors
&
Semiconductor
Equipment
.
88,973,893
—
—
88,973,893
Software
.............................
284,437,695
—
—
284,437,695
Specialty
Retail
........................
85,679,110
—
17,051,583
a
102,730,693
Technology
Hardware,
Storage
&
Peripherals
.
136,337,611
255,046,698
—
391,384,309
Textiles,
Apparel
&
Luxury
Goods
..........
120,733,151
—
—
120,733,151
Tobacco
.............................
127,048,962
139,932,291
—
266,981,253
Wireless
Telecommunication
Services
.......
92,925,135
26,896,395
—
119,821,530
Warrants
:
Diversified
Telecommunication
Services
.....
—
—
1,585,463
1,585,463
14.
Fair
Value
Measurements
(continued)
Franklin
Mutual
Series
Funds
Notes
to
Financial
Statements
43
franklintempleton.com
Annual
Report
Franklin
Mutual
Shares
Fund
(continued)
A
reconciliation
in
which
Level
3
inputs
are
used
in
determining
fair
value
is
presented
when
there
are
significant
Level
3
assets
and/or
liabilities
at
the
beginning
and/or
end
of
the
year.
15.
New
Accounting
Pronouncements
In
March
2020,
the
Financial
Accounting
Standards
Board
issued
Accounting
Standards
Update
(ASU)
No.
2020-04,
Reference
Rate
Reform
(Topic
848)
–
Facilitation
of
the
Effects
of
Reference
Rate
Reform
on
Financial
Reporting.
The
amendments
in
the
ASU
provides
optional
temporary
financial
reporting
relief
from
the
effect
of
certain
types
of
contract
modifications
due
to
the
planned
discontinuation
of
the
LIBOR
and
other
interbank-offered
based
reference
rates
as
of
the
end
of
2021.
The
ASU
is
effective
for
certain
reference
rate-related
contract
modifications
that
occur
during
the
period
March
12,
2020
through
December
31,
2022. Management
has
reviewed
the
requirements
and
believes
the
adoption
of
this
ASU
will
not
have
a
material
impact
on
the
financial
statements.
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.
Level
1
Level
2
Level
3
Total
Franklin
Mutual
Shares
Fund
(continued)
Assets:
(continued)
Investments
in
Securities:
Warrants:
Media
...............................
$
23,180
$
—
$
—
$
23,180
Software
.............................
—
899,408
—
899,408
Corporate
Bonds
........................
—
346,848,404
—
346,848,404
Senior
Floating
Rate
Interests
...............
—
35,053,760
—
35,053,760
Companies
in
Liquidation
..................
—
—
291,266
a
291,266
Short
Term
Investments
...................
146,482,625
5,000,000
—
151,482,625
Total
Investments
in
Securities
...........
$7,599,669,167
$1,356,730,455
$47,623,287
$9,004,022,909
Other
Financial
Instruments:
Forward
exchange
contracts
...............
$
—
$
1,271,717
$
—
$
1,271,717
Total
Other
Financial
Instruments
.........
$—
$1,271,717
$—
$1,271,717
Liabilities:
Other
Financial
Instruments:
Securities
Sold
Short
.....................
$176,829,022
$—
$—
$176,829,022
Forward
exchange
contracts
................
—
15,187,894
—
15,187,894
Futures
contracts
........................
1,782,597
—
—
1,782,597
Total
Other
Financial
Instruments
.........
$178,611,619
$15,187,894
$—
$193,799,513
a
Includes
securities
determined
to
have
no
value
at
December
31,
2020.
14.
Fair
Value
Measurements
(continued)
Franklin
Mutual
Series
Funds
Notes
to
Financial
Statements
44
franklintempleton.com
Annual
Report
Franklin
Mutual
Shares
Fund
(continued)
Abbreviations
Counterparty
BNY
Bank
of
New
York
BOFA
Bank
of
America
Corp.
HSBK
HSBC
Bank
plc
SSBT
State
Street
Bank
and
Trust
Co.
UBSW
UBS
AG
Currency
EUR
Euro
GBP
British
Pound
USD
United
States
Dollar
Selected
Portfolio
ADR
American
Depositary
Receipt
FHLB
Federal
Home
Loan
Banks
LIBOR
London
Inter-Bank
Offered
Rate
Franklin
Mutual
Series
Funds
Report
of
Independent
Registered
Public
Accounting
Firm
45
franklintempleton.com
Annual
Report
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,
2020,
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,
2020,
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,
2020,
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
23,
2021
Franklin
Mutual
Series
Funds
Tax
Information
(unaudited)
46
franklintempleton.com
Annual
Report
Franklin
Mutual
Shares
Fund
Under
Section
852(b)(3)(C)
of
the
Internal
Revenue
Code,
the
Fund
hereby
reports
the
maximum
amount
allowable
but
no
less
than
$124,751,222
as
a
long
term
capital
gain
dividend
for
the
fiscal
year
ended
December
31,
2020.
Under
Section
871(k)(2)(C)
of
the
Internal
Revenue
Code,
the
Fund
hereby
reports
the
maximum
amount
allowable
but
no
less
than
$31,531,950
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,
2020.
Under
Section
854(b)(1)(A)
of
the
Internal
Revenue
Code,
the
Fund
hereby
reports
100.00%
of
the
ordinary
income
dividends
as
income
qualifying
for
the
dividends
received
deduction
for
the
fiscal
year
ended
December
31,
2020.
Under
Section
854(b)(1)(B)
of
the
Internal
Revenue
Code,
the
Fund
hereby
reports
the
maximum
amount
allowable
but
no
less
than
$327,008,980
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,
2020.
Distributions,
including
qualified
dividend
income,
paid
during
calendar
year
2020
will
be
reported
to
shareholders
on
Form
1099-DIV
by
mid-February
2021.
Shareholders
are
advised
to
check
with
their
tax
advisors
for
information
on
the
treatment
of
these
amounts
on
their
individual
income
tax
returns.
Franklin
Mutual
Series
Funds
Board
Members
and
Officers
47
franklintempleton.com
Annual
Report
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
11
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)
Trustee
and
Chairperson
Trustee
since
1995
and
Chairperson
since
2020
30
Ares
Capital
Corporation
(specialty
finance
company)
(2010-present),
United
Natural
Foods,
Inc.
(distributor
of
natural,
organic
and
specialty
foods)
(2013-present),
formerly
,
Allied
Capital
Corporation
(financial
services)
(2003-
2010),
SLM
Corporation
(Sallie
Mae)
(1997-2014)
and
Navient
Corporation
(loan
management,
servicing
and
asset
recovery)
(2014-2016).
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
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)
Trustee
Since
2002
11
Franklin
Templeton
Emerging
Markets
Debt
Opportunities
Fund
PLC
(1999-present)
and
formerly
,
Fiduciary
International
Ireland
Limited
(1999-2015).
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:
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.
Franklin
Mutual
Series
Funds
48
franklintempleton.com
Annual
Report
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
Jan
Hopkins
Trachtman
(1947)
Trustee
Since
2009
11
FinTech
Acquisition
Corp.
III
(special
purpose
fintech
acquisition
company)
(2018-present)
and
FTAC
Olympus
Acquisition
Corp.
(special
purpose
fintech
acquisition
company)
(August
2020-present).
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:
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.
Keith
Mitchell
(1954)
Trustee
Since
2009
11
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)
Trustee
Since
2015
30
Hess
Midstream
LP
(oil
and
gas
midstream
infrastructure)
(2017-present).
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:
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).
Robert
E.
Wade
(1946)
Trustee
Since
1991
30
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
11
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).
Independent
Board
Members
(continued)
Franklin
Mutual
Series
Funds
49
franklintempleton.com
Annual
Report
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
136
None
One
Franklin
Parkway
San
Mateo,
CA
94403-1906
Principal
Occupation
During
at
Least
the
Past
5
Years:
Executive
Chairman,
Chairman
of
the
Board
and
Director,
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
,
Chief
Executive
Officer
(2013-2020)
and
President
(1994-2015),
Franklin
Resources,
Inc.
**Peter
A.
Langerman
(1955)
Trustee,
President,
and
Chief
Executive
Officer
–
Investment
Management
Trustee
since
2007,
President,
and
Chief
Executive
Officer
–
Investment
Management
since
2005
6
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:
Executive
Vice
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
Vice
President
Since
2012
Not
Applicable
Not
Applicable
One
Franklin
Parkway
San
Mateo,
CA
94403-1906
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)
Chief
Compliance
Officer
Since
October
2020
Not
Applicable
Not
Applicable
280
Park
Avenue
New
York,
NY
10017
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)
Vice
President
and
Secretary
Vice
President
since
2009
and
Secretary
since
2005
Not
Applicable
Not
Applicable
One
Franklin
Parkway
San
Mateo,
CA
94403-1906
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)
Chief
Executive
Officer
–
Finance
and
Administration
Since
2017
Not
Applicable
Not
Applicable
One
Franklin
Parkway
San
Mateo,
CA
94403-1906
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).
Franklin
Mutual
Series
Funds
50
franklintempleton.com
Annual
Report
*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.
Note
2:
Effective
October
17,
2020,
Charles
Rubens,
II
ceased
to
be
a
trustee
of
the
Trust.
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
Ann
Torre
Bates
and
David
W.
Niemiec
as
an
audit
committee
financial
expert.
The
Board
believes
that
Ms.
Bates
and
Mr.
Niemiec
qualify
as
such
an
expert
in
view
of
their
extensive
business
background
and
experience.
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
Partners
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
Ms.
Bates
and
Mr.
Niemiec
have
each
acquired
an
understanding
of
generally
accepted
accounting
principles
and
financial
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
G.
Kubilis
(1973)
Chief
Financial
Officer,
Chief
Accounting
Officer
and
Treasurer
Since
2012
Not
Applicable
Not
Applicable
300
S.E.
2nd
Street
Fort
Lauderdale,
FL
33301-
1923
Principal
Occupation
During
at
Least
the
Past
5
Years:
Treasurer,
U.S.
Fund
Administration
&
Reporting
and
officer
of
39
of
the
investment
companies
in
Franklin
Templeton.
Robert
Lim
(1948)
Vice
President
–
AML
Compliance
Since
2016
Not
Applicable
Not
Applicable
One
Franklin
Parkway
San
Mateo,
CA
94403-1906
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
41
of
the
investment
companies
in
Franklin
Templeton.
Navid
J.
Tofigh
(1972)
Vice
President
Since
2015
Not
Applicable
Not
Applicable
One
Franklin
Parkway
San
Mateo,
CA
94403-1906
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)
Vice
President
Since
2005
Not
Applicable
Not
Applicable
One
Franklin
Parkway
San
Mateo,
CA
94403-1906
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)
Vice
President
Since
2011
Not
Applicable
Not
Applicable
300
S.E.
2nd
Street
Fort
Lauderdale,
FL
33301-
1923
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.
Interested
Board
Members
and
Officers
(continued)
Franklin
Mutual
Series
Funds
51
franklintempleton.com
Annual
Report
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.
Ms.
Bates
and
Mr.
Niemiec
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.
Interested
Board
Members
and
Officers
(continued)
Franklin
Mutual
Series
Funds
Shareholder
Information
52
franklintempleton.com
Annual
Report
Proxy
Voting
Policies
and
Procedures
The
Fund’s
investment
manager
has
established
Proxy
Voting
Policies
and
Procedures
(Policies)
that
the
Fund
uses
to
determine
how
to
vote
proxies
relating
to
portfolio
securities.
Shareholders
may
view
the
Fund’s
complete
Policies
online
at
franklintempleton.com.
Alternatively,
shareholders
may
request
copies
of
the
Policies
free
of
charge
by
calling
the
Proxy
Group
collect
at
(954)
527-
7678
or
by
sending
a
written
request
to:
Franklin
Templeton
Companies,
LLC,
300
S.E.
2nd
Street,
Fort
Lauderdale,
FL
33301,
Attention:
Proxy
Group.
Copies
of
the
Fund’s
proxy
voting
records
are
also
made
available
online
at
franklintempleton.com
and
posted
on
the
U.S.
Securities
and
Exchange
Commission’s
website
at
sec.gov
and
reflect
the
most
recent
12-month
period
ended
June
30.
Quarterly
Statement
of
Investments
The
Trust,
on
behalf
of
the
Fund,
files
a
complete
statement
of
investments
with
the
U.S.
Securities
and
Exchange
Commission
for
the
first
and
third
quarters
for
each
fiscal
year
as
an
exhibit
to
its
report
on
Form
N-PORT.
Shareholders
may
view
the
filed
Form
N-PORT
by
visiting
the
Commission’s
website
at
sec.gov.
The
filed
form
may
also
be
viewed
and
copied
at
the
Commission’s
Public
Reference
Room
in
Washington,
DC.
Information
regarding
the
operations
of
the
Public
Reference
Room
may
be
obtained
by
calling
(800)
SEC-0330.
Householding
of
Reports
and
Prospectuses
You
will
receive,
or
receive
notice
of
the
availability
of,
the
Fund’s
financial
reports
every
six
months.
In
addition,
you
will
receive
an
annual
updated
summary
prospectus
(detail
prospectus
available
upon
request).
To
reduce
Fund
expenses,
we
try
to
identify
related
shareholders
in
a
household
and
send
only
one
copy
of
the
financial
reports
(to
the
extent
received
by
mail)
and
summary
prospectus.
This
process,
called
“householding,”
will
continue
indefinitely
unless
you
instruct
us
otherwise.
If
you
prefer
not
to
have
these
documents
householded,
please
call
us
at
(800)
632-2301.
At
any
time
you
may
view
current
prospectuses/
summary
prospectuses
and
financial
reports
on
our
website.
If
you
choose,
you
may
receive
these
documents
through
electronic
delivery.
474
A
02/21
©
2021
Franklin
Templeton
Investments.
All
rights
reserved.
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
franklintempleton.com
(800)
632-2301
-
(Class
A,
C,
R
&
R6)
(800)
448-FUND
-
(Class
Z)
Annual
Report
and
Shareholder
Letter
Franklin
Mutual
Beacon
Fund
A
Series
of
Franklin
Mutual
Series
Funds
December
31,
2020
Sign
up
for
electronic
delivery
at
franklintempleton.com/edelivery
Not
FDIC
Insured
May
Lose
Value
No
Bank
Guarantee
franklintempleton.com
Not
part
of
the
annual
report
1
SHAREHOLDER
LETTER
Dear
Franklin
Mutual
Beacon
Fund
Shareholder:
2020
was
a
year
that
felt
like
it
contained
several
different
years
within
it.
There
were
periods
of
stability
and
dramatic
moves
down
and
up
in
financial
markets.
The
year
ended
with
surging
stock
prices
despite
an
ongoing
pandemic.
If
one
had
gone
to
sleep
on
December
31,
2019,
and
woke
up
on
December
31,
2020,
a
quick
glance
at
the
MSCI
World
Index
(USD),
which
was
up
+16.50%
for
the
12
months,
might
cause
one
to
think
this
was
just
another
good
year
in
a
long
bull
market.
1
But
for
those
of
us
who
lived
through
it,
2020
was
chaotic
and
memorable.
The
year
began
with
a
continuation
of
trends
from
2019.
Accommodative
central
bank
policy
was
supporting
a
resilient
economy,
which
displayed
modest
growth.
Then
COVID-19
exploded
from
a
regional
issue
into
a
global
pandemic.
The
response
to
the
spread
of
the
virus
was
lockdown
and
physical
distancing
measures
in
attempts
to
flatten
the
curve
of
the
contagion.
Consumer
and
business
spending
fell,
and
manufacturing
and
other
activity
came
to
a
virtual
halt.
This
led
to
a
dramatic
share
price
plunge
in
equity
markets.
In
response,
governments
acted
directly
through
fiscal
policy
and
central
banks,
using
a
whatever-it-takes
approach
to
stabilize
economies.
The
efforts
worked
and
were
reflected
by
market
stabilization
and
the
beginning
of
a
recovery
in
prices.
Markets
continued
to
rally
in
the
second
half
of
the
year
on
signs
of
global
economic
resilience
despite
widespread
shutdowns.
Investor
sentiment
was
buoyed
by
hopes
for
continued
stimulus
measures,
very
positive
developments
on
the
vaccine
front
and
U.S.
presidential
election
results.
Valuations
were
also
supported
by
investors’
willingness
to
look
through
the
current
situation
to
2021
and
beyond,
when
widespread
vaccinations
are
expected
to
become
available
and
reignite
global
economies.
During
the
year,
there
was
significant
market
volatility
and
continued
variance
between
the
performance
of
growth
equities
and
value
equities.
Many
growth
stocks
benefited
from
the
changes
in
work
and
life
caused
by
the
pandemic
and
continued
to
grow
during
the
year.
As
a
result,
the
MSCI
World
Growth
Index
(USD)
ended
the
year
up
+34.18%,
while
the
MSCI
World
Value
Index
(USD)
recovered
from
the
spring
selloff,
but
trailed
its
growth
counterpart,
ending
the
year
down
-0.38%
for
the
12
months
ended
December
31,
2020.
1
Market
volatility
and
economic
uncertainty
can
often
present
what
we
consider
opportunities.
During
periods
of
market
fluctuation,
we
used
our
bottom-up,
fundamentally
driven
investment
process
to
add
select
positions
to
the
portfolio
that
historically
had
not
met
our
investment
criteria.
However,
given
the
decline
in
price,
these
stocks
were
now,
in
our
opinion,
attractively
valued.
We
also
moved
capital
between
existing
positions
to
reflect
market
shifts.
We
were
encouraged
to
see
value
equities
do
quite
well
in
the
fourth
quarter
on
both
an
absolute
and
relative
basis.
Our
expectation
is
that
earnings
will
continue
to
improve
for
the
overall
market
as
2021
progresses
and
COVID
vaccinations
allow
for
accelerated
reopening
of
the
global
economy.
We
would
expect
many
of
our
value
holdings
to
benefit
from
such
a
scenario.
It
is
important
to
remember
that
the
market
historically
rewards
investors
who
take
a
long-term
perspective.
To
that
end,
we
recognize
the
importance
of
financial
advisors
in
today’s
markets
and
encourage
investors
to
continue
to
seek
their
advice.
Amid
changing
markets
and
economic
conditions,
we
are
confident
investors
with
a
well-diversified
portfolio
and
a
patient,
long-term
outlook
should
be
well-positioned
for
the
years
ahead.
This
is
my
first
letter
to
you
as
president
and
chief
investment
officer
of
Franklin
Mutual
Series.
I
have
been
director
of
research
and
a
portfolio
manager
for
Franklin
Mutual
Series
since
January
2010
and
have
worked
with
Peter
Langerman,
chairman
and
chief
executive
officer
of
Franklin
Mutual
Series,
to
steward
the
platform.
I
want
to
thank
Peter
for
his
significant
contributions
and
30+
years
of
dedicated
service
and
leadership.
I
look
forward
to
working
with
Peter
through
mid-2021
to
complete
the
leadership
transition,
and
I
wish
him
the
very
best
in
his
well-deserved
retirement.
On
the
following
pages,
the
portfolio
management
team
reviews
investment
decisions
that
pertain
to
performance
during
the
past
12
months
considering
the
economic
environment
and
other
factors.
Please
remember
all
securities
markets
fluctuate,
as
do
mutual
fund
share
prices.
1.
Source:
Morningstar.
See
www.franklintempletondatasources.com
for
additional
data
provider
information.
franklintempleton.com
Not
part
of
the
annual
report
2
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,
Christian
Correa,
CFA
President
and
Chief
Investment
Officer
Franklin
Mutual
Advisers,
LLC
This
letter
reflects
our
analysis
and
opinions
as
of
December
31,
2020
,
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
27
Report
of
Independent
Registered
Public
Accounting
Firm
40
Tax
Information
41
Board
Members
and
Officers
42
Shareholder
Information
47
Visit
franklintempleton.com
for
fund
updates,
to
access
your
account,
or
to
find
helpful
financial
planning
tools.
CFA
®
is
a
trademark
owned
by
CFA
Institute.
3
franklintempleton.com
Annual
Report
ANNUAL
REPORT
Franklin
Mutual
Beacon
Fund
This
annual
report
for
Franklin
Mutual
Beacon
Fund
covers
the
fiscal
year
ended
December
31,
2020
.
Your
Fund’s
Goal
and
Main
Investments
The
Fund
seeks
capital
appreciation,
which
may
occasionally
be
short
term.
The
secondary
goal
is
income.
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
and
participations
in
foreign
government
debt.
The
Geographic
Composition
table
on
this
page
lists
the
leading
countries
where
the
Fund
invests.
Performance
Overview
The
Fund’s
Class
Z
shares
posted
a
+4.08%
cumulative
total
return
for
the
12
months
ended
December
31,
2020.
In
comparison,
the
Fund’s
new
benchmark,
the
MSCI
World
Value
Index-NR
(USD),
which
tracks
the
performance
of
stocks
exhibiting
overall
value
style
characteristics
in
global
developed
markets,
posted
a
-1.16%
total
return.
1
Also
for
comparison,
the
Fund’s
prior
benchmark,
the
MSCI
World
Index
(USD),
which
tracks
stock
performance
in
global
developed
markets,
posted
a
+16.50%
total
return.
1
The
MSCI
World
Value
Index-NR
(USD)
is
replacing
the
MSCI
World
Index
(USD)
as
the
Fund’s
benchmark.
The
investment
manager
believes
the
composition
of
the
MSCI
World
Value
Index-NR
(USD)
more
accurately
reflects
the
Fund’s
current
investment
strategy
and
portfolio
characteristics,
and
that
the
actual
tax
withholding
rates
for
the
Fund
are
closer
to
the
assumptions
of
the
MSCI
World
Value
Index-NR
(USD;
net
of
taxes
on
dividends)
than
the
MSCI
World
Index
(USD;
gross
of
taxes
on
dividends).
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
equities,
as
measured
by
the
MSCI
All
Country
World
Index
(USD),
posted
a
+16.82%
total
return
for
the
12
months
ended
December
31,
2020.
1
Stocks
fell
sharply
in
early
2020
as
many
investors
sold
equities
amid
fears
of
a
global
economic
slowdown
due
to
the
novel
coronavirus
(COVID-19)
pandemic.
Global
equities
began
to
rebound
in
late
March
2020
amid
optimism
about
economic
stimulus
measures,
easing
lockdown
restrictions,
and
vaccine
and
treatment
development.
Despite
declines
in
September
and
October
due
to
geopolitical
tensions
and
rising
infection
rates,
markets
rebounded
in
November
and
December,
as
positive
sentiment
about
successful
trials
of
COVID-19
vaccines,
the
beginning
of
vaccination
programs
in
some
countries
and
apparent
resolution
of
political
uncertainty
supported
markets.
In
the
U.S.,
pandemic-related
restrictions
caused
stiff
economic
headwinds,
including
mass
layoffs
that
drove
the
unemployment
rate
to
14.8%
in
April
2020.
2
According
to
the
Geographic
Composition
12/31/20
%
of
Total
Net
Assets
United
States
55.7%
Germany
10.0%
Switzerland
7.8%
United
Kingdom
7.5%
Netherlands
6.2%
South
Korea
4.6%
Israel
3.9%
Other
0.5%
Short-Term
Investments
&
Other
Net
Assets
3.8%
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.
Net
Returns
(NR)
include
income
net
of
tax
withholding
when
dividends
are
paid.
2.
Source:
U.S.
Bureau
of
Labor
Statistics.
See
www.franklintempletondatasources.com
for
additional
data
provider
information.
The
dollar
value,
number
of
shares
or
principal
amount,
and
names
of
all
portfolio
holdings
are
listed
in
the
Fund’s
Statement
of
Investments
(SOI).
The
SOI
begins
on
page
17
.
Franklin
Mutual
Beacon
Fund
4
franklintempleton.com
Annual
Report
National
Bureau
of
Economic
Research,
the
longest
U.S.
economic
expansion
in
history
ended
in
February,
and
the
country
slipped
into
a
deep
recession.
Equities
began
to
rebound
in
the
spring
amid
the
government’s
fiscal
and
monetary
stimulus
measures,
declining
jobless
claims,
rising
retail
sales
and
optimism
about
treatments
and
potential
vaccines
for
COVID-19.
Following
a
record
annualized
decline
in
second-quarter
gross
domestic
product
(GDP),
resilient
consumer
spending
helped
drive
third-quarter
GDP
to
expand
at
a
record
annualized
rate,
although
growth
slowed
in
the
fourth
quarter.
Equities
continued
to
rise
during
the
summer
but
declined
in
the
fall
due
to
concerns
about
possible
new
restrictions
amid
rising
COVID-19
infection
rates
and
uncertainties
about
additional
fiscal
stimulus
and
the
U.S.
presidential
election.
Despite
signs
that
the
economic
recovery
was
stalling
as
the
unemployment
rate
remained
relatively
high
(6.7%
at
period-end)
and
consumer
spending
declined,
stocks
rallied
in
November
and
December,
buoyed
by
the
outcome
of
the
U.S.
presidential
election,
the
start
of
COVID-19
vaccination
programs
and
the
passage
of
a
new
U.S.
stimulus
bill.
2
In
an
effort
to
support
the
economy,
the
U.S.
Federal
Reserve
(Fed)
lowered
the
federal
funds
target
rate
to
a
range
of
0.00%–0.25%
in
March
2020.
The
Fed
also
enacted
quantitative
easing
measures
aimed
at
ensuring
credit
flows
to
borrowers
and
supporting
credit
markets
with
open-
ended
bond
purchasing.
Furthermore,
the
Fed
signaled
that
interest
rates
would
potentially
remain
low,
even
if
inflation
moderately
exceeded
its
2%
target.
In
the
eurozone,
the
economy
contracted
again
in
the
fourth
quarter
of
2020,
following
quarter-on-quarter
expansion
in
the
third
quarter
and
contractions
in
the
first
and
second
quarters.
After
several
months
of
gains
due
to
easing
restrictions
and
robust
stimulus
measures,
European
developed
market
equities,
as
measured
by
the
MSCI
Europe
Index
(USD),
declined
in
September
and
October
as
rising
infection
rates
heightened
investor
concerns
that
the
nascent
economic
revival
could
stall.
Nevertheless,
successful
vaccine
development
and
a
Brexit
resolution
supported
European
developed
market
equities,
as
measured
by
the
MSCI
Europe
Index
(USD),
to
post
a
+5.93%
total
return
for
the
period.
1
Asian
developed
and
emerging
market
equities,
as
measured
by
the
MSCI
All
Country
Asia
Index
(USD),
posted
a
+21.30%
total
return
for
the
12
months
under
review.
1
Although
pandemic-related
lockdowns
derailed
economic
growth
in
early
2020,
sharp
market
declines
were
followed
by
rebounds
as
China’s
economy,
a
key
driver
of
the
region’s
economic
activity,
recovered
from
the
contraction
in
the
first
quarter
and
expanded
during
the
rest
of
2020.
Asian
stocks
rose
as
the
region’s
economies
reopened,
aided
by
robust
stimulus
measures
and
optimism
that
economic
revitalization
would
be
further
spurred
by
COVID-19
vaccines.
Global
emerging
market
stocks,
as
measured
by
the
MSCI
Emerging
Markets
Index
(USD),
posted
a
+18.69%
total
return
for
the
period,
despite
steep
pandemic-related
declines
in
early
2020,
benefiting
from
improving
economic
activity,
stabilizing
oil
prices
and
U.S.
dollar
weakness.
1
In
spite
of
higher
COVID-19
cases
in
some
countries,
emerging
market
stocks
rallied
near
the
end
of
2020,
bolstered
by
easing
political
uncertainty,
commencement
of
COVID-19
vaccinations
and
rising
commodity
prices.
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.
Our
portfolio
selection
process
generally
includes
an
assessment
Top
10
Industries
12/31/20
%
of
Total
Net
Assets
a
Pharmaceuticals
16.8%
Banks
9.3%
Software
9.1%
Technology
Hardware,
Storage
&
Peripherals
8.5%
Textiles,
Apparel
&
Luxury
Goods
7.0%
Diversified
Telecommunication
Services
4.7%
Media
4.4%
Electrical
Equipment
4.0%
Entertainment
3.8%
Health
Care
Equipment
&
Supplies
3.7%
Franklin
Mutual
Beacon
Fund
5
franklintempleton.com
Annual
Report
of
the
potential
impacts
of
any
material
environmental,
social
and
governance
(ESG)
factors
on
the
long-term
risk
and
return
profile
of
a
company.
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
addition,
it
is
our
practice
to
hedge
the
Fund’s
currency
exposure
when
we
deem
it
advantageous
for
our
shareholders.
Manager’s
Discussion
A
year
ago,
we
reflected
on
a
decade
of
overall
equity
market
strength
and
solid,
but
weaker,
returns
for
our
value
equity
investing
strategy.
2020
turned
out
to
be
an
amplification
of
this
performance
gap,
rather
than
a
correction.
The
year
started
with
a
continuation
of
strong
performance
from
market-darling
growth
stocks.
The
gap
exploded
as
COVID-19
led
to
lockdowns
and
people
working
from
home.
The
market
leaders
often
benefited
from
these
changes,
with
technology
tools
being
adopted
more
quickly
than
before.
Meanwhile,
the
lockdowns
and
disruption
severely
impacted
many
companies
thought
of
as
value
stocks.
Even
as
central
banks
and
governments
across
the
globe
acted
through
fiscal
and
monetary
stimulus
measures,
the
recovery
came
slowly
and
only
accelerated
when
the
prospects
of
an
effective
vaccine
helped
markets
understand
when
the
health
crisis
might
be
over.
By
the
end
of
2020,
the
MSCI
World
Value
Index
(USD)
had
recovered
to
be
almost
flat,
with
a
-0.38%
return.
1
However,
growth
stocks
advanced
substantially
further,
as
evidenced
by
the
MSCI
World
Growth
Index
(USD),
ending
the
year
up
+34.18%.
1
Many
signs
of
increased
speculation
in
the
market
have
appeared,
with
a
surge
in
the
number
of
IPOs
not
seen
since
the
tech
bubble
and
a
boom
in
special
purpose
acquisition
companies
(SPACs),
a
type
of
company
which
raises
money
in
anticipation
of
finding
profitable
investment
opportunities.
There
is
no
guarantee
that
some
speculation
will
not
be
profitable,
but
we
try
to
look
past
the
speculation
and
continue
to
see
attractive
values
in
various
parts
of
the
market.
Our
traditional
value
equity
investment
approach
is
complemented
with
two
other
strategies,
distressed
investing
and
merger
arbitrage.
We
were
active
in
both
during
2020.
Merger
arbitrage
activity
has
climbed
in
tandem
with
increasing
confidence
about
an
end
to
the
pandemic
crisis.
Significant
new
deals
have
been
announced
and
some
present
attractive
investment
opportunities.
In
addition,
the
deals
which
were
impacted
by
the
emergence
of
the
coronavirus
have
seen
renegotiated
terms
and
moved
toward
amicable
resolution.
This
includes
deals
such
as
Tiffany’s
acquisition
by
LVMH
Moet
Hennessy
Louis
Vuitton
and
Taubman’s
acquisition
by
Simon
Property
Group.
We
expect
an
ongoing
acceleration
of
merger
and
acquisition
activity
given
a
recovering
economy,
strong
markets
and
the
hope
for
increasing
regulatory
and
trade
predictability
under
the
incoming
U.S.
administration.
Within
our
distressed
credit
strategy,
we
targeted
companies
and
industries
directly
impacted
by
the
coronavirus
pandemic.
The
robust
government
fiscal
and
monetary
interventions
have
limited
the
number
of
attractive
options,
but
we
found
opportunities
in
the
energy
sector
and
the
retail
and
travel
industries.
As
the
vaccine
news
arrived
and
liquidity
remained
strong,
the
opportunities
have
become
more
limited.
We
expect
to
see
fewer
new
distressed
debt
opportunities
than
the
merger
arbitrage
opportunities
discussed
above.
Fund
Performance
Turning
to
Fund
performance,
top
positive
contributors
included
Samsung
Electronics,
Charter
Communications
and
Baidu.
Samsung
Electronics
and
Charter
Communications
are
listed
among
the
Fund’s
largest
positions
in
the
Top
10
Holdings
table
on
page
6.
Franklin
Mutual
Beacon
Fund
6
franklintempleton.com
Annual
Report
After
experiencing
COVID-related
volatility
during
the
first
few
months
of
the
year,
the
stock
price
of
South
Korea-
based
electronics
and
computer
peripherals
manufacturer
Samsung
Electronics
started
to
recover
in
April
and
continued
an
upward
trajectory
for
the
remainder
of
the
year,
making
it
a
leading
contributor
to
portfolio
performance.
The
company
posted
strong
first-quarter
results,
with
revenue
and
operating
profit
rising
year-over-year,
propelled
by
sales
of
its
memory
chips.
Demand
for
memory
chips
increased
during
the
lockdown,
driven
by
hyperscale
data
center
spending
and
spending
to
enable
working
from
home
and
online
learning.
Investors
are
optimistic
that
strength
in
memory
prices
can
continue,
and
Samsung
is
expected
to
announce
a
new
capital
return
program
in
early
2021,
which
may
include
a
special
dividend.
Shares
of
U.S.-based
cable
operator
Charter
Communications
rallied
throughout
much
of
2020’s
second
half,
lifted
by
second-quarter
earnings
that
exceeded
consensus
expectations.
The
stay-at-home
economy
emerging
in
the
wake
of
the
coronavirus
pandemic
led
to
an
increase
in
the
number
of
high-speed
data
subscribers
and
lower
turnover
among
the
existing
customer
base.
These
factors
drove
higher
margins
and
increased
free
cash
flow,
which
management
used
to
buy
back
stock.
Third-quarter
results
were
also
strong,
with
high-speed
data
net
subscriber
additions
and
residential
video
growth
soundly
beating
expectations.
The
company’s
financials
also
continued
to
improve.
Despite
strong
fourth-quarter
results,
the
stock
price
of
China-based
search
engine
and
artificial
intelligence
software
company
Baidu
was
affected
by
COVID-related
volatility
in
late
February
and
March.
However,
Baidu’s
recovery
from
the
market
bottom
was
swift,
and
a
rally
ensued
during
2020’s
second
quarter.
Declining
costs
led
to
better-than-expected
first-quarter
profitability
that
helped
boost
the
valuation.
Despite
subpar
advertising
revenues
during
the
summer
months,
second-quarter
results
were
positive,
due
in
part
to
tight
cost
controls
during
those
three
months.
As
China’s
advertising
market
rebounded
in
the
fall,
the
company’s
advertising
revenues
also
recovered,
turning
core
business
revenues
positive.
Third-quarter
earnings
beat
expectations,
and
along
with
news
of
an
acquisition,
provided
fuel
for
a
price
rally
that
lasted
for
the
remainder
of
the
year.
During
the
period
under
review,
Fund
investments
that
detracted
from
performance
included
Wells
Fargo,
Standard
Chartered
and
Discovery,
Inc.
The
performance
of
U.S.-based
diversified
financial
services
company
Wells
Fargo
was
affected
by
the
regulatory
restrictions
placed
on
it
following
the
account
opening
scandal,
particularly
the
ability
to
grow
the
size
of
its
balance
sheet
freely.
These
limits
negatively
impacted
the
company
in
March
when
a
flurry
of
companies
rushed
to
draw
on
their
credit
lines
to
strengthen
their
liquidity
positions
as
the
effects
of
the
pandemic
became
more
tangible.
After
the
March
downturn,
COVID-related
uncertainty
and
interest-
rate
declines
continued
to
hinder
the
organization,
leading
management
to
revise
its
forward
guidance
several
times
throughout
the
year.
First-quarter
earnings
fell
short
of
expectations,
and
Wells
Fargo
posted
a
second-quarter
loss,
although
much
of
it
was
due
to
the
bank’s
massive
contribution
to
its
loan
loss
reserves.
The
company
also
drastically
cut
its
dividend.
During
the
third
quarter,
headline
earnings
fell
short
of
expectations,
but
many
of
the
costs
incurred
during
the
quarter
were
associated
with
restructuring,
which
management
expects
will
reduce
costs
in
2021.
In
addition
to
shedding
its
student
loan
business
in
2020,
the
company
looks
forward
to
streamlining
its
business
model
further
in
the
year
ahead.
The
stock
of
London-based
banking
and
financial
services
company
Standard
Chartered
fell
in
early
January,
as
COVID-19
began
to
spread
across
parts
of
Asia
and
Europe.
The
uncertain
operating
environment
brought
on
by
the
pandemic,
combined
with
a
low
interest-rate
environment,
created
a
headwind
for
Standard
Chartered’s
operating
profits
during
the
year.
In
addition,
geopolitical
tension
between
the
U.S.
and
China,
pertaining
to
the
Top
10
Holdings
12/31/20
Company
Industry
,
Country
%
of
Total
Net
Assets
a
aa
Samsung
Electronics
Co.
Ltd.
4.7%
Technology
Hardware,
Storage
&
Peripherals
,
South
Korea
GlaxoSmithKline
plc
4.7%
Pharmaceuticals
,
United
Kingdom
Charter
Communications,
Inc.
4.4%
Media
Deutsche
Telekom
AG
4.0%
Diversified
Telecommunication
Services
,
Germany
Sensata
Technologies
Holding
plc
4.0%
Electrical
Equipment
Cie
Financiere
Richemont
SA
4.0%
Textiles,
Apparel
&
Luxury
Goods
,
Switzerland
Oracle
Corp.
3.9%
Software
Novartis
AG
3.9%
Pharmaceuticals
,
Switzerland
Eli
Lilly
and
Co.
3.9%
Pharmaceuticals
Check
Point
Software
Technologies
Ltd.
3.9%
Software
,
Israel
Franklin
Mutual
Beacon
Fund
7
franklintempleton.com
Annual
Report
Hong
Kong
national
security
law
passed
at
the
end
of
June
and
supported
by
the
business
community,
was
a
source
of
concern.
We
have
also
exited
our
position
in
Standard
Chartered.
Despite
quarterly
results
that
were
in
line
with
or
ahead
of
expectations
during
the
fiscal
year,
U.S.-based
cable
network
operator
Discovery,
Inc.,
a
company
that
provides
non-
fiction
and
educational
media
entertainment,
had
a
difficult
12-month
period.
After
the
March
decline,
Discovery’s
share
price
experienced
peaks
and
valleys
as
the
battle
for
homebound
viewers’
time
and
attention
ebbed
on.
During
the
period,
direct
to
consumer
(DTC)
initiatives
were
a
main
focus,
which
generated
significant
capital
spending
costs.
Unfortunately,
statistics
to
measure
success
of
the
DTC
efforts
were
unavailable.
Due
to
continued
costs
associated
with
DTC
efforts
and
their
weight
on
future
growth
prospects,
we
decided
to
sell
our
position
in
Discovery.
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
negative
overall
impact
on
the
Fund’s
performance
as
the
U.S.
dollar
fell
against
most
currencies
during
the
period.
As
fellow
shareholders,
we
found
recent
absolute
and
relative
performance
disappointing,
but
our
strategy
of
seeking
undervalued
stocks
can
lag
the
growth
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,
2020
,
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.
Performance
Summary
as
of
December
31,
2020
Franklin
Mutual
Beacon
Fund
8
franklintempleton.com
Annual
Report
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
12/31/20
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
.
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
.
Share
Class
Cumulative
Total
Return
1
Average
Annual
Total
Return
2
–
Z
1-Year
+4.08%
+4.08%
5-Year
+58.51%
+9.65%
10-Year
+138.78%
+9.09%
A
3
1-Year
+3.75%
-1.98%
5-Year
+56.41%
+8.12%
10-Year
+132.10%
+8.17%
See
page
10
for
Performance
Summary
footnotes.
Franklin
Mutual
Beacon
Fund
Performance
Summary
9
franklintempleton.com
Annual
Report
See
page
10
for
Performance
Summary
footnotes.
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
(1/1/11–
12/31/20
)
Class
A
(1/1/11–
12/31/20
)
Franklin
Mutual
Beacon
Fund
Performance
Summary
10
franklintempleton.com
Annual
Report
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
uncertainty
concerning
the
economic
consequences
of
the
departure
of
the
U.K.
from
the
European
Union
may
increase
market
volatility.
Smaller-company
stocks
have
exhibited
greater
price
volatility
than
larger-company
stocks,
partic-
ularly
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.
Unexpected
events
and
their
aftermaths,
such
as
the
spread
of
deadly
diseases;
natural,
environmental
or
man-made
disasters;
financial,
political
or
social
disruptions;
terrorism
and
war;
and
other
tragedies
or
catastrophes,
can
cause
investor
fear
and
panic,
which
can
adversely
affect
the
economies
of
many
companies,
sectors,
nations,
regions
and
the
market
in
general,
in
ways
that
cannot
necessarily
be
foreseen.
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
MSCI
World
Value
Index-NR
(USD)
is
a
free
float-adjusted,
market
capitalization-weighted
index
designed
to
measure
the
performance
of
stocks
exhibiting
overall
value
style
characteristics
in
global
developed
markets.
Net
Returns
(NR)
include
income
net
of
tax
withholding
when
dividends
are
paid.
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.
Distributions
(1/1/20–12/31/20)
Share
Class
Net
Investment
Income
Short-Term
Capital
Gain
Long-Term
Capital
Gain
Total
Z
$0.4526
$0.0427
$0.0580
$0.5533
A
$0.4139
$0.0427
$0.0580
$0.5146
C
$0.2715
$0.0427
$0.0580
$0.3722
R
$0.3664
$0.0427
$0.0580
$0.4671
R6
$0.4634
$0.0427
$0.0580
$0.5641
Total
Annual
Operating
Expenses
5
Share
Class
Z
0.82%
A
1.07%
Your
Fund’s
Expenses
Franklin
Mutual
Beacon
Fund
11
franklintempleton.com
Annual
Report
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.
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
184/366
to
reflect
the
one-half
year
period.
2.
Reflects
expenses
after
fee
waivers
and
expense
reimbursements,
for
Class
R6.
Actual
(actual
return
after
expenses)
Hypothetical
(5%
annual
return
before
expenses)
Share
Class
Beginning
Account
Value
7/1/20
Ending
Account
Value
12/31/20
Expenses
Paid
During
Period
7/1/20–12/31/20
1,
2
Ending
Account
Value
12/31/20
Expenses
Paid
During
Period
7/1/20–12/31/20
1,
2
a
Net
Annualized
Expense
Ratio
2
Z
$1,000
$1,249.55
$4.46
$1,021.17
$4.00
0.79%
A
$1,000
$1,247.14
$5.85
$1,019.93
$5.26
1.04%
C
$1,000
$1,242.43
$10.00
$1,016.21
$9.00
1.77%
R
$1,000
$1,245.51
$7.26
$1,018.67
$6.52
1.29%
R6
$1,000
$1,249.60
$4.05
$1,021.54
$3.64
0.72%
Franklin
Mutual
Series
Funds
Financial
Highlights
Franklin
Mutual
Beacon
Fund
franklintempleton.com
Annual
Report
The
accompanying
notes
are
an
integral
part
of
these
financial
statements.
12
a
Year
Ended
December
31,
2020
2019
2018
2017
2016
Class
Z
Per
share
operating
performance
(for
a
share
outstanding
throughout
the
year)
Net
asset
value,
beginning
of
year
...................
$16.40
$13.76
$16.61
$15.30
$14.30
Income
from
investment
operations
a
:
Net
investment
income
b
.........................
0.51
c
0.33
0.29
0.29
0.37
d
Net
realized
and
unrealized
gains
(losses)
...........
0.12
3.06
(1.68)
1.90
1.93
Total
from
investment
operations
....................
0.63
3.39
(1.39)
2.19
2.30
Less
distributions
from:
Net
investment
income
..........................
(0.45)
(0.36)
(0.31)
(0.31)
(0.37)
Net
realized
gains
.............................
(0.10)
(0.39)
(1.15)
(0.57)
(0.93)
Total
distributions
...............................
(0.55)
(0.75)
(1.46)
(0.88)
(1.30)
Net
asset
value,
end
of
year
.......................
$16.48
$16.40
$13.76
$16.61
$15.30
Total
return
....................................
4.08%
24.96%
(8.24)%
14.39%
16.11%
Ratios
to
average
net
assets
Expenses
e,f
....................................
0.82%
0.81%
g
0.80%
g
0.78%
0.80%
Expenses
-
incurred
in
connection
with
securities
sold
short
0.02%
0.02%
0.01%
—%
0.01%
Net
investment
income
...........................
3.56%
c
2.11%
1.77%
1.78%
2.48%
d
Supplemental
data
Net
assets,
end
of
year
(000’s)
.....................
$2,320,077
$2,600,744
$2,271,217
$2,700,327
$2,564,120
Portfolio
turnover
rate
............................
42.37%
30.72%
47.20%
24.80%
30.94%
a
The
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
repurchas-
es
of
the
Fund’s
shares
in
relation
to
income
earned
and/or
fluctuating
fair
value
of
the
investments
of
the
Fund.
b
Based
on
average
daily
shares
outstanding.
c
Net
investment
income
per
share
includes
approximately
$0.29
per
share
related
to
income
received
in
the
form
of
special
dividends
and
an
adjustment
for
EU
reclaims
in
connection
with
certain
Fund
holdings.
Excluding
this
amount,
the
ratio
of
net
investment
income
to
average
net
assets
would
have
been
1.56%.
d
Net
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
hold-
ings.
Excluding
this
amount,
the
ratio
of
net
investment
income
to
average
net
assets
would
have
been
1.81%.
e
Includes
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).
f
Benefit
of
expense
reduction
rounds
to
less
than
0.01%.
g
Benefit
of
waiver
and
payments
by
affiliates
rounds
to
less
than
0.01%.
Franklin
Mutual
Series
Funds
Financial
Highlights
Franklin
Mutual
Beacon
Fund
(continued)
franklintempleton.com
The
accompanying
notes
are
an
integral
part
of
these
financial
statements.
Annual
Report
13
a
Year
Ended
December
31,
2020
2019
2018
2017
2016
Class
A
Per
share
operating
performance
(for
a
share
outstanding
throughout
the
year)
Net
asset
value,
beginning
of
year
...................
$16.24
$13.63
$16.47
$15.18
$14.20
Income
from
investment
operations
a
:
Net
investment
income
b
.........................
0.47
c
0.29
0.25
0.25
0.33
d
Net
realized
and
unrealized
gains
(losses)
...........
0.10
3.03
(1.67)
1.87
1.91
Total
from
investment
operations
....................
0.57
3.32
(1.42)
2.12
2.24
Less
distributions
from:
Net
investment
income
..........................
(0.41)
(0.32)
(0.27)
(0.26)
(0.33)
Net
realized
gains
.............................
(0.10)
(0.39)
(1.15)
(0.57)
(0.93)
Total
distributions
...............................
(0.51)
(0.71)
(1.42)
(0.83)
(1.26)
Net
asset
value,
end
of
year
.......................
$16.30
$16.24
$13.63
$16.47
$15.18
Total
return
e
...................................
3.75%
24.69%
(8.49)%
14.09%
15.80%
Ratios
to
average
net
assets
Expenses
f,g
....................................
1.07%
1.06%
h
1.05%
h
1.03%
1.05%
Expenses
-
incurred
in
connection
with
securities
sold
short
0.02%
0.02%
0.01%
—%
0.01%
Net
investment
income
...........................
3.32%
c
1.86%
1.52%
1.53%
2.23%
d
Supplemental
data
Net
assets,
end
of
year
(000’s)
.....................
$893,378
$1,028,482
$890,294
$983,048
$992,306
Portfolio
turnover
rate
............................
42.37%
30.72%
47.20%
24.80%
30.94%
a
The
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
repurchas-
es
of
the
Fund’s
shares
in
relation
to
income
earned
and/or
fluctuating
fair
value
of
the
investments
of
the
Fund.
b
Based
on
average
daily
shares
outstanding.
c
Net
investment
income
per
share
includes
approximately
$0.28
per
share
related
to
income
received
in
the
form
of
special
dividends
and
an
adjustments
for
EU
reclaims
in
connection
with
certain
Fund
holdings.
Excluding
this
amount,
the
ratio
of
net
investment
income
to
average
net
assets
would
have
been
1.33%.
d
Net
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
hold-
ings.
Excluding
this
amount,
the
ratio
of
net
investment
income
to
average
net
assets
would
have
been
1.56%.
e
Total
return
does
not
reflect
sales
commissions
or
contingent
deferred
sales
charges,
if
applicable.
f
Includes
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).
g
Benefit
of
expense
reduction
rounds
to
less
than
0.01%.
h
Benefit
of
waiver
and
payments
by
affiliates
rounds
to
less
than
0.01%.
Franklin
Mutual
Series
Funds
Financial
Highlights
Franklin
Mutual
Beacon
Fund
(continued)
franklintempleton.com
Annual
Report
The
accompanying
notes
are
an
integral
part
of
these
financial
statements.
14
a
Year
Ended
December
31,
2020
2019
2018
2017
2016
Class
C
Per
share
operating
performance
(for
a
share
outstanding
throughout
the
year)
Net
asset
value,
beginning
of
year
...................
$16.29
$13.65
$16.34
$15.06
$14.10
Income
from
investment
operations
a
:
Net
investment
income
b
.........................
0.39
c
0.17
0.13
0.12
0.22
d
Net
realized
and
unrealized
gains
(losses)
...........
0.06
3.04
(1.65)
1.86
1.88
Total
from
investment
operations
....................
0.45
3.21
(1.52)
1.98
2.10
Less
distributions
from:
Net
investment
income
..........................
(0.27)
(0.18)
(0.02)
(0.13)
(0.21)
Net
realized
gains
.............................
(0.10)
(0.39)
(1.15)
(0.57)
(0.93)
Total
distributions
...............................
(0.37)
(0.57)
(1.17)
(0.70)
(1.14)
Net
asset
value,
end
of
year
.......................
$16.37
$16.29
$13.65
$16.34
$15.06
Total
return
e
...................................
2.96%
23.74%
(9.19)%
13.25%
14.94%
Ratios
to
average
net
assets
Expenses
f,g
....................................
1.82%
1.81%
h
1.80%
h
1.78%
1.80%
Expenses
-
incurred
in
connection
with
securities
sold
short
0.02%
0.02%
0.01%
—%
0.01%
Net
investment
income
...........................
2.75%
c
1.11%
0.77%
0.78%
1.48%
d
Supplemental
data
Net
assets,
end
of
year
(000’s)
.....................
$35,273
$52,620
$59,828
$260,113
$275,138
Portfolio
turnover
rate
............................
42.37%
30.72%
47.20%
24.80%
30.94%
a
The
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
repurchas-
es
of
the
Fund’s
shares
in
relation
to
income
earned
and/or
fluctuating
fair
value
of
the
investments
of
the
Fund.
b
Based
on
average
daily
shares
outstanding.
c
Net
investment
income
per
share
includes
approximately
$0.28
per
share
related
to
income
received
in
the
form
of
special
dividends
and
an
adjustment
for
EU
reclaims
in
connection
with
certain
Fund
holdings.
Excluding
this
amount,
the
ratio
of
net
investment
income
to
average
net
assets
would
have
been
0.76%.
d
Net
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
hold-
ings.
Excluding
this
amount,
the
ratio
of
net
investment
income
to
average
net
assets
would
have
been
0.81%.
e
Total
return
does
not
reflect
sales
commissions
or
contingent
deferred
sales
charges,
if
applicable.
f
Includes
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).
g
Benefit
of
expense
reduction
rounds
to
less
than
0.01%.
h
Benefit
of
waiver
and
payments
by
affiliates
rounds
to
less
than
0.01%.
Franklin
Mutual
Series
Funds
Financial
Highlights
Franklin
Mutual
Beacon
Fund
(continued)
franklintempleton.com
The
accompanying
notes
are
an
integral
part
of
these
financial
statements.
Annual
Report
15
a
Year
Ended
December
31,
2020
2019
2018
2017
2016
Class
R
Per
share
operating
performance
(for
a
share
outstanding
throughout
the
year)
Net
asset
value,
beginning
of
year
...................
$16.03
$13.46
$16.28
$15.01
$14.05
Income
from
investment
operations
a
:
Net
investment
income
b
.........................
0.44
c
0.24
0.20
0.21
0.30
d
Net
realized
and
unrealized
gains
(losses)
...........
0.09
3.01
(1.64)
1.84
1.89
Total
from
investment
operations
....................
0.53
3.25
(1.44)
2.05
2.19
Less
distributions
from:
Net
investment
income
..........................
(0.37)
(0.29)
(0.23)
(0.21)
(0.30)
Net
realized
gains
.............................
(0.10)
(0.39)
(1.15)
(0.57)
(0.93)
Total
distributions
...............................
(0.47)
(0.68)
(1.38)
(0.78)
(1.23)
Net
asset
value,
end
of
year
.......................
$16.09
$16.03
$13.46
$16.28
$15.01
Total
return
....................................
3.49%
24.33%
(8.65)%
13.76%
15.58%
Ratios
to
average
net
assets
Expenses
e,f
....................................
1.32%
1.31%
g
1.30%
g
1.28%
1.30%
Expenses
-
incurred
in
connection
with
securities
sold
short
0.02%
0.02%
0.01%
—%
0.01%
Net
investment
income
...........................
3.16%
c
1.61%
1.27%
1.28%
1.98%
d
Supplemental
data
Net
assets,
end
of
year
(000’s)
.....................
$1,262
$1,769
$1,662
$1,601
$2,035
Portfolio
turnover
rate
............................
42.37%
30.72%
47.20%
24.80%
30.94%
a
The
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
repurchas-
es
of
the
Fund’s
shares
in
relation
to
income
earned
and/or
fluctuating
fair
value
of
the
investments
of
the
Fund.
b
Based
on
average
daily
shares
outstanding.
c
Net
investment
income
per
share
includes
approximately
$0.28
per
share
related
to
income
received
in
the
form
of
special
dividends
and
an
adjustment
for
EU
reclaims
in
connection
with
certain
Fund
holdings.
Excluding
this
amount,
the
ratio
of
net
investment
income
to
average
net
assets
would
have
been
1.17%.
d
Net
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
hold-
ings.
Excluding
this
amount,
the
ratio
of
net
investment
income
to
average
net
assets
would
have
been
1.31%.
e
Includes
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).
f
Benefit
of
expense
reduction
rounds
to
less
than
0.01%.
g
Benefit
of
waiver
and
payments
by
affiliates
rounds
to
less
than
0.01%.
Franklin
Mutual
Series
Funds
Financial
Highlights
Franklin
Mutual
Beacon
Fund
(continued)
franklintempleton.com
Annual
Report
The
accompanying
notes
are
an
integral
part
of
these
financial
statements.
16
a
Year
Ended
December
31,
2020
2019
2018
2017
2016
Class
R6
Per
share
operating
performance
(for
a
share
outstanding
throughout
the
year)
Net
asset
value,
beginning
of
year
...................
$16.40
$13.75
$16.60
$15.30
$14.30
Income
from
investment
operations
a
:
Net
investment
income
b
.........................
0.53
c
0.34
0.30
0.37
0.38
d
Net
realized
and
unrealized
gains
(losses)
...........
0.10
3.07
(1.68)
1.82
1.93
Total
from
investment
operations
....................
0.63
3.41
(1.38)
2.19
2.31
Less
distributions
from:
Net
investment
income
..........................
(0.46)
(0.37)
(0.32)
(0.32)
(0.38)
Net
realized
gains
.............................
(0.10)
(0.39)
(1.15)
(0.57)
(0.93)
Total
distributions
...............................
(0.56)
(0.76)
(1.47)
(0.89)
(1.31)
Net
asset
value,
end
of
year
.......................
$16.47
$16.40
$13.75
$16.60
$15.30
Total
return
....................................
4.08%
25.13%
(8.18)%
14.42%
16.20%
Ratios
to
average
net
assets
Expenses
before
waiver
and
payments
by
affiliates
e
.....
0.78%
0.76%
0.75%
0.72%
0.71%
Expenses
net
of
waiver
and
payments
by
affiliates
e
,f
.....
0.75%
0.74%
0.73%
0.71%
0.71%
Expenses
-
incurred
in
connection
with
securities
sold
short
0.02%
0.02%
0.01%
—%
0.01%
Net
investment
income
...........................
3.67%
c
2.18%
1.84%
1.85%
2.57%
d
Supplemental
data
Net
assets,
end
of
year
(000’s)
.....................
$70,839
$90,220
$79,358
$106,845
$604
Portfolio
turnover
rate
............................
42.37%
30.72%
47.20%
24.80%
30.94%
a
The
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
repurchas-
es
of
the
Fund’s
shares
in
relation
to
income
earned
and/or
fluctuating
fair
value
of
the
investments
of
the
Fund.
b
Based
on
average
daily
shares
outstanding.
c
Net
investment
income
per
share
includes
approximately
$0.29
per
share
related
to
income
received
in
the
form
of
special
dividends
and
an
adjustment
for
EU
reclaims
in
connection
with
certain
Fund
holdings.
Excluding
this
amount,
the
ratio
of
net
investment
income
to
average
net
assets
would
have
been
1.68%.
d
Net
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
hold-
ings.
Excluding
this
amount,
the
ratio
of
net
investment
income
to
average
net
assets
would
have
been
1.90%.
e
Includes
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).
f
Benefit
of
expense
reduction
rounds
to
less
than
0.01%.
Franklin
Mutual
Series
Funds
Statement
of
Investments,
December
31,
2020
Franklin
Mutual
Beacon
Fund
franklintempleton.com
The
accompanying
notes
are
an
integral
part
of
these
financial
statements.
Annual
Report
17
a
a
Country
Shares
a
Value
a
a
a
a
a
a
Common
Stocks
88.2%
Aerospace
&
Defense
0.4%
BAE
Systems
plc
.....................................
United
Kingdom
2,119,086
$
14,132,739
Auto
Components
0.0%
†
a,b,c
International
Automotive
Components
Group
Brazil
LLC
........
Belgium
2,846,329
60,530
Banks
9.3%
b
ING
Groep
NV
.......................................
Netherlands
9,025,834
83,924,239
JPMorgan
Chase
&
Co.
.................................
United
States
1,001,230
127,226,296
Wells
Fargo
&
Co.
.....................................
United
States
3,283,550
99,097,539
310,248,074
Beverages
3.7%
Heineken
NV
........................................
Netherlands
1,094,204
121,941,893
Biotechnology
0.3%
b
Alexion
Pharmaceuticals,
Inc.
............................
United
States
67,715
10,579,792
Chemicals
3.1%
BASF
SE
...........................................
Germany
1,281,093
101,265,164
Diversified
Telecommunication
Services
4.0%
Deutsche
Telekom
AG
..................................
Germany
7,326,022
133,724,424
Electrical
Equipment
4.0%
b
Sensata
Technologies
Holding
plc
.........................
United
States
2,506,427
132,188,960
Entertainment
3.8%
b
Walt
Disney
Co.
(The)
..................................
United
States
688,200
124,688,076
Equity
Real
Estate
Investment
Trusts
(REITs)
3.7%
Brixmor
Property
Group,
Inc.
.............................
United
States
7,426,876
122,914,798
Health
Care
Equipment
&
Supplies
3.7%
Medtronic
plc
........................................
United
States
1,053,167
123,367,982
Health
Care
Providers
&
Services
2.2%
Anthem,
Inc.
.........................................
United
States
229,438
73,670,247
Insurance
3.0%
Hartford
Financial
Services
Group,
Inc.
(The)
................
United
States
1,733,915
84,927,157
Willis
Towers
Watson
plc
................................
United
States
75,200
15,843,136
100,770,293
Interactive
Media
&
Services
0.5%
b
Baidu,
Inc.,
ADR
......................................
China
82,747
17,893,211
IT
Services
2.6%
Cognizant
Technology
Solutions
Corp.,
A
....................
United
States
1,049,830
86,033,568
Media
4.4%
b
Charter
Communications,
Inc.,
A
..........................
United
States
218,487
144,540,075
Pharmaceuticals
17.0%
b
Elanco
Animal
Health,
Inc.
...............................
United
States
854,316
26,201,872
Eli
Lilly
and
Co.
.......................................
United
States
769,081
129,851,636
GlaxoSmithKline
plc
...................................
United
Kingdom
8,456,655
154,750,883
Merck
&
Co.,
Inc.
.....................................
United
States
1,527,829
124,976,412
Novartis
AG,
ADR
.....................................
Switzerland
1,357,080
128,149,064
563,929,867
Semiconductors
&
Semiconductor
Equipment
0.7%
b
Inphi
Corp.
..........................................
United
States
52,800
8,472,816
Franklin
Mutual
Series
Funds
Statement
of
Investments
Franklin
Mutual
Beacon
Fund
(continued)
franklintempleton.com
Annual
Report
The
accompanying
notes
are
an
integral
part
of
these
financial
statements.
18
a
a
Country
Shares
a
Value
a
a
a
a
a
a
Common
Stocks
(continued)
Semiconductors
&
Semiconductor
Equipment
(continued)
Xilinx,
Inc.
...........................................
United
States
109,500
$
15,523,815
23,996,631
Software
7.8%
b
Check
Point
Software
Technologies
Ltd.
....................
Israel
975,273
129,623,534
Oracle
Corp.
.........................................
United
States
1,996,500
129,153,585
258,777,119
Specialty
Retail
0.5%
Tiffany
&
Co.
.........................................
United
States
126,828
16,671,541
Technology
Hardware,
Storage
&
Peripherals
3.9%
Western
Digital
Corp.
..................................
United
States
2,343,867
129,826,793
Textiles,
Apparel
&
Luxury
Goods
7.0%
Cie
Financiere
Richemont
SA
............................
Switzerland
1,479,424
133,654,162
Tapestry,
Inc.
........................................
United
States
3,140,879
97,618,519
231,272,681
Tobacco
2.6%
British
American
Tobacco
plc
.............................
United
Kingdom
2,279,148
84,646,605
Total
Common
Stocks
(Cost
$2,129,029,364)
....................................
2,927,141,063
Preferred
Stocks
7.5%
Automobiles
2.9%
d
Porsche
Automobil
Holding
SE,
3.91%
.....................
Germany
1,378,400
95,219,450
Technology
Hardware,
Storage
&
Peripherals
4.6%
d
Samsung
Electronics
Co.
Ltd.,
1.92%
......................
South
Korea
2,284,959
154,770,309
Total
Preferred
Stocks
(Cost
$106,114,732)
.....................................
249,989,759
Warrants
Warrants
0.0%
†
Textiles,
Apparel
&
Luxury
Goods
0.0%
†
b
Cie
Financiere
Richemont
SA,
11/22/23
.....................
Switzerland
2,958,848
768,705
Total
Warrants
(Cost
$—)
.....................................................
768,705
Principal
Amount
*
Corporate
Bonds
1.6%
Diversified
Telecommunication
Services
0.6%
e
Frontier
Communications
Corp.
,
Senior
Note,
10.5%,
9/15/22
...........................
United
States
16,691,000
8,737,989
Senior
Note,
11%,
9/15/25
.............................
United
States
23,907,000
12,596,000
21,333,989
Software
1.0%
f
Veritas
US,
Inc.
/
Veritas
Bermuda
Ltd.
,
Senior
Note,
144A,
10.5%,
2/01/24
......................
United
States
22,708,000
23,177,261
Senior
Secured
Note,
144A,
7.5%,
2/01/23
................
United
States
2,766,000
2,777,825
Senior
Secured
Note,
144A,
7.5%,
9/01/25
................
United
States
6,691,000
6,875,002
32,830,088
Total
Corporate
Bonds
(Cost
$67,911,431)
......................................
54,164,077
Franklin
Mutual
Series
Funds
Statement
of
Investments
Franklin
Mutual
Beacon
Fund
(continued)
franklintempleton.com
The
accompanying
notes
are
an
integral
part
of
these
financial
statements.
Annual
Report
19
a
a
Country
Principal
Amount
*
a
Value
a
a
a
a
a
a
g
Senior
Floating
Rate
Interests
0.3%
Software
0.3%
Veritas
US,
Inc.,
Term
Loan,
B,
6.5%,
(3-month
USD
LIBOR
+
5.5%),
9/01/25
...........................................
United
States
10,380,983
$
10,366,709
Total
Senior
Floating
Rate
Interests
(Cost
$10,188,174)
..........................
10,366,709
Shares
Companies
in
Liquidation
0.0%
†
a,b,h
Tribune
Media,
Litigation
Trust,
Contingent
Distribution
.........
United
States
501,447
—
a,b,h
Vistra
Energy
Corp.,
Litigation
Trust,
Contingent
Distribution
.....
United
States
46,282,735
69,424
a,b,h
Walter
Energy,
Inc.,
Litigation
Trust,
Contingent
Distribution
......
United
States
5,229,000
—
Total
Companies
in
Liquidation
(Cost
$1,456,075)
...............................
69,424
Total
Long
Term
Investments
(Cost
$2,314,699,776)
.............................
3,242,499,737
a
Short
Term
Investments
1.9%
a
a
Country
Principal
Amount
*
a
Value
a
a
a
a
a
a
U.S.
Government
and
Agency
Securities
1.9%
i
FHLB,
1/04/21
.......................................
United
States
3,000,000
3,000,000
i
U.S.
Treasury
Bills
,
1/05/21
...........................................
United
States
12,500,000
12,500,002
j
1/14/21
...........................................
United
States
10,000,000
9,999,903
j
1/21/21
...........................................
United
States
10,000,000
9,999,835
j
2/04/21
...........................................
United
States
7,500,000
7,499,709
j
2/11/21
...........................................
United
States
7,500,000
7,499,604
j
7/01/21
...........................................
United
States
12,500,000
12,495,354
59,994,407
Total
U.S.
Government
and
Agency
Securities
(Cost
$62,992,277)
.................
62,994,407
Total
Short
Term
Investments
(Cost
$62,992,277
)
................................
62,994,407
a
Total
Investments
(Cost
$2,377,692,053)
99.5%
..................................
$3,305,494,144
Securities
Sold
Short
(1.4)%
..................................................
(47,487,165)
Other
Assets,
less
Liabilities
1.9%
.............................................
62,821,962
Net
Assets
100.0%
...........................................................
$3,320,828,941
Shares
Securities
Sold
Short
(1.4)%
Common
Stocks
(1.4)%
Insurance
(0.5)%
k
Aon
plc,
A
...........................................
United
States
81,216
(17,158,504)
Pharmaceuticals
(0.2)%
k
AstraZeneca
plc,
ADR
..................................
United
Kingdom
143,847
(7,190,912)
k
Semiconductors
&
Semiconductor
Equipment
(0.7)%
Advanced
Micro
Devices,
Inc.
............................
United
States
188,712
(17,306,778)
Marvell
Technology
Group
Ltd.
...........................
United
States
122,654
(5,830,971)
(23,137,749)
Total
Common
Stocks
(Proceeds
$46,930,688)
..................................
(47,487,165)
Franklin
Mutual
Series
Funds
Statement
of
Investments
Franklin
Mutual
Beacon
Fund
(continued)
franklintempleton.com
Annual
Report
The
accompanying
notes
are
an
integral
part
of
these
financial
statements.
20
a
a
a
Country
Shares
a
Value
a
a
a
a
a
a
Total
Securities
Sold
Short
(Proceeds
$46,930,688)
..............................
$(47,487,165)
*
The
principal
amount
is
stated
in
U.S.
dollars
unless
otherwise
indicated.
†
Rounds
to
less
than
0.1%
of
net
assets.
a
Fair
valued
using
significant
unobservable
inputs.
See
Note
13
regarding
fair
value
measurements.
b
Non-income
producing.
c
See
Note
10
regarding
restricted
securities.
d
Variable
rate
security.
The
rate
shown
represents
the
yield
at
period
end.
e
See
Note
8
regarding
defaulted
securities.
f
Security
was
purchased
pursuant
to
Rule
144A
or
Regulation
S
under
the
Securities
Act
of
1933.
144A
securities
may
be
sold
in
transactions
exempt
from
registration
only
to
qualified
institutional
buyers
or
in
a
public
offering
registered
under
the
Securities
Act
of
1933.
Regulation
S
securities
cannot
be
sold
in
the
United
States
without
either
an
effective
registration
statement
filed
pursuant
to
the
Securities
Act
of
1933,
or
pursuant
to
an
exemption
from
registration.
At
December
31,
2020,
the
aggregate
value
of
these
securities
was
$32,830,088,
representing
1.0%
of
net
assets.
g
See
Note
1(f)
regarding
senior
floating
rate
interests.
h
Contingent
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.
i
The
security
was
issued
on
a
discount
basis
with
no
stated
coupon
rate.
j
A
portion
or
all
of
the
security
has
been
segregated
as
collateral
for
securities
sold
short
and/or
open
forward
exchange
contracts.
At
December
31,
2020,
the
aggregate
value
of
these
securities
pledged
amounted
to
$33,847,686,
representing
1.0%
of
net
assets.
k
See
Note
1(d)
regarding
securities
sold
short.
Franklin
Mutual
Series
Funds
Statement
of
Investments
Franklin
Mutual
Beacon
Fund
(continued)
franklintempleton.com
The
accompanying
notes
are
an
integral
part
of
these
financial
statements.
Annual
Report
21
At
December
31,
2020,
the
Fund
had
the
following futures
contracts
outstanding.
See
Note
1(c). 
At
December
31,
2020,
the
Fund
had
the
following
forward
exchange
contracts
outstanding.
See
Note
1
(
c
). 
Futures
Contracts
Description
Type
Number
of
Contracts
Notional
Amount
*
Expiration
Date
Value/
Unrealized
Appreciation
(Depreciation)
Foreign
exchange
contracts
Foreign
Exchange
EUR/USD
...................
Short
221
$
33,829,575
3/15/21
$
(199,237)
Total
Futures
Contracts
......................................................................
$(199,237)
*
As
of
period
end.
Forward
Exchange
Contracts
Currency
Counter-
party
a
Type
Quantity
Contract
Amount
*
Settlement
Date
Unrealized
Appreciation
Unrealized
Depreciation
a
a
a
a
a
a
a
a
OTC
Forward
Exchange
Contracts
Euro
.............
BOFA
Buy
30,000,000
35,535,900
1/15/21
$
1,124,199
$
—
Euro
.............
BOFA
Sell
6,376,586
7,618,490
1/15/21
—
(173,719)
Euro
.............
HSBK
Sell
6,204,427
7,278,248
1/15/21
—
(303,583)
Euro
.............
SSBT
Sell
19,143,808
21,838,033
1/15/21
—
(1,555,763)
Euro
.............
UBSW
Buy
4,327,216
5,319,181
1/15/21
—
(31,309)
Euro
.............
UBSW
Sell
30,384,934
34,961,491
1/15/21
—
(2,168,999)
British
Pound
......
BNY
Buy
9,200,261
11,778,727
1/19/21
805,161
—
British
Pound
......
BOFA
Buy
7,588,767
9,925,585
1/19/21
454,141
—
British
Pound
......
HSBK
Buy
2,946,806
3,807,744
1/19/21
222,825
—
British
Pound
......
SSBT
Sell
19,735,834
24,721,343
1/19/21
—
(2,272,838)
British
Pound
......
BNY
Buy
525,000
684,248
2/16/21
33,979
—
British
Pound
......
BOFA
Buy
3,363,518
4,398,974
2/16/21
202,489
—
British
Pound
......
HSBK
Buy
4,952,520
6,522,635
2/16/21
252,666
—
British
Pound
......
HSBK
Sell
28,858,843
37,661,800
2/16/21
—
(1,818,569)
British
Pound
......
UBSW
Buy
20,017,805
26,423,137
2/16/21
962,242
—
Euro
.............
BOFA
Sell
3,793,237
4,559,008
2/23/21
—
(80,445)
Euro
.............
SSBT
Sell
952,738
1,138,112
2/23/21
—
(27,167)
Euro
.............
UBSW
Sell
447,449
545,769
2/23/21
—
(1,500)
Euro
.............
BOFA
Sell
1,265,453
1,501,849
4/07/21
—
(47,425)
Euro
.............
HSBK
Sell
11,503,468
13,607,480
4/07/21
—
(476,026)
Euro
.............
SSBT
Sell
4,252,714
5,044,143
4/07/21
—
(162,383)
Euro
.............
UBSW
Sell
46,124,128
54,591,989
4/07/21
—
(1,877,019)
South
Korean
Won
..
HSBK
Buy
41,377,120,829
37,428,422
5/14/21
592,642
—
South
Korean
Won
..
HSBK
Sell
41,377,120,829
36,907,700
5/14/21
—
(1,113,364)
South
Korean
Won
..
UBSW
Buy
22,943,197,297
20,740,551
5/14/21
341,747
—
South
Korean
Won
..
UBSW
Sell
22,943,197,297
20,509,901
5/14/21
—
(572,397)
Total
Forward
Exchange
Contracts
...................................................
$4,992,091
$(12,682,506)
Net
unrealized
appreciation
(depreciation)
............................................
$(7,690,415)
*
In
U.S.
dollars
unless
otherwise
indicated.
a
May
be
comprised
of
multiple
contracts
with
the
same
counterparty,
currency
and
settlement
date.
Franklin
Mutual
Series
Funds
Statement
of
Investments
Franklin
Mutual
Beacon
Fund
(continued)
franklintempleton.com
Annual
Report
The
accompanying
notes
are
an
integral
part
of
these
financial
statements.
22
See
Note
11
regarding
other
derivative
information.
See
Abbreviations
on
page
39
.
Franklin
Mutual
Series
Funds
Financial
Statements
Statement
of
Assets
and
Liabilities
December
31,
2020
franklintempleton.com
The
accompanying
notes
are
an
integral
part
of
these
financial
statements.
Annual
Report
23
Franklin
Mutual
Beacon
Fund
Assets:
Investments
in
securities:
Cost
-
Unaffiliated
issuers
...................................................................
$2,377,692,053
Value
-
Unaffiliated
issuers
..................................................................
$3,305,494,144
Cash
....................................................................................
7,002,404
Receivables:
Investment
securities
sold
...................................................................
9,906,886
Capital
shares
sold
........................................................................
767,232
Dividends
and
interest
.....................................................................
7,973,238
European
Union
tax
reclaims
(Note
1
g
)
.........................................................
9,143,358
Deposits
with
brokers
for:
Securities
sold
short
.....................................................................
48,134,845
Futures
contracts
........................................................................
514,497
Variation
margin
on
futures
contracts
...........................................................
172,656
Unrealized
appreciation
on
OTC
forward
exchange
contracts
..........................................
4,992,091
Other
assets
..............................................................................
879,554
Total
assets
..........................................................................
3,394,980,905
Liabilities:
Payables:
Investment
securities
purchased
..............................................................
6,631,814
Capital
shares
redeemed
...................................................................
4,321,619
Management
fees
.........................................................................
1,848,091
Distribution
fees
..........................................................................
213,922
Transfer
agent
fees
........................................................................
302,816
Trustees'
fees
and
expenses
.................................................................
299,324
Securities
sold
short,
at
value
(proceeds
$46,930,688)
...............................................
47,487,165
Unrealized
depreciation
on
OTC
forward
exchange
contracts
..........................................
12,682,506
Accrued
expenses
and
other
liabilities
...........................................................
364,707
Total
liabilities
.........................................................................
74,151,964
Net
assets,
at
value
.................................................................
$3,320,828,941
Net
assets
consist
of:
Paid-in
capital
.............................................................................
$2,484,847,416
Total
distributable
earnings
(losses)
.............................................................
835,981,525
Net
assets,
at
value
.................................................................
$3,320,828,941
Franklin
Mutual
Series
Funds
Financial
Statements
Statement
of
Assets
and
Liabilities
(continued)
December
31,
2020
franklintempleton.com
Annual
Report
The
accompanying
notes
are
an
integral
part
of
these
financial
statements.
24
Franklin
Mutual
Beacon
Fund
Class
Z:
Net
assets,
at
value
.......................................................................
$2,320,077,386
Shares
outstanding
........................................................................
140,796,430
Net
asset
value
and
maximum
offering
price
per
share
.............................................
$16.48
Class
A:
Net
assets,
at
value
.......................................................................
$893,377,691
Shares
outstanding
........................................................................
54,793,011
Net
asset
value
per
share
a
..................................................................
$16.30
Maximum
offering
price
per
share
(net
asset
value
per
share
÷
94.50%)
................................
$17.25
Class
C:
Net
assets,
at
value
.......................................................................
$35,272,558
Shares
outstanding
........................................................................
2,154,162
Net
asset
value
and
maximum
offering
price
per
share
a
.............................................
$16.37
Class
R:
Net
assets,
at
value
.......................................................................
$1,262,159
Shares
outstanding
........................................................................
78,438
Net
asset
value
and
maximum
offering
price
per
share
.............................................
$16.09
Class
R6:
Net
assets,
at
value
.......................................................................
$70,839,147
Shares
outstanding
........................................................................
4,300,295
Net
asset
value
and
maximum
offering
price
per
share
.............................................
$16.47
a
Redemption
price
is
equal
to
net
asset
value
less
contingent
deferred
sales
charges,
if
applicable.
Franklin
Mutual
Series
Funds
Financial
Statements
Statement
of
Operations
for
the
year
ended
December
31,
2020
franklintempleton.com
The
accompanying
notes
are
an
integral
part
of
these
financial
statements.
Annual
Report
25
Franklin
Mutual
Beacon
Fund
Investment
income:
Dividends:
(net
of
foreign
taxes
of
$1,387,073)
Unaffiliated
issuers
........................................................................
$123,469,834
Interest:
Unaffiliated
issuers
........................................................................
6,276,720
Adjustment
for
uncollectible
interest
(Note
8
)
(2,142,470)
Other
income
(Note
1
g
)
......................................................................
6,937,723
Total
investment
income
...................................................................
134,541,807
Expenses:
Management
fees
(Note
3
a
)
...................................................................
20,742,991
Distribution
fees:
(Note
3c
)
    Class
A
................................................................................
2,082,822
    Class
C
................................................................................
381,182
    Class
R
................................................................................
6,995
Transfer
agent
fees:
(Note
3e
)
    Class
Z
................................................................................
1,822,629
    Class
A
................................................................................
720,268
    Class
C
................................................................................
32,986
    Class
R
................................................................................
1,212
    Class
R6
...............................................................................
34,528
Custodian
fees
(Note
4
)
......................................................................
84,536
Reports
to
shareholders
......................................................................
223,934
Registration
and
filing
fees
....................................................................
104,068
Professional
fees
...........................................................................
306,442
Trustees'
fees
and
expenses
..................................................................
205,787
Dividends
on
securities
sold
short
..............................................................
617,830
Other
....................................................................................
190,222
Total
expenses
.........................................................................
27,558,432
Expense
reductions
(Note
4
)
...............................................................
(16,175)
Expenses
waived/paid
by
affiliates
(Note
3f)
....................................................
(20,245)
Net
expenses
.........................................................................
27,522,012
Net
investment
income
................................................................
107,019,795
Realized
and
unrealized
gains
(losses):
Net
realized
gain
(loss)
from:
Investments:
Unaffiliated
issuers
......................................................................
(94,827,725)
Foreign
currency
transactions
................................................................
405,290
Forward
exchange
contracts
.................................................................
(11,264,450)
Futures
contracts
.........................................................................
(5,201,248)
Securities
sold
short
.......................................................................
(2,232,539)
Net
realized
gain
(loss)
..................................................................
(113,120,672)
Net
change
in
unrealized
appreciation
(depreciation)
on:
Investments:
Unaffiliated
issuers
......................................................................
45,813,143
Translation
of
other
assets
and
liabilities
denominated
in
foreign
currencies
..............................
642,692
Forward
exchange
contracts
.................................................................
4,543,671
Futures
contracts
.........................................................................
1,648,938
Securities
sold
short
.......................................................................
2,571,073
Net
change
in
unrealized
appreciation
(depreciation)
............................................
55,219,517
Net
realized
and
unrealized
gain
(loss)
............................................................
(57,901,155)
Net
increase
(decrease)
in
net
assets
resulting
from
operations
..........................................
$49,118,640
Franklin
Mutual
Series
Funds
Financial
Statements
Statements
of
Changes
in
Net
Assets
franklintempleton.com
Annual
Report
The
accompanying
notes
are
an
integral
part
of
these
financial
statements.
26
Franklin
Mutual
Beacon
Fund
Year
Ended
December
31,
2020
Year
Ended
December
31,
2019
Increase
(decrease)
in
net
assets:
Operations:
Net
investment
income
.................................................
$107,019,795
$72,734,507
Net
realized
gain
(loss)
.................................................
(113,120,672)
51,129,864
Net
change
in
unrealized
appreciation
(depreciation)
...........................
55,219,517
666,435,033
Net
increase
(decrease)
in
net
assets
resulting
from
operations
................
49,118,640
790,299,404
Distributions
to
shareholders:
Class
Z
.............................................................
(76,905,231)
(117,204,577)
Class
A
.............................................................
(27,957,723)
(44,297,307)
Class
C
.............................................................
(810,951)
(1,880,966)
Class
R
.............................................................
(40,279)
(73,857)
Class
R6
............................................................
(2,431,509)
(4,118,811)
Total
distributions
to
shareholders
..........................................
(108,145,693)
(167,575,518)
Capital
share
transactions:
(Note
2
)
Class
Z
.............................................................
(245,275,617)
(100,073,026)
Class
A
.............................................................
(116,168,396)
(29,105,095)
Class
C
.............................................................
(14,894,960)
(17,741,717)
Class
R
.............................................................
(451,128)
(184,983)
Class
R6
............................................................
(17,188,067)
(4,143,408)
Total
capital
share
transactions
............................................
(393,978,168)
(151,248,229)
Net
increase
(decrease)
in
net
assets
...................................
(453,005,221)
471,475,657
Net
assets:
Beginning
of
year
.......................................................
3,773,834,162
3,302,358,505
End
of
year
...........................................................
$3,320,828,941
$3,773,834,162
Franklin
Mutual
Series
Funds
27
franklintempleton.com
Annual
Report
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 
six 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.
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. Events
can occur
Franklin
Mutual
Series
Funds
Notes
to
Financial
Statements
28
franklintempleton.com
Annual
Report
Franklin
Mutual
Beacon
Fund
(continued)
between
the
time
at
which
trading
in
a
foreign
security
is
completed
and
4
p.m.
Eastern
time
that
might
call
into
question
the
reliability
of
the
value
of
a
portfolio
security
held
by
the
Fund.
As
a
result,
differences
may
arise
between
the
value
of
the
Fund's
portfolio
securities
as
determined
at
the
foreign
market
close
and
the
latest
indications
of
value
at
4
p.m.
Eastern
time. In
order
to
minimize
the
potential
for
these
differences,
an
independent
pricing
service
may
be
used
to
adjust
the
value
of
the
Fund's
portfolio
securities
to
the
latest
indications
of
fair
value
at
4
p.m.
Eastern
time.
At
December
31,
2020,
certain
securities
may
have
been
fair
valued
using
these
procedures,
in
which
case
the
securities
were
categorized
as
Level
2
inputs
within
the
fair
value
hierarchy.
See
the
Fair
Value
Measurements
note
for
more
information.
When
the
last
day
of
the
reporting
period
is
a
non-business
day,
certain
foreign
markets
may
be
open
on
those
days
that
the
Fund's
NAV
is
not
calculated,
which
could
result
in
differences
between
the
value
of
the
Fund's
portfolio
securities
on
the
last
business
day
and
the
last
calendar
day
of
the
reporting
period.
Any
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
1.
Organization
and
Significant
Accounting
Policies
(continued)
a.
Financial
Instrument
Valuation 
(continued)
Franklin
Mutual
Series
Funds
Notes
to
Financial
Statements
29
franklintempleton.com
Annual
Report
Franklin
Mutual
Beacon
Fund
(continued)
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,
2020,
the
Fund
had
OTC
derivatives
in
a
net
liability
position
of
$10,008,795
and
the
aggregate
value
of
collateral
pledged
for
such
contracts
was
$10,721,844.  
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,
2020, the
Fund
received
$2,358,329
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
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
collateral
in
the
form
of
cash
and/or
U.S.
Government
and
Agency
securities
against
the
loaned
securities
in
an
amount
equal
to
at
least
102%
of
the
fair
value
of
the
loaned
securities.
Collateral
is
maintained
over
the
life
of
the
loan
1.
Organization
and
Significant
Accounting
Policies
(continued)
c.
Derivative
Financial
Instruments
(continued)
Franklin
Mutual
Series
Funds
Notes
to
Financial
Statements
30
franklintempleton.com
Annual
Report
Franklin
Mutual
Beacon
Fund
(continued)
in
an
amount
not
less
than
100%
of
the
fair
value
of
loaned
securities,
as
determined
at
the
close
of
Fund
business
each
day;
any
additional
collateral
required
due
to
changes
in
security
values
is
delivered
to
the
Fund
on
the
next
business
day.
Any
cash
collateral
received
is
deposited
into
a
joint
cash
account
with
other
funds
and
is
used
to
invest
in
a
money
market
fund
managed
by
Franklin
Advisers,
Inc.,
an
affiliate
of
the Fund,
and/or
a
joint
repurchase
agreement.
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 any
cash 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,
2020,
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.
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,
2020,
the
Fund
has
determined
that
no
tax
liability
is
required
in
its
financial
statements
related
to
uncertain
tax
positions
for
any
open
tax
years
(or
expected
to
be
taken
in
future
tax
years).
Open
tax
years
are
those
that
remain
subject
to
examination
and
are
based
on
the
statute
of
limitations
in
each
jurisdiction
in
which
the
Fund
invests. 
h.
Security
Transactions,
Investment
Income,
Expenses
and
Distributions
Security
transactions
are
accounted
for
on
trade
date.
Realized
gains
and
losses
on
security
transactions
are
determined
on
a
specific
identification
basis.
Interest
income
and]
estimated
expenses
are
accrued
daily.
Amortization
of
premium
and
accretion
of
discount
on
debt
securities
are
1.
Organization
and
Significant
Accounting
Policies
(continued)
e.
Securities
Lending
(continued)
Franklin
Mutual
Series
Funds
Notes
to
Financial
Statements
31
franklintempleton.com
Annual
Report
Franklin
Mutual
Beacon
Fund
(continued)
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,
2020,
there
were
an
unlimited
number
of
shares
authorized
(without
par
value).
Transactions
in
the
Fund’s
shares
were
as
follows:
Year
Ended
December
31,
2020
Year
Ended
December
31,
2019
Shares
Amount
Shares
Amount
Class
Z
Shares:
Shares
sold
...................................
6,518,275
$91,753,757
6,417,333
$99,580,274
Shares
issued
in
reinvestment
of
distributions
..........
4,589,573
71,459,173
6,936,116
109,259,281
Shares
redeemed
...............................
(28,849,747)
(408,488,547)
(19,916,799)
(308,912,581)
Net
increase
(decrease)
..........................
(17,741,899)
$(245,275,617)
(6,563,350)
$(100,073,026)
Class
A
Shares:
Shares
sold
a
...................................
5,565,356
$76,803,772
5,986,582
$92,355,623
Shares
issued
in
reinvestment
of
distributions
..........
1,766,127
27,128,904
2,768,759
43,071,568
Shares
redeemed
...............................
(15,867,439)
(220,101,072)
(10,754,960)
(164,532,286)
Net
increase
(decrease)
..........................
(8,535,956)
$(116,168,396)
(1,999,619)
$(29,105,095)
1.
Organization
and
Significant
Accounting
Policies
(continued)
h.
Security
Transactions,
Investment
Income,
Expenses
and
Distributions
(continued)
Franklin
Mutual
Series
Funds
Notes
to
Financial
Statements
32
franklintempleton.com
Annual
Report
Franklin
Mutual
Beacon
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:
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:
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.
Year
Ended
December
31,
2020
Year
Ended
December
31,
2019
Shares
Amount
Shares
Amount
Class
C
Shares:
Shares
sold
...................................
296,691
$4,210,695
389,809
$5,961,650
Shares
issued
in
reinvestment
of
distributions
..........
52,948
803,079
118,043
1,813,172
Shares
redeemed
a
..............................
(1,425,903)
(19,908,734)
(1,659,137)
(25,516,539)
Net
increase
(decrease)
..........................
(1,076,264)
$(14,894,960)
(1,151,285)
$(17,741,717)
Class
R
Shares:
Shares
sold
...................................
11,185
$148,721
11,975
$176,283
Shares
issued
in
reinvestment
of
distributions
..........
2,678
40,279
4,826
73,857
Shares
redeemed
...............................
(45,755)
(640,128)
(29,881)
(435,123)
Net
increase
(decrease)
..........................
(31,892)
$(451,128)
(13,080)
$(184,983)
Class
R6
Shares:
Shares
sold
...................................
1,026,719
$14,461,224
1,239,238
$19,145,578
Shares
issued
in
reinvestment
of
distributions
..........
155,064
2,412,061
260,098
4,098,079
Shares
redeemed
...............................
(2,383,080)
(34,061,352)
(1,768,710)
(27,387,065)
Net
increase
(decrease)
..........................
(1,201,297)
$(17,188,067)
(269,374)
$(4,143,408)
a
May
include
a
portion
of
Class
C
shares
that
were
automatically
converted
to
Class
A.
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
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
2.
Shares
of
Beneficial
Interest
(continued)
Franklin
Mutual
Series
Funds
Notes
to
Financial
Statements
33
franklintempleton.com
Annual
Report
Franklin
Mutual
Beacon
Fund
(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:
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:
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,
2020,
the
Fund
paid
transfer
agent
fees
of
$2,611,623,
of
which $1,257,053
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,
2021.
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,
2020,
the
custodian
fees
were
reduced
as
noted
in
the
Statement
of
Operations. 
Class
A
....................................................................................
0.35%
Class
C
....................................................................................
1.00%
Class
R
....................................................................................
0.50%
Sales
charges
retained
net
of
commissions
paid
to
unaffiliated
brokers/dealers
..............................
$48,654
CDSC
retained
..............................................................................
$4,910
3.
Transactions
with
Affiliates
(continued)
Franklin
Mutual
Series
Funds
Notes
to
Financial
Statements
34
franklintempleton.com
Annual
Report
Franklin
Mutual
Beacon
Fund
(continued)
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,
2020,
the
Fund’s
projected
benefit
obligation
and
benefit
payments
under
the
Plan
were
as
follows:
6.
Income
Taxes
For
tax
purposes,
capital
losses
may
be
carried
over
to
offset
future
capital
gains.
At
December
31,
2020,
the
capital
loss
carryforwards
were
as
follows:
The
tax
character
of
distributions
paid
during
the
years
ended
December
31,
2020
and
2019,
was
as
follows:
At
December
31,
2020,
the
cost
of
investments,
net
unrealized
appreciation
(depreciation)
and
undistributed
ordinary
income
for
income
tax
purposes
were
as
follows:
Differences
between
income
and/or
capital
gains
as
determined
on
a
book
basis
and
a
tax
basis
are
primarily
due
to
differing
treatments
of
defaulted
securities,
foreign
currency
transactions,
EU
reclaims,
passive
foreign
investment
company
shares
and
wash
sales.
a
Projected
benefit
obligation
at
December
31,
2020
......
$299,324
b
Decrease
in
projected
benefit
obligation
..............
$(248)
Benefit
payments
made
to
retired
trustees
.............
$(2,952)
a
The
projected
benefit
obligation
is
included
in
trustees’
fees
and
expenses
in
the
Statement
of
Assets
and
Liabilities.
b
The
decrease
in
projected
benefit
obligation
is
included
in
trustees’
fees
and
expenses
in
the
Statement
of
Operations.
Capital
loss
carryforwards
not
subject
to
expiration:
Short
term
................................................................................
$55,021,776
Long
term
................................................................................
57,297,313
Total
capital
loss
carryforwards
...............................................................
$112,319,089
2020
2019
Distributions
paid
from:
Ordinary
income
..........................................................
$96,261,869
$104,017,656
Long
term
capital
gain
......................................................
11,883,824
63,557,862
$108,145,693
$167,575,518
Cost
of
investments
..........................................................................
$2,331,195,918
Unrealized
appreciation
........................................................................
$974,345,715
Unrealized
depreciation
........................................................................
(55,424,306)
Net
unrealized
appreciation
(depreciation)
..........................................................
$918,921,409
Distributable
earnings:
Undistributed
ordinary
income
...................................................................
$20,336,191
Franklin
Mutual
Series
Funds
Notes
to
Financial
Statements
35
franklintempleton.com
Annual
Report
Franklin
Mutual
Beacon
Fund
(continued)
7.
Investment
Transactions
Purchases
and
sales
of
investments
(excluding
short
term
securities
and
securities
sold
short)
for
the
year
ended
December
31,
2020,
aggregated
$1,254,890,616
and
$1,612,161,501,
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.
For
the
year
ended
December
31,
2020,
the
Fund
recorded
an
adjustment
for
uncollectible
interest
of
$2,142,470,
as
noted
in
the
Statement
of
Operations.
At
December
31,
2020,
the
aggregate
long
value
of
distressed
company
securities
for
which
interest
recognition
has
been
discontinued
was
$21,333,989,
representing
0.6%
of
the
Fund's
net
assets.
For
information
as
to
specific
securities,
see
the
accompanying
Statement
of
Investments.
9.
Novel
Coronavirus
Pandemic 
The
global
outbreak
of
the
novel
coronavirus
disease,
known
as
COVID-19, has
caused
adverse
effects
on
many
companies,
sectors,
nations,
regions
and
the
markets
in
general, and
may
continue for
an unpredictable duration.
The
effects
of
this
pandemic
may
materially
impact
the
value
and
performance
of
the Fund, its ability
to
buy
and
sell
fund
investments
at
appropriate
valuations
and its ability
to
achieve its investment
objectives.
10.
Restricted
Securities
The
Fund
invests
in
securities
that
are
restricted
under
the
Securities
Act
of
1933
(1933
Act).
Restricted
securities
are
often
purchased
in
private
placement
transactions,
and
cannot
be
sold
without
prior
registration
unless
the
sale
is
pursuant
to
an
exemption
under
the
1933
Act.
Disposal
of
these
securities
may
require
greater
effort
and
expense,
and
prompt
sale
at
an
acceptable
price
may
be
difficult.
The Fund
may
have
registration
rights
for
restricted
securities.
The
issuer
generally
incurs
all
registration
costs.
At
December
31,
2020,
investments
in
restricted
securities,
excluding
securities
exempt
from
registration
under
the
1933
Act,
were
as
follows:
Shares
Issuer
Acquisition
Date
Cost
Value
Franklin
Mutual
Beacon
Fund
2,846,329
International
Automotive
Components
Group
Brazil
LLC
4/13/06
-
12/26/08
$
1,890,264
$
60,530
Franklin
Mutual
Series
Funds
Notes
to
Financial
Statements
36
franklintempleton.com
Annual
Report
Franklin
Mutual
Beacon
Fund
(continued)
11.
Other
Derivative
Information
At
December
31,
2020,
investments
in
derivative
contracts
are
reflected
in
the
Statement of
Assets
and
Liabilities
as
follows:
For
the
year
ended
December
31,
2020,
the
effect
of
derivative
contracts
in
the
Statement
of
Operations
was
as
follows:
For
the
year
ended
December
31,
2020,
the
average
month
end
notional
amount
of
futures
contracts
represented
$141,092,696.
The
average
month
end
contract
value
of
forward
exchange
contracts
was
$564,588,880.
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
5,
2021.
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
5,
2021,
the
Borrowers
renewed
the
Global
Credit
Facility
for
a
one
year
term,
maturing
February
4,
2022,
for
a
total
of
$2.675
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,
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
Franklin
Mutual
Beacon
Fund
Foreign
exchange
contracts
..
Variation
margin
on
futures
contracts
$
—
Variation
margin
on
futures
contracts
$
199,237
a
Unrealized
appreciation
on
OTC
forward
exchange
contracts
4,992,09
1
Unrealized
depreciation
on
OTC
forward
exchange
contracts
12,682,50
6
Total
....................
$4,992,091
$12,881,743
a
This
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.
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:
Franklin
Mutual
Beacon
Fund
Foreign
exchange
contracts
..
Futures
contracts
$(5,201,248)
Futures
contracts
$1,648,938
Forward
exchange
contracts
(11,264,450)
Forward
exchange
contracts
4,543,671
Total
....................
$(16,465,698)
$6,192,609
Franklin
Mutual
Series
Funds
Notes
to
Financial
Statements
37
franklintempleton.com
Annual
Report
Franklin
Mutual
Beacon
Fund
(continued)
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,
2020,
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)
12.
Credit
Facility
(continued)
Franklin
Mutual
Series
Funds
Notes
to
Financial
Statements
38
franklintempleton.com
Annual
Report
Franklin
Mutual
Beacon
Fund
(continued)
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,
2020,
in
valuing
the
Fund's
assets
and
liabilities
carried
at
fair
value,
is
as
follows:
A
reconciliation
in
which
Level
3
inputs
are
used
in
determining
fair
value
is
presented
when
there
are
significant
Level
3
assets
and/or
liabilities
at
the
beginning
and/or
end
of
the
year.
Level
1
Level
2
Level
3
Total
Franklin
Mutual
Beacon
Fund
Assets:
Investments
in
Securities:
Common
Stocks
:
Aerospace
&
Defense
...................
$
—
$
14,132,739
$
—
$
14,132,739
Auto
Components
......................
—
—
60,530
60,530
Banks
...............................
226,323,835
83,924,239
—
310,248,074
Beverages
...........................
121,941,893
—
—
121,941,893
Biotechnology
.........................
10,579,792
—
—
10,579,792
Chemicals
...........................
—
101,265,164
—
101,265,164
Diversified
Telecommunication
Services
.....
—
133,724,424
—
133,724,424
Electrical
Equipment
....................
132,188,960
—
—
132,188,960
Entertainment
.........................
124,688,076
—
—
124,688,076
Equity
Real
Estate
Investment
Trusts
(REITs)
.
122,914,798
—
—
122,914,798
Health
Care
Equipment
&
Supplies
.........
123,367,982
—
—
123,367,982
Health
Care
Providers
&
Services
..........
73,670,247
—
—
73,670,247
Insurance
............................
100,770,293
—
—
100,770,293
Interactive
Media
&
Services
..............
17,893,211
—
—
17,893,211
IT
Services
...........................
86,033,568
—
—
86,033,568
Media
...............................
144,540,075
—
—
144,540,075
Pharmaceuticals
.......................
409,178,984
154,750,883
—
563,929,867
Semiconductors
&
Semiconductor
Equipment
.
23,996,631
—
—
23,996,631
Software
.............................
258,777,119
—
—
258,777,119
Specialty
Retail
........................
16,671,541
—
—
16,671,541
Technology
Hardware,
Storage
&
Peripherals
.
129,826,793
—
—
129,826,793
Textiles,
Apparel
&
Luxury
Goods
..........
97,618,519
133,654,162
—
231,272,681
Tobacco
.............................
—
84,646,605
—
84,646,605
Preferred
Stocks
........................
—
249,989,759
—
249,989,759
Warrants
..............................
768,705
—
—
768,705
Corporate
Bonds
........................
—
54,164,077
—
54,164,077
Senior
Floating
Rate
Interests
...............
—
10,366,709
—
10,366,709
Companies
in
Liquidation
..................
—
—
69,424
a
69,424
Short
Term
Investments
...................
59,994,407
3,000,000
—
62,994,407
Total
Investments
in
Securities
...........
$2,281,745,429
$1,023,618,761
$129,954
$3,305,494,144
Other
Financial
Instruments:
Forward
exchange
contracts
...............
$
—
$
4,992,091
$
—
$
4,992,091
Total
Other
Financial
Instruments
.........
$—
$4,992,091
$—
$4,992,091
Liabilities:
Other
Financial
Instruments:
Securities
Sold
Short
.....................
$
47,487,165
$
—
$
—
$
47,487,165
Forward
exchange
contracts
................
—
12,682,506
—
12,682,506
Futures
contracts
........................
199,237
—
—
199,237
Total
Other
Financial
Instruments
.........
$47,686,402
$12,682,506
$—
$60,368,908
a
Includes
securities
determined
to
have
no
value
at
December
31,
2020.
13.
Fair
Value
Measurements
(continued)
Franklin
Mutual
Series
Funds
Notes
to
Financial
Statements
39
franklintempleton.com
Annual
Report
Franklin
Mutual
Beacon
Fund
(continued)
14.
New
Accounting
Pronouncements
In
March
2020,
the
Financial
Accounting
Standards
Board
issued
Accounting
Standards
Update
(ASU)
No.
2020-04,
Reference
Rate
Reform
(Topic
848)
–
Facilitation
of
the
Effects
of
Reference
Rate
Reform
on
Financial
Reporting.
The
amendments
in
the
ASU
provides
optional
temporary
financial
reporting
relief
from
the
effect
of
certain
types
of
contract
modifications
due
to
the
planned
discontinuation
of
the
LIBOR
and
other
interbank-offered
based
reference
rates
as
of
the
end
of
2021.
The
ASU
is
effective
for
certain
reference
rate-related
contract
modifications
that
occur
during
the
period
March
12,
2020
through
December
31,
2022. Management
has
reviewed
the
requirements
and
believes
the
adoption
of
this
ASU
will
not
have
a
material
impact
on
the
financial
statements.
15.
Subsequent
Events
The
Fund
has
evaluated
subsequent
events
through
the
issuance
of
the financial
statements
and
determined
that
no
events
have
occurred
that
require
disclosure
other
than
those
already
disclosed
in
the
financial
statements.
Abbreviations
Counterparty
BNY
Bank
of
New
York
Mellon
(The)
BOFA
Bank
of
America
NA.
HSBK
HSBC
Bank
plc
SSBT
State
Street
Bank
and
Trust
Co.
UBSW
UBS
AG
Currency
EUR
Euro
USD
United
States
Dollar
Selected
Portfolio
ADR
American
Depositary
Receipt
FHLB
Federal
Home
Loan
Banks
LIBOR
London
Inter-Bank
Offered
Rate
Franklin
Mutual
Series
Funds
Report
of
Independent
Registered
Public
Accounting
Firm
40
franklintempleton.com
Annual
Report
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,
2020,
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,
2020,
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,
2020,
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
23,
2021
Franklin
Mutual
Series
Funds
Tax
Information
(unaudited)
41
franklintempleton.com
Annual
Report
Franklin
Mutual
Beacon
Fund
Under
Section
852(b)(3)(C)
of
the
Internal
Revenue
Code,
the
Fund
hereby
reports
the
maximum
amount
allowable
but
no
less
than
$11,883,824
as
a
long
term
capital
gain
dividend
for
the
fiscal
year
ended
December
31,
2020.
Under
Section
871(k)(2)(C)
of
the
Internal
Revenue
Code,
the
Fund
hereby
reports
the
maximum
amount
allowable
but
no
less
than
$8,738,989
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,
2020.
Under
Section
854(b)(1)(A)
of
the
Internal
Revenue
Code,
the
Fund
hereby
reports
84.46%
of
the
ordinary
income
dividends
as
income
qualifying
for
the
dividends
received
deduction
for
the
fiscal
year
ended
December
31,
2020.
Under
Section
854(b)(1)(B)
of
the
Internal
Revenue
Code,
the
Fund
hereby
reports
the
maximum
amount
allowable
but
no
less
than
$115,259,001
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,
2020.
Distributions,
including
qualified
dividend
income,
paid
during
calendar
year
2020
will
be
reported
to
shareholders
on
Form
1099-DIV
by
mid-February
2021.
Shareholders
are
advised
to
check
with
their
tax
advisors
for
information
on
the
treatment
of
these
amounts
on
their
individual
income
tax
returns.
Franklin
Mutual
Series
Funds
Board
Members
and
Officers
42
franklintempleton.com
Annual
Report
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
11
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)
Trustee
and
Chairperson
Trustee
since
1995
and
Chairperson
since
2020
30
Ares
Capital
Corporation
(specialty
finance
company)
(2010-present),
United
Natural
Foods,
Inc.
(distributor
of
natural,
organic
and
specialty
foods)
(2013-present),
formerly
,
Allied
Capital
Corporation
(financial
services)
(2003-
2010),
SLM
Corporation
(Sallie
Mae)
(1997-2014)
and
Navient
Corporation
(loan
management,
servicing
and
asset
recovery)
(2014-2016).
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
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)
Trustee
Since
2002
11
Franklin
Templeton
Emerging
Markets
Debt
Opportunities
Fund
PLC
(1999-present)
and
formerly
,
Fiduciary
International
Ireland
Limited
(1999-2015).
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:
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.
Franklin
Mutual
Series
Funds
43
franklintempleton.com
Annual
Report
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
Jan
Hopkins
Trachtman
(1947)
Trustee
Since
2009
11
FinTech
Acquisition
Corp.
III
(special
purpose
fintech
acquisition
company)
(2018-present)
and
FTAC
Olympus
Acquisition
Corp.
(special
purpose
fintech
acquisition
company)
(August
2020-present).
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:
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.
Keith
Mitchell
(1954)
Trustee
Since
2009
11
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)
Trustee
Since
2015
30
Hess
Midstream
LP
(oil
and
gas
midstream
infrastructure)
(2017-present).
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:
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).
Robert
E.
Wade
(1946)
Trustee
Since
1991
30
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
11
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).
Independent
Board
Members
(continued)
Franklin
Mutual
Series
Funds
44
franklintempleton.com
Annual
Report
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
136
None
One
Franklin
Parkway
San
Mateo,
CA
94403-1906
Principal
Occupation
During
at
Least
the
Past
5
Years:
Executive
Chairman,
Chairman
of
the
Board
and
Director,
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
,
Chief
Executive
Officer
(2013-2020)
and
President
(1994-2015),
Franklin
Resources,
Inc.
**Peter
A.
Langerman
(1955)
Trustee,
President,
and
Chief
Executive
Officer
–
Investment
Management
Trustee
since
2007,
President,
and
Chief
Executive
Officer
–
Investment
Management
since
2005
6
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:
Executive
Vice
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
Vice
President
Since
2012
Not
Applicable
Not
Applicable
One
Franklin
Parkway
San
Mateo,
CA
94403-1906
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)
Chief
Compliance
Officer
Since
October
2020
Not
Applicable
Not
Applicable
280
Park
Avenue
New
York,
NY
10017
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)
Vice
President
and
Secretary
Vice
President
since
2009
and
Secretary
since
2005
Not
Applicable
Not
Applicable
One
Franklin
Parkway
San
Mateo,
CA
94403-1906
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)
Chief
Executive
Officer
–
Finance
and
Administration
Since
2017
Not
Applicable
Not
Applicable
One
Franklin
Parkway
San
Mateo,
CA
94403-1906
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).
Franklin
Mutual
Series
Funds
45
franklintempleton.com
Annual
Report
*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.
Note
2:
Effective
October
17,
2020,
Charles
Rubens,
II
ceased
to
be
a
trustee
of
the
Trust.
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
Ann
Torre
Bates
and
David
W.
Niemiec
as
an
audit
committee
financial
expert.
The
Board
believes
that
Ms.
Bates
and
Mr.
Niemiec
qualify
as
such
an
expert
in
view
of
their
extensive
business
background
and
experience.
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
Partners
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
Ms.
Bates
and
Mr.
Niemiec
have
each
acquired
an
understanding
of
generally
accepted
accounting
principles
and
financial
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
G.
Kubilis
(1973)
Chief
Financial
Officer,
Chief
Accounting
Officer
and
Treasurer
Since
2012
Not
Applicable
Not
Applicable
300
S.E.
2nd
Street
Fort
Lauderdale,
FL
33301-
1923
Principal
Occupation
During
at
Least
the
Past
5
Years:
Treasurer,
U.S.
Fund
Administration
&
Reporting
and
officer
of
39
of
the
investment
companies
in
Franklin
Templeton.
Robert
Lim
(1948)
Vice
President
–
AML
Compliance
Since
2016
Not
Applicable
Not
Applicable
One
Franklin
Parkway
San
Mateo,
CA
94403-1906
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
41
of
the
investment
companies
in
Franklin
Templeton.
Navid
J.
Tofigh
(1972)
Vice
President
Since
2015
Not
Applicable
Not
Applicable
One
Franklin
Parkway
San
Mateo,
CA
94403-1906
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)
Vice
President
Since
2005
Not
Applicable
Not
Applicable
One
Franklin
Parkway
San
Mateo,
CA
94403-1906
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)
Vice
President
Since
2011
Not
Applicable
Not
Applicable
300
S.E.
2nd
Street
Fort
Lauderdale,
FL
33301-
1923
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.
Interested
Board
Members
and
Officers
(continued)
Franklin
Mutual
Series
Funds
46
franklintempleton.com
Annual
Report
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.
Ms.
Bates
and
Mr.
Niemiec
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.
Interested
Board
Members
and
Officers
(continued)
Franklin
Mutual
Series
Funds
Shareholder
Information
47
franklintempleton.com
Annual
Report
Proxy
Voting
Policies
and
Procedures
The
Fund’s
investment
manager
has
established
Proxy
Voting
Policies
and
Procedures
(Policies)
that
the
Fund
uses
to
determine
how
to
vote
proxies
relating
to
portfolio
securities.
Shareholders
may
view
the
Fund’s
complete
Policies
online
at
franklintempleton.com.
Alternatively,
shareholders
may
request
copies
of
the
Policies
free
of
charge
by
calling
the
Proxy
Group
collect
at
(954)
527-
7678
or
by
sending
a
written
request
to:
Franklin
Templeton
Companies,
LLC,
300
S.E.
2nd
Street,
Fort
Lauderdale,
FL
33301,
Attention:
Proxy
Group.
Copies
of
the
Fund’s
proxy
voting
records
are
also
made
available
online
at
franklintempleton.com
and
posted
on
the
U.S.
Securities
and
Exchange
Commission’s
website
at
sec.gov
and
reflect
the
most
recent
12-month
period
ended
June
30.
Quarterly
Statement
of
Investments
The
Trust,
on
behalf
of
the
Fund,
files
a
complete
statement
of
investments
with
the
U.S.
Securities
and
Exchange
Commission
for
the
first
and
third
quarters
for
each
fiscal
year
as
an
exhibit
to
its
report
on
Form
N-PORT.
Shareholders
may
view
the
filed
Form
N-PORT
by
visiting
the
Commission’s
website
at
sec.gov.
The
filed
form
may
also
be
viewed
and
copied
at
the
Commission’s
Public
Reference
Room
in
Washington,
DC.
Information
regarding
the
operations
of
the
Public
Reference
Room
may
be
obtained
by
calling
(800)
SEC-0330.
Householding
of
Reports
and
Prospectuses
You
will
receive,
or
receive
notice
of
the
availability
of,
the
Fund's
financial
reports
every
six
months.
In
addition,
you
will
receive
an
annual
updated
summary
prospectus
(detail
prospectus
available
upon
request).
To
reduce
Fund
expenses,
we
try
to
identify
related
shareholders
in
a
household
and
send
only
one
copy
of
the
financial
reports
(to
the
extent
received
by
mail)
and
summary
prospectus.
This
process,
called
“householding,”
will
continue
indefinitely
unless
you
instruct
us
otherwise.
If
you
prefer
not
to
have
these
documents
householded,
please
call
us
at
(800)
632-2301.
At
any
time
you
may
view
current
prospectuses/
summary
prospectuses
and
financial
reports
on
our
website.
If
you
choose,
you
may
receive
these
documents
through
electronic
delivery.
476
A
02/21
©
2021
Franklin
Templeton
Investments.
All
rights
reserved.
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)
DIAL
BEN
®
/
342-5236
franklintempleton.com
(800)
632-2301
-
(Class
A,
C,
R
&
R6)
(800)
448-FUND
-
(Class
Z)
ANNUAL
REPORT
AND
SHAREHOLDER
LETTER
Franklin
Mutual
Global
Discovery
Fund
A
Series
of
Franklin
Mutual
Series
Funds
December
31,
2020
Sign
up
for
electronic
delivery
at
franklintempleton.com/edelivery
Not
FDIC
Insured
May
Lose
Value
No
Bank
Guarantee
franklintempleton.com
Not
part
of
the
annual
report
1
SHAREHOLDER
LETTER
Dear
Franklin
Mutual
Global
Discovery
Fund
Shareholder:
2020
was
a
year
that
felt
like
it
contained
several
different
years
within
it.
There
were
periods
of
stability
and
dramatic
moves
down
and
up
in
financial
markets.
The
year
ended
with
surging
stock
prices
despite
an
ongoing
pandemic.
If
one
had
gone
to
sleep
on
December
31,
2019,
and
woke
up
on
December
31,
2020,
a
quick
glance
at
the
MSCI
World
Index
(USD),
which
was
up
+16.50%
for
the
12
months,
might
cause
one
to
think
this
was
just
another
good
year
in
a
long
bull
market.
1
But
for
those
of
us
who
lived
through
it,
2020
was
chaotic
and
memorable.
The
year
began
with
a
continuation
of
trends
from
2019.
Accommodative
central
bank
policy
was
supporting
a
resilient
economy,
which
displayed
modest
growth.
Then
COVID-19
exploded
from
a
regional
issue
into
a
global
pandemic.
The
response
to
the
spread
of
the
virus
was
lockdown
and
physical
distancing
measures
in
attempts
to
flatten
the
curve
of
the
contagion.
Consumer
and
business
spending
fell,
and
manufacturing
and
other
activity
came
to
a
virtual
halt.
This
led
to
a
dramatic
share
price
plunge
in
equity
markets.
In
response,
governments
acted
directly
through
fiscal
policy
and
central
banks,
using
a
whatever-it-takes
approach
to
stabilize
economies.
The
efforts
worked
and
were
reflected
by
market
stabilization
and
the
beginning
of
a
recovery
in
prices.
Markets
continued
to
rally
in
the
second
half
of
the
year
on
signs
of
global
economic
resilience
despite
widespread
shutdowns.
Investor
sentiment
was
buoyed
by
hopes
for
continued
stimulus
measures,
very
positive
developments
on
the
vaccine
front
and
U.S.
presidential
election
results.
Valuations
were
also
supported
by
investors’
willingness
to
look
through
the
current
situation
to
2021
and
beyond,
when
widespread
vaccinations
are
expected
to
become
available
and
reignite
global
economies.
During
the
year,
there
was
significant
market
volatility
and
continued
variance
between
the
performance
of
growth
equities
and
value
equities.
Many
growth
stocks
benefited
from
the
changes
in
work
and
life
caused
by
the
pandemic
and
continued
to
grow
during
the
year.
As
a
result,
the
MSCI
World
Growth
Index
(USD)
ended
the
year
up
+34.18%,
while
the
MSCI
World
Value
Index
(USD)
recovered
from
the
spring
selloff,
but
trailed
its
growth
counterpart,
ending
the
year
down
-0.38%
for
the
12
months
ended
December
31,
2020.
1
Market
volatility
and
economic
uncertainty
can
often
present
what
we
consider
opportunities.
During
periods
of
market
fluctuation,
we
used
our
bottom-up,
fundamentally
driven
investment
process
to
add
select
positions
to
the
portfolio
that
historically
had
not
met
our
investment
criteria.
However,
given
the
decline
in
price,
these
stocks
were
now,
in
our
opinion,
attractively
valued.
We
also
moved
capital
between
existing
positions
to
reflect
market
shifts.
We
were
encouraged
to
see
value
equities
do
quite
well
in
the
fourth
quarter
on
both
an
absolute
and
relative
basis.
Our
expectation
is
that
earnings
will
continue
to
improve
for
the
overall
market
as
2021
progresses
and
COVID
vaccinations
allow
for
accelerated
reopening
of
the
global
economy.
We
would
expect
many
of
our
value
holdings
to
benefit
from
such
a
scenario.
It
is
important
to
remember
that
the
market
historically
rewards
investors
who
take
a
long-term
perspective.
To
that
end,
we
recognize
the
importance
of
financial
advisors
in
today’s
markets
and
encourage
investors
to
continue
to
seek
their
advice.
Amid
changing
markets
and
economic
conditions,
we
are
confident
investors
with
a
well-diversified
portfolio
and
a
patient,
long-term
outlook
should
be
well-positioned
for
the
years
ahead.
This
is
my
first
letter
to
you
as
president
and
chief
investment
officer
of
Franklin
Mutual
Series.
I
have
been
director
of
research
and
a
portfolio
manager
for
Franklin
Mutual
Series
since
January
2010
and
have
worked
with
Peter
Langerman,
chairman
and
chief
executive
officer
of
Franklin
Mutual
Series,
to
steward
the
platform.
I
want
to
thank
Peter
for
his
significant
contributions
and
30+
years
of
dedicated
service
and
leadership.
I
look
forward
to
working
with
Peter
through
mid-2021
to
complete
the
leadership
transition,
and
I
wish
him
the
very
best
in
his
well-deserved
retirement.
On
the
following
pages,
the
portfolio
management
team
reviews
investment
decisions
that
pertain
to
performance
during
the
past
12
months
considering
the
economic
environment
and
other
factors.
Please
remember
all
securities
markets
fluctuate,
as
do
mutual
fund
share
prices.
1.
Source:
Morningstar.
See
www.franklintempletondatasources.com
for
additional
data
provider
information.
franklintempleton.com
Not
part
of
the
annual
report
2
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,
Christian
Correa,
CFA
President
and
Chief
Investment
Officer
Franklin
Mutual
Advisers,
LLC
This
letter
reflects
our
analysis
and
opinions
as
of
December
31,
2020
,
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
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.
CFA
®
is
a
trademark
owned
by
CFA
Institute.
3
franklintempleton.com
Annual
Report
ANNUAL
REPORT
Franklin
Mutual
Global
Discovery
Fund
This
annual
report
for
Franklin
Mutual
Global
Discovery
Fund
covers
the
fiscal
year
ended
December
31,
2020.
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
and
participations
in
foreign
government
debt.
The
Geographic
Composition
table
on
this
page
lists
the
leading
countries
where
the
Fund
invests.
Performance
Overview
The
Fund’s
Class
Z
shares
posted
a
-4.38%
cumulative
total
return
for
the
12
months
ended
December
31,
2020.
In
comparison,
the
Fund’s
new
benchmark,
the
MSCI
World
Value
Index-NR
(USD),
which
tracks
the
performance
of
stocks
exhibiting
overall
value
style
characteristics
in
global
developed
markets,
posted
a
-1.16%
total
return.
1
Also
for
comparison,
the
Fund’s
prior
benchmark,
the
MSCI
World
Index
(USD),
which
tracks
stock
performance
in
global
developed
markets,
posted
a
+16.50%
total
return.
1
The
MSCI
World
Value
Index-NR
(USD)
is
replacing
the
MSCI
World
Index
(USD)
as
the
Fund’s
benchmark.
The
investment
manager
believes
the
composition
of
the
MSCI
World
Value
Index-NR
(USD)
more
accurately
reflects
the
Fund’s
current
investment
strategy
and
portfolio
characteristics,
and
that
the
actual
tax
withholding
rates
for
the
Fund
are
closer
to
the
assumptions
of
the
MSCI
World
Value
Index-NR
(USD;
net
of
taxes
on
dividends)
than
the
MSCI
World
Index
(USD;
gross
of
taxes
on
dividends).
You
can
find
more
of
the
Fund’s
performance
data
in
the
Performance
Summary
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
equities,
as
measured
by
the
MSCI
All
Country
World
Index
(USD),
posted
a
+16.82%
total
return
for
the
12
months
ended
December
31,
2020.
1
Stocks
fell
sharply
in
early
2020
as
many
investors
sold
equities
amid
fears
of
a
global
economic
slowdown
due
to
the
novel
coronavirus
(COVID-19)
pandemic.
Global
equities
began
to
rebound
in
late
March
Geographic
Composition
12/31/20
%
of
Total
Net
Assets
United
States
52.1%
United
Kingdom
9.4%
Germany
8.2%
Switzerland
7.7%
Netherlands
5.8%
South
Korea
2.8%
China
2.2%
Israel
2.1%
Japan
1.5%
Canada
1.4%
France
1.2%
Other
0.5%
Short-Term
Investments
&
Other
Net
Assets
5.1%
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.
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
18
.
Franklin
Mutual
Global
Discovery
Fund
4
franklintempleton.com
Annual
Report
2020
amid
optimism
about
economic
stimulus
measures,
easing
lockdown
restrictions,
and
vaccine
and
treatment
development.
Despite
declines
in
September
and
October
due
to
geopolitical
tensions
and
rising
infection
rates,
markets
rebounded
in
November
and
December,
as
positive
sentiment
about
successful
trials
of
COVID-19
vaccines,
the
beginning
of
vaccination
programs
in
some
countries
and
apparent
resolution
of
political
uncertainty
supported
markets.
In
the
U.S.,
pandemic-related
restrictions
caused
stiff
economic
headwinds,
including
mass
layoffs
that
drove
the
unemployment
rate
to
14.8%
in
April
2020.
2
According
to
the
National
Bureau
of
Economic
Research,
the
longest
U.S.
economic
expansion
in
history
ended
in
February,
and
the
country
slipped
into
a
deep
recession.
Equities
began
to
rebound
in
the
spring
amid
the
government’s
fiscal
and
monetary
stimulus
measures,
declining
jobless
claims,
rising
retail
sales
and
optimism
about
treatments
and
potential
vaccines
for
COVID-19.
Following
a
record
annualized
decline
in
second-quarter
gross
domestic
product
(GDP),
resilient
consumer
spending
helped
drive
third-quarter
GDP
to
expand
at
a
record
annualized
rate,
although
growth
slowed
in
the
fourth
quarter.
Equities
continued
to
rise
during
the
summer
but
declined
in
the
fall
due
to
concerns
about
possible
new
restrictions
amid
rising
COVID-19
infection
rates
and
uncertainties
about
additional
fiscal
stimulus
and
the
U.S.
presidential
election.
Despite
signs
that
the
economic
recovery
was
stalling
as
the
unemployment
rate
remained
relatively
high
(6.7%
at
period-end)
and
consumer
spending
declined,
stocks
rallied
in
November
and
December,
buoyed
by
the
outcome
of
the
U.S.
presidential
election,
the
start
of
COVID-19
vaccination
programs
and
the
passage
of
a
new
U.S.
stimulus
bill.
2
In
an
effort
to
support
the
economy,
the
U.S.
Federal
Reserve
(Fed)
lowered
the
federal
funds
target
rate
to
a
range
of
0.00%–0.25%
in
March
2020.
The
Fed
also
enacted
quantitative
easing
measures
aimed
at
ensuring
credit
flows
to
borrowers
and
supporting
credit
markets
with
open-
ended
bond
purchasing.
Furthermore,
the
Fed
signaled
that
interest
rates
would
potentially
remain
low,
even
if
inflation
moderately
exceeded
its
2%
target.
In
the
eurozone,
the
economy
contracted
again
in
the
fourth
quarter
of
2020,
following
quarter-on-quarter
expansion
in
the
third
quarter
and
contractions
in
the
first
and
second
quarters.
After
several
months
of
gains
due
to
easing
restrictions
and
robust
stimulus
measures,
European
developed
market
equities,
as
measured
by
the
MSCI
Europe
Index
(USD),
declined
in
September
and
October
as
rising
infection
rates
heightened
investor
concerns
that
the
nascent
economic
revival
could
stall.
Nevertheless,
successful
vaccine
development
and
a
Brexit
resolution
supported
European
developed
market
equities,
as
measured
by
the
MSCI
Europe
Index
(USD),
to
post
a
+5.93%
total
return
for
the
period.
1
Asian
developed
and
emerging
market
equities,
as
measured
by
the
MSCI
All
Country
Asia
Index
(USD),
posted
a
+21.30%
total
return
for
the
12
months
under
review.
1
Although
pandemic-related
lockdowns
derailed
economic
growth
in
early
2020,
sharp
market
declines
were
followed
by
rebounds
as
China’s
economy,
a
key
driver
of
the
region’s
economic
activity,
recovered
from
the
contraction
in
the
first
quarter
and
expanded
during
the
rest
of
2020.
Asian
stocks
rose
as
the
region’s
economies
reopened,
aided
by
robust
stimulus
measures
and
optimism
that
economic
revitalization
would
be
further
spurred
by
COVID-19
vaccines.
Global
emerging
market
stocks,
as
measured
by
the
MSCI
Emerging
Markets
Index
(USD),
posted
a
+18.69%
total
return
for
the
period,
despite
steep
pandemic-related
declines
in
early
2020,
benefiting
from
improving
economic
activity,
stabilizing
oil
prices
and
U.S.
dollar
weakness.
1
In
spite
of
higher
COVID-19
cases
in
some
countries,
emerging
market
stocks
rallied
near
the
end
of
2020,
bolstered
by
easing
political
uncertainty,
commencement
of
COVID-19
vaccinations
and
rising
commodity
prices.
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
2.
Source:
U.S.
Bureau
of
Labor
Statistics.
See
www.franklintempletondatasources.com
for
additional
data
provider
information.
Franklin
Mutual
Global
Discovery
Fund
5
franklintempleton.com
Annual
Report
are
made
in
publicly
traded
companies
globally,
we
may
invest
occasionally
in
privately
held
companies
as
well.
Our
portfolio
selection
process
generally
includes
an
assessment
of
the
potential
impacts
of
any
material
environmental,
social
and
governance
(ESG)
factors
on
the
long-term
risk
and
return
profile
of
a
company.
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
addition,
it
is
our
practice
to
hedge
the
Fund’s
currency
exposure
when
we
deem
it
advantageous
for
our
shareholders.
Manager’s
Discussion
A
year
ago,
we
reflected
on
a
decade
of
overall
equity
market
strength
and
solid,
but
weaker,
returns
for
our
value
equity
investing
strategy.
2020
turned
out
to
be
an
amplification
of
this
performance
gap,
rather
than
a
correction.
The
year
started
with
a
continuation
of
strong
performance
from
market-darling
growth
stocks.
The
gap
exploded
as
COVID-19
led
to
lockdowns
and
people
working
from
home.
The
market
leaders
often
benefited
from
these
changes,
with
technology
tools
being
adopted
more
quickly
than
before.
Meanwhile,
the
lockdowns
and
disruption
severely
impacted
many
companies
thought
of
as
value
stocks.
Even
as
central
banks
and
governments
across
the
globe
acted
through
fiscal
and
monetary
stimulus
measures,
the
recovery
came
slowly
and
only
accelerated
when
the
prospects
of
an
effective
vaccine
helped
markets
understand
when
the
health
crisis
might
be
over.
By
the
end
of
2020,
the
MSCI
World
Value
Index
(USD)
had
recovered
to
be
almost
flat,
with
a
-0.38%
return.
1
However,
growth
stocks
advanced
substantially
further,
as
evidenced
by
the
MSCI
World
Growth
Index
(USD),
ending
the
year
up
+34.18%.
1
Many
signs
of
increased
speculation
in
the
market
have
appeared,
with
a
surge
in
the
number
of
IPOs
not
seen
since
the
tech
bubble
and
a
boom
in
special
purpose
acquisition
companies
(SPACs),
a
type
of
company
which
raises
money
in
anticipation
of
finding
profitable
investment
opportunities.
There
is
no
guarantee
that
some
speculation
will
not
be
profitable,
but
we
try
to
look
past
the
speculation
and
continue
to
see
attractive
values
in
various
parts
of
the
market.
Our
traditional
value
equity
investment
approach
is
complemented
with
two
other
strategies,
distressed
investing
and
merger
arbitrage.
We
were
active
in
both
during
2020.
Merger
arbitrage
activity
has
climbed
in
tandem
with
increasing
confidence
about
an
end
to
the
pandemic
crisis.
Significant
new
deals
have
been
announced
and
some
present
attractive
investment
opportunities.
In
addition,
the
deals
which
were
impacted
by
the
emergence
of
the
coronavirus
have
seen
renegotiated
terms
and
moved
toward
amicable
resolution.
This
includes
deals
such
as
Tiffany’s
acquisition
by
LVMH
Moet
Hennessy
Louis
Vuitton
and
Taubman’s
acquisition
by
Simon
Property
Group.
We
expect
an
ongoing
acceleration
of
merger
and
acquisition
activity
given
a
recovering
economy,
strong
markets
and
the
hope
for
increasing
regulatory
and
trade
predictability
under
the
incoming
U.S.
administration.
Within
our
distressed
credit
strategy,
we
targeted
companies
and
industries
directly
impacted
by
the
coronavirus
pandemic.
The
robust
government
fiscal
and
monetary
Top
10
Industries
12/31/20
%
of
Total
Net
Assets
a
Pharmaceuticals
11.2%
Insurance
8.2%
Oil,
Gas
&
Consumable
Fuels
7.2%
Banks
6.7%
Technology
Hardware,
Storage
&
Peripherals
5.1%
Health
Care
Providers
&
Services
4.3%
Software
3.9%
Capital
Markets
3.8%
Chemicals
3.7%
Tobacco
3.6%
Franklin
Mutual
Global
Discovery
Fund
6
franklintempleton.com
Annual
Report
interventions
have
limited
the
number
of
attractive
options,
but
we
found
opportunities
in
the
energy
sector
and
the
retail
and
travel
industries.
As
the
vaccine
news
arrived
and
liquidity
remained
strong,
the
opportunities
have
become
more
limited.
We
expect
to
see
fewer
new
distressed
debt
opportunities
than
the
merger
arbitrage
opportunities
discussed
above.
Fund
Performance
Turning
to
Fund
performance,
top
positive
contributors
included
Samsung
Electronics,
Charter
Communications
and
Cognizant
Technology.
Samsung
Electronics
and
Charter
Communications
are
listed
among
the
Fund’s
largest
positions
in
the
Top
10
Holdings
table
on
this
page.
After
experiencing
COVID-related
volatility
during
the
first
few
months
of
the
year,
the
stock
price
of
South
Korea-
based
electronics
and
computer
peripherals
manufacturer
Samsung
Electronics
started
to
recover
in
April
and
continued
an
upward
trajectory
for
the
remainder
of
the
year,
making
it
a
leading
contributor
to
portfolio
performance.
The
company
posted
strong
first-quarter
results,
with
revenue
and
operating
profit
rising
year-over-year,
propelled
by
sales
of
its
memory
chips.
Demand
for
memory
chips
increased
during
the
lockdown,
driven
by
hyperscale
data
center
spending
and
spending
to
enable
working
from
home
and
online
learning.
Investors
are
optimistic
that
strength
in
memory
prices
can
continue,
and
Samsung
is
expected
to
announce
a
new
capital
return
program
in
early
2021,
which
may
include
a
special
dividend.
Shares
of
U.S.-based
cable
operator
Charter
Communications
rallied
throughout
much
of
2020’s
second
half,
lifted
by
second-quarter
earnings
that
exceeded
consensus
expectations.
The
stay-at-home
economy
emerging
in
the
wake
of
the
coronavirus
pandemic
led
to
an
increase
in
the
number
of
high-speed
data
subscribers
and
lower
turnover
among
the
existing
customer
base.
These
factors
drove
higher
margins
and
increased
free
cash
flow,
which
management
used
to
buy
back
stock.
Third-quarter
results
were
also
strong,
with
high-speed
data
net
subscriber
additions
and
residential
video
growth
soundly
beating
expectations.
The
company’s
financials
also
continued
to
improve.
Shares
of
U.S.-based
Cognizant
Technology
Solutions
Group,
a
provider
of
information
technology
(IT),
consulting
and
business
process
outsourcing
services,
rose
in
February
largely
due
to
fourth-quarter
2019
financial
results
that
beat
expectations.
After
price
fluctuation
in
March
due
to
uncertainty
around
the
impact
of
COVID-19,
the
stock
continued
its
rally
after
first-quarter
2020
results
announced
in
May
were
also
better
than
expected,
despite
softer-
than-expected
margins
and
pandemic-related
expenses.
Second-quarter
financial
results
similarly
beat
expectations.
Shares
of
Cognizant
rallied
as
management’s
turnaround
initiatives
contributed
to
positive
investor
sentiment.
The
pandemic
has
also
accelerated
digital
transformation
across
industries,
which
resulted
in
solid
growth
for
IT
services
vendors
such
as
Cognizant.
Growth
in
the
company’s
digital
practice
segments—which
were
up
by
half—drove
second-
quarter
results.
Cognizant
continued
to
ramp
up
its
digital
strategy
by
acquiring
seven
companies
that
it
merged
into
existing
divisions
during
2020’s
first
three
quarters.
A
strong
third-quarter
announcement
and
broader
recovery
in
IT
services
demand
continued
to
support
the
stock
price,
which
generally
rose
throughout
the
remainder
of
the
period.
During
the
period
under
review,
Fund
investments
that
detracted
from
performance
included
American
International
Group
(AIG),
Citizens
Financial
Group
and
Wells
Fargo.
The
stock
price
of
U.S.-based
insurer
AIG
fell
from
mid-
February
through
late
March.
The
declining
valuation
was
fueled
by
investor
concerns
regarding
the
coronavirus
outbreak
and
operating
shortfalls
in
fourth-quarter
earnings.
An
uncertain
environment
and
changes
in
leadership
and
business
strategy
continued
to
affect
the
company
throughout
the
remainder
of
the
year,
culminating
in
the
announcement
of
the
spinoff
of
its
life
insurance
business
and
a
change
in
leadership.
We
have
since
exited
the
position.
Top
10
Holdings
12/31/20
Company
Industry
,
Country
%
of
Total
Net
Assets
a
aa
GlaxoSmithKline
plc
3.0%
Pharmaceuticals
,
United
Kingdom
Novartis
AG
2.9%
Pharmaceuticals
,
Switzerland
Charter
Communications,
Inc.
2.9%
Media
Medtronic
plc
2.8%
Health
Care
Equipment
&
Supplies
Samsung
Electronics
Co.
Ltd.
2.8%
Technology
Hardware,
Storage
&
Peripherals
,
South
Korea
Merck
&
Co.,
Inc.
2.7%
Pharmaceuticals
CVS
Health
Corp.
2.7%
Health
Care
Providers
&
Services
NN
Group
NV
2.6%
Insurance
,
Netherlands
British
American
Tobacco
plc
2.6%
Tobacco
,
United
Kingdom
Hartford
Financial
Services
Group,
Inc.
(The)
2.6%
Insurance
Franklin
Mutual
Global
Discovery
Fund
7
franklintempleton.com
Annual
Report
The
stock
price
of
U.S.-based
banking
services
company
Citizens
Financial
Group
declined
from
mid-February
through
late
March.
The
valuation
reduction
was
fueled
by
investor
concern
regarding
the
coronavirus
outbreak
and
its
economic
effects,
including
increased
borrower
defaults
and
a
falling
interest-rate
environment
which
decreases
the
profitability
of
lending
products.
However,
the
price
stabilized
as
the
broader
market
calmed
down.
In
April,
the
bank
posted
decent
first-quarter
financial
results
amid
a
deteriorating
economic
environment.
Management
reported
modest
increases
in
revenue,
loans
and
net
interest
margin,
and
broadly
stable
credit
performance
in
the
loan
portfolio.
However,
in
June,
bank
stocks
retreated
based
on
concerns
about
potential
dividend
cuts
resulting
from
the
Federal
Reserve
Board’s
stress
tests
of
large
banks.
The
company’s
stock
price
was
bolstered
in
July
by
favorable
second-
quarter
earnings,
but
continued
to
experience
volatility
toward
period-end
as
third-quarter
results
fell
short
of
consensus,
due
in
part
to
large
payments
into
reserves.
We
have
since
exited
the
stock.
The
performance
of
U.S.-based
diversified
financial
services
company
Wells
Fargo
was
affected
by
the
regulatory
restrictions
placed
on
it
following
the
account
opening
scandal,
particularly
the
ability
to
grow
the
size
of
its
balance
sheet
freely.
These
limits
negatively
impacted
the
company
in
March
when
a
flurry
of
companies
rushed
to
draw
on
their
credit
lines
to
strengthen
their
liquidity
positions
as
the
effects
of
the
pandemic
became
more
tangible.
After
the
March
downturn,
COVID-related
uncertainty
and
interest-
rate
declines
continued
to
hinder
the
organization,
leading
management
to
revise
its
forward
guidance
several
times
throughout
the
year.
First-quarter
earnings
fell
short
of
expectations,
and
Wells
Fargo
posted
a
second-quarter
loss,
although
much
of
it
was
due
to
the
bank’s
massive
contribution
to
its
loan
loss
reserves.
The
company
also
drastically
cut
its
dividend.
During
the
third
quarter,
headline
earnings
fell
short
of
expectations,
but
many
of
the
costs
incurred
during
the
quarter
were
associated
with
restructuring,
which
management
expects
will
reduce
costs
in
2021.
In
addition
to
shedding
its
student
loan
business
in
2020,
the
company
looks
forward
to
streamlining
its
business
model
further
in
the
year
ahead.
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
negative
overall
impact
on
the
Fund’s
performance
as
the
U.S.
dollar
fell
against
most
currencies
during
the
period.
As
fellow
shareholders,
we
found
recent
absolute
and
relative
performance
disappointing,
but
our
strategy
of
seeking
undervalued
stocks
can
lag
the
growth
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.
Franklin
Mutual
Global
Discovery
Fund
8
franklintempleton.com
Annual
Report
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
Christian
Correa,
CFA
Co-Portfolio
Manager
Katrina
Dudley,
CFA
Co-Portfolio
Manager
Timothy
Rankin,
CFA
Co-Portfolio
Manager
The
foregoing
information
reflects
our
analysis,
opinions
and
portfolio
holdings
as
of
December
31,
2020
,
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.
Performance
Summary
as
of
December
31,
2020
Franklin
Mutual
Global
Discovery
Fund
9
franklintempleton.com
Annual
Report
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
12/31/20
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
.
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
.
Share
Class
Cumulative
Total
Return
1
Average
Annual
Total
Return
2
–
Z
1-Year
-4.38%
-4.38%
5-Year
+31.88%
+5.69%
10-Year
+86.53%
+6.43%
A
3
1-Year
-4.61%
-9.87%
5-Year
+30.22%
+4.24%
10-Year
+81.50%
+5.54%
See
page
11
for
Performance
Summary
footnotes.
Franklin
Mutual
Global
Discovery
Fund
Performance
Summary
10
franklintempleton.com
Annual
Report
See
page
11
for
Performance
Summary
footnotes.
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
(1/1/11–
12/31/20
)
Class
A
(1/1/11–
12/31/20
)
Franklin
Mutual
Global
Discovery
Fund
Performance
Summary
11
franklintempleton.com
Annual
Report
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.
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
uncertainty
concerning
the
economic
consequences
of
the
departure
of
the
U.K.
from
the
European
Union
may
increase
market
volatility.
Smaller-company
stocks
have
exhibited
greater
price
volatility
than
larger-company
stocks,
partic-
ularly
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.
Unexpected
events
and
their
aftermaths,
such
as
the
spread
of
deadly
diseases;
natural,
environmental
or
man-made
disasters;
financial,
political
or
social
disruptions;
terrorism
and
war;
and
other
tragedies
or
catastrophes,
can
cause
investor
fear
and
panic,
which
can
adversely
affect
the
economies
of
many
companies,
sectors,
nations,
regions
and
the
market
in
general,
in
ways
that
cannot
necessarily
be
foreseen.
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
MSCI
World
Value
Index-NR
(USD)
is
a
free
float-adjusted,
market
capitalization-weighted
index
designed
to
measure
the
performance
of
stocks
exhibiting
overall
value
style
characteristics
in
global
developed
markets.
Net
Returns
(NR)
include
income
net
of
tax
withholding
when
dividends
are
paid.
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.
Distributions
(1/1/20–12/31/20)
Share
Class
Net
Investment
Income
Short-Term
Capital
Gain
Long-Term
Capital
Gain
Total
Z
$0.8329
$0.0543
$0.1196
$1.0068
A
$0.7621
$0.0543
$0.1196
$0.9360
C
$0.5007
$0.0543
$0.1196
$0.6746
R
$0.6940
$0.0543
$0.1196
$0.8679
R6
$0.8665
$0.0543
$0.1196
$1.0404
Total
Annual
Operating
Expenses
5
Share
Class
Z
1.01%
A
1.26%
Your
Fund’s
Expenses
Franklin
Mutual
Global
Discovery
Fund
12
franklintempleton.com
Annual
Report
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.
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
184/366
to
reflect
the
one-half
year
period.
2.
Reflects
expenses
after
fee
waivers
and
expense
reimbursements.
Does
not
include
acquired
fund
fees
and
expenses.
Actual
(actual
return
after
expenses)
Hypothetical
(5%
annual
return
before
expenses)
Share
Class
Beginning
Account
Value
7/1/20
Ending
Account
Value
12/31/20
Expenses
Paid
During
Period
7/1/20–12/31/20
1,
2
Ending
Account
Value
12/31/20
Expenses
Paid
During
Period
7/1/20–12/31/20
1,
2
a
Net
Annualized
Expense
Ratio
2
Z
$1,000
$1,220.85
$5.69
$1,020.01
$5.18
1.02%
A
$1,000
$1,219.25
$7.08
$1,018.76
$6.44
1.27%
C
$1,000
$1,214.77
$11.25
$1,014.98
$10.23
2.02%
R
$1,000
$1,217.63
$8.44
$1,017.53
$7.67
1.51%
R6
$1,000
$1,221.41
$5.12
$1,020.53
$4.65
0.92%
Franklin
Mutual
Series
Funds
Financial
Highlights
Franklin
Mutual
Global
Discovery
Fund
franklintempleton.com
The
accompanying
notes
are
an
integral
part
of
these
financial
statements.
Annual
Report
13
a
Year
Ended
December
31,
2020
2019
2018
2017
2016
Class
Z
Per
share
operating
performance
(for
a
share
outstanding
throughout
the
year)
Net
asset
value,
beginning
of
year
...................
$31.19
$26.86
$32.42
$31.12
$29.35
Income
from
investment
operations
a
:
Net
investment
income
b
.........................
0.96
c
0.67
0.58
0.76
d
0.67
e
Net
realized
and
unrealized
gains
(losses)
...........
(2.38)
5.91
(4.13)
2.29
3.08
Total
from
investment
operations
....................
(1.42)
6.58
(3.55)
3.05
3.75
Less
distributions
from:
Net
investment
income
..........................
(0.83)
(0.70)
(0.64)
(0.79)
(0.69)
Net
realized
gains
.............................
(0.17)
(1.55)
(1.37)
(0.96)
(1.29)
Total
distributions
...............................
(1.00)
(2.25)
(2.01)
(1.75)
(1.98)
Net
asset
value,
end
of
year
.......................
$28.77
$31.19
$26.86
$32.42
$31.12
Total
return
....................................
(4.38)%
24.70%
(10.78)%
9.84%
12.86%
Ratios
to
average
net
assets
Expenses
f,g
....................................
1.03%
h
1.00%
h
0.97%
h
0.96%
0.99%
h
Expenses
-
incurred
in
connection
with
securities
sold
short
0.01%
0.02%
—%
i
—%
0.01%
Net
investment
income
...........................
3.66%
c
2.20%
1.82%
2.30%
d
2.27%
e
Supplemental
data
Net
assets,
end
of
year
(000’s)
.....................
$3,274,956
$5,176,787
$5,114,274
$7,175,981
$8,354,865
Portfolio
turnover
rate
............................
17.25%
14.08%
14.70%
17.50%
17.01%
a
The
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
repurchas-
es
of
the
Fund’s
shares
in
relation
to
income
earned
and/or
fluctuating
fair
value
of
the
investments
of
the
Fund.
b
Based
on
average
daily
shares
outstanding.
c
Net
investment
income
per
share
includes
approximately
$0.43
per
share
related
to
income
received
in
the
form
of
special
dividends
and
an
adjustment
for
EU
reclaims
in
connection
with
certain
Fund
holdings.
Excluding
this
amount,
the
ratio
of
net
investment
income
to
average
net
assets
would
have
been
2.02%.
d
Net
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
hold-
ings.
Excluding
this
amount,
the
ratio
of
net
investment
income
to
average
net
assets
would
have
been
1.68%.
e
Net
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
hold-
ings.
Excluding
this
amount,
the
ratio
of
net
investment
income
to
average
net
assets
would
have
been
1.94%.
f
Includes
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).
g
Benefit
of
expense
reduction
rounds
to
less
than
0.01%.
h
Benefit
of
waiver
and
payments
by
affiliates
rounds
to
less
than
0.01%.
i
Rounds
to
less
than
0.01%.
Franklin
Mutual
Series
Funds
Financial
Highlights
Franklin
Mutual
Global
Discovery
Fund
(continued)
franklintempleton.com
Annual
Report
The
accompanying
notes
are
an
integral
part
of
these
financial
statements.
14
a
Year
Ended
December
31,
2020
2019
2018
2017
2016
Class
A
Per
share
operating
performance
(for
a
share
outstanding
throughout
the
year)
Net
asset
value,
beginning
of
year
...................
$30.51
$26.32
$31.80
$30.57
$28.86
Income
from
investment
operations
a
:
Net
investment
income
b
.........................
0.86
c
0.58
0.49
0.66
d
0.59
e
Net
realized
and
unrealized
gains
(losses)
...........
(2.32)
5.78
(4.04)
2.25
3.01
Total
from
investment
operations
....................
(1.46)
6.36
(3.55)
2.91
3.60
Less
distributions
from:
Net
investment
income
..........................
(0.76)
(0.62)
(0.56)
(0.72)
(0.60)
Net
realized
gains
.............................
(0.17)
(1.55)
(1.37)
(0.96)
(1.29)
Total
distributions
...............................
(0.93)
(2.17)
(1.93)
(1.68)
(1.89)
Net
asset
value,
end
of
year
.......................
$28.12
$30.51
$26.32
$31.80
$30.57
Total
return
f
....................................
(4.61)%
24.37%
(10.99)%
9.57%
12.56%
Ratios
to
average
net
assets
Expenses
g,h
....................................
1.28%
i
1.25%
i
1.22%
i
1.21%
1.24%
i
Expenses
-
incurred
in
connection
with
securities
sold
short
0.01%
0.02%
—%
j
—%
0.01%
Net
investment
income
...........................
3.39%
c
1.95%
1.57%
2.05%
d
2.02%
e
Supplemental
data
Net
assets,
end
of
year
(000’s)
.....................
$5,358,016
$7,683,644
$7,461,444
$9,589,033
$10,498,722
Portfolio
turnover
rate
............................
17.25%
14.08%
14.70%
17.50%
17.01%
a
The
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
repurchas-
es
of
the
Fund’s
shares
in
relation
to
income
earned
and/or
fluctuating
fair
value
of
the
investments
of
the
Fund.
b
Based
on
average
daily
shares
outstanding.
c
Net
investment
income
per
share
includes
approximately
$0.42
per
share
related
to
income
received
in
the
form
of
special
dividends
and
an
adjustment
for
EU
reclaims
in
connection
with
certain
Fund
holdings.
Excluding
this
amount,
the
ratio
of
net
investment
income
to
average
net
assets
would
have
been
1.75%.
d
Net
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
hold-
ings.
Excluding
this
amount,
the
ratio
of
net
investment
income
to
average
net
assets
would
have
been
1.43%.
e
Net
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
hold-
ings.
Excluding
this
amount,
the
ratio
of
net
investment
income
to
average
net
assets
would
have
been
1.69%.
f
Total
return
does
not
reflect
sales
commissions
or
contingent
deferred
sales
charges,
if
applicable.
g
Include
dividends
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).
h
Benefit
of
expense
reduction
rounds
to
less
than
0.01%.
i
Benefit
of
waiver
and
payments
by
affiliates
rounds
to
less
than
0.01%.
j
Rounds
to
less
than
0.01%.
Franklin
Mutual
Series
Funds
Financial
Highlights
Franklin
Mutual
Global
Discovery
Fund
(continued)
franklintempleton.com
The
accompanying
notes
are
an
integral
part
of
these
financial
statements.
Annual
Report
15
a
Year
Ended
December
31,
2020
2019
2018
2017
2016
Class
C
Per
share
operating
performance
(for
a
share
outstanding
throughout
the
year)
Net
asset
value,
beginning
of
year
...................
$30.46
$26.25
$31.44
$30.22
$28.55
Income
from
investment
operations
a
:
Net
investment
income
b
.........................
0.67
c
0.36
0.26
0.41
d
0.36
e
Net
realized
and
unrealized
gains
(losses)
...........
(2.34)
5.74
(3.98)
2.23
2.97
Total
from
investment
operations
....................
(1.67)
6.10
(3.72)
2.64
3.33
Less
distributions
from:
Net
investment
income
..........................
(0.50)
(0.34)
(0.10)
(0.46)
(0.37)
Net
realized
gains
.............................
(0.17)
(1.55)
(1.37)
(0.96)
(1.29)
Total
distributions
...............................
(0.67)
(1.89)
(1.47)
(1.42)
(1.66)
Net
asset
value,
end
of
year
.......................
$28.12
$30.46
$26.25
$31.44
$30.22
Total
return
f
....................................
(5.32)%
23.43%
(11.70)%
8.78%
11.70%
Ratios
to
average
net
assets
Expenses
g,h
....................................
2.03%
i
2.00%
i
1.97%
i
1.96%
1.99%
i
Expenses
-
incurred
in
connection
with
securities
sold
short
0.01%
0.02%
—%
j
—%
0.01%
Net
investment
income
...........................
2.66%
c
1.20%
0.82%
1.30%
d
1.27%
e
Supplemental
data
Net
assets,
end
of
year
(000’s)
.....................
$494,606
$872,717
$1,054,412
$2,438,507
$2,758,563
Portfolio
turnover
rate
............................
17.25%
14.08%
14.70%
17.50%
17.01%
a
The
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
repurchas-
es
of
the
Fund’s
shares
in
relation
to
income
earned
and/or
fluctuating
fair
value
of
the
investments
of
the
Fund.
b
Based
on
average
daily
shares
outstanding.
c
Net
investment
income
per
share
includes
approximately
$0.42
per
share
related
to
income
received
in
the
form
of
special
dividends
and
an
adjustment
for
EU
reclaims
in
connection
with
certain
Fund
holdings.
Excluding
this
amount,
the
ratio
of
net
investment
income
to
average
net
assets
would
have
been
1.01%.
d
Net
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
hold-
ings.
Excluding
this
amount,
the
ratio
of
net
investment
income
to
average
net
assets
would
have
been
0.68%.
e
Net
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
hold-
ings.
Excluding
this
amount,
the
ratio
of
net
investment
income
to
average
net
assets
would
have
been
0.94%.
f
Total
return
does
not
reflect
sales
commissions
or
contingent
deferred
sales
charges,
if
applicable.
g
Include
dividends
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).
h
Benefit
of
expense
reduction
rounds
to
less
than
0.01%.
i
Benefit
of
waiver
and
payments
by
affiliates
rounds
to
less
than
0.01%.
j
Rounds
to
less
than
0.01%.
Franklin
Mutual
Series
Funds
Financial
Highlights
Franklin
Mutual
Global
Discovery
Fund
(continued)
franklintempleton.com
Annual
Report
The
accompanying
notes
are
an
integral
part
of
these
financial
statements.
16
a
Year
Ended
December
31,
2020
2019
2018
2017
2016
Class
R
Per
share
operating
performance
(for
a
share
outstanding
throughout
the
year)
Net
asset
value,
beginning
of
year
...................
$30.08
$25.97
$31.37
$30.17
$28.51
Income
from
investment
operations
a
:
Net
investment
income
b
.........................
0.78
c
0.50
0.41
0.57
d
0.50
e
Net
realized
and
unrealized
gains
(losses)
...........
(2.29)
5.69
(3.97)
2.22
2.98
Total
from
investment
operations
....................
(1.51)
6.19
(3.56)
2.79
3.48
Less
distributions
from:
Net
investment
income
..........................
(0.70)
(0.53)
(0.47)
(0.63)
(0.53)
Net
realized
gains
.............................
(0.17)
(1.55)
(1.37)
(0.96)
(1.29)
Total
distributions
...............................
(0.87)
(2.08)
(1.84)
(1.59)
(1.82)
Net
asset
value,
end
of
year
.......................
$27.70
$30.08
$25.97
$31.37
$30.17
Total
return
....................................
(4.87)%
24.09%
(11.24)%
9.31%
12.28%
Ratios
to
average
net
assets
Expenses
f,g
....................................
1.53%
h
1.50%
h
1.47%
h
1.46%
1.49%
h
Expenses
-
incurred
in
connection
with
securities
sold
short
0.01%
0.02%
—%
i
—%
0.01%
Net
investment
income
...........................
3.13%
c
1.70%
1.32%
1.80%
d
1.77%
e
Supplemental
data
Net
assets,
end
of
year
(000’s)
.....................
$175,393
$251,089
$274,086
$398,692
$444,813
Portfolio
turnover
rate
............................
17.25%
14.08%
14.70%
17.50%
17.01%
a
The
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
repurchas-
es
of
the
Fund’s
shares
in
relation
to
income
earned
and/or
fluctuating
fair
value
of
the
investments
of
the
Fund.
b
Based
on
average
daily
shares
outstanding.
c
Net
investment
income
per
share
includes
approximately
$0.41
per
share
related
to
income
received
in
the
form
of
special
dividends
and
an
adjustment
for
EU
reclaims
in
connection
with
certain
Fund
holdings.
Excluding
this
amount,
the
ratio
of
net
investment
income
to
average
net
assets
would
have
been
1.48%.
d
Net
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
hold-
ings.
Excluding
this
amount,
the
ratio
of
net
investment
income
to
average
net
assets
would
have
been
1.18%.
e
Net
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
hold-
ings.
Excluding
this
amount,
the
ratio
of
net
investment
income
to
average
net
assets
would
have
been
1.44%.
f
Includes
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).
g
Benefit
of
expense
reduction
rounds
to
less
than
0.01%.
h
Benefit
of
waiver
and
payments
by
affiliates
rounds
to
less
than
0.01%.
i
Rounds
to
less
than
0.01%.
Franklin
Mutual
Series
Funds
Financial
Highlights
Franklin
Mutual
Global
Discovery
Fund
(continued)
franklintempleton.com
The
accompanying
notes
are
an
integral
part
of
these
financial
statements.
Annual
Report
17
a
Year
Ended
December
31,
2020
2019
2018
2017
2016
Class
R6
Per
share
operating
performance
(for
a
share
outstanding
throughout
the
year)
Net
asset
value,
beginning
of
year
...................
$31.17
$26.85
$32.41
$31.13
$29.35
Income
from
investment
operations
a
:
Net
investment
income
b
.........................
0.97
c
0.70
0.62
0.75
d
0.61
e
Net
realized
and
unrealized
gains
(losses)
...........
(2.35)
5.90
(4.13)
2.34
3.19
Total
from
investment
operations
....................
(1.38)
6.60
(3.51)
3.09
3.80
Less
distributions
from:
Net
investment
income
..........................
(0.87)
(0.73)
(0.68)
(0.85)
(0.73)
Net
realized
gains
.............................
(0.17)
(1.55)
(1.37)
(0.96)
(1.29)
Total
distributions
...............................
(1.04)
(2.28)
(2.05)
(1.81)
(2.02)
Net
asset
value,
end
of
year
.......................
$28.75
$31.17
$26.85
$32.41
$31.13
Total
return
....................................
(4.27)%
24.80%
(10.67)%
9.98%
13.02%
Ratios
to
average
net
assets
Expenses
before
waiver
and
payments
by
affiliates
f
......
0.92%
0.90%
0.88%
0.84%
0.85%
Expenses
net
of
waiver
and
payments
by
affiliates
f
,g
.....
0.92%
h
0.89%
0.87%
0.84%
0.85%
h
Expenses
-
incurred
in
connection
with
securities
sold
short
0.01%
0.02%
—%
i
—%
0.01%
Net
investment
income
...........................
3.73%
c
2.31%
1.92%
2.42%
d
2.41%
e
Supplemental
data
Net
assets,
end
of
year
(000’s)
.....................
$843,143
$1,295,457
$1,418,812
$2,221,338
$528,617
Portfolio
turnover
rate
............................
17.25%
14.08%
14.70%
17.50%
17.01%
a
The
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
repurchas-
es
of
the
Fund’s
shares
in
relation
to
income
earned
and/or
fluctuating
fair
value
of
the
investments
of
the
Fund.
b
Based
on
average
daily
shares
outstanding.
c
Net
investment
income
per
share
includes
approximately
$0.43
per
share
related
to
income
received
in
the
form
of
special
dividends
and
an
adjustment
for
EU
reclaims
in
connection
with
certain
Fund
holdings.
Excluding
this
amount,
the
ratio
of
net
investment
income
to
average
net
assets
would
have
been
2.08%.
d
Net
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
hold-
ings.
Excluding
this
amount,
the
ratio
of
net
investment
income
to
average
net
assets
would
have
been
1.80%.
e
Net
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
hold-
ings.
Excluding
this
amount,
the
ratio
of
net
investment
income
to
average
net
assets
would
have
been
2.08%.
f
Includes
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).
g
Benefit
of
expense
reduction
rounds
to
less
than
0.01%.
h
Benefit
of
waiver
and
payments
by
affiliates
rounds
to
less
than
0.01%.
i
Rounds
to
less
than
0.01%.
Franklin
Mutual
Series
Funds
Statement
of
Investments,
December
31,
2020
Franklin
Mutual
Global
Discovery
Fund
franklintempleton.com
Annual
Report
The
accompanying
notes
are
an
integral
part
of
these
financial
statements.
18
a
a
Country
Shares
a
Value
a
a
a
a
a
a
Common
Stocks
91.6%
Aerospace
&
Defense
1.4%
BAE
Systems
plc
.....................................
United
Kingdom
21,813,405
$
145,479,301
Auto
Components
0.0%
†
a,b,c
International
Automotive
Components
Group
Brazil
LLC
........
Belgium
3,819,425
81,224
Automobiles
1.2%
General
Motors
Co.
....................................
United
States
2,874,252
119,683,853
Banks
6.7%
Citigroup,
Inc.
........................................
United
States
2,029,040
125,110,606
b
ING
Groep
NV
.......................................
Netherlands
19,138,491
177,954,002
JPMorgan
Chase
&
Co.
.................................
United
States
1,536,256
195,212,050
Wells
Fargo
&
Co.
.....................................
United
States
6,026,804
181,888,945
680,165,603
Beverages
1.4%
Heineken
NV
........................................
Netherlands
1,242,920
138,515,320
Biotechnology
0.3%
b
Alexion
Pharmaceuticals,
Inc.
............................
United
States
210,136
32,831,649
Building
Products
1.3%
Johnson
Controls
International
plc
.........................
United
States
2,845,807
132,586,148
Capital
Markets
3.8%
Credit
Suisse
Group
AG
................................
Switzerland
16,074,469
207,535,521
b
Deutsche
Bank
AG
....................................
Germany
10,513,763
115,645,468
d
Guotai
Junan
Securities
Co.
Ltd.,
H,
144A,
Reg
S
.............
China
41,520,689
60,502,828
383,683,817
Chemicals
3.7%
BASF
SE
...........................................
Germany
2,257,202
178,422,589
d
Covestro
AG,
144A,
Reg
S
..............................
Germany
3,163,966
194,950,820
373,373,409
Communications
Equipment
0.9%
Cisco
Systems,
Inc.
...................................
United
States
2,128,930
95,269,618
Construction
Materials
1.3%
b
LafargeHolcim
Ltd.
....................................
Switzerland
2,426,231
133,170,497
Consumer
Finance
1.6%
Capital
One
Financial
Corp.
.............................
United
States
1,623,965
160,528,940
Containers
&
Packaging
1.1%
International
Paper
Co.
.................................
United
States
2,256,848
112,210,483
Diversified
Financial
Services
1.8%
Voya
Financial,
Inc.
....................................
United
States
3,206,753
188,589,144
Diversified
Telecommunication
Services
1.0%
Deutsche
Telekom
AG
..................................
Germany
5,667,057
103,442,759
Entertainment
2.2%
b
Walt
Disney
Co.
(The)
..................................
United
States
1,211,861
219,564,976
Food
Products
2.1%
Kraft
Heinz
Co.
(The)
..................................
United
States
6,306,300
218,576,358
Health
Care
Equipment
&
Supplies
2.8%
Medtronic
plc
........................................
United
States
2,423,701
283,912,335
Franklin
Mutual
Series
Funds
Statement
of
Investments
Franklin
Mutual
Global
Discovery
Fund
(continued)
franklintempleton.com
The
accompanying
notes
are
an
integral
part
of
these
financial
statements.
Annual
Report
19
a
a
Country
Shares
a
Value
a
a
a
a
a
a
Common
Stocks
(continued)
Health
Care
Providers
&
Services
4.3%
Anthem,
Inc.
.........................................
United
States
496,728
$
159,494,393
CVS
Health
Corp.
.....................................
United
States
3,993,966
272,787,878
432,282,271
Hotels,
Restaurants
&
Leisure
1.2%
b
Accor
SA
...........................................
France
3,304,687
119,901,581
Industrial
Conglomerates
1.4%
General
Electric
Co.
...................................
United
States
12,864,150
138,932,820
Insurance
9.0%
Alleghany
Corp.
......................................
United
States
148,961
89,926,266
China
Pacific
Insurance
Group
Co.
Ltd.,
H
...................
China
40,436,632
158,106,259
Direct
Line
Insurance
Group
plc
..........................
United
Kingdom
668,514
2,924,098
Everest
Re
Group
Ltd.
.................................
United
States
282,300
66,083,607
Hartford
Financial
Services
Group,
Inc.
(The)
................
United
States
5,297,987
259,495,403
NN
Group
NV
........................................
Netherlands
6,134,045
265,187,065
Willis
Towers
Watson
plc
................................
United
States
335,543
70,692,199
912,414,897
IT
Services
2.1%
Cognizant
Technology
Solutions
Corp.,
A
....................
United
States
2,575,090
211,028,625
Media
3.2%
b
Charter
Communications,
Inc.,
A
..........................
United
States
439,865
290,992,691
b
iHeartMedia
,
Inc.,
A
....................................
United
States
2,634,302
34,193,240
a,b
iHeartMedia
,
Inc.,
B
...................................
United
States
44,430
536,332
325,722,263
Oil,
Gas
&
Consumable
Fuels
7.2%
BP
plc
..............................................
United
Kingdom
59,232,197
204,410,017
Canadian
Natural
Resources
Ltd.
.........................
Canada
5,694,700
136,939,606
Kinder
Morgan,
Inc.
....................................
United
States
10,051,858
137,408,899
Williams
Cos.,
Inc.
(The)
................................
United
States
12,380,235
248,223,712
726,982,234
Pharmaceuticals
11.4%
b
Elanco
Animal
Health,
Inc.
...............................
United
States
1,336,464
40,989,351
Eli
Lilly
and
Co.
.......................................
United
States
1,504,626
254,041,054
GlaxoSmithKline
plc
...................................
United
Kingdom
16,358,996
299,358,206
Merck
&
Co.,
Inc.
.....................................
United
States
3,349,173
273,962,351
Novartis
AG,
ADR
.....................................
Switzerland
3,068,676
289,775,075
1,158,126,037
Semiconductors
&
Semiconductor
Equipment
2.5%
b
Inphi
Corp.
..........................................
United
States
175,900
28,226,673
b
Renesas
Electronics
Corp.
..............................
Japan
14,821,814
155,139,790
Xilinx,
Inc.
...........................................
United
States
518,700
73,536,099
256,902,562
Software
3.9%
b
Avaya
Holdings
Corp.
..................................
United
States
537
10,284
b
Check
Point
Software
Technologies
Ltd.
....................
Israel
1,577,097
209,611,962
Oracle
Corp.
.........................................
United
States
2,843,300
183,933,077
393,555,323
Technology
Hardware,
Storage
&
Peripherals
5.1%
Catcher
Technology
Co.
Ltd.
.............................
Taiwan
7,238,000
53,207,837
Franklin
Mutual
Series
Funds
Statement
of
Investments
Franklin
Mutual
Global
Discovery
Fund
(continued)
franklintempleton.com
Annual
Report
The
accompanying
notes
are
an
integral
part
of
these
financial
statements.
20
a
a
Country
Shares
a
Value
a
a
a
a
a
a
Common
Stocks
(continued)
Technology
Hardware,
Storage
&
Peripherals
(continued)
Samsung
Electronics
Co.
Ltd.
............................
South
Korea
3,849,669
$
287,041,365
Western
Digital
Corp.
..................................
United
States
3,247,529
179,880,631
520,129,833
Textiles,
Apparel
&
Luxury
Goods
1.4%
Cie
Financiere
Richemont
SA
............................
Switzerland
1,537,099
138,864,638
Tobacco
3.6%
Altria
Group,
Inc.
......................................
United
States
2,606,727
106,875,807
British
American
Tobacco
plc
.............................
United
Kingdom
5,861,984
217,711,639
British
American
Tobacco
plc,
ADR
........................
United
Kingdom
1,129,284
42,336,857
366,924,303
Wireless
Telecommunication
Services
0.7%
Vodafone
Group
plc
...................................
United
Kingdom
44,121,728
72,474,702
Total
Common
Stocks
(Cost
$7,190,655,599)
....................................
9,295,907,523
Preferred
Stocks
2.4%
Automobiles
2.4%
e
Volkswagen
AG,
3.18%
.................................
Germany
1,283,999
239,968,546
Total
Preferred
Stocks
(Cost
$228,922,862)
.....................................
239,968,546
Warrants
Warrants
0.0%
†
Media
0.0%
†
b
iHeartMedia
,
Inc.,
5/01/39
...............................
United
States
292
3,790
Software
0.0%
†
b
Avaya
Holdings
Corp.,
12/15/22
..........................
United
States
401,411
1,304,586
Textiles,
Apparel
&
Luxury
Goods
0.0%
†
b
Cie
Financiere
Richemont
SA,
11/22/23
.....................
Switzerland
3,074,198
798,673
Total
Warrants
(Cost
$6,824)
..................................................
2,107,049
Principal
Amount
*
Corporate
Bonds
2.9%
Airlines
1.4%
d
American
Airlines,
Inc.
,
Senior
Secured
Note
,
144A,
11.75
%
,
7/15/25
United
States
77,131,000
89,067,022
d
Mileage
Plus
Holdings
LLC
/
Mileage
Plus
Intellectual
Property
Assets
Ltd.
,
Senior
Secured
Note
,
144A,
6.5
%
,
6/20/27
.......
United
States
47,777,000
51,449,857
140,516,879
Diversified
Telecommunication
Services
1.3%
f
Frontier
Communications
Corp.
,
Senior
Note,
10.5%,
9/15/22
...........................
United
States
117,895,000
61,719,801
Senior
Note,
11%,
9/15/25
.............................
United
States
133,179,000
70,168,685
131,888,486
Multiline
Retail
0.2%
d
Macy's,
Inc.
,
Senior
Secured
Note
,
144A,
8.375
%
,
6/15/25
......
United
States
19,531,000
21,710,660
Total
Corporate
Bonds
(Cost
$377,187,571)
.....................................
294,116,025
Franklin
Mutual
Series
Funds
Statement
of
Investments
Franklin
Mutual
Global
Discovery
Fund
(continued)
franklintempleton.com
The
accompanying
notes
are
an
integral
part
of
these
financial
statements.
Annual
Report
21
a
a
Country
Shares
a
Value
a
a
a
a
a
a
Companies
in
Liquidation
0.0%
†
a,b,g
Tribune
Media,
Litigation
Trust,
Contingent
Distribution
.........
United
States
1,297,978
$
—
a,b,g
Vistra
Energy
Corp.,
Litigation
Trust,
Contingent
Distribution
.....
United
States
142,325,613
213,489
a,b,g
Walter
Energy,
Inc.,
Litigation
Trust,
Contingent
Distribution
......
United
States
30,996,000
—
Total
Companies
in
Liquidation
(Cost
$4,500,343)
...............................
213,489
Total
Long
Term
Investments
(Cost
$7,801,273,199)
.............................
9,832,312,632
a
Short
Term
Investments
2.3%
a
a
Country
Principal
Amount
*
a
Value
a
a
a
a
a
a
U.S.
Government
and
Agency
Securities
2.3%
h
FHLB,
1/04/21
.......................................
United
States
39,000,000
39,000,000
h
U.S.
Treasury
Bills
,
1/05/21
...........................................
United
States
50,500,000
50,500,007
i
1/14/21
...........................................
United
States
10,000,000
9,999,903
i
1/21/21
...........................................
United
States
25,000,000
24,999,586
i
2/04/21
...........................................
United
States
20,000,000
19,999,225
i
2/11/21
...........................................
United
States
20,000,000
19,998,944
i
6/10/21
...........................................
United
States
30,000,000
29,990,482
i
6/17/21
...........................................
United
States
15,000,000
14,995,046
i
6/24/21
...........................................
United
States
11,000,000
10,996,212
i
7/01/21
...........................................
United
States
14,000,000
13,994,797
195,474,202
Total
U.S.
Government
and
Agency
Securities
(Cost
$234,465,694)
................
234,474,202
Total
Short
Term
Investments
(Cost
$234,465,694
)
...............................
234,474,202
a
Total
Investments
(Cost
$8,035,738,893)
99.2%
..................................
$10,066,786,834
Securities
Sold
Short
(2.0)%
..................................................
(200,284,218)
Other
Assets,
less
Liabilities
2.8%
.............................................
279,611,088
Net
Assets
100.0%
...........................................................
$10,146,113,704
Shares
Securities
Sold
Short
(2.0)%
Common
Stocks
(2.0)%
Insurance
(0.8)%
j
Aon
plc,
A
...........................................
United
States
362,386
(76,561,290)
Pharmaceuticals
(0.2)%
j
AstraZeneca
plc,
ADR
..................................
United
Kingdom
446,393
(22,315,186)
j
Semiconductors
&
Semiconductor
Equipment
(1.0)%
Advanced
Micro
Devices,
Inc.
............................
United
States
893,928
(81,982,137)
Marvell
Technology
Group
Ltd.
...........................
United
States
408,616
(19,425,605)
(101,407,742)
Total
Common
Stocks
(Proceeds
$198,016,227)
.................................
(200,284,218)
Total
Securities
Sold
Short
(Proceeds
$198,016,227)
.............................
$(200,284,218)
*
The
principal
amount
is
stated
in
U.S.
dollars
unless
otherwise
indicated.
†
Rounds
to
less
than
0.1%
of
net
assets.
Franklin
Mutual
Series
Funds
Statement
of
Investments
Franklin
Mutual
Global
Discovery
Fund
(continued)
franklintempleton.com
Annual
Report
The
accompanying
notes
are
an
integral
part
of
these
financial
statements.
22
At
December
31,
2020,
the
Fund
had
the
following futures
contracts
outstanding.
See
Note
1(c). 
At
December
31,
2020,
the
Fund
had
the
following
forward
exchange
contracts
outstanding.
See
Note
1
(
c
). 
a
Fair
valued
using
significant
unobservable
inputs.
See
Note
14
regarding
fair
value
measurements.
b
Non-income
producing.
c
See
Note
10
regarding
restricted
securities.
d
Security
was
purchased
pursuant
to
Rule
144A
or
Regulation
S
under
the
Securities
Act
of
1933.
144A
securities
may
be
sold
in
transactions
exempt
from
registration
only
to
qualified
institutional
buyers
or
in
a
public
offering
registered
under
the
Securities
Act
of
1933.
Regulation
S
securities
cannot
be
sold
in
the
United
States
without
either
an
effective
registration
statement
filed
pursuant
to
the
Securities
Act
of
1933,
or
pursuant
to
an
exemption
from
registration.
At
December
31,
2020,
the
aggregate
value
of
these
securities
was
$417,681,187,
representing
4.1%
of
net
assets.
e
Variable
rate
security.
The
rate
shown
represents
the
yield
at
period
end.
f
See
Note
8
regarding
defaulted
securities.
g
Contingent
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.
h
The
security
was
issued
on
a
discount
basis
with
no
stated
coupon
rate.
i
A
portion
or
all
of
the
security
has
been
segregated
as
collateral
for
securities
sold
short
and/or
open
forward
exchange
contracts.
At
December
31,
2020,
the
aggregate
value
of
these
securities
pledged
amounted
to
$137,302,056,
representing
1.4%
of
net
assets.
j
See
Note
1(d)
regarding
securities
sold
short.
Futures
Contracts
Description
Type
Number
of
Contracts
Notional
Amount
*
Expiration
Date
Value/
Unrealized
Appreciation
(Depreciation)
Foreign
exchange
contracts
Foreign
Exchange
EUR/USD
...................
Short
2,929
$
448,356,675
3/15/21
$
(2,643,008)
Foreign
Exchange
GBP/USD
...................
Short
2,845
242,874,094
3/15/21
(3,607,112)
Total
Futures
Contracts
......................................................................
$(6,250,120)
*
As
of
period
end.
Forward
Exchange
Contracts
Currency
Counter-
party
a
Type
Quantity
Contract
Amount
*
Settlement
Date
Unrealized
Appreciation
Unrealized
Depreciation
a
a
a
a
a
a
a
a
OTC
Forward
Exchange
Contracts
Euro
.............
HSBK
Sell
16,675,708
19,741,021
1/15/21
$
—
$
(636,751)
Euro
.............
SSBT
Sell
44,233,457
50,456,981
1/15/21
—
(3,596,449)
Euro
.............
UBSW
Sell
49,484,453
56,489,234
1/15/21
—
(3,980,931)
British
Pound
......
BNY
Buy
252,276
343,127
1/19/21
1,930
—
British
Pound
......
BOFA
Buy
11,595,663
15,255,271
1/19/21
604,987
—
British
Pound
......
HSBK
Buy
43,258,497
57,462,773
1/19/21
1,705,118
—
British
Pound
......
SSBT
Buy
977,290
1,317,814
1/19/21
18,899
—
British
Pound
......
SSBT
Sell
91,098,184
114,110,678
1/19/21
—
(10,491,141)
British
Pound
......
UBSW
Buy
14,838,010
19,433,575
1/19/21
861,483
—
New
Taiwan
Dollar
..
HSBK
Sell
696,674,986
24,823,103
1/29/21
6,900
(67,804)
New
Taiwan
Dollar
..
UBSW
Sell
734,711,894
26,201,615
1/29/21
8,066
(49,069)
British
Pound
......
HSBK
Sell
34,822,950
45,441,815
2/16/21
—
(2,197,757)
Swiss
Franc
.......
HSBK
Sell
87,218,061
98,277,526
2/16/21
—
(366,038)
Swiss
Franc
.......
UBSW
Sell
87,218,061
98,248,963
2/16/21
—
(394,601)
Euro
.............
BOFA
Sell
5,141,671
6,223,472
2/23/21
—
(65,228)
Euro
.............
HSBK
Sell
10,770,394
13,087,318
2/23/21
—
(85,789)
Euro
.............
UBSW
Sell
171,309,273
203,297,171
2/23/21
—
(6,228,621)
Euro
.............
BOFA
Sell
2,043,328
2,423,209
4/07/21
—
(78,405)
Euro
.............
HSBK
Sell
13,513,078
16,050,069
4/07/21
—
(493,770)
Franklin
Mutual
Series
Funds
Statement
of
Investments
Franklin
Mutual
Global
Discovery
Fund
(continued)
franklintempleton.com
The
accompanying
notes
are
an
integral
part
of
these
financial
statements.
Annual
Report
23
See
Note 11
regarding
other
derivative
information.
Forward
Exchange
Contracts
(continued)
Currency
Counter-
party
a
Type
Quantity
Contract
Amount*
Settlement
Date
Unrealized
Appreciation
Unrealized
Depreciation
a
a
a
a
a
a
a
a
OTC
Forward
Exchange
Contracts
(continued)
Euro
.............
SSBT
Sell
7,761,160
9,205,512
4/07/21
$
—
$
(296,348)
Euro
.............
UBSW
Sell
143,580,709
170,034,178
4/07/21
—
(5,749,316)
British
Pound
......
HSBK
Sell
5,034,819
6,788,290
4/23/21
—
(102,026)
South
Korean
Won
..
HSBK
Buy
26,812,728,450
24,550,378
5/14/21
115,336
(27,739)
South
Korean
Won
..
HSBK
Sell
32,265,574,855
28,780,353
5/14/21
—
(868,194)
South
Korean
Won
..
UBSW
Buy
23,009,926,725
20,799,934
5/14/21
343,681
—
South
Korean
Won
..
UBSW
Sell
43,891,886,811
39,256,475
5/14/21
—
(1,075,385)
South
Korean
Won
..
HSBK
Sell
81,751,462,429
74,037,900
6/18/21
—
(1,078,451)
South
Korean
Won
..
UBSW
Sell
114,087,753,243
103,035,854
6/18/21
—
(1,792,308)
Total
Forward
Exchange
Contracts
...................................................
$3,666,400
$(39,722,121)
Net
unrealized
appreciation
(depreciation)
............................................
$(36,055,721)
*
In
U.S.
dollars
unless
otherwise
indicated.
a
May
be
comprised
of
multiple
contracts
with
the
same
counterparty,
currency
and
settlement
date.
See
Abbreviations
on
page
43
.
Franklin
Mutual
Series
Funds
Financial
Statements
Statement
of
Assets
and
Liabilities
December
31,
2020
franklintempleton.com
Annual
Report
The
accompanying
notes
are
an
integral
part
of
these
financial
statements.
24
Franklin
Mutual
Global
Discovery
Fund
Assets:
Investments
in
securities:
Cost
-
Unaffiliated
issuers
...................................................................
$8,035,738,893
Value
-
Unaffiliated
issuers
..................................................................
$10,066,786,834
Cash
....................................................................................
198,878
Foreign
currency,
at
value
(cost
$241,551)
........................................................
296,074
Receivables:
Investment
securities
sold
...................................................................
69,257,735
Capital
shares
sold
........................................................................
3,536,530
Dividends
and
interest
.....................................................................
34,887,920
European
Union
tax
reclaims
(Note
1
f
)
.........................................................
49,906,286
Deposits
with
brokers
for:
Securities
sold
short
.....................................................................
202,471,947
Futures
contracts
........................................................................
15,100,070
Variation
margin
on
futures
contracts
...........................................................
1,559,250
Unrealized
appreciation
on
OTC
forward
exchange
contracts
..........................................
3,666,400
Other
assets
..............................................................................
1,128,385
Total
assets
..........................................................................
10,448,796,309
Liabilities:
Payables:
Investment
securities
purchased
..............................................................
9,164,071
Capital
shares
redeemed
...................................................................
25,429,432
Management
fees
.........................................................................
7,315,994
Distribution
fees
..........................................................................
1,634,324
Transfer
agent
fees
........................................................................
1,679,808
Trustees'
fees
and
expenses
.................................................................
1,150,609
Securities
sold
short,
at
value
(proceeds
$198,016,227)
..............................................
200,284,218
Unrealized
depreciation
on
OTC
forward
exchange
contracts
..........................................
39,722,121
Accrued
expenses
and
other
liabilities
...........................................................
16,302,028
Total
liabilities
.........................................................................
302,682,605
Net
assets,
at
value
.................................................................
$10,146,113,704
Net
assets
consist
of:
Paid-in
capital
.............................................................................
$8,544,251,457
Total
distributable
earnings
(losses)
.............................................................
1,601,862,247
Net
assets,
at
value
.................................................................
$10,146,113,704
Franklin
Mutual
Series
Funds
Financial
Statements
Statement
of
Assets
and
Liabilities
(continued)
December
31,
2020
franklintempleton.com
The
accompanying
notes
are
an
integral
part
of
these
financial
statements.
Annual
Report
25
Franklin
Mutual
Global
Discovery
Fund
Class
Z:
Net
assets,
at
value
.......................................................................
$3,274,955,634
Shares
outstanding
........................................................................
113,838,102
Net
asset
value
and
maximum
offering
price
per
share
.............................................
$28.77
Class
A:
Net
assets,
at
value
.......................................................................
$5,358,016,007
Shares
outstanding
........................................................................
190,552,592
Net
asset
value
per
share
a
..................................................................
$28.12
Maximum
offering
price
per
share
(net
asset
value
per
share
÷
94.50%)
................................
$29.76
Class
C:
Net
assets,
at
value
.......................................................................
$494,606,225
Shares
outstanding
........................................................................
17,587,006
Net
asset
value
and
maximum
offering
price
per
share
a
.............................................
$28.12
Class
R:
Net
assets,
at
value
.......................................................................
$175,393,254
Shares
outstanding
........................................................................
6,331,276
Net
asset
value
and
maximum
offering
price
per
share
.............................................
$27.70
Class
R6:
Net
assets,
at
value
.......................................................................
$843,142,584
Shares
outstanding
........................................................................
29,323,532
Net
asset
value
and
maximum
offering
price
per
share
.............................................
$28.75
a
Redemption
price
is
equal
to
net
asset
value
less
contingent
deferred
sales
charges,
if
applicable.
Franklin
Mutual
Series
Funds
Financial
Statements
Statement
of
Operations
for
the
year
ended
December
31,
2020
franklintempleton.com
Annual
Report
The
accompanying
notes
are
an
integral
part
of
these
financial
statements.
26
Franklin
Mutual
Global
Discovery
Fund
Investment
income:
Dividends:
(net
of
foreign
taxes
of
$13,352,988)
Unaffiliated
issuers
........................................................................
$437,345,692
Interest:
Unaffiliated
issuers
........................................................................
19,716,845
Adjustment
for
uncollectible
interest
(Note
8
)
(13,214,014)
Income
from
securities
loaned:
Unaffiliated
entities
(net
of
fees
and
rebates)
.....................................................
9,983
Non-controlled
affiliates
(Note
3
f
)
.............................................................
64
Other
income
(Note
1
f
)
.......................................................................
78,671,669
Less:
IRS
closing
agreement
fees
for
European
Union
tax
reclaims
(Note
1
f
)
..............................
(14,443,214)
Total
investment
income
...................................................................
508,087,025
Expenses:
Management
fees
(Note
3
a
)
...................................................................
92,169,688
Distribution
fees:
(Note
3c
)
    Class
A
................................................................................
14,015,252
    Class
C
................................................................................
5,818,767
    Class
R
................................................................................
917,265
Transfer
agent
fees:
(Note
3e
)
    Class
Z
................................................................................
4,762,026
    Class
A
................................................................................
7,429,949
    Class
C
................................................................................
769,865
    Class
R
................................................................................
244,781
    Class
R6
...............................................................................
288,772
Custodian
fees
(Note
4
)
......................................................................
323,133
Reports
to
shareholders
......................................................................
1,110,379
Registration
and
filing
fees
....................................................................
197,169
Professional
fees
...........................................................................
387,811
Trustees'
fees
and
expenses
..................................................................
778,609
Dividends
on
securities
sold
short
..............................................................
1,536,491
Other
....................................................................................
487,643
Total
expenses
.........................................................................
131,237,600
Expense
reductions
(Note
4
)
...............................................................
(66,674)
Expenses
waived/paid
by
affiliates
(Note
3f
and
3g)
..............................................
(11,873)
Net
expenses
.........................................................................
131,159,053
Net
investment
income
................................................................
376,927,972
Franklin
Mutual
Series
Funds
Financial
Statements
Statement
of
Operations
(continued)
for
the
year
ended
December
31,
2020
franklintempleton.com
The
accompanying
notes
are
an
integral
part
of
these
financial
statements.
Annual
Report
27
Franklin
Mutual
Global
Discovery
Fund
Realized
and
unrealized
gains
(losses):
Net
realized
gain
(loss)
from:
Investments:
Unaffiliated
issuers
......................................................................
(414,759,343)
Foreign
currency
transactions
................................................................
882,024
Forward
exchange
contracts
.................................................................
(66,518,970)
Futures
contracts
.........................................................................
(45,954,657)
Securities
sold
short
.......................................................................
(8,011,183)
Net
realized
gain
(loss)
..................................................................
(534,362,129)
Net
change
in
unrealized
appreciation
(depreciation)
on:
Investments:
Unaffiliated
issuers
......................................................................
(1,216,686,642)
Translation
of
other
assets
and
liabilities
denominated
in
foreign
currencies
..............................
2,265,330
Forward
exchange
contracts
.................................................................
180,258
Futures
contracts
.........................................................................
5,720,731
Securities
sold
short
.......................................................................
7,959,900
Net
change
in
unrealized
appreciation
(depreciation)
............................................
(1,200,560,423)
Net
realized
and
unrealized
gain
(loss)
............................................................
(1,734,922,552)
Net
increase
(decrease)
in
net
assets
resulting
from
operations
..........................................
$(1,357,994,580)
Franklin
Mutual
Series
Funds
Financial
Statements
Statements
of
Changes
in
Net
Assets
franklintempleton.com
Annual
Report
The
accompanying
notes
are
an
integral
part
of
these
financial
statements.
28
Franklin
Mutual
Global
Discovery
Fund
Year
Ended
December
31,
2020
Year
Ended
December
31,
2019
Increase
(decrease)
in
net
assets:
Operations:
Net
investment
income
.................................................
$376,927,972
$314,928,953
Net
realized
gain
(loss)
.................................................
(534,362,129)
677,497,640
Net
change
in
unrealized
appreciation
(depreciation)
...........................
(1,200,560,423)
2,424,756,459
Net
increase
(decrease)
in
net
assets
resulting
from
operations
................
(1,357,994,580)
3,417,183,052
Distributions
to
shareholders:
Class
Z
.............................................................
(114,749,627)
(361,251,360)
Class
A
.............................................................
(179,565,272)
(528,196,610)
Class
C
.............................................................
(12,234,587)
(53,529,898)
Class
R
.............................................................
(5,652,491)
(17,206,023)
Class
R6
............................................................
(30,706,058)
(92,112,429)
Total
distributions
to
shareholders
..........................................
(342,908,035)
(1,052,296,320)
Capital
share
transactions:
(Note
2
)
Class
Z
.............................................................
(1,287,029,331)
(733,602,714)
Class
A
.............................................................
(1,502,192,342)
(931,107,368)
Class
C
.............................................................
(272,533,751)
(339,610,836)
Class
R
.............................................................
(52,024,364)
(64,450,784)
Class
R6
............................................................
(318,898,089)
(339,450,065)
Total
capital
share
transactions
............................................
(3,432,677,877)
(2,408,221,767)
Net
increase
(decrease)
in
net
assets
...................................
(5,133,580,492)
(43,335,035)
Net
assets:
Beginning
of
year
.......................................................
15,279,694,196
15,323,029,231
End
of
year
...........................................................
$10,146,113,704
$15,279,694,196
Franklin
Mutual
Series
Funds
29
franklintempleton.com
Annual
Report
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 six 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.
Franklin
Mutual
Series
Funds
Notes
to
Financial
Statements
30
franklintempleton.com
Annual
Report
Franklin
Mutual
Global
Discovery
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. Events
can occur
between
the
time
at
which
trading
in
a
foreign
security
is
completed
and
4
p.m.
Eastern
time
that
might
call
into
question
the
reliability
of
the
value
of
a
portfolio
security
held
by
the
Fund.
As
a
result,
differences
may
arise
between
the
value
of
the
Fund's
portfolio
securities
as
determined
at
the
foreign
market
close
and
the
latest
indications
of
value
at
4
p.m.
Eastern
time. In
order
to
minimize
the
potential
for
these
differences,
an
independent
pricing
service
may
be
used
to
adjust
the
value
of
the
Fund's
portfolio
securities
to
the
latest
indications
of
fair
value
at
4
p.m.
Eastern
time.
At
December
31,
2020,
certain
securities
may
have
been
fair
valued
using
these
procedures,
in
which
case
the
securities
were
categorized
as
Level
2
inputs
within
the
fair
value
hierarchy.
See
the
Fair
Value
Measurements
note
for
more
information.
When
the
last
day
of
the
reporting
period
is
a
non-business
day,
certain
foreign
markets
may
be
open
on
those
days
that
the
Fund's
NAV
is
not
calculated,
which
could
result
in
differences
between
the
value
of
the
Fund's
portfolio
securities
on
the
last
business
day
and
the
last
calendar
day
of
the
reporting
period.
Any
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.
1.
Organization
and
Significant
Accounting
Policies
(continued)
a.
Financial
Instrument
Valuation 
(continued)
Franklin
Mutual
Series
Funds
Notes
to
Financial
Statements
31
franklintempleton.com
Annual
Report
Franklin
Mutual
Global
Discovery
Fund
(continued)
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,
2020,
the
Fund
had
OTC
derivatives
in
a
net
liability
position
of
$36,519,005
and
the
aggregate
value
of
collateral
pledged
for
such
contracts
was
$40,382,706.  
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,
2020, the
Fund
received
$241,820
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
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
collateral
in
the
form
of
cash
and/or
U.S.
Government
1.
Organization
and
Significant
Accounting
Policies
(continued)
c.
Derivative
Financial
Instruments
(continued)
Franklin
Mutual
Series
Funds
Notes
to
Financial
Statements
32
franklintempleton.com
Annual
Report
Franklin
Mutual
Global
Discovery
Fund
(continued)
and
Agency
securities
against
the
loaned
securities
in
an
amount
equal
to
at
least
102%
of
the
fair
value
of
the
loaned
securities.
Collateral
is
maintained
over
the
life
of
the
loan
in
an
amount
not
less
than
100%
of
the
fair
value
of
loaned
securities,
as
determined
at
the
close
of
Fund
business
each
day;
any
additional
collateral
required
due
to
changes
in
security
values
is
delivered
to
the
Fund
on
the
next
business
day.
Any
cash
collateral
received
is
deposited
into
a
joint
cash
account
with
other
funds
and
is
used
to
invest
in
a
money
market
fund
managed
by
Franklin
Advisers,
Inc.,
an
affiliate
of
the Fund,
and/or
a
joint
repurchase
agreement.
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 any
cash 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,
2020,
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.
In
the
event
that
EU
reclaims
received
by
the Fund
during
the
fiscal
year
exceed
foreign
withholding
taxes
paid,
and
the
Fund previously
passed
foreign
tax
credit
on
to
its
shareholders,
the Fund
will enter
into
a
closing
agreement
with
the
Internal
Revenue
Service
(IRS)
in
order
to
pay
the
associated
tax
liability
on
behalf
of
the Fund's
shareholders.
During
the
fiscal
year
ended
December
31,
2020,
the Fund
received
EU
reclaims
in
excess
of
the
foreign
taxes
paid
during
the
year.
The
Fund
determined
to
enter
into
a
closing
agreement
with
the
IRS
and
recorded
the
estimated
fees
as
a
reduction
to
income,
as
reflected
in
the
Statement
of
Operations.
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,
2020,
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
1.
Organization
and
Significant
Accounting
Policies
(continued)
e.
Securities
Lending
(continued)
Franklin
Mutual
Series
Funds
Notes
to
Financial
Statements
33
franklintempleton.com
Annual
Report
Franklin
Mutual
Global
Discovery
Fund
(continued)
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.
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.
1.
Organization
and
Significant
Accounting
Policies
(continued)
g.
Security
Transactions,
Investment
Income,
Expenses
and
Distributions
(continued)
Franklin
Mutual
Series
Funds
Notes
to
Financial
Statements
34
franklintempleton.com
Annual
Report
Franklin
Mutual
Global
Discovery
Fund
(continued)
2.
Shares
of
Beneficial
Interest
At
December
31,
2020,
there
were
an
unlimited
number
of
shares
authorized
(without
par
value).
Transactions
in
the
Fund’s
shares
were
as
follows:
Year
Ended
December
31,
2020
Year
Ended
December
31,
2019
Shares
Amount
Shares
Amount
Class
Z
Shares:
Shares
sold
...................................
10,135,382
$262,062,155
12,263,198
$369,164,159
Shares
issued
in
reinvestment
of
distributions
..........
3,777,102
104,139,014
10,621,505
326,481,046
Shares
issued
on
reorganization
(Note
12
)
............
1,077,880
33,166,426
—
—
Shares
redeemed
...............................
(67,138,038)
(1,686,396,926)
(47,272,140)
(1,429,247,919)
Net
increase
(decrease)
..........................
(52,147,674)
$(1,287,029,331)
(24,387,437)
$(733,602,714)
Class
A
Shares:
Shares
sold
a
...................................
15,209,053
$385,426,903
17,462,220
$518,262,717
Shares
issued
in
reinvestment
of
distributions
..........
6,518,510
175,257,194
17,190,278
516,611,982
Shares
issued
on
reorganization
(Note
12
)
............
1,407,732
42,358,901
—
—
Shares
redeemed
...............................
(84,431,073)
(2,105,235,340)
(66,274,047)
(1,965,982,067)
Net
increase
(decrease)
..........................
(61,295,778)
$(1,502,192,342)
(31,621,549)
$(931,107,368)
Class
C
Shares:
Shares
sold
...................................
1,462,444
$36,852,493
1,771,751
$52,145,801
Shares
issued
in
reinvestment
of
distributions
..........
458,386
12,128,301
1,728,177
51,590,928
Shares
issued
on
reorganization
(Note
12
)
............
342,264
10,271,407
—
—
Shares
redeemed
a
..............................
(13,322,993)
(331,785,952)
(15,014,827)
(443,347,565)
Net
increase
(decrease)
..........................
(11,059,899)
$(272,533,751)
(11,514,899)
$(339,610,836)
Class
R
Shares:
Shares
sold
...................................
976,306
$23,071,005
673,375
$19,591,339
Shares
issued
in
reinvestment
of
distributions
..........
213,165
5,628,938
571,874
16,917,190
Shares
issued
on
reorganization
(Note
12
)
............
52,424
1,554,387
—
—
Shares
redeemed
...............................
(3,259,087)
(82,278,694)
(3,452,518)
(100,959,313)
Net
increase
(decrease)
..........................
(2,017,192)
$(52,024,364)
(2,207,269)
$(64,450,784)
Class
R6
Shares:
Shares
sold
...................................
7,168,764
$177,915,442
5,767,180
$173,953,547
Shares
issued
in
reinvestment
of
distributions
..........
987,854
27,232,946
2,704,420
83,110,071
Shares
issued
on
reorganization
(Note
12
)
............
152,681
4,696,495
—
—
Shares
redeemed
...............................
(20,540,906)
(528,742,972)
(19,752,108)
(596,513,683)
Net
increase
(decrease)
..........................
(12,231,607)
$(318,898,089)
(11,280,508)
$(339,450,065)
a
May
include
a
portion
of
Class
C
shares
that
were
automatically
converted
to
Class
A.
Franklin
Mutual
Series
Funds
Notes
to
Financial
Statements
35
franklintempleton.com
Annual
Report
Franklin
Mutual
Global
Discovery
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:
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:
For
the
year
ended
December
31,
2020,
the
gross
effective
investment
management
fee
rate
was
0.848%
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.
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
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
Franklin
Mutual
Series
Funds
Notes
to
Financial
Statements
36
franklintempleton.com
Annual
Report
Franklin
Mutual
Global
Discovery
Fund
(continued)
The
maximum
annual
plan
rates,
based
on
the
average
daily
net
assets,
for
each
class,
are
as
follows:
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:
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,
2020,
the
Fund
paid
transfer
agent
fees
of
$13,495,393,
of
which
$5,849,403
was
retained
by
Investor
Services.
Class
A
....................................................................................
0.35%
Class
C
....................................................................................
1.00%
Class
R
....................................................................................
0.50%
Sales
charges
retained
net
of
commissions
paid
to
unaffiliated
brokers/dealers
..............................
$380,756
CDSC
retained
..............................................................................
$37,167
3.
Transactions
with
Affiliates
(continued)
c.
Distribution
Fees
(continued)
Franklin
Mutual
Series
Funds
Notes
to
Financial
Statements
37
franklintempleton.com
Annual
Report
Franklin
Mutual
Global
Discovery
Fund
(continued)
f.
Investments
in
Affiliated
Management
Investment
Companies
The
Fund
invests
in
one
or
more
affiliated
management
investment
companies
for
purposes
other
than
exercising
a
controlling
influence
over
the
management
or
policies.
Management
fees
paid
by
the
Fund
are
waived
on
assets
invested
in
the
affiliated
management
investment
companies,
as
noted
in
the
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,
2020,
the
Fund
held
investments
in
affiliated
management
investment
companies
as
follows:
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
0.03%
based
on
the
average
net
assets
of
the
class
until
April
30,
2021.
Prior
to
May
1,
2020,
the
Class
R6
transfer
agent
fees
were
limited
to
0.02%.
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,
2020,
these
purchase
and
sale
transactions
aggregated
$0
and
$1,233,191,
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,
2020,
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,
2020,
the
Fund’s
projected
benefit
obligation
and
benefit
payments
under
the
Plan
were
as
follows:
    aa
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
Investment
Income
a      
a  
a  
a  
a  
a  
a  
a  
Franklin
Mutual
Global
Discovery
Fund
Non-Controlled
Affiliates
Income
from
securities
loaned
Institutional
Fiduciary
Trust
-
Money
Market
Portfolio,
0%
$—
$15,425,000
$(15,425,000)
$
—
$
—
$—
a
—
$64
Total
Affiliated
Securities
$—
$15,425,000
$(15,425,000)
$—
$—
$—
$64
a
As
of
December
31,
2020,
no
longer
held
by
the
Fund.
3.
Transactions
with
Affiliates
(continued)
Franklin
Mutual
Series
Funds
Notes
to
Financial
Statements
38
franklintempleton.com
Annual
Report
Franklin
Mutual
Global
Discovery
Fund
(continued)
6.
Income
Taxes
For
tax
purposes,
capital
losses
may
be
carried
over
to
offset
future
capital
gains.
At
December
31,
2020,
the
capital
loss
carryforwards
were
as
follows:
The
tax
character
of
distributions
paid
during
the
years
ended
December
31,
2020
and
2019,
was
as
follows:
At
December
31,
2020,
the
cost
of
investments,
net
unrealized
appreciation
(depreciation)
and
undistributed
ordinary
income
for
income
tax
purposes
were
as
follows:
Differences
between
income
and/or
capital
gains
as
determined
on
a
book
basis
and
a
tax
basis
are
primarily
due
to
differing
treatments
of
defaulted
securities,
foreign
currency
transactions,
futures
contracts,
EU
reclaims,
pass-through
entity
income,
passive
foreign
investment
company
shares,
tax
straddles
and
return
of
capital
distributions.
7.
Investment
Transactions
Purchases
and
sales
of
investments
(excluding
short
term
securities
and
securities
sold
short)
for
the
year
ended
December
31,
2020,
aggregated
$1,815,733,399
and
$5,247,223,939,
respectively.
a
Projected
benefit
obligation
at
December
31,
2020
......
$1,150,609
b
Decrease
in
projected
benefit
obligation
..............
$(806)
Benefit
payments
made
to
retired
trustees
.............
$(11,191)
a
The
projected
benefit
obligation
is
included
in
trustees’
fees
and
expenses
in
the
Statement
of
Assets
and
Liabilities.
b
The
decrease
in
projected
benefit
obligation
is
included
in
trustees’
fees
and
expenses
in
the
Statement
of
Operations.
Capital
loss
carryforwards
not
subject
to
expiration:
Short
term
................................................................................
$106,292,917
Long
term
................................................................................
404,873,458
a
Total
capital
loss
carryforwards
...............................................................
$511,166,375
a
Includes
$7,228,368
from
the
acquired
Franklin
Mutual
International
Fund,
which
may
be
carried
over
to
offset
future
capital
gains,
subject
to
certain
limitations
.
2020
2019
Distributions
paid
from:
Ordinary
income
..........................................................
$297,243,026
$355,756,491
Long
term
capital
gain
......................................................
45,665,009
696,539,829
$342,908,035
$1,052,296,320
Cost
of
investments
..........................................................................
$7,807,165,726
Unrealized
appreciation
........................................................................
$2,699,825,810
Unrealized
depreciation
........................................................................
(682,794,761)
Net
unrealized
appreciation
(depreciation)
..........................................................
$2,017,031,049
Distributable
earnings:
Undistributed
ordinary
income
...................................................................
$70,251,107
5.
Independent
Trustees'
Retirement
Plan
(continued)
Franklin
Mutual
Series
Funds
Notes
to
Financial
Statements
39
franklintempleton.com
Annual
Report
Franklin
Mutual
Global
Discovery
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.
For
the
year
ended
December
31,
2020,
the
Fund
recorded
an
adjustment
for
uncollectible
interest
of
$13,214,014,
as
noted
in
the
Statement
of
Operations.
At
December
31,
2020,
the
aggregate
long
value
of
distressed
company
securities
for
which
interest
recognition
has
been
discontinued
was
$131,888,486,
representing
1.3%
of
the
Fund's
net
assets.
For
information
as
to
specific
securities,
see
the
accompanying
Statement
of
Investments.
9.
Novel
Coronavirus
Pandemic 
The
global
outbreak
of
the
novel
coronavirus
disease,
known
as
COVID-19, has
caused
adverse
effects
on
many
companies,
sectors,
nations,
regions
and
the
markets
in
general, and
may
continue for
an unpredictable duration.
The
effects
of
this
pandemic
may
materially
impact
the
value
and
performance
of
the Fund, its ability
to
buy
and
sell
fund
investments
at
appropriate
valuations
and its ability
to
achieve its investment
objectives.
10.
Restricted
Securities
The
Fund
invests
in
securities
that
are
restricted
under
the
Securities
Act
of
1933
(1933
Act).
Restricted
securities
are
often
purchased
in
private
placement
transactions,
and
cannot
be
sold
without
prior
registration
unless
the
sale
is
pursuant
to
an
exemption
under
the
1933
Act.
Disposal
of
these
securities
may
require
greater
effort
and
expense,
and
prompt
sale
at
an
acceptable
price
may
be
difficult.
The Fund
may
have
registration
rights
for
restricted
securities.
The
issuer
generally
incurs
all
registration
costs.
At
December
31,
2020,
investments
in
restricted
securities,
excluding
securities
exempt
from
registration
under
the
1933
Act,
were
as
follows:
11.
Other
Derivative
Information
At
December
31,
2020,
investments
in
derivative
contracts
are
reflected
in
the
Statement of
Assets
and
Liabilities
as
follows:
Shares
Issuer
Acquisition
Date
Cost
Value
Franklin
Mutual
Global
Discovery
Fund
3,819,425
International
Automotive
Components
Group
Brazil
LLC
4/13/06
-12/26/08
$
2,536,498
$
81,224
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
Franklin
Mutual
Global
Discovery
Fund
Foreign
exchange
contracts
..
Variation
margin
on
futures
contracts
$
—
Variation
margin
on
futures
contracts
$
6,250,120
a
Franklin
Mutual
Series
Funds
Notes
to
Financial
Statements
40
franklintempleton.com
Annual
Report
Franklin
Mutual
Global
Discovery
Fund
(continued)
For
the
year
ended
December
31,
2020,
the
effect
of
derivative
contracts
in
the
Statement
of
Operations
was
as
follows:
For
the
year
ended
December
31,
2020,
the
average
month
end
notional
amount
of
futures
contracts
represented
$919,375,447.
The
average
month
end
contract
value
of
forward
exchange
contracts
was
$1,921,481,832.
See
Note
1(c)
regarding
derivative
financial
instruments. 
12.
Reorganization
On
February
21,
2020,
Franklin
Mutual
Global
Discovery
Fund
(Surviving
Fund),
pursuant
to
a
plan
of
reorganization
approved
on
December
6,
2019,
by
shareholders
of
Franklin
Mutual
International
Fund
(Acquired
Fund),
a
series
of
Franklin
Mutual
Series
Funds,
acquired
100%
of
the
Acquired
Fund’s
net
assets,
primarily
made
up
of
investment
securities,
which
included
$6,750,005
of
unrealized
depreciation,
through
a
tax-free
exchange
of
3,032,981
shares
of
the
Surviving
Fund
(valued
at
$92,047,616).
Immediately
after
the
completion
of
the
reorganization,
the
combined
net
assets
of
the
Surviving
Fund
were
$14,766,810,033.
The
primary
purpose
for
the
reorganization
was
to
combine
the
Acquired
Fund
with
a
larger
fund
that
had
lower
annual
fund
operating
expenses
(before
waivers),
better
long-term
historical
performance
and
similar
investment
goals,
principal
investment
strategies
and
risks.
The
estimated
cost
of
the
reorganization
was
$175,174
of
which
the
Surviving
Fund
and
the
Acquired
Fund
each
paid
25%
and
Franklin
Mutual
paid
50%.
The
allocated
portion
of
the
Surviving
Fund's
reorganization
expenses
are
included
with
other
expenses
in
the
Statement
of
Operations.
Assuming
the
reorganization
had
been
completed
on
January
1,
2020,
the
Surviving
Fund's
pro
forma
results
of
operations,
would
have
been
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
Franklin
Mutual
Global
Discovery
Fund
(continued)
Unrealized
appreciation
on
OTC
forward
exchange
contracts
$
3,666,400
Unrealized
depreciation
on
OTC
forward
exchange
contracts
$
39,722,121
Total
....................
$3,666,400
$45,972,241
a
This
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.
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:
Franklin
Mutual
Global
Discovery
Fund
Foreign
exchange
contracts
..
Futures
contracts
$(45,954,657)
Futures
contracts
$5,720,731
Forward
exchange
contracts
(66,518,970)
Forward
exchange
contracts
180,258
Total
....................
$(112,473,627)
$5,900,989
11.
Other
Derivative
Information
(continued)
Franklin
Mutual
Series
Funds
Notes
to
Financial
Statements
41
franklintempleton.com
Annual
Report
Franklin
Mutual
Global
Discovery
Fund
(continued)
Subsequent
to
the
reorganization,
the
Surviving
Fund
has
been
managed
as
a
single
entity.
Accordingly,
it
is
impracticable
to
identify
the
amount
of
net
investment
income
attributable
to
the
Acquired
Fund’s
assets
after
the
completion
of
the
reorganization.
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
5,
2021.
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
5,
2021,
the
Borrowers
renewed
the
Global
Credit
Facility
for
a
one
year
term,
maturing
February
4,
2022,
for
a
total
of
$2.675
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,
2020,
the Fund
did
not
use
the
Global
Credit
Facility.
14.
Fair
Value
Measurements
The
Fund
follows
a
fair
value
hierarchy
that
distinguishes
between
market
data
obtained
from
independent
sources
(observable
inputs)
and
the Fund's
own
market
assumptions
(unobservable
inputs).
These
inputs
are
used
in
determining
the
value
of
the
Fund's financial
instruments
and
are
summarized
in
the
following
fair
value
hierarchy:
Level
1
–
quoted
prices
in
active
markets
for
identical
financial
instruments
Level
2
–
other
significant
observable
inputs
(including
quoted
prices
for
similar
financial
instruments,
interest
rates,
prepayment
speed,
credit
risk,
etc.)
Level
3
–
significant
unobservable
inputs
(including
the
Fund's
own
assumptions
in
determining
the
fair
value
of
financial
instruments)
The
input
levels
are
not
necessarily
an
indication
of
the
risk
or
liquidity
associated
with
financial
instruments
at
that
level.
A
summary
of
inputs
used
as
of
December
31,
2020,
in
valuing
the
Fund's
assets
and
liabilities
carried
at
fair
value,
is
as
follows:
Period
Net
Investment
income
Net
Realized
and
Unrealized
Gain
(Loss)
Net
Increase
(Decrease)
in
Net
Assets
from
Operations
For
the
period
January
1,
2020
through
December
31,
2020
.........
$376,925,065
$(1,736,394,219)
$(1,359,469,154)
12.
Reorganization
(continued)
Franklin
Mutual
Series
Funds
Notes
to
Financial
Statements
42
franklintempleton.com
Annual
Report
Franklin
Mutual
Global
Discovery
Fund
(continued)
Level
1
Level
2
Level
3
Total
Franklin
Mutual
Global
Discovery
Fund
Assets:
Investments
in
Securities:
Common
Stocks
:
Aerospace
&
Defense
...................
$
—
$
145,479,301
$
—
$
145,479,301
Auto
Components
......................
—
—
81,224
81,224
Automobiles
..........................
119,683,853
—
—
119,683,853
Banks
...............................
502,211,601
177,954,002
—
680,165,603
Beverages
...........................
138,515,320
—
—
138,515,320
Biotechnology
.........................
32,831,649
—
—
32,831,649
Building
Products
......................
132,586,148
—
—
132,586,148
Capital
Markets
........................
—
383,683,817
—
383,683,817
Chemicals
...........................
—
373,373,409
—
373,373,409
Communications
Equipment
..............
95,269,618
—
—
95,269,618
Construction
Materials
..................
—
133,170,497
—
133,170,497
Consumer
Finance
.....................
160,528,940
—
—
160,528,940
Containers
&
Packaging
.................
112,210,483
—
—
112,210,483
Diversified
Financial
Services
.............
188,589,144
—
—
188,589,144
Diversified
Telecommunication
Services
.....
—
103,442,759
—
103,442,759
Entertainment
.........................
219,564,976
—
—
219,564,976
Food
Products
........................
218,576,358
—
—
218,576,358
Health
Care
Equipment
&
Supplies
.........
283,912,335
—
—
283,912,335
Health
Care
Providers
&
Services
..........
432,282,271
—
—
432,282,271
Hotels,
Restaurants
&
Leisure
.............
—
119,901,581
—
119,901,581
Industrial
Conglomerates
................
138,932,820
—
—
138,932,820
Insurance
............................
486,197,475
426,217,422
—
912,414,897
IT
Services
...........................
211,028,625
—
—
211,028,625
Media
...............................
325,185,931
—
536,332
325,722,263
Oil,
Gas
&
Consumable
Fuels
.............
522,572,217
204,410,017
—
726,982,234
Pharmaceuticals
.......................
858,767,831
299,358,206
—
1,158,126,037
Semiconductors
&
Semiconductor
Equipment
.
101,762,772
155,139,790
—
256,902,562
Software
.............................
393,555,323
—
—
393,555,323
Technology
Hardware,
Storage
&
Peripherals
.
179,880,631
340,249,202
—
520,129,833
Textiles,
Apparel
&
Luxury
Goods
..........
—
138,864,638
—
138,864,638
Tobacco
.............................
149,212,664
217,711,639
—
366,924,303
Wireless
Telecommunication
Services
.......
—
72,474,702
—
72,474,702
Preferred
Stocks
........................
—
239,968,546
—
239,968,546
Warrants
:
Media
...............................
3,790
—
—
3,790
Software
.............................
—
1,304,586
—
1,304,586
Textiles,
Apparel
&
Luxury
Goods
..........
798,673
—
—
798,673
Corporate
Bonds
........................
—
294,116,025
—
294,116,025
Companies
in
Liquidation
..................
—
—
213,489
a
213,489
Short
Term
Investments
...................
195,474,202
39,000,000
—
234,474,202
Total
Investments
in
Securities
...........
$6,200,135,650
$3,865,820,139
$831,045
$10,066,786,834
Other
Financial
Instruments:
Forward
exchange
contracts
...............
$
—
$
3,666,400
$
—
$
3,666,400
Total
Other
Financial
Instruments
.........
$—
$3,666,400
$—
$3,666,400
Liabilities:
Other
Financial
Instruments:
Securities
Sold
Short
.....................
$
200,284,218
$
—
$
—
$
200,284,218
Forward
exchange
contracts
................
—
39,722,121
—
39,722,121
Futures
contracts
........................
6,250,120
—
—
6,250,120
Total
Other
Financial
Instruments
.........
$206,534,338
$39,722,121
$—
$246,256,459
a
Includes
securities
determined
to
have
no
value
at
December
31,
2020.
14.
Fair
Value
Measurements
(continued)
Franklin
Mutual
Series
Funds
Notes
to
Financial
Statements
43
franklintempleton.com
Annual
Report
Franklin
Mutual
Global
Discovery
Fund
(continued)
A
reconciliation
in
which
Level
3
inputs
are
used
in
determining
fair
value
is
presented
when
there
are
significant
Level
3
assets
and/or
liabilities
at
the
beginning
and/or
end
of
the
year.
15.
New
Accounting
Pronouncements
In
March
2020,
the
Financial
Accounting
Standards
Board
issued
Accounting
Standards
Update
(ASU)
No.
2020-04,
Reference
Rate
Reform
(Topic
848)
–
Facilitation
of
the
Effects
of
Reference
Rate
Reform
on
Financial
Reporting.
The
amendments
in
the
ASU
provides
optional
temporary
financial
reporting
relief
from
the
effect
of
certain
types
of
contract
modifications
due
to
the
planned
discontinuation
of
the
London
InterBank
Offered
Rate
(LIBOR)
and
other
interbank-offered
based
reference
rates
as
of
the
end
of
2021.
The
ASU
is
effective
for
certain
reference
rate-related
contract
modifications
that
occur
during
the
period
March
12,
2020
through
December
31,
2022. Management
has
reviewed
the
requirements
and
believes
the
adoption
of
this
ASU
will
not
have
a
material
impact
on
the
financial
statements.
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
BNY
Bank
of
New
York
Mellon
(The)
BOFA
Bank
of
America
NA
HSBK
HSBC
Bank
plc
SSBT
State
Street
Bank
and
Trust
Co.
UBSW
UBS
AG
Currency
EUR
Euro
GBP
British
Pound
USD
United
States
Dollar
Selected
Portfolio
ADR
American
Depositary
Receipt
FHLB
Federal
Home
Loan
Banks
14.
Fair
Value
Measurements
(continued)
Franklin
Mutual
Series
Funds
Report
of
Independent
Registered
Public
Accounting
Firm
44
franklintempleton.com
Annual
Report
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,
2020,
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,
2020,
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,
2020,
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
23,
2021
Franklin
Mutual
Series
Funds
Tax
Information
(unaudited)
45
franklintempleton.com
Annual
Report
Franklin
Mutual
Global
Discovery
Fund
Under
Section
852(b)(3)(C)
of
the
Internal
Revenue
Code,
the
Fund
hereby
reports
the
maximum
amount
allowable
but
no
less
than
$45,665,009
as
a
long
term
capital
gain
dividend
for
the
fiscal
year
ended
December
31,
2020.
Under
Section
871(k)(2)(C)
of
the
Internal
Revenue
Code,
the
Fund
hereby
reports
the
maximum
amount
allowable
but
no
less
than
$20,725,970
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,
2020.
Under
Section
854(b)(1)(A)
of
the
Internal
Revenue
Code,
the
Fund
hereby
reports
83.11%
of
the
ordinary
income
dividends
as
income
qualifying
for
the
dividends
received
deduction
for
the
fiscal
year
ended
December
31,
2020.
Under
Section
854(b)(1)(B)
of
the
Internal
Revenue
Code,
the
Fund
hereby
reports
the
maximum
amount
allowable
but
no
less
than
$420,460,627
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,
2020.
Distributions,
including
qualified
dividend
income,
paid
during
calendar
year
2020
will
be
reported
to
shareholders
on
Form
1099-DIV
by
mid-February
2021.
Shareholders
are
advised
to
check
with
their
tax
advisors
for
information
on
the
treatment
of
these
amounts
on
their
individual
income
tax
returns.
Franklin
Mutual
Series
Funds
Board
Members
and
Officers
46
franklintempleton.com
Annual
Report
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
11
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)
Trustee
and
Chairperson
Trustee
since
1995
and
Chairperson
since
2020
30
Ares
Capital
Corporation
(specialty
finance
company)
(2010-present),
United
Natural
Foods,
Inc.
(distributor
of
natural,
organic
and
specialty
foods)
(2013-present),
formerly
,
Allied
Capital
Corporation
(financial
services)
(2003-
2010),
SLM
Corporation
(Sallie
Mae)
(1997-2014)
and
Navient
Corporation
(loan
management,
servicing
and
asset
recovery)
(2014-2016).
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
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)
Trustee
Since
2002
11
Franklin
Templeton
Emerging
Markets
Debt
Opportunities
Fund
PLC
(1999-present)
and
formerly
,
Fiduciary
International
Ireland
Limited
(1999-2015).
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:
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.
Franklin
Mutual
Series
Funds
47
franklintempleton.com
Annual
Report
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
Jan
Hopkins
Trachtman
(1947)
Trustee
Since
2009
11
FinTech
Acquisition
Corp.
III
(special
purpose
fintech
acquisition
company)
(2018-present)
and
FTAC
Olympus
Acquisition
Corp.
(special
purpose
fintech
acquisition
company)
(August
2020-present).
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:
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.
Keith
Mitchell
(1954)
Trustee
Since
2009
11
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)
Trustee
Since
2015
30
Hess
Midstream
LP
(oil
and
gas
midstream
infrastructure)
(2017-present).
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:
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).
Robert
E.
Wade
(1946)
Trustee
Since
1991
30
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
11
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).
Independent
Board
Members
(continued)
Franklin
Mutual
Series
Funds
48
franklintempleton.com
Annual
Report
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
136
None
One
Franklin
Parkway
San
Mateo,
CA
94403-1906
Principal
Occupation
During
at
Least
the
Past
5
Years:
Executive
Chairman,
Chairman
of
the
Board
and
Director,
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
,
Chief
Executive
Officer
(2013-2020)
and
President
(1994-2015),
Franklin
Resources,
Inc.
**Peter
A.
Langerman
(1955)
Trustee,
President,
and
Chief
Executive
Officer
–
Investment
Management
Trustee
since
2007,
President,
and
Chief
Executive
Officer
–
Investment
Management
since
2005
6
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:
Executive
Vice
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
Vice
President
Since
2012
Not
Applicable
Not
Applicable
One
Franklin
Parkway
San
Mateo,
CA
94403-1906
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)
Chief
Compliance
Officer
Since
October
2020
Not
Applicable
Not
Applicable
280
Park
Avenue
New
York,
NY
10017
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)
Vice
President
and
Secretary
Vice
President
since
2009
and
Secretary
since
2005
Not
Applicable
Not
Applicable
One
Franklin
Parkway
San
Mateo,
CA
94403-1906
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)
Chief
Executive
Officer
–
Finance
and
Administration
Since
2017
Not
Applicable
Not
Applicable
One
Franklin
Parkway
San
Mateo,
CA
94403-1906
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).
Franklin
Mutual
Series
Funds
49
franklintempleton.com
Annual
Report
*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.
Note
2:
Effective
October
17,
2020,
Charles
Rubens,
II
ceased
to
be
a
trustee
of
the
Trust.
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
Ann
Torre
Bates
and
David
W.
Niemiec
as
an
audit
committee
financial
expert.
The
Board
believes
that
Ms.
Bates
and
Mr.
Niemiec
qualify
as
such
an
expert
in
view
of
their
extensive
business
background
and
experience.
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
Partners
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
Ms.
Bates
and
Mr.
Niemiec
have
each
acquired
an
understanding
of
generally
accepted
accounting
principles
and
financial
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
G.
Kubilis
(1973)
Chief
Financial
Officer,
Chief
Accounting
Officer
and
Treasurer
Since
2012
Not
Applicable
Not
Applicable
300
S.E.
2nd
Street
Fort
Lauderdale,
FL
33301-
1923
Principal
Occupation
During
at
Least
the
Past
5
Years:
Treasurer,
U.S.
Fund
Administration
&
Reporting
and
officer
of
39
of
the
investment
companies
in
Franklin
Templeton.
Robert
Lim
(1948)
Vice
President
–
AML
Compliance
Since
2016
Not
Applicable
Not
Applicable
One
Franklin
Parkway
San
Mateo,
CA
94403-1906
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
41
of
the
investment
companies
in
Franklin
Templeton.
Navid
J.
Tofigh
(1972)
Vice
President
Since
2015
Not
Applicable
Not
Applicable
One
Franklin
Parkway
San
Mateo,
CA
94403-1906
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)
Vice
President
Since
2005
Not
Applicable
Not
Applicable
One
Franklin
Parkway
San
Mateo,
CA
94403-1906
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)
Vice
President
Since
2011
Not
Applicable
Not
Applicable
300
S.E.
2nd
Street
Fort
Lauderdale,
FL
33301-
1923
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.
Interested
Board
Members
and
Officers
(continued)
Franklin
Mutual
Series
Funds
50
franklintempleton.com
Annual
Report
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.
Ms.
Bates
and
Mr.
Niemiec
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.
Interested
Board
Members
and
Officers
(continued)
Franklin
Mutual
Series
Funds
Shareholder
Information
51
franklintempleton.com
Annual
Report
Proxy
Voting
Policies
and
Procedures
The
Fund’s
investment
manager
has
established
Proxy
Voting
Policies
and
Procedures
(Policies)
that
the
Fund
uses
to
determine
how
to
vote
proxies
relating
to
portfolio
securities.
Shareholders
may
view
the
Fund’s
complete
Policies
online
at
franklintempleton.com.
Alternatively,
shareholders
may
request
copies
of
the
Policies
free
of
charge
by
calling
the
Proxy
Group
collect
at
(954)
527-
7678
or
by
sending
a
written
request
to:
Franklin
Templeton
Companies,
LLC,
300
S.E.
2nd
Street,
Fort
Lauderdale,
FL
33301,
Attention:
Proxy
Group.
Copies
of
the
Fund’s
proxy
voting
records
are
also
made
available
online
at
franklintempleton.com
and
posted
on
the
U.S.
Securities
and
Exchange
Commission’s
website
at
sec.gov
and
reflect
the
most
recent
12-month
period
ended
June
30.
Quarterly
Statement
of
Investments
The
Trust,
on
behalf
of
the
Fund,
files
a
complete
statement
of
investments
with
the
U.S.
Securities
and
Exchange
Commission
for
the
first
and
third
quarters
for
each
fiscal
year
as
an
exhibit
to
its
report
on
Form
N-PORT.
Shareholders
may
view
the
filed
Form
N-PORT
by
visiting
the
Commission’s
website
at
sec.gov.
The
filed
form
may
also
be
viewed
and
copied
at
the
Commission’s
Public
Reference
Room
in
Washington,
DC.
Information
regarding
the
operations
of
the
Public
Reference
Room
may
be
obtained
by
calling
(800)
SEC-0330.
Householding
of
Reports
and
Prospectuses
You
will
receive,
or
receive
notice
of
the
availability
of,
the
Fund's
financial
reports
every
six
months.
In
addition,
you
will
receive
an
annual
updated
summary
prospectus
(detail
prospectus
available
upon
request).
To
reduce
Fund
expenses,
we
try
to
identify
related
shareholders
in
a
household
and
send
only
one
copy
of
the
financial
reports
(to
the
extent
received
by
mail)
and
summary
prospectus.
This
process,
called
“householding,”
will
continue
indefinitely
unless
you
instruct
us
otherwise.
If
you
prefer
not
to
have
these
documents
householded,
please
call
us
at
(800)
632-2301.
At
any
time
you
may
view
current
prospectuses/
summary
prospectuses
and
financial
reports
on
our
website.
If
you
choose,
you
may
receive
these
documents
through
electronic
delivery.
477
A
02/21
©
2021
Franklin
Templeton
Investments.
All
rights
reserved.
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)
DIAL
BEN
®
/
342-5236
franklintempleton.com
(800)
632-2301
-
(Class
A,
C,
R
&
R6)
(800)
448-FUND
-
(Class
Z)
Annual
Report
and
Shareholder
Letter
Franklin
Mutual
Quest
Fund
A
Series
of
Franklin
Mutual
Series
Funds
December
31,
2020
Sign
up
for
electronic
delivery
at
franklintempleton.com/edelivery
Not
FDIC
Insured
May
Lose
Value
No
Bank
Guarantee
franklintempleton.com
Not
part
of
the
annual
report
1
SHAREHOLDER
LETTER
Dear
Franklin
Mutual
Quest
Fund
Shareholder:
2020
was
a
year
that
felt
like
it
contained
several
different
years
within
it.
There
were
periods
of
stability
and
dramatic
moves
down
and
up
in
financial
markets.
The
year
ended
with
surging
stock
prices
despite
an
ongoing
pandemic.
If
one
had
gone
to
sleep
on
December
31,
2019,
and
woke
up
on
December
31,
2020,
a
quick
glance
at
the
MSCI
World
Index
(USD),
which
was
up
+16.50%
for
the
12
months,
might
cause
one
to
think
this
was
just
another
good
year
in
a
long
bull
market.
1
But
for
those
of
us
who
lived
through
it,
2020
was
chaotic
and
memorable.
The
year
began
with
a
continuation
of
trends
from
2019.
Accommodative
central
bank
policy
was
supporting
a
resilient
economy,
which
displayed
modest
growth.
Then
COVID-19
exploded
from
a
regional
issue
into
a
global
pandemic.
The
response
to
the
spread
of
the
virus
was
lockdown
and
physical
distancing
measures
in
attempts
to
flatten
the
curve
of
the
contagion.
Consumer
and
business
spending
fell,
and
manufacturing
and
other
activity
came
to
a
virtual
halt.
This
led
to
a
dramatic
share
price
plunge
in
equity
markets.
In
response,
governments
acted
directly
through
fiscal
policy
and
central
banks,
using
a
whatever-it-takes
approach
to
stabilize
economies.
The
efforts
worked
and
were
reflected
by
market
stabilization
and
the
beginning
of
a
recovery
in
prices.
Markets
continued
to
rally
in
the
second
half
of
the
year
on
signs
of
global
economic
resilience
despite
widespread
shutdowns.
Investor
sentiment
was
buoyed
by
hopes
for
continued
stimulus
measures,
very
positive
developments
on
the
vaccine
front
and
U.S.
presidential
election
results.
Valuations
were
also
supported
by
investors’
willingness
to
look
through
the
current
situation
to
2021
and
beyond,
when
widespread
vaccinations
are
expected
to
become
available
and
reignite
global
economies.
During
the
year,
there
was
significant
market
volatility
and
continued
variance
between
the
performance
of
growth
equities
and
value
equities.
Many
growth
stocks
benefited
from
the
changes
in
work
and
life
caused
by
the
pandemic
and
continued
to
grow
during
the
year.
As
a
result,
the
MSCI
World
Growth
Index
(USD)
ended
the
year
up
+34.18%,
while
the
MSCI
World
Value
Index
(USD)
recovered
from
the
spring
selloff,
but
trailed
its
growth
counterpart,
ending
the
year
down
-0.38%
for
the
12
months
ended
December
31,
2020.
1
Market
volatility
and
economic
uncertainty
can
often
present
what
we
consider
opportunities.
During
periods
of
market
fluctuation,
we
used
our
bottom-up,
fundamentally
driven
investment
process
to
add
select
positions
to
the
portfolio
that
historically
had
not
met
our
investment
criteria.
However,
given
the
decline
in
price,
these
stocks
were
now,
in
our
opinion,
attractively
valued.
We
also
moved
capital
between
existing
positions
to
reflect
market
shifts.
We
were
encouraged
to
see
value
equities
do
quite
well
in
the
fourth
quarter
on
both
an
absolute
and
relative
basis.
Our
expectation
is
that
earnings
will
continue
to
improve
for
the
overall
market
as
2021
progresses
and
COVID
vaccinations
allow
for
accelerated
reopening
of
the
global
economy.
We
would
expect
many
of
our
value
holdings
to
benefit
from
such
a
scenario.
It
is
important
to
remember
that
the
market
historically
rewards
investors
who
take
a
long-term
perspective.
To
that
end,
we
recognize
the
importance
of
financial
advisors
in
today’s
markets
and
encourage
investors
to
continue
to
seek
their
advice.
Amid
changing
markets
and
economic
conditions,
we
are
confident
investors
with
a
well-diversified
portfolio
and
a
patient,
long-term
outlook
should
be
well-positioned
for
the
years
ahead.
This
is
my
first
letter
to
you
as
president
and
chief
investment
officer
of
Franklin
Mutual
Series.
I
have
been
director
of
research
and
a
portfolio
manager
for
Franklin
Mutual
Series
since
January
2010
and
have
worked
with
Peter
Langerman,
chairman
and
chief
executive
officer
of
Franklin
Mutual
Series,
to
steward
the
platform.
I
want
to
thank
Peter
for
his
significant
contributions
and
30+
years
of
dedicated
service
and
leadership.
I
look
forward
to
working
with
Peter
through
mid-2021
to
complete
the
leadership
transition,
and
I
wish
him
the
very
best
in
his
well-deserved
retirement.
On
the
following
pages,
the
portfolio
management
team
reviews
investment
decisions
that
pertain
to
performance
during
the
past
12
months
considering
the
economic
environment
and
other
factors.
Please
remember
all
securities
markets
fluctuate,
as
do
mutual
fund
share
prices.
1.
Source:
Morningstar.
See
www.franklintempletondatasources.com
for
additional
data
provider
information.
franklintempleton.com
Not
part
of
the
annual
report
2
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,
Christian
Correa,
CFA
President
and
Chief
Investment
Officer
Franklin
Mutual
Advisers,
LLC
This
letter
reflects
our
analysis
and
opinions
as
of
December
31,
2020
,
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
8
Your
Fund’s
Expenses
11
Financial
Highlights
and
Statement
of
Investments
12
Financial
Statements
25
Notes
to
Financial
Statements
30
Report
of
Independent
Registered
Public
Accounting
Firm
47
Tax
Information
48
Board
Members
and
Officers
49
Shareholder
Information
54
Visit
franklintempleton.com
for
fund
updates,
to
access
your
account,
or
to
find
helpful
financial
planning
tools.
CFA
®
is
a
trademark
owned
by
CFA
Institute.
3
franklintempleton.com
Annual
Report
ANNUAL
REPORT
Franklin
Mutual
Quest
Fund
This
annual
report
for
Franklin
Mutual
Quest
Fund
covers
the
fiscal
year
ended
December
31,
2020
.
Your
Fund’s
Goal
and
Main
Investments
The
Fund
seeks
capital
appreciation,
which
may
occasionally
be
short
term.
The
secondary
goal
is
income.
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
and
participations
in
foreign
government
debt.
The
Geographic
Composition
table
on
this
page
lists
the
leading
countries
where
the
Fund
invests.
Performance
Overview
The
Fund’s
Class
Z
shares
posted
a
-1.83%
cumulative
total
return
for
the
12
months
ended
December
31,
2020.
In
comparison,
the
Fund’s
new
benchmark,
the
MSCI
World
Value
Index-NR
(USD),
which
tracks
the
performance
of
stocks
exhibiting
overall
value
style
characteristics
in
global
developed
markets,
posted
a
-1.16%
total
return.
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
+7.11%
total
return.
1
Additionally,
the
Fund’s
prior
benchmark,
the
MSCI
World
Index
(USD),
which
tracks
stock
performance
in
global
developed
markets,
posted
a
+16.50%
total
return.
1
The
MSCI
World
Value
Index-NR
(USD)
is
replacing
the
MSCI
World
Index
(USD)
as
the
Fund’s
benchmark.
The
investment
manager
believes
the
composition
of
the
MSCI
World
Value
Index-NR
(USD)
more
accurately
reflects
the
Fund’s
current
investment
strategy
and
portfolio
characteristics,
and
that
the
actual
tax
withholding
rates
for
the
Fund
are
closer
to
the
assumptions
of
the
MSCI
World
Value
Index-NR
(USD;
net
of
taxes
on
dividends)
than
the
MSCI
World
Index
(USD;
gross
of
taxes
on
dividends).
You
can
find
more
of
the
Fund’s
performance
data
in
the
Performance
Summary
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
equities,
as
measured
by
the
MSCI
All
Country
World
Index
(USD),
posted
a
+16.82%
total
return
for
the
12
months
ended
December
31,
2020.
1
Stocks
fell
sharply
in
early
2020
as
many
investors
sold
equities
amid
fears
of
a
global
economic
slowdown
due
to
the
novel
coronavirus
(COVID-19)
pandemic.
Global
equities
began
to
rebound
in
late
March
2020
amid
optimism
about
economic
stimulus
measures,
easing
lockdown
restrictions,
and
vaccine
and
treatment
development.
Despite
declines
in
September
and
October
due
to
geopolitical
tensions
and
rising
infection
rates,
markets
rebounded
in
November
and
December,
as
positive
sentiment
about
successful
trials
of
COVID-19
vaccines,
the
beginning
of
vaccination
programs
in
some
countries
and
apparent
resolution
of
political
uncertainty
supported
markets.
Geographic
Composition
12/31/20
%
of
Total
Net
Assets
United
States
48.0%
United
Kingdom
22.1%
Netherlands
4.6%
Israel
1.6%
Luxembourg
1.6%
Germany
1.4%
Switzerland
1.1%
Other
1.7%
Short-Term
Investments
&
Other
Net
Assets
17.9%
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.
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
17
.
Franklin
Mutual
Quest
Fund
4
franklintempleton.com
Annual
Report
In
the
U.S.,
pandemic-related
restrictions
caused
stiff
economic
headwinds,
including
mass
layoffs
that
drove
the
unemployment
rate
to
14.8%
in
April
2020.
2
According
to
the
National
Bureau
of
Economic
Research,
the
longest
U.S.
economic
expansion
in
history
ended
in
February,
and
the
country
slipped
into
a
deep
recession.
Equities
began
to
rebound
in
the
spring
amid
the
government’s
fiscal
and
monetary
stimulus
measures,
declining
jobless
claims,
rising
retail
sales
and
optimism
about
treatments
and
potential
vaccines
for
COVID-19.
Following
a
record
annualized
decline
in
second-quarter
gross
domestic
product
(GDP),
resilient
consumer
spending
helped
drive
third-quarter
GDP
to
expand
at
a
record
annualized
rate,
although
growth
slowed
in
the
fourth
quarter.
Equities
continued
to
rise
during
the
summer
but
declined
in
the
fall
due
to
concerns
about
possible
new
restrictions
amid
rising
COVID-19
infection
rates
and
uncertainties
about
additional
fiscal
stimulus
and
the
U.S.
presidential
election.
Despite
signs
that
the
economic
recovery
was
stalling
as
the
unemployment
rate
remained
relatively
high
(6.7%
at
period-end)
and
consumer
spending
declined,
stocks
rallied
in
November
and
December,
buoyed
by
the
outcome
of
the
U.S.
presidential
election,
the
start
of
COVID-19
vaccination
programs
and
the
passage
of
a
new
U.S.
stimulus
bill.
2
In
an
effort
to
support
the
economy,
the
U.S.
Federal
Reserve
(Fed)
lowered
the
federal
funds
target
rate
to
a
range
of
0.00%–0.25%
in
March
2020.
The
Fed
also
enacted
quantitative
easing
measures
aimed
at
ensuring
credit
flows
to
borrowers
and
supporting
credit
markets
with
open-
ended
bond
purchasing.
Furthermore,
the
Fed
signaled
that
interest
rates
would
potentially
remain
low,
even
if
inflation
moderately
exceeded
its
2%
target.
In
the
eurozone,
the
economy
contracted
again
in
the
fourth
quarter
of
2020,
following
quarter-on-quarter
expansion
in
the
third
quarter
and
contractions
in
the
first
and
second
quarters.
After
several
months
of
gains
due
to
easing
restrictions
and
robust
stimulus
measures,
European
developed
market
equities,
as
measured
by
the
MSCI
Europe
Index
(USD),
declined
in
September
and
October
as
rising
infection
rates
heightened
investor
concerns
that
the
nascent
economic
revival
could
stall.
Nevertheless,
successful
vaccine
development
and
a
Brexit
resolution
supported
European
developed
market
equities,
as
measured
by
the
MSCI
Europe
Index
(USD),
to
post
a
+5.93%
total
return
for
the
period.
1
Asian
developed
and
emerging
market
equities,
as
measured
by
the
MSCI
All
Country
Asia
Index
(USD),
posted
a
+21.30%
total
return
for
the
12
months
under
review.
1
Although
pandemic-related
lockdowns
derailed
economic
growth
in
early
2020,
sharp
market
declines
were
followed
by
rebounds
as
China’s
economy,
a
key
driver
of
the
region’s
economic
activity,
recovered
from
the
contraction
in
the
first
quarter
and
expanded
during
the
rest
of
2020.
Asian
stocks
rose
as
the
region’s
economies
reopened,
aided
by
robust
stimulus
measures
and
optimism
that
economic
revitalization
would
be
further
spurred
by
COVID-19
vaccines.
Global
emerging
market
stocks,
as
measured
by
the
MSCI
Emerging
Markets
Index
(USD),
posted
a
+18.69%
total
return
for
the
period,
despite
steep
pandemic-related
declines
in
early
2020,
benefiting
from
improving
economic
activity,
stabilizing
oil
prices
and
U.S.
dollar
weakness.
1
In
spite
of
higher
COVID-19
cases
in
some
countries,
emerging
market
stocks
rallied
near
the
end
of
2020,
bolstered
by
easing
political
uncertainty,
commencement
of
COVID-19
vaccinations
and
rising
commodity
prices.
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
2.
Source:
U.S.
Bureau
of
Labor
Statistics.
See
www.franklintempletondatasources.com
for
additional
data
provider
information.
Top
10
Industries
12/31/20
%
of
Total
Net
Assets
a
Insurance
12.5%
Diversified
Telecommunication
Services
12.1%
Tobacco
7.3%
Pharmaceuticals
6.4%
Software
5.6%
Oil,
Gas
&
Consumable
Fuels
4.7%
Diversified
Financial
Services
3.2%
Commercial
Services
&
Supplies
2.9%
Health
Care
Providers
&
Services
2.8%
Aerospace
&
Defense
2.6%
Franklin
Mutual
Quest
Fund
5
franklintempleton.com
Annual
Report
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.
Our
portfolio
selection
process
generally
includes
an
assessment
of
the
potential
impacts
of
any
material
environmental,
social
and
governance
(ESG)
factors
on
the
long-term
risk
and
return
profile
of
a
company.
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
addition,
it
is
our
practice
to
hedge
the
Fund’s
currency
exposure
when
we
deem
it
advantageous
for
our
shareholders.
Manager’s
Discussion
A
year
ago,
we
reflected
on
a
decade
of
overall
equity
market
strength
and
solid,
but
weaker,
returns
for
our
value
equity
investing
strategy.
2020
turned
out
to
be
an
amplification
of
this
performance
gap,
rather
than
a
correction.
The
year
started
with
a
continuation
of
strong
performance
from
market-darling
growth
stocks.
The
gap
exploded
as
COVID-19
led
to
lockdowns
and
people
working
from
home.
The
market
leaders
often
benefited
from
these
changes,
with
technology
tools
being
adopted
more
quickly
than
before.
Meanwhile,
the
lockdowns
and
disruption
severely
impacted
many
companies
thought
of
as
value
stocks.
Even
as
central
banks
and
governments
across
the
globe
acted
through
fiscal
and
monetary
stimulus
measures,
the
recovery
came
slowly
and
only
accelerated
when
the
prospects
of
an
effective
vaccine
helped
markets
understand
when
the
health
crisis
might
be
over.
By
the
end
of
2020,
the
MSCI
World
Value
Index
(USD)
had
recovered
to
be
almost
flat,
with
a
-0.38%
return.
1
However,
growth
stocks
advanced
substantially
further,
as
evidenced
by
the
MSCI
World
Growth
Index
(USD),
ending
the
year
up
+34.18%.
1
Many
signs
of
increased
speculation
in
the
market
have
appeared,
with
a
surge
in
the
number
of
IPOs
not
seen
since
the
tech
bubble
and
a
boom
in
special
purpose
acquisition
companies
(SPACs),
a
type
of
company
which
raises
money
in
anticipation
of
finding
profitable
investment
opportunities.
There
is
no
guarantee
that
some
speculation
will
not
be
profitable,
but
we
try
to
look
past
the
speculation
and
continue
to
see
attractive
values
in
various
parts
of
the
market.
Our
traditional
value
equity
investment
approach
is
complemented
with
two
other
strategies,
distressed
investing
and
merger
arbitrage.
We
were
active
in
both
during
2020.
Merger
arbitrage
activity
has
climbed
in
tandem
with
increasing
confidence
about
an
end
to
the
pandemic
crisis.
Significant
new
deals
have
been
announced
and
some
present
attractive
investment
opportunities.
In
addition,
the
deals
which
were
impacted
by
the
emergence
of
the
coronavirus
have
seen
renegotiated
terms
and
moved
toward
amicable
resolution.
This
includes
deals
such
as
Tiffany’s
acquisition
by
LVMH
Moet
Hennessy
Louis
Vuitton
and
Taubman’s
acquisition
by
Simon
Property
Group.
We
expect
an
ongoing
acceleration
of
merger
and
acquisition
activity
given
a
recovering
economy,
strong
markets
and
the
hope
for
increasing
regulatory
and
trade
predictability
under
the
incoming
U.S.
administration.
Within
our
distressed
credit
strategy,
we
targeted
companies
and
industries
directly
impacted
by
the
coronavirus
pandemic.
The
robust
government
fiscal
and
monetary
interventions
have
limited
the
number
of
attractive
options,
but
we
found
opportunities
in
the
energy
sector
and
the
retail
and
travel
industries.
As
the
vaccine
news
arrived
and
liquidity
remained
strong,
the
opportunities
have
become
more
limited.
We
expect
to
see
fewer
new
distressed
debt
opportunities
than
the
merger
arbitrage
opportunities
discussed
above.
Franklin
Mutual
Quest
Fund
6
franklintempleton.com
Annual
Report
Fund
Performance
Turning
to
Fund
performance,
top
positive
contributors
included
Baidu,
RSA
Insurance
Group
and
Check
Point
Software
Technologies.
RSA
Insurance
Group
is
listed
among
the
Fund’s
largest
positions
in
the
Top
10
Holdings
table
on
this
page.
Despite
strong
fourth-quarter
results,
the
stock
price
of
China-based
search
engine
and
artificial
intelligence
software
company
Baidu
was
affected
by
COVID-related
volatility
in
late
February
and
March.
However,
Baidu’s
recovery
from
the
market
bottom
was
swift,
and
a
rally
ensued
during
2020’s
second
quarter.
Declining
costs
led
to
better-than-expected
first-quarter
profitability
that
helped
boost
the
valuation.
Despite
subpar
advertising
revenues
during
the
summer
months,
second-quarter
results
were
positive,
due
in
part
to
tight
cost
controls
during
those
three
months.
As
China’s
advertising
market
rebounded
in
the
fall,
the
company’s
advertising
revenues
also
recovered,
turning
core
business
revenues
positive.
Third-quarter
earnings
beat
expectations,
and
along
with
news
of
an
acquisition,
provided
fuel
for
a
price
rally
that
lasted
for
the
remainder
of
the
year.
After
the
broad
market
drawdown
in
March,
the
stock
price
of
U.K.-based
insurer
RSA
Insurance
Group
recovered
some
of
its
lost
ground
throughout
the
summer
and
fall,
buoyed
by
business
improvement
efforts
and
growth
in
underwriting
profits.
However,
the
company’s
adherence
to
dividend
restrictions
recommended
by
some
insurance
regulators
due
to
the
COVID-19
pandemic,
but
not
followed
by
all
insurance
companies,
caused
the
stock
to
lag
the
industry.
During
the
third
quarter,
underwriting
improvements
continued,
but
lasting
financial
effects
of
COVID-19
weighed
on
premium
growth.
Nevertheless,
the
stock
price
jumped
significantly
in
November,
after
a
joint
takeover
bid
from
Intact
Financial
and
Tryg
was
announced.
The
year
started
on
a
positive
note
for
Israel-based
information
technology
security
solutions
company
Check
Point
Software
Technologies,
with
fourth-quarter
and
2019
fiscal
year
results
that
were
in
line
with
expectations.
Forward
guidance
for
revenues
and
earnings
per
share
also
pleased
investors,
lifting
the
stock
price
in
February.
However,
COVID-related
volatility
affected
the
stock
price
in
March.
First-quarter
financial
reports
beat
expectations
amid
optimism
that
salesforce
reinvestment
by
Check
Point
was
paying
off.
In
the
second
half
of
2020,
the
company
benefited
from
products
related
to
enabling
virtual
work
and
learning,
including
VPN,
network
access
and
endpoint
security
products.
During
the
period
under
review,
Fund
investments
that
detracted
from
performance
included
Occidental
Petroleum,
BP
and
Discovery,
Inc.
Shares
of
U.S.-based
Occidental
Petroleum
fell
in
March
as
lockdowns
took
effect
around
the
world,
cratering
oil
demand
and
consequently
oil
prices. Following
its
acquisition
of
Anadarko
Petroleum
last
year,
Occidental
suffered
from
an
overleveraged
balance
sheet,
which
accentuated
the
impact
of
lower
oil
prices. When
Occidental’s
debt
also
traded
down,
we
took
the
opportunity
to
trade
out
of
the
company’s
equity
and
into
certain
debt
instruments.
We
believed
these
debt
securities
had
specific
features
that
improved
their
already
favorable
risk/reward
profile,
and
represented
a
more
attractive
investment
than
the
equity,
given
the
wide
range
of
potential
outcomes.
U.K.-based
oil
and
gas
company
BP
began
the
year
on
a
positive
note
by
reporting
positive
fourth-quarter
results
and
increasing
its
dividend.
However,
the
stock
price
slid
during
March,
due
in
part
to
cratering
gasoline
demand
caused
by
reduced
commuter
and
business
travel.
The
COVID-19
pandemic
brought
travel
to
a
halt
for
several
months
during
the
period,
putting
downward
pressure
on
the
price
of
oil.
A
pricing
disagreement
between
Russia
and
Saudi
Arabia
exacerbated
the
issue.
BP
responded
to
the
crisis
by
substantially
reducing
its
capital
expenditures.
The
belt-
tightening
continued
as
the
company
cut
jobs
significantly
in
June,
then
cut
its
dividend
in
half.
In
our
opinion,
the
company
used
the
downturn
to
accelerate
changes
already
Top
10
Holdings
12/31/20
Company
Industry
,
Country
%
of
Total
Net
Assets
a
aa
Sorenson
Communications
LLC,
Membership
Interests
5.0%
Diversified
Telecommunication
Services
RSA
Insurance
Group
plc
3.2%
Insurance,
United
Kingdom
British
American
Tobacco
plc
3.1%
Tobacco,
United
Kingdom
G4S
plc
2.9%
Commercial
Services
&
Supplies,
United
Kingdom
Voya
Financial,
Inc.
2.7%
Diversified
Financial
Services
GlaxoSmithKline
plc
2.7%
Pharmaceuticals,
United
Kingdom
Liberty
Global
plc
2.5%
Diversified
Telecommunication
Services,
United
Kingdom
Imperial
Brands
plc
2.4%
Tobacco,
United
Kingdom
Everest
Re
Group
Ltd.
2.3%
Insurance
Tiffany
&
Co.
2.2%
Specialty
Retail
Franklin
Mutual
Quest
Fund
7
franklintempleton.com
Annual
Report
underway,
positioning
the
company
to
be
a
leader
in
the
energy
transition,
with
ambitious
goals
toward
zero
carbon
emissions.
Nevertheless,
it
may
take
time
to
convince
investors
of
their
ability
to
execute
on
this
transition,
and
the
share
price
continues
to
show
very
little
positive
expectation.
Despite
quarterly
results
that
were
in
line
with
or
ahead
of
expectations
during
the
fiscal
year,
U.S.-based
cable
network
operator
Discovery,
Inc.,
a
company
that
provides
non-
fiction
and
educational
media
entertainment,
had
a
difficult
12-month
period.
After
the
March
downturn,
Discovery’s
share
price
experienced
peaks
and
valleys
as
the
battle
for
homebound
viewers’
time
and
attention
ebbed
on.
During
the
period,
direct
to
consumer
(DTC)
initiatives
were
a
main
focus,
which
generated
significant
capital
spending
costs.
Unfortunately,
statistics
to
measure
success
of
the
DTC
efforts
were
unavailable.
Due
to
continued
costs
associated
with
DTC
efforts
and
their
weight
on
future
growth
prospects,
we
decided
to
sell
our
position
in
Discovery.
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
negative
overall
impact
on
the
Fund’s
performance
as
the
U.S.
dollar
fell
against
most
currencies
during
the
period.
As
fellow
shareholders,
we
found
recent
absolute
and
relative
performance
disappointing,
but
our
strategy
of
seeking
undervalued
stocks
can
lag
the
growth
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
Quest
Fund.
We
look
forward
to
continuing
to
serve
your
investment
needs.
Keith
Luh,
CFA
Co-Portfolio
Manager
Andrew
B.
Dinnhaupt,
CFA
Co-Portfolio
Manager
The
foregoing
information
reflects
our
analysis,
opinions
and
portfolio
holdings
as
of
December
31,
2020
,
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.
Performance
Summary
as
of
December
31,
2020
Franklin
Mutual
Quest
Fund
8
franklintempleton.com
Annual
Report
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
12/31/20
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
.
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
.
Share
Class
Cumulative
Total
Return
1
Average
Annual
Total
Return
2
–
Z
1-Year
-1.83%
-1.83%
5-Year
+27.76%
+5.02%
10-Year
+73.76%
+5.68%
A
3
1-Year
-2.12%
-7.53%
5-Year
+26.20%
+3.59%
10-Year
+69.05%
+4.80%
See
page
10
for
Performance
Summary
footnotes.
Franklin
Mutual
Quest
Fund
Performance
Summary
9
franklintempleton.com
Annual
Report
See
page
10
for
Performance
Summary
footnotes.
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
(1/1/11–
12/31/20
)
Class
A
(1/1/11–
12/31/20
)
Franklin
Mutual
Quest
Fund
Performance
Summary
10
franklintempleton.com
Annual
Report
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
uncertainty
concerning
the
economic
consequences
of
the
departure
of
the
U.K.
from
the
European
Union
may
increase
market
volatility.
Smaller-company
stocks
have
exhibited
greater
price
volatility
than
larger-company
stocks,
partic-
ularly
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.
Unexpected
events
and
their
aftermaths,
such
as
the
spread
of
deadly
diseases;
natural,
environmental
or
man-made
disasters;
financial,
political
or
social
disruptions;
terrorism
and
war;
and
other
tragedies
or
catastrophes,
can
cause
investor
fear
and
panic,
which
can
adversely
affect
the
economies
of
many
companies,
sectors,
nations,
regions
and
the
market
in
general,
in
ways
that
cannot
necessarily
be
foreseen.
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+).
The
MSCI
World
Value
Index-NR
(USD)
is
a
free
float-adjusted,
market
capi-
talization-weighted
index
designed
to
measure
the
performance
of
stocks
exhibiting
overall
value
style
characteristics
in
global
developed
markets.
Net
Returns
(NR)
include
income
net
of
tax
withholding
when
dividends
are
paid.
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.
Distributions
(1/1/20–12/31/20)
Share
Class
Net
Investment
Income
Z
$0.4870
A
$0.4513
C
$0.3276
R
$0.4115
R6
$0.4933
Total
Annual
Operating
Expenses
5
Share
Class
Z
0.79%
A
1.04%
Your
Fund’s
Expenses
Franklin
Mutual
Quest
Fund
11
franklintempleton.com
Annual
Report
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.
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
184/366
to
reflect
the
one-half
year
period.
2.
Reflects
expenses
after
fee
waivers
and
expense
reimbursements.
Does
not
include
acquired
fund
fees
and
expenses.
Actual
(actual
return
after
expenses)
Hypothetical
(5%
annual
return
before
expenses)
Share
Class
Beginning
Account
Value
7/1/20
Ending
Account
Value
12/31/20
Expenses
Paid
During
Period
7/1/20–12/31/20
1,
2
Ending
Account
Value
12/31/20
Expenses
Paid
During
Period
7/1/20–12/31/20
1,
2
a
Net
Annualized
Expense
Ratio
2
Z
$1,000
$1,161.82
$4.26
$1,021.19
$3.99
0.78%
A
$1,000
$1,159.78
$5.62
$1,019.93
$5.26
1.04%
C
$1,000
$1,156.12
$9.69
$1,016.15
$9.06
1.79%
R
$1,000
$1,158.34
$6.87
$1,018.77
$6.43
1.27%
R6
$1,000
$1,161.62
$3.99
$1,021.45
$3.73
0.73%
Franklin
Mutual
Series
Funds
Financial
Highlights
Franklin
Mutual
Quest
Fund
franklintempleton.com
Annual
Report
The
accompanying
notes
are
an
integral
part
of
these
financial
statements.
12
a
Year
Ended
December
31,
2020
2019
2018
2017
2016
Class
Z
Per
share
operating
performance
(for
a
share
outstanding
throughout
the
year)
Net
asset
value,
beginning
of
year
...................
$14.06
$12.95
$15.83
$15.52
$14.47
Income
from
investment
operations
a
:
Net
investment
income
b
.........................
0.40
c
0.45
0.48
0.58
0.87
d
Net
realized
and
unrealized
gains
(losses)
...........
(0.66)
1.16
(1.58)
0.49
1.47
Total
from
investment
operations
....................
(0.26)
1.61
(1.10)
1.07
2.34
Less
distributions
from:
Net
investment
income
..........................
(0.49)
(0.50)
(0.58)
(0.63)
(1.01)
Net
realized
gains
.............................
—
—
(1.20)
(0.13)
(0.28)
Total
distributions
...............................
(0.49)
(0.50)
(1.78)
(1.78)
(1.29)
Net
asset
value,
end
of
year
.......................
$13.31
$14.06
$12.95
$15.83
$15.52
Total
return
....................................
(1.83)%
12.40%
(6.85)%
6.92%
16.26%
Ratios
to
average
net
assets
Expenses
e,f
....................................
0.81%
g
0.78%
0.78%
0.79%
0.79%
g
Expenses
-
incurred
in
connection
with
securities
sold
short
0.02%
0.02%
—%
h
—%
0.01%
Net
investment
income
...........................
3.22%
c
3.22%
2.96%
3.65%
5.74%
d
Supplemental
data
Net
assets,
end
of
year
(000’s)
.....................
$2,472,118
$3,042,387
$3,054,792
$3,667,351
$3,683,095
Portfolio
turnover
rate
............................
52.07%
60.96%
115.52%
32.90%
44.04%
a
The
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
repurchas-
es
of
the
Fund’s
shares
in
relation
to
income
earned
and/or
fluctuating
fair
value
of
the
investments
of
the
Fund.
b
Based
on
average
daily
shares
outstanding.
c
Net
investment
income
per
share
includes
approximately
$0.11
per
share
related
to
income
received
in
the
form
of
special
dividends
and
an
adjustment
for
EU
reclaims
in
connection
with
certain
Fund
holdings.
Excluding
this
amount,
the
ratio
of
net
investment
income
to
average
net
assets
would
have
been
2.32%.
d
Net
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
hold-
ings.
Excluding
this
amount,
the
ratio
of
net
investment
income
to
average
net
assets
would
have
been
5.42%.
e
Includes
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).
f
Benefit
of
expense
reduction
rounds
to
less
than
0.01%.
g
Benefit
of
waiver
and
payments
by
affiliates
rounds
to
less
than
0.01%.
h
Rounds
to
less
than
0.01%.
Franklin
Mutual
Series
Funds
Financial
Highlights
Franklin
Mutual
Quest
Fund
(continued)
franklintempleton.com
The
accompanying
notes
are
an
integral
part
of
these
financial
statements.
Annual
Report
13
a
Year
Ended
December
31,
2020
2019
2018
2017
2016
Class
A
Per
share
operating
performance
(for
a
share
outstanding
throughout
the
year)
Net
asset
value,
beginning
of
year
...................
$13.84
$12.75
$15.60
$15.32
$14.29
Income
from
investment
operations
a
:
Net
investment
income
b
.........................
0.37
c
0.41
0.43
0.53
0.83
d
Net
realized
and
unrealized
gains
(losses)
...........
(0.67)
1.14
(1.54)
0.46
1.45
Total
from
investment
operations
....................
(0.30)
1.55
(1.11)
0.99
2.28
Less
distributions
from:
Net
investment
income
..........................
(0.45)
(0.46)
(0.54)
(0.58)
(0.97)
Net
realized
gains
.............................
—
—
(1.20)
(0.13)
(0.28)
Total
distributions
...............................
(0.45)
(0.46)
(1.74)
(0.71)
(1.25)
Net
asset
value,
end
of
year
.......................
$13.09
$13.84
$12.75
$15.60
$15.32
Total
return
e
...................................
(2.12)%
12.14%
(7.00)%
6.54%
16.04%
Ratios
to
average
net
assets
Expenses
f,g
....................................
1.06%
h
1.03%
1.03%
1.04%
1.04%
h
Expenses
-
incurred
in
connection
with
securities
sold
short
0.02%
0.02%
—%
i
—%
0.01%
Net
investment
income
...........................
2.98%
c
2.97%
2.71%
3.40%
5.49%
d
Supplemental
data
Net
assets,
end
of
year
(000’s)
.....................
$760,173
$1,035,699
$1,067,382
$1,153,870
$1,216,085
Portfolio
turnover
rate
............................
52.07%
60.96%
115.52%
32.90%
44.04%
a
The
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
repurchas-
es
of
the
Fund’s
shares
in
relation
to
income
earned
and/or
fluctuating
fair
value
of
the
investments
of
the
Fund.
b
Based
on
average
daily
shares
outstanding.
c
Net
investment
income
per
share
includes
approximately
$0.11
per
share
related
to
income
received
in
the
form
of
special
dividends
and
an
adjustment
for
EU
reclaims
in
connection
with
certain
Fund
holdings.
Excluding
this
amount,
the
ratio
of
net
investment
income
to
average
net
assets
would
have
been
2.08%.
d
Net
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
hold-
ings.
Excluding
this
amount,
the
ratio
of
net
investment
income
to
average
net
assets
would
have
been
5.17%.
e
Total
return
does
not
reflect
sales
commissions
or
contingent
deferred
sales
charges,
if
applicable.
f
Includes
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).
g
Benefit
of
expense
reduction
rounds
to
less
than
0.01%.
h
Benefit
of
waiver
and
payments
by
affiliates
rounds
to
less
than
0.01%.
i
Rounds
to
less
than
0.01%.
Franklin
Mutual
Series
Funds
Financial
Highlights
Franklin
Mutual
Quest
Fund
(continued)
franklintempleton.com
Annual
Report
The
accompanying
notes
are
an
integral
part
of
these
financial
statements.
14
a
Year
Ended
December
31,
2020
2019
2018
2017
2016
Class
C
Per
share
operating
performance
(for
a
share
outstanding
throughout
the
year)
Net
asset
value,
beginning
of
year
...................
$13.73
$12.64
$15.35
$15.06
$14.08
Income
from
investment
operations
a
:
Net
investment
income
b
.........................
0.27
c
0.30
0.29
0.41
0.70
d
Net
realized
and
unrealized
gains
(losses)
...........
(0.66)
1.12
(1.49)
0.47
1.41
Total
from
investment
operations
....................
(0.39)
1.42
(1.20)
0.88
2.11
Less
distributions
from:
Net
investment
income
..........................
(0.33)
(0.33)
(0.31)
(0.46)
(0.85)
Net
realized
gains
.............................
—
—
(1.20)
(0.13)
(0.28)
Total
distributions
...............................
(0.33)
(0.33)
(1.51)
(0.59)
(1.13)
Net
asset
value,
end
of
year
.......................
$13.01
$13.73
$12.64
$15.35
$15.06
Total
return
e
...................................
(2.83)%
11.26%
(7.77)%
5.89%
15.10%
Ratios
to
average
net
assets
Expenses
f,g
....................................
1.81%
h
1.78%
1.78%
1.79%
1.79%
h
Expenses
-
incurred
in
connection
with
securities
sold
short
0.02%
0.02%
—%
i
—%
0.01%
Net
investment
income
...........................
2.24%
c
2.22%
1.96%
2.65%
4.74%
d
Supplemental
data
Net
assets,
end
of
year
(000’s)
.....................
$65,715
$112,751
$141,619
$309,160
$34,624
Portfolio
turnover
rate
............................
52.07%
60.96%
115.52%
32.90%
44.04%
a
The
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
repurchas-
es
of
the
Fund’s
shares
in
relation
to
income
earned
and/or
fluctuating
fair
value
of
the
investments
of
the
Fund.
b
Based
on
average
daily
shares
outstanding.
c
Net
investment
income
per
share
includes
approximately
$0.11
per
share
related
to
income
received
in
the
form
of
special
dividends
and
an
adjustment
for
EU
reclaims
in
connection
with
certain
Fund
holdings.
Excluding
this
amount,
the
ratio
of
net
investment
income
to
average
net
assets
would
have
been
1.34%.
d
Net
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
hold-
ings.
Excluding
this
amount,
the
ratio
of
net
investment
income
to
average
net
assets
would
have
been
4.42%.
e
Total
return
does
not
reflect
sales
commissions
or
contingent
deferred
sales
charges,
if
applicable.
f
Includes
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).
g
Benefit
of
expense
reduction
rounds
to
less
than
0.01%.
h
Benefit
of
waiver
and
payments
by
affiliates
rounds
to
less
than
0.01%.
i
Rounds
to
less
than
0.01%.
Franklin
Mutual
Series
Funds
Financial
Highlights
Franklin
Mutual
Quest
Fund
(continued)
franklintempleton.com
The
accompanying
notes
are
an
integral
part
of
these
financial
statements.
Annual
Report
15
a
Year
Ended
December
31,
2020
2019
2018
2017
2016
Class
R
Per
share
operating
performance
(for
a
share
outstanding
throughout
the
year)
Net
asset
value,
beginning
of
year
...................
$13.61
$12.54
$15.40
$15.14
$14.14
Income
from
investment
operations
a
:
Net
investment
income
b
.........................
0.33
c
0.37
0.39
0.50
0.78
d
Net
realized
and
unrealized
gains
(losses)
...........
(0.66)
1.12
(1.53)
0.46
1.43
Total
from
investment
operations
....................
(0.33)
1.49
(1.14)
0.96
2.21
Less
distributions
from:
Net
investment
income
..........................
(0.41)
(0.42)
(0.52)
(0.57)
(0.93)
Net
realized
gains
.............................
—
—
(1.20)
(0.13)
(0.28)
Total
distributions
...............................
(0.41)
(0.42)
(1.72)
(0.70)
(1.21)
Net
asset
value,
end
of
year
.......................
$12.87
$13.61
$12.54
$15.40
$15.14
Total
return
....................................
(2.38)%
11.88%
(7.31)%
6.38%
15.69%
Ratios
to
average
net
assets
Expenses
e,f
....................................
1.31%
g
1.28%
1.28%
1.29%
1.29%
g
Expenses
-
incurred
in
connection
with
securities
sold
short
0.02%
0.02%
—%
h
—%
0.01%
Net
investment
income
...........................
2.72%
c
2.72%
2.46%
3.15%
5.24%
d
Supplemental
data
Net
assets,
end
of
year
(000’s)
.....................
$2,495
$3,415
$2,929
$1,774
$880
Portfolio
turnover
rate
............................
52.07%
60.96%
115.52%
32.90%
44.04%
a
The
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
repurchas-
es
of
the
Fund’s
shares
in
relation
to
income
earned
and/or
fluctuating
fair
value
of
the
investments
of
the
Fund.
b
Based
on
average
daily
shares
outstanding.
c
Net
investment
income
per
share
includes
approximately
$0.11
per
share
related
to
income
received
in
the
form
of
special
dividends
and
an
adjustment
for
EU
reclaims
in
connection
with
certain
Fund
holdings.
Excluding
this
amount,
the
ratio
of
net
investment
income
to
average
net
assets
would
have
been
1.82%.
d
Net
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
hold-
ings.
Excluding
this
amount,
the
ratio
of
net
investment
income
to
average
net
assets
would
have
been
4.92%.
e
Includes
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).
f
Benefit
of
expense
reduction
rounds
to
less
than
0.01%.
g
Benefit
of
waiver
and
payments
by
affiliates
rounds
to
less
than
0.01%.
h
Rounds
to
less
than
0.01%.
Franklin
Mutual
Series
Funds
Financial
Highlights
Franklin
Mutual
Quest
Fund
(continued)
franklintempleton.com
Annual
Report
The
accompanying
notes
are
an
integral
part
of
these
financial
statements.
16
a
Year
Ended
December
31,
2020
2019
2018
2017
2016
Class
R6
Per
share
operating
performance
(for
a
share
outstanding
throughout
the
year)
Net
asset
value,
beginning
of
year
...................
$14.05
$12.94
$15.81
$15.51
$14.45
Income
from
investment
operations
a
:
Net
investment
income
b
.........................
0.41
c
0.46
0.49
0.64
0.88
d
Net
realized
and
unrealized
gains
(losses)
...........
(0.68)
1.15
(1.57)
0.43
1.48
Total
from
investment
operations
....................
(0.27)
1.61
(1.08)
1.07
2.36
Less
distributions
from:
Net
investment
income
..........................
(0.49)
(0.50)
(0.59)
(0.64)
(1.02)
Net
realized
gains
.............................
—
—
(1.20)
(0.13)
(0.28)
Total
distributions
...............................
(0.49)
(0.50)
(1.79)
(0.77)
(1.30)
Net
asset
value,
end
of
year
.......................
$13.29
$14.05
$12.94
$15.81
$15.51
Total
return
....................................
(1.79)%
12.40%
(6.73)%
6.94%
16.44%
Ratios
to
average
net
assets
Expenses
before
waiver
and
payments
by
affiliates
e
.....
0.79%
0.74%
0.74%
0.72%
0.71%
Expenses
net
of
waiver
and
payments
by
affiliates
e,f
.....
0.75%
0.72%
0.72%
0.72%
0.71%
g
Expenses
-
incurred
in
connection
with
securities
sold
short
0.02%
0.02%
—%
h
—%
0.01%
Net
investment
income
...........................
3.28%
c
3.28%
3.02%
3.72%
5.82%
d
Supplemental
data
Net
assets,
end
of
year
(000’s)
.....................
$47,970
$107,723
$116,012
$123,863
$52,277
Portfolio
turnover
rate
............................
52.07%
60.96%
115.52%
32.90%
44.04%
a
The
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
repurchas-
es
of
the
Fund’s
shares
in
relation
to
income
earned
and/or
fluctuating
fair
value
of
the
investments
of
the
Fund.
b
Based
on
average
daily
shares
outstanding.
c
Net
investment
income
per
share
includes
approximately
$0.11
per
share
related
to
income
received
in
the
form
of
special
dividends
and
an
adjustment
for
EU
reclaims
in
connection
with
certain
Fund
holdings.
Excluding
this
amount,
the
ratio
of
net
investment
income
to
average
net
assets
would
have
been
2.38%.
d
Net
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
hold-
ings.
Excluding
this
amount,
the
ratio
of
net
investment
income
to
average
net
assets
would
have
been
5.50%.
e
Include
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).
f
Benefit
of
expense
reduction
rounds
to
less
than
0.01%.
g
Benefit
of
waiver
and
payments
by
affiliates
rounds
to
less
than
0.01%.
h
Rounds
to
less
than
0.01%.
Franklin
Mutual
Series
Funds
Statement
of
Investments,
December
31,
2020
Franklin
Mutual
Quest
Fund
franklintempleton.com
The
accompanying
notes
are
an
integral
part
of
these
financial
statements.
Annual
Report
17
a
a
Country
Shares
a
Value
a
a
a
a
a
a
Common
Stocks
73.2%
Aerospace
&
Defense
2.6%
BAE
Systems
plc
.....................................
United
Kingdom
3,919,425
$
26,139,670
Huntington
Ingalls
Industries,
Inc.
.........................
United
States
356,000
60,690,880
86,830,550
Auto
Components
0.0%
†
a,b,c
International
Automotive
Components
Group
Brazil
LLC
........
Belgium
2,548,299
54,192
Banks
0.5%
b
BNP
Paribas
SA
......................................
France
316,236
16,695,473
Beverages
0.6%
Heineken
NV
........................................
Netherlands
192,840
21,490,759
Biotechnology
0.5%
b
Alexion
Pharmaceuticals,
Inc.
............................
United
States
104,227
16,284,427
Chemicals
1.2%
d,e
Advanced
Emissions
Solutions,
Inc.
.......................
United
States
1,724,209
9,483,150
f
Covestro
AG,
144A,
Reg
S
..............................
Germany
474,675
29,247,558
38,730,708
Commercial
Services
&
Supplies
2.9%
b
G4S
plc
............................................
United
Kingdom
27,584,520
95,822,495
Diversified
Financial
Services
3.2%
M&G
plc
............................................
United
Kingdom
5,362,814
14,476,213
Voya
Financial,
Inc.
....................................
United
States
1,557,986
91,625,157
106,101,370
Diversified
Telecommunication
Services
8.7%
Deutsche
Telekom
AG
..................................
Germany
930,921
16,992,424
b
Intelsat
SA
..........................................
United
States
433,269
173,741
b
Liberty
Global
plc,
C
...................................
United
Kingdom
3,543,274
83,798,430
a,b,c,d
Sorenson
Communications
LLC,
Membership
Interests
.........
United
States
224,279
168,209,173
a,c
Windstream
Holdings,
Inc.
...............................
United
States
1,623,438
21,492,696
290,666,464
Energy
Equipment
&
Services
0.0%
†
Schlumberger
NV
.....................................
United
States
11,332
247,378
Entertainment
0.5%
b
Walt
Disney
Co.
(The)
..................................
United
States
102,500
18,570,950
Equity
Real
Estate
Investment
Trusts
(REITs)
1.1%
Brixmor
Property
Group,
Inc.
.............................
United
States
835,200
13,822,560
Uniti
Group,
Inc.
......................................
United
States
1,379,640
16,183,177
Vornado
Realty
Trust
...................................
United
States
176,000
6,571,840
36,577,577
Food
Products
0.1%
Conagra
Brands,
Inc.
..................................
United
States
131,612
4,772,251
Health
Care
Equipment
&
Supplies
0.6%
b
Envista
Holdings
Corp.
.................................
United
States
204,400
6,894,412
Medtronic
plc
........................................
United
States
102,143
11,965,031
18,859,443
Independent
Power
and
Renewable
Electricity
Producers
1.8%
Vistra
Corp.
..........................................
United
States
3,073,147
60,418,070
Franklin
Mutual
Series
Funds
Statement
of
Investments
Franklin
Mutual
Quest
Fund
(continued)
franklintempleton.com
Annual
Report
The
accompanying
notes
are
an
integral
part
of
these
financial
statements.
18
a
a
Country
Shares
a
Value
a
a
a
a
a
a
Common
Stocks
(continued)
Insurance
14.0%
ASR
Nederland
NV
....................................
Netherlands
1,510,686
$
60,446,648
b
Brighthouse
Financial,
Inc.
..............................
United
States
328,459
11,891,858
b
Conduit
Holdings
Ltd.
..................................
United
States
2,455,000
16,903,122
Direct
Line
Insurance
Group
plc
..........................
United
Kingdom
8,967,550
39,224,302
Everest
Re
Group
Ltd.
.................................
United
States
334,566
78,318,555
Hartford
Financial
Services
Group,
Inc.
(The)
................
United
States
1,129,790
55,337,114
NN
Group
NV
........................................
Netherlands
1,223,210
52,881,821
RSA
Insurance
Group
plc
...............................
United
Kingdom
11,640,959
107,906,330
Willis
Towers
Watson
plc
................................
United
States
220,986
46,557,330
469,467,080
Interactive
Media
&
Services
0.6%
b
Baidu,
Inc.,
ADR
......................................
China
92,993
20,108,806
IT
Services
0.9%
Cognizant
Technology
Solutions
Corp.,
A
....................
United
States
380,689
31,197,464
Machinery
1.1%
b
Navistar
International
Corp.
..............................
United
States
838,959
36,880,638
Media
1.7%
b
Charter
Communications,
Inc.,
A
..........................
United
States
6,670
4,412,538
b
Clear
Channel
Outdoor
Holdings,
Inc.
......................
United
States
17,622,660
29,077,389
b,e
iHeartMedia
,
Inc.,
A
....................................
United
States
1,623,513
21,073,199
a,b
iHeartMedia
,
Inc.,
B
...................................
United
States
23,770
286,937
b
Lee
Enterprises,
Inc.
...................................
United
States
1,154,653
1,454,863
56,304,926
Oil,
Gas
&
Consumable
Fuels
4.7%
BP
plc
..............................................
United
Kingdom
13,624,693
47,018,748
ENEOS
Holdings,
Inc.
..................................
Japan
5,778,256
20,753,775
Royal
Dutch
Shell
plc,
A
................................
Netherlands
1,122,432
19,758,959
b
Whiting
Petroleum
Corp.
................................
United
States
163,397
4,084,925
Williams
Cos.,
Inc.
(The)
................................
United
States
3,292,500
66,014,625
157,631,032
Pharmaceuticals
6.8%
b
Elanco
Animal
Health,
Inc.
...............................
United
States
512,220
15,709,787
Eli
Lilly
and
Co.
.......................................
United
States
57,700
9,742,068
GlaxoSmithKline
plc
...................................
United
Kingdom
4,896,677
89,605,771
Merck
&
Co.,
Inc.
.....................................
United
States
911,700
74,577,060
Novartis
AG,
ADR
.....................................
Switzerland
394,006
37,205,987
226,840,673
Semiconductors
&
Semiconductor
Equipment
2.3%
b
Inphi
Corp.
..........................................
United
States
184,400
29,590,668
Xilinx,
Inc.
...........................................
United
States
341,100
48,357,747
77,948,415
Software
3.8%
b
Check
Point
Software
Technologies
Ltd.
....................
Israel
418,311
55,597,715
NortonLifeLock
,
Inc.
...................................
United
States
609,904
12,673,805
Oracle
Corp.
.........................................
United
States
912,426
59,024,838
127,296,358
Specialty
Retail
2.7%
Tiffany
&
Co.
.........................................
United
States
569,896
74,912,829
a,b,d
TRU
Kids
Parent
LLC
..................................
United
States
7,104
16,218,825
Franklin
Mutual
Series
Funds
Statement
of
Investments
Franklin
Mutual
Quest
Fund
(continued)
franklintempleton.com
The
accompanying
notes
are
an
integral
part
of
these
financial
statements.
Annual
Report
19
a
a
Country
Shares
a
Value
a
a
a
a
a
a
Common
Stocks
(continued)
Specialty
Retail
(continued)
a,b,d
Wayne
Services
Legacy,
Inc.
.............................
United
States
7,104
$
—
91,131,654
Technology
Hardware,
Storage
&
Peripherals
1.1%
Western
Digital
Corp.
..................................
United
States
637,782
35,326,745
Tobacco
7.3%
Altria
Group,
Inc.
......................................
United
States
1,494,845
61,288,645
British
American
Tobacco
plc
.............................
United
Kingdom
2,788,247
103,554,329
Imperial
Brands
plc
....................................
United
Kingdom
3,824,765
80,228,721
245,071,695
Wireless
Telecommunication
Services
1.9%
Vodafone
Group
plc
...................................
United
Kingdom
38,321,892
62,947,845
Total
Common
Stocks
(Cost
$2,250,230,487)
....................................
2,450,275,438
Convertible
Preferred
Stocks
0.7%
Multi-Utilities
0.7%
Sempra
Energy,
6%,
A
.................................
United
States
225,650
22,510,844
Total
Convertible
Preferred
Stocks
(Cost
$22,951,706)
...........................
22,510,844
Warrants
Warrants
0.0%
†
Diversified
Telecommunication
Services
0.0%
†
a,b
Windstream
Holdings,
Inc.,
9/21/55
........................
United
States
91,545
1,211,964
Media
0.0%
†
a,b
Cxloyalty
Group
Holdings,
Inc.,
4/10/24
.....................
United
States
48,381
—
b
iHeartMedia
,
Inc.,
5/01/39
...............................
United
States
1,872
24,297
a,b
Lee
Enterprises,
Inc.,
12/31/22
...........................
United
States
1,110,000
37,851
62,148
Software
0.0%
†
b
Avaya
Holdings
Corp.,
12/15/22
..........................
United
States
338,090
1,098,793
Total
Warrants
(Cost
$9,283,796)
..............................................
2,372,905
Principal
Amount
*
Corporate
Bonds
8.2%
Airlines
1.8%
f
American
Airlines,
Inc.
,
Senior
Secured
Note
,
144A,
11.75
%
,
7/15/25
United
States
39,357,000
45,447,495
f
Mileage
Plus
Holdings
LLC
/
Mileage
Plus
Intellectual
Property
Assets
Ltd.
,
Senior
Secured
Note
,
144A,
6.5
%
,
6/20/27
.......
United
States
15,498,000
16,689,409
62,136,904
Diversified
Telecommunication
Services
3.1%
g
Frontier
Communications
Corp.
,
Senior
Note,
8.875%,
9/15/20
..........................
United
States
21,382,000
10,370,270
Senior
Note,
10.5%,
9/15/22
...........................
United
States
77,063,000
40,343,636
Senior
Note,
11%,
9/15/25
.............................
United
States
41,812,000
22,029,698
Intelsat
Jackson
Holdings
SA
,
Senior
Bond
,
5.5
%
,
8/01/23
......
Luxembourg
45,750,000
31,110,000
103,853,604
Franklin
Mutual
Series
Funds
Statement
of
Investments
Franklin
Mutual
Quest
Fund
(continued)
franklintempleton.com
Annual
Report
The
accompanying
notes
are
an
integral
part
of
these
financial
statements.
20
a
a
Country
Principal
Amount
*
a
Value
a
a
a
a
a
a
Corporate
Bonds
(continued)
Machinery
0.7%
f
Navistar
International
Corp.
,
Senior
Note,
144A,
6.625%,
11/01/25
....................
United
States
13,500,000
$
14,160,150
Senior
Secured
Note,
144A,
9.5%,
5/01/25
................
United
States
7,061,400
7,939,662
22,099,812
Media
0.7%
Charter
Communications
Operating
LLC
/
Charter
Communications
Operating
Capital
,
Senior
Secured
Note
,
4.5
%
,
2/01/24
.......
United
States
1,642,000
1,822,066
iHeartCommunications
,
Inc.
,
Senior
Note
,
8.375
%
,
5/01/27
......
United
States
20,000,000
21,383,500
23,205,566
Multiline
Retail
0.2%
f
Macy's,
Inc.
,
Senior
Secured
Note
,
144A,
8.375
%
,
6/15/25
......
United
States
6,246,000
6,943,053
Software
1.3%
f
Veritas
US,
Inc.
/
Veritas
Bermuda
Ltd.
,
Senior
Note,
144A,
10.5%,
2/01/24
......................
United
States
30,222,000
30,846,538
Senior
Secured
Note,
144A,
7.5%,
2/01/23
................
United
States
3,682,000
3,697,741
Senior
Secured
Note,
144A,
7.5%,
9/01/25
................
United
States
8,935,000
9,180,712
43,724,991
Wireless
Telecommunication
Services
0.4%
f,g
Intelsat
Connect
Finance
SA
,
Senior
Note
,
144A,
9.5
%
,
2/15/23
..
Luxembourg
48,845,000
13,340,791
Total
Corporate
Bonds
(Cost
$339,351,325)
.....................................
275,304,721
h
Senior
Floating
Rate
Interests
4.1%
i
Diversified
Telecommunication
Services
0.5%
Intelsat
Jackson
Holdings
SA,
Term
Loan,
B3,
8%,
(1-month
USD
LIBOR
+
4.75%),
11/27/23
.............................
Luxembourg
8,000,000
8,134,280
d
Sorenson
Communications
LLC,
First
Lien,
Initial
Term
Loan,
6.754%,
(3-month
USD
LIBOR
+
6.5%),
4/29/24
.............
United
States
8,901,584
8,929,446
17,063,726
a
a
a
a
a
a
Health
Care
Providers
&
Services
2.9%
j
Envision
Healthcare
Corp.,
2020
New
Term
Loan,
5.5%,
PIK,
(1-month
USD
LIBOR),
10/10/25
........................
United
States
78,167,194
60,657,195
Envision
Healthcare
Corp.,
Initial
Term
Loan,
3.896%,
(1-month
USD
LIBOR
+
3.75%),
10/10/25
.............................
United
States
40,229,123
33,737,349
94,394,544
a
a
a
a
a
a
Machinery
0.3%
i
Navistar,
Inc.,
Term
Loan,
B,
3.66%,
(1-month
USD
LIBOR
+
3.5%),
11/06/24
..........................................
United
States
10,015,695
10,024,459
Software
0.4%
i
Veritas
US,
Inc.,
Term
Loan,
B,
6.5%,
(3-month
USD
LIBOR
+
5.5%),
9/01/25
...........................................
United
States
13,864,253
13,845,189
Total
Senior
Floating
Rate
Interests
(Cost
$211,386,972)
.........................
135,327,918
Shares
Companies
in
Liquidation
0.0%
†
a,b,k
Bosgen
Liquidating
Trust
c/o
Verdolino
and
Lowey
P.C.,
Contingent
Distribution
........................................
Netherlands
159,828
—
a,b,k
Tribune
Media,
Litigation
Trust,
Contingent
Distribution
.........
United
States
1,531,470
—
Franklin
Mutual
Series
Funds
Statement
of
Investments
Franklin
Mutual
Quest
Fund
(continued)
franklintempleton.com
The
accompanying
notes
are
an
integral
part
of
these
financial
statements.
Annual
Report
21
a
a
Country
Shares
a
Value
a
a
a
a
a
a
Companies
in
Liquidation
(continued)
a,b,k
Vistra
Energy
Corp.,
Litigation
Trust,
Contingent
Distribution
.....
United
States
104,175,133
$
156,262
a,b,k
Walter
Energy,
Inc.,
Litigation
Trust,
Contingent
Distribution
......
United
States
7,443,000
—
Total
Companies
in
Liquidation
(Cost
$3,234,626)
...............................
156,262
Total
Long
Term
Investments
(Cost
$2,836,438,912)
.............................
2,885,948,088
a
Short
Term
Investments
13.7%
a
a
Country
Principal
Amount
*
a
Value
a
a
a
a
a
a
U.S.
Government
and
Agency
Securities
13.7%
l
FHLB,
1/04/21
.......................................
United
States
39,000,000
39,000,000
l
U.S.
Treasury
Bills
,
1/05/21
...........................................
United
States
84,500,000
84,500,012
1/21/21
...........................................
United
States
50,000,000
49,999,173
1/26/21
...........................................
United
States
4,500,000
4,499,897
2/04/21
...........................................
United
States
50,000,000
49,998,062
m
2/11/21
...........................................
United
States
50,000,000
49,997,361
m
2/18/21
...........................................
United
States
50,000,000
49,996,563
3/09/21
...........................................
United
States
50,000,000
49,993,334
m
4/27/21
...........................................
United
States
50,000,000
49,989,328
6/01/21
...........................................
United
States
20,000,000
19,993,833
m
6/10/21
...........................................
United
States
10,000,000
9,996,827
418,964,390
Total
U.S.
Government
and
Agency
Securities
(Cost
$457,946,842)
................
457,964,390
n
Investments
from
Cash
Collateral
Received
for
Loaned
Securities
0.0%
†
Shares
Money
Market
Funds
0.0%
†
o,p
Institutional
Fiduciary
Trust
-
Money
Market
Portfolio,
0%
........
United
States
391,000
391,000
Principal
Amount
*
Repurchase
Agreements
0.0%
†
q
Joint
Repurchase
Agreement,
BofA
Securities,
Inc.,
0.06%,
1/04/21
(Maturity
Value
$36,764)
Collateralized
by
U.S.
Treasury
Note,
1.5%,
11/30/24
(valued
at
$37,499)
..........................................
36,764
36,764
Total
Investments
from
Cash
Collateral
Received
for
Loaned
Securities
(Cost
$427,764)
.............................................................
427,764
Total
Short
Term
Investments
(Cost
$458,374,606
)
...............................
458,392,154
a
Total
Investments
(Cost
$3,294,813,518)
99.9%
..................................
$3,344,340,242
Securities
Sold
Short
(4.1)%
..................................................
(135,771,733)
Other
Assets,
less
Liabilities
4.2%
.............................................
139,903,537
Net
Assets
100.0%
...........................................................
$3,348,472,046
Franklin
Mutual
Series
Funds
Statement
of
Investments
Franklin
Mutual
Quest
Fund
(continued)
franklintempleton.com
Annual
Report
The
accompanying
notes
are
an
integral
part
of
these
financial
statements.
22
a
a
a
Country
Shares
a
Value
Securities
Sold
Short
(4.1)%
Common
Stocks
(4.1)%
Insurance
(1.5)%
r
Aon
plc,
A
...........................................
United
States
238,687
(50,427,402)
Pharmaceuticals
(0.4)%
r
AstraZeneca
plc,
ADR
..................................
United
Kingdom
221,408
(11,068,186)
r
Semiconductors
&
Semiconductor
Equipment
(2.2)%
Advanced
Micro
Devices,
Inc.
............................
United
States
587,851
(53,911,815)
Marvell
Technology
Group
Ltd.
...........................
United
States
428,362
(20,364,330)
(74,276,145)
Total
Common
Stocks
(Proceeds
$134,701,980)
.................................
(135,771,733)
Total
Securities
Sold
Short
(Proceeds
$134,701,980)
.............................
$(135,771,733)
*
The
principal
amount
is
stated
in
U.S.
dollars
unless
otherwise
indicated.
†
Rounds
to
less
than
0.1%
of
net
assets.
a
Fair
valued
using
significant
unobservable
inputs.
See
Note
15
regarding
fair
value
measurements.
b
Non-income
producing.
c
See
Note
11
regarding
restricted
securities.
d
See
Note
13
regarding
holdings
of
5%
voting
securities.
e
A
portion
or
all
of
the
security
is
on
loan
at
December
31,
2020.
See
Note
1(f).
f
Security
was
purchased
pursuant
to
Rule
144A
or
Regulation
S
under
the
Securities
Act
of
1933.
144A
securities
may
be
sold
in
transactions
exempt
from
registration
only
to
qualified
institutional
buyers
or
in
a
public
offering
registered
under
the
Securities
Act
of
1933.
Regulation
S
securities
cannot
be
sold
in
the
United
States
without
either
an
effective
registration
statement
filed
pursuant
to
the
Securities
Act
of
1933,
or
pursuant
to
an
exemption
from
registration.
At
December
31,
2020,
the
aggregate
value
of
these
securities
was
$177,493,109,
representing
5.3%
of
net
assets.
g
See
Note
8
regarding
credit
risk
and
defaulted
securities.
h
See
Note
1(g)
regarding
senior
floating
rate
interests.
i
The
coupon
rate
shown
represents
the
rate
at
period
end.
j
Income
may
be
received
in
additional
securities
and/or
cash.
k
Contingent
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.
l
The
security
was
issued
on
a
discount
basis
with
no
stated
coupon
rate.
m
A
portion
or
all
of
the
security
has
been
segregated
as
collateral
for
securities
sold
short
and/or
open
forward
exchange
contracts.
At
December
31,
2020,
the
aggregate
value
of
these
securities
pledged
amounted
to
$84,795,540,
representing
2.5%
of
net
assets.
n
See
Note
1(f)
regarding
securities
on
loan.
o
See
Note
3(f)
regarding
investments
in
affiliated
management
investment
companies.
p
The
rate
shown
is
the
annualized
seven-day
effective
yield
at
period
end.
q
See
Note
1(c)
regarding
joint
repurchase
agreement.
r
See
Note
1(e)
regarding
securities
sold
short.
Franklin
Mutual
Series
Funds
Statement
of
Investments
Franklin
Mutual
Quest
Fund
(continued)
franklintempleton.com
The
accompanying
notes
are
an
integral
part
of
these
financial
statements.
Annual
Report
23
At
December
31,
2020,
the
Fund
had
the
following futures
contracts
outstanding.
See
Note
1(d). 
At
December
31,
2020,
the
Fund
had
the
following
forward
exchange
contracts
outstanding.
See
Note
1
(
d
). 
Futures
Contracts
Description
Type
Number
of
Contracts
Notional
Amount
*
Expiration
Date
Value/
Unrealized
Appreciation
(Depreciation)
Foreign
exchange
contracts
Foreign
Exchange
EUR/USD
...................
Short
243
$
37,197,225
3/15/21
$
(219,017)
Foreign
Exchange
GBP/USD
...................
Short
735
62,746,031
3/15/21
(932,055)
Total
Futures
Contracts
......................................................................
$(1,151,072)
*
As
of
period
end.
Forward
Exchange
Contracts
Currency
Counter-
party
a
Type
Quantity
Contract
Amount
*
Settlement
Date
Unrealized
Appreciation
Unrealized
Depreciation
a
a
a
a
a
a
a
a
OTC
Forward
Exchange
Contracts
Euro
.............
HSBK
Sell
6,513,531
7,678,591
1/15/21
$
—
$
(280,966)
Euro
.............
SSBT
Sell
13,417,827
15,304,105
1/15/21
—
(1,092,524)
Euro
.............
UBSW
Sell
14,061,801
16,068,971
1/15/21
—
(1,114,595)
British
Pound
......
HSBK
Buy
3,099,049
2,271,422
1/19/21
7,746
—
British
Pound
......
SSBT
Sell
23,411,716
29,325,796
1/19/21
—
(2,696,164)
British
Pound
......
BNY
Sell
34,257,636
44,887,393
2/16/21
—
(1,978,802)
British
Pound
......
BOFA
Sell
25,261,406
33,326,922
2/16/21
—
(1,231,969)
British
Pound
......
HSBK
Sell
78,783,947
102,847,913
2/16/21
—
(4,932,546)
British
Pound
......
SSBT
Sell
6,623,833
8,786,581
2/16/21
—
(275,161)
British
Pound
......
UBSW
Sell
5,904,520
7,750,624
2/16/21
—
(327,061)
Euro
.............
BOFA
Sell
6,789,794
8,276,574
2/23/21
—
(27,920)
Euro
.............
HSBK
Sell
4,900,753
6,007,705
2/23/21
20,434
(6,766)
Euro
.............
SSBT
Sell
904,233
1,080,170
2/23/21
—
(25,784)
Euro
.............
UBSW
Sell
10,580,355
12,550,886
2/23/21
—
(389,786)
Euro
.............
BNY
Sell
3,573,000
4,170,870
4/07/21
—
(203,495)
Euro
.............
HSBK
Sell
1,897,322
2,253,252
4/07/21
—
(69,608)
Euro
.............
SSBT
Sell
1,169,814
1,387,517
4/07/21
—
(44,668)
Euro
.............
UBSW
Sell
3,051,031
3,626,683
4/07/21
—
(108,643)
British
Pound
......
BNY
Sell
1,000,000
1,337,585
4/23/21
—
(30,948)
British
Pound
......
BOFA
Sell
10,023,218
13,508,467
4/23/21
—
(208,638)
British
Pound
......
HSBK
Sell
118,740,335
158,414,579
4/23/21
—
(4,085,487)
British
Pound
......
SSBT
Sell
22,087,585
29,608,861
4/23/21
—
(618,727)
British
Pound
......
UBSW
Sell
37,842,378
50,633,173
4/23/21
—
(1,155,371)
Total
Forward
Exchange
Contracts
...................................................
$28,180
$(20,905,629)
Net
unrealized
appreciation
(depreciation)
............................................
$(20,877,449)
*
In
U.S.
dollars
unless
otherwise
indicated.
a
May
be
comprised
of
multiple
contracts
with
the
same
counterparty,
currency
and
settlement
date.
Franklin
Mutual
Series
Funds
Statement
of
Investments
Franklin
Mutual
Quest
Fund
(continued)
franklintempleton.com
Annual
Report
The
accompanying
notes
are
an
integral
part
of
these
financial
statements.
24
See
Note
12
regarding
other
derivative
information.
See
Abbreviations
on
page
46
.
Franklin
Mutual
Series
Funds
Financial
Statements
Statement
of
Assets
and
Liabilities
December
31,
2020
franklintempleton.com
The
accompanying
notes
are
an
integral
part
of
these
financial
statements.
Annual
Report
25
Franklin
Mutual
Quest
Fund
Assets:
Investments
in
securities:
Cost
-
Unaffiliated
issuers
...................................................................
$3,224,413,148
Cost
-
Non-controlled
affiliates
(Note
3
f
and
13
)
...................................................
70,363,606
Cost
-
Unaffiliated
repurchase
agreements
......................................................
36,764
Value
-
Unaffiliated
issuers
(Includes
securities
loaned
of
$421,850)
...................................
$3,141,071,884
Value
-
Non-controlled
affiliates
(Note
3
f
and
13
)
..................................................
203,231,594
Value
-
Unaffiliated
repurchase
agreements
......................................................
36,764
Cash
....................................................................................
1,294,956
Foreign
currency,
at
value
(cost
$2,577,096)
......................................................
2,576,684
Receivables:
Investment
securities
sold
...................................................................
3,989,649
Capital
shares
sold
........................................................................
860,007
Dividends
and
interest
.....................................................................
15,105,984
European
Union
tax
reclaims
(Note
1
h
)
.........................................................
13,335,338
Deposits
with
brokers
for:
Securities
sold
short
.....................................................................
137,533,971
Futures
contracts
........................................................................
2,548,761
Variation
margin
on
futures
contracts
...........................................................
1,500
Unrealized
appreciation
on
OTC
forward
exchange
contracts
..........................................
28,180
Other
assets
..............................................................................
722,216
Total
assets
..........................................................................
3,522,337,488
Liabilities:
Payables:
Investment
securities
purchased
..............................................................
8,160,166
Capital
shares
redeemed
...................................................................
5,393,537
Management
fees
.........................................................................
1,912,767
Distribution
fees
..........................................................................
227,059
Transfer
agent
fees
........................................................................
265,671
Trustees'
fees
and
expenses
.................................................................
352,002
Securities
sold
short,
at
value
(proceeds
$134,701,980)
..............................................
135,771,733
Unrealized
depreciation
on
OTC
forward
exchange
contracts
..........................................
20,905,629
Payable
upon
return
of
securities
loaned
(Note
1
f
)
..................................................
427,764
Accrued
expenses
and
other
liabilities
...........................................................
449,114
Total
liabilities
.........................................................................
173,865,442
Net
assets,
at
value
.................................................................
$3,348,472,046
Net
assets
consist
of:
Paid-in
capital
.............................................................................
$3,918,791,438
Total
distributable
earnings
(losses)
.............................................................
(570,319,392)
Net
assets,
at
value
.................................................................
$3,348,472,046
Franklin
Mutual
Series
Funds
Financial
Statements
Statement
of
Assets
and
Liabilities
(continued)
December
31,
2020
franklintempleton.com
Annual
Report
The
accompanying
notes
are
an
integral
part
of
these
financial
statements.
26
Franklin
Mutual
Quest
Fund
Class
Z:
Net
assets,
at
value
.......................................................................
$2,472,118,489
Shares
outstanding
........................................................................
185,779,906
Net
asset
value
and
maximum
offering
price
per
share
.............................................
$13.31
Class
A:
Net
assets,
at
value
.......................................................................
$760,172,992
Shares
outstanding
........................................................................
58,075,087
Net
asset
value
per
share
a
..................................................................
$13.09
Maximum
offering
price
per
share
(net
asset
value
per
share
÷
94.50%)
................................
$13.85
Class
C:
Net
assets,
at
value
.......................................................................
$65,714,727
Shares
outstanding
........................................................................
5,052,969
Net
asset
value
and
maximum
offering
price
per
share
a
.............................................
$13.01
Class
R:
Net
assets,
at
value
.......................................................................
$2,495,352
Shares
outstanding
........................................................................
193,876
Net
asset
value
and
maximum
offering
price
per
share
.............................................
$12.87
Class
R6:
Net
assets,
at
value
.......................................................................
$47,970,486
Shares
outstanding
........................................................................
3,609,017
Net
asset
value
and
maximum
offering
price
per
share
.............................................
$13.29
a
Redemption
price
is
equal
to
net
asset
value
less
contingent
deferred
sales
charges,
if
applicable.
Franklin
Mutual
Series
Funds
Financial
Statements
Statement
of
Operations
for
the
year
ended
December
31,
2020
franklintempleton.com
The
accompanying
notes
are
an
integral
part
of
these
financial
statements.
Annual
Report
27
Franklin
Mutual
Quest
Fund
Investment
income:
Dividends:
(net
of
foreign
taxes
of
$1,538,105)
Unaffiliated
issuers
........................................................................
$87,148,568
Non-controlled
affiliates
(Note
3
f
and
13
)
........................................................
431,052
Interest:
Unaffiliated
issuers
........................................................................
45,088,363
Adjustment
for
uncollectible
interest
(Note
8
)
(10,102,743)
Non-controlled
affiliates
(Note
3
f
and
13
)
........................................................
3,094,284
Income
from
securities
loaned:
Unaffiliated
entities
(net
of
fees
and
rebates)
.....................................................
54,458
Non-controlled
affiliates
(Note
3
f
)
.............................................................
4,386
Other
income
(Note
1
h
)
......................................................................
12,941,680
Total
investment
income
...................................................................
138,660,048
Expenses:
Management
fees
(Note
3
a
)
...................................................................
23,224,095
Distribution
fees:
(Note
3c
)
    Class
A
................................................................................
2,017,871
    Class
C
................................................................................
792,254
    Class
R
................................................................................
14,244
Transfer
agent
fees:
(Note
3e
)
    Class
Z
................................................................................
1,898,702
    Class
A
................................................................................
620,948
    Class
C
................................................................................
61,219
    Class
R
................................................................................
2,260
    Class
R6
...............................................................................
43,217
Custodian
fees
(Note
4
)
......................................................................
80,782
Reports
to
shareholders
......................................................................
291,602
Registration
and
filing
fees
....................................................................
112,501
Professional
fees
...........................................................................
175,592
Trustees'
fees
and
expenses
..................................................................
237,286
Dividends
on
securities
sold
short
..............................................................
845,982
Other
....................................................................................
195,730
Total
expenses
.........................................................................
30,614,285
Expense
reductions
(Note
4
)
...............................................................
(42,804)
Expenses
waived/paid
by
affiliates
(Note
3f
and
3g)
..............................................
(29,894)
Net
expenses
.........................................................................
30,541,587
Net
investment
income
................................................................
108,118,461
Franklin
Mutual
Series
Funds
Financial
Statements
Statement
of
Operations
(continued)
for
the
year
ended
December
31,
2020
franklintempleton.com
Annual
Report
The
accompanying
notes
are
an
integral
part
of
these
financial
statements.
28
Franklin
Mutual
Quest
Fund
Realized
and
unrealized
gains
(losses):
Net
realized
gain
(loss)
from:
Investments:
Unaffiliated
issuers
......................................................................
(273,578,231)
Non-controlled
affiliates
(Note
3
f
and
13
)
......................................................
1,557,129
Written
options
...........................................................................
1,954,918
Foreign
currency
transactions
................................................................
(780,607)
Forward
exchange
contracts
.................................................................
(4,048,697)
Futures
contracts
.........................................................................
(3,862,214)
Securities
sold
short
.......................................................................
(2,724,003)
Net
realized
gain
(loss)
..................................................................
(281,481,705)
Net
change
in
unrealized
appreciation
(depreciation)
on:
Investments:
Unaffiliated
issuers
......................................................................
(1,726,496)
Non-controlled
affiliates
(Note
3
f
and
13
)
......................................................
9,089,410
Translation
of
other
assets
and
liabilities
denominated
in
foreign
currencies
..............................
524,696
Written
options
...........................................................................
(34,125)
Forward
exchange
contracts
.................................................................
(7,813,363)
Futures
contracts
.........................................................................
(61,775)
Securities
sold
short
.......................................................................
4,752,276
Net
change
in
unrealized
appreciation
(depreciation)
............................................
4,730,623
Net
realized
and
unrealized
gain
(loss)
............................................................
(276,751,082)
Net
increase
(decrease)
in
net
assets
resulting
from
operations
..........................................
$(168,632,621)
Franklin
Mutual
Series
Funds
Financial
Statements
Statements
of
Changes
in
Net
Assets
franklintempleton.com
The
accompanying
notes
are
an
integral
part
of
these
financial
statements.
Annual
Report
29
Franklin
Mutual
Quest
Fund
Year
Ended
December
31,
2020
Year
Ended
December
31,
2019
Increase
(decrease)
in
net
assets:
Operations:
Net
investment
income
.................................................
$108,118,461
$140,355,063
Net
realized
gain
(loss)
.................................................
(281,481,705)
(205,867,676)
Net
change
in
unrealized
appreciation
(depreciation)
...........................
4,730,623
583,830,277
Net
increase
(decrease)
in
net
assets
resulting
from
operations
................
(168,632,621)
518,317,664
Distributions
to
shareholders:
Class
Z
.............................................................
(88,513,242)
(104,723,243)
Class
A
.............................................................
(25,836,539)
(33,694,633)
Class
C
.............................................................
(1,653,400)
(2,725,827)
Class
R
.............................................................
(79,463)
(102,662)
Class
R6
............................................................
(1,787,534)
(3,763,980)
Total
distributions
to
shareholders
..........................................
(117,870,178)
(145,010,345)
Capital
share
transactions:
(Note
2
)
Class
Z
.............................................................
(375,723,823)
(273,149,893)
Class
A
.............................................................
(202,140,515)
(122,215,243)
Class
C
.............................................................
(38,007,161)
(40,715,515)
Class
R
.............................................................
(650,224)
223,722
Class
R6
............................................................
(50,477,828)
(18,209,640)
Total
capital
share
transactions
............................................
(666,999,551)
(454,066,569)
Net
increase
(decrease)
in
net
assets
...................................
(953,502,350)
(80,759,250)
Net
assets:
Beginning
of
year
.......................................................
4,301,974,396
4,382,733,646
End
of
year
...........................................................
$3,348,472,046
$4,301,974,396
Franklin
Mutual
Series
Funds
Notes
to
Financial
Statements
Franklin
Mutual
Quest
Fund
30
franklintempleton.com
Annual
Report
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 six
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.
Securities
denominated
in
a
foreign
currency
are
converted
into
their
U.S.
dollar
equivalent
at
the
foreign
exchange
rate
in
effect
at
4
p.m.
Eastern
time
on
the
date
that
the
values
of
the
foreign
debt
securities
are
determined.
Investments
in 
open-end mutual
funds
are
valued
at
the
closing
NAV.
Investments
in
repurchase
agreements
are
valued
at
cost,
which
approximates
fair
value.
Certain
derivative
financial
instruments
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
Franklin
Mutual
Series
Funds
Notes
to
Financial
Statements
31
franklintempleton.com
Annual
Report
Franklin
Mutual
Quest
Fund
(continued)
such
investments,
the
fair
values
may
differ
significantly
from
the
values
that
would
have
been
used
had
an
active
market
existed.
Trading
in
securities
on
foreign
securities
stock
exchanges
and
OTC
markets
may
be
completed
before
4
p.m.
Eastern
time.
In
addition,
trading
in
certain
foreign
markets
may
not
take
place
on
every
Fund's
business
day. Events
can occur
between
the
time
at
which
trading
in
a
foreign
security
is
completed
and
4
p.m.
Eastern
time
that
might
call
into
question
the
reliability
of
the
value
of
a
portfolio
security
held
by
the
Fund.
As
a
result,
differences
may
arise
between
the
value
of
the
Fund's
portfolio
securities
as
determined
at
the
foreign
market
close
and
the
latest
indications
of
value
at
4
p.m.
Eastern
time. In
order
to
minimize
the
potential
for
these
differences,
an
independent
pricing
service
may
be
used
to
adjust
the
value
of
the
Fund's
portfolio
securities
to
the
latest
indications
of
fair
value
at
4
p.m.
Eastern
time.
At
December
31,
2020,
certain
securities
may
have
been
fair
valued
using
these
procedures,
in
which
case
the
securities
were
categorized
as
Level
2
inputs
within
the
fair
value
hierarchy.
See
the
Fair
Value
Measurements
note
for
more
information.
When
the
last
day
of
the
reporting
period
is
a
non-business
day,
certain
foreign
markets
may
be
open
on
those
days
that
the
Fund's
NAV
is
not
calculated,
which
could
result
in
differences
between
the
value
of
the
Fund's
portfolio
securities
on
the
last
business
day
and
the
last
calendar
day
of
the
reporting
period.
Any
security
valuation
changes
due
to
an
open
foreign
market
are
adjusted
and
reflected
by
the
Fund
for
financial
reporting
purposes.
b.
Foreign
Currency
Translation 
Portfolio
securities
and
other
assets
and
liabilities
denominated
in
foreign
currencies
are
translated
into
U.S.
dollars
based
on
the
exchange
rate
of
such
currencies
against
U.S.
dollars
on
the
date
of
valuation.
The
Fund
may
enter
into
foreign
currency
exchange
contracts
to
facilitate
transactions
denominated
in
a
foreign
currency.
Purchases
and
sales
of
securities,
income
and
expense
items
denominated
in
foreign
currencies
are
translated
into
U.S.
dollars
at
the
exchange
rate
in
effect
on
the
transaction
date.
Portfolio
securities
and
assets
and
liabilities
denominated
in
foreign
currencies
contain
risks
that
those
currencies
will
decline
in
value
relative
to
the
U.S.
dollar.
Occasionally,
events
may
impact
the
availability
or
reliability
of
foreign
exchange
rates
used
to
convert
the
U.S.
dollar
equivalent
value.
If
such
an
event
occurs,
the
foreign
exchange
rate
will
be
valued
at
fair
value
using
procedures
established
and
approved
by
the
Board.
The
Fund
does
not
separately
report
the
effect
of
changes
in
foreign
exchange
rates
from
changes
in
market
prices
on
securities
held.
Such
changes
are
included
in
net
realized
and
unrealized
gain
or
loss
from
investments
in
the
Statement of
Operations.
Realized
foreign
exchange
gains
or
losses
arise
from
sales
of
foreign
currencies,
currency
gains
or
losses
realized
between
the
trade
and
settlement
dates
on
securities
transactions
and
the
difference
between
the
recorded
amounts
of
dividends,
interest,
and
foreign
withholding
taxes
and
the
U.S.
dollar
equivalent
of
the
amounts
actually
received
or
paid.
Net
unrealized
foreign
exchange
gains
and
losses
arise
from
changes
in
foreign
exchange
rates
on
foreign
denominated
assets
and
liabilities
other
than
investments
in
securities
held
at
the
end
of
the
reporting
period.
c.
Joint
Repurchase
Agreement
The
Fund
enters
into
a
joint
repurchase
agreement
whereby
its
uninvested
cash
balance
is
deposited
into
a
joint
cash
account
with
other
funds
managed
by
the
investment
manager
or
an
affiliate
of
the
investment
manager
and
is
used
to
invest
in
one
or
more
repurchase
agreements.
The
value
and
face
amount
of
the
joint
repurchase
agreement
are
allocated
to
the
funds
based
on
their
pro-rata
interest.
A
repurchase
agreement
is
accounted
for
as
a
loan
by
the
Fund
to
the
seller,
collateralized
by
securities
which
are
delivered
to
the
Fund's
custodian.
The
fair
value,
including
accrued
interest,
of
the
initial
collateralization
is
required
to
be
at
least
102%
of
the
dollar
amount
invested
by
the
funds,
with
the
value
of
the
underlying
securities
marked
to
market
daily
to
maintain
coverage
of
at
least
100%.
Repurchase
agreements
are
subject
to
the
terms
of
Master
Repurchase
Agreements
(MRAs)
with
approved
counterparties
(sellers).
The
MRAs
contain
various
provisions,
including
but
not
limited
to
events
of
default
and
maintenance
of
collateral
for
repurchase
agreements.
In
the
event
of
default
by
either
the
seller
or
the
Fund,
certain
MRAs
may
permit
the
non-
defaulting
party
to
net
and
close-out
all
transactions,
if
any,
traded
under
such
agreements.
The
Fund
may
sell
securities
it
holds
as
collateral
and
apply
the
proceeds
towards
the
1.
Organization
and
Significant
Accounting
Policies
(continued)
a.
Financial
Instrument
Valuation 
(continued)
Franklin
Mutual
Series
Funds
Notes
to
Financial
Statements
32
franklintempleton.com
Annual
Report
Franklin
Mutual
Quest
Fund
(continued)
repurchase
price
and
any
other
amounts
owed
by
the
seller
to
the
Fund
in
the
event
of
default
by
the
seller.
This
could
involve
costs
or
delays
in
addition
to
a
loss
on
the
securities
if
their
value
falls
below
the
repurchase
price
owed
by
the
seller.
The
joint
repurchase
agreement
held
by
the Fund
at
year
end,
as
indicated
in
the
Statement
of
Investments,
had
been
entered
into
on
December
31,
2020.
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. 
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,
2020,
the
Fund
had
OTC
derivatives
in
a
net
liability
position
of
$20,877,449
and
the
aggregate
value
of
collateral
pledged
for
such
contracts
was
$19,122,680.
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.
1.
Organization
and
Significant
Accounting
Policies
(continued)
c.
Joint
Repurchase
Agreement
(continued)
Franklin
Mutual
Series
Funds
Notes
to
Financial
Statements
33
franklintempleton.com
Annual
Report
Franklin
Mutual
Quest
Fund
(continued)
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
12 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.
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
collateral
in
the
form
of
cash
and/or
U.S.
Government
and
Agency
securities
against
the
loaned
securities
in
an
amount
equal
to
at
least
102%
of
the
fair
value
of
the
loaned
securities.
Collateral
is
maintained
over
the
life
of
the
loan
in
an
amount
not
less
than
100%
of
the
fair
value
of
loaned
securities,
as
determined
at
the
close
of
Fund
business
each
day;
any
additional
collateral
required
due
to
changes
in
security
values
is
delivered
to
the
Fund
on
the
next
business
day.
Any
cash
collateral
received
is
deposited
into
a
joint
cash
account
with
other
funds
and
is
used
to
invest
in
a
money
market
fund
managed
by
Franklin
Advisers,
Inc.,
an
affiliate
of
the Fund,
and/or
a
joint
repurchase
agreement
in
the
Statement
of
Assets
and
Liabilities.
The
Fund
may
receive
income
from
the
investment
of
cash
collateral,
in
addition
to
lending
fees
and
rebates
paid
by
the
borrower.
Income
from
securities
loaned,
net
of
fees
paid
to
the
securities
lending
agent
and/or
third-party
vendor,
is
reported
separately
in
the
Statement
of
Operations.
The
Fund
bears
the
market
risk
with
respect
to any
cash collateral
investment,
securities
loaned,
and
the
risk
that
the
agent
may
default
on
its
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.
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.
1.
Organization
and
Significant
Accounting
Policies
(continued)
d.
Derivative
Financial
Instruments
(continued)
Franklin
Mutual
Series
Funds
Notes
to
Financial
Statements
34
franklintempleton.com
Annual
Report
Franklin
Mutual
Quest
Fund
(continued)
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
its
technical
merits.
As
of
December
31,
2020,
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
1.
Organization
and
Significant
Accounting
Policies
(continued)
Franklin
Mutual
Series
Funds
Notes
to
Financial
Statements
35
franklintempleton.com
Annual
Report
Franklin
Mutual
Quest
Fund
(continued)
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.
2.
Shares
of
Beneficial
Interest
At
December
31,
2020,
there
were
an
unlimited
number
of
shares
authorized
(without
par
value).
Transactions
in
the
Fund’s
shares
were
as
follows:
1
Year
Ended
December
31,
2020
Year
Ended
December
31,
2019
Shares
Amount
Shares
Amount
Class
Z
Shares:
Shares
sold
...................................
11,975,046
$149,320,633
15,090,002
$210,921,808
Shares
issued
in
reinvestment
of
distributions
..........
6,365,818
83,875,711
7,039,345
99,052,207
Shares
redeemed
...............................
(48,888,085)
(608,920,167)
(41,662,846)
(583,123,908)
Net
increase
(decrease)
..........................
(30,547,221)
$(375,723,823)
(19,533,499)
$(273,149,893)
Class
A
Shares:
Shares
sold
a
...................................
5,459,688
$66,335,009
8,918,707
$122,459,568
Shares
issued
in
reinvestment
of
distributions
..........
1,926,839
24,975,532
2,357,320
32,648,125
Shares
redeemed
...............................
(24,143,354)
(293,451,056)
(20,150,894)
(277,322,936)
Net
increase
(decrease)
..........................
(16,756,827)
$(202,140,515)
(8,874,867)
$(122,215,243)
Class
C
Shares:
Shares
sold
...................................
543,895
$6,612,820
1,166,930
$15,819,778
Shares
issued
in
reinvestment
of
distributions
..........
127,396
1,638,319
195,226
2,680,611
Shares
redeemed
a
..............................
(3,830,835)
(46,258,300)
(4,357,765)
(59,215,904)
Net
increase
(decrease)
..........................
(3,159,544)
$(38,007,161)
(2,995,609)
$(40,715,515)
Class
R
Shares:
Shares
sold
...................................
64,584
$795,475
96,194
$1,289,422
Shares
issued
in
reinvestment
of
distributions
..........
6,240
79,463
7,540
102,662
Shares
redeemed
...............................
(127,918)
(1,525,162)
(86,277)
(1,168,362)
Net
increase
(decrease)
..........................
(57,094)
$(650,224)
17,457
$223,722
Class
R6
Shares:
Shares
sold
...................................
1,366,692
$16,709,924
1,870,657
$26,089,722
Shares
issued
in
reinvestment
of
distributions
..........
132,282
1,738,797
264,636
3,718,560
Shares
redeemed
...............................
(5,559,457)
(68,926,549)
(3,434,204)
(48,017,922)
Net
increase
(decrease)
..........................
(4,060,483)
$(50,477,828)
(1,298,911)
$(18,209,640)
1.
Organization
and
Significant
Accounting
Policies
(continued)
j.
Accounting
Estimates
(continued)
Franklin
Mutual
Series
Funds
Notes
to
Financial
Statements
36
franklintempleton.com
Annual
Report
Franklin
Mutual
Quest
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:
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:
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:
The
Board
has
set
the
current
rate
at
0.25%
per
year
for
Class
A
shares
until
further
notice
and
approval
by
the
Board.
a
May
include
a
portion
of
Class
C
shares
that
were
automatically
converted
to
Class
A.
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
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
Class
A
....................................................................................
0.35%
Class
C
....................................................................................
1.00%
Class
R
....................................................................................
0.50%
2.
Shares
of
Beneficial
Interest
(continued)
Franklin
Mutual
Series
Funds
Notes
to
Financial
Statements
37
franklintempleton.com
Annual
Report
Franklin
Mutual
Quest
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:
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,
2020,
the
Fund
paid
transfer
agent
fees
of
$2,626,346,
of
which $1,375,131
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,
2020,
the
Fund
held
investments
in
affiliated
management
investment
companies
as
follows:
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,
2021.
Sales
charges
retained
net
of
commissions
paid
to
unaffiliated
brokers/dealers
..............................
$48,244
CDSC
retained
..............................................................................
$11,145
    aa
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
Investment
Income
a      
a  
a  
a  
a  
a  
a  
a  
Franklin
Mutual
Quest
Fund
Non-Controlled
Affiliates
Income
from
securities
loaned
Institutional
Fiduciary
Trust
-
Money
Market
Portfolio,
0%
.........
$—
$29,702,000
$(29,311,000)
$
—
$
—
$391,000
391,000
$4,386
Total
Affiliated
Securities
....
$—
$29,702,000
$(29,311,000)
$—
$—
$391,000
$4,386
3.
Transactions
with
Affiliates
(continued)
Franklin
Mutual
Series
Funds
Notes
to
Financial
Statements
38
franklintempleton.com
Annual
Report
Franklin
Mutual
Quest
Fund
(continued)
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,
2020,
these
purchase
and
sale
transactions
aggregated
$
10,210,804
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,
2020,
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,
2020,
the
Fund’s
projected
benefit
obligation
and
benefit
payments
under
the
Plan
were
as
follows:
6.
Income
Taxes
For
tax
purposes,
capital
losses
may
be
carried
over
to
offset
future
capital
gains.
At
December
31,
2020,
the
capital
loss
carryforwards
were
as
follows:
The
tax
character
of
distributions
paid
during
the
years
ended
December
31,
2020
and
December
31,
2019
,
was
as
follows:
At
December
31,
2020,
the
cost
of
investments,
net
unrealized
appreciation
(depreciation)
and
undistributed
ordinary
income
for
income
tax
purposes
were
as
follows:
a
Projected
benefit
obligation
at
December
31,
2020
......
$352,002
b
Decrease
in
projected
benefit
obligation
..............
$(279)
Benefit
payments
made
to
retired
trustees
.............
$(3,384)
a
The
projected
benefit
obligation
is
included
in
trustees’
fees
and
expenses
in
the
Statement
of
Assets
and
Liabilities.
b
The
decrease
in
projected
benefit
obligation
is
included
in
trustees’
fees
and
expenses
in
the
Statement
of
Operations.
Capital
loss
carryforwards
not
subject
to
expiration:
Short
term
................................................................................
$126,806,674
Long
term
................................................................................
410,635,392
Total
capital
loss
carryforwards
...............................................................
$537,442,066
2020
2019
Distributions
paid
from:
Ordinary
income
..........................................................
$117,870,178
$145,010,345
3.
Transactions
with
Affiliates
(continued)
Franklin
Mutual
Series
Funds
Notes
to
Financial
Statements
39
franklintempleton.com
Annual
Report
Franklin
Mutual
Quest
Fund
(continued)
Differences
between
income
and/or
capital
gains
as
determined
on
a
book
basis
and
a
tax
basis
are
primarily
due
to
differing
treatments
of
defaulted
securities,
foreign
currency
transactions,
EU
reclaims,
bond
discounts
and
premiums,
return
of
capital
distributions
and
wash
sales.
7.
Investment
Transactions
Purchases
and
sales
of
investments
(excluding
short
term
securities
and
securities
sold
short)
for
the
year
ended
December
31,
2020,
aggregated
$1,450,125,523
and
$1,929,657,157,
respectively.
At
December
31,
2020,
in
connection
with
securities
lending
transactions,
the
Fund
loaned
equity
investments
and
received
$427,764
of
cash
collateral.
The
gross
amount
of
recognized
liability
for
such
transactions
is
included
in
payable
upon
return
of
securities
loaned
in
the
Statement
of
Assets
and
Liabilities.
The
agreements
can
be
terminated
at
any
time.
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.
For
the
year
ended
December
31,
2020,
the
Fund
recorded
an
adjustment
for
uncollectible
interest
of
$10,102,743,
as
noted
in
the
Statement
of
Operations.
At
December
31,
2020,
the
aggregate
long
value
of
distressed
company
securities
for
which
interest
recognition
has
been
discontinued
was
$117,194,395,
representing
3.5%
of
the
Fund's
net
assets.
For
information
as
to
specific
securities,
see
the
accompanying
Statement
of
Investments.
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.
Cost
of
investments
..........................................................................
$3,232,681,006
Unrealized
appreciation
........................................................................
$478,723,673
Unrealized
depreciation
........................................................................
(524,864,691)
Net
unrealized
appreciation
(depreciation)
..........................................................
$(46,141,018)
Distributable
earnings:
Undistributed
ordinary
income
...................................................................
$157,358
6.
Income
Taxes
(continued)
Franklin
Mutual
Series
Funds
Notes
to
Financial
Statements
40
franklintempleton.com
Annual
Report
Franklin
Mutual
Quest
Fund
(continued)
10.
Novel
Coronavirus
Pandemic 
The
global
outbreak
of
the
novel
coronavirus
disease,
known
as
COVID-19, has
caused
adverse
effects
on
many
companies,
sectors,
nations,
regions
and
the
markets
in
general, and
may
continue for
an unpredictable duration.
The
effects
of
this
pandemic
may
materially
impact
the
value
and
performance
of
the Fund, its ability
to
buy
and
sell
fund
investments
at
appropriate
valuations
and its ability
to
achieve its investment
objectives.
11.
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,
2020,
investments
in
restricted
securities,
excluding
securities
exempt
from
registration
under
the
1933
Act,
were
as
follows:
12.
Other
Derivative
Information
At
December
31,
2020,
investments
in
derivative
contracts
are
reflected
in
the
Statement of
Assets
and
Liabilities
as
follows:
For
the
year
ended
December
31,
2020,
the
effect
of
derivative
contracts
in
the
Statement
of
Operations
was
as
follows:
Shares
Issuer
Acquisition
Date
Cost
Value
Franklin
Mutual
Quest
Fund
2,548,299
International
Automotive
Components
Group
Brazil
LLC
4/13/06
–
12/26/08
$
1,692,334
$
54,192
224,279
a
Sorenson
Communications
LLC,
Membership
Interests
4/30/14
—
168,209,173
1,623,438
b
Windstream
Holdings,
Inc.
.....................
9/21/20
12,859,476
21,492,696
Total
Restricted
Securities
(Value
is
5.66%
of
Net
Assets)
.............
$14,551,810
$189,756,061
a
The
Fund
also
invests
in
unrestricted
securities
of
the
issuer,
valued
at
$8,929,446
as
of
December
31,
2020.
b
The
Fund
also
invests
in
unrestricted
securities
of
the
issuer,
valued
at
$1,211,964
as
of
December
31,
2020.
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
Franklin
Mutual
Quest
Fund
Foreign
exchange
contracts
..
Variation
margin
on
futures
contracts
$
—
Variation
margin
on
futures
contracts
$
1,151,072
a
Unrealized
appreciation
on
OTC
forward
exchange
contracts
28,180
Unrealized
depreciation
on
OTC
forward
exchange
contracts
20,905,629
Total
....................
$28,180
$22,056,701
a
This
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.
Franklin
Mutual
Series
Funds
Notes
to
Financial
Statements
41
franklintempleton.com
Annual
Report
Franklin
Mutual
Quest
Fund
(continued)
For
the
year
ended
December
31,
2020,
the
average
month
end
notional
amount
of
futures
contracts
and
options
represented
$105,048,312
and
355,815
shares,
respectively.
The
average
month
end
contract
value
of
forward
exchange
contracts
was
$436,214,261.
See
Note
1(d)
regarding
derivative
financial
instruments. 
13.
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,
2020,
investments
in
“affiliated
companies”
were
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:
Franklin
Mutual
Quest
Fund
Foreign
exchange
contracts
..
Futures
contracts
$(3,862,215)
Futures
contracts
$(61,775)
Forward
exchange
contracts
(4,048,697)
Forward
exchange
contracts
(7,813,363)
Equity
Contracts
...........
Investments
(46)
a
Investments
42,539
a
Written
options
1,954,918
Written
options
(34,125)
Total
....................
$(5,956,040)
$(7,866,724)
a
Purchased
option
contracts
are
included
in
net
realized
gain
(loss)
from
investments
and
net
change
in
unrealized
appreciation
(depreciation)
on
investments
in
the
Statement
of
Operations.
Value
at
Beginning
of
Year
Purchases
Sales
Realized
Gain
(Loss)
Net
Change
in
Unrealized
Appreciation
(Depreciation)
Value
at
End
of
Year
Number
of
Shares/Principal
Amount
Held
at
End
of
Year
Investment
Income
Franklin
Mutual
Quest
Fund
Non-Controlled
Affiliates
Dividends
Advanced
Emissions
Solutions
Inc
.................
$
18,104,195
$
—
$
—
$
—
$
(8,621,045)
$
9,483,150
1,724,209
$
431,052
Lee
Enterprises,
Inc.
......
4,609,275
—
(2,329,081)
(387,686)
—
a
—
a
—
a
—
Lee
Enterprises,
Inc.,
12/31/22
130,691
—
—
—
—
a
—
a
—
a
—
Sorenson
Communications
LLC,
Membership
Interests
152,057,986
—
—
—
16,151,187
168,209,173
224,279
—
TRU
Kids
Parent
LLC
......
26,506,829
—
—
—
(10,288,004)
16,218,825
7,104
—
Wayne
Services
Legacy
Inc
..
—
—
(683,307)
b
683,307
—
—
7,104
—
12.
Other
Derivative
Information
(continued)
Franklin
Mutual
Series
Funds
Notes
to
Financial
Statements
42
franklintempleton.com
Annual
Report
Franklin
Mutual
Quest
Fund
(continued)
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
5,
2021.
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
5,
2021,
the
Borrowers
renewed
the
Global
Credit
Facility
for
a
one
year
term,
maturing
February
4,
2022,
for
a
total
of
$2.675
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,
2020,
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.)
Value
at
Beginning
of
Year
Purchases
Sales
Realized
Gain
(Loss)
Net
Change
in
Unrealized
Appreciation
(Depreciation)
Value
at
End
of
Year
Number
of
Shares/Principal
Amount
Held
at
End
of
Year
Investment
Income
Franklin
Mutual
Quest
Fund
(continued)
Non-Controlled
Affiliates
Interest
Lee
Enterprises,
Inc.,
Second
Lien,
Term
Loan,
12%,
12/15/22
.............
$
34,210,244
$
41,580
b
$
(34,317,486)
$
644,118
$
(578,456)
$
—
c
—
$
452,880
Lee
Enterprises,
Inc.,
Senior
Secured
Note,
144A,
9.5%,
3/15/22
..............
90,529,405
45,481
b
(97,050,000)
507,122
5,967,992
—
c
—
1,920,781
Sorenson
Communications
LLC,
First
Lien,
Initial
Term
Loan
...............
12,473,036
46,787
b
(3,595,676)
110,268
(104,969)
8,929,446
8,901,584
720,623
Total
Affiliated
Securities
(Value
is
6.1%
of
Net
Assets)
$338,621,661
$133,848
$(137,975,550)
$
1,557,129
$
2,526,705
$202,840,594
$3,525,336
a
As
of
December
31,
2020,
no
longer
an
affiliate.
b
May
include
accretion,
amortization,
partnership
adjustments,
and/or
corporate
actions.
c
As
of
December
31,
2020,
no
longer
held
by
the
Fund.
13.
Holdings
of
5%
Voting
Securities
of
Portfolio
Companies
(continued)
Franklin
Mutual
Series
Funds
Notes
to
Financial
Statements
43
franklintempleton.com
Annual
Report
Franklin
Mutual
Quest
Fund
(continued)
Level
3
–
significant
unobservable
inputs
(including
the
Fund's
own
assumptions
in
determining
the
fair
value
of
financial
instruments)
The
input
levels
are
not
necessarily
an
indication
of
the
risk
or
liquidity
associated
with
financial
instruments
at
that
level.
A
summary
of
inputs
used
as
of
December
31,
2020,
in
valuing
the
Fund's
assets
and
liabilities
carried
at
fair
value,
is
as
follows:
Level
1
Level
2
Level
3
Total
Franklin
Mutual
Quest
Fund
Assets:
Investments
in
Securities:
Common
Stocks
:
Aerospace
&
Defense
...................
$
60,690,880
$
26,139,670
$
—
$
86,830,550
Auto
Components
......................
—
—
54,192
54,192
Banks
...............................
—
16,695,473
—
16,695,473
Beverages
...........................
21,490,759
—
—
21,490,759
Biotechnology
.........................
16,284,427
—
—
16,284,427
Chemicals
...........................
9,483,150
29,247,558
—
38,730,708
Commercial
Services
&
Supplies
...........
—
95,822,495
—
95,822,495
Diversified
Financial
Services
.............
91,625,157
14,476,213
—
106,101,370
Diversified
Telecommunication
Services
.....
83,972,171
16,992,424
189,701,869
290,666,464
Energy
Equipment
&
Services
.............
247,378
—
—
247,378
Entertainment
.........................
18,570,950
—
—
18,570,950
Equity
Real
Estate
Investment
Trusts
(REITs)
.
36,577,577
—
—
36,577,577
Food
Products
........................
4,772,251
—
—
4,772,251
Health
Care
Equipment
&
Supplies
.........
18,859,443
—
—
18,859,443
Independent
Power
and
Renewable
Electricity
Producers
..........................
60,418,070
—
—
60,418,070
Insurance
............................
209,007,979
260,459,101
—
469,467,080
Interactive
Media
&
Services
..............
20,108,806
—
—
20,108,806
IT
Services
...........................
31,197,464
—
—
31,197,464
Machinery
............................
36,880,638
—
—
36,880,638
Media
...............................
56,017,989
—
286,937
56,304,926
Oil,
Gas
&
Consumable
Fuels
.............
70,099,550
87,531,482
—
157,631,032
Pharmaceuticals
.......................
137,234,902
89,605,771
—
226,840,673
Semiconductors
&
Semiconductor
Equipment
.
77,948,415
—
—
77,948,415
Software
.............................
127,296,358
—
—
127,296,358
Specialty
Retail
........................
74,912,829
—
16,218,825
a
91,131,654
Technology
Hardware,
Storage
&
Peripherals
.
35,326,745
—
—
35,326,745
Tobacco
.............................
61,288,645
183,783,050
—
245,071,695
Wireless
Telecommunication
Services
.......
—
62,947,845
—
62,947,845
Companies
in
Liquidation
..................
—
—
156,262
a
156,262
Convertible
Preferred
Stocks
...............
22,510,844
—
—
22,510,844
Corporate
Bonds
........................
—
275,304,721
—
275,304,721
Senior
Floating
Rate
Interests
...............
—
135,327,918
—
135,327,918
Warrants
:
Diversified
Telecommunication
Services
.....
—
—
1,211,964
1,211,964
Media
...............................
24,297
—
37,851
a
62,148
Software
.............................
—
1,098,793
—
1,098,793
Short
Term
Investments
...................
419,355,390
39,036,764
—
458,392,154
Total
Investments
in
Securities
...........
$1,802,203,064
$1,334,469,278
$207,667,900
$3,344,340,242
Other
Financial
Instruments:
Forward
exchange
contracts
...............
$
—
$
28,180
$
—
$
28,180
Total
Other
Financial
Instruments
.........
$—
$28,180
$—
$28,180
15.
Fair
Value
Measurements
(continued)
Franklin
Mutual
Series
Funds
Notes
to
Financial
Statements
44
franklintempleton.com
Annual
Report
Franklin
Mutual
Quest
Fund
(continued)
A
reconciliation
in
which
Level
3
inputs
are
used
in
determining
fair
value
is
presented
when
there
are
significant
Level
3
assets
and/or
liabilities
at
the
be
ginning
and/or
end
of
the
year
.
At December
31,
2020,
the
reconciliation
is
as
follows:
Significant
unobservable
valuation
inputs
for
material
Level
3 assets
and/or
liabilities and
impact
to
fair
value
as
a
result
of
changes
in
unobservable
valuation
inputs
as
of
December
31,
2020,
are
as
follows:
Level
1
Level
2
Level
3
Total
Franklin
Mutual
Quest
Fund
(continued)
Liabilities:
Other
Financial
Instruments:
Securities
Sold
Short
.....................
$
135,771,733
$
—
$
—
$
135,771,733
Forward
exchange
contracts
................
—
20,905,629
—
20,905,629
Futures
contracts
........................
1,151,072
—
—
1,151,072
Total
Other
Financial
Instruments
.........
$136,922,805
$20,905,629
$—
$157,828,434
a
Includes
securities
determined
to
have
no
value
at
December
31,
2020.
Balance
at
Beginning
of
Year
Purchases
Sales
Transfer
Into
Level
3
Transfer
Out
of
Level
3
Cost
Basis
Adjust-
ments
a
Net
Realized
Gain
(Loss)
Net
Unr
ealized
Appreciatio
n
(
Depreciation
)
Balance
at
End
of
Year
Net
Change
in
Unrealized
Appreciation
(Depreciation)
on
Assets
Held
at
Year
End
a
a
a
a
a
a
a
a
a
a
a
Franklin
Mutual
Quest
Fund
Assets:
Investments
in
Securities:
Common
Stocks
:
Auto
Components
....
$
92,503
$
—
$
—
$
—
$
—
$
—
$
—
$
(38,311)
$
54,192
$
(38,311)
Diversified
Telecommunication
Services
........
152,057,986
12,859,476
—
—
—
—
—
24,784,407
189,701,869
24,784,407
Media
...........
341,456
—
—
—
—
—
—
(54,519)
286,937
(54,519)
Specialty
Retail
.....
26,506,829
b
—
—
—
—
(683,307)
683,307
(10,288,004)
16,218,825
b
(10,288,004)
Warrants
:
Diversified
Telecommunication
Services
........
—
b
1,161,706
—
—
—
—
—
50,258
1,211,964
50,258
Media
...........
130,691
—
—
—
—
—
—
(92,840)
37,851
b
(92,840)
Companies
in
Liquidation
57,296
b
—
—
—
—
(17,597)
17,597
98,967
156,262
b
98,967
Total
Investments
in
Securities
.
$179,186,761
$14,021,182
$—
$—
$—
$(700,904)
$700,904
$14,459,958
$207,667,900
$14,459,958
a
May
include
accretion,
amortization,
partnership
adjustments,
and/or
other
cost
basis
adjustments.
May
also
include
amounts
related
to
a
corporate
action.
b
Includes
securities
determined
to
have
no
value.
15.
Fair
Value
Measurements
(continued)
Franklin
Mutual
Series
Funds
Notes
to
Financial
Statements
45
franklintempleton.com
Annual
Report
Franklin
Mutual
Quest
Fund
(continued)
16.
New
Accounting
Pronouncements
In
March
2020,
the
Financial
Accounting
Standards
Board
issued
Accounting
Standards
Update
(ASU)
No.
2020-04,
Reference
Rate
Reform
(Topic
848)
–
Facilitation
of
the
Effects
of
Reference
Rate
Reform
on
Financial
Reporting.
The
amendments
in
the
ASU
provides
optional
temporary
financial
reporting
relief
from
the
effect
of
certain
types
of
contract
modifications
due
to
the
planned
discontinuation
of
the
LIBOR
and
other
interbank-offered
based
reference
rates
as
of
the
end
of
2021.
The
ASU
is
effective
for
certain
reference
rate-related
contract
modifications
that
occur
during
the
period
March
12,
2020
through
December
31,
2022. Management
has
reviewed
the
requirements
and
believes
the
adoption
of
this
ASU
will
not
have
a
material
impact
on
the
financial
statements.
17.
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.
Description
Fair
Value
at
End
of
Year
Valuation
Technique
Unobservable
Inputs
Amount/Range
(Weighted
Average)
a
Impact
to
Fair
Value
if
Input
Increases
b
Franklin
Mutual
Quest
Fund
Assets:
Investments
in
Securities:
Common
Stocks:
Diversified
Telecommunication
Services
...................
$189,701,869
Market
comparables
Discount
for
lack
of
marketability
10.0%
Decrease
c
EV/EBITDA
multiple
3.9x-6.5x
(6.2x)
Increase
d
Market
transactions
Transaction
price
weighting
50.0%
Increase
Specialty
Retail
...............
16,218,825
Market
comparables
Discount
for
lack
of
marketability
17.7%
Decrease
EV/EBITDA
multiple
12.9x
Increase
c
EV/Revenue
multiple
0.6x
Increase
Market
transactions
Transaction
price
weighting
60.0%
Increase
c
All
Other
Investments
..........
1,747,206
e,
f
Total
..........................
$207,667,900
a
Weighted
based
in
the
relative
fair
value
of
the
financial
instruments.
b
Represents
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.
c
Represents
a
significant
impact
to
fair
value
but
not
net
assets.
d
Represents
a
significant
impact
to
fair
value
and
net
assets.
e
Includes
v
alues
derived
using
private
transaction
prices
or
non-public
third
party
pricing
information
which
is
unobservable.
May
also
include
fair
value
of
immaterial
assets
and/or
liabilities
developed
using
various
valuation
techniques
and
unobservable
inputs.
f
Includes
securities
determined
to
have
no
value
at
December
31,
2020.
Abbreviations
List
EBITDA
-
Earnings
before
interest,
taxes,
depreciation
and
amortization
EV
-
Enterprise
value
15.
Fair
Value
Measurements
(continued)
Franklin
Mutual
Series
Funds
Notes
to
Financial
Statements
46
franklintempleton.com
Annual
Report
Franklin
Mutual
Quest
Fund
(continued)
Abbreviations
Counterparty
BNY
Bank
of
New
York
BOFA
Bank
of
America
Corp.
HSBK
HSBC
Bank
plc
SSBT
State
Street
Bank
and
Trust
Co.
UBSW
UBS
AG
Currency
EUR
Euro
GBP
British
Pound
USD
United
States
Dollar
Selected
Portfolio
ADR
American
Depositary
Receipt
FHLB
Federal
Home
Loan
Banks
FRN
Floating
Rate
Note
LIBOR
London
Inter-Bank
Offered
Rate
PIK
Payment-In-Kind
Franklin
Mutual
Series
Funds
Report
of
Independent
Registered
Public
Accounting
Firm
47
franklintempleton.com
Annual
Report
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,
2020,
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,
2020,
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,
2020,
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
23,
2021
Franklin
Mutual
Series
Funds
Tax
Information
(unaudited)
48
franklintempleton.com
Annual
Report
Franklin
Mutual
Quest
Fund
Under
Section
854(b)(1)(A)
of
the
Internal
Revenue
Code,
the
Fund
hereby
reports
35.24%
of
the
ordinary
income
dividends
as
income
qualifying
for
the
dividends
received
deduction
for
the
fiscal
year
ended
December
31,
2020.
Under
Section
854(b)(1)(B)
of
the
Internal
Revenue
Code,
the
Fund
hereby
reports
the
maximum
amount
allowable
but
no
less
than
$83,071,748
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,
2020.
Distributions,
including
qualified
dividend
income,
paid
during
calendar
year
2020
will
be
reported
to
shareholders
on
Form
1099-DIV
by
mid-February
2021.
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
$43,725,807
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,
2020.
Franklin
Mutual
Series
Funds
Board
Members
and
Officers
49
franklintempleton.com
Annual
Report
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
11
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)
Trustee
and
Chairperson
Trustee
since
1995
and
Chairperson
since
2020
30
Ares
Capital
Corporation
(specialty
finance
company)
(2010-present),
United
Natural
Foods,
Inc.
(distributor
of
natural,
organic
and
specialty
foods)
(2013-present),
formerly
,
Allied
Capital
Corporation
(financial
services)
(2003-
2010),
SLM
Corporation
(Sallie
Mae)
(1997-2014)
and
Navient
Corporation
(loan
management,
servicing
and
asset
recovery)
(2014-2016).
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
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)
Trustee
Since
2002
11
Franklin
Templeton
Emerging
Markets
Debt
Opportunities
Fund
PLC
(1999-present)
and
formerly
,
Fiduciary
International
Ireland
Limited
(1999-2015).
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:
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.
Franklin
Mutual
Series
Funds
50
franklintempleton.com
Annual
Report
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
Jan
Hopkins
Trachtman
(1947)
Trustee
Since
2009
11
FinTech
Acquisition
Corp.
III
(special
purpose
fintech
acquisition
company)
(2018-present)
and
FTAC
Olympus
Acquisition
Corp.
(special
purpose
fintech
acquisition
company)
(August
2020-present).
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:
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.
Keith
Mitchell
(1954)
Trustee
Since
2009
11
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)
Trustee
Since
2015
30
Hess
Midstream
LP
(oil
and
gas
midstream
infrastructure)
(2017-present).
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:
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).
Robert
E.
Wade
(1946)
Trustee
Since
1991
30
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
11
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).
Independent
Board
Members
(continued)
Franklin
Mutual
Series
Funds
51
franklintempleton.com
Annual
Report
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
136
None
One
Franklin
Parkway
San
Mateo,
CA
94403-1906
Principal
Occupation
During
at
Least
the
Past
5
Years:
Executive
Chairman,
Chairman
of
the
Board
and
Director,
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
,
Chief
Executive
Officer
(2013-2020)
and
President
(1994-2015),
Franklin
Resources,
Inc.
**Peter
A.
Langerman
(1955)
Trustee,
President,
and
Chief
Executive
Officer
–
Investment
Management
Trustee
since
2007,
President,
and
Chief
Executive
Officer
–
Investment
Management
since
2005
6
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:
Executive
Vice
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
Vice
President
Since
2012
Not
Applicable
Not
Applicable
One
Franklin
Parkway
San
Mateo,
CA
94403-1906
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)
Chief
Compliance
Officer
Since
October
2020
Not
Applicable
Not
Applicable
280
Park
Avenue
New
York,
NY
10017
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)
Vice
President
and
Secretary
Vice
President
since
2009
and
Secretary
since
2005
Not
Applicable
Not
Applicable
One
Franklin
Parkway
San
Mateo,
CA
94403-1906
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)
Chief
Executive
Officer
–
Finance
and
Administration
Since
2017
Not
Applicable
Not
Applicable
One
Franklin
Parkway
San
Mateo,
CA
94403-1906
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).
Franklin
Mutual
Series
Funds
52
franklintempleton.com
Annual
Report
*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.
Note
2:
Effective
October
17,
2020,
Charles
Rubens,
II
ceased
to
be
a
trustee
of
the
Trust.
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
Ann
Torre
Bates
and
David
W.
Niemiec
as
an
audit
committee
financial
expert.
The
Board
believes
that
Ms.
Bates
and
Mr.
Niemiec
qualify
as
such
an
expert
in
view
of
their
extensive
business
background
and
experience.
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
Partners
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
Ms.
Bates
and
Mr.
Niemiec
have
each
acquired
an
understanding
of
generally
accepted
accounting
principles
and
financial
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
G.
Kubilis
(1973)
Chief
Financial
Officer,
Chief
Accounting
Officer
and
Treasurer
Since
2012
Not
Applicable
Not
Applicable
300
S.E.
2nd
Street
Fort
Lauderdale,
FL
33301-
1923
Principal
Occupation
During
at
Least
the
Past
5
Years:
Treasurer,
U.S.
Fund
Administration
&
Reporting
and
officer
of
39
of
the
investment
companies
in
Franklin
Templeton.
Robert
Lim
(1948)
Vice
President
–
AML
Compliance
Since
2016
Not
Applicable
Not
Applicable
One
Franklin
Parkway
San
Mateo,
CA
94403-1906
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
41
of
the
investment
companies
in
Franklin
Templeton.
Navid
J.
Tofigh
(1972)
Vice
President
Since
2015
Not
Applicable
Not
Applicable
One
Franklin
Parkway
San
Mateo,
CA
94403-1906
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)
Vice
President
Since
2005
Not
Applicable
Not
Applicable
One
Franklin
Parkway
San
Mateo,
CA
94403-1906
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)
Vice
President
Since
2011
Not
Applicable
Not
Applicable
300
S.E.
2nd
Street
Fort
Lauderdale,
FL
33301-
1923
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.
Interested
Board
Members
and
Officers
(continued)
Franklin
Mutual
Series
Funds
53
franklintempleton.com
Annual
Report
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.
Ms.
Bates
and
Mr.
Niemiec
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.
Interested
Board
Members
and
Officers
(continued)
Franklin
Mutual
Series
Funds
Shareholder
Information
54
franklintempleton.com
Annual
Report
Proxy
Voting
Policies
and
Procedures
The
Fund’s
investment
manager
has
established
Proxy
Voting
Policies
and
Procedures
(Policies)
that
the
Fund
uses
to
determine
how
to
vote
proxies
relating
to
portfolio
securities.
Shareholders
may
view
the
Fund’s
complete
Policies
online
at
franklintempleton.com.
Alternatively,
shareholders
may
request
copies
of
the
Policies
free
of
charge
by
calling
the
Proxy
Group
collect
at
(954)
527-
7678
or
by
sending
a
written
request
to:
Franklin
Templeton
Companies,
LLC,
300
S.E.
2nd
Street,
Fort
Lauderdale,
FL
33301,
Attention:
Proxy
Group.
Copies
of
the
Fund’s
proxy
voting
records
are
also
made
available
online
at
franklintempleton.com
and
posted
on
the
U.S.
Securities
and
Exchange
Commission’s
website
at
sec.gov
and
reflect
the
most
recent
12-month
period
ended
June
30.
Quarterly
Statement
of
Investments
The
Trust,
on
behalf
of
the
Fund,
files
a
complete
statement
of
investments
with
the
U.S.
Securities
and
Exchange
Commission
for
the
first
and
third
quarters
for
each
fiscal
year
as
an
exhibit
to
its
report
on
Form
N-PORT.
Shareholders
may
view
the
filed
Form
N-PORT
by
visiting
the
Commission’s
website
at
sec.gov.
The
filed
form
may
also
be
viewed
and
copied
at
the
Commission’s
Public
Reference
Room
in
Washington,
DC.
Information
regarding
the
operations
of
the
Public
Reference
Room
may
be
obtained
by
calling
(800)
SEC-0330.
Householding
of
Reports
and
Prospectuses
You
will
receive,
or
receive
notice
of
the
availability
of,
the
Fund’s
financial
reports
every
six
months.
In
addition,
you
will
receive
an
annual
updated
summary
prospectus
(detail
prospectus
available
upon
request).
To
reduce
Fund
expenses,
we
try
to
identify
related
shareholders
in
a
household
and
send
only
one
copy
of
the
financial
reports
(to
the
extent
received
by
mail)
and
summary
prospectus.
This
process,
called
“householding,”
will
continue
indefinitely
unless
you
instruct
us
otherwise.
If
you
prefer
not
to
have
these
documents
householded,
please
call
us
at
(800)
632-2301.
At
any
time
you
may
view
current
prospectuses/
summary
prospectuses
and
financial
reports
on
our
website.
If
you
choose,
you
may
receive
these
documents
through
electronic
delivery.
475
A
02/21
©
2021
Franklin
Templeton
Investments.
All
rights
reserved.
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
franklintempleton.com
(800)
632-2301
-
(Class
A,
C,
R
&
R6)
(800)
448-FUND
-
(Class
Z)
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 $344,041 for the fiscal year ended December 31, 2020 and $466,362 for the fiscal year ended December 31, 2019.
 
(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 $3,282 the fiscal year ended December 31, 2020 and $22,310 for the fiscal year ended December 31, 2019. 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 $91,000 for the fiscal year ended December 31, 2020 and $70,000 for the fiscal year ended December 31, 2019. 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
There were no fees paid to the principal accountant for products and services rendered by the principal accountant to the registrant other than the services reported in paragraphs (a)-(c) of Item 4. 
 
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 $94,282 for the fiscal year ended December 31, 2020 and $92,310 for the fiscal year ended December 31, 2019.
 
(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
.
During the period covered by this report, a third-party service provider commenced performing certain accounting and administrative services for the Registrant that are subject to Franklin Templeton’s oversight.
 
 
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 26, 2021
 
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 26, 2021
 
 
By S/ROBERT G. KUBILIS________________________
Robert G. Kubilis
Chief Financial Officer and Chief Accounting Officer
Date February 26, 2021