UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM N-CSRS

CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES

Investment Company Act file number 811-03143
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TEMPLETON GLOBAL SMALLER COMPANIES FUND
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(Exact name of registrant as specified in charter)

500 EAST BROWARD BLVD., FORT LAUDERDALE, FL 33394-3091
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(Address of principal executive offices) (Zip code)

MURRAY L. SIMPSON, ONE FRANKLIN PARKWAY, SAN MATEO, CA 94403-1906
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(Name and address of agent for service)

Registrant's telephone number, including area code: (954) 527-7500
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Date of fiscal year end: 8/31
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Date of reporting period: 2/28/05
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ITEM 1. REPORTS TO STOCKHOLDERS

[GRAPHIC OMITTED]

FEBRUARY 28, 2005
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SEMIANNUAL REPORT AND SHAREHOLDER LETTER | GLOBAL
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WANT TO RECEIVE
[GRAPHIC OMITTED] THIS DOCUMENT
FASTER VIA EMAIL?
TEMPLETON GLOBAL
SMALLER COMPANIES FUND Eligible shareholders can
sign up for eDelivery at
franklintempleton.com.
See inside for details.

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[LOGO](R)
FRANKLIN(R) TEMPLETON(R)
INVESTMENTS

Franklin o TEMPLETON o Mutual Series

Franklin Templeton Investments

GAIN FROM OUR PERSPECTIVE

Franklin Templeton's distinct multi-manager
structure combines the specialized expertise of
three world-class investment management groups--
Franklin, Templeton and Mutual Series.

SPECIALIZED EXPERTISE Each of our portfolio management groups
operates autonomously, relying on its own research
and staying true to the unique investment
disciplines that underlie its success.

FRANKLIN. Founded in 1947, Franklin is a recognized
leader in fixed income investing and also brings
expertise in growth- and value-style U.S. equity
investing.

TEMPLETON. Founded in 1940, Templeton pioneered
international investing and, in 1954, launched what
has become the industry's oldest global fund. Today,
with research offices in over 25 countries, they
offer investors the broadest global reach in the
industry.

MUTUAL SERIES. Founded in 1949, Mutual Series is
dedicated to a unique style of value investing,
searching aggressively for opportunity among
undervalued stocks, arbitrage situations and
distressed companies.

TRUE DIVERSIFICATION Because our management groups work independently and
adhere to distinctly different investment
approaches, Franklin, Templeton and Mutual Series
funds typically have a low overlap of securities.
That's why our funds can be used to build truly
diversified portfolios covering every major asset
class.

RELIABILITY YOU CAN TRUST At Franklin Templeton Investments, we seek to
consistently provide investors with exceptional
risk-adjusted returns over the long term, as well as
the reliable account services that have helped us
become one of the most trusted names in financial
services.

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MUTUAL FUNDS | RETIREMENT PLANS | 529 COLLEGE SAVINGS PLANS | SEPARATE ACCOUNTS
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[GRAPHIC OMITTED]

Not part of the semiannual report

Contents

SHAREHOLDER LETTER ........................................................ 1

SEMIANNUAL REPORT

Templeton Global Smaller Companies Fund ................................... 3

Performance Summary ....................................................... 8

Your Fund's Expenses ...................................................... 11

Financial Highlights and Statement of Investments ......................... 13

Financial Statements ...................................................... 21

Notes to Financial Statements ............................................. 25

Shareholder Information ................................................... 35

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Semiannual Report

Templeton Global Smaller Companies Fund

YOUR FUND'S GOAL AND MAIN INVESTMENTS: Templeton Global Smaller Companies Fund
seeks to achieve long-term capital growth. Under normal market conditions, the
Fund invests at least 80% of its net assets in equity securities of smaller
companies located anywhere in the world, including emerging markets, as defined
in the Fund's prospectus.

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PERFORMANCE DATA QUOTED 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. PLEASE VISIT FRANKLINTEMPLETON.COM OR CALL
1-800/342-5236 FOR MOST RECENT MONTH-END PERFORMANCE.
- --------------------------------------------------------------------------------

We are pleased to bring you Templeton Global Smaller Companies Fund's semiannual
report for the period ended February 28, 2005.

PERFORMANCE OVERVIEW

For the six months under review, the Fund's Class A shares posted a 23.43%
cumulative total return. The Fund outperformed its benchmark, the Morgan Stanley
Capital International (MSCI) World Index, which posted a 15.24% cumulative total
return for the same period.(1) Please note that index performance information
is provided for reference and that we do not attempt to track the index, but
rather undertake investments on the basis of fundamental research. You can find
the Fund's long-term performance data in the Performance Summary beginning on
page 8.

ECONOMIC AND MARKET OVERVIEW

For the six months under review, the global economy generally continued to
expand. In fourth quarter 2004, gross domestic product (GDP) increased at
annualized rates of 3.8% in the U.S. and 9.5% in China.(2) For the same quarter,
GDP grew an annualized 1.7% in Canada, while rising 2.8% in the U.K. and 1.6% in
the euro zone.(3) Japan's GDP rose only 0.5% annualized.(4) Industrial metals
and several other commodity prices rose particularly due to

(1) Source: Standard & Poor's Micropal. The MSCI World Index is a free
float-adjusted, market capitalization-weighted index designed to measure
equity market performance in global developed markets. The index is
unmanaged and includes reinvested dividends. One cannot invest directly in
an index, nor is an index representative of the Fund's portfolio.

(2) Source: National Bureau of Statistics of China.

(3) Sources: Statistics Canada; Office for National Statistics (U.K.);
Eurostat.

(4) Source: Japan Cabinet Office.

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.

Semiannual Report | 3

GEOGRAPHIC DISTRIBUTION
Based on Total Net Assets as of 2/28/05

[THE FOLLOWING TABLE WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL.]

Europe 37.2%
Asia 31.7%
North America 19.5%
Australia & New Zealand 4.5%
Middle East & Africa 1.4%
Latin America 0.4%
Short-Term Investments & Other Net Assets 5.3%

increased demand from China. While Chile, Brazil, Canada, Australia and
Argentina benefited from strong overall demand for natural resources, Mexico and
other oil-exporting countries benefited specifically from high oil prices.

Investors' major concerns during the six months were rising energy costs (oil
prices reached a high of $56 in October 2004) and the large U.S. budget and
current account deficits.(5) Offsetting this, relatively low inflation and
short-term interest rates supported global stock market levels, despite recent
rate increases by the U.S. Federal Reserve Board and other central banks. An
additional factor was the large number of companies that returned cash to
shareholders during the period through rising dividends and share repurchases.

During the six-month period under review, the MSCI World Index's total return
was 15.24% and the MSCI Emerging Markets Index's was 35.36%, in U.S. dollars.(6)
In local currencies, their respective total returns were 11.12% and 23.89%.(6)
For most of the period, the majority of the world's currencies strengthened in
relation to the U.S. dollar. However, the U.S. dollar's protracted decline
versus these currencies reversed course in January 2005, as the dollar
appreciated. Still, the currency effect benefited U.S.-based investors who
invested in non-U.S. equities from developed and emerging market countries, as
local currency returns were boosted when translated into a weaker U.S. dollar.

INVESTMENT STRATEGY

At Templeton, we take a long-term, value-oriented approach to investing. We
focus our analysis primarily at the company level; we seek to identify when a
company's value on the stock exchange is substantially below our estimate of the
company's underlying worth -- also known as its "intrinsic value." Our analysts
determine the intrinsic value of a company first by understanding the company
and the industry in which it operates, and then by forecasting future earnings
and cash flow growth. We look to invest in those companies selling at the lowest
level relative to our expectations for future earnings and cash flow. We are
patient investors; our typical holding period is four to five years.

(5) Source: U.S. Department of Energy.

(6) Source: Standard & Poor's Micropal. See footnote 1 for a description of
the MSCI World Index. The MSCI Emerging Markets Index is a free
float-adjusted, market capitalization-weighted index designed to measure
equity market performance in global emerging markets.

4 | Semiannual Report

In looking for opportunities, we put less emphasis on the current situation and
more on what we believe could materialize in the future. Hence, the greatest
opportunities often can be in companies that are out of favor -- they may be
undergoing a restructuring, the business cycle may have turned against them, or
they may have been oversold due to temporary difficulties that our analysis
indicates have been over-discounted by the market.

MANAGER'S DISCUSSION

Several Fund holdings performed well during the six months under review. Shares
of Novar, a British company that offers building security systems, aluminum
products and security printing services, appreciated strongly and contributed to
Fund performance. Consistent with our strategy, we considered Novar an
attractive investment based on its low valuation, strong market positions in
many of its products and relatively high dividend yield of about 8% when we
purchased it. The acquisition offer from Honeywell International, a large
American multinational, also fueled Novar's strong market performance. Honeywell
International agreed to purchase Novar as a way to expand into building
products. Due to the sharp increase in the stock price accompanying news of the
takeover offer, we sold our position in Novar by period-end.

Kidde, a leading fire and safety products manufacturer for aerospace, industrial
and retail markets, also performed well during the reporting period. The British
company holds the number one global position for aircraft fire safety systems in
the aerospace and defense industry. In addition, its residential and commercial
divisions make Kidde the market leader for carbon monoxide alarms, fire blankets
and escape ladders and one of the key players in the fire extinguisher market.
Operating in a growth industry driven by regulatory demand and increasing
consumer safety awareness and need for safety products and systems, Kidde
benefited from the favorable regulatory environment. Similar to Novar, Kidde
also announced that it had accepted a takeover offer from a large U.S.
multinational, United Technologies. As a result, Kidde's stock price increased
materially, contributing to Fund performance, and we chose to sell our position
by period-end.

TOP 10 HOLDINGS
2/28/05

- --------------------------------------------------------------------------------
COMPANY % OF TOTAL
SECTOR/INDUSTRY, COUNTRY NET ASSETS
- --------------------------------------------------------------------------------
OPG Groep NV 2.5%
HEALTH CARE PROVIDERS & SERVICES,
NETHERLANDS
- --------------------------------------------------------------------------------
Aalberts Industries NV 2.1%
INDUSTRIAL CONGLOMERATES, NETHERLANDS
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Bodycote International PLC,
common & restricted 2.0%
MACHINERY, U.K.
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Iluka Resources Ltd. 1.9%
METALS & MINING, AUSTRALIA
- --------------------------------------------------------------------------------
Moulin International Holdings Ltd. 1.8%
HEALTH CARE EQUIPMENT & SUPPLIES,
HONG KONG
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Gamestop Corp. 1.8%
SPECIALTY RETAIL, U.S.
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Vestas Wind Systems AS,
common & restricted 1.7%
ELECTRICAL EQUIPMENT, DENMARK
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Metso OYJ 1.7%
MACHINERY, FINLAND
- --------------------------------------------------------------------------------
Imtech NV 1.7%
CONSTRUCTION & ENGINEERING,
NETHERLANDS
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Vedior NV 1.6%
COMMERCIAL SERVICES & SUPPLIES,
NETHERLANDS
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Semiannual Report | 5

Another contributor to Fund performance during this period was Aalberts
Industries, a Dutch-based engineering group that manufactures high-grade
industrial products. As the leading supplier to many European industrial
companies, Aalberts benefited from Europe's improving economic conditions. In
line with our strategy, we considered the company attractive because of its
outstanding track record of identifying acquisitions that add value. Its shares
appreciated strongly and aided Fund performance during the reporting period. We
continued to hold its shares based on its low valuations.

It is also important to recognize the effect of foreign currency movements on
the Fund's performance. In general, if the value of the U.S. dollar increases
compared with a foreign currency, an investment traded in that foreign currency
will decrease in value because it will be worth fewer U.S. dollars. This can
have a negative effect on Fund performance. Conversely, when the U.S. dollar
weakens in relation to a foreign currency, an investment traded in that foreign
currency will increase in value, which can contribute to Fund performance. For
the six months ended February 28, 2005, the U.S. dollar declined in value
relative to most non-U.S. currencies. The Fund's performance was positively
affected by the portfolio's predominant investment in securities with non-U.S.
currency exposure due to the U.S. dollar's decrease in value during the period.
However, one cannot expect the same result in future periods.

Some of our holdings did not perform well and detracted from Fund performance
during the six months under review. As a leading car rental company in Europe,
Asia and the Middle East, Avis Europe faced a challenging revenue environment
resulting from competitors' excessive growth in capacity and increased market
penetration of online brokers. Our research highlighted the company's potential
for cost cutting through the initiation of online marketing, reduction of fleet
costs and improvement in customer service. Despite the share price decline, we
continued to hold our position in Avis Europe because of management's renewed
focus on turning the business around.

Another detractor from Fund performance during this period was Invensys. Based
in England, Invensys offers customers strategic solutions to improve
productivity and reliability in their supply chains by conserving energy and
water usage in commercial, industrial and residential buildings. The company
also manufactures railroad signaling and control equipment, wind turbine gear
units and power components. Our investment in Invensys was a disappointment; the
expected operating leverage to an improving economic environment failed to
materialize in the markets where the company operates. In addition, Invensys
struggled in an intensely competitive environment and under pressure of
customers' reduced capital spending, commodization trends and manufacturing's
move to Asia. As a result of this unfavorable environment, we sold our shares by
period-end.

6 | Semiannual Report

We thank you for your interest in Templeton Global Smaller Companies Fund,
welcome your questions and comments, and look forward to serving your future
investment needs.

/s/ Tucker Scott
[PHOTO OMITTED] Tucker Scott, CFA

/s/ Cynthia Sweeting
[PHOTO OMITTED] Cynthia Sweeting, CFA

Portfolio Management Team
Templeton Global Smaller Companies Fund

THE FOREGOING INFORMATION REFLECTS OUR ANALYSIS, OPINIONS AND PORTFOLIO HOLDINGS
AS OF FEBRUARY 28, 2005, 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.

Semiannual Report | 7

Performance Summary as of 2/28/05

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. The performance table does not reflect any taxes due 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.

PRICE AND DISTRIBUTION INFORMATION

- -------------------------------------------------------------------------------
CLASS A CHANGE 2/28/05 8/31/04
- -------------------------------------------------------------------------------
Net Asset Value (NAV) +$0.88 $9.57 $8.69
- -------------------------------------------------------------------------------
DISTRIBUTIONS (9/1/04-2/28/05)
- -------------------------------------------------------------------------------
Dividend Income $0.1037
- -------------------------------------------------------------------------------
Long-Term Capital Gain $0.9103
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TOTAL $1.0140
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CLASS B CHANGE 2/28/05 8/31/04
- -------------------------------------------------------------------------------
Net Asset Value (NAV) +$0.87 $9.29 $8.42
- -------------------------------------------------------------------------------
DISTRIBUTIONS (9/1/04-2/28/05)
- -------------------------------------------------------------------------------
Dividend Income $0.0153
- -------------------------------------------------------------------------------
Long-Term Capital Gain $0.9103
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TOTAL $0.9256
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CLASS C CHANGE 2/28/05 8/31/04
- -------------------------------------------------------------------------------
Net Asset Value (NAV) +$0.89 $9.44 $8.55
- -------------------------------------------------------------------------------
DISTRIBUTIONS (9/1/04-2/28/05)
- -------------------------------------------------------------------------------
Dividend Income $0.0274
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Long-Term Capital Gain $0.9103
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TOTAL $0.9377
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ADVISOR CLASS CHANGE 2/28/05 8/31/04
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Net Asset Value (NAV) +$0.86 $9.57 $8.71
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DISTRIBUTIONS (9/1/04-2/28/05)
- -------------------------------------------------------------------------------
Dividend Income $0.1265
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Long-Term Capital Gain $0.9103
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TOTAL $1.0368
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8 | Semiannual Report

Performance Summary (CONTINUED)

PERFORMANCE

CLASS A: 5.75% MAXIMUM INITIAL SALES CHARGE; CLASS B: CONTINGENT DEFERRED SALES
CHARGE (CDSC) DECLINING FROM 4% TO 1% OVER SIX YEARS, AND ELIMINATED THEREAFTER;
CLASS C: 1% CDSC IN FIRST YEAR ONLY. CUMULATIVE TOTAL RETURN EXCLUDES SALES
CHARGES. AVERAGE ANNUAL TOTAL RETURNS AND VALUE OF $10,000 INVESTMENT INCLUDE
MAXIMUM SALES CHARGES.

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CLASS A 6-MONTH 1-YEAR 5-YEAR 10-YEAR
- ---------------------------------------------------------------------------------------------------

Cumulative Total Return(1) 23.43% 20.24% 60.29% 146.21%
- ---------------------------------------------------------------------------------------------------
Average Annual Total Return(2) 16.33% 13.38% 8.61% 8.78%
- ---------------------------------------------------------------------------------------------------
Value of $10,000 Investment(3) $11,633 $11,338 $15,110 $23,206
- ---------------------------------------------------------------------------------------------------
Avg. Ann. Total Return (3/31/05)(4) 13.64% 7.66% 8.42%
- ---------------------------------------------------------------------------------------------------
CLASS B 6-MONTH 1-YEAR 5-YEAR INCEPTION (1/1/99)
- ---------------------------------------------------------------------------------------------------
Cumulative Total Return(1) 22.95% 19.40% 54.14% 70.85%
- ---------------------------------------------------------------------------------------------------
Average Annual Total Return(2) 18.95% 15.40% 8.76% 9.08%
- ---------------------------------------------------------------------------------------------------
Value of $10,000 Investment(3) $11,895 $11,540 $15,214 $17,085
- ---------------------------------------------------------------------------------------------------
Avg. Ann. Total Return (3/31/05)(4) 15.65% 7.81% 8.73%
- ---------------------------------------------------------------------------------------------------
CLASS C 6-MONTH 1-YEAR 5-YEAR INCEPTION (5/1/95)
- ---------------------------------------------------------------------------------------------------
Cumulative Total Return(1) 23.01% 19.51% 54.62% 114.62%
- ---------------------------------------------------------------------------------------------------
Average Annual Total Return(2) 22.01% 18.51% 9.11% 8.08%
- ---------------------------------------------------------------------------------------------------
Value of $10,000 Investment(3) $12,201 $11,851 $15,462 $21,462
- ---------------------------------------------------------------------------------------------------
Avg. Ann. Total Return (3/31/05)(4) 18.76% 8.14% 7.86%
- ---------------------------------------------------------------------------------------------------
ADVISOR CLASS(5) 6-MONTH 1-YEAR 5-YEAR 10-YEAR
- ---------------------------------------------------------------------------------------------------
Cumulative Total Return(1) 23.58% 20.54% 62.63% 152.72%
- ---------------------------------------------------------------------------------------------------
Average Annual Total Return(2) 23.58% 20.54% 10.21% 9.71%
- ---------------------------------------------------------------------------------------------------
Value of $10,000 Investment(3) $12,358 $12,054 $16,263 $25,272
- ---------------------------------------------------------------------------------------------------
Avg. Ann. Total Return (3/31/05)(4) 20.78% 9.22% 9.34%
- ---------------------------------------------------------------------------------------------------

PERFORMANCE DATA QUOTED 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, SEE "FUNDS AND PERFORMANCE" AT
FRANKLINTEMPLETON.COM OR CALL 1-800/342-5236.

Semiannual Report | 9

Performance Summary (CONTINUED)

ENDNOTES

THE FUND INVESTS IN FOREIGN SECURITIES, WHICH CAN INVOLVE EXPOSURE TO CURRENCY
VOLATILITY AND POLITICAL, ECONOMIC AND REGULATORY UNCERTAINTY. INVESTMENTS IN
DEVELOPING MARKETS INVOLVE HEIGHTENED RISKS RELATED TO THE SAME FACTORS, IN
ADDITION TO THOSE ASSOCIATED WITH THEIR RELATIVELY SMALL SIZE AND LESSER
LIQUIDITY. IN ADDITION, SMALLER-COMPANY STOCKS HAVE HISTORICALLY EXHIBITED
GREATER PRICE VOLATILITY THAN LARGER-COMPANY STOCKS, PARTICULARLY OVER THE SHORT
TERM. THE FUND'S PROSPECTUS ALSO INCLUDES A DESCRIPTION OF THE MAIN INVESTMENT
RISKS.

CLASS B: These shares have higher annual fees and expenses than Class A
shares.

CLASS C: Prior to 1/1/04, these shares were offered with an initial sales
charge; thus actual total returns would have differed. These
shares have higher annual fees and expenses than Class A shares.

ADVISOR CLASS: Shares are available to certain eligible investors as described
in the prospectus.

(1) Cumulative total return represents the change in value of an investment
over the periods indicated and does not include a sales charge.

(2) Average annual total return represents the average annual change in value
of an investment over the periods indicated and includes any current,
applicable, maximum sales charge. Six-month return has not been
annualized.

(3) These figures represent the value of a hypothetical $10,000 investment in
the Fund over the periods indicated and include any current, applicable,
maximum sales charge.

(4) In accordance with SEC rules, we provide standardized average annual total
return information through the latest calendar quarter.

(5) Effective 1/2/97, the Fund began offering Advisor Class shares, which do
not have sales charges or a Rule 12b-1 plan. Performance quotations for
this class reflect the following methods of calculation: (a) For periods
prior to 1/2/97, a restated figure is used based upon the Fund's Class A
performance, excluding the effect of Class A's maximum initial sales
charge, but reflecting the effect of the Class A Rule 12b-1 fees; and (b)
for periods after 1/1/97, actual Advisor Class performance is used
reflecting all charges and fees applicable to that class. Since 1/2/97
(commencement of sales), the cumulative and average annual total returns
of Advisor Class shares were 74.76% and 7.08%.

10 | Semiannual Report

Your Fund's Expenses

As a Fund shareholder, you can incur two types of costs:

o Transaction costs, including sales charges (loads) on Fund purchases and
redemption fees; and

o 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 following table 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 first line (Actual) for each share class listed in the table below provides
actual account values and expenses. The "Ending Account Value" is derived from
the Fund's actual return, which includes the effect of Fund expenses.

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:

1. Divide your account value by $1,000.

IF AN ACCOUNT HAD AN $8,600 VALUE, THEN $8,600 / $1,000 = 8.6.

2. Multiply the result by the number under the heading "Expenses Paid During
Period."

IF EXPENSES PAID DURING PERIOD WERE $7.50, THEN 8.6 X $7.50 = $64.50.

In this illustration, the estimated expenses paid this period are $64.50.

HYPOTHETICAL EXAMPLE FOR COMPARISON WITH OTHER FUNDS

Information in the second line (Hypothetical) for each class in the table can
help you compare ongoing costs of investing in the Fund with those of other
mutual funds. This information may not be used to estimate the actual ending
account balance or expenses you paid during the period. The hypothetical "Ending
Account Value" is based on the actual expense ratio for each class and an
assumed 5% annual rate of return before expenses, which does not represent the
Fund's actual return. The figure under the heading "Expenses Paid During Period"
shows the hypothetical expenses your account would have incurred under this
scenario. You can compare this figure with the 5% hypothetical examples that
appear in shareholder reports of other funds.

Semiannual Report | 11

Your Fund's Expenses (CONTINUED)

PLEASE NOTE THAT EXPENSES SHOWN IN THE TABLE ARE MEANT TO HIGHLIGHT ONGOING
COSTS AND DO NOT REFLECT ANY TRANSACTION COSTS, SUCH AS SALES CHARGES OR
REDEMPTION FEES. Therefore, the second line for each class is useful in
comparing ongoing costs only, and will not help you compare total costs of
owning different funds. In addition, if transaction costs were included, your
total costs would have been higher. Please refer to the Fund prospectus for
additional information on operating expenses.

- -------------------------------------------------------------------------------------------------------------
BEGINNING ACCOUNT ENDING ACCOUNT EXPENSES PAID DURING
CLASS A VALUE 8/31/04 VALUE 2/28/05 PERIOD* 8/31/04-2/28/05
- -------------------------------------------------------------------------------------------------------------

Actual $1,000 $1,234.30 $ 7.48
- -------------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000 $1,018.10 $ 6.76
- -------------------------------------------------------------------------------------------------------------
CLASS B
- -------------------------------------------------------------------------------------------------------------
Actual $1,000 $1,229.50 $11.55
- -------------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000 $1,014.43 $10.44
- -------------------------------------------------------------------------------------------------------------
CLASS C
- -------------------------------------------------------------------------------------------------------------
Actual $1,000 $1,230.10 $11.61
- -------------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000 $1,014.38 $10.49
- -------------------------------------------------------------------------------------------------------------
ADVISOR CLASS
- -------------------------------------------------------------------------------------------------------------
Actual $1,000 $1,235.80 $ 6.10
- -------------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000 $1,019.34 $ 5.51
- -------------------------------------------------------------------------------------------------------------

* Expenses are equal to the annualized expense ratio for each class (A:
1.35%; B: 2.09%; C: 2.10%; and Advisor: 1.10%), multiplied by the average
account value over the period, multiplied by 181/365 to reflect the
one-half year period.

12 | Semiannual Report

Templeton Global Smaller Companies Fund

FINANCIAL HIGHLIGHTS

-----------------------------------------------------------------------------------
SIX MONTHS ENDED
FEBRUARY 28, 2005 YEAR ENDED AUGUST 31,
CLASS A (UNAUDITED) 2004 2003 2002 2001 2000
-----------------------------------------------------------------------------------

PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout
the period)

Net asset value, beginning of period ...... $ 8.69 $ 7.16 $ 5.82 $ 6.10 $ 7.30 $ 7.40
-----------------------------------------------------------------------------------
Income from investment operations:

Net investment income(a) ................. .02 .07 .07 .05 .07 .11

Net realized and unrealized gains (losses) 1.87 1.56 1.32 (.27) (.98) .35
-----------------------------------------------------------------------------------
Total from investment operations .......... 1.89 1.63 1.39 (.22) (.91) .46
-----------------------------------------------------------------------------------
Less distributions from:

Net investment income .................... (.10) (.10) (.05) (.06) (.10) (.17)

Net realized gains ....................... (.91) -- -- -- (.19) (.39)
-----------------------------------------------------------------------------------
Total distributions ....................... (1.01) (.10) (.05) (.06) (.29) (.56)
-----------------------------------------------------------------------------------
Redemption fees ........................... --(c) --(c) --(c) -- -- --
-----------------------------------------------------------------------------------
Net asset value, end of period ............ $ 9.57 $ 8.69 $ 7.16 $ 5.82 $ 6.10 $ 7.30
===================================================================================

Total return(b) ........................... 23.43% 23.04% 24.09% (3.59)% (12.50)% 7.09%

RATIOS/SUPPLEMENTAL DATA

Net assets, end of period (000's) ......... $ 914,505 $ 744,017 $ 691,103 $ 565,680 $ 647,893 $ 952,784

Ratios to average net assets:

Expenses ................................. 1.35%(d) 1.42% 1.46% 1.44% 1.46% 1.37%

Net investment income .................... .43%(d) .91% 1.18% .82% 1.07% 1.60%

Portfolio turnover rate ................... 19.96% 31.69% 29.51% 25.31% 36.65% 27.19%

(a) Based on average daily shares outstanding.

(b) Total return does not reflect sales commissions or the contingent deferred
sales charge, and is not annualized for periods less than one year.

(d) Annualized.

Semiannual Report | See notes to financial statements. | 13

Templeton Global Smaller Companies Fund

FINANCIAL HIGHLIGHTS (CONTINUED)

-----------------------------------------------------------------------------------
SIX MONTHS ENDED
FEBRUARY 28, 2005 YEAR ENDED AUGUST 31,
CLASS B (UNAUDITED) 2004 2003 2002 2001 2000
-----------------------------------------------------------------------------------

PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout
the period)

Net asset value, beginning of period ...... $ 8.42 $ 6.97 $ 5.70 $ 5.99 $ 7.20 $ 7.36
-----------------------------------------------------------------------------------
Income from investment operations:

Net investment income (loss)(a) .......... (.02) .02 .03 .02 .03 .07

Net realized and unrealized gains (losses) 1.82 1.52 1.27 (.28) (.97) .32
-----------------------------------------------------------------------------------
Total from investment operations .......... 1.80 1.54 1.30 (.26) (.94) .39
-----------------------------------------------------------------------------------
Less distributions from:

Net investment income .................... (.02) (.09) (.03) (.03) (.08) (.16)

Net realized gains ....................... (.91) -- -- -- (.19) (.39)
-----------------------------------------------------------------------------------
Total distributions ....................... (.93) (.09) (.03) (.03) (.27) (.55)
-----------------------------------------------------------------------------------
Redemption fees ........................... --(c) --(c) --(c) -- -- --
-----------------------------------------------------------------------------------
Net asset value, end of period ............ $ 9.29 $ 8.42 $ 6.97 $ 5.70 $ 5.99 $ 7.20
===================================================================================

Total return(b) ........................... 22.95% 22.23% 22.97% (4.25)% (13.13)% 6.01%

RATIOS/SUPPLEMENTAL DATA

Net assets, end of period (000's) ......... $ 7,899 $ 4,896 $ 3,171 $ 1,409 $ 333 $ 519

Ratios to average net assets:

Expenses ................................. 2.09%(d) 2.16% 2.21% 2.19% 2.20% 2.11%

Net investment income (loss) ............. (.31)%(d) .17% .43% .07% .53% .98%

Portfolio turnover rate ................... 19.96% 31.69% 29.51% 25.31% 36.65% 27.19%

(a) Based on average daily shares outstanding.

(b) Total return does not reflect the contingent deferred sales charge, and is
not annualized for periods less than one year.

(d) Annualized.

14 | See notes to financial statements. | Semiannual Report

Templeton Global Smaller Companies Fund

FINANCIAL HIGHLIGHTS (CONTINUED)

-----------------------------------------------------------------------------------
SIX MONTHS ENDED
FEBRUARY 28, 2005 YEAR ENDED AUGUST 31,
CLASS C (UNAUDITED) 2004 2003 2002 2001 2000
-----------------------------------------------------------------------------------

PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout
the period)

Net asset value, beginning of period ...... $ 8.55 $ 7.05 $ 5.75 $ 6.00 $ 7.19 $ 7.27
-----------------------------------------------------------------------------------
Income from investment operations:

Net investment income (loss)(a) .......... (.01) .02 .02 .01 .02 .05

Net realized and unrealized gains (losses) 1.84 1.54 1.30 (.26) (.96) .35
-----------------------------------------------------------------------------------
Total from investment operations .......... 1.83 1.56 1.32 (.25) (.94) .40
-----------------------------------------------------------------------------------
Less distributions from:

Net investment income .................... (.03) (.06) (.02) --(d) (.06) (.09)

Net realized gains ....................... (.91) -- -- -- (.19) (.39)
-----------------------------------------------------------------------------------
Total distributions ....................... (.94) (.06) (.02) -- (.25) (.48)
-----------------------------------------------------------------------------------
Redemption fees ........................... --(c) --(c) --(c) -- -- --
-----------------------------------------------------------------------------------
Net asset value, end of period ............ $ 9.44 $ 8.55 $ 7.05 $ 5.75 $ 6.00 $ 7.19
===================================================================================

Total return(b) ........................... 23.01% 22.07% 23.17% (4.12)% (13.17)% 6.15%

RATIOS/SUPPLEMENTAL DATA

Net assets, end of period (000's) ......... $43,442 $ 30,741 $ 17,347 $ 12,894 $ 13,348 $ 20,729

Ratios to average net assets:

Expenses ................................. 2.10%(e) 2.17% 2.20% 2.17% 2.20% 2.11%

Net investment income (loss).............. (.32)%(e) .16% .44% .09% .33% .79%

Portfolio turnover rate ................... 19.96% 31.69% 29.51% 25.31% 36.65% 27.19%

(a) Based on average daily shares outstanding.

(b) Total return does not reflect the contingent deferred sales charge, and is
not annualized for periods less than one year.

(d) Actual distribution from net investment income per share was $.003.

(e) Annualized.

Semiannual Report | See notes to financial statements. | 15

Templeton Global Smaller Companies Fund

FINANCIAL HIGHLIGHTS (CONTINUED)

-----------------------------------------------------------------------------------
SIX MONTHS ENDED
FEBRUARY 28, 2005 YEAR ENDED AUGUST 31,
ADVISOR CLASS (UNAUDITED) 2004 2003 2002 2001 2000
-----------------------------------------------------------------------------------

PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout
the period)

Net asset value, beginning of period ...... $ 8.71 $ 7.17 $ 5.84 $ 6.12 $ 7.31 $ 7.42
-----------------------------------------------------------------------------------
Income from investment operations:

Net investment income(a) ................. .02 .10 .06 .07 .07 .14

Net realized and unrealized gains (losses) 1.88 1.56 1.33 (.28) (.96) .34
-----------------------------------------------------------------------------------
Total from investment operations .......... 1.90 1.66 1.39 (.21) (.89) .48
-----------------------------------------------------------------------------------
Less distributions from:

Net investment income .................... (.13) (.12) (.06) (.07) (.11) (.20)

Net realized gains ....................... (.91) -- -- -- (.19) (.39)
-----------------------------------------------------------------------------------
Total distributions ....................... (1.04) (.12) (.06) (.07) (.30) (.59)
-----------------------------------------------------------------------------------
Redemption fees ........................... --(c) --(c) --(c) -- -- --
-----------------------------------------------------------------------------------
Net asset value, end of period ............ $ 9.57 $ 8.71 $ 7.17 $ 5.84 $ 6.12 $ 7.31
===================================================================================

Total return(b) ........................... 23.58% 23.30% 24.39% (3.27)% (12.16)% 7.34%

RATIOS/SUPPLEMENTAL DATA

Net assets, end of period (000's) ......... $25,310 $ 9,329 $ 4,834 $ 10,344 $ 2,929 $ 10,234

Ratios to average net assets:

Expenses ................................. 1.10%(d) 1.17% 1.21% 1.19% 1.21% 1.12%

Net investment income .................... .68%(d) 1.16% 1.43% 1.07% 1.10% 1.93%

Portfolio turnover rate ................... 19.96% 31.69% 29.51% 25.31% 36.65% 27.19%

(a) Based on average daily shares outstanding.

(b) Total return is not annualized for periods less than one year.

(d) Annualized.

16 | See notes to financial statements. | Semiannual Report

Templeton Global Smaller Companies Fund

STATEMENT OF INVESTMENTS, FEBRUARY 28, 2005 (UNAUDITED)

- -------------------------------------------------------------------------------------------------------------------------------
INDUSTRY SHARES VALUE
- -------------------------------------------------------------------------------------------------------------------------------

COMMON STOCKS 93.4%
AUSTRALIA 4.5%
APN News & Media Ltd. ............................ Media 2,345,720 $ 8,942,273
Billabong International Ltd. ..................... Textiles Apparel & Luxury Goods 369,406 4,010,986
Downer EdI Ltd. .................................. Commercial Services & Supplies 1,509,000 5,991,750
Iluka Resources Ltd. ............................. Metals & Mining 4,085,420 18,391,271
John Fairfax Holdings Ltd. ....................... Media 2,259,450 7,592,683
--------------
44,928,963
--------------
BAHAMAS .4%
(a) Steiner Leisure Ltd. ............................. Specialty Retail 126,500 4,168,175
--------------
BERMUDA .1%
Axis Capital Holdings Ltd. ....................... Insurance 31,100 870,489
--------------
CANADA 5.5%
Abitibi-Consolidated Inc. ........................ Paper & Forest Products 558,470 2,590,688
CAE Inc. ......................................... Aerospace & Defense 1,903,300 8,721,175
(a) GSI Lumonics Inc. ................................ Electronic Equipment & Instruments 729,000 6,243,251
Legacy Hotels .................................... Real Estate 1,621,700 9,206,358
Linamar Corp. .................................... Auto Components 690,000 7,795,061
National Bank of Canada .......................... Commercial Banks 226,400 9,733,153
Quebecor World Inc. .............................. Commercial Services & Supplies 454,260 10,499,501
--------------
54,789,187
--------------
CHINA 2.5%
China Oilfield Services Ltd. ..................... Energy Equipment & Services 14,768,000 5,254,707
China Resources Power Co. Ltd. ................... Electric Utilities 9,984,000 5,312,715
(a) TCL Communication Technology Holdings ............ Communications Equipment 10,508,000 741,048
TCL International Holdings Inc. .................. Household Durables 32,956,000 7,648,512
Weiqiao Textile Co. Ltd. ......................... Textiles Apparel & Luxury Goods 2,463,000 4,026,600
Weiqiao Textile Co. Ltd., 144A ................... Textiles Apparel & Luxury Goods 1,290,500 2,109,755
--------------
25,093,337
--------------
DENMARK 2.9%
ISS AS ........................................... Commercial Services & Supplies 179,500 11,271,736
(a) Vestas Wind Systems AS ........................... Electrical Equipment 955,140 12,743,242
(a) Vestas Wind Systems AS, 144A ..................... Electrical Equipment 318,380 4,247,748
--------------
28,262,726
--------------
FINLAND 5.1%
Amer Group Ltd., A ............................... Leisure Equipment & Products 569,700 10,588,420
Huhtamaki OYJ .................................... Containers & Packaging 444,900 6,975,681
Metso OYJ ........................................ Machinery 891,650 16,696,151
Orion OYJ ........................................ Pharmaceuticals 1,013,800 16,137,241
--------------
50,397,493
--------------
GERMANY 1.6%
Celesio AG ....................................... Health Care Providers & Services 151,000 11,397,887
Vossloh AG ....................................... Machinery 80,900 4,012,110
--------------
15,409,997
--------------

Semiannual Report | 17

Templeton Global Smaller Companies Fund

STATEMENT OF INVESTMENTS, FEBRUARY 28, 2005 (UNAUDITED) (CONTINUED)

COMMON STOCKS (CONT.)
HONG KONG 10.7%
Asia Satellite Telecommunications Holdings Ltd. .. Diversified Telecommunication Services 2,845,000 $ 5,180,056
China Pharmaceutical Enterprise &
Investment Corp. Ltd. .......................... Pharmaceuticals 26,277,848 6,991,523
Dah Sing Financial Holdings Ltd. ................. Commercial Banks 1,280,000 9,683,355
Fountain Set Holdings Ltd. ....................... Textiles Apparel & Luxury Goods 8,684,000 5,790,113
Giordano International Ltd. ...................... Specialty Retail 14,531,348 9,595,707
Hang Lung Group Ltd. ............................. Real Estate 1,665,000 3,031,562
Hopewell Holdings Ltd. ........................... Transportation Infrastructure 2,982,000 7,513,357
Hung Hing Printing Group Ltd. .................... Containers & Packaging 20,862,508 16,183,996
Li & Fung Ltd. ................................... Distributors 4,761,000 8,149,732
Moulin International Holdings Ltd. ............... Health Care Equipment & Supplies 21,946,000 17,868,700
Ngai Lik Industrial Holding Ltd. ................. Household Durables 16,222,000 4,940,056
Techtronic Industries Co. Ltd. ................... Household Durables 4,561,242 10,702,816
--------------
105,630,973
--------------
INDIA 4.8%
Associated Cement Cos. Ltd. ...................... Construction Materials 989,700 8,324,050
Gail India Ltd., GDR, 144A ....................... Gas Utilities 379,910 12,586,418
Gujarat Ambuja Cements Ltd. ...................... Construction Materials 1,006,480 10,364,657
Housing Development Finance Corp. Ltd. ........... Thrifts & Mortgage Finance 601,660 10,720,537
Satyam Computers Services Ltd. ................... IT Services 543,622 5,124,760
--------------
47,120,422
--------------
INDONESIA .6%
PT Indosat TBK ................................... Diversified Telecommunication Services 9,955,000 5,641,292
--------------
ISRAEL 1.4%
(a) Orbotech Ltd. .................................... Electronic Equipment & Instruments 614,700 14,045,895
--------------
JAPAN 3.9%
Meitec Corp. ..................................... Commercial Services & Supplies 304,100 10,442,575
Ono Pharmaceutical Co. Ltd. ...................... Pharmaceuticals 203,000 11,067,961
Sangetsu Co. Ltd. ................................ Household Durables 352,000 8,333,254
Sohgo Security Services Co. Ltd. ................. Commercial Services & Supplies 651,500 9,297,795
--------------
39,141,585
--------------
LUXEMBOURG .4%
(a) Thiel Logistik AG ................................ IT Services 629,000 4,173,120
--------------
MEXICO .4%
Grupo Continental SA ............................. Beverages 1,992,962 3,608,698
--------------
NETHERLANDS 11.2%
Aalberts Industries NV ........................... Industrial Conglomerates 423,479 21,153,201
Arcadis NV ....................................... Construction & Engineering 533,932 11,277,664
Draka Holding NV ................................. Electrical Equipment 193,464 3,394,600
Draka Holding NV, 144A ........................... Electrical Equipment 135,422 2,376,171
IHC Caland NV .................................... Energy Equipment & Services 142,300 9,440,938
Imtech NV ........................................ Construction & Engineering 459,190 16,485,209
Oce NV ........................................... Office Electronics 347,450 5,751,417
OPG Groep NV ..................................... Health Care Providers & Services 385,100 24,861,118
Vedior NV ........................................ Commercial Services & Supplies 869,000 16,295,045
--------------
111,035,363
--------------

18 | Semiannual Report

Templeton Global Smaller Companies Fund

STATEMENT OF INVESTMENTS, FEBRUARY 28, 2005 (UNAUDITED) (CONTINUED)

COMMON STOCKS (CONT.)
NORWAY 1.5%
Norske Skogindustrier ASA, A ..................... Paper & Forest Products 286,000 $ 6,079,129
Prosafe ASA ...................................... Energy Equipment & Services 266,800 8,764,304
--------------
14,843,433
--------------
SINGAPORE .9%
Huan Hsin Holdings Ltd. .......................... Electronic Equipment & Instruments 2,411,000 1,419,459
Want Want Holdings Ltd. .......................... Food Products 7,863,500 7,313,055
--------------
8,732,514
--------------
SOUTH KOREA 4.6%
Bank of Pusan .................................... Commercial Banks 1,517,430 12,341,865
Dae Duck Electronics Co. Ltd. .................... Electronic Equipment & Instruments 1,025,665 9,158,999
Daegu Bank Co. Ltd. .............................. Commercial Banks 1,124,200 8,438,495
Halla Climate Control Co. Ltd. ................... Auto Components 1,104,000 9,968,422
Hansol Paper Co. Ltd. ............................ Paper & Forest Products 482,400 5,402,688
--------------
45,310,469
--------------
SPAIN 2.2%
Sol Melia SA ..................................... Hotels Restaurants & Leisure 835,560 9,593,327
Transportes Azkar SA ............................. Air Freight & Logistics 1,359,133 12,472,908
--------------
22,066,235
--------------
SWEDEN 1.4%
D. Carnegie & Co. AB ............................. Capital Markets 1,132,536 14,278,794
--------------
SWITZERLAND 3.3%
Gurit Heberlein AG, Br. .......................... Chemicals 11,677 9,401,124
Kuoni Reisen Holding AG, B ....................... Hotels Restaurants & Leisure 12,720 5,854,256
SIG Holding AG ................................... Machinery 41,150 9,921,212
Vontobel Holding AG .............................. Capital Markets 295,900 7,643,691
--------------
32,820,283
--------------
TAIWAN 3.5%
D-Link Corp. ..................................... Communications Equipment 10,185,000 12,125,000
Fu Sheng Industrial .............................. Industrial Conglomerates 8,017,000 11,607,625
Giant Manufacturing Co. .......................... Leisure Equipment & Products 247,000 437,098
Taiwan Fu Hsing .................................. Building Products 3,762,000 4,260,695
(a) Taiwan Green Point Enterprises Co. Ltd. .......... Communications Equipment 1,743,000 6,000,676
--------------
34,431,094
--------------
THAILAND .2%
BEC World Public Co. Ltd., fgn. .................. Media 4,847,000 2,129,435
--------------
UNITED KINGDOM 6.3%
Avis Europe PLC .................................. Road & Rail 4,834,600 5,575,382
Bodycote International PLC ....................... Machinery 4,450,330 15,631,925
Bodycote International PLC 144A .................. Machinery 1,075,082 3,776,260
(a) Dimension Data Holdings PLC ...................... IT Services 6,406,800 4,556,231
DS Smith PLC ..................................... Containers & Packaging 3,902,900 12,265,014
Homeserve ........................................ Commercial Services & Supplies 334,800 5,289,567
John Wood Group .................................. Energy Equipment & Services 5,226,800 14,692,464
Yule Catto & Company PLC ......................... Chemicals 171,400 989,138
--------------
62,775,981
--------------

Semiannual Report | 19

Templeton Global Smaller Companies Fund

STATEMENT OF INVESTMENTS, FEBRUARY 28, 2005 (UNAUDITED) (CONTINUED)

COMMON STOCKS (CONT.)
UNITED STATES 13.5%
(a) Agile Software Corp. ......................... Software 927,850 $ 6,365,051
Alberto-Culver Co. ........................... Household Products 85,925 4,491,300
American Italian Pasta Co., A ................ Food Products 475,100 12,827,700
(a) BearingPoint Inc. ............................ IT Services 643,300 5,056,338
Central Parking Corp. ........................ Commercial Services & Supplies 815,400 11,301,444
(a) Coinstar Inc. ................................ Commercial Services & Supplies 659,180 15,431,404
(a) Convergys Corp. .............................. IT Services 78,000 1,169,220
(a) Gamestop Corp. ............................... Specialty Retail 904,950 17,565,079
Hubbell Inc., B .............................. Electrical Equipment 168,700 9,076,060
(a) Maxtor Corp. ................................. Computers & Peripherals 2,365,100 13,102,654
(a) Scholastic Corp. ............................. Media 157,400 5,584,552
(a),(b) Sharper Image Corp. Specialty Retail 937,400 14,567,196
Tredegar Corp. ............................... Machinery 418,300 7,236,590
(a) Triad Hospitals Inc. ......................... Health Care Providers & Services 229,764 10,033,794
--------------
133,808,382
--------------
TOTAL COMMON STOCKS (COST $614,958,182)....... 925,514,335
--------------
PREFERRED STOCK (COST $2,072,372) 1.3%
GERMANY 1.3%
Hugo Boss AG, pfd. ........................... Textiles Apparel & Luxury Goods 398,880 13,332,271
--------------
TOTAL INVESTMENTS BEFORE REPURCHASE AGREEMENT
(COST $617,030,554)......................... 938,846,606
--------------

----------------
PRINCIPAL AMOUNT
----------------
REPURCHASE AGREEMENT (COST $43,781,000) 4.4%
UNITED STATES 4.4%

(c) Dresdner Bank AG, 2.59%, 3/01/05 (Maturity
Value $43,784,150) Collateralized by U.S.
Treasury Bills, 3/10/05 - 8/18/05,
and U.S. Treasury Notes,
1.875% - 6.75%, 5/15/05 - 2/15/10 ........... $ 43,781,000 43,781,000
--------------
TOTAL INVESTMENTS (COST $660,811,554) 99.1% .. 982,627,606
OTHER ASSETS, LESS LIABILITIES .9%............ 8,528,865
--------------
NET ASSETS 100.0%............................. $ 991,156,471
==============

PORTFOLIO ABBREVIATIONS:
GDR - Global Depository Receipt

(a) Non-income producing.

(b) See Note 7 regarding holdings of 5% voting securities.

20 | See notes to financial statements. | Semiannual Report

Templeton Global Smaller Companies Fund

FINANCIAL STATEMENTS

STATEMENT OF ASSETS AND LIABILITIES
February 28, 2005 (unaudited)

Assets:
Investments in securities:
Cost - Unaffiliated issuers ................................. $ 601,573,230
Cost - Non-controlled affiliated issuers (Note 7) ........... 15,457,324
Cost - Repurchase agreements ................................ 43,781,000
--------------
Total cost of investments ................................... $ 660,811,554
==============
Value - Unaffiliated issuers ................................ $ 924,279,410
Value - Non-controlled affiliated issuers (Note 7) .......... 14,567,196
Value - Repurchase agreements ............................... 43,781,000
--------------
Total value of investments .................................. 982,627,606
Foreign currency, at value (cost $7,033,826) ................. 7,740,109
Receivables:
Investment securities sold .................................. 935,347
Capital shares sold ......................................... 2,942,595
Dividends and interest ...................................... 2,406,333
Foreign income tax receivable ............................... 6,920
Affiliates (Note 8) ......................................... 45,919
--------------
Total assets ............................................ 996,704,829
--------------
Liabilities:
Payables:
Investment securities purchased ............................. 2,316,611
Capital shares redeemed ..................................... 1,785,550
Affiliates .................................................. 1,027,046
Funds advanced by custodian .................................. 217,675
Other liabilities ............................................ 201,476
--------------
Total liabilities ....................................... 5,548,358
--------------
Net assets, at value .................................. $ 991,156,471
==============
Net assets consist of:
Distributions in excess of net investment income ............. $ (4,097,999)
Net unrealized appreciation (depreciation) ................... 322,621,694
Accumulated net realized gain (loss) ......................... 50,358,374
Capital shares ............................................... 622,274,402
--------------
Net assets, at value .................................. $ 991,156,471
==============

Semiannual Report | See notes to financial statements. | 21

Templeton Global Smaller Companies Fund

FINANCIAL STATEMENTS (CONTINUED)

STATEMENT OF ASSETS AND LIABILITIES (CONTINUED)
February 28, 2005 (unaudited)

CLASS A:

Net assets, at value ......................................... $ 914,504,880
==============
Shares outstanding ........................................... 95,593,460
==============
Net asset value per share(a) ................................. $ 9.57
==============
Maximum offering price per share (net asset
value per share / 94.25%) ................................... $ 10.15
==============
CLASS B:
Net assets, at value ......................................... $ 7,899,354
==============
Shares outstanding ........................................... 849,869
==============
Net asset value and maximum offering price per share(a) ...... $ 9.29
==============
CLASS C:
Net assets, at value ......................................... $ 43,441,989
==============
Shares outstanding ........................................... 4,601,270
==============
Net asset value and maximum offering price per share(a) ...... $ 9.44
==============
ADVISOR CLASS:
Net assets, at value ......................................... $ 25,310,248
==============
Shares outstanding ........................................... 2,643,538
==============
Net asset value and maximum offering price per share(a) ...... $ 9.57
==============

(a) Redemption price is equal to net asset value less contingent deferred
sales charges, if applicable, and redemption fees retained by the Fund.

22 | See notes to financial statements. | Semiannual Report

Templeton Global Smaller Companies Fund

FINANCIAL STATEMENTS (CONTINUED)

STATEMENT OF OPERATIONS
for the six months ended February 28, 2005 (unaudited)

Investment income:
Dividends - Unaffiliated issuers (net of foreign
taxes of $662,611) .......................................... $ 7,296,327
Interest (net of foreign taxes of $460) ...................... 471,761
Other income (Note 8) ........................................ 45,919
--------------
Total investment income .................................. 7,814,007
--------------
Expenses:
Management fees (Note 3) ..................................... 3,296,075
Administrative fees (Note 3) ................................. 575,847
Distribution fees (Note 3)
Class A ..................................................... 1,022,371
Class B ..................................................... 31,109
Class C ..................................................... 181,678
Transfer agent fees (Note 3) ................................. 606,100
Custodian fees (Note 4) ...................................... 179,100
Reports to shareholders ...................................... 55,600
Registration and filing fees ................................. 51,700
Professional fees ............................................ 2,800
Trustees' fees and expenses .................................. 65,600
Other ........................................................ 16,300
--------------
Total expenses .......................................... 6,084,280
Expense reductions (Note 4) ............................. (15,613)
--------------
Net expenses .......................................... 6,068,667
--------------
Net investment income ............................... 1,745,340
--------------
Realized and unrealized gains (losses):
Net realized gain (loss) from:
Investments - Unaffiliated issuers (includes foreign
taxes of $1,231 less foreign tax refund of $6,920) ........ 67,550,851
Foreign currency transactions .............................. (88,781)
--------------
Net realized gain (loss) ................................ 67,462,070
--------------
Net change in unrealized appreciation (depreciation) on:
Investments ................................................. 113,349,620
Translation of assets and liabilities denominated
in foreign currencies ...................................... 789,983
Deferred taxes .............................................. 1,790,679
--------------
Net change in unrealized appreciation (depreciation) .... 115,930,282
--------------
Net realized and unrealized gain (loss) ....................... 183,392,352
--------------
Net increase (decrease) in net assets resulting
from operations .............................................. $ 185,137,692
==============

Semiannual Report | See notes to financial statements. | 23

Templeton Global Smaller Companies Fund

FINANCIAL STATEMENTS (CONTINUED)

STATEMENTS OF CHANGES IN NET ASSETS
for the six months ended February 28, 2005 (unaudited)
and the year ended August 31, 2004

-----------------------------------
SIX MONTHS ENDED YEAR ENDED
FEBRUARY 28, 2005 AUGUST 31, 2004
-----------------------------------

Increase (decrease) in net assets:
Operations:
Net investment income ..................................................................... $ 1,745,340 $ 7,215,508
Net realized gain (loss) from investments and foreign currency transactions ............... 67,462,070 124,039,062
Net change in unrealized appreciation (depreciation) on investments, translation of assets
and liabilities denominated in foreign currencies, and deferred taxes .................... 115,930,282 28,977,939
-----------------------------------
Net increase (decrease) in net assets resulting from operations ....................... 185,137,692 160,232,509
-----------------------------------
Distributions to shareholders from:
Net investment income:
Class A .................................................................................. (8,990,630) (10,007,645)
Class B .................................................................................. (10,120) 52,559)
Class C .................................................................................. (103,440) (159,628)
Advisor Class ............................................................................ (177,563) (86,378)
Net realized gains:
Class A .................................................................................. (78,639,477) --
Class B .................................................................................. (586,834) --
Class C .................................................................................. (3,462,049) --
Advisor Class ............................................................................ (1,223,672) --
-----------------------------------
Total distributions to shareholders ........................................................ 93,193,785) (10,306,210)
-----------------------------------
Capital share transactions (Note 2):
Class A .................................................................................. 85,369,222 (90,963,416)
Class B .................................................................................. 2,324,401 859,846
Class C .................................................................................. 8,771,735 9,294,105
Advisor Class ............................................................................ 13,763,979 3,386,073
-----------------------------------
Total capital share transactions ........................................................... 110,229,337 (77,423,392)
-----------------------------------
Redemption fees ............................................................................ 257 25,007
Net increase (decrease) in net assets ................................................ 202,173,501 72,527,914
Net assets:
Beginning of period ........................................................................ 788,982,970 716,455,056
-----------------------------------
End of period .............................................................................. $ 991,156,471 $ 788,982,970
===================================
Distributions in excess of net investment income (undistributed net investment
income) included in net assets:
End of period .............................................................................. $ (4,097,999) $ 3,438,414
===================================

24 | See notes to financial statements. | Semiannual Report

Templeton Global Smaller Companies Fund

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

Templeton Global Smaller Companies Fund (the Fund) is registered under the
Investment Company Act of 1940 as a diversified, open-end investment company.
Effective June 1, 2004, the Fund was reorganized from a Maryland corporation to
a Delaware statutory trust. The Fund seeks to achieve long-term capital growth.
Under normal market conditions, the Fund will invest at least 80% of its net
assets in the equity securities of smaller companies located anywhere in the
world, including emerging markets. The following summarizes the Fund's
significant accounting policies.

A. SECURITY VALUATION

Securities listed on a securities 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. Over-the-counter securities and listed securities for
which there is no reported sale 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. Short term securities are valued at cost.

U.S. Government securities generally trade in the over-the-counter market rather
than on a securities exchange. The Fund may utilize independent pricing
services, quotations from bond dealers and information with respect to bond and
note transactions, to assist in determining a current market value for each
security. The Fund's pricing services may use valuation models or matrix pricing
which considers information with respect to comparable bond and note
transactions, quotations from bond dealers, or by reference to other securities
that are considered comparable in such characteristics as rating, interest rate
and maturity date, option adjusted spread models, prepayment projections,
interest rate spreads and yield curves, to determine current value.

Foreign securities are valued as of the close of trading on the foreign stock
exchange on which the security is primarily traded, or the NYSE, whichever is
earlier. The value is then converted into its U.S. dollar equivalent at the
foreign exchange rate in effect at the close of the NYSE on the day that the
value of the foreign security is determined. If no sale is reported at that
time, the foreign security will be valued within the range of the most recent
quoted bid and ask prices.

The Fund has procedures to determine the fair value of individual securities and
other assets for which market prices are not readily available or which may not
be reliably priced. Some methods for valuing these securities may include:
fundamental analysis, matrix pricing, discounts from market prices of similar
securities, or discounts applied due to the nature and duration of restrictions
on the disposition of the securities. Occasionally, events occur between the
time at which trading in a security is completed and the close of the NYSE that
might call into question the availability (including the reliability) of the
value of a portfolio security held by the Fund. If such an event occurs, the
securities may be valued using fair value procedures, which may include the use
of independent pricing services. All security valuation procedures are approved
by the Fund's Board of Trustees.

Semiannual Report | 25

Templeton Global Smaller Companies Fund

NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

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. 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. 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 Fund's Board of Trustees.

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 on 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. REPURCHASE AGREEMENTS

The Fund may enter into repurchase agreements, which are accounted for as a loan
by the Fund to the seller, collateralized by securities which are delivered to
the Fund's custodian. The market value, including accrued interest, of the
initial collateralization is required to be at least 102% of the dollar amount
invested by the Fund, with the value of the underlying securities marked to
market daily to maintain coverage of at least 100%. At February 28, 2005, all
repurchase agreements held by the Fund had been entered into on that date.

D. FOREIGN CURRENCY CONTRACTS

When the Fund purchases or sells foreign securities it may enter into foreign
exchange contracts to minimize foreign exchange risk from the trade date to the
settlement date of the transactions. A foreign exchange contract is an agreement
between two parties to exchange different currencies at an agreed upon exchange
rate on a specified date. Realized and unrealized gains and losses on these
contracts are included in the Statement of Operations.

The risks of these contracts include movement in the values of the foreign
currencies relative to the U.S. dollar and the possible inability of the
counterparties to fulfill their obligations under the contracts.

26 | Semiannual Report

Templeton Global Smaller Companies Fund

NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

E. INCOME AND DEFERRED TAXES

No provision has been made for U.S. income taxes because the Fund's policy is to
qualify as a regulated investment company under Subchapter M of the Internal
Revenue Code and to distribute substantially all of its taxable income. Fund
distributions to shareholders are determined on an income tax basis and may
differ from net investment income and realized gains for financial reporting
purposes.

The Fund is subject to a tax imposed on net realized gains of securities of
certain foreign countries. The Fund records an estimated deferred tax liability
for net unrealized gains on these securities in an amount that would be payable
if the securities were disposed of on valuation date.

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. Dividend income and
distributions to shareholders are recorded on the ex-dividend date.

Realized and unrealized gains and losses and net investment income, other than
class specific expenses, are allocated daily to each class of shares based upon
the relative proportion of net assets of each class.

G. ACCOUNTING ESTIMATES

The preparation of financial statements in accordance with accounting principles
generally accepted in the United States of America 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. REDEMPTION FEES

Redemptions and exchanges of Fund shares held five trading days or less (30 days
or less prior to June 1, 2004 and 90 days or less prior to January 1, 2004) may
be subject to the Fund's redemption fee, which is 2% of the amount redeemed.
Such fees are retained by the Fund and accounted for as additional paid-in
capital as noted in the Statements of Changes in Net Assets.

I. GUARANTEES AND INDEMNIFICATIONS

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

Semiannual Report | 27

Templeton Global Smaller Companies Fund

NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

2. SHARES OF BENEFICIAL INTEREST

The Fund offers four classes of shares: Class A, Class B, Class C and Advisor
Class. Effective March 1, 2005, Class B shares will no longer be offered except
to existing Class B shareholders through reinvested distributions or exchanges
into other Franklin Templeton funds' Class B shares, as permitted by the
applicable fund prospectus. Each class of shares differs by its initial sales
load, contingent deferred sales charges, distribution fees, voting rights on
matters affecting a single class and its exchange privilege.

At February 28, 2005, there were an unlimited number of shares authorized
(without par value). Transactions in the Fund's shares were as follows:

---------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED
FEBRUARY 28, 2005 AUGUST 31, 2004
---------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT
---------------------------------------------------------

CLASS A SHARES:
Shares sold ...................... 7,704,027 $ 69,842,984 16,608,824 $ 137,819,241
Shares issued in reinvestment of
distributions ................... 9,113,379 77,203,673 1,129,959 8,565,100
Shares redeemed .................. (6,823,106) (61,677,435) (28,682,784) (237,347,757)
---------------------------------------------------------
Net increase (decrease) .......... 9,994,300 $ 85,369,222 (10,944,001) $ (90,963,416)
=========================================================
CLASS B SHARES:
Shares sold ...................... 259,987 $ 2,296,124 791,378 $ 6,371,024
Shares issued in reinvestment of
distributions ................... 64,006 527,747 6,754 49,578
Shares redeemed .................. (55,766) (499,470) (671,299) (5,560,756)
---------------------------------------------------------
Net increase (decrease) .......... 268,227 $ 2,324,401 126,833 $ 859,846
=========================================================
CLASS C SHARES:
Shares sold ...................... 1,073,746 $ 9,584,101 2,457,661 $ 20,249,276
Shares issued in reinvestment of
distributions ................... 329,414 2,754,725 17,982 133,963
Shares redeemed .................. (397,538) (3,567,091) (1,339,336) (11,089,134)
---------------------------------------------------------
Net increase (decrease) .......... 1,005,622 $ 8,771,735 1,136,307 $ 9,294,105
=========================================================
ADVISOR CLASS SHARES:
Shares sold ...................... 1,575,688 $ 13,866,819 1,354,236 $ 10,993,871
Shares issued in reinvestment of
distributions ................... 116,823 991,141 10,694 81,278
Shares redeemed .................. (120,230) (1,093,981) (967,391) (7,689,076)
---------------------------------------------------------
Net increase (decrease) .......... 1,572,281 $ 13,763,979 397,539 $ 3,386,073
=========================================================

28 | Semiannual Report

Templeton Global Smaller Companies Fund

NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

3. TRANSACTION WITH AFFILIATES

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

- --------------------------------------------------------------------------------------------
SUBSIDIARY AFFILIATION
- --------------------------------------------------------------------------------------------

Templeton Investments Counsel LLC (TIC) Investment manager
Franklin Templeton Services LLC (FT Services) Administrative manager
Franklin Templeton Distributors Inc. (Distributors) Principal underwriter
Franklin Templeton Investor Services LLC (Investor Services) Transfer agent

A. MANAGEMENT FEES

The Fund pays an investment management fee to TIC based on the Fund's average
daily net assets as follows:

- --------------------------------------------------------------------------------
ANNUALIZED FEE RATE NET ASSETS
- --------------------------------------------------------------------------------
0.750% Up to and including $1 billion
0.730% Over $1 billion, up to and including $5 billion
0.710% Over $5 billion, up to and including $10 billion
0.690% Over $10 billion, up to and including $15 billion
0.670% Over $15 billion, up to and including $20 billion
0.650% Over $20 billion

B. ADMINISTRATIVE FEES

The Fund pays an administrative fee to FT Services based on the Fund's average
daily net assets as follows:

- --------------------------------------------------------------------------------
ANNUALIZED FEE RATE NET ASSETS
- --------------------------------------------------------------------------------
0.150% Up to and including $200 million
0.135% Over $200 million, up to and including $700 million
0.100% Over $700 million, up to and including $1.2 billion
0.075% Over $1.2 billion

C. DISTRIBUTION FEES

The Fund reimburses Distributors up to 0.25%, 1.00%, and 1.00% per year of the
average daily net assets of Class A, Class B, and Class C, respectively, for
costs incurred in marketing the Fund's shares under a Rule 12b-1 plan.

Under the Class A distribution plan, costs exceeding the maximum for the current
plan year may be reimbursed in subsequent periods. At February 28, 2005,
Distributors advised the Fund that unreimbursed costs were $1,320,897.

Semiannual Report | 29

Templeton Global Smaller Companies Fund

NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

3. TRANSACTION WITH AFFILIATES (CONTINUED)

D. SALES CHARGES/UNDERWRITING AGREEMENTS

Distributors has advised the Fund of the following commission transactions
related to the sales and redemptions of the Fund's shares for the period:

Net sales charges received ............................. $ 74,032
Contingent deferred sales charges retained ............. $ 8,848

E. TRANSFER AGENT FEES

The Fund paid transfer agent fees of $606,100, of which $468,394 was paid to
Investor Services.

4. EXPENSE OFFSET ARRANGEMENT

The Fund has entered into an arrangement with its custodian whereby credits
realized as a result of uninvested cash balances are used to reduce a portion of
the Fund's custodian expenses. During the period ended February 28, 2005, the
custodian fees were reduced as noted in the Statement of Operations.

5. INCOME TAXES

Net investment income differs for financial statement and tax purposes
primarily due to differing treatments of passive foreign investment company
shares.

Net realized gains differ for financial statement and tax purposes primarily due
to differing treatments of foreign currency transactions and foreign taxes on
sales of securities.

At February 28, 2005, the net unrealized appreciation (depreciation) based on
the cost of investments for income tax purposes were as follows:

Cost of investments ................................... $ 665,790,939
=============
Unrealized appreciation ............................... $ 328,763,306
Unrealized depreciation ............................... (11,926,639)
-------------
Net unrealized appreciation (depreciation) ............ $ 316,836,667
=============

6. INVESTMENT TRANSACTIONS

Purchases and sales of investments (excluding short-term securities) for the
period ended February 28, 2005 aggregated $175,439,177 and $165,701,798,
respectively.

30 | Semiannual Report

Templeton Global Smaller Companies Fund

NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

7. HOLDINGS OF 5% VOTING SECURITIES

The Investment Company Act of 1940 defines "affiliated companies" to include
investments in portfolio companies in which a fund owns 5% or more of the
outstanding voting securities. Investments in "affiliated companies" for the
Fund at February 28, 2005 were as shown below:

- ----------------------------------------------------------------------------------------------------------------
NUMBER OF NUMBER OF
SHARES HELD SHARES HELD VALUE
AT BEGINNING GROSS GROSS AT END AT END INVESTMENT REALIZED CAPITAL
NAME OF ISSUER OF PERIOD ADDITIONS REDUCTIONS OF PERIOD OF PERIOD INCOME GAIN (LOSS)
- ----------------------------------------------------------------------------------------------------------------

Sharper Image
Corp ........... -- 937,400 -- 937,400 $14,567,196 $-- $--
-----------------------------------------
TOTAL AFFILIATED SECURITIES (1.47% of Net Assets) $14,567,196 $-- $--
=========================================

8. REGULATORY MATTERS

INVESTIGATIONS

As part of various investigations by a number of federal, state, and foreign
regulators and governmental entities, including the Securities and Exchange
Commission ("SEC"), the California Attorney General's Office ("CAGO"), and the
National Association of Securities Dealers, Inc. ("NASD"), relating to certain
practices in the mutual fund industry, including late trading, market timing and
marketing support payments to securities dealers who sell fund shares, Franklin
Resources, Inc. and certain of its subsidiaries (as used in this section,
together, the "Company"), as well as certain current or former executives and
employees of the Company, received subpoenas and/or requests for documents,
information and/or testimony. The Company and its current employees provided
documents and information in response to those requests and subpoenas.

SETTLEMENTS

Beginning in August 2004, the Company entered into settlements with certain
regulators investigating the mutual fund industry practices noted above. The
Company believes that settlement of each of the matters described in this
section is in the best interest of the Company and shareholders of the Franklin,
Templeton, and Mutual Series mutual funds (the "funds").

On August 2, 2004, Franklin Resources, Inc. announced that its subsidiary,
Franklin Advisers, Inc., reached an agreement with the SEC that resolved the
issues resulting from the SEC investigation into market timing activity. In
connection with that agreement, the SEC issued an "Order Instituting
Administrative and Cease-and-Desist Proceedings Pursuant to Sections 203(e) and
203(k) of the Investment Advisers Act of 1940 and Sections 9(b) and 9(f) of the
Investment Company Act of 1940, Making Findings and Imposing Remedial Sanctions
and a Cease-and-Desist Order" (the "Order"). The SEC's Order concerned the
activities of a limited number of third parties that ended in 2000 and those
that were the subject of the first Massachusetts administrative complaint
described below.

Semiannual Report | 31

Templeton Global Smaller Companies Fund

NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

8. REGULATORY MATTERS (CONTINUED)

SETTLEMENTS (CONTINUED)

Under the terms of the SEC's Order, pursuant to which Franklin Advisers, Inc.
neither admitted nor denied any of the findings contained therein, Franklin
Advisers, Inc. agreed to pay $50 million, of which $20 million is a civil
penalty, to be distributed to shareholders of certain funds in accordance with a
plan to be developed by an independent distribution consultant. At this time, it
is unclear which funds or which shareholders of any particular fund will receive
distributions. The Order also required Franklin Advisers, Inc. to, among other
things, enhance and periodically review compliance policies and procedures.

On September 20, 2004, Franklin Resources, Inc. announced that two of its
subsidiaries, Franklin Advisers, Inc. and Franklin Templeton Alternative
Strategies, Inc. ("FTAS"), reached an agreement with the Securities Division of
the Office of the Secretary of the Commonwealth of Massachusetts (the "State of
Massachusetts") related to its administrative complaint filed on February 4,
2004, concerning one instance of market timing that was also a subject of the
August 2, 2004 settlement that Franklin Advisers, Inc. reached with the SEC, as
described above.

Under the terms of the settlement consent order issued by the State of
Massachusetts, Franklin Advisers, Inc. and FTAS consented to the entry of a
cease-and-desist order and agreed to pay a $5 million administrative fine to the
State of Massachusetts (the "Massachusetts Consent Order"). The Massachusetts
Consent Order included two different sections: "Statements of Fact" and
"Violations of Massachusetts Securities Laws." Franklin Advisers, Inc. and FTAS
admitted the facts in the Statements of Fact.

On October 25, 2004, the State of Massachusetts filed a second administrative
complaint, alleging that Franklin Resources, Inc.'s Form 8-K filing (in which it
described the Massachusetts Consent Order and stated that "Franklin did not
admit or deny engaging in any wrongdoing") failed to state that Franklin
Advisers, Inc. and FTAS admitted the Statements of Fact portion of the
Massachusetts Consent Order (the "Second Complaint"). Franklin Resources, Inc.
reached a second agreement with the State of Massachusetts on November 19, 2004,
resolving the Second Complaint. As a result of the November 19, 2004 settlement,
Franklin Resources, Inc. filed a new Form 8-K. The terms of the Massachusetts
Consent Order did not change and there was no monetary fine associated with this
second settlement.

On November 17, 2004, Franklin Resources, Inc. announced that Franklin Templeton
Distributors, Inc. ("FTDI") reached an agreement with the CAGO, resolving the
issues resulting from the CAGO's investigation concerning sales and marketing
support payments. Under the terms of the settlement, FTDI neither admitted nor
denied the allegations in the CAGO's complaint and agreed to pay $2 million to
the State of California as a civil penalty, $14 million to the funds, to be
allocated by an independent distribution consultant to be paid for by FTDI, and
$2 million to the CAGO for its investigative costs.

32 | Semiannual Report

Templeton Global Smaller Companies Fund,Inc.

NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

8. REGULATORY MATTERS (CONTINUED)

SETTLEMENTS (CONTINUED)

On December 13, 2004, Franklin Resources, Inc. announced that its subsidiaries
FTDI and Franklin Advisers, Inc. reached an agreement with the SEC, resolving
the issues resulting from the SEC's investigation concerning marketing support
payments to securities dealers who sell fund shares. In connection with that
agreement, the SEC issued an "Order Instituting Administrative and
Cease-and-Desist Proceedings, Making Findings, and Imposing Remedial Sanctions
Pursuant to Sections 203(e) and 203(k) of the Investment Advisers Act of 1940,
Sections 9(b) and 9(f) of the Investment Company Act of 1940, and Section 15(b)
of the Securities Exchange Act of 1934" (the "Second Order").

Under the terms of the Second Order, in which FTDI and Franklin Advisers, Inc.
neither admitted nor denied the findings contained therein, they agreed to pay
the funds a penalty of $20 million and disgorgement of $1 (one dollar). FTDI and
Franklin Advisers, Inc. also agreed to implement certain measures and
undertakings relating to marketing support payments to broker-dealers for the
promotion or sale of fund shares, including making additional disclosures in the
funds' Prospectuses and Statements of Additional Information. The Second Order
further requires the appointment of an independent distribution consultant, at
the Company's expense, who shall develop a plan for the distribution of the
penalty and disgorgement to the funds.

The SEC's Second Order and the CAGO settlement agreement concerning marketing
support payments provide that the distribution of settlement monies are to be
made to the relevant funds, not to individual shareholders. The independent
distribution consultant has substantially completed preparation of these
distribution plans. The CAGO has approved the distribution plan pertaining to
the distribution of the monies owed under the CAGO settlement agreement and, in
accordance with the terms and conditions of that settlement, the monies were
disbursed to the participating funds and are recorded as other income in the
current period. The SEC has not yet approved the distribution plan pertaining to
the Second Order. When approved, disbursements of settlement monies under the
SEC's Second Order will be made promptly in accordance with the terms and
conditions of that order.

Semiannual Report | 33

Templeton Global Smaller Companies Fund

NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

8. REGULATORY MATTERS (CONTINUED)

OTHER LEGAL PROCEEDINGS

The Fund, in addition to the Company and other funds, and certain current and
former officers, employees, and directors have been named in multiple lawsuits
in different federal courts in Nevada, California, Illinois, New York and
Florida, alleging violations of various federal securities laws and seeking,
among other relief, monetary damages, restitution, removal of fund trustees,
directors, advisers, administrators, and distributors, rescission of management
contracts and 12b-1 Plans, and/or attorneys' fees and costs. Specifically, the
lawsuits claim breach of duty with respect to alleged arrangements to permit
market timing and/or late trading activity, or breach of duty with respect to
the valuation of the portfolio securities of certain Templeton funds managed by
Franklin Resources, Inc. subsidiaries, resulting in alleged market timing
activity. The majority of these lawsuits duplicate, in whole or in part, the
allegations asserted in the February 4, 2004 Massachusetts administrative
complaint and the findings in the SEC's August 2, 2004 Order, as described
above. The lawsuits are styled as class actions or derivative actions on behalf
of either the named funds or Franklin Resources, Inc.

In addition, the Company, as well as certain current and former officers,
employees, and directors, have been named in multiple lawsuits alleging
violations of various securities laws and pendent state law claims relating to
the disclosure of directed brokerage payments and/or payment of allegedly
excessive advisory, commission, and distribution fees, and seeking, among other
relief, monetary damages, restitution, rescission of advisory contracts,
including recovery of all fees paid pursuant to those contracts, an accounting
of all monies paid to the named advisers, declaratory relief, injunctive relief,
and/or attorneys' fees and costs. These lawsuits are styled as class actions or
derivative actions brought on behalf of certain funds.

The Company and fund management strongly believe that the claims made in each of
the lawsuits identified above are without merit and intend to vigorously defend
against them. The Company cannot predict with certainty, however, the eventual
outcome of the remaining governmental investigations or private lawsuits, nor
whether they will have a material negative impact on the Company. Public trust
and confidence are critical to the Company's business and any material loss of
investor and/or client confidence could result in a significant decline in
assets under management by the Company, which would have an adverse effect on
the Company's future financial results. If the Company finds that it bears
responsibility for any unlawful or inappropriate conduct that caused losses to
the Fund, it is committed to making the Fund or its shareholders whole, as
appropriate. The Company is committed to taking all appropriate actions to
protect the interests of its funds' shareholders.

34 | Semiannual Report

Templeton Global Smaller Companies Fund

SHAREHOLDER INFORMATION

PROXY VOTING POLICIES AND PROCEDURES

The Fund 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 1-954/847-2268 or
by sending a written request to: Franklin Templeton Companies, LLC, 500 East
Broward Boulevard, Suite 1500, Fort Lauderdale, FL 33394, 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 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 on
Form N-Q. Shareholders may view the filed Form N-Q 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
1-800/SEC-0330.

Semiannual Report | 35

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Literature Request

LITERATURE REQUEST. TO RECEIVE A BROCHURE AND PROSPECTUS, PLEASE CALL US AT
1-800/DIAL BEN(R) (1-800/342-5236) OR VISIT FRANKLINTEMPLETON.COM. INVESTORS
SHOULD CAREFULLY CONSIDER A FUND'S INVESTMENT GOALS, RISKS, CHARGES AND EXPENSES
BEFORE INVESTING. THE PROSPECTUS CONTAINS THIS AND OTHER INFORMATION. PLEASE
CAREFULLY READ THE PROSPECTUS BEFORE INVESTING. To ensure the highest quality of
service, we may monitor, record and access telephone calls to or from our
service departments. These calls can be identified by the presence of a regular
beeping tone.

FRANKLIN TEMPLETON INVESTMENTS

INTERNATIONAL

Mutual European Fund
Templeton China World Fund
Templeton Developing Markets Trust
Templeton Foreign Fund
Templeton Foreign Smaller Companies Fund
Templeton International (Ex EM) Fund

GLOBAL

Mutual Discovery Fund
Templeton Global Long-Short Fund
Templeton Global Opportunities Trust
Templeton Global Smaller Companies Fund
Templeton Growth Fund
Templeton World Fund

GROWTH

Franklin Aggressive Growth Fund
Franklin Capital Growth Fund
Franklin Flex Cap Growth Fund
Franklin Small-Mid Cap Growth Fund
Franklin Small Cap Growth Fund II(1)

VALUE

Franklin Balance Sheet
Investment Fund(2)
Franklin Equity Income Fund
Franklin Large Cap Value Fund
Franklin MicroCap Value Fund(2)
Franklin Small Cap Value Fund
Mutual Beacon Fund
Mutual Qualified Fund
Mutual Recovery Fund(3)
Mutual Shares Fund

BLEND

Franklin Blue Chip Fund
Franklin Convertible Securities Fund
Franklin Growth Fund
Franklin Rising Dividends Fund
Franklin U.S. Long-Short Fund

SECTOR

Franklin Biotechnology Discovery Fund
Franklin DynaTech Fund
Franklin Global Communications Fund
Franklin Global Health Care Fund
Franklin Gold and Precious Metals Fund
Franklin Natural Resources Fund
Franklin Real Estate Securities Fund
Franklin Technology Fund
Franklin Utilities Fund
Mutual Financial Services Fund

ASSET ALLOCATION

Franklin Templeton Corefolio
Allocation Fund
Franklin Templeton Founding Funds Allocation Fund
Franklin Templeton Perspectives Allocation Fund

TARGET FUNDS

Franklin Templeton Conservative Target Fund
Franklin Templeton Growth Target Fund
Franklin Templeton Moderate Target Fund

INCOME

Franklin Adjustable U.S. Government
Securities Fund(4)
Franklin's AGE High Income Fund
Franklin Floating Rate Daily Access Fund
Franklin Income Fund
Franklin Limited Maturity
U.S. Government Securities Fund(4),(5)
Franklin Low Duration Total Return Fund
Franklin Real Return Fund
Franklin Strategic Income Fund
Franklin Strategic Mortgage Portfolio
Franklin Templeton Hard Currency Fund
Franklin Total Return Fund
Franklin U.S. Government Securities Fund(4)
Templeton Global Bond Fund

TAX-FREE INCOME(6)

NATIONAL FUNDS

Double Tax-Free Income Fund
Federal Tax-Free Income Fund
High Yield Tax-Free Income Fund
Insured Tax-Free Income Fund(7)

LIMITED-TERM FUNDS

California Limited-Term Tax-Free Income Fund
Federal Limited-Term Tax-Free Income Fund
New York Limited-Term Tax-Free Income Fund

INTERMEDIATE-TERM FUNDS

California Intermediate-Term
Tax-Free Income Fund
Federal Intermediate-Term
Tax-Free Income Fund
New York Intermediate-Term
Tax-Free Income Fund

STATE-SPECIFIC

Alabama
Arizona
California(8)
Colorado
Connecticut
Florida(8)
Georgia
Kentucky
Louisiana
Maryland
Massachusetts(7)
Michigan(7)
Minnesota(7)
Missouri
New Jersey
New York(8)
North Carolina
Ohio(7)
Oregon
Pennsylvania
Tennessee
Virginia

INSURANCE FUNDS

Franklin Templeton Variable Insurance Products Trust(9)

(1) The fund is closed to new investors. Existing shareholders can continue
adding to their accounts.

(2) The fund is only open to existing shareholders and select retirement
plans.

(3) The fund is a continuously offered, closed-end fund. Shares may be
purchased daily; there is no daily redemption. However, each quarter,
pending board approval, the fund will authorize the repurchase of 5%-25%
of the outstanding number of shares. Investors may tender all or a portion
of their shares during the tender period.

(4) An investment in the fund is neither insured nor guaranteed by the U.S.
government or by any other entity or institution.

(5) Formerly Franklin Short-Intermediate U.S. Government Securities Fund.
Effective 9/1/04, the fund's name changed; its investment goal and
strategy remained the same.

(6) For investors subject to the alternative minimum tax, a small portion of
fund dividends may be taxable. Distributions of capital gains are
generally taxable.

(7) Portfolio of insured municipal securities.

(8) These funds are available in two or more variations, including long-term
portfolios, portfolios of insured securities, a high-yield portfolio (CA)
and limited-term, intermediate-term and money market portfolios (CA and
NY).

(9) The funds of the Franklin Templeton Variable Insurance Products Trust are
generally available only through insurance company variable contracts.

01/05 Not part of the semiannual report

[LOGO](R)
FRANKLIN(R) TEMPLETON(R) One Franklin Parkway
INVESTMENTS San Mateo, CA 94403-1906

o WANT TO RECEIVE THIS DOCUMENT FASTER VIA EMAIL?

Eligible shareholders can sign up for eDelivery at franklintempleton.com.
See inside for details.

SEMIANNUAL REPORT AND SHAREHOLDER LETTER

TEMPLETON GLOBAL SMALLER
COMPANIES FUND

INVESTMENT MANAGER

Templeton Investment Counsel, LLC

SUB-ADVISOR

Franklin Templeton Investments (Asia) Limited

PRINCIPAL UNDERWRITER

Franklin Templeton Distributors, Inc.
1-800/DIAL BEN(R)
franklintempleton.com

SHAREHOLDER SERVICES

1-800/632-2301

Authorized for distribution only when accompanied or preceded by a prospectus.
Investors should carefully consider a fund's investment goals, risks, charges
and expenses before investing. Like any investment in securities, the value of
the Fund's portfolio will be subject to the risk of loss from market, currency,
economic, political and other factors. The Fund and its investors are not
protected from such losses by the Investment Manager. Therefore, investors who
cannot accept this risk should not invest in shares of the Fund. The prospectus
contains this and other information; please read it carefully before investing.

To ensure the highest quality of service, telephone calls to or from our service
departments may be monitored, recorded and accessed. These calls can be
identified by the presence of a regular beeping tone.

103 S2005 04/05

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.

(d) N/A

(f) Pursuant to Item 11(a), 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 Fred R. Millsaps and Frank A.
Olson, they are "independent" as defined under the relevant Securities and
Exchange Commission Rules and Releases.

ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES. N/A

ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS. N/A

ITEM 6. SCHEDULE OF INVESTMENTS. N/A

ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES. N/A

ITEM 8. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANIES AND AFFILIATED PURCHASES. N/A

ITEM 9. SUBMISSION OF MATTERS OF 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 10. CONTROLS AND PROCEDURES.

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

Within 90 days prior to the filing date of this Shareholder Report on Form
N-CSR, the Registrant had carried out an evaluation, under the supervision and
with the participation of the Registrant's management, including the
Registrant's principal executive officer and the Registrant's principal
financial officer, of the effectiveness of the design and operation of the
Registrant's disclosure controls and procedures. Based on such evaluation, the
Registrant's principal executive officer and principal financial officer
concluded that the Registrant's disclosure controls and procedures are
effective.

(B) CHANGES IN INTERNAL CONTROLS. There have been no significant changes in the
Registrant's internal controls or in other factors that could significantly
affect the internal controls subsequent to the date of their evaluation in
connection with the preparation of this Shareholder Report on Form N-CSR.

ITEM 11. EXHIBITS

(a) Code of Ethics

(b)(1) Certifications pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
of Jimmy D. Gambill, Chief Executive Officer - Finance and Administration, and
Galen G. Vetter, Chief Financial Officer

(b)(2) Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
of Jimmy D. Gambill, Chief Executive Officer - Finance and Administration, and
Galen G. Vetter, Chief Financial 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.

TEMPLETON GLOBAL SMALLER COMPANIES FUND

By /s/JIMMY D. GAMBILL
Chief Executive Officer - Finance and Administration
Date April 25, 2005

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/JIMMY D. GAMBILL
Chief Executive Officer - Finance and Administration
Date April 25, 2005

By /s/GALEN G. VETTER
Chief Financial Officer
Date April 25, 2005