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)

CRAIG S. TYLE, 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
----

Date of reporting period: 2/28/06
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ITEM 1. REPORTS TO STOCKHOLDERS

[GRAPHIC OMITTED]

FEBRUARY 28, 2006
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SEMIANNUAL REPORT AND SHAREHOLDER LETTER | GLOBAL
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WANT TO RECEIVE
THIS DOCUMENT
FASTER VIA EMAIL?

Eligible shareholders can
TEMPLETON GLOBAL sign up for eDelivery at
SMALLER COMPANIES FUND franklintempleton.com.
See inside for details.

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[LOGO](R)
FRANKLIN TEMPLETON
INVESTMENTS

Franklin o TEMPLETON o Mutual Series

Franklin Templeton Investments

GAIN FROM OUR PERSPECTIVE(R)

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 offices in over 25 countries,
Templeton offers investors a truly global
perspective.

MUTUAL SERIES. Founded in 1949, Mutual Series is
dedicated to a unique style of value investing,
searching aggressively for opportunity among what
it believes are undervalued stocks, as well as
arbitrage situations and distressed securities.

TRUE DIVERSIFICATION Because our management groups work independently
and adhere to different investment approaches,
Franklin, Templeton and Mutual Series funds
typically have distinct portfolios. That's why our
funds can be used to build truly diversified
allocation plans 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, accurate and personal service
that has 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 ...................................................... 22

Notes to Financial Statements ............................................. 26

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

Shareholder Letter

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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, as defined in the Fund's prospectus, including emerging markets.

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PERFORMANCE DATA REPRESENT PAST PERFORMANCE, WHICH DOES NOT GUARANTEE FUTURE
RESULTS. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE, AND YOU MAY HAVE
A GAIN OR LOSS WHEN YOU SELL YOUR SHARES. CURRENT PERFORMANCE MAY DIFFER FROM
FIGURES SHOWN. 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, 2006.

PERFORMANCE OVERVIEW

For the six months under review, Templeton Global Smaller Companies Fund -Class
A posted a +10.80% cumulative total return. The Fund outperformed its benchmark,
the Morgan Stanley Capital International (MSCI) World Index, which posted a
+10.50% 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

The global economy overcame fears of derailment generated by higher energy costs
and advanced at a fair pace over the six-month period ended February 28, 2006.
In the fourth quarter of 2005, gross domestic product grew at annualized rates
of 5.5% in Japan, 1.6% in the U.S. and 1.2% in the euro zone. 2 Based on more
recent economic indicators, the economic expansion probably accelerated in the
first two months of this year.

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. Sources: Economic and Social Research Institute (Japan); U.S. Bureau of
Economic Analysis; Eurostat.

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 BREAKDOWN
Based on Total Net Assets as of 2/28/06

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

Europe 31.7%
Asia 31.2%
North America 28.1%
Australia & New Zealand 3.0%
Middle East & Africa 1.2%
Latin America 0.5%
Short-Term Investments & Other Net Assets 4.3%

Excluding the volatile energy and food sectors, inflation was relatively subdued
worldwide and monetary policy remained fairly accommodative. The U.S. Federal
Reserve Board raised the short-term federal funds target rate in four
quarter-point increments, bringing it to 4.50%. The European Central Bank (ECB)
made one increase that brought short-term rates to 2.25%, after keeping rates at
historically low levels for more than two and a half years. Even after these
increases, both rates remained at levels considered supportive of further
economic growth.

Strong demand for oil sustained high prices during most of the reporting period,
while prices for other commodities such as industrial metals were also high, led
by copper, whose contract price rose 29% over the six-month period. 3 This
contributed to economic growth in countries such as Australia and Canada, and
emerging markets in Asia and Latin America that are tied to mining and
industrial commodities.

In this environment, global equity markets performed strongly, particularly
outside the U.S. The six-month total return for the MSCI Europe, Australasia,
Far East (EAFE) Index was +15.23%, calculated in U.S. dollars. 4 By comparison
the total return for the MSCI USA Index was +6.20%. 5 The performance of
non-U.S. equity markets would have been stronger had the dollar not appreciated
in value versus other major currencies. For the reporting period, the dollar
rose against the British pound (+2.70%), the euro (+3.16%), the yen (+4.22%) and
the Swiss franc (+4.22%). 6 However, the dollar declined versus some other
currencies. For example, the dollar fell against the Brazilian real (-9.72%),
the South Korean won (-6.68%), the Canadian dollar (-4.22%) and the Mexican peso
(-3.27%). 6

In terms of global sector performance, as measured by the MSCI World Index,
materials and financial stocks provided the strongest total returns, while
energy and consumer staples provided the lowest positive returns. The
telecommunication services sector was the only sector that had negative returns
for the period.

3. Source: New York Mercantile Exchange.

4. Source: Standard & Poor's Micropal. The MSCI EAFE Index is a free
float-adjusted, market capitalization-weighted index designed to measure
equity market performance in global developed markets excluding the U.S.
and Canada.

5. Source: Standard & Poor's Micropal. The MSCI USA Index is a free
float-adjusted, market capitalization-weighted index designed to measure
equity market performance in the U.S.

6. Source: IDC/ExShare via Factset Research Systems.

4 | Semiannual Report

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 evaluating future earnings
and cash flow growth potential. 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.

MANAGER'S DISCUSSION

Several holdings performed well during the six months under review. One example
is U.S.-based Maxtor. Maxtor is a leading hard disk drive manufacturer for
consumer, industrial and entertainment applications. While these drives are used
primarily for personal computers, there are emerging opportunities in a variety
of consumer electronic applications such as personal video recorders, set-top
boxes and game consoles. We believe Maxtor is well positioned to benefit from
increasing demand for hard disk storage. The stock performed well with the
announced takeover bid from Seagate Technologies. We think industry
consolidation has the potential to drive more favorable pricing for the
company's products.

Shares of Daegu Bank, a South Korean regional bank with a strong client base in
the Daegu and Kyungbuk provinces, also contributed positively to Fund
performance. The bank provides various services to its clients from commercial
banking to foreign exchange. The bank seemed positioned to be one of the key
beneficiaries from the pickup in the domestic economy due to its large loan book
of small-and-medium enterprises. Daegu Bank improved most of its operations due
to the improving export environment, as well as declining credit costs as
delinquency ratios fell across segments during the period.

Another top contributor to Fund performance during the period was D. Carnegie, a
small-cap investment bank that operates in the Nordic capital markets. Carnegie
is the leading investment banking adviser in the Nordic region. The company did
well during the period, capitalizing on its leveraged business model in the
strong capital market environment across the Nordic region. Based on our
investment strategy, we believe Carnegie shares are attractive.

TOP 10 HOLDINGS
2/28/06

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COMPANY % OF TOTAL
SECTOR/INDUSTRY, COUNTRY NET ASSETS
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West Marine Inc., common & restricted 2.2%
SPECIALTY RETAIL, U.S.
- --------------------------------------------------------------------------------
Bodycote International PLC,
common & restricted 2.1%
MACHINERY, U.K.
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Vestas Wind Systems AS,
common & restricted 2.0%
ELECTRICAL EQUIPMENT, DENMARK
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D-Link Corp. 1.9%
COMMUNICATIONS EQUIPMENT, TAIWAN
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Vedior NV 1.8%
COMMERCIAL SERVICES & SUPPLIES,
NETHERLANDS
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Coinstar Inc. 1.7%
COMMERCIAL SERVICES & SUPPLIES, U.S.
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OPG Groep NV 1.7%
HEALTH CARE PROVIDERS & SERVICES,
NETHERLANDS
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MDS Inc. 1.7%
HEALTH CARE PROVIDERS & SERVICES,
CANADA
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D. Carnegie & Co. AB 1.6%
CAPITAL MARKETS, SWEDEN
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Convergys Corp. 1.6%
IT SERVICES, U.S.
- --------------------------------------------------------------------------------

Semiannual Report | 5

Some of our holdings did not perform well over the six months and detracted from
performance. One example is Sigmatel, a U.S.-based semiconductor company.
Sigmatel designs, develops and markets proprietary analog circuits that are used
in applications like MP3 audio players. Pricing pressure for low-end flash
memory weighed on the company's earnings in the most recent quarter. Longer
term, we believe that Sigmatel has opportunities to improve upon its business
model through new product introductions and the integration of recent
acquisitions. Moreover, we were attracted to the company's strong balance sheet
where net cash represented over 20% of market capitalization.

Also hindering performance during the period was West Marine, the largest
specialty retailer of boating supplies and equipment in the U.S. The company
services the boating enthusiast, offering boating parts, hardware, electronics,
apparel and safety supplies through nearly 400 retail locations in the U.S.,
Canada and Puerto Rico, as well as through catalog and Internet channels. The
company's key competitive advantage is having a large chain of stores in the
highly fragmented market of approximately 4,000 independent retailers. As the
industry leader, West Marine has strong brand recognition, pricing power and
leverage with its vendors. Recently, the company faced a number of issues
including weak store traffic, high gas prices, one of the most intense hurricane
seasons in history, and fewer volume discounts from vendors, as the company took
efforts to lower inventory levels. We believe that many of these issues are
short term in nature and that valuations were significantly below the stock's
intrinsic value, which is consistent with our investment strategy.

Quebecor World also negatively impacted Fund performance during the reporting
period. Quebecor World, a Canadian company, provides print, pre-media, logistics
and distribution services to book and magazine publishers, retailers, telephone
companies, and direct mail and catalog customers. Recently, overall industry
conditions were difficult with too much capacity and pricing pressure. In
addition, the company suffered from some underperforming European operations.
The company remained an industry leader and stands to benefit from a gradual
improvement in the U.S. commercial printing industry, which is closely tied to
economic growth and advertising markets. At period-end, we remained comfortable
with our holding for the long term.

6 | Semiannual Report

Thank you for your continued participation in Templeton Global Smaller Companies
Fund. We look forward to serving your future investment needs.

[PHOTO OMITTED] /s/ Tucker Scott

Tucker Scott, CFA

[PHOTO OMITTED] /s/ Cynthia Sweeting

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, 2006, 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 2/28/06

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 that a
shareholder would pay on Fund dividends, capital gain distributions, if any, or
any realized gains on the sale of Fund shares. Total return reflects
reinvestment of the Fund's dividends and capital gain distributions, if any, and
any unrealized gains or losses.

PRICE AND DISTRIBUTION INFORMATION

- --------------------------------------------------------------------------------
CLASS A (SYMBOL: TEMGX) CHANGE 2/28/06 8/31/05
- --------------------------------------------------------------------------------
Net Asset Value (NAV) -$0.80 $9.02 $9.82
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DISTRIBUTIONS (9/1/05-2/28/06)
- --------------------------------------------------------------------------------
Dividend Income $0.1440
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Short-Term Capital Gain $0.1052
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Long-Term Capital Gain $1.3941
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TOTAL $1.6433
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CLASS B (SYMBOL: N/A) CHANGE 2/28/06 8/31/05
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Net Asset Value (NAV) -$0.81 $8.69 $9.50
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DISTRIBUTIONS (9/1/05-2/28/06)
- --------------------------------------------------------------------------------
Dividend Income $0.0990
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Short-Term Capital Gain $0.1052
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Long-Term Capital Gain $1.3941
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TOTAL $1.5983
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CLASS C (SYMBOL: TESGX) CHANGE 2/28/06 8/31/05
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Net Asset Value (NAV) -$0.80 $8.85 $9.65
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DISTRIBUTIONS (9/1/05-2/28/06)
- --------------------------------------------------------------------------------
Dividend Income $0.1072
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Short-Term Capital Gain $0.1052
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Long-Term Capital Gain $1.3941
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TOTAL $1.6065
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ADVISOR CLASS (SYMBOL: TGSAX) CHANGE 2/28/06 8/31/05
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Net Asset Value (NAV) -$0.80 $9.04 $9.84
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DISTRIBUTIONS (9/1/05-2/28/06)
- --------------------------------------------------------------------------------
Dividend Income $0.1595
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Short-Term Capital Gain $0.1052
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Long-Term Capital Gain $1.3941
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TOTAL $1.6588
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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 +10.80% +13.81% + 95.86% +123.67%
- ---------------------------------------------------------------------------------------------------------
Average Annual Total Return 2 +4.42% +7.30% + 13.05% +7.75%
- ---------------------------------------------------------------------------------------------------------
Value of $10,000 Investment 3 $10,442 $10,730 $18,468 $21,087
- ---------------------------------------------------------------------------------------------------------
Avg. Ann. Total Return (3/31/06) 4 +12.69% + 16.03% +7.99%
- ---------------------------------------------------------------------------------------------------------

- ---------------------------------------------------------------------------------------------------------
CLASS B 6-MONTH 1-YEAR 5-YEAR INCEPTION (1/1/99)
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Cumulative Total Return 1 +10.36% +12.97% + 88.57% +93.00%
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Average Annual Total Return 2 +6.70% +9.23% + 13.28% +9.62%
- ---------------------------------------------------------------------------------------------------------
Value of $10,000 Investment 3 $10,670 $10,923 $18,657 $19,300
- ---------------------------------------------------------------------------------------------------------
Avg. Ann. Total Return (3/31/06) 4 +14.86% + 16.29% +10.06%
- ---------------------------------------------------------------------------------------------------------

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

Cumulative Total Return 1 +10.39% +12.84% + 88.78% +107.22%
- ---------------------------------------------------------------------------------------------------------
Average Annual Total Return 2 +9.47% +11.91% + 13.55% +7.56%
- ---------------------------------------------------------------------------------------------------------
Value of $10,000 Investment 3 $10,947 $11,191 $18,878 $20,722
- ---------------------------------------------------------------------------------------------------------
Avg. Ann. Total Return (3/31/06) 4 +17.71% + 16.54% +7.82%
- ---------------------------------------------------------------------------------------------------------

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

Cumulative Total Return 1 +10.97% +14.10% +98.51% +130.18%
- ---------------------------------------------------------------------------------------------------------
Average Annual Total Return 2 +10.97% +14.10% +14.70% +8.69%
- ---------------------------------------------------------------------------------------------------------
Value of $10,000 Investment 3 $11,097 $11,410 $19,851 $23,018
- ---------------------------------------------------------------------------------------------------------
Avg. Ann. Total Return (3/31/06) 4 +20.03% +17.73% +8.95%
- ---------------------------------------------------------------------------------------------------------

PERFORMANCE DATA REPRESENT PAST PERFORMANCE, WHICH DOES NOT GUARANTEE FUTURE
RESULTS. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE, AND YOU MAY HAVE
A GAIN OR LOSS WHEN YOU SELL YOUR SHARES. CURRENT PERFORMANCE MAY DIFFER FROM
FIGURES SHOWN.

FOR MOST RECENT MONTH-END PERFORMANCE, SEE "FUNDS AND PERFORMANCE" AT
FRANKLINTEMPLETON.COM OR CALL 1-800/342-5236.

Semiannual Report | 9

Performance Summary (CONTINUED)

ENDNOTES

SPECIAL RISKS ARE ASSOCIATED WITH FOREIGN INVESTING, INCLUDING CURRENCY
FLUCTUATIONS, ECONOMIC INSTABILITY AND POLITICAL DEVELOPMENTS.

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 +99.41% and +7.82%.

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

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 9/1/05 VALUE 2/28/06 PERIOD* 9/1/05-2/28/06
- ------------------------------------------------------------------------------------------------------------

Actual $1,000 $1,108.00 $ 7.00
- ------------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000 $1,018.15 $ 6.71
- ------------------------------------------------------------------------------------------------------------
CLASS B
- ------------------------------------------------------------------------------------------------------------
Actual $1,000 $1,103.60 $10.90
- ------------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000 $1,014.43 $10.44
- ------------------------------------------------------------------------------------------------------------
CLASS C
- ------------------------------------------------------------------------------------------------------------
Actual $1,000 $1,103.90 $10.90
- ------------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000 $1,014.43 $10.44
- ------------------------------------------------------------------------------------------------------------
ADVISOR CLASS
- ------------------------------------------------------------------------------------------------------------
Actual $1,000 $1,109.70 $ 5.70
- ------------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000 $1,019.39 $ 5.46

* Expenses are equal to the annualized expense ratio for each class (A:
1.34%; B: 2.09%; C: 2.09%; and Advisor: 1.09%), 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, 2006 YEAR ENDED AUGUST 31,
CLASS A (UNAUDITED) 2005 2004 2003 2002 2001
-------------------------------------------------------------------------------

PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the period)
Net asset value, beginning of period ............ $ 9.82 $ 8.69 $ 7.16 $ 5.82 $ 6.10 $ 7.30
-------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) a ................. (0.01) 0.12 0.07 0.07 0.05 0.07
Net realized and unrealized gains (losses) ..... 0.85 2.02 1.56 1.32 (0.27) (0.98)
-------------------------------------------------------------------------------
Total from investment operations ................ 0.84 2.14 1.63 1.39 (0.22) (0.91)
-------------------------------------------------------------------------------
Less distributions from:
Net investment income .......................... (0.14) (0.10) (0.10) (0.05) (0.06) (0.10)
Net realized gains ............................. (1.50) (0.91) -- -- -- (0.19)
-------------------------------------------------------------------------------
Total distributions ............................. (1.64) (1.01) (0.10) (0.05) (0.06) (0.29)
-------------------------------------------------------------------------------
Redemption fees ................................. -- c -- c -- c -- c -- --
-------------------------------------------------------------------------------
Net asset value, end of period .................. $ 9.02 $ 9.82 $ 8.69 $ 7.16 $ 5.82 $ 6.10
===============================================================================

Total return b .................................. 10.80% 26.78% 23.04% 24.09% (3.59)% (12.50)%

RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's) ............... $1,068,486 $949,606 $744,017 $691,103 $565,680 $647,893
Ratios to average net assets:
Expenses ....................................... 1.34% d,e 1.35% e 1.42% e 1.46% 1.44% 1.46%
Net investment income .......................... (0.21)% d 1.33% 0.91% 1.18% 0.82% 1.07%
Portfolio turnover rate ......................... 21.09% 41.58% 31.69% 29.51% 25.31% 36.65%

a Based on average daily shares outstanding.

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

c Amount is less than $0.01 per share.

d Annualized.

e Benefit of expense reduction is less than 0.01%.

Semiannual Report | See notes to financial statements. | 13

Templeton Global Smaller Companies Fund

FINANCIAL HIGHLIGHTS

----------------------------------------------------------------------------
SIX MONTHS ENDED
FEBRUARY 28, 2006 YEAR ENDED AUGUST 31,
CLASS B (UNAUDITED) 2005 2004 2003 2002 2001
----------------------------------------------------------------------------

PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the period)
Net asset value, beginning of period ............. $ 9.50 $ 8.42 $ 6.97 $ 5.70 $ 5.99 $ 7.20
-------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) a .................. (0.04) 0.06 0.02 0.03 0.02 0.03
Net realized and unrealized gains (losses) ...... 0.83 1.95 1.52 1.27 (0.28) (0.97)
------------------------------------------------------------------------
Total from investment operations ................. 0.79 2.01 1.54 1.30 (0.26) (0.94)
-------------------------------------------------------------------------
Less distributions from:
Net investment income ........................... (0.10) (0.02) (0.09) (0.03) (0.03) (0.08)
Net realized gains .............................. (1.50) (0.91) -- -- -- (0.19)
--------------------------------------------------------------------------
Total distributions .............................. (1.60) (0.93) (0.09) (0.03) (0.03) (0.27)
-------------------------------------------------------------------------
Redemption fees .................................. -- c -- c -- c -- c -- --
-------------------------------------------------------------------------
Net asset value, end of period ................... $ 8.69 $ 9.50 $ 8.42 $ 6.97 $ 5.70 $ 5.99
=========================================================================

Total return b ................................... 10.36% 25.86% 22.23% 22.97% (4.25)% (13.13)%

RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's) ................ $8,306 $7,983 $4,896 $3,171 $1,409 $ 333
Ratios to average net assets:
Expenses ........................................ 2.09% d,e 2.10% e 2.16% e 2.21% 2.19% 2.20%
Net investment income (loss) .................... (0.96)% d 0.58% 0.17% 0.43% 0.07% 0.53%
Portfolio turnover rate .......................... 21.09% 41.58% 31.69% 29.51% 25.31% 36.65%

a Based on average daily shares outstanding.

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

c Amount is less than $0.01 per share.

d Annualized.

e Benefit of expense reduction is less than 0.01%.

14 | See notes to financial statements. | Semiannual Report

Templeton Global Smaller Companies Fund

FINANCIAL HIGHLIGHTS (CONTINUED)

--------------------------------------------------------------------------------
SIX MONTHS ENDED
FEBRUARY 28, 2006 YEAR ENDED AUGUST 31,
CLASS C (UNAUDITED) 2005 2004 2003 2002 2001
--------------------------------------------------------------------------------

PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the period)
Net asset value, beginning of period ............ $ 9.65 $ 8.55 $ 7.05 $ 5.75 $ 6.00 $ 7.19
------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) a ................. (0.04) 0.06 0.02 0.02 0.01 0.02
Net realized and unrealized gains (losses) ..... 0.85 1.98 1.54 1.30 (0.26) (0.96)
------------------------------------------------------------------------------
Total from investment operations ................ 0.81 2.04 1.56 1.32 (0.25) (0.94)
------------------------------------------------------------------------------
Less distributions from:
Net investment income .......................... (0.11) (0.03) (0.06) (0.02) -- f (0.06)
Net realized gains ............................. (1.50) (0.91) -- -- -- (0.19)
------------------------------------------------------------------------------
Total distributions ............................. (1.61) (0.94) (0.06) (0.02) -- (0.25)
------------------------------------------------------------------------------
Redemption fees ................................. -- c -- c -- c -- c -- --
------------------------------------------------------------------------------
Net asset value, end of period .................. $ 8.85 $ 9.65 $ 8.55 $ 7.05 $ 5.75 $ 6.00
==============================================================================

Total return b .................................. 10.39% 25.74% 22.07% 23.17% (4.12)% (13.17)%

RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's) ............... $64,498 $55,448 $30,741 $17,347 $12,894 $13,348
Ratios to average net assets:
Expenses ....................................... 2.09% d,e 2.10% e 2.17% e 2.20% 2.17% 2.20%
Net investment income (loss) ................... (0.96)% d 0.58% 0.16% 0.44% 0.09% 0.33%
Portfolio turnover rate ......................... 21.09% 41.58% 31.69% 29.51% 25.31% 36.65%

a Based on average daily shares outstanding.

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

c Amount is less than $0.01 per share.

d Annualized.

e Benefit of expense reduction is less than 0.01%.

f Actual distribution from net investment income per share was $.003.

Semiannual Report | See notes to financial statements. | 15

Templeton Global Smaller Companies Fund

FINANCIAL HIGHLIGHTS (CONTINUED)

----------------------------------------------------------------------------
SIX MONTHS ENDED
FEBRUARY 28, 2006 YEAR ENDED AUGUST 31,
ADVISOR CLASS (UNAUDITED) 2005 2004 2003 2002 2001
----------------------------------------------------------------------------

PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the period)
Net asset value, beginning of period ............ $ 9.84 $ 8.71 $ 7.17 $ 5.84 $ 6.12 $ 7.31
----------------------------------------------------------------------------
Income from investment operations:
Net investment income a ........................ -- c 0.16 0.10 0.06 0.07 0.07
Net realized and unrealized gains (losses) ..... 0.86 2.01 1.56 1.33 (0.28) (0.96)
----------------------------------------------------------------------------
Total from investment operations ................ 0.86 2.17 1.66 1.39 (0.21) (0.89)
----------------------------------------------------------------------------
Less distributions from:
Net investment income .......................... (0.16) (0.13) (0.12) (0.06) (0.07) (0.11)
Net realized gains ............................. (1.50) (0.91) -- -- -- (0.19)
----------------------------------------------------------------------------
Total distributions ............................. (1.66) (1.04) (0.12) (0.06) (0.07) (0.30)
----------------------------------------------------------------------------
Redemption fees ................................. -- d -- d -- d -- d -- --
----------------------------------------------------------------------------
Net asset value, end of period .................. $ 9.04 $ 9.84 $ 8.71 $ 7.17 $ 5.84 $ 6.12
=============================================================================

Total return b .................................. 10.97% 27.07% 23.30% 24.39% (3.27)% (12.16)%

RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's) ............... $48,884 $39,912 $9,329 $4,834 $10,344 $2,929
Ratios to average net assets:
Expenses ....................................... 1.09% e,f 1.10% f 1.17% f 1.21% 1.19% 1.21%
Net investment income .......................... 0.04% e 1.58% 1.16% 1.43% 1.07% 1.10%
Portfolio turnover rate ......................... 21.09% 41.58% 31.69% 29.51% 25.31% 36.65%

a Based on average daily shares outstanding.

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

c Actual net investment income per share was $.002.

d Amount is less than $0.01 per share.

e Annualized.

f Benefit of expense reduction is less than 0.01%.

16 | See notes to financial statements. | Semiannual Report

Templeton Global Smaller Companies Fund

STATEMENT OF INVESTMENTS, FEBRUARY 28, 2006 (UNAUDITED)

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

COMMON STOCKS 94.9%
AUSTRALIA 3.0%
Billabong International Ltd. ................. Textiles Apparel & Luxury Goods 369,406 $ 4,256,600
Downer EDI Ltd. .............................. Commercial Services & Supplies 2,872,999 16,744,507
PaperlinX Ltd. ............................... Paper & Forest Products 5,969,799 15,069,743
--------------
36,070,850
--------------
BAHAMAS 0.5%
a Steiner Leisure Ltd. ......................... Diversified Consumer Services 126,500 5,392,695
--------------
BELGIUM 1.1%
Barco NV ..................................... Electronic Equipment & Instruments 151,370 12,705,150
--------------
BRAZIL 0.5%
a,b Companhia de Saneamento de
Minas Gerais, 144A ........................... Water Utilities 526,500 6,248,081
--------------
CANADA 8.4%
Abitibi-Consolidated Inc. .................... Paper & Forest Products 1,922,370 6,700,629
CAE Inc. ..................................... Aerospace & Defense 740,600 6,153,740
Domtar Inc. .................................. Paper & Forest Products 892,900 4,833,496
a Dorel Industries Inc., B ..................... Household Durables 129,400 3,833,821
a GSI Group Inc. ............................... Electronic Equipment & Instruments 1,253,000 16,514,540
Legacy Hotels ................................ Real Estate 1,621,700 11,747,726
Linamar Corp. ................................ Auto Components 690,000 8,047,267
MDS Inc. ..................................... Health Care Providers & Services 970,300 19,643,429
a Open Text Corp. .............................. Internet Software & Services 731,300 12,758,002
Quebecor World Inc. .......................... Commercial Services & Supplies 986,460 10,008,884
--------------
100,241,534
--------------
CHINA 5.7%
Bio-Treat Technology Ltd. .................... Commercial Services & Supplies 7,564,000 5,361,233
BYD Co. Ltd., H .............................. Electrical Equipment 36,000 72,158
China Oilfield Services Ltd. ................. Energy Equipment & Services 23,400,000 12,065,043
a China Pharmaceutical Group Ltd. .............. Pharmaceuticals 26,320,000 4,885,414
China Resources Power Co. Ltd. ............... Independent Power Producers & Energy Traders 9,984,000 6,692,077
People's Food Holdings Ltd. .................. Food Products 26,641,000 18,882,681
a TCL Communication Technology Holdings Ltd. ... Communications Equipment 115,540,875 4,468,111
TCL Multimedia Technology Holdings Ltd. ...... Household Durables 41,598,413 6,112,722
Weiqiao Textile Co. Ltd. ..................... Textiles Apparel & Luxury Goods 4,107,000 6,617,405
b Weiqiao Textile Co. Ltd., 144A ............... Textiles Apparel & Luxury Goods 1,290,500 2,079,319
--------------
67,236,163
--------------
DENMARK 2.0%
a Vestas Wind Systems AS ....................... Electrical Equipment 955,140 20,029,418
a,b Vestas Wind Systems AS, 144A ................. Electrical Equipment 166,580 3,493,206
--------------
23,522,624
--------------

Semiannual Report | 17

Templeton Global Smaller Companies Fund

STATEMENT OF INVESTMENTS, FEBRUARY 28, 2006 (UNAUDITED) (CONTINUED)

COMMON STOCKS (CONTINUED)
FINLAND 1.7%
Amer Sports OYJ .............................. Leisure Equipment & Products 569,700 $ 11,920,395
Huhtamaki OYJ ................................ Containers & Packaging 444,900 8,248,218
--------------
20,168,613
--------------
GERMANY 2.2%
Celesio AG ................................... Health Care Providers & Services 151,000 14,018,916
Vossloh AG ................................... Machinery 236,430 12,284,490
--------------
26,303,406
--------------
HONG KONG 6.3%
Asia Satellite Telecommunications
Holdings Ltd. .............................. Diversified Telecommunication Services 3,454,500 5,922,293
Dah Sing Financial Group ..................... Commercial Banks 1,280,000 8,959,068
Fountain Set Holdings Ltd. ................... Textiles Apparel & Luxury Goods 15,038,000 6,735,935
Giordano International Ltd. .................. Specialty Retail 14,531,348 7,726,501
Hang Lung Group Ltd. ......................... Real Estate 1,665,000 3,680,708
Hopewell Holdings Ltd. ....................... Transportation Infrastructure 2,982,000 8,360,263
Hung Hing Printing Group Ltd. ................ Containers & Packaging 20,862,508 13,849,266
Ngai Lik Industrial Holding Ltd. ............. Household Durables 13,886,000 2,058,392
Techtronic Industries Co. Ltd. ............... Household Durables 2,869,242 4,974,420
Yue Yuen Industrial Holdings Ltd. ............ Textiles Apparel & Luxury Goods 4,196,500 13,009,342
--------------
75,276,188
--------------
INDIA 1.9%
b Gail India Ltd., GDR, 144A ................... Metals & Mining 264,710 9,939,860
Housing Development Finance Corp. Ltd. ....... Thrifts & Mortgage Finance 393,766 12,058,445
--------------
21,998,305
--------------
INDONESIA 0.5%
PT Indosat Tbk ............................... Diversified Telecommunication Services 9,955,000 5,691,669
--------------
ISRAEL 1.2%
a Orbotech Ltd. ................................ Electronic Equipment & Instruments 614,700 14,648,301
--------------
JAPAN 3.4%
Meitec Corp. ................................. Commercial Services & Supplies 304,100 10,507,493
Nichii Gakkan Co. ............................ Health Care Providers & Services 312,700 6,806,928
Sangetsu Co. Ltd. ............................ Household Durables 186,800 5,131,292
Sohgo Security Services Co. Ltd. ............. Commercial Services & Supplies 1,127,400 18,445,088
--------------
40,890,801
--------------
LUXEMBOURG 0.5%
a Thiel Logistik AG ............................ IT Services 1,517,100 6,240,230
--------------
NETHERLANDS 7.2%
Aalberts Industries NV ....................... Industrial Conglomerates 103,969 7,406,433
Arcadis NV ................................... Construction & Engineering 267,162 9,953,871
a Draka Holding NV ............................. Electrical Equipment 193,464 3,446,022
a,b Draka Holding NV, 144A ....................... Electrical Equipment 135,422 2,412,166
Imtech NV .................................... Construction & Engineering 227,460 9,516,028

18 | Semiannual Report

Templeton Global Smaller Companies Fund

STATEMENT OF INVESTMENTS, FEBRUARY 28, 2006 (UNAUDITED) (CONTINUED)

COMMON STOCKS (CONTINUED)
NETHERLANDS (CONTINUED)
OPG Groep NV ................................. Health Care Providers & Services 233,620 $ 20,332,940
SBM Offshore NV .............................. Energy Equipment & Services 117,680 11,603,139
Vedior NV .................................... Commercial Services & Supplies 1,104,630 20,874,372
--------------
85,544,971
--------------
NORWAY 1.7%
Norske Skogindustrier ASA .................... Paper & Forest Products 428,000 6,407,423
b Norske Skogindustrier ASA, 144A .............. Paper & Forest Products 183,426 2,746,000
Prosafe ASA .................................. Energy Equipment & Services 215,450 10,698,172
--------------
19,851,595
--------------
RUSSIA 0.4%
a,b Pyaterochka Holding NV, GDR, 144A ............ Food & Staples Retailing 310,112 4,936,983
--------------
SINGAPORE 1.3%
Huan Hsin Holdings Ltd. ...................... Electronic Equipment & Instruments 6,101,000 2,011,732
Venture Corp. Ltd. ........................... Electronic Equipment & Instruments 1,700,000 13,725,732
Want Want Holdings Ltd. ...................... Food Products 99,500 125,370
--------------
15,862,834
--------------
SOUTH KOREA 4.9%
Bank of Pusan ................................ Commercial Banks 1,416,940 18,897,397
Dae Duck Electronics Co. Ltd. ................ Electronic Equipment & Instruments 1,221,875 10,595,456
Daegu Bank Co. Ltd. .......................... Commercial Banks 1,132,530 17,728,585
Halla Climate Control Corp. .................. Auto Components 1,104,000 10,516,993
Sindo Ricoh Co. .............................. Office Electronics 22,000 1,002,575
--------------
58,741,006
--------------
SWEDEN 1.6%
D. Carnegie & Co. AB ......................... Capital Markets 1,132,536 19,178,302
--------------
SWITZERLAND 3.3%
Gurit Heberlein AG, Br. ...................... Chemicals 8,517 8,862,407
a Kuoni Reisen Holding AG, B ................... Hotels, Restaurants & Leisure 12,720 5,439,793
SIG Holding AG ............................... Machinery 32,580 7,227,306
Verwaltungs-und Privat-Bank AG ............... Capital Markets 63,038 11,677,263
Vontobel Holding AG .......................... Capital Markets 160,170 6,336,959
--------------
39,543,728
--------------
TAIWAN 4.6%
AcBel Polytech Inc. .......................... Electrical Equipment 15,465,290 7,148,714
D-Link Corp. ................................. Communications Equipment 19,905,100 22,818,438
Fu Sheng Industrial Co. Ltd. ................. Industrial Conglomerates 8,658,360 10,592,653
Giant Manufacturing Co. Ltd. ................. Leisure Equipment & Products 3,682,000 6,921,372
Taiwan Fu Hsing .............................. Building Products 6,059,180 6,572,569
--------------
54,053,746
--------------

Semiannual Report | 19

Templeton Global Smaller Companies Fund

STATEMENT OF INVESTMENTS, FEBRUARY 28, 2006 (UNAUDITED) (CONTINUED)

COMMON STOCKS (CONTINUED)
THAILAND 2.6%
BEC World Public Co. Ltd., fgn. .............. Media 15,103,200 $ 5,058,858
Glow Energy Public Co. Ltd., fgn. ............ Independent Power Producers & Energy Traders 4,900,700 3,289,271
b Glow Energy Public Co. Ltd., fgn., 144A ...... Independent Power Producers & Energy Traders 12,056,200 8,091,926
a Total Access Communication Public Co. Ltd. ... Wireless Telecommunication Services 4,179,600 14,628,600
--------------
31,068,655
--------------
UNITED KINGDOM 9.2%
Bodycote International PLC ................... Machinery 4,450,330 20,337,212
b Bodycote International PLC, 144A ............. Machinery 1,075,082 4,912,932
Burberry Group PLC ........................... Textiles Apparel & Luxury Goods 804,310 6,469,255
a Cambridge Antibody Technology Group PLC ...... Biotechnology 553,100 7,490,528
DS Smith PLC ................................. Containers & Packaging 3,902,900 12,187,058
DX Services PLC .............................. Air Freight & Logistics 3,509,910 18,748,855
Electrocomponents PLC ........................ Electronic Equipment & Instruments 360,000 1,821,964
Game Group PLC ............................... Specialty Retail 11,430,900 16,042,125
John Wood Group PLC .......................... Energy Equipment & Services 2,861,570 11,922,284
Yule Catto & Company PLC ..................... Chemicals 2,090,510 9,938,321
--------------
109,870,534
--------------
UNITED STATES 19.2%
a Agile Software Corp. ......................... Software 1,759,250 12,209,195
a BearingPoint Inc. ............................ IT Services 1,141,250 10,168,537
Blockbuster Inc., A .......................... Specialty Retail 2,410,730 9,329,525
Central Parking Corp. ........................ Commercial Services & Supplies 815,400 13,291,020
a Coinstar Inc. ................................ Commercial Services & Supplies 795,880 20,533,704
a Convergys Corp. .............................. IT Services 1,091,490 18,959,181
a Input/Output Inc. ............................ Energy Equipment & Services 1,123,680 8,495,021
Irwin Financial Corp. ........................ Commercial Banks 598,170 11,987,327
a K2 Inc. ...................................... Leisure Equipment & Products 774,200 8,825,880
a Maxtor Corp. ................................. Computers & Peripherals 1,572,030 15,091,488
Pier 1 Imports Inc. .......................... Specialty Retail 1,480,520 15,589,876
a Scholastic Corp. ............................. Media 157,400 4,630,708
a Seitel Inc. .................................. Energy Equipment & Services 3,575,920 8,939,800
a,c Sharper Image Corp. .......................... Specialty Retail 937,400 11,061,320
a Sigmatel Inc. ................................ Semiconductors & Semiconductor Equipment 1,370,840 14,736,530
Tredegar Corp. ............................... Industrial Conglomerates 1,110,680 18,326,220
a,c West Marine Inc. ............................. Specialty Retail 1,991,430 25,629,703
--------------
227,805,035
--------------
TOTAL COMMON STOCKS
(COST $861,847,814) 1,129,091,999
--------------
PREFERRED STOCK (COST $1,139,744) 0.8%
GERMANY 0.8%
Hugo Boss AG, pfd. ........................... Textiles Apparel & Luxury Goods 250,980 9,943,443
--------------

20 | Semiannual Report

Templeton Global Smaller Companies Fund

STATEMENT OF INVESTMENTS, FEBRUARY 28, 2006 (UNAUDITED) (CONTINUED)

- -----------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT VALUE
- -----------------------------------------------------------------------------------------------------------------------------------

SHORT TERM INVESTMENTS 4.0%
d Federal Home Loan Bank, 3/01/06 .............. $28,015,000 $ 28,015,000
d U.S. Treasury Bill, 3/30/06 .................. 20,000,000 19,930,720
--------------
TOTAL SHORT TERM INVESTMENTS
(COST $47,941,531) ......................... 47,945,720
--------------
TOTAL INVESTMENTS
(COST $910,929,089) 99.7% .................. 1,186,981,162
OTHER ASSETS, LESS LIABILITIES 0.3% .......... 3,192,090
--------------
NET ASSETS 100.0% ............................ $1,190,173,252
==============

SELECTED PORTFOLIO ABBREVIATIONS

GDR - Global Depository Receipt

a Non-income producing.

b Security was purchased pursuant to Rule 144A under the Securities Act of
1933 and may be sold in transactions exempt from registration only to
qualified institutional buyers or in a public offering registered under
the Securities Act of 1933. These securities have been deemed liquid under
the guidelines approved by the Fund's Board of Trustees. At February 28,
2006, the aggregate value of these securities was $44,860,473,
representing 3.77% of net assets.

c See Note 8 regarding holdings of 5% voting securities.

d The security is traded on a discount basis with no stated coupon rate.

Semiannual Report | See notes to financial statements. | 21

Templeton Global Smaller Companies Fund

FINANCIAL STATEMENTS

STATEMENT OF ASSETS AND LIABILITIES
February 28, 2006 (unaudited)

Assets:
Investments in securities:
Cost - Unaffiliated issuers
$ 864,755,596
Cost - Non-controlled affiliated issuers (Note 8) ......... 46,173,493
--------------
Total cost of Investments ................................. $ 910,929,089
==============
Value - Unaffiliated issuers .............................. $1,150,290,139
Value - Non-controlled affiliated issuers (Note 8) ........ 36,691,023
--------------
Total value of Investments ................................ 1,186,981,162
Cash ....................................................... 740,846
Foreign currency, at value (cost $1,886,155) ............... 2,177,048
Receivables:
Investment securities sold ................................ 933,331
Capital shares sold ....................................... 2,819,327
Dividends and interest .................................... 1,709,346
--------------
Total assets ........................................ 1,195,361,060
--------------
Liabilities:
Payables:
Investment securities purchased ........................... 2,046,970
Capital shares redeemed ................................... 1,646,694
Affiliates ................................................ 1,209,230
Accrued expenses and other liabilities ..................... 284,914
--------------
Total liabilities ................................... 5,187,808
--------------
Net assets, at value ............................. $1,190,173,252
==============
Net assets consist of:
Paid-in capital ............................................ $ 863,607,053
Distributions in excess of net investment income ........... (10,836,528)
Net unrealized appreciation (depreciation) ................. 276,377,192
Accumulated net realized gain (loss) ....................... 61,025,535
--------------
Net assets, at value ............................. $1,190,173,252
==============

22 | See notes to financial statements. | Semiannual Report

Templeton Global Smaller Companies Fund

FINANCIAL STATEMENTS (CONTINUED)

STATEMENT OF ASSETS AND LIABILITIES (CONTINUED)
February 28, 2006 (unaudited)

CLASS A:
Net assets, at value ....................................................... $1,068,485,573
==============
Shares outstanding ......................................................... 118,426,031
==============
Net asset value per share a ................................................ $ 9.02
==============
Maximum offering price per share (net asset value per share / 94.25%) ...... $ 9.57
==============
CLASS B:
Net assets, at value ....................................................... $ 8,305,543
==============
Shares outstanding ......................................................... 955,579
==============
Net asset value and maximum offering price per share a ..................... $ 8.69
==============
CLASS C:
Net assets, at value ....................................................... $ 64,497,895
==============
Shares outstanding ......................................................... 7,290,655
==============
Net asset value and maximum offering price per share a ..................... $ 8.85
==============
ADVISOR CLASS:
Net assets, at value ....................................................... $ 48,884,241
==============
Shares outstanding ......................................................... 5,407,825
==============
Net asset value and maximum offering price per share a ..................... $ 9.04
==============

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

Semiannual Report | See notes to financial statements. | 23

Templeton Global Smaller Companies Fund

FINANCIAL STATEMENTS (CONTINUED)

STATEMENT OF OPERATIONS
for the six months ended February 28, 2006 (unaudited)

Investment income:
Dividends (net of foreign taxes of $456,623) .................................. $ 5,276,841
Interest (net of foreign taxes of $706) ....................................... 823,972
Other income .................................................................. 8,176
------------
Total investment income ................................................ 6,108,989
------------
Expenses:
Management fees (Note 3a) ..................................................... 4,052,867
Administrative fees (Note 3b) ................................................. 677,971
Distribution fees (Note 3c)
Class A ...................................................................... 1,210,320
Class B ...................................................................... 39,115
Class C ...................................................................... 291,985
Transfer agent fees (Note 3e) ................................................. 691,379
Custodian fees (Note 4) ....................................................... 238,345
Reports to shareholders ....................................................... 65,253
Registration and filing fees .................................................. 87,713
Professional fees ............................................................. 21,854
Trustees' fees and expenses ................................................... 81,643
Total expenses ......................................................... 7,458,445
------------
Expense reductions (Note 4) ............................................ (7,965)
------------
Net expenses ........................................................ 7,450,480
------------
Net investment income (loss) ..................................... (1,341,491)
------------
Realized and unrealized gains (losses):
Net realized gain (loss) from:
Investments (net of foreign taxes of $510,337) ............................... 109,618,449
Foreign currency transactions ................................................ (136,578)
------------
Net realized gain (loss) ................................................... 109,481,871
------------
Net change in unrealized appreciation (depreciation) on:
Investments .................................................................. 7,129,449
Translation of assets and liabilities denominated in foreign currencies ...... 24,763
------------
Net change in unrealized appreciation (depreciation) ....................... 7,154,212
------------
Net realized and unrealized gain (loss) ........................................ 116,636,083
------------
Net increase (decrease) in net assets resulting from operations ................ $115,294,592
============

24 | See notes to financial statements. | Semiannual Report

Templeton Global Smaller Companies Fund

FINANCIAL STATEMENTS (CONTINUED)

STATEMENTS OF CHANGES IN NET ASSETS

-----------------------------------
SIX MONTHS ENDED
FEBRUARY 28, 2006 YEAR ENDED
(UNAUDITED) AUGUST 31, 2005
-----------------------------------

Increase (decrease) in net assets:
Operations:
Net investment income (loss) ........................................................... $ (1,341,491) $ 12,312,232
Net realized gain (loss) from investments and foreign currency transactions ............ 109,481,871 137,566,126
Net change in unrealized appreciation (depreciation) on investments, translation of
assets and liabilities denominated in foreign currencies, and deferred taxes ......... 7,154,212 62,531,568
-----------------------------------
Net increase (decrease) in net assets resulting from operations .................. 115,294,592 212,409,926
-----------------------------------
Distributions to shareholders from:
Net investment income:
Class A .............................................................................. (14,072,204) (8,990,630)
Class B .............................................................................. (84,075) (10,120)
Class C .............................................................................. (638,278) (103,440)
Advisor Class ........................................................................ (661,196) (177,563)
Net realized gains:
Class A .............................................................................. (152,288,253) (78,639,477)
Class B .............................................................................. (1,295,699) (586,834)
Class C .............................................................................. (9,289,589) (3,462,049)
Advisor Class ........................................................................ (6,553,403) (1,223,672)
-----------------------------------
Total distributions to shareholders ..................................................... (184,882,697) (93,193,785)
-----------------------------------
Capital share transactions: (Note 2)
Class A .............................................................................. 181,409,845 96,033,384
Class B .............................................................................. 927,214 2,234,294
Class C .............................................................................. 12,976,723 19,437,641
Advisor Class ........................................................................ 11,497,448 27,042,122
-----------------------------------
Total capital share transactions ........................................................ 206,811,230 144,747,441
-----------------------------------
Redemption fees ......................................................................... 1,752 1,823
-----------------------------------
Net increase (decrease) in net assets .......................................... 137,224,877 263,965,405
Net assets:
Beginning of period ..................................................................... 1,052,948,375 788,982,970
-----------------------------------
End of period ........................................................................... $1,190,173,252 $1,052,948,375
===================================
Undistributed net investment income (distributions in excess of net investment income)
included in net assets:
End of period ........................................................................... $ (10,836,528) $ 5,960,716
===================================

Semiannual Report | See notes to financial statements. | 25

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.
The Fund offers four classes of shares: Class A, Class B, Class C, and Advisor
Class. Effective March 1, 2005, Class B shares are only offered to existing
Class B shareholders in the form of reinvested distributions and certain
exchanges from other Franklin Templeton Class B shares. 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.

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. Government agency securities are valued at cost.

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. 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 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.

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. 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. Due to the inherent uncertainty of
valuations of such securities, the fair values may differ significantly from the
values that would have been used had a ready market for such investments
existed. 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

26 | Semiannual Report

Templeton Global Smaller Companies Fund

NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

A. SECURITY VALUATION (CONTINUED)

(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.

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. 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, which may be in
excess of the amount reflected in the Statement of Assets and Liabilities.

Semiannual Report | 27

Templeton Global Smaller Companies Fund

NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

D. INCOME TAXES AND DEFERRED TAXES

No provision has been made for U.S. income taxes because each Fund's policy is
to continue to qualify as a regulated investment company under the Internal
Revenue Code and to distribute to shareholders substantially all of its taxable
income and net realized gains.

The Fund is subject to a tax imposed on net realized gains on 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 the valuation date.

Foreign securities held by the Fund may be subject to foreign taxation. Foreign
taxes, if any, are recorded based on the tax regulations and rates that exist in
the foreign markets in which the Fund invests.

E. SECURITY TRANSACTIONS, INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS

Security transactions are accounted for on trade date. Realized gains and losses
on security transactions are determined on a specific identification basis.
Interest income and estimated expenses are accrued daily. Amortization of
premium and accretion of discount on debt securities are included in interest
income. Dividend income is recorded on the ex-dividend date except that certain
dividends from foreign securities are recognized as soon as the Fund is notified
of the ex-dividend date. Distributions to shareholders are recorded on the
ex-dividend date and are determined according to income tax regulations (tax
basis). Distributable earnings determined on a tax basis may differ from
earnings recorded in accordance with accounting principles generally accepted in
the United States. These differences may be permanent or temporary.

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

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.

F. 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.

28 | Semiannual Report

Templeton Global Smaller Companies Fund

NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

G. REDEMPTION FEES

A short term trading redemption fee will be imposed, with some exceptions, on
any Fund shares that are redeemed or exchanged within seven calendar days
following their purchase date (30 days or less prior to June 1, 2004). The
redemption fee is 2% of the amount redeemed. Such fees are retained by the Fund
and accounted for as an addition to paid-in capital.

H. GUARANTEES AND INDEMNIFICATIONS

Under the Fund's organizational documents, its officers and trustees are
indemnified by the Fund against certain liabilities 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.

2. SHARES OF BENEFICIAL INTEREST

At February 28, 2006, 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, 2006 AUGUST 31, 2005
-----------------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT
-----------------------------------------------------------------

CLASS A SHARES:
Shares sold ........................... 13,644,574 $ 120,671,368 17,204,944 $ 160,106,256
Shares issued in reinvestment of
distributions ........................ 17,755,401 146,536,411 9,113,379 77,203,673
Shares redeemed ....................... (9,689,660) (85,797,934) (15,201,767) (141,276,545)
-----------------------------------------------------------------
Net increase (decrease) ............... 21,710,315 $ 181,409,845 11,116,556 $ 96,033,384
=================================================================
CLASS B SHARES:
Shares sold ........................... 114,318 $ 976,515 337,187 $ 3,006,475
Shares issued in reinvestment of
distributions ........................ 150,687 1,202,126 64,007 527,747
Shares redeemed ....................... (149,309) (1,251,427) (142,953) (1,299,928)
-----------------------------------------------------------------
Net increase (decrease) ............... 115,696 $ 927,214 258,241 $ 2,234,294
=================================================================
CLASS C SHARES:
Shares sold ........................... 1,736,739 $ 15,021,660 2,667,404 $ 24,455,155
Shares issued in reinvestment of
distributions ........................ 863,404 7,009,216 329,414 2,754,726
Shares redeemed ....................... (1,053,359) (9,054,153) (848,595) (7,772,240)
-----------------------------------------------------------------
Net increase (decrease) ............... 1,546,784 $ 12,976,723 2,148,223 $ 19,437,641
=================================================================

Semiannual Report | 29

Templeton Global Smaller Companies Fund

NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

2. SHARES OF BENEFICIAL INTEREST (CONTINUED)

--------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED
FEBRUARY 28, 2006 AUGUST 31, 2005
--------------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT
--------------------------------------------------------------

ADVISOR CLASS SHARES:
Shares sold ........................... 2,568,866 $ 22,100,000 3,133,170 $ 28,520,085
Shares issued in reinvestment of
distributions ........................ 440,087 3,637,268 116,823 991,141
Shares redeemed ....................... (1,657,707) (14,239,820) (264,671) (2,469,104)
--------------------------------------------------------------
Net increase (decrease) ............... 1,351,246 $ 11,497,448 2,985,322 $ 27,042,122
==============================================================

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 Investment Counsel, LLC (TIC) Investment manager
Franklin Templeton Investment Management Limited (FTIML) 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 average daily net
assets of the Fund 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% In excess of $20 billion

Under a subadvisory agreement effective October 18, 2005, FTIML, an affiliate of
TIC, provides subadvisory services to the Fund and receives from TIC fees based
on the average daily net assets of the Fund. Prior to July 20, 2005, Franklin
Templeton Investments (Asia) Limited, an affiliate of TIC, provided subadvisory
services to the Fund and received from TIC fees based on the average daily net
assets of the Fund.

30 | Semiannual Report

Templeton Global Smaller Companies Fund

NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

3. TRANSACTION WITH AFFILIATES (CONTINUED)

B. ADMINISTRATIVE FEES

The Fund pays an administrative fee to FT Services based on the average daily
net assets of the Fund 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% In excess of $1.2 billion

C. DISTRIBUTION FEES

The Fund's Board of Trustees has adopted distribution plans for each share
class, with the exception of Advisor class shares, pursuant to Rule 12b-1 under
the 1940 Act. Under the Fund's Class A reimbursement distribution plan, the Fund
reimburses Distributors up to 0.25% per year of Class A's average daily net
assets for costs incurred in connection with the sale and distribution of the
Fund's shares. Prior toNovember 1, 2005, Class A distribution costs exceeding
the maximum for the current plan year could be reimbursed in subsequent periods.
Effective November 1, 2005, the Class A reimbursement distribution plan was
amended to discontinue the reimbursement of excess plan year costs in subsequent
periods.

Under the Fund's compensation distribution plans, the Fund pays Distributors for
costs incurred in connection with the sale and distribution of the Fund's shares
up to a certain percentage per year of its average daily net assets of each
class as follows:

Class B ............................................................... 1.00%
Class C ............................................................... 1.00%

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 a ........................................ $260,920
Contingent deferred sales charges retained .......................... $ 10,152

a Net of commissions paid to unaffiliated broker/dealers.

E. TRANSFER AGENT FEES

The Fund paid transfer agent fees of $691,379 of which $513,600 was retained by
Investor Services.

Semiannual Report | 31

Templeton Global Smaller Companies Fund

NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

4. EXPENSE OFFSET ARRANGEMENT

The Fund has entered into an arrangement with its custodian whereby credits
realized as a result of uninvested cash balances are used to reduce a portion of
the Fund's custodian expenses. During the period ended February 28, 2006, the
custodian fees were reduced as noted in the Statement of Operations.

5. INCOME TAXES

For tax purposes, realized currency losses occurring subsequent to October 31,
may be deferred and treated as occuring on the first day of the following fiscal
year. At August 31, 2005, the Fund deferred realized currency losses of
$122,661.

Net investment income differs for financial statement and tax purposes primarily
due to differing treatments of foreign currency transactions, passive foreign
investment company shares, and foreign taxes paid on net realized gains.

Net realized gains (losses) differ for financial statement and tax purposes
primarily due to differing treatments of foreign currency transactions, and
foreign taxes paid on net realized gains.

At February 28, 2006, the cost of investments and net unrealized appreciation
(depreciation) for income tax purposes were as follows:

Cost of investments ............................. $919,651,509
============

Unrealized appreciation ......................... $320,984,384
Unrealized depreciation ......................... (53,654,731)
------------
Net unrealized appreciation (depreciation) ...... $267,329,653
============

6. INVESTMENT TRANSACTIONS

Purchases and sales of investments (excluding short term securities) for the
period ended February 28, 2006, aggregated $261,581,218 and $221,138,191,
respectively.

7. CONCENTRATION OF RISK

Investing in foreign securities may include certain risks and considerations not
typically associated with investing in U.S. securities, such as fluctuating
currency values and changing local and regional economic, political and social
conditions, which may result in greater market volatility. In addition, certain
foreign securities may not be as liquid as U.S. securities.

32 | Semiannual Report

Templeton Global Smaller Companies Fund

NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

8. HOLDINGS OF 5% VOTING SECURITIES OF PORTFOLIO COMPANIES

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
period ended February 28, 2006 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 YEAR INCOME GAIN (LOSS)
- --------------------------------------------------------------------------------------------------------------------------------
NON-CONTROLLED AFFILIATES
Sharper Image Corp. ...... 937,400 -- -- 937,400 $11,061,320 $-- $--
West Marine Inc. ......... 477,510 1,513,920 -- 1,991,430 25,629,703 $-- --
------------------------------------------
TOTAL AFFILIATED SECURITIES (3.08% of Net Assets) $36,691,023 $-- $--
==========================================

9. REGULATORY MATTERS

As part of various investigations by a number of federal, state, and foreign
regulators and governmental entities, 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 (collectively, the "Company"), entered into
settlements with certain of those regulators.

Specifically, the Company entered into settlements with the Securities and
Exchange Commission ("SEC") concerning market timing (the "August 2, 2004 SEC
Order") and marketing support payments to securities dealers who sell fund
shares (the "December 13, 2004 SEC Order") and with the California Attorney
General's Office ("CAGO") concerning marketing support payments to securities
dealers who sell fund shares (the "CAGO Settlement"). Under the terms of the
settlements with the SEC and the CAGO, the Company retained an Independent
Distribution Consultant ("IDC") to develop a plan for distribution of the
respective settlement monies. The CAGO approved the distribution plan under the
CAGO Settlement and, in accordance with the terms and conditions of that
settlement, the monies were disbursed to the relevant funds in March, 2005. The
SEC has not yet approved the distribution plan pertaining to the December 13,
2004 SEC Order. When approved, disbursements of settlement monies will be made
promptly to the relevant funds, in accordance with the terms and conditions of
that order. The IDC has also prepared and submitted to the SEC for its approval
a plan of distribution under the August 2, 2004 SEC Order that resolved the
SEC's market timing investigation.

In addition, the Company, as well as most of the mutual funds within Franklin
Templeton Investments and certain current or former officers, directors, and/or
employees, have been named in private lawsuits (styled as shareholder class
actions, or as derivative actions on behalf of either the named funds or
Franklin Resources, Inc.) relating to the industry practices referenced above,
as well as to allegedly excessive advisory fees, commissions, and/or 12b-1 fees.
The lawsuits were filed in different courts throughout the country. Many of
those suits are now pending in a multi-district litigation in the United States
District Court for the District of Maryland.

Semiannual Report | 33

Templeton Global Smaller Companies Fund

NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

9. REGULATORY MATTERS (CONTINUED)

The Company and fund management strongly believe that the claims made in each of
the private lawsuits referenced above are without merit and intend to defend
against them vigorously. The Company cannot predict with certainty the eventual
outcome of these lawsuits, nor whether they will have a material negative impact
on the Company. If it is determined that the Company 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.

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

This page intentionally left blank.

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 MidCap Value Fund
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
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
Templeton Income Fund

TAX-FREE INCOME 5

NATIONAL FUNDS

Double Tax-Free Income Fund
Federal Tax-Free Income Fund
High Yield Tax-Free Income Fund
Insured Tax-Free Income Fund 6

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 7
Colorado
Connecticut
Florida 7
Georgia
Kentucky
Louisiana
Maryland
Massachusetts 6
Michigan 6
Minnesota 6
Missouri
New Jersey
New York 7
North Carolina
Ohio 7
Oregon
Pennsylvania
Tennessee
Virginia

INSURANCE FUNDS

Franklin Templeton Variable Insurance Products Trust 8

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

6. Portfolio of insured municipal securities.

7. 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).

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

09/05
Not part of the semiannual report

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

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 Investment Management 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 S2006 04/06

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 12(a)(1), the registrant is attaching as an exhibit a copy
of its code of ethics that applies to its principal executive officers and
principal financial and accounting officer.

ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.

(A)(1) The Registrant has an audit committee financial expert serving on its
audit committee.

(2) The audit committee financial experts are David W. Niemiec 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. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES. N/A

ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANIES AND AFFILIATED PURCHASES. N/A

ITEM 10. 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 11. 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 12. EXHIBITS

(a)(1) Code of Ethics

(a)(2) 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) 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 24, 2006

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 24, 2006

By /s/GALEN G. VETTER
Chief Financial Officer
Date April 24, 2006