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

TEMPLETON GLOBAL SMALLER COMPANIES FUND
(Exact name of registrant as specified in charter)

500 EAST BROWARD BLVD., SUITE 2100, FORT LAUDERDALE, FL 33394-3091
(Address of principal executive offices) (Zip code)

CRAIG S. TYLE, ONE FRANKLIN PARKWAY, SAN MATEO, CA 94403-1906
(Name and address of agent for service)

Registrant's telephone number, including area code: (954) 527-7500
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Date of fiscal year end: 8/31
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Date of reporting period: 2/28/07
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ITEM 1. REPORTS TO STOCKHOLDERS.

[GRAPHIC OMITTED]

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FEBRUARY 28, 2007
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SEMIANNUAL REPORT AND SHAREHOLDER LETTER GLOBAL
- --------------------------------------------------------------------------------
WANT TO RECEIVE
THIS DOCUMENT
FASTER VIA EMAIL?
TEMPLETON GLOBAL
SMALLER COMPANIES FUND Eligible shareholders can
sign up for eDelivery at
franklintempleton.com.
See inside for details.
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[LOGO](R)
FRANKLIN 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
- --------------------------------------------------------------------------------

[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

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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, 2007.

PERFORMANCE OVERVIEW

For the six months under review, Templeton Global Smaller Companies Fund -
Class A posted a cumulative total return of +17.15%. The Fund outperformed its
benchmark, the Morgan Stanley Capital International (MSCI) World Index, which
posted a +10.58% 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 remained solid during the six months under review, despite
earlier concerns of a U.S.-led global slowdown. Gross domestic product growth
accelerated in Europe underpinned by strong exports and internal demand, while
it slowed in the U.S. mainly due to cooler activity in the housing and auto
sectors.

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.

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 2/28/07

[THE FOLLOWING TABLE WAS REPRESENTED AS A BAR GRAPH IN THE PRINTED MATERIAL.]

Asia 34.2%
Europe 28.1%
North America 26.1%
Australia & New Zealand 3.7%
Middle East & Africa 0.9%
Latin America 0.9%
Short-Term Investments & Other Net Assets 6.1%

The economic drivers remained consistent with those of the past four years:
strong corporate and consumer demand, reasonably low inflation, improving
labor markets and a relatively moderate, though higher, interest rate
environment. Overall, global liquidity -- petrodollars, corporate cash,
private equity, household savings and central banks' reserves -- remained
abundant and continued to search for a home. Largely as a result, bond yield
spreads over U.S. Treasury securities narrowed, and equity and commodity
markets rose. A shift toward greater risk tolerance was concurrent with the
U.S. Federal Reserve Board's decisions throughout the period to hold the
federal funds target rate at 5.25%, as well as with lower oil prices compared
with the $77 per-barrel high reached in July 2006.

Narrowing corporate credit spreads globally indicated greater risk tolerance,
while abundant cash supplies in the capital markets contributed to record
global merger and acquisition activity in 2006. The total value of deals
announced as a result of hostile takeovers, private equity buyouts and broad
corporate consolidation was $3.8 trillion. 2 This figure surpassed the $3.4
trillion mark set in 2000. 2 Announced deals from private equity alone reached
a record $700 billion, almost double the record set in 2005 and 20 times
greater than a decade ago. 3 The heightened merger activity continued in 2007.

With this economic backdrop, the non-U.S. equity markets -- including emerging
markets that remained a major magnet for global fund flows -- led global
equity markets to end the period with strong total returns. Stock market
indexes in the U.S. and most European countries reached six-year highs during
the reporting period, and many emerging market indexes in Asia, Europe and
Latin America neared or reached all-time highs. As the period ended, however,
equity prices fell from their highs as uncertainties about the U.S. economy
and a decline in China's stock market led many investors to reassess their
risk profiles.

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.

2. Source: "Can M&A's 'Best of Times' Get Better?," THE WALL STREET JOURNAL,
1/2/07.

3. Sources: Thomson Financial; "TPG tops buy-out league with $101bn,"
FINANCIAL TIMES, 12/27/06.

4 | Semiannual Report

MANAGER'S DISCUSSION

The Fund benefited from several holdings that performed well during the
six-month period under review. One example is U.K.-based GAME Group. GAME
Group is Europe's leading specialty retailer of computer software, video
games, consoles and related products sold through its commercial web-site and
roughly 700 GAME stores. Approximately 76% of GAME Group's revenue is derived
from the U.K. and Ireland, where 408 of its stores are located. This presence
helped establish GAME Group's dominant position in the U.K. market, where it
holds a commanding 25% market share. The remaining revenue comes from the
company's growing base of 313 stores in France, Spain, Portugal and
Scandinavia. During the period under review, GAME Group's shares rose nearly
60% as successful launches of Nintendo Wii and Microsoft Xbox 360 alleviated
concerns about the transition to a new generation of video game consoles.
Consistent with our strategy, we feel that GAME Group is fundamentally strong
and has a solid balance sheet. We continue to like GAME Group, which offered a
1.95% dividend yield at period-end, and we believe its shares offer compelling
value to long-term investors who are willing to look past potential near-term
industry weakness.

The Fund also benefited from Denmark-based Vestas Wind Systems, a world leader
in wind turbine manufacturing and distribution. Vestas' shares rose nearly 67%
this reporting period. The company has a leading market share globally and a
reputation for providing reliable and efficient products. One of the company's
positive differentiating factors is its global nature versus the more regional
nature of its competitors, which tend to have dominant market shares in their
home markets. For example, Vestas' main competitors, General Electric (U.S.)
and Gamesa (Spain), each capture dominant local market shares in their home
countries, but only possess global market share of 18% and 13%, respectively.
Vestas also has the technological ability to develop durable, reliable and
cost-effective wind turbines, an objective that many other companies have not
yet accomplished. According to our analysis, the company can potentially
benefit if demand increases in the coming years for environmentally friendly
power sources. Wind power is the cheapest source of renewable energy today
when you factor in the environmental degradation costs of traditional power
sources. Vestas benefited from a structural shift in the wind energy market,
as three key regions -- Europe, the Americas and Asia -- began to focus on
renewable energy and environmental responsibility.

TOP 10 HOLDINGS
2/28/07

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COMPANY % OF TOTAL
SECTOR/INDUSTRY, COUNTRY NET ASSETS
- --------------------------------------------------------------------------------
GAME Group PLC 2.9%
SPECIALTY RETAIL, U.K.
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West Marine Inc. 2.2%
SPECIALTY RETAIL, U.S.
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D-Link Corp. 2.0%
COMMUNICATIONS EQUIPMENT, TAIWAN
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People's Food Holdings Inc. 1.7%
FOOD PRODUCTS, CHINA
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Sohgo Security Services Co. Ltd. 1.7%
COMMERCIAL SERVICES & SUPPLIES,
JAPAN
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Vedior NV 1.7%
COMMERCIAL SERVICES & SUPPLIES,
NETHERLANDS
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OPG Groep NV 1.6%
HEALTH CARE PROVIDERS & SERVICES,
NETHERLANDS
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Bank of Pusan 1.6%
COMMERCIAL BANKS, SOUTH KOREA
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Bodycote International PLC 1.5%
MACHINERY, U.K.
- --------------------------------------------------------------------------------
Irwin Financial Corp. 1.5%
COMMERCIAL BANKS, U.S.
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Semiannual Report | 5

Also performing well during the period was our holding in Taiwan-based D-Link,
a global data-networking vendor focused on the home, SOHO (small office and
home office) and SMB (small and medium business) markets. D-Link's stock rose
48% this reporting period. The company sells branded WLAN (wireless local area
network) products, broadband access equipment, LAN switches and other
networking equipment. D-Link enjoys leading global market share in the home,
SOHO and WLAN equipment markets, followed by NetGear and Linksys (owned by
Cisco). An important driver for growth in home and SOHO networking is the
expected double-digit growth in worldwide broadband connections through 2009,
according to our analysis. Moreover, we believe growth in emerging markets,
where D-Link is relatively stronger than its rivals, should outpace that of
the global market. Given our assessment of its growth prospects, we considered
D-Link's stock valuation compelling with its low 0.4 price/earnings-to-growth
ratio.

Despite the Fund's solid returns this reporting period, we had several
detractors from our overall performance. Shares of Singapore-based Osim
International, a dominant player in Asia's healthy-lifestyle and home health
care product segment, fell nearly 40%. Osim has franchise retail outlets in
Hong Kong, China, Taiwan, Singapore and Malaysia. The company's flagship
product is the massage chair, but it also has a number of newer fitness,
cleansing, massaging and relaxation products that are gaining traction in the
marketplace. The company's purchase of Brookstone widened its global reach,
and will give Osim direct access to a retail network of more than 300 stores.
In our analysis, recent weakness appears relatively isolated to a single
product and a single market as the company received bad publicity from an
imitation product in Hong Kong. The Fund continued to hold Osim stock at
period-end, despite its recent setbacks.

Also hindering performance during the period was Canada-based ATS Automation
Tooling Systems, whose shares dropped 18% during the six months under review.
ATS makes automated production and testing systems for manufacturers in the
automotive, computer, electronics, consumer and health care industries, and
also uses its own systems to design and manufacture components on an
outsourcing basis. Additionally, the company manufactures modules and
thin-film flexible cells for the solar industry. ATS has a solid reputation
for systems automation and manufacturing. Although the company's high fixed
costs recently weighed heavily on its bottom line, based on our analysis we
think profitability could improve if order flow picks up going forward. The
stock's underlying valuation support also looks strong to us, with ATS shares
trading near book value at period-end.

6 | Semiannual Report

Our investment in Finland-based Elcoteq fell nearly 40% and weighed negatively
on the Fund's overall results. Elcoteq is the largest European electronics
manufacturing services company and focuses solely on the telecommunications
sector, with about 80% of company sales stemming from wireless handsets and
the other 20% from telecom infrastructure. The company recently stumbled as
one of its key customers, Nokia, lost market share among certain of its
mid-line phone products. In our view, these issues are largely temporary, as
we think Nokia's proven long-term track record suggests it could win back
market share in due time as it refreshes the product lineup. With this in
mind, we believe Elcoteq's current profitability woes should be temporary.
Elcoteq's other major customers include Motorola, Siemens and Ericsson. We
considered the stock cheap at 0.9 times book value at year-end 2006, while it
offered a dividend yield of more than 2%.

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, 2007, 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 2/28/07

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 2/28/07 8/31/06
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Net Asset Value (NAV) +$0.29 $9.38 $9.09
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DISTRIBUTIONS (9/1/06-2/28/07)
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Dividend Income $0.1205
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Short-Term Capital Gain $0.1859
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Long-Term Capital Gain $0.8439
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TOTAL $1.1503
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CLASS B (SYMBOL: N/A) CHANGE 2/28/07 8/31/06
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Net Asset Value (NAV) +$0.27 $8.99 $8.72
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DISTRIBUTIONS (9/1/06-2/28/07)
-----------------------------------------------------------------------------
Dividend Income $0.0521
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Short-Term Capital Gain $0.1859
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Long-Term Capital Gain $0.8439
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TOTAL $1.0819
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CLASS C (SYMBOL: TESGX) CHANGE 2/28/07 8/31/06
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Net Asset Value (NAV) +$0.28 $9.16 $8.88
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DISTRIBUTIONS (9/1/06-2/28/07)
-----------------------------------------------------------------------------
Dividend Income $0.0617
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Short-Term Capital Gain $0.1859
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Long-Term Capital Gain $0.8439
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TOTAL $1.0915
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ADVISOR CLASS (SYMBOL: TGSAX) CHANGE 2/28/07 8/31/06
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Net Asset Value (NAV) +$0.29 $9.40 $9.11
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DISTRIBUTIONS (9/1/06-2/28/07)
-----------------------------------------------------------------------------
Dividend Income $0.1414
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Short-Term Capital Gain $0.1859
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Long-Term Capital Gain $0.8439
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TOTAL $1.1712
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8 | Semiannual Report

Performance Summary (CONTINUED)

PERFORMANCE

CUMULATIVE TOTAL RETURN EXCLUDES SALES CHARGES. AVERAGE ANNUAL TOTAL RETURNS AND
VALUE OF $10,000 INVESTMENT INCLUDE MAXIMUM SALES CHARGES. 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; ADVISOR CLASS: NO SALES CHARGES. THE FUND MAY CHARGE A
2% FEE ON REDEMPTIONS MADE WITHIN SEVEN DAYS OF PURCHASE.

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

Cumulative Total Return 1 +17.15% +18.06% +133.92% +122.12%
- ------------------------------------------------------------------------------------------------------------------------------
Average Annual Total Return 2 +10.47% +11.28% +17.15% +7.66%
- ------------------------------------------------------------------------------------------------------------------------------
Value of $10,000 Investment 3 $11,047 $11,128 $22,061 $20,924
- ------------------------------------------------------------------------------------------------------------------------------
Avg. Ann. Total Return (3/31/07) 4 +11.13% +16.03% +8.13%
- ------------------------------------------------------------------------------------------------------------------------------
Total Annual Operating Expenses 5 1.34%
- ------------------------------------------------------------------------------------------------------------------------------
CLASS B 6-MONTH 1-YEAR 5-YEAR INCEPTION (1/1/99)
- ------------------------------------------------------------------------------------------------------------------------------
Cumulative Total Return 1 +16.73% +17.13% +125.54% +126.57%
- ------------------------------------------------------------------------------------------------------------------------------
Average Annual Total Return 2 +12.73% +13.13% +17.46% +10.54%
- ------------------------------------------------------------------------------------------------------------------------------
Value of $10,000 Investment 3 $11,273 $11,313 $22,354 $22,657
- ------------------------------------------------------------------------------------------------------------------------------
Avg. Ann. Total Return (3/31/07) 4 +12.99% +16.29% +10.92%
- ------------------------------------------------------------------------------------------------------------------------------
Total Annual Operating Expenses 5 2.09%
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CLASS C 6-MONTH 1-YEAR 5-YEAR 10-YEAR
- ------------------------------------------------------------------------------------------------------------------------------
Cumulative Total Return 1 +16.67% +17.19% +125.39% +105.77%
- ------------------------------------------------------------------------------------------------------------------------------
Average Annual Total Return 2 +15.67% +16.19% +17.65% +7.48%
- ------------------------------------------------------------------------------------------------------------------------------
Value of $10,000 Investment 3 $11,567 $11,619 $22,539 $20,577
- ------------------------------------------------------------------------------------------------------------------------------
Avg. Ann. Total Return (3/31/07) 4 +16.04% +16.56% +7.95%
- ------------------------------------------------------------------------------------------------------------------------------
Total Annual Operating Expenses 5 2.09%
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ADVISOR CLASS 6-MONTH 1-YEAR 5-YEAR 10-YEAR
- ------------------------------------------------------------------------------------------------------------------------------
Cumulative Total Return 1 +17.37% +18.27% +137.13% +128.18%
- ------------------------------------------------------------------------------------------------------------------------------
Average Annual Total Return 2 +17.37% +18.27% +18.85% +8.60%
- ------------------------------------------------------------------------------------------------------------------------------
Value of $10,000 Investment 3 $11,737 $11,827 $23,713 $22,818
- ------------------------------------------------------------------------------------------------------------------------------
Avg. Ann. Total Return (3/31/07) 4 +18.23% +17.72% +9.06%
- ------------------------------------------------------------------------------------------------------------------------------
Total Annual Operating Expenses 5 1.09%
- ------------------------------------------------------------------------------------------------------------------------------

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

2. Average annual total return represents the average annual change in value
of an investment over the periods indicated. 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.

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

5. Figures are as stated in the Fund's prospectus current as of the date of
this report.

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 provides actual
account values and expenses. The "Ending Account Value" is derived from the
Fund's actual return, which includes the effect of Fund expenses.

You can estimate the expenses you paid during the period by following these
steps. OF COURSE, YOUR ACCOUNT VALUE AND EXPENSES WILL DIFFER FROM THOSE IN THIS
ILLUSTRATION:

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

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

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

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

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

HYPOTHETICAL EXAMPLE FOR COMPARISON WITH OTHER FUNDS

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

Semiannual Report | 11

Your Fund's Expenses (CONTINUED)

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

- ----------------------------------------------------------------------------------------------------------
BEGINNING ACCOUNT ENDING ACCOUNT EXPENSES PAID DURING
CLASS A VALUE 9/1/06 VALUE 2/28/07 PERIOD* 9/1/06-2/28/07
- ----------------------------------------------------------------------------------------------------------

Actual $1,000 $1,171.50 $ 7.05
- ----------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000 $1,018.30 $ 6.56
- ----------------------------------------------------------------------------------------------------------
CLASS B
- ----------------------------------------------------------------------------------------------------------
Actual $1,000 $1,167.30 $11.07
- ----------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000 $1,014.58 $10.29
- ----------------------------------------------------------------------------------------------------------
CLASS C
- ----------------------------------------------------------------------------------------------------------
Actual $1,000 $1,166.70 $11.01
- ----------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000 $1,014.63 $10.24
- ----------------------------------------------------------------------------------------------------------
ADVISOR CLASS
- ----------------------------------------------------------------------------------------------------------
Actual $1,000 $1,173.70 $ 5.71
- ----------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000 $1,019.54 $ 5.31
- ----------------------------------------------------------------------------------------------------------

* Expenses are equal to the annualized expense ratio for each class (A:
1.31%; B: 2.06%; C: 2.05%; and Advisor: 1.06%), 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, 2007 YEAR ENDED AUGUST 31,
CLASS A (UNAUDITED) 2006 2005 2004 2003 2002
-----------------------------------------------------------------------------------------

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

Net asset value, beginning of period .. $ 9.09 $ 9.82 $ 8.69 $ 7.16 $ 5.82 $ 6.10
-----------------------------------------------------------------------------------------
Income from investment operations a:

Net investment income (loss) b ..... (0.01) 0.08 0.12 0.07 0.07 0.05

Net realized and unrealized gains
(losses) .......................... 1.45 0.83 2.02 1.56 1.32 (0.27)
-----------------------------------------------------------------------------------------

Total from investment operations ...... 1.44 0.91 2.14 1.63 1.39 (0.22)
-----------------------------------------------------------------------------------------
Less distributions from:

Net investment income and net
realized foreign currency gains ... (0.12) (0.14) (0.10) (0.10) (0.05) (0.06)

Net realized gains from
investments ....................... (1.03) (1.50) (0.91) -- -- --
-----------------------------------------------------------------------------------------
Total distributions ................... (1.15) (1.64) (1.01) (0.10) (0.05) (0.06)
-----------------------------------------------------------------------------------------
Redemption fees ....................... -- d -- d -- d -- d -- d --
-----------------------------------------------------------------------------------------
Net asset value, end of period ........ $ 9.38 $ 9.09 $ 9.82 $ 8.69 $ 7.16 $ 5.82
=========================================================================================
Total return c ........................ 17.15% 11.66% 26.78% 23.04% 24.09% (3.59)%

RATIOS/SUPPLEMENTAL DATA

Net assets, end of period (000's) ..... $1,345,640 $1,128,415 $ 949,606 $ 744,017 $ 691,103 $ 565,680

Ratios to average net assets:

Expenses ........................... 1.31% e,f 1.34% f 1.35% f 1.42% f 1.46% 1.44%

Net investment income (loss) ....... (0.17)% e 0.90% 1.33% 0.91% 1.18% 0.82%

Portfolio turnover rate ............... 12.13% 33.90% 41.58% 31.69% 29.51% 25.31%

a The amount shown for a share outstanding throughout the period may not
correlate with the Statement of Operations for the period due to the
timing of sales and repurchase of the Fund shares in relation to income
earned and/or fluctuating market value of the investments of the Fund.

b Based on average daily shares outstanding.

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

d Amount rounds to less than $0.01 per share.

e Annualized.

f Benefit of expense reduction rounds to less than 0.01%.

Semiannual Report |
The accompanying notes are an integral part of these financial statements. | 13

Templeton Global Smaller Companies Fund

FINANCIAL HIGHLIGHTS (CONTINUED)

------------------------------------------------------------------------------
SIX MONTHS ENDED
FEBRUARY 28, 2007 YEAR ENDED AUGUST 31,
CLASS B (UNAUDITED) 2006 2005 2004 2003 2002
------------------------------------------------------------------------------

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

Net asset value, beginning of period ........ $ 8.72 $ 9.50 $ 8.42 $ 6.97 $ 5.70 $ 5.99
------------------------------------------------------------------------------
Income from investment operations a:

Net investment income (loss) b ........... (0.04) 0.01 0.06 0.02 0.03 0.02

Net realized and unrealized gains
(losses) ................................ 1.39 0.81 1.95 1.52 1.27 (0.28)
------------------------------------------------------------------------------
Total from investment operations ............ 1.35 0.82 2.01 1.54 1.30 (0.26)
------------------------------------------------------------------------------
Less distributions from:

Net investment income and net realized
foreign currency gains .................. (0.05) (0.10) (0.02) (0.09) (0.03) (0.03)

Net realized gains from investments ...... (1.03) (1.50) (0.91) -- -- --
------------------------------------------------------------------------------
Total distributions ......................... (1.08) (1.60) (0.93) (0.09) (0.03) (0.03)
------------------------------------------------------------------------------
Redemption fees ............................. -- d -- d -- d -- d -- d --
------------------------------------------------------------------------------
Net asset value, end of period .............. $ 8.99 $ 8.72 $ 9.50 $ 8.42 $ 6.97 $ 5.70
==============================================================================

Total return c .............................. 16.73% 10.74% 25.86% 22.23% 22.97% (4.25)%

RATIOS/SUPPLEMENTAL DATA

Net assets, end of period (000's) ........... $ 8,932 $ 8,027 $ 7,983 $ 4,896 $ 3,171 $ 1,409

Ratios to average net assets:

Expenses ................................. 2.06% e,f 2.09% f 2.10% f 2.16% f 2.21% 2.19%

Net investment income (loss) ............. (0.92)% e 0.15% 0.58% 0.17% 0.43% 0.07%

Portfolio turnover rate ..................... 12.13% 33.90% 41.58% 31.69% 29.51% 25.31%

b Based on average daily shares outstanding.

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

d Amount rounds to less than $0.01 per share.

e Annualized.

f Benefit of expense reduction rounds to less than 0.01%.

14 | The accompanying notes are an integral part of these financial statements.
| Semiannual Report

Templeton Global Smaller Companies Fund

FINANCIAL HIGHLIGHTS (CONTINUED)

------------------------------------------------------------------------------
SIX MONTHS ENDED
FEBRUARY 28, 2007 YEAR ENDED AUGUST 31,
CLASS C (UNAUDITED) 2006 2005 2004 2003 2002
------------------------------------------------------------------------------

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

Net asset value, beginning of period ........ $ 8.88 $ 9.65 $ 8.55 $ 7.05 $ 5.75 $ 6.00
------------------------------------------------------------------------------
Income from investment operations a:

Net investment income (loss) b ........... (0.04) 0.01 0.06 0.02 0.02 0.01

Net realized and unrealized gains
(losses) ............................... 1.41 0.83 1.98 1.54 1.30 (0.26)
------------------------------------------------------------------------------
Total from investment operations ............ 1.37 0.84 2.04 1.56 1.32 (0.25)
------------------------------------------------------------------------------
Less distributions from:

Net investment income and net realized
foreign currency gains ................. (0.06) (0.11) (0.03) (0.06) (0.02) -- g

Net realized gains from investments ...... (1.03) (1.50) (0.91) -- -- --
------------------------------------------------------------------------------
Total distributions ......................... (1.09) (1.61) (0.94) (0.06) (0.02) --
------------------------------------------------------------------------------
Redemption fees ............................. -- d -- d -- d -- d -- d --
------------------------------------------------------------------------------
Net asset value, end of period .............. $ 9.16 $ 8.88 $ 9.65 $ 8.55 $ 7.05 $ 5.75
==============================================================================

Total return c .............................. 16.67% 10.89% 25.74% 22.07% 23.17% (4.12)%

RATIOS/SUPPLEMENTAL DATA

Net assets, end of period (000's) ........... $88,396 $71,857 $55,448 $30,741 $17,347 $12,894

Ratios to average net assets:

Expenses ................................. 2.05% e,f 2.09% f 2.10% f 2.17% f 2.20% 2.17%

Net investment income (loss) ............. (0.91)% e 0.15% 0.58% 0.16% 0.44% 0.09%

Portfolio turnover rate ..................... 12.13% 33.90% 41.58% 31.69% 29.51% 25.31%

b Based on average daily shares outstanding.

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

d Amount rounds to less than $0.01 per share.

e Annualized.

f Benefit of expense reduction rounds to less than 0.01%.

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

Semiannual Report |
The accompanying notes are an integral part of these financial statements. | 15

Templeton Global Smaller Companies Fund

FINANCIAL HIGHLIGHTS (CONTINUED)

------------------------------------------------------------------------------
SIX MONTHS ENDED
FEBRUARY 28, 2007 YEAR ENDED AUGUST 31,
ADVISOR CLASS (UNAUDITED) 2006 2005 2004 2003 2002
------------------------------------------------------------------------------

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

Net asset value, beginning of period ........ $ 9.11 $ 9.84 $ 8.71 $ 7.17 $ 5.84 $ 6.12
------------------------------------------------------------------------------
Income from investment operations a:

Net investment income b .................. -- d 0.11 0.16 0.10 0.06 0.07

Net realized and unrealized gains
(losses) ............................... 1.46 0.82 2.01 1.56 1.33 (0.28)
------------------------------------------------------------------------------
Total from investment operations ............ 1.46 0.93 2.17 1.66 1.39 (0.21)
------------------------------------------------------------------------------
Less distributions from:

Net investment income and net realized
foreign currency gains ................. (0.14) (0.16) (0.13) (0.12) (0.06) (0.07)

Net realized gains from investments ...... (1.03) (1.50) (0.91) -- -- --
------------------------------------------------------------------------------
Total distributions ......................... (1.17) (1.66) (1.04) (0.12) (0.06) (0.07)
------------------------------------------------------------------------------
Redemption fees ............................. -- d -- d -- d -- d -- d --
------------------------------------------------------------------------------
Net asset value, end of period .............. $ 9.40 $ 9.11 $ 9.84 $ 8.71 $ 7.17 $ 5.84
==============================================================================

Total return c .............................. 17.37% 11.83% 27.07% 23.30% 24.39% (3.27)%

RATIOS/SUPPLEMENTAL DATA

Net assets, end of period (000's) ........... $96,002 $60,588 $39,912 $ 9,329 $ 4,834 $10,344

Ratios to average net assets:

Expenses ................................. 1.06% e,f 1.09% f 1.10% f 1.17% f 1.21% 1.19%

Net investment income .................... 0.08% 1.15% 1.58% 1.16% 1.43% 1.07%

Portfolio turnover rate ..................... 12.13% 33.90% 41.58% 31.69% 29.51% 25.31%

b Based on average daily shares outstanding.

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

d Amount rounds to less than $0.01 per share.

e Annualized.

f Benefit of expense reduction rounds to less than 0.01%.

16 | The accompanying notes are an integral part of these financial statements.
| Semiannual Report

Templeton Global Smaller Companies Fund

STATEMENT OF INVESTMENTS, FEBRUARY 28, 2007 (UNAUDITED)

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

COMMON STOCKS 93.9%
AUSTRALIA 3.7%
Billabong International Ltd. .................. Textiles, Apparel & Luxury Goods 369,406 $ 5,003,260
Downer EDI Ltd. ............................... Commercial Services & Supplies 2,419,687 13,995,428
PaperlinX Ltd. ................................ Paper & Forest Products 7,001,361 22,367,148
a Repco Corp. Ltd. .............................. Distributors 11,361,533 15,272,854
--------------
56,638,690
--------------
BAHAMAS 0.6%
b Steiner Leisure Ltd. .......................... Diversified Consumer Services 203,500 9,200,235
--------------
BELGIUM 0.9%
Barco NV ...................................... Electronic Equipment & Instruments 151,370 13,900,485
--------------
BRAZIL 0.4%
c Companhia de Saneamento de Minas Gerais,
144A ....................................... Water Utilities 526,500 6,701,361
--------------
CANADA 8.0%
Abitibi-Consolidated Inc. ..................... Paper & Forest Products 4,812,670 13,295,919
b ATS Automation Tooling Systems Inc. ........... Machinery 681,700 6,005,654
Domtar Inc. ................................... Paper & Forest Products 892,900 7,453,880
b Dorel Industries Inc., B ...................... Household Durables 362,300 10,845,914
b GSI Group Inc. ................................ Electronic Equipment & Instruments 1,071,820 9,989,363
Legacy Hotels ................................. Real Estate 1,302,500 12,522,003
Linamar Corp. ................................. Auto Components 690,000 8,787,666
MDS Inc. ...................................... Health Care Providers & Services 970,300 18,092,238
b Open Text Corp. ............................... Internet Software & Services 731,300 16,031,492
Quebecor World Inc. ........................... Commercial Services & Supplies 1,030,960 13,667,947
b Saxon Energy Services Inc. .................... Energy Equipment & Services 1,959,100 6,535,081
--------------
123,227,157
--------------
CHINA 6.4%
Bio-Treat Technology Ltd. ..................... Commercial Services & Supplies 20,258,000 10,598,653
China Oilfield Services Ltd. .................. Energy Equipment & Services 23,400,000 15,124,598
b China Pharmaceutical Group Ltd. ............... Pharmaceuticals 26,320,000 4,615,121
China Resources Power Holdings Co. Ltd. ....... Independent Power Producers & Energy
Traders 7,092,000 9,984,769
People's Food Holdings Ltd. ................... Food Products 29,293,000 25,861,978
Sinotrans Ltd., H ............................. Air Freight & Logistics 34,391,000 13,293,164
b TCL Communication Technology Holdings Ltd. .... Communications Equipment 143,878,875 4,972,073
Weiqiao Textile Co. Ltd., H ................... Textiles, Apparel & Luxury Goods 9,651,000 13,587,564
--------------
98,037,920
--------------
DENMARK 1.3%
b Vestas Wind Systems AS ........................ Electrical Equipment 419,990 19,506,069
--------------
FINLAND 1.9%
Amer Sports OYJ ............................... Leisure Equipment & Products 778,180 17,116,644
Elcoteq SE, A ................................. Communications Equipment 491,510 5,509,641
Huhtamaki OYJ ................................. Containers & Packaging 444,900 7,265,828
--------------
29,892,113
--------------

Semiannual Report | 17

Templeton Global Smaller Companies Fund

STATEMENT OF INVESTMENTS, FEBRUARY 28, 2007 (UNAUDITED) (CONTINUED)

COMMON STOCKS (CONTINUED)
GERMANY 2.8%
Celesio AG .................................... Health Care Providers & Services 302,000 $ 17,125,787
b Jenoptik AG ................................... Electronic Equipment & Instruments 977,110 9,332,573
Vossloh AG .................................... Machinery 187,900 16,039,746
--------------
42,498,106
--------------
HONG KONG 5.8%
Asia Satellite Telecommunications
Holdings Ltd. ............................... Diversified Telecommunication Services 3,454,500 7,836,323
Dah Sing Financial Group ...................... Commercial Banks 1,280,000 11,123,327
Fountain Set (Holdings) Ltd. .................. Textiles, Apparel & Luxury Goods 33,524,000 11,285,307
Giordano International Ltd. ................... Specialty Retail 20,439,348 9,528,306
Hang Lung Group Ltd. .......................... Real Estate 1,665,000 5,450,679
Hopewell Holdings Ltd. ........................ Transportation Infrastructure 2,982,000 11,487,951
Hung Hing Printing Group Ltd. ................. Containers & Packaging 20,862,508 12,233,325
Ngai Lik Industrial Holding Ltd. .............. Household Durables 13,886,000 1,156,465
Techtronic Industries Co. Ltd. ................ Household Durables 2,869,242 3,928,253
Yue Yuen Industrial Holdings Ltd. ............. Textiles, Apparel & Luxury Goods 4,196,500 14,505,964
--------------
88,535,900
--------------
INDIA 0.4%
c Gail India Ltd., GDR, 144A Metals & Mining 157,710 6,071,082
--------------
INDONESIA 0.4%
PT Indosat Tbk ................................ Diversified Telecommunication Services 9,955,000 6,429,554
--------------
ISRAEL 0.9%
b Orbotech Ltd. ................................. Electronic Equipment & Instruments 614,700 13,738,545
--------------
JAPAN 4.4%
b Descente Ltd. ................................. Textiles, Apparel & Luxury Goods 127,000 608,311
Meitec Corp. .................................. Commercial Services & Supplies 304,100 9,544,186
Nichii Gakkan Co. ............................. Health Care Providers & Services 739,200 15,027,426
Sangetsu Co. Ltd. ............................. Household Durables 186,800 4,531,134
Sohgo Security Services Co. Ltd. .............. Commercial Services & Supplies 1,337,700 25,700,260
Takuma Co. Ltd. ............................... Machinery 2,141,000 12,954,919
--------------
68,366,236
--------------
LUXEMBOURG 0.4%
b Thiel Logistik AG ............................. IT Services 1,547,850 5,756,291
--------------
MEXICO 0.4%
b Promotora Ambiental SA de CV .................. Commercial Services & Supplies 3,466,800 6,596,599
--------------
NETHERLANDS 6.2%
Aalberts Industries NV ........................ Machinery 81,109 7,799,938
b Draka Holding NV .............................. Electrical Equipment 328,886 10,290,394
Imtech NV ..................................... Construction & Engineering 192,410 13,176,375
OPG Groep NV .................................. Health Care Providers & Services 209,640 25,275,758

18 | Semiannual Report

Templeton Global Smaller Companies Fund

STATEMENT OF INVESTMENTS, FEBRUARY 28, 2007 (UNAUDITED) (CONTINUED)

COMMON STOCKS (CONTINUED)
NETHERLANDS (CONTINUED)
SBM Offshore NV ............................... Energy Equipment & Services 370,390 $ 13,159,834
Vedior NV ..................................... Commercial Services & Supplies 1,178,610 25,675,423
--------------
95,377,722
--------------

NORWAY 1.2%
Norske Skogindustrier ASA ..................... Paper & Forest Products 876,400 15,319,428
c Norske Skogindustrier ASA, 144A ............... Paper & Forest Products 183,426 3,206,278
--------------
18,525,706
--------------

SINGAPORE 1.8%
Cerebos Pacific Ltd. .......................... Food Products 746,253 1,522,881
Huan Hsin Holdings Ltd. ....................... Electronic Equipment & Instruments 6,101,000 2,157,013
Osim International Ltd. ....................... Specialty Retail 10,597,200 6,900,251
Venture Corp. Ltd. ............................ Electronic Equipment & Instruments 1,971,000 17,819,916
--------------
28,400,061
--------------

SOUTH KOREA 4.7%
Bank of Pusan ................................. Commercial Banks 1,793,670 24,915,782
b Daeduck Electronics Co. Ltd. .................. Electronic Equipment & Instruments 1,221,875 9,964,480
Daegu Bank Co. Ltd. ........................... Commercial Banks 625,330 10,710,740
b Halla Climate Control Corp. ................... Auto Components 1,104,000 12,096,254
Sindo Ricoh Co. ............................... Office Electronics 110,350 5,908,059
Youngone Corp. ................................ Textiles, Apparel & Luxury Goods 1,599,960 8,595,601
--------------
72,190,916
--------------

SWEDEN 1.2%
D. Carnegie & Co. AB .......................... Capital Markets 877,886 18,402,839
--------------
SWITZERLAND 2.2%
b Kuoni Reisen Holding AG, B .................... Hotels, Restaurants & Leisure 12,720 7,294,829
Verwaltungs-und Privat-Bank AG ................ Capital Markets 75,518 18,445,052
Vontobel Holding AG ........................... Capital Markets 160,170 7,644,291
--------------
33,384,172
--------------

TAIWAN 7.2%
AcBel Polytech Inc. ........................... Electrical Equipment 15,774,595 6,953,401
b BenQ Corp. .................................... Computers & Peripherals 12,137,000 5,794,012
D-Link Corp. .................................. Communications Equipment 22,170,610 30,915,493
Fu Sheng Industrial Co. Ltd. .................. Leisure Equipment & Products 9,004,694 8,226,293
Giant Manufacturing Co. Ltd. .................. Leisure Equipment & Products 3,682,000 5,549,714
a Pihsiang Machinery Manufacturing Co. Ltd. ..... Health Care Equipment & Supplies 8,528,000 14,128,083
Simplo Technology Co. Ltd. .................... Computers & Peripherals 4,857,600 17,474,750
Ta Chong Bank Ltd. ............................ Commercial Banks 15,483,000 5,007,068
Taiwan Fu Hsing ............................... Building Products 9,336,180 7,873,848
Test-Rite International Co. Ltd. .............. Distributors 16,149,387 9,158,722
--------------
111,081,384
--------------

Semiannual Report | 19

Templeton Global Smaller Companies Fund

STATEMENT OF INVESTMENTS, FEBRUARY 28, 2007 (UNAUDITED) (CONTINUED)

COMMON STOCKS (CONTINUED)
THAILAND 3.1%
Bank of Ayudhya Public Co. Ltd. ............... Commercial Banks 18,625,300 $ 10,334,275
BEC World Public Co. Ltd., fgn. ............... Media 11,961,000 7,141,901
Glow Energy Public Co. Ltd., fgn. ............. Independent Power Producers & Energy
Traders 4,900,700 4,692,967
c Glow Energy Public Co. Ltd., fgn., 144A ....... Independent Power Producers & Energy
Traders 12,056,200 11,545,157
b Total Access Communication Public Co.
Ltd., fgn. ................................. Wireless Telecommunication Services 3,332,000 13,994,400
--------------
47,708,700
--------------

UNITED KINGDOM 10.1%
Bodycote International PLC .................... Machinery 4,450,330 23,474,077
Burberry Group PLC ............................ Textiles, Apparel & Luxury Goods 804,310 9,934,828
b Fiberweb PLC .................................. Personal Products 2,002,120 8,249,813
FKI PLC ....................................... Machinery 8,882,160 19,111,023
Future PLC .................................... Media 11,231,610 9,575,289
GAME Group PLC ................................ Specialty Retail 16,058,130 44,091,492
a,b iSOFT Group PLC ............................... Healthcare Technology 12,142,540 10,554,586
John Wood Group PLC ........................... Energy Equipment & Services 2,861,570 14,927,963
Yule Catto & Company PLC ...................... Chemicals 3,250,560 16,037,271
--------------
155,956,342
--------------

UNITED STATES 17.5%
b Agile Software Corp. .......................... Software 1,759,250 11,276,792
b BearingPoint Inc. ............................. IT Services 1,141,250 9,130,000
Blockbuster Inc., A ........................... Specialty Retail 1,608,230 10,678,647
Bowater Inc. .................................. Paper & Forest Products 288,550 6,977,139
b Bristow Group Inc. ............................ Energy Equipment & Services 303,390 11,119,243
Central Parking Corp. ......................... Commercial Services & Supplies 815,400 18,093,726
b Coinstar Inc. ................................. Diversified Consumer Services 185,470 5,473,220
b Convergys Corp. ............................... IT Services 675,230 17,366,915
b Input/Output Inc. ............................. Energy Equipment & Services 1,123,680 15,248,338
b Interpublic Group of Cos. Inc. ................ Media 6,603 83,132
Irwin Financial Corp. ......................... Commercial Banks 1,113,630 23,007,596
b K2 Inc. ....................................... Leisure Equipment & Products 911,060 10,659,402
b Leapfrog Enterprises Inc. ..................... Leisure Equipment & Products 1,480,690 15,310,335
Pier 1 Imports Inc. ........................... Specialty Retail 2,927,670 19,878,879
b RC2 Corp. ..................................... Leisure Equipment & Products 292,400 11,555,648
b Scholastic Corp. .............................. Media 363,740 12,654,515
a,b Sharper Image Corp. ........................... Specialty Retail 937,400 9,730,212
b SigmaTel Inc. ................................. Semiconductors & Semiconductor Equipment 1,370,840 4,866,482
Tredegar Corp. ................................ Industrial Conglomerates 993,080 22,155,615
a,b West Marine Inc. .............................. Specialty Retail 1,991,430 33,376,367
--------------
268,642,203
--------------
TOTAL COMMON STOCKS
(COST $1,107,406,158) ...................... 1,444,766,388
--------------

20 | Semiannual Report

Templeton Global Smaller Companies Fund

STATEMENT OF INVESTMENTS, FEBRUARY 28, 2007 (UNAUDITED) (CONTINUED)

PRINCIPAL AMOUNT VALUE

SHORT TERM INVESTMENTS 5.4%
GOVERNMENT AND AGENCY SECURITIES 5.4%
UNITED STATES 5.4%
d Federal Home Loan Bank, 3/01/07 ................................ $ 44,322,000 $ 44,315,672
d Federal Home Loan Mortgage Corporation, 4/30/07 ................ 20,000,000 19,829,500
d Federal National Mortgage Association, 5/16/07 ................. 20,000,000 19,784,040
--------------
TOTAL SHORT TERM INVESTMENTS (COST $83,921,347) 83,929,212
--------------

TOTAL INVESTMENTS (COST $1,191,327,505) 99.3% .................. 1,528,695,600
OTHER ASSETS, LESS LIABILITIES 0.7% ............................ 10,273,708
--------------

NET ASSETS 100.0% .............................................. $1,538,969,308
==============

SELECTED PORTFOLIO ABBREVIATION

GDR - Global Depository Receipt

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

b Non-income producing for the twelve months ended February 28, 2007.

c 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 guidelines approved by
the Fund's Board of Trustees. At February 28, 2007, the aggregate value of these
securities was $27,523,878, representing 1.79% of net assets.

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

Semiannual Report |
The accompanying notes are an integral part of these financial statements. | 21

Templeton Global Smaller Companies Fund

FINANCIAL STATEMENTS

STATEMENT OF ASSETS AND LIABILITIES
February 28, 2007 (unaudited)

Assets:
Investments in securities:
Cost - Unaffiliated issuers ............................ $ 1,089,109,819
Cost - Non-controlled affiliated issuers (Note 8) ...... 102,217,686
---------------
Total cost of investments .............................. $ 1,191,327,505
===============
Value - Unaffiliated issuers ........................... $ 1,445,633,498
Value - Non-controlled affiliated issuers (Note 8) ..... 83,062,102
---------------
Total value of investments ............................. 1,528,695,600
Cash ..................................................... 6,960
Foreign currency, at value (cost $7,007,028) ............. 7,195,118
Receivables:
Investment securities sold ............................. 10,716,075
Capital shares sold .................................... 6,117,307
Dividends .............................................. 2,229,611
Foreign tax ............................................ 6,950
---------------
Total assets ......................................... 1,554,967,621
---------------
Liabilities:
Payables:
Investment securities purchased .......................... 11,672,083
Capital shares redeemed ................................ 2,435,548
Affiliates ............................................. 1,625,361
Accrued expenses and other liabilities ................... 265,321
---------------
Total liabilities .................................... 15,998,313
---------------
Net assets, at value ............................... $ 1,538,969,308
===============
Net assets consist of:
Paid-in capital .......................................... $ 1,151,406,239
Distributions in excess of net investment income ......... (10,656,263)
Net unrealized appreciation (depreciation) ............... 337,566,725
Accumulated net realized gain (loss) ..................... 60,652,607
---------------
Net assets, at value ............................... $ 1,538,969,308
===============

22 | The accompanying notes are an integral part of these financial statements.
| Semiannual Report

Templeton Global Smaller Companies Fund

FINANCIAL STATEMENTS (CONTINUED)

STATEMENT OF ASSETS AND LIABILITIES (CONTINUED)
February 28, 2007 (unaudited)

CLASS A:
Net assets, at value ...................................................... $1,345,639,622
==============
Shares outstanding ........................................................ 143,517,346
==============
Net asset value per share a ............................................... $ 9.38
==============
Maximum offering price per share (net asset value per share / 94.25%) ..... $ 9.95
==============

CLASS B:
Net assets, at value ...................................................... $ 8,932,025
==============
Shares outstanding ........................................................ 993,550
==============
Net asset value and maximum offering price per share a .................... $ 8.99
==============

CLASS C:
Net assets, at value ...................................................... $ 88,395,670
==============
Shares outstanding ........................................................ 9,648,667
==============
Net asset value and maximum offering price per share a .................... $ 9.16
==============

ADVISOR CLASS:
Net assets, at value ...................................................... $ 96,001,991
==============
Shares outstanding ........................................................ 10,212,456
==============
Net asset value and maximum offering price per share a .................... $ 9.40
==============

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 |
The accompanying notes are an integral part of these financial statements. | 23

Templeton Global Smaller Companies Fund

FINANCIAL STATEMENTS (CONTINUED)

STATEMENT OF OPERATIONS
for the six months ended February 28, 2007 (unaudited)

Investment income:
Dividends (net of foreign taxes of $474,751) .................................. $ 6,703,538
Interest (net of foreign taxes of $1,932) ..................................... 1,218,105
-------------
Total investment income ................................................... 7,921,643
-------------
Expenses:
Management fees (Note 3a) ..................................................... 5,165,806
Administrative fees (Note 3b) ................................................. 805,681
Distribution fees (Note 3c)
Class A ..................................................................... 1,542,567
Class B ..................................................................... 41,941
Class C ..................................................................... 384,867
Transfer agent fees (Note 3e) ................................................. 870,459
Custodian fees (Note 4) ....................................................... 224,850
Reports to shareholders ....................................................... 71,018
Registration and filing fees .................................................. 100,013
Professional fees ............................................................. 43,353
Trustees' fees and expenses ................................................... 59,409
Other ......................................................................... 14,515
-------------
Total expenses ............................................................ 9,324,479
Expense reductions (Note 4) ............................................... (2,641)
-------------
Net expenses ............................................................ 9,321,838
-------------
Net investment income (loss) .......................................... (1,400,195)
-------------
Realized and unrealized gains (losses):
Net realized gain (loss) from:
Investments ................................................................. 79,743,696
Foreign currency transactions ............................................... (117,026)
-------------
Net realized gain (loss) ................................................ 79,626,670
-------------
Net change in unrealized appreciation (depreciation) on:
Investments ................................................................. 141,576,844
Translation of assets and liabilities denominated in foreign currencies ..... (27,475)
-------------
Net change in unrealized appreciation (depreciation) .................... 141,549,369
-------------
Net realized and unrealized gain (loss) .......................................... 221,176,039
-------------
Net increase (decrease) in net assets resulting from operations .................. $ 219,775,844
=============

24 | The accompanying notes are an integral part of these financial statements.
| Semiannual Report

Templeton Global Smaller Companies Fund

FINANCIAL STATEMENTS (CONTINUED)

STATEMENTS OF CHANGES IN NET ASSETS

------------------------------------
SIX MONTHS ENDED
FEBRUARY 28, 2007 YEAR ENDED
(UNAUDITED) AUGUST 31, 2006
------------------------------------

Increase (decrease) in net assets:
Operations:
Net investment income (loss) ................................................... $ (1,400,195) $ 10,082,548
Net realized gain (loss) from investments and foreign currency transactions .... 79,626,670 183,590,006
Net change in unrealized appreciation (depreciation) on investments and
translation of assets and liabilities denominated in foreign currencies ...... 141,549,369 (73,205,624)
------------------------------------
Net increase (decrease) in net assets resulting from operations ............ 219,775,844 120,466,930
------------------------------------
Distributions to shareholders from:
Net investment income and net realized foreign currency gains:
Class A ...................................................................... (15,050,836) (14,072,406)
Class B ...................................................................... (47,192) (84,075)
Class C ...................................................................... (499,864) (638,278)
Advisor Class ................................................................ (1,008,972) (661,196)
Net realized gains from investments:
Class A ...................................................................... (130,374,696) (152,290,447)
Class B ...................................................................... (942,747) (1,295,699)
Class C ...................................................................... (8,442,311) (9,289,590)
Advisor Class ................................................................ (7,582,297) (6,553,403)
------------------------------------
Total distributions to shareholders .............................................. (163,948,915) (184,885,094)
------------------------------------
Capital share transactions: (Note 2)
Class A ...................................................................... 168,229,415 236,046,942
Class B ...................................................................... 588,224 627,223
Class C ...................................................................... 13,491,770 20,477,866
Advisor Class ................................................................ 31,944,243 23,201,262
------------------------------------
Total capital share transactions ................................................. 214,253,652 280,353,293
------------------------------------
Redemption fees .................................................................. 2,192 3,031
------------------------------------
Net increase (decrease) in net assets ...................................... 270,082,773 215,938,160
Net assets:
Beginning of period .............................................................. 1,268,886,535 1,052,948,375
------------------------------------
End of period .................................................................... $ 1,538,969,308 $ 1,268,886,535
====================================
Distributions in excess of net investment income / undistributed net investment
income included in net assets:
End of period .................................................................... $ (10,656,263) $ 7,350,796
====================================

Semiannual Report |
The accompanying notes are an integral part of these 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 amended, (the 1940 Act) as a diversified,
open-end investment company. The Fund offers four classes of shares: Class A,
Class B, Class C, and Advisor Class. 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 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 (including the reliability) of the value of a portfolio
security held by the Fund. The investment manager monitors price movements
following the close of trading in foreign stock markets

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)

through a series of country specific market proxies (such as baskets of American
Depository Receipts, futures contracts and exchange traded funds). These price
movements are measured against established trigger thresholds for each specific
market proxy to assist in determining if an event has occurred. 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 AND DEFERRED TAXES

No provision has been made for U.S. income taxes because it is the Fund's policy
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.

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

The Fund may be 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.

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. Differences in per share
distributions, by class, are generally due to differences in class specific
expenses.

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. 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. Currently, the Fund expects the
risk of loss to be remote.

2. SHARES OF BENEFICIAL INTEREST

At February 28, 2007, 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, 2007 AUGUST 31, 2006
-----------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT
-----------------------------------------------------------

CLASS A SHARES:
Shares sold ..................................... 17,786,657 $ 161,312,898 29,226,711 $ 264,578,465
Shares issued in reinvestment of distributions .. 14,926,713 128,461,057 17,755,481 146,537,072
Shares redeemed ................................. (13,396,206) (121,544,540) (19,497,726) (175,068,595)
-----------------------------------------------------------
Net increase (decrease) ......................... 19,317,164 $ 168,229,415 27,484,466 $ 236,046,942
===========================================================
CLASS B SHARES:
Shares sold ..................................... 79,290 $ 688,634 208,119 $ 1,818,522
Shares issued in reinvestment of distributions .. 105,668 875,424 150,687 1,202,126
Shares redeemed ................................. (112,047) (975,834) (278,050) (2,393,425)
-----------------------------------------------------------
Net increase (decrease) ......................... 72,911 $ 588,224 80,756 $ 627,223
===========================================================
CLASS C SHARES:
Shares sold ..................................... 1,689,473 $ 15,033,769 3,505,816 $ 31,051,054
Shares issued in reinvestment of distributions .. 797,162 6,725,380 863,406 7,009,223
Shares redeemed ................................. (933,957) (8,267,379) (2,017,104) (17,582,411)
-----------------------------------------------------------
Net increase (decrease) ......................... 1,552,678 $ 13,491,770 2,352,118 $ 20,477,866
===========================================================

Semiannual Report | 29

Templeton Global Smaller Companies Fund

NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

2. SHARES OF BENEFICIAL INTEREST (CONTINUED)

ADVISOR CLASS SHARES:
Shares sold ..................................... 3,050,199 $ 27,690,823 4,489,047 $ 39,947,076
Shares issued in reinvestment of distributions .. 935,293 8,074,661 440,087 3,637,268
Shares redeemed ................................. (420,175) (3,821,241) (2,338,574) (20,383,082)
-----------------------------------------------------------
Net increase (decrease) ......................... 3,565,317 $ 31,944,243 2,590,560 $ 23,201,262
===========================================================

3. TRANSACTIONS 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, 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.

30 | Semiannual Report

Templeton Global Smaller Companies Fund

NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

3. TRANSACTIONS WITH AFFILIATES (CONTINUED)

B. ADMINISTRATIVE FEES

The Funds 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 for costs incurred in connection with the servicing,
sale and distribution of the Fund's shares up to the maximum annual plan rate.
Under the Class A reimbursement distribution plan, costs exceeding the maximum
for the current plan year cannot be reimbursed in subsequent periods.

In addition, under the Fund's Class B, and C compensation distribution plans,
the Fund pays Distributors for costs incurred in connection with the servicing,
sale and distribution of the Fund's shares up to the maximum annual plan rate
for each class.

The maximum annual plan rates, based on the average daily net assets, for each
class, are as follows:

Class A .......................................... 0.25%
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:

Sales charges retained net of commissions
paid to unaffiliated broker/dealers ........... $ 311,907
Contingent deferred sales charges retained ....... $ 6,867

E. TRANSFER AGENT FEES

The Fund paid transfer agent fees of $870,459, of which $578,591 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, 2007, 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 occurring on the first day of the following
fiscal year. At August 31, 2006, the Fund deferred realized currency losses of
$366,479.

At February 28, 2007, the cost of investments and net unrealized appreciation
(depreciation) for income tax purposes were as follows:

Cost of investments ................................... $ 1,194,810,368
================

Unrealized appreciation ............................... $ 419,873,643
Unrealized depreciation ............................... (85,988,411)
----------------
Net unrealized appreciation (depreciation) ............ $ 333,885,232
================

Net investment income (loss) and net realized gains (losses) differ for
financial statement and tax purposes primarily due to differing treatments of
foreign currency transactions and passive foreign investment company shares.

6. INVESTMENT TRANSACTIONS

Purchases and sales of investments (excluding short term securities) for the
period ended February 28, 2007, aggregated $163,164,710 and $171,140,549,
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 1940 Act 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, 2007
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 YEAR ADDITIONS REDUCTIONS OF PERIOD OF PERIOD INCOME GAIN (LOSS)
- -----------------------------------------------------------------------------------------------------------------------------------

NON-CONTROLLED AFFILIATES
iSOFT Group PLC ............. 12,142,540 -- -- 12,142,540 $ 10,554,586 $ -- $ --
Repco Corp. Ltd. ............ 11,361,533 -- -- 11,361,533 15,272,854 -- --
Pihsiang Machinery
Manufacturing Co. Ltd. ...... 7,209,000 1,319,000 -- 8,528,000 14,128,083 -- --
Sharper Image Corp. ......... 937,400 -- -- 937,400 9,730,212 -- --
West Marine Inc. ............ 1,991,430 -- -- 1,991,430 33,376,367 -- --
---------------------------------------------
TOTAL AFFILIATED SECURITIES (5.40% of Net Assets) $ 83,062,102 $ -- $ --
=============================================

9. REGULATORY AND LITIGATION MATTERS

As part of various investigations by a number of federal, state, and foreign
regulators and governmental entities, including the Securities and Exchange
Commission ("SEC"), 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 ("marketing support"), Franklin
Resources, Inc. and certain of its subsidiaries (collectively, the "Company"),
entered into settlements with certain of those regulators and governmental
entities. Specifically, the Company entered into settlements with the SEC, among
others, concerning market timing and marketing support.

On June 23, 2006, the SEC approved the proposed plan of distribution for the
marketing support settlement, and disbursement of the settlement monies to the
designated funds, in accordance with the terms and conditions of that settlement
and plan, was completed in September 2006.

The plan of distribution for the market timing settlement is currently under
review by the SEC staff. After publication of notice of the plan and a 30-day
comment period, the proposed plan of distribution will be submitted to the SEC
for approval. Following the SEC's approval of the plan of distribution, with
modifications as appropriate, distribution of the settlement monies will begin
in accordance with the terms and conditions of the settlement and plan.

Semiannual Report | 33

Templeton Global Smaller Companies Fund

NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

9. REGULATORY AND LITIGATION MATTERS (CONTINUED)

In addition, the Company, as well as most of the mutual funds within Franklin
Templeton Investments and certain current or former officers, Company directors,
fund directors, and 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.). The lawsuits relate to the industry
practices referenced above, as well as to allegedly excessive commissions and
advisory and distribution fees.

The Company and fund management 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.

10. NEW ACCOUNTING PRONOUNCEMENTS

In July 2006, the Financial Accounting Standards Board (FASB) issued FASB
Interpretation No. 48, "Accounting for Uncertainty in Income Taxes -- an
Interpretation of FASB Statement No. 109" ("FIN 48"), which clarifies the
accounting for uncertainty in tax positions taken or expected to be taken in a
tax return. FIN 48 provides guidance on the measurement, recognition,
classification and disclosure of tax positions, along with accounting for the
related interest and penalties. FIN 48 is effective for fiscal years beginning
after December 15, 2006, and is to be applied to all open tax years as of the
date of effectiveness. On December 22, 2006, the Securities and Exchange
Commission extended the implementation date to no later than the last net asset
value calculation in the first semi-annual reporting period in 2007. The Fund is
currently evaluating the impact, if any, of applying the various provisions of
FIN 48.

In September 2006, FASB issued FASB Statement No. 157, "Fair Value Measurement"
("SFAS 157"), which defines fair value, establishes a framework for measuring
fair value, and expands disclosures about fair value measurements. SFAS 157 is
effective for fiscal years beginning after November 15, 2007, and interim
periods within those fiscal years. The Fund believes the adoption of SFAS 157
will have no material impact on its financial statements.

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 1-954/527-7678 or
by sending a written request to: Franklin Templeton Companies, LLC, 500 East
Broward Boulevard, Suite 1500, Fort Lauderdale, FL 33394, Attention: Proxy
Group. Copies of the Fund's proxy voting records are also made available online
at franklintempleton.com and posted on the U.S. Securities and Exchange
Commission's website at sec.gov and reflect the most recent 12-month period
ended June 30.

QUARTERLY STATEMENT OF INVESTMENTS

The Fund files a complete statement of investments with the U.S. Securities and
Exchange Commission for the first and third quarters for each fiscal year on
Form N-Q. Shareholders may view the filed Form N-Q by visiting the Commission's
website at sec.gov. The filed form may also be viewed and copied at the
Commission's Public Reference Room in Washington, DC. Information regarding the
operations of the Public Reference Room may be obtained by calling
1-800/SEC-0330.

Semiannual Report | 35

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Literature Request

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

FRANKLIN TEMPLETON INVESTMENTS

INTERNATIONAL

Mutual European Fund
Templeton BRIC Fund
Templeton China World Fund
Templeton Developing Markets Trust
Templeton Emerging Markets Small Cap Fund
Templeton Foreign Fund
Templeton Foreign Smaller Companies Fund
Templeton International (Ex EM) Fund 1

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 Balanced Fund
Franklin Blue Chip Fund 1
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 Global Real Estate 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

RETIREMENT TARGET FUNDS

Franklin Templeton 2015 Retirement Target Fund
Franklin Templeton 2025 Retirement Target Fund
Franklin Templeton 2035 Retirement Target Fund
Franklin Templeton 2045 Retirement Target Fund

INCOME

Franklin Adjustable U.S. Government
Securities Fund 4
Franklin Floating Rate Daily Access Fund
Franklin High Income Fund 5
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 6

NATIONAL FUNDS

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

LIMITED-TERM FUNDS

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

INTERMEDIATE-TERM FUNDS

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

STATE-SPECIFIC

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

INSURANCE FUNDS

Franklin Templeton Variable Insurance Products Trust 9

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

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

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

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

5. Effective 10/1/06, Franklin's AGE High Income Fund changed its name to
Franklin High Income Fund. The fund's investment goal and strategy
remained the same.

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

7. Portfolio of insured municipal securities.

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

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

01/07 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 S2007 04/07

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
COMPANY AND AFFILIATED PURCHASERS. N/A

ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

There have been no changes to the procedures by which shareholders may recommend
nominees to the Registrant's Board of Trustees that would require disclosure
herein.

ITEM 11. CONTROLS AND PROCEDURES.

(A) EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES. The Registrant maintains
disclosure controls and procedures that are designed to 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
----------------------
Jimmy D. Gambill
Chief Executive Officer - Finance and Administration
Date: April 26, 2007

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
----------------------
Jimmy D. Gambill
Chief Executive Officer - Finance and Administration
Date: April 26, 2007

By /s/GALEN G. VETTER
----------------------
Galen G. Vetter
Chief Financial Officer
Date: April 26, 2007