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

FORM N-CSR/A

CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES

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

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

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

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

[GRAPHIC OMITTED]

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AUGUST 31, 2007
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ANNUAL REPORT AND SHAREHOLDER LETTER GLOBAL
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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
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[GRAPHIC OMITTED]

Not part of the annual report

Contents

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

ANNUAL REPORT

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

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

Your Fund's Expenses .................................................... 13

Financial Highlights and Statement of Investments ....................... 15

Financial Statements .................................................... 24

Notes to Financial Statements ........................................... 28

Report of Independent Registered Public Accounting Firm ................. 37

Tax Designation ......................................................... 38

Meeting of Shareholders ................................................. 42

Board Members and Officers .............................................. 44

Shareholder Information ................................................. 49

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Annual 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 annual
report for the fiscal year ended August 31, 2007.

PERFORMANCE OVERVIEW

For the 12 months under review, Templeton Global Smaller Companies Fund - Class
A posted a +26.52% cumulative total return. The Fund outperformed its benchmark,
the Morgan Stanley Capital International (MSCI) World Index, which posted a
+17.54% 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

In spite of elevated energy prices, higher global interest rates, a weaker U.S.
housing market and restrained U.S. economic growth, the global economy remained
resilient throughout the 12-month reporting period. The strength of consumer and
corporate demand, particularly in developing economies, along with reasonably
low inflation, tight or improving labor markets, and moderate, though higher,
global interest rates, continued to support the economic recovery, which began
in 2002.

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 19.

Annual Report | 3

GEOGRAPHIC BREAKDOWN
Based on Total Net Assets as of 8/31/07

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

Asia 39.4%
Europe 27.1%
North America 25.6%
Australia & New Zealand 3.8%
Middle East & Africa 0.8%
Latin America 0.5%
Short-Term Investments & Other Net Assets 2.8%

These factors also contributed to the strength of global equity markets during
the 12 months under review. In addition, narrow corporate credit spreads,
together with strong cash flows from the corporate sector in the world's capital
markets contributed to record-breaking global merger and acquisition activity.
In particular the private equity industry, which has grown substantially in
recent years, played a pivotal role in a number of large and high profile
acquisitions.

However, concerns about slower growth and declining asset quality surfaced
during the first quarter of 2007. These were initially centered on the U.S.
sub-prime mortgage market but spread in August 2007 to global capital markets.
In particular, the difficulties of assessing risk and the value of collateral in
the structured finance industry contributed to a decline in risk appetite among
both lenders and investors. The private equity industry, which is reliant on the
availability of cheap credit, was particularly affected, and deal activity
slowed toward the end of the period.

Despite this decline in investor confidence, most global equity markets ended
the 12-month period with double-digit total returns. Many stock market indexes
in the U.S. and most European countries reached six-year highs, and many
emerging market indexes in Asia, Europe and Latin America neared or reached
all-time highs during the latter part of the period.

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 a company's
long-term earnings, asset value and cash flow growth potential. We are patient
investors; our typical holding period is four to five years.

MANAGER'S DISCUSSION

The Fund benefited from several holdings that performed well during the fiscal
year. U.K.-based GAME Group, Europe's largest retailer of computer software,
video games, consoles and related products, was among the most significant
contributors to Fund performance. GAME Group's shares increased in value as the
company announced its acquisition of GameStation, the U.K.'s second-largest
video game retailer. The deal, in our view, made financial and strategic

4 | Annual Report

sense, as it removed the risk that competitor Gamestop would develop a U.K.
business through acquiring GameStation. The deal also gives GAME Group access to
a large, higher margin, existing sales base, and we believe offers synergies and
magnifies the positive impact of the current game console cycle. Consistent with
our investment strategy, we believe that GAME Group is fundamentally strong with
a solid balance sheet.

The Fund also benefited from Denmark's Vestas Wind Systems, the world's leading
wind turbine manufacturer. The company's success stems in large part from its
ability to develop durable, reliable and cost effective wind turbines. Wind
power is the cheapest source of renewable energy when costs of environmental
degradation from traditional power sources are considered. Vestas benefited from
rising energy prices and increased global attention on renewable and
environmentally friendly power sources.

Another contributor to Fund performance during the fiscal year was Taiwan-based
D-Link, a global data networking vendor that sells branded wireless local area
network (WLAN) products, broadband access equipment, LAN switches and other
networking equipment. The combination of rising notebook personal computer
penetration rates and increased broadband adoption bolstered demand from home
users and small businesses for D-Link's products. The company continued to gain
market share along with larger companies such as Linksys and NetGear, while
smaller competitors lost market share. D-Link's recent results indicated to us
that the company was competing well and seemed poised to benefit from a pending
upgrade cycle in wireless access equipment.

It is important to recognize the effect of currency movements on the Fund's
performance. In general, if the value of the U.S. dollar goes up compared with a
foreign currency, an investment traded in that foreign currency will go down in
value because it will be worth fewer U.S. dollars. This can have a negative
effect on Fund performance. Conversely, when the U.S. dollar weakens in relation
to a foreign currency, an investment traded in that foreign currency will
increase in value, which can contribute to Fund performance. For the 12 months
ended August 31, 2007, the U.S. dollar declined in value relative to most
non-U.S. currencies. As a result, the Fund's performance was positively affected
by the portfolio's substantial investment in securities with non-U.S. currency
exposure. However, one cannot expect the same result in future periods.

TOP 10 HOLDINGS
8/31/07

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COMPANY % OF TOTAL
SECTOR/INDUSTRY, COUNTRY NET ASSETS
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GAME Group PLC 3.6%
SPECIALTY RETAIL, U.K.
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D-Link Corp. 2.4%
COMMUNICATIONS EQUIPMENT, TAIWAN
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Bank of Pusan 2.0%
COMMERCIAL BANKS, SOUTH KOREA
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Yule Catto & Company PLC 1.8%
CHEMICALS, U.K.
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FKI PLC 1.6%
MACHINERY, U.K.
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Hibbett Sports Inc. 1.6%
SPECIALTY RETAIL, U.S.
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West Marine Inc. 1.6%
SPECIALTY RETAIL, U.S.
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Vedior NV 1.6%
COMMERCIAL SERVICES & SUPPLIES,
NETHERLANDS
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Sealy Corp. 1.6%
HOUSEHOLD DURABLES, U.S.
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Simplo Technology Co. Ltd. 1.6%
COMPUTERS & PERIPHERALS, TAIWAN
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Annual Report | 5

By contrast, the Fund had some detractors from performance during the fiscal
year. One example is Osim International, a dominant company in Asia's healthy
lifestyle products industry, which has franchise outlets in Hong Kong, China,
Taiwan, Singapore and Malaysia. Osim's sales are largely driven by its flagship
massage chair product line, and it has a number of new products that were
gaining traction in the market. The company's purchase of U.S.-based Brookstone
in 2005 widened its global reach and gave Osim direct access to a retail network
of more than 300 stores. In our analysis, the cause of Osim's recent share price
weakness appeared relatively isolated to a single product and a single market as
the company received negative publicity from imitation products spreading to
markets in Hong Kong and Taiwan. We continued to hold the stock because we were
confident in Osim's long-term prospects.

Irwin Financial, a U.S. regional bank that operates in the commercial banking,
commercial finance and home equity lending segments, also hurt performance.
During the period, the company suffered from its exposure to home equity loans,
which are particularly sensitive to home price depreciation, and from regional
exposure in the Midwest, which has experienced adverse employment trends and
corresponding weakness in the residential real estate market. Despite this
challenge to the company's near-term outlook, the stock appeared to have
valuation support on a price-to-book basis with a tangible book value
significantly higher than the share price at period-end.

Another major detractor from Fund performance was Canada-based ATS Automation
Tooling Systems, which supplies automated manufacturing systems, and also
manufactures components on an outsourcing basis using its own systems. Key
markets include the automotive, electronics and health care industries. In
addition, the company manufactures modules and thin-film flexible cells for the
solar industry. The company's stock declined in value during the reporting
period as a combination of sluggish order growth and high fixed costs weighed on
the company's bottom line. Moreover, company management cancelled a proposed
initial public offering for its solar division given a challenging pricing
environment. We believed management was finally taking the difficult measures
needed to get the company's stock back on track. For example, company management
installed new leadership for the disappointing solar division, and it decided to
sell the precision components division following earlier unsuccessful attempts
to stem ongoing problems. At period-end, we believe the shares' valuation
support appeared compelling with shares trading near book value.

6 | Annual Report

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

[PHOTO OMITTED] /s/ Tucker Scott

Tucker Scott, CFA

[PHOTO OMITTED] /s/ Cynthia Sweeting

Cynthia Sweeting, CFA

Portfolio Management Team
Templeton Global Smaller Companies Fund

THE FOREGOING INFORMATION REFLECTS OUR ANALYSIS, OPINIONS AND PORTFOLIO HOLDINGS
AS OF AUGUST 31, 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.

Annual Report | 7

Performance Summary as of 8/31/07

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 and graphs do not reflect any taxes
that a shareholder would pay on Fund dividends, capital gain distributions, if
any, or any realized gains on the sale of Fund shares. Total return reflects
reinvestment of the Fund's dividends and capital gain distributions, if any, and
any unrealized gains or losses.

PRICE AND DISTRIBUTION INFORMATION

- --------------------------------------------------------------------------------
CLASS A (SYMBOL: TEMGX) CHANGE 8/31/07 8/31/06
- --------------------------------------------------------------------------------
Net Asset Value (NAV) +$1.04 $10.13 $9.09
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DISTRIBUTIONS (9/1/06-8/31/07)
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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 8/31/07 8/31/06
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Net Asset Value (NAV) +$0.96 $ 9.68 $8.72
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DISTRIBUTIONS (9/1/06-8/31/07)
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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 8/31/07 8/31/06
- --------------------------------------------------------------------------------
Net Asset Value (NAV) +$0.98 $ 9.86 $8.88
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DISTRIBUTIONS (9/1/06-8/31/07)
- --------------------------------------------------------------------------------
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 8/31/07 8/31/06
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Net Asset Value (NAV) +$1.06 $10.17 $9.11
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DISTRIBUTIONS (9/1/06-8/31/07)
- --------------------------------------------------------------------------------
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 | Annual 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 1-YEAR 5-YEAR 10-YEAR
- -------------------------------------------------------------------------------------

Cumulative Total Return 1 +26.52% +173.46% +116.73%
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Average Annual Total Return 2 +19.30% +20.83% +7.41%
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Value of $10,000 Investment 3 $11,930 $25,753 $20,429
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Avg. Ann. Total Return (9/30/07) 4 +18.77% +23.40% +7.04%
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Total Annual Operating Expenses 5 1.34%
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CLASS B 1-YEAR 5-YEAR INCEPTION (1/1/99)
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Cumulative Total Return 1 +25.69% +163.30% +144.68%
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Average Annual Total Return 2 +21.69% +21.18% +10.88%
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Value of $10,000 Investment 3 $12,169 $26,130 $24,468
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Avg. Ann. Total Return (9/30/07) 4 +21.18% +23.74% +10.86%
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Total Annual Operating Expenses 5 2.09%
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CLASS C 1-YEAR 5-YEAR 10-YEAR
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Cumulative Total Return 1 +25.58% +163.28% +100.81%
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Average Annual Total Return 2 +24.58% +21.36% +7.22%
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Value of $10,000 Investment 3 $12,458 $26,328 $20,081
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Avg. Ann. Total Return (9/30/07) 4 +24.08% +23.93% +6.86%
- -------------------------------------------------------------------------------------
Total Annual Operating Expenses 5 2.09%
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ADVISOR CLASS 1-YEAR 5-YEAR 10-YEAR
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Cumulative Total Return 1 +26.98% +176.76% +122.58%
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Average Annual Total Return 2 +26.98% +22.58% +8.33%
- -------------------------------------------------------------------------------------
Value of $10,000 Investment 3 $12,698 $27,676 $22,258
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Avg. Ann. Total Return (9/30/07) 4 +26.33% +25.15% +7.96%
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Total Annual Operating Expenses 5 1.09%
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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. FOR MOST RECENT MONTH-END PERFORMANCE, SEE "FUNDS AND
PERFORMANCE" AT FRANKLINTEMPLETON.COM OR CALL 1-800/342-5236.

Annual Report | 9

Performance Summary (CONTINUED)

TOTAL RETURN INDEX COMPARISON FOR HYPOTHETICAL $10,000 INVESTMENT

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

AVERAGE ANNUAL TOTAL RETURN

- -----------------------------------------------------
CLASS A 8/31/07
- -----------------------------------------------------
1-Year +19.30%
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5-Year +20.83%
- -----------------------------------------------------
10-Year +7.41%
- -----------------------------------------------------

CLASS A (9/1/97-8/31/07)

[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.]

Templeton
Global
Smaller
Companies MSCI World
Date Fund Index 6 CPI 6
- --------------------------------------------------------
9/1/1997 $ 9,426 $10,000 $10,000
9/30/1997 $ 9,812 $10,545 $10,025
10/31/1997 $ 9,076 $ 9,991 $10,050
11/30/1997 $ 8,867 $10,170 $10,044
12/31/1997 $ 8,853 $10,295 $10,031
1/31/1998 $ 8,564 $10,584 $10,050
2/28/1998 $ 9,281 $11,302 $10,068
3/31/1998 $ 9,731 $11,781 $10,087
4/30/1998 $ 9,806 $11,897 $10,106
5/31/1998 $ 9,592 $11,750 $10,124
6/30/1998 $ 9,174 $12,031 $10,137
7/31/1998 $ 8,842 $12,013 $10,149
8/31/1998 $ 7,387 $10,413 $10,162
9/30/1998 $ 7,312 $10,599 $10,174
10/31/1998 $ 7,476 $11,559 $10,199
11/30/1998 $ 7,767 $12,248 $10,199
12/31/1998 $ 7,845 $12,848 $10,193
1/31/1999 $ 7,521 $13,131 $10,218
2/28/1999 $ 7,264 $12,784 $10,230
3/31/1999 $ 7,465 $13,318 $10,261
4/30/1999 $ 8,169 $13,845 $10,336
5/31/1999 $ 8,057 $13,341 $10,336
6/30/1999 $ 8,281 $13,965 $10,336
7/31/1999 $ 8,359 $13,925 $10,367
8/31/1999 $ 8,270 $13,902 $10,392
9/30/1999 $ 8,001 $13,769 $10,442
10/31/1999 $ 7,985 $14,487 $10,460
11/30/1999 $ 8,130 $14,896 $10,466
12/31/1999 $ 8,638 $16,104 $10,466
1/31/2000 $ 8,516 $15,184 $10,498
2/29/2000 $ 8,783 $15,226 $10,560
3/31/2000 $ 9,062 $16,281 $10,647
4/30/2000 $ 8,638 $15,594 $10,653
5/31/2000 $ 8,504 $15,201 $10,665
6/30/2000 $ 8,856 $15,715 $10,721
7/31/2000 $ 8,783 $15,275 $10,746
8/31/2000 $ 8,856 $15,774 $10,746
9/30/2000 $ 8,432 $14,937 $10,802
10/31/2000 $ 7,971 $14,688 $10,821
11/30/2000 $ 7,630 $13,798 $10,827
12/31/2000 $ 7,914 $14,024 $10,821
1/31/2001 $ 8,333 $14,296 $10,889
2/28/2001 $ 8,181 $13,089 $10,933
3/31/2001 $ 7,457 $12,232 $10,958
4/30/2001 $ 7,787 $13,139 $11,001
5/31/2001 $ 8,155 $12,976 $11,051
6/30/2001 $ 7,978 $12,571 $11,070
7/31/2001 $ 7,825 $12,406 $11,039
8/31/2001 $ 7,749 $11,813 $11,039
9/30/2001 $ 6,695 $10,773 $11,088
10/31/2001 $ 6,944 $10,981 $11,051
11/30/2001 $ 7,394 $11,632 $11,032
12/31/2001 $ 7,779 $11,707 $10,989
1/31/2002 $ 7,869 $11,353 $11,014
2/28/2002 $ 8,087 $11,257 $11,057
3/31/2002 $ 8,793 $11,757 $11,119
4/30/2002 $ 9,075 $11,362 $11,182
5/31/2002 $ 9,217 $11,388 $11,182
6/30/2002 $ 8,703 $10,700 $11,188
7/31/2002 $ 7,715 $ 9,799 $11,200
8/31/2002 $ 7,471 $ 9,819 $11,238
9/30/2002 $ 6,778 $ 8,742 $11,256
10/31/2002 $ 6,966 $ 9,388 $11,275
11/30/2002 $ 7,212 $ 9,897 $11,275
12/31/2002 $ 7,095 $ 9,419 $11,250
1/31/2003 $ 6,836 $ 9,134 $11,300
2/28/2003 $ 6,487 $ 8,978 $11,387
3/31/2003 $ 6,513 $ 8,953 $11,455
4/30/2003 $ 7,173 $ 9,753 $11,430
5/31/2003 $ 7,924 $10,315 $11,412
6/30/2003 $ 8,209 $10,498 $11,424
7/31/2003 $ 8,701 $10,713 $11,437
8/31/2003 $ 9,270 $10,947 $11,480
9/30/2003 $ 9,426 $11,016 $11,517
10/31/2003 $10,134 $11,672 $11,505
11/30/2003 $10,317 $11,853 $11,474
12/31/2003 $10,881 $12,599 $11,461
1/31/2004 $11,223 $12,804 $11,517
2/29/2004 $11,708 $13,023 $11,580
3/31/2004 $11,538 $12,942 $11,654
4/30/2004 $11,380 $12,684 $11,692
5/31/2004 $11,301 $12,808 $11,760
6/30/2004 $11,669 $13,077 $11,797
7/31/2004 $11,367 $12,653 $11,779
8/31/2004 $11,406 $12,714 $11,785
9/30/2004 $11,840 $12,958 $11,810
10/31/2004 $12,131 $13,279 $11,872
11/30/2004 $13,082 $13,982 $11,878
12/31/2004 $13,740 $14,520 $11,835
1/31/2005 $13,534 $14,196 $11,859
2/28/2005 $14,079 $14,652 $11,928
3/31/2005 $13,917 $14,375 $12,021
4/30/2005 $13,313 $14,071 $12,102
5/31/2005 $13,578 $14,331 $12,090
6/30/2005 $13,887 $14,462 $12,096
7/31/2005 $14,491 $14,970 $12,152
8/31/2005 $14,461 $15,090 $12,214
9/30/2005 $14,800 $15,486 $12,363
10/31/2005 $14,022 $15,113 $12,388
11/30/2005 $14,327 $15,625 $12,289
12/31/2005 $14,797 $15,975 $12,239
1/31/2006 $15,863 $16,692 $12,332
2/28/2006 $16,023 $16,674 $12,357
3/31/2006 $16,645 $17,048 $12,425
4/30/2006 $17,249 $17,575 $12,531
5/31/2006 $16,254 $16,990 $12,593
6/30/2006 $15,845 $16,992 $12,618
7/31/2006 $15,810 $17,102 $12,655
8/31/2006 $16,147 $17,555 $12,680
9/30/2006 $16,325 $17,769 $12,618
10/31/2006 $17,021 $18,425 $12,550
11/30/2006 $17,678 $18,886 $12,531
12/31/2006 $18,393 $19,275 $12,550
1/31/2007 $18,816 $19,506 $12,588
2/28/2007 $18,917 $19,413 $12,655
3/31/2007 $19,623 $19,776 $12,771
4/30/2007 $20,288 $20,660 $12,854
5/31/2007 $20,994 $21,259 $12,932
6/30/2007 $21,418 $21,103 $12,957
7/31/2007 $21,337 $20,640 $12,954
8/31/2007 $20,429 $20,633 $12,930

AVERAGE ANNUAL TOTAL RETURN

- -----------------------------------------------------
CLASS B 8/31/07
- -----------------------------------------------------
1-Year +21.69%
- -----------------------------------------------------
5-Year +21.18%
- -----------------------------------------------------
Since Inception (1/1/99) +10.88%
- -----------------------------------------------------

[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.]

CLASS B (1/1/99-8/31/07)

Templeton
Global
Smaller
Companies MSCI World
Date Fund Index 6 CPI 6
- --------------------------------------------------------
1/1/1999 $10,000 $10,000 $10,000
1/31/1999 $ 9,573 $10,220 $10,024
2/28/1999 $ 9,245 $ 9,950 $10,037
3/31/1999 $ 9,487 $10,366 $10,067
4/30/1999 $10,385 $10,776 $10,140
5/31/1999 $10,242 $10,383 $10,140
6/30/1999 $10,513 $10,869 $10,140
7/31/1999 $10,613 $10,838 $10,171
8/31/1999 $10,484 $10,820 $10,195
9/30/1999 $10,142 $10,717 $10,244
10/31/1999 $10,118 $11,275 $10,262
11/30/1999 $10,287 $11,594 $10,268
12/31/1999 $10,914 $12,534 $10,268
1/31/2000 $10,759 $11,818 $10,299
2/29/2000 $11,084 $11,851 $10,360
3/31/2000 $11,423 $12,672 $10,445
4/30/2000 $10,883 $12,137 $10,451
5/31/2000 $10,713 $11,831 $10,464
6/30/2000 $11,145 $12,231 $10,519
7/31/2000 $11,037 $11,889 $10,543
8/31/2000 $11,114 $12,277 $10,543
9/30/2000 $10,590 $11,626 $10,598
10/31/2000 $ 9,985 $11,432 $10,616
11/30/2000 $ 9,569 $10,740 $10,622
12/31/2000 $ 9,929 $10,915 $10,616
1/31/2001 $10,428 $11,127 $10,683
2/28/2001 $10,235 $10,188 $10,726
3/31/2001 $ 9,332 $ 9,520 $10,750
4/30/2001 $ 9,719 $10,227 $10,793
5/31/2001 $10,187 $10,100 $10,842
6/30/2001 $ 9,961 $ 9,785 $10,860
7/31/2001 $ 9,751 $ 9,656 $10,830
8/31/2001 $ 9,655 $ 9,194 $10,830
9/30/2001 $ 8,333 $ 8,385 $10,879
10/31/2001 $ 8,645 $ 8,547 $10,842
11/30/2001 $ 9,180 $ 9,054 $10,824
12/31/2001 $ 9,667 $ 9,112 $10,781
1/31/2002 $ 9,764 $ 8,837 $10,805
2/28/2002 $10,023 $ 8,761 $10,848
3/31/2002 $10,915 $ 9,151 $10,909
4/30/2002 $11,240 $ 8,843 $10,970
5/31/2002 $11,418 $ 8,864 $10,970
6/30/2002 $10,769 $ 8,328 $10,976
7/31/2002 $ 9,553 $ 7,627 $10,988
8/31/2002 $ 9,245 $ 7,643 $11,025
9/30/2002 $ 8,385 $ 6,804 $11,043
10/31/2002 $ 8,612 $ 7,307 $11,062
11/30/2002 $ 8,906 $ 7,703 $11,062
12/31/2002 $ 8,759 $ 7,331 $11,037
1/31/2003 $ 8,417 $ 7,110 $11,086
2/28/2003 $ 7,992 $ 6,988 $11,171
3/31/2003 $ 8,009 $ 6,969 $11,239
4/30/2003 $ 8,824 $ 7,591 $11,214
5/31/2003 $ 9,754 $ 8,029 $11,196
6/30/2003 $10,080 $ 8,170 $11,208
7/31/2003 $10,684 $ 8,338 $11,220
8/31/2003 $11,369 $ 8,520 $11,263
9/30/2003 $11,548 $ 8,574 $11,300
10/31/2003 $12,411 $ 9,085 $11,287
11/30/2003 $12,642 $ 9,225 $11,257
12/31/2003 $13,318 $ 9,806 $11,245
1/31/2004 $13,731 $ 9,966 $11,300
2/29/2004 $14,309 $10,136 $11,361
3/31/2004 $14,094 $10,073 $11,434
4/30/2004 $13,896 $ 9,872 $11,470
5/31/2004 $13,780 $ 9,969 $11,538
6/30/2004 $14,226 $10,178 $11,574
7/31/2004 $13,846 $ 9,848 $11,556
8/31/2004 $13,896 $ 9,895 $11,562
9/30/2004 $14,408 $10,086 $11,586
10/31/2004 $14,757 $10,335 $11,647
11/30/2004 $15,893 $10,883 $11,653
12/31/2004 $16,680 $11,301 $11,611
1/31/2005 $16,423 $11,049 $11,635
2/28/2005 $17,085 $11,404 $11,702
3/31/2005 $16,864 $11,188 $11,794
4/30/2005 $16,128 $10,951 $11,873
5/31/2005 $16,441 $11,154 $11,861
6/30/2005 $16,809 $11,256 $11,867
7/31/2005 $17,526 $11,651 $11,922
8/31/2005 $17,489 $11,745 $11,983
9/30/2005 $17,875 $12,053 $12,129
10/31/2005 $16,910 $11,763 $12,154
11/30/2005 $17,291 $12,161 $12,056
12/31/2005 $17,834 $12,434 $12,007
1/31/2006 $19,100 $12,992 $12,099
2/28/2006 $19,300 $12,978 $12,123
3/31/2006 $20,033 $13,269 $12,190
4/30/2006 $20,744 $13,679 $12,294
5/31/2006 $19,522 $13,224 $12,355
6/30/2006 $19,034 $13,225 $12,379
7/31/2006 $18,967 $13,311 $12,416
8/31/2006 $19,367 $13,663 $12,441
9/30/2006 $19,567 $13,830 $12,379
10/31/2006 $20,393 $14,341 $12,312
11/30/2006 $21,162 $14,699 $12,294
12/31/2006 $22,029 $15,002 $12,312
1/31/2007 $22,536 $15,182 $12,350
2/28/2007 $22,657 $15,109 $12,416
3/31/2007 $23,502 $15,392 $12,529
4/30/2007 $24,299 $16,080 $12,610
5/31/2007 $25,145 $16,547 $12,688
6/30/2007 $25,653 $16,425 $12,712
7/31/2007 $25,555 $16,064 $12,709
8/31/2007 $24,468 $16,059 $12,686

10 | Annual Report

Performance Summary (CONTINUED)

[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.]

CLASS C (9/1/97-8/31/07)

Templeton
Global
Smaller
Companies MSCI World
Date Fund Index 6 CPI 6
- --------------------------------------------------------
9/1/1997 $10,000 $10,000 $10,000
9/30/1997 $10,403 $10,545 $10,025
10/31/1997 $ 9,608 $ 9,991 $10,050
11/30/1997 $ 9,385 $10,170 $10,044
12/31/1997 $ 9,369 $10,295 $10,031
1/31/1998 $ 9,049 $10,584 $10,050
2/28/1998 $ 9,804 $11,302 $10,068
3/31/1998 $10,261 $11,781 $10,087
4/30/1998 $10,330 $11,897 $10,106
5/31/1998 $10,090 $11,750 $10,124
6/30/1998 $ 9,644 $12,031 $10,137
7/31/1998 $ 9,289 $12,013 $10,149
8/31/1998 $ 7,756 $10,413 $10,162
9/30/1998 $ 7,676 $10,599 $10,174
10/31/1998 $ 7,847 $11,559 $10,199
11/30/1998 $ 8,156 $12,248 $10,199
12/31/1998 $ 8,227 $12,848 $10,193
1/31/1999 $ 7,883 $13,131 $10,218
2/28/1999 $ 7,598 $12,784 $10,230
3/31/1999 $ 7,811 $13,318 $10,261
4/30/1999 $ 8,548 $13,845 $10,336
5/31/1999 $ 8,429 $13,341 $10,336
6/30/1999 $ 8,643 $13,965 $10,336
7/31/1999 $ 8,726 $13,925 $10,367
8/31/1999 $ 8,631 $13,902 $10,392
9/30/1999 $ 8,346 $13,769 $10,442
10/31/1999 $ 8,332 $14,487 $10,460
11/30/1999 $ 8,471 $14,896 $10,466
12/31/1999 $ 8,983 $16,104 $10,466
1/31/2000 $ 8,868 $15,184 $10,498
2/29/2000 $ 9,123 $15,226 $10,560
3/31/2000 $ 9,416 $16,281 $10,647
4/30/2000 $ 8,970 $15,594 $10,653
5/31/2000 $ 8,830 $15,201 $10,665
6/30/2000 $ 9,187 $15,715 $10,721
7/31/2000 $ 9,110 $15,275 $10,746
8/31/2000 $ 9,161 $15,774 $10,746
9/30/2000 $ 8,728 $14,937 $10,802
10/31/2000 $ 8,239 $14,688 $10,821
11/30/2000 $ 7,897 $13,798 $10,827
12/31/2000 $ 8,180 $14,024 $10,821
1/31/2001 $ 8,604 $14,296 $10,889
2/28/2001 $ 8,432 $13,089 $10,933
3/31/2001 $ 7,689 $12,232 $10,958
4/30/2001 $ 8,021 $13,139 $11,001
5/31/2001 $ 8,392 $12,976 $11,051
6/30/2001 $ 8,207 $12,571 $11,070
7/31/2001 $ 8,034 $12,406 $11,039
8/31/2001 $ 7,955 $11,813 $11,039
9/30/2001 $ 6,867 $10,773 $11,088
10/31/2001 $ 7,123 $10,981 $11,051
11/30/2001 $ 7,574 $11,632 $11,032
12/31/2001 $ 7,972 $11,707 $10,989
1/31/2002 $ 8,065 $11,353 $11,014
2/28/2002 $ 8,277 $11,257 $11,057
3/31/2002 $ 8,993 $11,757 $11,119
4/30/2002 $ 9,272 $11,362 $11,182
5/31/2002 $ 9,418 $11,388 $11,182
6/30/2002 $ 8,887 $10,700 $11,188
7/31/2002 $ 7,879 $ 9,799 $11,200
8/31/2002 $ 7,627 $ 9,819 $11,238
9/30/2002 $ 6,911 $ 8,742 $11,256
10/31/2002 $ 7,106 $ 9,388 $11,275
11/30/2002 $ 7,345 $ 9,897 $11,275
12/31/2002 $ 7,225 $ 9,419 $11,250
1/31/2003 $ 6,946 $ 9,134 $11,300
2/28/2003 $ 6,587 $ 8,978 $11,387
3/31/2003 $ 6,613 $ 8,953 $11,455
4/30/2003 $ 7,279 $ 9,753 $11,430
5/31/2003 $ 8,037 $10,315 $11,412
6/30/2003 $ 8,317 $10,498 $11,424
7/31/2003 $ 8,809 $10,713 $11,437
8/31/2003 $ 9,394 $10,947 $11,480
9/30/2003 $ 9,541 $11,016 $11,517
10/31/2003 $10,247 $11,672 $11,505
11/30/2003 $10,435 $11,853 $11,474
12/31/2003 $10,998 $12,599 $11,461
1/31/2004 $11,334 $12,804 $11,517
2/29/2004 $11,803 $13,023 $11,580
3/31/2004 $11,629 $12,942 $11,654
4/30/2004 $11,468 $12,684 $11,692
5/31/2004 $11,374 $12,808 $11,760
6/30/2004 $11,750 $13,077 $11,797
7/31/2004 $11,428 $12,653 $11,779
8/31/2004 $11,468 $12,714 $11,785
9/30/2004 $11,897 $12,958 $11,810
10/31/2004 $12,188 $13,279 $11,872
11/30/2004 $13,125 $13,982 $11,878
12/31/2004 $13,777 $14,520 $11,835
1/31/2005 $13,553 $14,196 $11,859
2/28/2005 $14,106 $14,652 $11,928
3/31/2005 $13,927 $14,375 $12,021
4/30/2005 $13,314 $14,071 $12,102
5/31/2005 $13,568 $14,331 $12,090
6/30/2005 $13,867 $14,462 $12,096
7/31/2005 $14,465 $14,970 $12,152
8/31/2005 $14,420 $15,090 $12,214
9/30/2005 $14,764 $15,486 $12,363
10/31/2005 $13,961 $15,113 $12,388
11/30/2005 $14,271 $15,625 $12,289
12/31/2005 $14,712 $15,975 $12,239
1/31/2006 $15,774 $16,692 $12,332
2/28/2006 $15,918 $16,674 $12,357
3/31/2006 $16,530 $17,048 $12,425
4/30/2006 $17,125 $17,575 $12,531
5/31/2006 $16,116 $16,990 $12,593
6/30/2006 $15,702 $16,992 $12,618
7/31/2006 $15,666 $17,102 $12,655
8/31/2006 $15,990 $17,555 $12,680
9/30/2006 $16,152 $17,769 $12,618
10/31/2006 $16,822 $18,425 $12,550
11/30/2006 $17,465 $18,886 $12,531
12/31/2006 $18,187 $19,275 $12,550
1/31/2007 $18,573 $19,506 $12,588
2/28/2007 $18,655 $19,413 $12,655
3/31/2007 $19,347 $19,776 $12,771
4/30/2007 $19,979 $20,660 $12,854
5/31/2007 $20,691 $21,259 $12,932
6/30/2007 $21,078 $21,103 $12,957
7/31/2007 $20,997 $20,640 $12,954
8/31/2007 $20,081 $20,633 $12,930

AVERAGE ANNUAL TOTAL RETURN

- -----------------------------------------------------
CLASS C 8/31/07
- -----------------------------------------------------
1-Year +24.58%
- -----------------------------------------------------
5-Year +21.36%
- -----------------------------------------------------
10-Year +7.22%
- -----------------------------------------------------

ADVISOR CLASS (9/1/97-8/31/07)

[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.]

Templeton
Global
Smaller
Companies MSCI World
Date Fund Index 6 CPI 6
- --------------------------------------------------------
9/1/1997 $10,000 $10,000 $10,000
9/30/1997 $10,419 $10,545 $10,025
10/31/1997 $ 9,644 $ 9,991 $10,050
11/30/1997 $ 9,423 $10,170 $10,044
12/31/1997 $ 9,405 $10,295 $10,031
1/31/1998 $ 9,099 $10,584 $10,050
2/28/1998 $ 9,871 $11,302 $10,068
3/31/1998 $10,337 $11,781 $10,087
4/30/1998 $10,428 $11,897 $10,106
5/31/1998 $10,200 $11,750 $10,124
6/30/1998 $ 9,757 $12,031 $10,137
7/31/1998 $ 9,394 $12,013 $10,149
8/31/1998 $ 7,849 $10,413 $10,162
9/30/1998 $ 7,781 $10,599 $10,174
10/31/1998 $ 7,962 $11,559 $10,199
11/30/1998 $ 8,270 $12,248 $10,199
12/31/1998 $ 8,354 $12,848 $10,193
1/31/1999 $ 8,009 $13,131 $10,218
2/28/1999 $ 7,736 $12,784 $10,230
3/31/1999 $ 7,950 $13,318 $10,261
4/30/1999 $ 8,698 $13,845 $10,336
5/31/1999 $ 8,591 $13,341 $10,336
6/30/1999 $ 8,829 $13,965 $10,336
7/31/1999 $ 8,912 $13,925 $10,367
8/31/1999 $ 8,817 $13,902 $10,392
9/30/1999 $ 8,544 $13,769 $10,442
10/31/1999 $ 8,527 $14,487 $10,460
11/30/1999 $ 8,681 $14,896 $10,466
12/31/1999 $ 9,218 $16,104 $10,466
1/31/2000 $ 9,102 $15,184 $10,498
2/29/2000 $ 9,373 $15,226 $10,560
3/31/2000 $ 9,684 $16,281 $10,647
4/30/2000 $ 9,231 $15,594 $10,653
5/31/2000 $ 9,102 $15,201 $10,665
6/30/2000 $ 9,464 $15,715 $10,721
7/31/2000 $ 9,399 $15,275 $10,746
8/31/2000 $ 9,464 $15,774 $10,746
9/30/2000 $ 9,024 $14,937 $10,802
10/31/2000 $ 8,524 $14,688 $10,821
11/30/2000 $ 8,173 $13,798 $10,827
12/31/2000 $ 8,477 $14,024 $10,821
1/31/2001 $ 8,911 $14,296 $10,889
2/28/2001 $ 8,762 $13,089 $10,933
3/31/2001 $ 7,988 $12,232 $10,958
4/30/2001 $ 8,327 $13,139 $11,001
5/31/2001 $ 8,735 $12,976 $11,051
6/30/2001 $ 8,545 $12,571 $11,070
7/31/2001 $ 8,382 $12,406 $11,039
8/31/2001 $ 8,314 $11,813 $11,039
9/30/2001 $ 7,186 $10,773 $11,088
10/31/2001 $ 7,450 $10,981 $11,051
11/30/2001 $ 7,932 $11,632 $11,032
12/31/2001 $ 8,345 $11,707 $10,989
1/31/2002 $ 8,455 $11,353 $11,014
2/28/2002 $ 8,676 $11,257 $11,057
3/31/2002 $ 9,447 $11,757 $11,119
4/30/2002 $ 9,750 $11,362 $11,182
5/31/2002 $ 9,901 $11,388 $11,182
6/30/2002 $ 9,350 $10,700 $11,188
7/31/2002 $ 8,290 $ 9,799 $11,200
8/31/2002 $ 8,042 $ 9,819 $11,238
9/30/2002 $ 7,299 $ 8,742 $11,256
10/31/2002 $ 7,496 $ 9,388 $11,275
11/30/2002 $ 7,761 $ 9,897 $11,275
12/31/2002 $ 7,635 $ 9,419 $11,250
1/31/2003 $ 7,356 $ 9,134 $11,300
2/28/2003 $ 6,980 $ 8,978 $11,387
3/31/2003 $ 7,008 $ 8,953 $11,455
4/30/2003 $ 7,733 $ 9,753 $11,430
5/31/2003 $ 8,541 $10,315 $11,412
6/30/2003 $ 8,847 $10,498 $11,424
7/31/2003 $ 9,377 $10,713 $11,437
8/31/2003 $10,004 $10,947 $11,480
9/30/2003 $10,171 $11,016 $11,517
10/31/2003 $10,925 $11,672 $11,505
11/30/2003 $11,137 $11,853 $11,474
12/31/2003 $11,754 $12,599 $11,461
1/31/2004 $12,123 $12,804 $11,517
2/29/2004 $12,647 $13,023 $11,580
3/31/2004 $12,462 $12,942 $11,654
4/30/2004 $12,293 $12,684 $11,692
5/31/2004 $12,208 $12,808 $11,760
6/30/2004 $12,618 $13,077 $11,797
7/31/2004 $12,293 $12,653 $11,779
8/31/2004 $12,335 $12,714 $11,785
9/30/2004 $12,802 $12,958 $11,810
10/31/2004 $13,126 $13,279 $11,872
11/30/2004 $14,154 $13,982 $11,878
12/31/2004 $14,861 $14,520 $11,835
1/31/2005 $14,638 $14,196 $11,859
2/28/2005 $15,244 $14,652 $11,928
3/31/2005 $15,052 $14,375 $12,021
4/30/2005 $14,415 $14,071 $12,102
5/31/2005 $14,702 $14,331 $12,090
6/30/2005 $15,052 $14,462 $12,096
7/31/2005 $15,706 $14,970 $12,152
8/31/2005 $15,674 $15,090 $12,214
9/30/2005 $16,040 $15,486 $12,363
10/31/2005 $15,188 $15,113 $12,388
11/30/2005 $15,538 $15,625 $12,289
12/31/2005 $16,047 $15,975 $12,239
1/31/2006 $17,201 $16,692 $12,332
2/28/2006 $17,394 $16,674 $12,357
3/31/2006 $18,067 $17,048 $12,425
4/30/2006 $18,721 $17,575 $12,531
5/31/2006 $17,644 $16,990 $12,593
6/30/2006 $17,201 $16,992 $12,618
7/31/2006 $17,163 $17,102 $12,655
8/31/2006 $17,528 $17,555 $12,680
9/30/2006 $17,740 $17,769 $12,618
10/31/2006 $18,493 $18,425 $12,550
11/30/2006 $19,206 $18,886 $12,531
12/31/2006 $20,003 $19,275 $12,550
1/31/2007 $20,463 $19,506 $12,588
2/28/2007 $20,572 $19,413 $12,655
3/31/2007 $21,360 $19,776 $12,771
4/30/2007 $22,083 $20,660 $12,854
5/31/2007 $22,870 $21,259 $12,932
6/30/2007 $23,330 $21,103 $12,957
7/31/2007 $23,242 $20,640 $12,954
8/31/2007 $22,258 $20,633 $12,930

AVERAGE ANNUAL TOTAL RETURN

- -----------------------------------------------------
ADVISOR CLASS 8/31/07
- -----------------------------------------------------
1-Year +26.98%
- -----------------------------------------------------
5-Year +22.58%
- -----------------------------------------------------
10-Year +8.33%
- -----------------------------------------------------

Annual Report | 11

Performance Summary (CONTINUED)

ENDNOTES

SPECIAL RISKS ARE ASSOCIATED WITH FOREIGN INVESTING, INCLUDING CURRENCY
FLUCTUATIONS, ECONOMIC INSTABILITY AND POLITICAL DEVELOPMENTS. INVESTMENTS IN
EMERGING MARKETS INVOLVE HEIGHTENED RISKS RELATED TO THE SAME FACTORS, IN
ADDITION TO THOSE ASSOCIATED WITH THESE MARKETS' SMALLER 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.

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.

6. 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 Consumer Price Index (CPI),
calculated by the U.S. Bureau of Labor Statistics, is a commonly used measure of
the inflation rate.

12 | Annual 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.

Annual Report | 13

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 3/1/07 VALUE 8/31/07 PERIOD* 3/1/07-8/31/07
- ------------------------------------------------------------------------------------------------------

Actual $1,000 $1,080.00 $ 6.92
- ------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000 $1,018.55 $ 6.72
- ------------------------------------------------------------------------------------------------------
CLASS B
- ------------------------------------------------------------------------------------------------------
Actual $1,000 $1,076.80 $10.84
- ------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000 $1,014.77 $10.51
- ------------------------------------------------------------------------------------------------------
CLASS C
- ------------------------------------------------------------------------------------------------------
Actual $1,000 $1,076.40 $10.83
- ------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000 $1,014.77 $10.51
- ------------------------------------------------------------------------------------------------------
ADVISOR CLASS
- ------------------------------------------------------------------------------------------------------
Actual $1,000 $1,081.90 $ 5.67
- ------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000 $1,019.76 $ 5.50
- ------------------------------------------------------------------------------------------------------

* Expenses are calculated using the most recent six-month expense ratio,
annualized for each class (A: 1.32%; B: 2.07%; C: 2.07%; and Advisor: 1.08%),
multiplied by the average account value over the period, multiplied by 184/365
to reflect the one-half year period.

14 | Annual Report

Templeton Global Smaller Companies Fund

FINANCIAL HIGHLIGHTS

------------------------------------------------------------------------
YEAR ENDED AUGUST 31,
CLASS A 2007 2006 2005 2004 2003
------------------------------------------------------------------------

PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the year)
Net asset value, beginning of year .............. $ 9.09 $ 9.82 $ 8.69 $ 7.16 $ 5.82
------------------------------------------------------------------------
Income from investment operations a:
Net investment income b ...................... 0.06 0.08 0.12 0.07 0.07
Net realized and unrealized gains (losses) 2.13 0.83 2.02 1.56 1.32
------------------------------------------------------------------------
Total from investment operations ................ 2.19 0.91 2.14 1.63 1.39
------------------------------------------------------------------------
Less distributions from:
Net investment income ........................ (0.12) (0.14) (0.10) (0.10) (0.05)
Net realized gains ........................... (1.03) (1.50) (0.91) -- --
------------------------------------------------------------------------
Total distributions ............................. (1.15) (1.64) (1.01) (0.10) (0.05)
------------------------------------------------------------------------
Redemption fees ................................. -- d -- d -- d -- d -- d
------------------------------------------------------------------------
Net asset value, end of year .................... $ 10.13 $ 9.09 $ 9.82 $ 8.69 $ 7.16
========================================================================

Total return c .................................. 26.52% 11.66% 26.78% 23.04% 24.09%

RATIOS TO AVERAGE NET ASSETS
Expenses ........................................ 1.32% e 1.34% e 1.35% e 1.42% e 1.46%
Net investment income ........................... 0.68% 0.90% 1.33% 0.91% 1.18%

SUPPLEMENTAL DATA
Net assets, end of year (000's) ................. $ 1,470,895 $ 1,128,415 $ 949,606 $ 744,017 $ 691,103
Portfolio turnover rate ......................... 28.07% 33.90% 41.58% 31.69% 29.51%

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.

d Amount rounds to less than $0.01 per share.

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

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

Templeton Global Smaller Companies Fund

FINANCIAL HIGHLIGHTS (CONTINUED)

------------------------------------------------------------------------
YEAR ENDED AUGUST 31,
CLASS B 2007 2006 2005 2004 2003
------------------------------------------------------------------------

PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the year)
Net asset value, beginning of year .............. $ 8.72 $ 9.50 $ 8.42 $ 6.97 $ 5.70
------------------------------------------------------------------------
Income from investment operations a:
Net investment income (loss) b ............... (0.01) 0.01 0.06 0.02 0.03
Net realized and unrealized
gains (losses) ............................. 2.05 0.81 1.95 1.52 1.27
------------------------------------------------------------------------
Total from investment operations ................ 2.04 0.82 2.01 1.54 1.30
------------------------------------------------------------------------
Less distributions from:
Net investment income ........................ (0.05) (0.10) (0.02) (0.09) (0.03)
Net realized gains ........................... (1.03) (1.50) (0.91) -- --
------------------------------------------------------------------------
Total distributions ............................. (1.08) (1.60) (0.93) (0.09) (0.03)
------------------------------------------------------------------------
Redemption fees ................................. -- d -- d -- d -- d -- d
------------------------------------------------------------------------
Net asset value, end of year .................... $ 9.68 $ 8.72 $ 9.50 $ 8.42 $ 6.97
========================================================================

Total return c .................................. 25.69% 10.74% 25.86% 22.23% 22.97%

RATIOS TO AVERAGE NET ASSETS
Expenses ........................................ 2.07% e 2.09% e 2.10% e 2.16% e 2.21%
Net investment income (loss) .................... (0.07)% 0.15% 0.58% 0.17% 0.43%

SUPPLEMENTAL DATA

Net assets, end of year (000's) ................. $ 9,010 $ 8,027 $ 7,983 $ 4,896 $ 3,171
Portfolio turnover rate ......................... 28.07% 33.90% 41.58% 31.69% 29.51%

b Based on average daily shares outstanding.

c Total return does not reflect sales commissions or contingent deferred sales
charges, if applicable.

d Amount rounds to less than $0.01 per share.

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

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

Templeton Global Smaller Companies Fund

FINANCIAL HIGHLIGHTS (CONTINUED)

------------------------------------------------------------------------
YEAR ENDED AUGUST 31,
CLASS C 2007 2006 2005 2004 2003
------------------------------------------------------------------------

PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the year)
Net asset value, beginning of year .............. $ 8.88 $ 9.65 $ 8.55 $ 7.05 $ 5.75
------------------------------------------------------------------------
Income from investment operations a:
Net investment income (loss) b ............... -- d 0.01 0.06 0.02 0.02
Net realized and unrealized
gains (losses) ............................. 2.07 0.83 1.98 1.54 1.30
------------------------------------------------------------------------
Total from investment operations ................ 2.07 0.84 2.04 1.56 1.32
------------------------------------------------------------------------
Less distributions from:
Net investment income ........................ (0.06) (0.11) (0.03) (0.06) (0.02)
Net realized gains ........................... (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 year .................... $ 9.86 $ 8.88 $ 9.65 $ 8.55 $ 7.05
========================================================================

Total return c .................................. 25.58% 10.89% 25.74% 22.07% 23.17%

RATIOS TO AVERAGE NET ASSETS
Expenses ........................................ 2.06% e 2.09% e 2.10% e 2.17% e 2.20%
Net investment income (loss) .................... (0.06)% 0.15% 0.58% 0.16% 0.44%

SUPPLEMENTAL DATA
Net assets, end of year (000's) ................. $ 98,269 $ 71,857 $ 55,448 $ 30,741 $ 17,347
Portfolio turnover rate ......................... 28.07% 33.90% 41.58% 31.69% 29.51%

b Based on average daily shares outstanding.

c Total return does not reflect sales commissions or contingent deferred sales
charges, if applicable.

d Amount rounds to less than $0.01 per share.

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

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

Templeton Global Smaller Companies Fund

FINANCIAL HIGHLIGHTS (CONTINUED)

------------------------------------------------------------------------
YEAR ENDED AUGUST 31,
ADVISOR CLASS 2007 2006 2005 2004 2003
------------------------------------------------------------------------

PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the year)
Net asset value, beginning of year .............. $ 9.11 $ 9.84 $ 8.71 $ 7.17 $ 5.84
------------------------------------------------------------------------
Income from investment operations a:
Net investment income b ...................... 0.10 0.11 0.16 0.10 0.06
Net realized and unrealized
gains (losses) ............................. 2.13 0.82 2.01 1.56 1.33
------------------------------------------------------------------------
Total from investment operations ................ 2.23 0.93 2.17 1.66 1.39
------------------------------------------------------------------------
Less distributions from:
Net investment income ........................ (0.14) (0.16) (0.13) (0.12) (0.06)
Net realized gains ........................... (1.03) (1.50) (0.91) -- --
------------------------------------------------------------------------
Total distributions ............................. (1.17) (1.66) (1.04) (0.12) (0.06)
------------------------------------------------------------------------
Redemption fees ................................. -- c -- c -- c -- c -- c
------------------------------------------------------------------------
Net asset value, end of year .................... $ 10.17 $ 9.11 $ 9.84 $ 8.71 $ 7.17
========================================================================

Total return .................................... 26.98% 11.83% 27.07% 23.30% 24.39%

RATIOS TO AVERAGE NET ASSETS
Expenses ........................................ 1.07% d 1.09% d 1.10% d 1.17% d 1.21%
Net investment income ........................... 0.93% 1.15% 1.58% 1.16% 1.43%

SUPPLEMENTAL DATA
Net assets, end of year (000's) ................. $ 117,115 $ 60,588 $ 39,912 $ 9,329 $ 4,834
Portfolio turnover rate ......................... 28.07% 33.90% 41.58% 31.69% 29.51%

b Based on average daily shares outstanding.

c Amount rounds to less than $0.01 per share.

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

18 | The accompanying notes are an integral part of these financial statements.
| Annual Report

Templeton Global Smaller Companies Fund

STATEMENT OF INVESTMENTS, AUGUST 31, 2007

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

COMMON STOCKS 97.2%
AUSTRALIA 3.8%
Billabong International Ltd. .................... Textiles, Apparel & Luxury Goods 369,406 $ 4,789,752
Downer EDI Ltd. ................................. Commercial Services & Supplies 4,502,734 23,868,830
Iluka Resources Ltd. ............................ Metals & Mining 3,557,174 16,150,201
PaperlinX Ltd. .................................. Paper & Forest Products 7,001,361 19,358,826
---------------
64,167,609
---------------
BAHAMAS 0.5%
a Steiner Leisure Ltd. ............................ Diversified Consumer Services 203,500 8,803,410
---------------
BELGIUM 0.8%
Barco NV ........................................ Electronic Equipment & Instruments 151,370 14,359,551
---------------
BRAZIL 0.5%
b Companhia de Saneamento de Minas Gerais,
144A ......................................... Water Utilities 526,500 8,291,973
---------------
CANADA 7.5%
a Abitibi-Consolidated Inc. ....................... Paper & Forest Products 6,156,970 11,953,583
a ATS Automation Tooling Systems Inc. ............. Machinery 885,180 5,239,488
Dorel Industries Inc., B ........................ Household Durables 362,300 10,701,901
a GSI Group Inc. .................................. Electronic Equipment & Instruments 1,071,820 10,450,245
Linamar Corp. ................................... Auto Components 690,000 16,768,065
MDS Inc. ........................................ Health Care Providers & Services 970,300 19,021,886
a Mega Brands Inc. ................................ Leisure Equipment & Products 772,900 14,273,653
a Open Text Corp. ................................. Internet Software & Services 731,300 18,187,269
Quebecor World Inc. ............................. Commercial Services & Supplies 1,030,960 9,197,503
a Saxon Energy Services Inc. ...................... Energy Equipment & Services 2,338,700 11,650,310
---------------
127,443,903
---------------
CHINA 5.8%
a AAC Acoustic Technologies Holdings Inc. ......... Communications Equipment 9,478,000 9,991,364
Bio-Treat Technology Ltd. ....................... Commercial Services & Supplies 20,258,000 11,361,862
a China Pharmaceutical Group Ltd. ................. Pharmaceuticals 26,320,000 11,645,047
People's Food Holdings Ltd. ..................... Food Products 29,293,000 25,748,709
Sinotrans Ltd., H ............................... Air Freight & Logistics 34,391,000 18,876,646
Weiqiao Textile Co. Ltd., H ..................... Textiles, Apparel & Luxury Goods 9,651,000 21,411,874
---------------
99,035,502
---------------
DENMARK 0.5%
a Vestas Wind Systems AS .......................... Electrical Equipment 122,590 8,295,530
---------------
FINLAND 2.2%
Amer Sports OYJ ................................. Leisure Equipment & Products 778,180 17,684,010
Elcoteq SE, A ................................... Communications Equipment 756,951 5,775,112
Huhtamaki OYJ ................................... Containers & Packaging 863,810 13,027,783
---------------
36,486,905
---------------

Annual Report | 19

Templeton Global Smaller Companies Fund

STATEMENT OF INVESTMENTS, AUGUST 31, 2007 (CONTINUED)

COMMON STOCKS (CONTINUED)
GERMANY 2.5%
Celesio AG ...................................... Health Care Providers & Services 302,000 $ 19,000,522
a Jenoptik AG ..................................... Electronic Equipment & Instruments 977,110 9,118,821
a Thiel Logistik AG ............................... IT Services 1,547,850 5,061,098
Vossloh AG ...................................... Machinery 77,560 8,363,602
---------------
41,544,043
---------------
HONG KONG 5.7%
Asia Satellite Telecommunications Holdings
Ltd. ......................................... Diversified Telecommunication Services 3,454,500 6,680,713
Dah Sing Financial Group ........................ Commercial Banks 1,519,600 12,238,415
Fountain Set (Holdings) Ltd. .................... Textiles, Apparel & Luxury Goods 33,524,000 13,026,709
Giordano International Ltd. ..................... Specialty Retail 20,439,348 9,881,996
Hang Lung Group Ltd. ............................ Real Estate 1,665,000 7,953,839
Hopewell Holdings Ltd. .......................... Transportation Infrastructure 2,982,000 14,207,011
Hung Hing Printing Group Ltd. ................... Containers & Packaging 20,862,508 11,210,289
Ngai Lik Industrial Holding Ltd. ................ Household Durables 13,886,000 997,244
a TCL Communication Technology Holdings
Ltd. ......................................... Communications Equipment 143,878,875 4,705,150
Techtronic Industries Co. Ltd. .................. Household Durables 2,869,242 3,238,069
Yue Yuen Industrial Holdings Ltd. ............... Textiles, Apparel & Luxury Goods 4,196,500 12,674,020
---------------
96,813,455
---------------
INDIA 0.4%
b Gail India Ltd., GDR, 144A ...................... Gas Utilities 157,710 7,200,564
---------------
INDONESIA 0.5%
PT Indosat Tbk .................................. Diversified Telecommunication Services 9,955,000 7,633,227
---------------
ISRAEL 0.8%
a Orbotech Ltd. ................................... Electronic Equipment & Instruments 614,700 13,308,255
---------------
JAPAN 5.4%
Descente Ltd. ................................... Textiles, Apparel & Luxury Goods 2,255,500 11,843,372
MEITEC Corp. .................................... Commercial Services & Supplies 304,100 9,769,859
Nichii Gakkan Co. ............................... Health Care Providers & Services 739,200 11,491,148
Sangetsu Co. Ltd. ............................... Household Durables 186,800 4,025,097
Sanyo Shinpan Finance Co. Ltd. .................. Consumer Finance 393,340 12,297,183
Sohgo Security Services Co. Ltd. ................ Commercial Services & Supplies 1,337,700 21,072,327
Takuma Co. Ltd. ................................. Machinery 2,627,000 16,607,341
USS Co. Ltd. .................................... Specialty Retail 70,540 4,745,717
---------------
91,852,044
---------------
NETHERLANDS 5.5%
Draka Holding NV ................................ Electrical Equipment 235,136 11,487,726
Imtech NV ....................................... Construction & Engineering 192,410 16,921,098
OPG Groep NV .................................... Health Care Providers & Services 838,560 24,905,501
SBM Offshore NV ................................. Energy Equipment & Services 370,390 13,882,078
Vedior NV ....................................... Commercial Services & Supplies 1,178,610 26,767,658
---------------
93,964,061
---------------

20 | Annual Report

Templeton Global Smaller Companies Fund

STATEMENT OF INVESTMENTS, AUGUST 31, 2007 (CONTINUED)

COMMON STOCKS (CONTINUED)
NORWAY 0.9%
Norske Skogindustrier ASA ....................... Paper & Forest Products 1,133,650 $ 13,806,029
b Norske Skogindustrier ASA, 144A ................. Paper & Forest Products 183,426 2,233,833
---------------
16,039,862
---------------
PHILIPPINES 0.1%
a First Gen Corp. ................................. Independent Power Producers & Energy Traders 610,000 846,584
---------------
SINGAPORE 1.7%
Cerebos Pacific Ltd. ............................ Food Products 746,253 1,928,720
Huan Hsin Holdings Ltd. ......................... Electronic Equipment & Instruments 6,101,000 2,121,113
Osim International Ltd. ......................... Specialty Retail 10,597,200 4,170,894
Venture Corp. Ltd. .............................. Electronic Equipment & Instruments 1,971,000 20,169,635
---------------
28,390,362
---------------
SOUTH KOREA 7.3%
Bank of Pusan ................................... Commercial Banks 1,793,670 33,455,076
Daeduck Electronics Co. Ltd. .................... Electronic Equipment & Instruments 1,221,875 9,402,545
Daegu Bank Co. Ltd. ............................. Commercial Banks 1,249,460 23,304,610
Halla Climate Control Corp. ..................... Auto Components 1,104,000 12,472,582
INTOPS Co. Ltd. ................................. Electronic Equipment & Instruments 223,678 7,771,812
People & Telecommunication ...................... Communications Equipment 612,718 8,130,391
Sindo Ricoh Co. ................................. Office Electronics 110,350 8,409,299
Youngone Corp. .................................. Textiles, Apparel & Luxury Goods 1,990,740 20,474,970
---------------
123,421,285
---------------
SWEDEN 1.4%
D. Carnegie & Co. AB ............................ Capital Markets 877,886 14,224,739
Securitas Systems AB, B ......................... Commercial Services & Supplies 2,880,000 10,105,703
---------------
24,330,442
---------------
SWITZERLAND 1.9%
Kuoni Reisen Holding AG, B ...................... Hotels, Restaurants & Leisure 12,720 6,418,928
Verwaltungs-und Privat-Bank AG .................. Capital Markets 75,518 18,632,730
Vontobel Holding AG ............................. Capital Markets 160,170 7,817,695
---------------
32,869,353
---------------
TAIWAN 9.2%
a AcBel Polytech Inc. ............................. Electrical Equipment 15,774,595 10,110,081
D-Link Corp. .................................... Communications Equipment 18,472,822 40,696,186
Fu Sheng Industrial Co. Ltd. .................... Leisure Equipment & Products 9,094,740 9,577,037
Giant Manufacturing Co. Ltd. .................... Leisure Equipment & Products 3,682,000 8,814,485
Pihsiang Machinery Manufacturing Co. Ltd. ....... Health Care Equipment & Supplies 8,528,000 20,441,358
a Qisda Corp. ..................................... Computers & Peripherals 12,137,000 5,700,712
Simplo Technology Co. Ltd. ...................... Computers & Peripherals 4,170,360 26,412,280
a Ta Chong Bank Ltd. .............................. Commercial Banks 52,393,000 16,511,734
Taiwan Fu Hsing ................................. Building Products 9,336,180 7,044,572
a Test-Rite International Co. Ltd. ................ Distributors 16,149,387 11,353,508
---------------
156,661,953
---------------

Annual Report | 21

Templeton Global Smaller Companies Fund

STATEMENT OF INVESTMENTS, AUGUST 31, 2007 (CONTINUED)

COMMON STOCKS (CONTINUED)
THAILAND 3.3%
Bank of Ayudhya Public Co. Ltd. ................. Commercial Banks 18,625,300 $ 14,385,615
BEC World Public Co. Ltd., fgn. ................. Media 11,961,000 8,087,881
Glow Energy Public Co. Ltd., fgn. ............... Independent Power Producers & Energy Traders 16,956,900 15,815,238
a Total Access Communication Public Co. Ltd.,
fgn. ......................................... Wireless Telecommunication Services 13,647,200 16,922,528
---------------
55,211,262
---------------
UNITED KINGDOM 11.4%
Bodycote International PLC ...................... Machinery 4,450,330 23,851,601
Burberry Group PLC .............................. Textiles, Apparel & Luxury Goods 804,310 9,902,872
Fiberweb PLC .................................... Personal Products 3,451,380 9,170,551
FKI PLC ......................................... Machinery 12,968,940 27,593,640
Future PLC ...................................... Media 11,231,610 10,193,107
GAME Group PLC .................................. Specialty Retail 16,058,130 61,693,867
John Wood Group PLC ............................. Energy Equipment & Services 2,861,570 20,862,422
Yule Catto & Company PLC ........................ Chemicals 6,153,774 29,847,549
---------------
193,115,609
---------------
UNITED STATES 17.6%
a BearingPoint Inc. ............................... IT Services 1,141,250 6,699,138
a Blockbuster Inc., A ............................. Specialty Retail 1,608,230 7,976,821
Bowater Inc. .................................... Paper & Forest Products 811,100 13,658,924
a Bristow Group Inc. .............................. Energy Equipment & Services 303,390 13,151,956
a Convergys Corp. ................................. IT Services 650,230 10,891,352
a Domtar Corp. .................................... Paper & Forest Products 892,900 7,137,111
a,c Fuel Systems Solutions Inc. ..................... Auto Components 933,580 16,907,134
a Hibbett Sports Inc. ............................. Specialty Retail 1,098,970 27,408,312
a Input/Output Inc. ............................... Energy Equipment & Services 1,123,680 15,945,019
a The Interpublic Group of Cos. Inc. .............. Media 6,603 72,303
Irwin Financial Corp. ........................... Commercial Banks 842,260 8,970,069
a,c Leapfrog Enterprises Inc. ....................... Leisure Equipment & Products 2,971,610 21,365,876
a LifePoint Hospitals Inc. ........................ Health Care Providers & Services 357,000 10,031,700
a Pier 1 Imports Inc. ............................. Specialty Retail 3,257,950 20,134,131
a RC2 Corp. ....................................... Leisure Equipment & Products 292,400 8,929,896
a Scholastic Corp. ................................ Media 363,740 12,396,259
Sealy Corp. ..................................... Household Durables 1,751,580 26,729,111
a Select Comfort Corp. ............................ Specialty Retail 1,305,830 22,394,984
a,c Sharper Image Corp. ............................. Specialty Retail 937,400 4,827,610
Tredegar Corp. .................................. Industrial Conglomerates 874,320 15,283,114
a,c West Marine Inc. ................................ Specialty Retail 1,991,430 27,123,277
---------------
298,034,097
---------------
TOTAL COMMON STOCKS
(COST $1,281,792,653) ........................ 1,648,120,841
---------------

22 | Annual Report

Templeton Global Smaller Companies Fund

STATEMENT OF INVESTMENTS, AUGUST 31, 2007 (CONTINUED)

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

SHORT TERM INVESTMENTS (COST $45,457,274) 2.7%
U.S. GOVERNMENT AND AGENCY SECURITIES 2.7%
d FHLB, 1/23/08 - 2/15/08 ......................... $ 46,450,000 $ 45,529,074
---------------
TOTAL INVESTMENTS (COST $1,327,249,927)
99.9% ........................................ 1,693,649,915
OTHER ASSETS, LESS LIABILITIES 0.1%. 1,639,909
---------------
NET ASSETS 100.0% ............................... $1,695,289,824
===============

SELECTED PORTFOLIO ABBREVIATIONS

FHLB - Federal Home Loan Bank
GDR - Global Depository Receipt

a Non-income producing for the twelve months ended August 31, 2007.

b Security was purchased pursuant to Rule 144A under the Securities Act of 1933
and may be sold in transactions exempt from registration only to qualified
institutional buyers or in a public offering registered under the Securities Act
of 1933. These securities have been deemed liquid under guidelines approved by
the Fund's Board of Trustees. At August 31, 2007, the aggregate value of these
securities was $17,726,370, representing 1.05% of net assets.

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

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

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

Templeton Global Smaller Companies Fund

FINANCIAL STATEMENTS

STATEMENT OF ASSETS AND LIABILITIES
August 31, 2007

Assets:
Investments in securities:
Cost - Unaffiliated issuers ............................................... $1,235,339,292
Cost - Non-controlled affiliated issuers (Note 8) ......................... 91,910,635
--------------
Total cost of investments ................................................. $1,327,249,927
==============
Value - Unaffiliated issuers .............................................. $1,623,426,018
Value - Non-controlled affiliated issuers (Note 8) ........................ 70,223,897
--------------
Total value of investments ................................................ 1,693,649,915
Cash ......................................................................... 32,727
Foreign currency, at value (cost $9,256,973) ................................. 9,461,850
Receivables:
Investment securities sold ................................................ 238,731
Capital shares sold ....................................................... 1,761,625
Dividends and interest .................................................... 4,194,150
--------------
Total assets .......................................................... 1,709,338,998
--------------
Liabilities:
Payables:
Investment securities purchased ........................................... 5,217,673
Capital shares redeemed ................................................... 6,317,275
Affiliates ................................................................ 2,213,039
Accrued expenses and other liabilities ....................................... 301,187
--------------
Total liabilities ..................................................... 14,049,174
--------------
Net assets, at value ............................................... $1,695,289,824
==============
Net assets consist of:
Paid-in capital .............................................................. $1,183,460,805
Undistributed net investment income .......................................... 16,044,932
Net unrealized appreciation (depreciation) ................................... 366,608,224
Accumulated net realized gain (loss) ......................................... 129,175,863
--------------
Net assets, at value ............................................... $1,695,289,824
==============

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

Templeton Global Smaller Companies Fund

FINANCIAL STATEMENTS (CONTINUED)

STATEMENT OF ASSETS AND LIABILITIES (CONTINUED)
August 31, 2007

CLASS A:
Net assets, at value ......................................................... $1,470,894,955
==============
Shares outstanding ........................................................... 145,144,021
==============
Net asset value per share a .................................................. $ 10.13
==============
Maximum offering price per share (net asset value per share / 94.25%) ........ $ 10.75
==============
CLASS B:
Net assets, at value ......................................................... $ 9,010,254
==============
Shares outstanding ........................................................... 930,820
==============
Net asset value and maximum offering price per share a ....................... $ 9.68
==============
CLASS C:
Net assets, at value ......................................................... $ 98,269,480
==============
Shares outstanding ........................................................... 9,962,007
==============
Net asset value and maximum offering price per share a ....................... $ 9.86
==============
ADVISOR CLASS:
Net assets, at value ......................................................... $ 117,115,135
==============
Shares outstanding ........................................................... 11,512,178
==============
Net asset value and maximum offering price per share a ....................... $ 10.17
==============

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

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

Templeton Global Smaller Companies Fund

FINANCIAL STATEMENTS (CONTINUED)

STATEMENT OF OPERATIONS
for the year ended August 31, 2007

Investment income:
Dividends (net of foreign taxes of $2,872,276) ............................... $ 27,288,799
Interest (net of foreign taxes of $3,834) .................................... 3,707,427
---------------
Total investment income ................................................ 30,996,226
---------------
Expenses:
Management fees (Note 3a) .................................................... 11,533,972
Administrative fees (Note 3b) ................................................ 1,739,449
Distribution fees (Note 3c)
Class A ................................................................... 3,391,634
Class B ................................................................... 89,385
Class C ................................................................... 887,103
Transfer agent fees (Note 3e) ................................................ 2,321,345
Custodian fees (Note 4) ...................................................... 455,384
Reports to shareholders ...................................................... 174,469
Registration and filing fees ................................................. 140,845
Professional fees ............................................................ 92,628
Trustees' fees and expenses .................................................. 96,261
Other ........................................................................ 43,286
---------------
Total expenses ......................................................... 20,965,761
Expense reductions (Note 4) ............................................ (6,414)
---------------
Net expenses ........................................................ 20,959,347
---------------
Net investment income ............................................ 10,036,879
---------------
Realized and unrealized gains (losses):
Net realized gain (loss) from:
Investments
Unaffiliated issuers ................................................... 165,091,065
Non-controlled affiliated issuers (Note 8) ............................. (1,205,102)
Foreign currency transactions ............................................. (474,590)
---------------
Net realized gain (loss) ............................................ 163,411,373
---------------
Net change in unrealized appreciation (depreciation) on:
Investments ............................................................... 170,608,737
Translation of assets and liabilities denominated in foreign currencies ... (17,869)
---------------
Net change in unrealized appreciation (depreciation) ................ 170,590,868
---------------
Net realized and unrealized gain (loss) ......................................... 334,002,241
---------------
Net increase (decrease) in net assets resulting from operations ................. $ 344,039,120
===============

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

Templeton Global Smaller Companies Fund

FINANCIAL STATEMENTS (CONTINUED)

STATEMENTS OF CHANGES IN NET ASSETS

------------------------------------
YEAR ENDED AUGUST 31,
2007 2006
------------------------------------

Increase (decrease) in net assets:
Operations:
Net investment income ........................................................... $ 10,036,879 $ 10,082,548
Net realized gain (loss) from investments and foreign currency transactions ..... 163,411,373 183,590,006
Net change in unrealized appreciation (depreciation) on investments and
translation of assets and liabilities denominated in foreign currencies ...... 170,590,868 (73,205,624)
------------------------------------
Net increase (decrease) in net assets resulting from operations ........... 344,039,120 120,466,930
------------------------------------
Distributions to shareholders from:
Net investment income:
Class A ...................................................................... (15,048,067) (14,072,406)
Class B ...................................................................... (47,191) (84,075)
Class C ...................................................................... (499,960) (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 ................................................ (163,946,241) (184,885,094)
------------------------------------
Capital share transactions: (Note 2)
Class A ...................................................................... 184,816,320 236,046,942
Class B ...................................................................... (7,494) 627,223
Class C ...................................................................... 16,393,367 20,477,866
Advisor Class ................................................................ 45,103,275 23,201,262
------------------------------------
Total capital share transactions ................................................... 246,305,468 280,353,293
------------------------------------
Redemption fees .................................................................... 4,942 3,031
------------------------------------
Net increase (decrease) in net assets ..................................... 426,403,289 215,938,160
Net assets:
Beginning of year .................................................................. 1,268,886,535 1,052,948,375
------------------------------------
End of year ........................................................................ $ 1,695,289,824 $ 1,268,886,535
====================================
Undistributed net investment income included in net assets:
End of year ........................................................................ $ 16,044,932 $ 7,350,796
====================================

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

Templeton Global Smaller Companies Fund

NOTES TO FINANCIAL STATEMENTS

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 Fund was
closed to new investors effective April 30, 2007.

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.

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 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.

28 | Annual Report

Templeton Global Smaller Companies Fund

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

B. FOREIGN CURRENCY TRANSLATION

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

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

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

C. 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 at a future 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.

D. INCOME 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.

Annual Report | 29

Templeton Global Smaller Companies Fund

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

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 of America. 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.

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.

30 | Annual Report

Templeton Global Smaller Companies Fund

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

2. SHARES OF BENEFICIAL INTEREST

At August 31, 2007, there were an unlimited number of shares authorized (without
par value). Transactions in the Fund's shares were as follows:

---------------------------------------------------------------
YEAR ENDED AUGUST 31,
2007 2006
---------------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT
---------------------------------------------------------------

CLASS A SHARES:
Shares sold ........................... 33,430,757 $ 319,544,148 29,226,711 $ 264,578,465
Shares issued in reinvestment of
distributions ...................... 14,926,722 128,461,129 17,755,481 146,537,072
Shares redeemed ....................... (27,413,640) (263,188,957) (19,497,726) (175,068,595)
---------------------------------------------------------------
Net increase (decrease) ............... 20,943,839 $ 184,816,320 27,484,466 $ 236,046,942
===============================================================
CLASS B SHARES:
Shares sold ........................... 123,786 $ 1,113,589 208,119 $ 1,818,522
Shares issued in reinvestment of
distributions ...................... 105,669 875,424 150,687 1,202,126
Shares redeemed ....................... (219,274) (1,996,507) (278,050) (2,393,425)
---------------------------------------------------------------
Net increase (decrease) ............... 10,181 $ (7,494) 80,756 $ 627,223
===============================================================
CLASS C SHARES:
Shares sold ........................... 2,880,102 $ 26,561,750 3,505,816 $ 31,051,054
Shares issued in reinvestment of
distributions ...................... 797,149 6,725,270 863,406 7,009,223
Shares redeemed ....................... (1,811,233) (16,893,653) (2,017,104) (17,582,411)
---------------------------------------------------------------
Net increase (decrease) ............... 1,866,018 $ 16,393,367 2,352,118 $ 20,477,866
===============================================================
ADVISOR CLASS SHARES:
Shares sold ........................... 5,337,731 $ 50,709,881 4,489,047 $ 39,947,076
Shares issued in reinvestment of
distributions ...................... 935,293 8,074,661 440,087 3,637,268
Shares redeemed ....................... (1,407,985) (13,681,267) (2,338,574) (20,383,082)
---------------------------------------------------------------
Net increase (decrease) ............... 4,865,039 $ 45,103,275 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

Annual Report | 31

Templeton Global Smaller Companies Fund

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

3. TRANSACTIONS WITH AFFILIATES (CONTINUED)

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.

B. ADMINISTRATIVE FEES

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

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

32 | Annual Report

Templeton Global Smaller Companies Fund

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

3. TRANSACTIONS WITH AFFILIATES (CONTINUED)

D. SALES CHARGES/UNDERWRITING AGREEMENTS

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

Sales charges retained net of commissions
paid to unaffiliated broker/dealers ............................. $ 560,723
Contingent deferred sales charges retained ......................... $ 40,923

E. TRANSFER AGENT FEES

For the year ended August 31, 2007, the Fund paid transfer agent fees of
$2,321,345, of which $1,224,324 was retained by Investor Services.

4. EXPENSE OFFSET ARRANGEMENT

The Fund has entered into an arrangement with its custodian whereby credits
realized as a result of uninvested cash balances are used to reduce a portion of
the Fund's custodian expenses. During the year ended August 31, 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, 2007, the Fund deferred realized currency losses of
$400,183.

The tax character of distributions paid during the years ended August 31, 2007
and 2006, was as follows:

-----------------------------
2007 2006
-----------------------------
Distributions paid from:

Ordinary Income ............................. $ 43,821,267 $ 27,293,368
Long term capital gain ...................... 120,124,974 157,591,726
-----------------------------
$ 163,946,241 $ 184,885,094
=============================

Annual Report | 33

Templeton Global Smaller Companies Fund

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

5. INCOME TAXES (CONTINUED)

At August 31, 2007, the cost of investments, net unrealized appreciation
(depreciation), undistributed ordinary income and undistributed long term
capital gains for income tax purposes were as follows:

Cost of investments ......................................... $ 1,327,249,927
===============

Unrealized appreciation ..................................... $ 478,585,757
Unrealized depreciation ..................................... (112,185,769)
---------------
Net unrealized appreciation (depreciation) .................. $ 366,399,988
===============

Undistributed ordinary income ............................... $ 17,712,645
Undistributed long term capital gains ....................... 127,908,333
---------------
Distributable earnings ...................................... $ 145,620,978
===============

Net investment income 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
year ended August 31, 2007, aggregated $495,957,291 and $413,687,188,
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.

34 | Annual Report

Templeton Global Smaller Companies Fund

NOTES TO FINANCIAL STATEMENTS (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 Fund for the year ended August 31,
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 YEAR OF YEAR INCOME GAIN (LOSS)
- ---------------------------------------------------------------------------------------------------------------------------------

NON-CONTROLLED AFFILIATES
Fuel Systems
Solutions Inc. .......... -- 933,580 -- 933,580 $ 16,907,134 $ -- $ --
iSOFT Group PLC ............ 12,142,540 -- 12,142,540 -- -- -- (339,858)
Leapfrog Enterprises
Inc. .................... 1,267,760 1,703,850 -- 2,971,610 21,365,876 -- --
Repco Corp. Ltd. ........... 11,361,533 -- 11,361,533 -- -- -- (865,244)
Sharper Image Corp. ........ 937,400 -- -- 937,400 4,827,610 -- --
West Marine Inc. ........... 1,991,430 -- -- 1,991,430 27,123,277 -- --
---------------------------------------------
TOTAL AFFILIATED SECURITIES (4.14% of Net Assets) $ 70,223,897 $ -- $ (1,205,102)
=============================================

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.

On June 6, 2007, the SEC posted for public comment the proposed plan of
distribution for the market timing settlement. Once the SEC approves the final
plan of distribution, disbursements of settlement monies will be made promptly
to individuals who were shareholders of the designated funds during the relevant
period, in accordance with the terms and conditions of the settlement and plan.

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.

Annual Report | 35

Templeton Global Smaller Companies Fund

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

9. REGULATORY AND LITIGATION MATTERS (CONTINUED)

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 beginning after
December 15, 2006. The Fund believes the adoption of FIN 48 will have no
material impact on its financial statements.

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.

36 | Annual Report

Templeton Global Smaller Companies Fund

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

TO THE BOARD OF TRUSTEES AND SHAREHOLDERS OF TEMPLETON GLOBAL SMALLER COMPANIES
FUND

In our opinion, the accompanying statement of assets and liabilities, including
the statement of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Templeton Global Smaller Companies
Fund (the "Fund") at August 31, 2007, the results of its operations for the year
then ended, the changes in its net assets for each of the two years in the
period then ended and the financial highlights for each of the five years in the
period then ended, in conformity with accounting principles generally accepted
in the United States of America. These financial statements and financial
highlights (hereafter referred to as "financial statements") are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those standards
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at August 31, 2007 by correspondence with the
custodian and brokers, provide a reasonable basis for our opinion.

PricewaterhouseCoopers LLP

San Francisco, California
October 18, 2007

Annual Report | 37

Templeton Global Smaller Companies Fund

TAX DESIGNATION (UNAUDITED)

Under Section 852(b)(3)(C) of the Internal Revenue Code (Code), the Fund
designates the maximum amount allowable but no less than $137,435,617 as a long
term capital gain dividend for the fiscal year ended August 31, 2007.

Under Section 871(k)(2)(C) of the Code, the Fund designates the maximum amount
allowable but no less than $10,748,013 as a short term capital gain dividend for
purposes of the tax imposed under Section 871(a)(1)(A) of the Code for the
fiscal year ended August 31, 2007.

Under Section 854(b)(2) of the Code, the Fund designates 2.37% of the ordinary
income dividends as income qualifying for the dividends received deduction for
the fiscal year ended August 31, 2007.

Under Section 854(b)(2) of the Code, the Fund designates the maximum amount
allowable but no less than $18,112,533 as qualified dividends for purposes of
the maximum rate under Section 1(h)(11) of the Code for the fiscal year ended
August 31, 2007. In January 2008, shareholders will receive Form 1099-DIV which
will include their share of qualified dividends distributed during the calendar
year 2007. Shareholders are advised to check with their tax advisors for
information on the treatment of these amounts on their individual income tax
returns.

Under Section 871(k)(1)(C) of the Code, the Fund designates the maximum amount
allowable but no less than $2,047,435 as interest related dividends for purposes
of the tax imposed under Section 871(a)(1)(A) of the Code for the fiscal year
ended August 31, 2007.

At August 31, 2007, more than 50% of the Templeton Global Smaller Companies
Fund's total assets were invested in securities of foreign issuers. In most
instances, foreign taxes were withheld from dividends paid to the Fund on these
investments. As shown in the table below, the Fund designates to shareholders
the foreign source income and foreign taxes paid, pursuant to Section 853 of the
Code. This designation will allow shareholders of record on October 18, 2007, to
treat their proportionate share of foreign taxes paid by the Fund as having been
paid directly by them. The shareholder shall consider these amounts as foreign
taxes paid in the tax year in which they receive the Fund distribution.

The following tables provide a detailed analysis, by country, of foreign tax
paid, foreign source income, and foreign qualified dividends as designated by
the Fund, to Class A, Class B, Class C, and Advisor Class shareholders of
record.

38 | Annual Report

Templeton Global Smaller Companies Fund

TAX DESIGNATION (UNAUDITED) (CONTINUED)

RECORD DATE: 10/18/2007
- --------------------------------------------------------------------------------
CLASS A
FOREIGN TAX FOREIGN FOREIGN
PAID SOURCE INCOME QUALIFIED DIVIDENDS
COUNTRY PER SHARE PER SHARE PER SHARE
- --------------------------------------------------------------------------------
Australia .................. $0.0009 $0.0050 $0.0050
Belgium .................... 0.0004 0.0015 0.0015
Bermuda .................... 0.0000 0.0004 0.0000
Brazil ..................... 0.0002 0.0005 0.0000
Canada ..................... 0.0002 0.0020 0.0009
China ...................... 0.0000 0.0058 0.0000
Finland .................... 0.0009 0.0032 0.0032
Germany .................... 0.0006 0.0020 0.0020
Hong Kong .................. 0.0000 0.0110 0.0000
India ...................... 0.0000 0.0007 0.0007
Indonesia .................. 0.0001 0.0005 0.0005
Japan ...................... 0.0003 0.0026 0.0025
Netherlands ................ 0.0017 0.0060 0.0060
Norway ..................... 0.0011 0.0038 0.0038
Singapore .................. 0.0000 0.0034 0.0000
South Korea ................ 0.0023 0.0074 0.0074
Sweden ..................... 0.0012 0.0042 0.0042
Switzerland ................ 0.0005 0.0033 0.0013
Taiwan ..................... 0.0058 0.0138 0.0000
Thailand ................... 0.0007 0.0038 0.0038
United Kingdom ............. 0.0000 0.0112 0.0112
-------------------------------------------------
TOTAL ...................... $0.0169 $0.0921 $0.0540
=================================================

- --------------------------------------------------------------------------------
CLASS B
FOREIGN TAX FOREIGN FOREIGN
PAID SOURCE INCOME QUALIFIED DIVIDENDS
COUNTRY PER SHARE PER SHARE PER SHARE
- --------------------------------------------------------------------------------
Australia .................. $0.0009 $0.0023 $0.0023
Belgium .................... 0.0004 0.0007 0.0007
Bermuda .................... 0.0000 0.0002 0.0000
Brazil ..................... 0.0002 0.0002 0.0000
Canada ..................... 0.0002 0.0009 0.0004
China ...................... 0.0000 0.0027 0.0000
Finland .................... 0.0009 0.0015 0.0015
Germany .................... 0.0006 0.0009 0.0009
Hong Kong .................. 0.0000 0.0052 0.0000
India ...................... 0.0000 0.0003 0.0003
Indonesia .................. 0.0001 0.0002 0.0002
Japan ...................... 0.0003 0.0012 0.0012
Netherlands ................ 0.0017 0.0028 0.0028
Norway ..................... 0.0011 0.0018 0.0018
Singapore .................. 0.0000 0.0016 0.0000
South Korea ................ 0.0023 0.0035 0.0035
Sweden ..................... 0.0012 0.0020 0.0020
Switzerland ................ 0.0005 0.0015 0.0006
Taiwan ..................... 0.0058 0.0065 0.0000
Thailand ................... 0.0007 0.0018 0.0018
United Kingdom ............. 0.0000 0.0053 0.0053
-------------------------------------------------
TOTAL ...................... $0.0169 $0.0431 $0.0253
=================================================

Annual Report | 39

Templeton Global Smaller Companies Fund

TAX DESIGNATION (UNAUDITED) (CONTINUED)

- --------------------------------------------------------------------------------
CLASS C
FOREIGN TAX FOREIGN FOREIGN
PAID SOURCE INCOME QUALIFIED DIVIDENDS
COUNTRY PER SHARE PER SHARE PER SHARE
- --------------------------------------------------------------------------------
Australia .................. $0.0009 $0.0026 $0.0026
Belgium .................... 0.0004 0.0008 0.0008
Bermuda .................... 0.0000 0.0002 0.0000
Brazil ..................... 0.0002 0.0003 0.0000
Canada ..................... 0.0002 0.0010 0.0005
China ...................... 0.0000 0.0030 0.0000
Finland .................... 0.0009 0.0017 0.0017
Germany .................... 0.0006 0.0011 0.0011
Hong Kong .................. 0.0000 0.0058 0.0000
India ...................... 0.0000 0.0004 0.0004
Indonesia .................. 0.0001 0.0002 0.0002
Japan ...................... 0.0003 0.0014 0.0014
Netherlands ................ 0.0017 0.0031 0.0031
Norway ..................... 0.0011 0.0020 0.0020
Singapore .................. 0.0000 0.0018 0.0000
South Korea ................ 0.0023 0.0039 0.0039
Sweden ..................... 0.0012 0.0022 0.0022
Switzerland ................ 0.0005 0.0017 0.0007
Taiwan ..................... 0.0058 0.0072 0.0000
Thailand ................... 0.0007 0.0020 0.0020
United Kingdom ............. 0.0000 0.0058 0.0058
-------------------------------------------------
TOTAL ...................... $0.0169 $0.0482 $0.0284
=================================================

- --------------------------------------------------------------------------------
ADVISOR CLASS
FOREIGN TAX FOREIGN FOREIGN
PAID SOURCE INCOME QUALIFIED DIVIDENDS
COUNTRY PER SHARE PER SHARE PER SHARE
- --------------------------------------------------------------------------------
Australia .................. $0.0009 $0.0058 $0.0058
Belgium .................... 0.0004 0.0017 0.0017
Bermuda .................... 0.0000 0.0005 0.0000
Brazil ..................... 0.0002 0.0006 0.0000
Canada ..................... 0.0002 0.0023 0.0011
China ...................... 0.0000 0.0068 0.0000
Finland .................... 0.0009 0.0037 0.0037
Germany .................... 0.0006 0.0023 0.0023
Hong Kong .................. 0.0000 0.0129 0.0000
India ...................... 0.0000 0.0008 0.0008
Indonesia .................. 0.0001 0.0005 0.0005
Japan ...................... 0.0003 0.0031 0.0030
Netherlands ................ 0.0017 0.0070 0.0070
Norway ..................... 0.0011 0.0044 0.0044
Singapore .................. 0.0000 0.0039 0.0000
South Korea ................ 0.0023 0.0086 0.0086
Sweden ..................... 0.0012 0.0048 0.0048
Switzerland ................ 0.0005 0.0038 0.0015
Taiwan ..................... 0.0058 0.0161 0.0000
Thailand ................... 0.0007 0.0044 0.0044
United Kingdom ............. 0.0000 0.0130 0.0130
-------------------------------------------------
TOTAL ...................... $0.0169 $0.1070 $0.0626
=================================================

40 | Annual Report

Templeton Global Smaller Companies Fund

TAX DESIGNATION (UNAUDITED) (CONTINUED)

Foreign Tax Paid Per Share (Column 1) is the amount per share available to you,
as a tax credit (assuming you held your shares in the Fund for a minimum of 16
days during the 31-day period beginning 15 days before the ex-dividend date of
the Fund's distribution to which the foreign taxes relate), or, as a tax
deduction.

Foreign Source Income Per Share (Column 2) is the amount per share of income
dividends paid to you that is attributable to foreign securities held by the
Fund, plus any foreign taxes withheld on these dividends. The amounts reported
include foreign source qualified dividends that have not been adjusted for the
rate differential applicable to such dividend income. 1

Foreign Qualified Dividends Per Share (Column 3) is the amount per share of
foreign source qualified dividends the Fund paid to you, plus any foreign taxes
withheld on these dividends. These amounts represent the portion of the Foreign
Source Income reported to you in column 2 that were derived from qualified
foreign securities held by the Fund. 1

In January 2008, shareholders will receive Form 1099-DIV which will include
their share of taxes paid and foreign source income distributed during the
calendar year 2007. The Foreign Source Income reported on Form 1099-DIV has not
been adjusted for the rate differential on foreign source qualified dividend
income. Shareholders are advised to check with their tax advisors for
information on the treatment of these amounts on their 2007 individual income
tax returns.

1 Qualified dividends are taxed at a maximum rate of 15% (5% for those in the
10% and 15% income tax brackets). In determining the amount of foreign tax
credit that may be applied against the U.S. tax liability of individuals
receiving foreign source qualified dividends, adjustments may be required to the
foreign tax credit limitation calculation to reflect the rate differential
applicable to such dividend income. The rules however permit certain individuals
to elect not to apply the rate differential adjustments for capital gains and/or
dividends for any taxable year. Please consult your tax advisor and the
instructions to Form 1116 for more information.

Annual Report | 41

Templeton Global Smaller Companies Fund

SPECIAL MEETING OF SHAREHOLDERS - MARCH 21, 2007 AND RECONVENED ON
APRIL 11, 2007 (UNAUDITED)

A Special Meeting of the Shareholders of Templeton Global Smaller Companies Fund
(the "Trust") was held at the offices of Franklin Templeton Investments, One
Franklin Parkway, San Mateo, California on March 21, 2007, and reconvened on
April 11, 2007. The purpose of the meeting was to elect Trustees of the Trust
and to approve amendments to certain of the Trust's fundamental investment
restrictions (including two (2) Sub-Proposals).

At the meeting, the following persons were elected by the shareholders to serve
as Independent Trustees of the Trust: Harris J. Ashton, Frank J. Crothers, Edith
E. Holiday, David W. Niemiec, Frank A. Olson, Larry D. Thompson, Constantine D.
Tseretopoulos and Robert E. Wade. Charles B. Johnson and Gregory E. Johnson were
elected by the shareholders to serve as Interested Trustees. Shareholders also
approved amendments to certain of the Trust's fundamental investment
restrictions (including two (2) Sub-Proposals). No other business was transacted
at the meeting.

The results of the voting at the meeting are as follows:

Proposal 1. The Election of Trustees:

- ----------------------------------------------------------------------------------------------------------------
% OF % OF % OF % OF
OUTSTANDING VOTED OUTSTANDING VOTED
NAME FOR SHARES SHARES WITHHELD SHARES SHARES
- ----------------------------------------------------------------------------------------------------------------

Harris J. Ashton .............. 105,280,801.155 65.290% 97.486% 2,714,595.253 1.683% 2.514%
Frank J. Crothers ............. 105,540,569.979 65.451% 97.727% 2,454,826.429 1.522% 2.273%
Edith E. Holiday .............. 105,352,648.826 65.334% 97.553% 2,642,747.582 1.639% 2.447%
David W. Niemiec .............. 105,562,538.476 65.464% 97.747% 2,432,857.932 1.509% 2.253%
Frank A. Olson ................ 105,268,655.809 65.282% 97.475% 2,726,740.599 1.691% 2.525%
Larry D. Thompson ............. 105,505,589.853 65.429% 97.695% 2,489,806.555 1.544% 2.305%
Constantine D. Tseretopoulos .. 105,471,198.858 65.408% 97.663% 2,524,197.550 1.565% 2.337%
Robert E. Wade ................ 105,492,309.266 65.421% 97.682% 2,503,087.142 1.552% 2.318%
Charles B. Johnson ............ 105,297,208.536 65.300% 97.502% 2,698,187.872 1.673% 2.498%
Gregory E. Johnson ............ 105,425,690.755 65.380% 97.621% 2,569,705.653 1.593% 2.379%

Proposal 2. To approve amendments to certain of the Fund's fundamental
investment restrictions (includes two (2) Sub-Proposals):

(a) To amend the Trust's fundamental investment restriction regarding lending:

- --------------------------------------------------------------------------
% OF % OF
OUTSTANDING VOTED
SHARES VOTED SHARES SHARES
- --------------------------------------------------------------------------
For ........................... 75,625,444.812 46.899% 70.027%
Against ....................... 4,538,215.155 2.814% 4.202%
Abstain ....................... 4,082,199.441 2.532% 3.780%
Broker Non-Votes .............. 23,749,537.000 14.728% 21.991%
- --------------------------------------------------------------------------
TOTAL ......................... 107,995,396.408 66.973% 100.000%
- --------------------------------------------------------------------------

42 | Annual Report

Templeton Global Smaller Companies Fund

SPECIAL MEETING OF SHAREHOLDERS - MARCH 21, 2007 AND RECONVENED ON
APRIL 11, 2007 (UNAUDITED) (CONTINUED)

(b) To amend the Trust's fundamental investment restriction regarding
investments in real estate:

- --------------------------------------------------------------------------
% OF % OF
OUTSTANDING VOTED
SHARES VOTED SHARES SHARES
- --------------------------------------------------------------------------
For ........................... 76,147,828.036 47.223% 70.510%
Against ....................... 4,253,431.789 2.638% 3.939%
Abstain ....................... 3,844,599.583 2.384% 3.559%
Broker Non-Votes .............. 23,749,537.000 14.728% 21.991%
- --------------------------------------------------------------------------
TOTAL ......................... 107,995,396.408 66.973% 100.000%
- --------------------------------------------------------------------------

Annual Report | 43

Templeton Global Smaller Companies Fund

BOARD MEMBERS AND OFFICERS

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

INDEPENDENT BOARD MEMBERS

- ------------------------------------------------------------------------------------------------------------------------------------
NUMBER OF PORTFOLIOS IN
NAME, YEAR OF BIRTH LENGTH OF FUND COMPLEX OVERSEEN
AND ADDRESS POSITION TIME SERVED BY BOARD MEMBER* OTHER DIRECTORSHIPS HELD
- ------------------------------------------------------------------------------------------------------------------------------------

HARRIS J. ASHTON (1932) Trustee Since 1992 139 Bar-S Foods (meat packing company).
500 East Broward Blvd.
Suite 2100
Fort Lauderdale, FL 33394-3091

PRINCIPAL OCCUPATION DURING PAST 5 YEARS:

Director of various companies; and FORMERLY, Director, RBC Holdings, Inc. (bank holding company) (until 2002); and President, Chief
Executive Officer and Chairman of the Board, General Host Corporation (nursery and craft centers) (until 1998).
- ------------------------------------------------------------------------------------------------------------------------------------
FRANK J. CROTHERS (1944) Trustee Since 2004 19 Fortis, Inc. (utility holding
500 East Broward Blvd. company), Nuinsco Resources Limited
Suite 2100 (mineral exploration), Fidelity
Fort Lauderdale, FL 33394-3091 Merchant Bank & Trust (Cayman)
Limited (financial services), C.A.
Bancorp Inc. (financial services),
Victory Nickel Inc. (mineral
exploration), ABACO Markets Limited
(retail distributors), and Belize
Electricity Limited (electric
utility).

PRINCIPAL OCCUPATION DURING PAST 5 YEARS:

Chairman, Island Corporate Holdings Ltd.; Director and Vice Chairman, Caribbean Utilities Company Ltd.; Director, Provo Power
Company Ltd.; director of various other business and nonprofit organizations; and FORMERLY, Chairman, Atlantic Equipment & Power
Ltd. (1977-2003).
- ------------------------------------------------------------------------------------------------------------------------------------
EDITH E. HOLIDAY (1952) Trustee Since 2004 139 Hess Corporation (exploration and
500 East Broward Blvd. refining of oil and gas), H.J. Heinz
Suite 2100 Company (processed foods and allied
Fort Lauderdale, FL 33394-3091 products), RTI International Metals,
Inc. (manufacture and distribution of
titanium), Canadian National Railway
(railroad) and White Mountains
Insurance Group, Ltd. (holding
company).

PRINCIPAL OCCUPATION DURING PAST 5 YEARS:

Director or Trustee of various companies and trusts; and FORMERLY, Assistant to the President of the United States and Secretary of
the Cabinet (1990-1993); General Counsel to the United States Treasury Department (1989-1990); and Counselor to the Secretary and
Assistant Secretary for Public Affairs and Public Liaison-United States Treasury Department (1988-1989).
- ------------------------------------------------------------------------------------------------------------------------------------

44 | Annual Report

DAVID W. NIEMIEC (1949) Trustee Since 2005 19 Emeritus Corporation (assisted
500 East Broward Blvd. living) and OSI Pharmaceuticals, Inc.
Suite 2100 (pharmaceutical products).
Fort Lauderdale, FL 33394-3091

PRINCIPAL OCCUPATION DURING PAST 5 YEARS:

Advisor, Saratoga Partners (private equity fund); Director, various private companies; and FORMERLY, Managing Director, Saratoga
Partners (1998-2001) and SBC Warburg Dillon Read (investment banking) (1997-1998); Vice Chairman, Dillon, Read & Co. Inc.
(investment banking) (1991-1997); and Chief Financial Officer, Dillon, Read & Co. Inc. (1982-1997).
- ------------------------------------------------------------------------------------------------------------------------------------
FRANK A. OLSON (1932) Trustee Since 2004 139 Hess Corporation (exploration and
500 East Broward Blvd. refining of oil and gas) and Sentient
Suite 2100 Jet (private jet service).
Fort Lauderdale, FL 33394-3091

PRINCIPAL OCCUPATION DURING PAST 5 YEARS:

Chairman Emeritus, The Hertz Corporation (car rental) (since 2000) (Chairman of the Board (1980-2000) and Chief Executive Officer
(1977-1999)); and FORMERLY, Chairman of the Board, President and Chief Executive Officer, UAL Corporation (airlines).
- ------------------------------------------------------------------------------------------------------------------------------------
LARRY D. THOMPSON (1945) Trustee Since 2005 139 None
500 East Broward Blvd.
Suite 2100
Fort Lauderdale, FL 33394-3091

PRINCIPAL OCCUPATION DURING PAST 5 YEARS:

Senior Vice President - Government Affairs, General Counsel and Secretary, PepsiCo, Inc. (consumer products); and FORMERLY,
Director, Delta Airlines (aviation) (2003-2005) and Providian Financial Corp. (credit card provider) (1997-2001); Senior Fellow of
The Brookings Institution (2003-2004); Visiting Professor, University of Georgia School of Law (2004); and Deputy Attorney General,
U.S. Department of Justice (2001-2003).
- ------------------------------------------------------------------------------------------------------------------------------------
CONSTANTINE D. TSERETOPOULOS Trustee Since 2004 19 None
(1954)
500 East Broward Blvd.
Suite 2100
Fort Lauderdale, FL 33394-3091

PRINCIPAL OCCUPATION DURING PAST 5 YEARS:

Physician, Lyford Cay Hospital (1987-present); director of various nonprofit organizations; and FORMERLY, Cardiology Fellow,
University of Maryland (1985-1987) and Internal Medicine Resident, Greater Baltimore Medical Center (1982-1985).
- ------------------------------------------------------------------------------------------------------------------------------------
ROBERT E. WADE (1946) Trustee Since 2006 33 El Oro and Exploration Co., p.l.c.
500 East Broward Blvd. (investments) and ARC Wireless
Suite 2100 Solutions, Inc. (wireless components
Fort Lauderdale, FL 33394-3091 and network products).

PRINCIPAL OCCUPATION DURING PAST 5 YEARS:

Practicing attorney.
- ------------------------------------------------------------------------------------------------------------------------------------

Annual Report | 45

INTERESTED BOARD MEMBERS AND OFFICERS

**CHARLES B. JOHNSON (1933) Trustee, Trustee and 139 None
One Franklin Parkway Chairman of the Chairman of the
San Mateo, CA 94403-1906 Board and Board since
Vice President 1995 and Vice
President since
1992

PRINCIPAL OCCUPATION DURING PAST 5 YEARS:

Chairman of the Board, Member - Office of the Chairman and Director, Franklin Resources, Inc.; Director, Templeton Worldwide, Inc.;
and officer and/or director or trustee, as the case may be, of some of the other subsidiaries of Franklin Resources, Inc. and of 42
of the investment companies in Franklin Templeton Investments.
- ------------------------------------------------------------------------------------------------------------------------------------
**GREGORY E. JOHNSON (1961) Trustee Since April 91 None
One Franklin Parkway 2007
San Mateo, CA 94403-1906

PRINCIPAL OCCUPATION DURING PAST 5 YEARS:

Director, President and Chief Executive Officer, Franklin Resources, Inc.; President, Templeton Worldwide, Inc.; Director, Templeton
Asset Management Ltd.; and officer and/or director or trustee, as the case may be, of some of the other subsidiaries of Franklin
Resources, Inc. and of 33 of the investment companies in Franklin Templeton Investments.
- ------------------------------------------------------------------------------------------------------------------------------------
JAMES M. DAVIS (1952) Chief Chief Not Applicable Not Applicable
One Franklin Parkway Compliance Compliance
San Mateo, CA 94403-1906 Officer and Officer since
Vice President 2004 and Vice
- AML President - AML
Compliance Compliance
since 2006

PRINCIPAL OCCUPATION DURING PAST 5 YEARS:

Director, Global Compliance, Franklin Resources, Inc.; officer of some of the other subsidiaries of Franklin Resources, Inc. and of
46 of the investment companies in Franklin Templeton Investments; and FORMERLY, Director of Compliance, Franklin Resources, Inc.
(1994-2001).
- ------------------------------------------------------------------------------------------------------------------------------------
JEFFREY A. EVERETT (1964) President and Since 2002 Not Applicable Not Applicable
PO Box N-7759 Chief Executive
Lyford Cay, Nassau, Bahamas Officer -
Investment
Management

PRINCIPAL OCCUPATION DURING PAST 5 YEARS:

Chairman, President and Director, Templeton Global Advisors Limited; and officer of 14 of the investment companies in Franklin
Templeton Investments.
- ------------------------------------------------------------------------------------------------------------------------------------
JIMMY D. GAMBILL (1947) Senior Vice Since 2002 Not Applicable Not Applicable
500 East Broward Blvd. President and
Suite 2100 Chief Executive
Fort Lauderdale, Officer -
FL 33394-3091 Finance and
Administration

PRINCIPAL OCCUPATION DURING PAST 5 YEARS:

President, Franklin Templeton Services, LLC; Senior Vice President, Templeton Worldwide, Inc.; and officer of some of the other
subsidiaries of Franklin Resources, Inc. and of 46 of the investment companies in Franklin Templeton Investments.
- ------------------------------------------------------------------------------------------------------------------------------------

46 | Annual Report

DAVID P. GOSS (1947) Vice President Since 2000 Not Applicable Not Applicable
One Franklin Parkway
San Mateo, CA 94403-1906

PRINCIPAL OCCUPATION DURING PAST 5 YEARS:

Senior Associate General Counsel, Franklin Templeton Investments; officer and director of one of the subsidiaries of Franklin
Resources, Inc.; and officer of 46 of the investment companies in Franklin Templeton Investments.
- ------------------------------------------------------------------------------------------------------------------------------------
RUPERT H. JOHNSON, JR. (1940) Vice President Since 1996 Not Applicable Not Applicable
One Franklin Parkway
San Mateo, CA 94403-1906

PRINCIPAL OCCUPATION DURING PAST 5 YEARS:

Vice Chairman, Member - Office of the Chairman and Director, Franklin Resources, Inc.; Director, Franklin Advisers, Inc. and
Templeton Worldwide, Inc.; Senior Vice President, Franklin Advisory Services, LLC; and officer and/or director or trustee, as the
case may be, of some of the other subsidiaries of Franklin Resources, Inc. and of 44 of the investment companies in Franklin
Templeton Investments.
- ------------------------------------------------------------------------------------------------------------------------------------
JOHN R. KAY (1940) Vice President Since 1994 Not Applicable Not Applicable
500 East Broward Blvd.
Suite 2100
Fort Lauderdale, FL 33394-3091

PRINCIPAL OCCUPATION DURING PAST 5 YEARS:

Vice President, Templeton Worldwide, Inc.; Senior Vice President, Franklin Templeton Services, LLC; and officer of some of the other
subsidiaries of Franklin Resources, Inc. and of 32 of the investment companies in Franklin Templeton Investments; and FORMERLY, Vice
President and Controller, Keystone Group, Inc.
- ------------------------------------------------------------------------------------------------------------------------------------
ROBERT C. ROSSELOT (1960) Secretary Since 2004 Not Applicable Not Applicable
500 East Broward Blvd.
Suite 2100
Fort Lauderdale, FL 33394-3091

PRINCIPAL OCCUPATION DURING PAST 5 YEARS:

Senior Associate General Counsel, Franklin Templeton Investments; Assistant Secretary, Franklin Resources, Inc.; Vice President and
Assistant Secretary, Templeton Investment Counsel, LLC; Vice President, Secretary and Trust Officer, Fiduciary Trust International
of the South; and officer of 14 of the investment companies in Franklin Templeton Investments.
- ------------------------------------------------------------------------------------------------------------------------------------
GREGORY R. SEWARD (1956) Treasurer Since 2004 Not Applicable Not Applicable
500 East Broward Blvd.
Suite 2100
Fort Lauderdale, FL 33394-3091

PRINCIPAL OCCUPATION DURING PAST 5 YEARS:

Vice President, Franklin Templeton Services, LLC; officer of 16 of the investment companies in Franklin Templeton Investments; and
FORMERLY, Vice President, JPMorgan Chase (2000-2004) and American General Financial Group (1991-2000).
- ------------------------------------------------------------------------------------------------------------------------------------

Annual Report | 47

CRAIG S. TYLE (1960) Vice President Since 2005 Not Applicable Not Applicable
One Franklin Parkway
San Mateo, CA 94403-1906

PRINCIPAL OCCUPATION DURING PAST 5 YEARS:

General Counsel and Executive Vice President, Franklin Resources, Inc.; officer of some of the other subsidiaries of Franklin
Resources, Inc. and of 46 of the investment companies in Franklin Templeton Investments; and FORMERLY, Partner, Shearman & Sterling,
LLP (2004-2005); and General Counsel, Investment Company Institute (ICI) (1997-2004).
- ------------------------------------------------------------------------------------------------------------------------------------
GALEN VETTER (1951) Chief Financial Since 2004 Not Applicable Not Applicable
500 East Broward Blvd. Officer and
Suite 2100 Chief
Fort Lauderdale, Accounting
FL 33394-3091 Officer

PRINCIPAL OCCUPATION DURING PAST 5 YEARS:

Senior Vice President, Franklin Templeton Services, LLC; officer of 46 of the investment companies in Franklin Templeton
Investments; and FORMERLY, Managing Director, RSM McGladrey, Inc. (1999-2004); and Partner, McGladrey & Pullen, LLP (1979-1987 and
1991-2004).
- ------------------------------------------------------------------------------------------------------------------------------------

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

** Charles B. Johnson is considered to be an interested person of the Fund under
the federal securities laws due to his position as officer and director and
major shareholder of Franklin Resources, Inc. (Resources), which is the parent
company of the Fund's investment manager and distributor. Gregory E. Johnson is
considered to be an interested person of the Fund under the federal securities
laws due to his position as an officer and director of Resources.

Note 1: Charles B. Johnson and Rupert H. Johnson, Jr. are brothers and the
father and uncle, respectively, of Gregory E. Johnson.

Note 2: Officer information is current as of the date of this report. It is
possible that after this date, information about officers may change.

Note 3: Prior to August 31, 2007, Nicholas F. Brady and Harmon E. Burns ceased
to be trustees of the Trust.

THE SARBANES-OXLEY ACT OF 2002 AND RULES ADOPTED BY THE U.S. SECURITIES AND
EXCHANGE COMMISSION REQUIRE THE FUND TO DISCLOSE WHETHER THE FUND'S AUDIT
COMMITTEE INCLUDES AT LEAST ONE MEMBER WHO IS AN AUDIT COMMITTEE FINANCIAL
EXPERT WITHIN THE MEANING OF SUCH ACT AND RULES. THE FUND'S BOARD OF TRUSTEES
HAS DETERMINED THAT THERE IS AT LEAST ONE SUCH FINANCIAL EXPERT ON THE AUDIT
COMMITTEE AND HAS DESIGNATED EACH OF FRANK A. OLSON AND DAVID W. NIEMIEC AS AN
AUDIT COMMITTEE FINANCIAL EXPERT. THE BOARD BELIEVES THAT MESSRS. OLSON AND
NIEMIEC QUALIFY AS SUCH AN EXPERT IN VIEW OF THEIR EXTENSIVE BUSINESS BACKGROUND
AND EXPERIENCE. MR. OLSON HAS SERVED AS A MEMBER OF THE FUND AUDIT COMMITTEE
SINCE 2003. HE CURRENTLY SERVES AS CHAIRMAN EMERITUS OF THE HERTZ CORPORATION
AND WAS FORMERLY ITS CHAIRMAN OF THE BOARD FROM 1980 TO 2000 AND ITS CHIEF
EXECUTIVE OFFICER FROM 1977 TO 1999. MR. OLSON IS ALSO A DIRECTOR AND AUDIT
COMMITTEE MEMBER OF HESS CORPORATION, A FORMER DIRECTOR AND AUDIT COMMITTEE
MEMBER OF WHITE MOUNTAINS INSURANCE GROUP, LTD., AND A FORMER CHAIRMAN,
PRESIDENT AND CHIEF EXECUTIVE OFFICER OF UAL CORPORATION. MR. NIEMIEC HAS SERVED
AS A MEMBER OF THE FUND AUDIT COMMITTEE SINCE 2005, CURRENTLY SERVES AS AN
ADVISOR TO SARATOGA PARTNERS AND WAS FORMERLY ITS MANAGING DIRECTOR FROM 1998 TO
2001. MR. NIEMIEC IS A DIRECTOR OF EMERITUS CORPORATION AND OSI PHARMACEUTICALS,
INC., AND VARIOUS PRIVATE COMPANIES, AND WAS FORMERLY MANAGING DIRECTOR OF SBC
WARBURG DILLON READ FROM 1997 TO 1998, AND WAS VICE CHAIRMAN FROM 1991 TO 1997
AND CHIEF FINANCIAL OFFICER FROM 1982 TO 1997 OF DILLON, READ & CO. INC. AS A
RESULT OF SUCH BACKGROUND AND EXPERIENCE, THE BOARD OF TRUSTEES BELIEVES THAT
MR. OLSON AND MR. NIEMIEC HAVE EACH ACQUIRED AN UNDERSTANDING OF GENERALLY
ACCEPTED ACCOUNTING PRINCIPLES AND FINANCIAL STATEMENTS, THE GENERAL APPLICATION
OF SUCH PRINCIPLES IN CONNECTION WITH THE ACCOUNTING ESTIMATES, ACCRUALS AND
RESERVES, AND ANALYZING AND EVALUATING FINANCIAL STATEMENTS THAT PRESENT A
BREADTH AND LEVEL OF COMPLEXITY OF ACCOUNTING ISSUES GENERALLY COMPARABLE TO
THOSE OF THE FUND, AS WELL AS AN UNDERSTANDING OF INTERNAL CONTROLS AND
PROCEDURES FOR FINANCIAL REPORTING AND AN UNDERSTANDING OF AUDIT COMMITTEE
FUNCTIONS. MESSRS. OLSON AND NIEMIEC ARE INDEPENDENT TRUSTEES AS THAT TERM IS
DEFINED UNDER THE APPLICABLE U.S. SECURITIES AND EXCHANGE COMMISSION RULES AND
RELEASES.

THE STATEMENT OF ADDITIONAL INFORMATION (SAI) INCLUDES ADDITIONAL INFORMATION
ABOUT THE BOARD MEMBERS AND IS AVAILABLE, WITHOUT CHARGE, UPON REQUEST.
SHAREHOLDERS MAY CALL 1-800/DIAL BEN (1-800/342-5236) TO REQUEST THE SAI.

48 | Annual Report

Templeton Global Smaller Companies Fund

SHAREHOLDER INFORMATION

BOARD REVIEW OF INVESTMENT MANAGEMENT AGREEMENT

At a meeting held May 22, 2007, the Board of Trustees (Board), including a
majority of non-interested or independent Trustees, approved renewal of the
investment management agreement for the Fund. In reaching this decision, the
Board took into account information furnished throughout the year at regular
Board meetings, as well as information prepared specifically in connection with
the annual renewal review process. Information furnished and discussed
throughout the year included investment performance reports and related
financial information for the Fund, as well as periodic reports on shareholder
services, legal, compliance, pricing, brokerage commissions and execution and
other services provided by the Investment Manager (Manager) and its affiliates.
Information furnished specifically in connection with the renewal process
included a report for the Fund prepared by Lipper, Inc. (Lipper), an independent
organization, as well as a Fund profitability analysis report prepared by
management. The Lipper report compared the Fund's investment performance and
expenses with those of other mutual funds deemed comparable to the Fund as
selected by Lipper. The Fund profitability analysis report discussed the
profitability to Franklin Templeton Investments from its overall U.S. fund
operations, as well as on an individual fund-by-fund basis. Included with such
profitability analysis report was information on a fund-by-fund basis listing
portfolio managers and other accounts they manage, as well as information on
management fees charged by the Manager and its affiliates including management's
explanation of differences where relevant and a three-year expense analysis with
an explanation for any increase in expense ratios. Additional material
accompanying such report was a memorandum prepared by management describing
project initiatives and capital investments relating to the services provided to
the Fund by the Franklin Templeton Investments organization, as well as a
memorandum relating to economies of scale and a comparative analysis concerning
transfer agent fees charged the Fund.

In considering such materials, the independent Trustees received assistance and
advice from and met separately with independent counsel. In approving
continuance of the investment management agreement for the Fund, the Board,
including a majority of independent Trustees, determined that the existing
management fee structure was fair and reasonable and that continuance of the
investment management agreement was in the best interests of the Fund and its
shareholders. While attention was given to all information furnished, the
following discusses some primary factors relevant to the Board's decision.

NATURE, EXTENT AND QUALITY OF SERVICES. The Board was satisfied with the nature
and quality of the overall services provided by the Manager and its affiliates
to the Fund and its shareholders. In addition to investment performance and
expenses discussed later, the Board's opinion was based, in part, upon periodic
reports furnished them showing that the investment policies and restrictions for
the Fund were consistently complied with as well as other reports periodically
furnished the Board covering matters such as the compliance of portfolio
managers and other management personnel with the code of ethics adopted
throughout the Franklin Templeton fund complex, the adherence to fair value
pricing procedures established by the

Annual Report | 49

Templeton Global Smaller Companies Fund

SHAREHOLDER INFORMATION (CONTINUED)

BOARD REVIEW OF INVESTMENT MANAGEMENT AGREEMENT (CONTINUED)

Board, and the accuracy of net asset value calculations. The Board also noted
the extent of benefits provided Fund shareholders from being part of the
Franklin Templeton family of funds, including the right to exchange investments
between the same class of funds without a sales charge, the ability to reinvest
Fund dividends into other funds and the right to combine holdings in other funds
to obtain a reduced sales charge. Favorable consideration was given to
management's continuous efforts and expenditures in establishing back-up systems
and recovery procedures to function in the event of a natural disaster, it being
noted that such systems and procedures had functioned smoothly during the
Florida hurricanes and blackouts experienced in recent years. Among other
factors taken into account by the Board were the Manager's best execution
trading policies, including a favorable report by an independent portfolio
trading analytical firm. Consideration was also given to the experience of the
Fund's portfolio management team, the number of accounts managed and general
method of compensation. In this latter respect, the Board noted that a primary
factor in management's determination of a portfolio manager's bonus compensation
was the relative investment performance of the funds he or she managed and that
a portion of such bonus was required to be invested in a predesignated list of
funds within such person's fund management area so as to be aligned with the
interests of Fund shareholders. The Board also took into account the transfer
agent and shareholder services provided Fund shareholders by an affiliate of the
Manager, noting continuing expenditures by management to increase and improve
the scope of such services, periodic favorable reports on such service conducted
by third parties, the high industry ranking given to the Franklin Templeton
web-site, and the firsthand experience of individual Board members who deal with
the shareholder services department in their capacities as shareholders in one
or more of the various Franklin Templeton funds.

INVESTMENT PERFORMANCE. The Board placed significant emphasis on the investment
performance of the Fund in view of its importance to shareholders. While
consideration was given to performance reports and discussions with portfolio
managers at Board meetings during the year, particular attention in assessing
such performance was given to the Lipper report furnished for the agreement
renewal. The Lipper report prepared for the Fund showed the investment
performance of its Class A shares for the one-year period ended February 28,
2007, as well as the previous 10 years ended on such date in comparison to a
performance universe consisting of the Fund and all retail and institutional
global small/mid-cap core funds as selected by Lipper. The Fund's total return,
as shown in such report, was in the highest quin-tile of such performance
universe for the one-year period, and on an annualized basis was in the highest
quintile of such performance universe for the previous five- and 10-year
periods, and in the second-highest quintile for the previous three-year period.
The Board expressed its satisfaction with such performance.

50 | Annual Report

Templeton Global Smaller Companies Fund

SHAREHOLDER INFORMATION (CONTINUED)

BOARD REVIEW OF INVESTMENT MANAGEMENT AGREEMENT (CONTINUED)

COMPARATIVE EXPENSES. Consideration was given to a comparative analysis of the
management fees and total expense ratios of the Fund compared with those of a
group of other funds selected by Lipper as its appropriate Lipper expense group
under the Lipper report. Prior to making such comparison, the Board relied upon
a survey showing that the scope of management advisory services covered under
the Fund's investment management agreement was similar to those provided by fund
managers to other mutual fund groups. In reviewing comparative costs, emphasis
was given to the Fund's contractual investment management fee in comparison with
the contractual investment management fee that would have been charged by other
funds within its Lipper expense group assuming they were similar in size to the
Fund, as well as the actual total expenses of the Fund in comparison with those
of its Lipper expense group. The Lipper contractual investment management fee
analysis includes administrative charges as being part of a management fee, and
total expenses, for comparative consistency, are shown by Lipper for fund Class
A shares. The results of such expense comparisons showed that the contractual
investment management fee rate for the Fund was in the second least expensive
quintile for its Lipper expense group while its actual total expenses were in
the least expensive quintile of such group. The Board was satisfied with the
management fee and total expenses of the Fund in comparison to its Lipper
expense group.

MANAGEMENT PROFITABILITY. The Board also considered the level of profits
realized by the Manager and its affiliates in connection with the operation of
the Fund. In this respect, the Board reviewed the Fund profitability analysis
that addresses the overall profitability of Franklin Templeton's U.S. fund
business, as well as its profits in providing management and other services to
the Fund. Specific attention was given to the methodology followed in allocating
costs to the Fund, it being recognized that allocation methodologies are
inherently subjective and various allocation methodologies may each be
reasonable while producing different results. In this respect, the Board noted
that, while being continuously refined and reflecting changes in the Manager's
own cost accounting, the allocation methodology was consistent with that
followed in profitability report presentations for the Fund made in prior years
and that the Fund's independent registered public accounting firm had been
engaged by the Manager to perform certain procedures on a biennial basis,
specified and approved by the Manager and the Fund's Board solely for their
purposes and use in reference to the profitability analysis. In reviewing and
discussing such analysis, management discussed with the Board its belief that
costs incurred in establishing the infrastructure necessary for the type of
mutual fund operations conducted by the Manager and its affiliates may not be
fully reflected in the expenses allocated to the Fund in determining its
profitability, as well as the fact that the level of profits, to a certain
extent, reflected operational cost savings and efficiencies initiated by
management. The Board also took into account management's expenditures in
improving shareholder services provided the Fund, as well as the need to meet
additional regulatory and compliance requirements resulting from the
Sarbanes-Oxley Act and recent SEC requirements. In addition, the Board
considered a third-party study comparing the profitability of the

Annual Report | 51

Templeton Global Smaller Companies Fund

SHAREHOLDER INFORMATION (CONTINUED)

BOARD REVIEW OF INVESTMENT MANAGEMENT AGREEMENT (CONTINUED)

Manager's parent on an overall basis as compared to other publicly held managers
broken down to show profitability from management operations exclusive of
distribution expenses, as well as profitability including distribution expenses.
The Board also considered the extent to which the Manager and its affiliates
might derive ancillary benefits from fund operations, including its interest in
a joint venture entity that financed up-front commissions paid to
brokers/dealers who sold fund Class B shares prior to February 2005, when the
offering of such shares was discontinued, as well as potential benefits
resulting from allocation of fund brokerage and the use of "soft" commission
dollars to pay for research. Based upon its consideration of all these factors,
the Board determined that the level of profits realized by the Manager and its
affiliates from providing services to the Fund was not excessive in view of the
nature, quality and extent of services provided.

ECONOMIES OF SCALE. The Board also considered whether economies of scale are
realized by the Manager as the Fund grows larger and the extent to which this is
reflected in the level of management fees charged. While recognizing that any
precise determination is inherently subjective, the Board noted that based upon
the Fund profitability analysis, it appears that as some funds get larger, at
some point economies of scale do result in the Manager realizing a larger profit
margin on management services provided such a fund. The Board also noted that
economies of scale are shared with a fund and its shareholders through
management fee breakpoints so that as a fund grows in size, its effective
management fee rate declines. The Fund's investment management agreement
provides a fee at the rate of 0.75% on the first $1 billion of Fund net assets;
0.73% on the next $4 billion of Fund net assets; 0.71% on the next $5 billion of
Fund net assets; 0.69% on the next $5 billion of Fund net assets; 0.67% on the
next $5 billion of Fund net assets; and 0.65% on net assets in excess of $20
billion. The Fund is also charged a separate fee for administrative services
that starts at 0.15% on the first $200 million of Fund net assets, and declines
through breakpoints to a fixed rate of 0.075% after net assets reach the $1.2
billion level. At the end of 2006, the Fund's net assets were approximately $1.5
billion, and to the extent economies of scale may be realized by the Manager and
its affiliates, the Board believes the schedules of fees under the investment
management agreement provide a sharing of benefits with the Fund and its
shareholders.

52 | Annual Report

Templeton Global Smaller Companies Fund

SHAREHOLDER INFORMATION (CONTINUED)

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.

Annual Report | 53

This page intentionally left blank.

Literature Request

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

FRANKLIN TEMPLETON FUNDS

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 1

GLOBAL

Mutual Discovery Fund
Templeton Global Long-Short Fund
Templeton Global Opportunities Trust
Templeton Global Smaller Companies Fund 1
Templeton Growth Fund
Templeton World Fund

GROWTH

Franklin Aggressive Growth Fund
Franklin Capital Growth Fund
Franklin Flex Cap Growth Fund
Franklin Small Cap Growth Fund II 2
Franklin Small-Mid Cap Growth Fund

VALUE

Franklin Balance Sheet Investment Fund 1
Franklin Equity Income Fund
Franklin Large Cap Value Fund
Franklin MicroCap Value Fund 1
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 Convertible Securities Fund
Franklin Growth Fund
Franklin Rising Dividends 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(R) Allocation Fund
Franklin Templeton Founding Funds Allocation Fund
Franklin Templeton Perspectives Allocation Fund
Franklin Templeton Conservative Target Fund
Franklin Templeton Growth Target Fund
Franklin Templeton Moderate Target Fund
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
Arizona
California 8
Colorado
Connecticut
Florida 8
Georgia
Kentucky
Louisiana
Maryland
Massachusetts 7
Michigan 7
Minnesota 7
Missouri
New Jersey
New York 8
North Carolina
Ohio 7
Oregon
Pennsylvania
Tennessee
Virginia

INSURANCE FUNDS

Franklin Templeton Variable Insurance Products Trust 9

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

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

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. The fund invests primarily in 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.

05/07 Not part of the annual report

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

o WANT TO RECEIVE THIS DOCUMENT FASTER VIA EMAIL?
Eligible shareholders can sign up for eDelivery at franklintempleton.com.
See inside for details.

ANNUAL REPORT AND SHAREHOLDER LETTER

TEMPLETON GLOBAL SMALLER
COMPANIES FUND

INVESTMENT MANAGER

Templeton Investment Counsel, LLC

SUBADVISOR

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 or the subadvisor.
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 A2007 10/07

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 expert is David W. Niemiec and he is
"independent" as defined under the relevant Securities and Exchange
Commission Rules and Releases.

ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.

(a) Audit Fees

The aggregate fees paid to the principal accountant for professional services
rendered by the principal accountant for the audit of the registrant's annual
financial statements or for services that are normally provided by the principal
accountant in connection with statutory and regulatory filings or engagements
were $54,706 for the fiscal year ended August 31, 2007 and $57,898 for the
fiscal year ended August 31, 2006.

(b) Audit-Related Fees

There were no fees paid to the principal accountant for assurance and related
services rendered by the principal accountant to the registrant that are
reasonably related to the performance of the audit of the registrant's financial
statements and are not reported under paragraph (a) of Item 4.

There were no fees paid to the principal accountant for assurance and related
services rendered by the principal accountant to the registrant's investment
adviser and any entity controlling, controlled by or under common control with
the investment adviser that provides ongoing services to the registrant that are
reasonably related to the performance of the audit of their financial
statements.

There were no fees paid to the principal accountant for professional services
rendered by the principal accountant to the registrant for tax compliance, tax
advice and tax planning.

The aggregate fees paid to the principal accountant for professional services
rendered by the principal accountant to the registrant's investment adviser and
any entity controlling, controlled by or under common control with the
investment adviser that provides ongoing services to the registrant for tax
compliance, tax advice and tax planning were $46,000 for the fiscal year ended
August 31, 2007 and $0 for the fiscal year ended August 31, 2006. The services
for which these fees were paid included tax compliance and advice.

(d) All Other Fees

The aggregate fees paid to the principal accountant for products and services
rendered by the principal accountant to the registrant not reported in
paragraphs (a)-(c) of Item 4 were $0 for the fiscal year ended August 31, 2007
and $664 for the fiscal year ended August 31, 2006. The services for which these
fees were paid included review of materials provided to the fund Board in
connection with the investment management contract renewal process.

The aggregate fees paid to the principal accountant for products and services
rendered by the principal accountant to the registrant's investment adviser and
any entity controlling, controlled by or under common control with the
investment adviser that provides ongoing services to the registrant not reported
in paragraphs (a)-(c) of Item 4 were $0 for the fiscal year ended August 31,
2007 and $175,540 for the fiscal year ended August 31, 2006. The services for
which these fees were paid included review of materials provided to the fund
Board in connection with the investment management contract renewal process.

(e) (1) The registrant's audit committee is directly responsible for approving
the services to be provided by the auditors, including:

(i) pre-approval of all audit and audit related services;

(ii) pre-approval of all non-audit related services to be provided to
the Fund by the auditors;

(iii) pre-approval of all non-audit related services to be provided to
the registrant by the auditors to the registrant's investment adviser or to any
entity that controls, is controlled by or is under common control with the
registrant's investment adviser and that provides ongoing services to the
registrant where the non-audit services relate directly to the operations or
financial reporting of the registrant; and

(iv) establishment by the audit committee, if deemed necessary or
appropriate, as an alternative to committee pre-approval of services to be
provided by the auditors, as required by paragraphs (ii) and (iii) above, of
policies and procedures to permit such services to be pre-approved by other
means, such as through establishment of guidelines or by action of a designated
member or members of the committee; provided the policies and procedures are
detailed as to the particular service and the committee is informed of each
service and such policies and procedures do not include delegation of audit
committee responsibilities, as contemplated under the Securities Exchange Act of
1934, to management; subject, in the case of (ii) through (iv), to any waivers,
exceptions or exemptions that may be available under applicable law or rules.

(e) (2) None of the services provided to the registrant described in paragraphs
(b)-(d) of Item 4 were approved by the audit committee pursuant to paragraph
(c)(7)(i)(C) of Rule 2-01 of regulation S-X.

(f) No disclosures are required by this Item 4(f).

(g) The aggregate non-audit fees paid to the principal accountant for services
rendered by the principal accountant to the registrant and the registrant's
investment adviser and any entity controlling, controlled by or under common
control with the investment adviser that provides ongoing services to the
registrant were $46,000 for the fiscal year ended August 31, 2007 and $176,204
for the fiscal year ended August 31, 2006.

(h) The registrant's audit committee of the board has considered whether the
provision of non-audit services that were rendered to the registrant's
investment adviser (not including any sub-adviser whose role is primarily
portfolio management and is subcontracted with or overseen by another investment
adviser), and any entity controlling, controlled by, or under common control
with the investment adviser that provides ongoing services to the registrant
that were not pre-approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of
Regulation S-X is compatible with maintaining the principal accountant's
independence.

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

ITEM 6. SCHEDULE OF INVESTMENTS. N/A

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

ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES. N/A

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

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

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

ITEM 11. CONTROLS AND PROCEDURES.

(A) EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES. The Registrant maintains
disclosure controls and procedures that are designed to 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: January 24, 2008

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: January 24, 2008

By /s/GALEN G. VETTER
------------------
Galen G. Vetter
Chief Financial Officer
Date: January 24, 2008