<PAGE> 1
TEMPLETON GLOBAL SMALLER
COMPANIES FUND, INC.
Auditors
McGladrey & Pullen, LLP
555 Fifth Avenue
New York, New York 10017-2416
Principal Underwriter:
Franklin Templeton
Distributors, Inc.
700 Central Avenue
St. Petersburg,
Florida 33701-3628
Shareholder Services
1-800-632-2301
Fund Information
1-800-342-5236
This report must be preceded or accompanied by a current prospectus of the
Templeton Global Smaller Companies Fund, Inc., which contains more complete
information including charges and expenses.
Investors should be aware that the value of investments made for the Fund may go
up as well as down and that the Investment Manager may make errors in selecting
securities for the Fund's portfolio. Like any investment in securities, the
Fund's portfolio will be subject to the risk of loss from market, currency,
economic, political, and other factors. The Fund and Fund investors are not
protected from such losses by the Investment Manager. Therefore, investors who
cannot accept the risk of such losses should not invest in shares of the Fund.
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
DETERMINED BY THE PRESENCE OF A REGULAR BEEPING TONE.
[RECYCLE LOGO] TL103 A96 10/96
[GLOBE GRAPHIC]
TEMPLETON
GLOBAL
SMALLER
COMPANIES
FUND, INC.
Annual Report
August 31, 1996
[FRANKLIN TEMPLETON LOGO]
<PAGE> 2
TEMPLETON GLOBAL SMALLER
COMPANIES FUND
YOUR FUND'S OBJECTIVE:
The Templeton Global Smaller Companies Fund seeks to achieve long-term growth
through a flexible policy of investing primarily in common stocks and all types
of common stock equivalents, including rights, warrants, and preferred stock, of
companies of various nations throughout the world. The Fund seeks to achieve its
objectives by investing primarily in securities of smaller companies globally.
OCTOBER 15, 1996
Dear Shareholder:
We are pleased to bring you the annual report of the Templeton Global Smaller
Companies Fund for the fiscal year ended August 31, 1996. This period was
generally rewarding for investors in the world's stock markets. Although few
markets yielded exceptional returns, nearly every major market registered a
positive performance when measured in local currencies, and the Templeton Global
Smaller Companies Fund Class I shares provided a one-year total return of
11.69%, as discussed in the Performance Summary on page 5.
Some of the highest returns were earned in the U.S. market, which reached record
levels in May. After suffering a sharp, temporary setback in July, it rose again
at the end of the reporting period. Since we found more bargains outside the
United States during the past year, we decreased our U.S. exposure by
approximately one-third, while increasing our weighting in European and Asian
shares.
1
<PAGE> 3
- -----------------------------------------------------------------------------
TEMPLETON GLOBAL SMALLER COMPANIES FUND
Geographic Distribution on 8/31/96
Based on Total Net Assets
<TABLE>
<S> <C>
European Stocks 37.4%
Asian Stocks 13.0%
Australian &
New Zealand Stocks 5.5%
Latin American Stocks 4.7%
Canadian Stocks 2.2%
United States Stocks 22.5%
Short-Term Obligations
& Other Net Assets 14.7%
</TABLE>
The Fund's performance was helped by its European holdings and hurt by its lack
of exposure to the Japanese market, which registered a solid performance during
the fiscal year, as measured in U.S. dollars. As disciplined value investors, we
continue to find it difficult to identify Japanese "bargain" stocks. The average
Japanese stock has been selling at about 80 times projected earnings; stocks in
most other major markets have been selling for between 12 and 20 times earnings.
To invest in Japan today, one must be willing to pay much more than for an
equivalent company located elsewhere in the world. During the fiscal year, our
exposure to emerging markets had mixed results. While we benefited from our
Brazilian, Portuguese and Hungarian holdings, the Fund's performance was hurt by
its Korean and Chilean stocks.
In some years, currency changes will diminish the Fund's U.S. dollar
performance; in other years, the dollar will weaken and help the Fund.
Throughout this reporting period, the world currency markets were generally
unfavorable to the Fund. Since the U.S. dollar strengthened against most other
major currencies, at the end of the year our holdings of international stocks,
which are denominated in foreign currencies, were worth less in U.S. dollars
than they would have been if those currencies had not depreciated during the
year.
During the reporting period, we bought stocks in 22 countries and sold stocks in
16 countries. On August 31, 1996, stocks from 39 different countries were
represented in the Fund's portfolio. The Netherlands (7.7% of total net assets)
and Spain (5.1%) were two of our largest European country weightings, while our
largest Asian weighting was in Hong Kong (8.8%). The average price/earnings
ratio of stocks in
2
<PAGE> 4
each of these markets has been below 16, while the world market average has been
above 21. One interesting observation about our global diversification and value
emphasis: when the small cap market in the U.S. was down approximately 16%
during the early part of the summer of this year, the Templeton Global Smaller
Companies Fund was down only 3%.
Looking forward, we remain cautiously optimistic. Today's relatively high market
valuation levels make identifying investment bargains a particular challenge. We
continue to believe that many investors should have a portion of their assets in
global small-capitalization stocks to reap the benefits of diversification.
Although no one can reliably predict the direction of the markets in the near
term, we believe that our disciplined approach to identifying undervalued stocks
has the potential to reward long-term investors.
TEMPLETON GLOBAL SMALLER COMPANIES FUND
Top 10 Holdings on 8/31/96
As a Percentage of Total Net Assets
<TABLE>
<CAPTION>
% OF TOTAL
COMPANY, INDUSTRY, COUNTRY NET ASSETS
<S> <C>
News International PLC
Broadcasting & Publishing, Australia 3.0%
Adecco SA
Business & Public Services, Switzerland 1.9%
Gesa-Gas Y Electricidad SA
Utilities - Electrical & Gas, Spain 1.3%
Internatio-Mueller NV
Health & Personal Care, Netherlands 1.1%
Hollandsche Beton Groep NV
Construction & Housing, Netherlands 1.0%
SIG Schweizerische Industrie
Gesellschaft Holdings AG
Metals & Mining, Switzerland 1.0%
Banco de Andalucia
Banking, Spain 1.0%
Ahrend Groep NV
Business & Public Services, Netherlands 0.9%
Wing Hang Bank
Banking, Hong Kong 0.9%
New Asia Realty and Trust Co. Ltd., A
Real Estate, Hong Kong 0.8%
</TABLE>
FOR A COMPLETE LIST OF PORTFOLIO HOLDINGS, PLEASE SEE PAGE 12 OF THIS REPORT.
TEMPLETON GLOBAL SMALLER
COMPANIES FUND
Top 10 Industries on 8/31/96
As a Percentage of Total Net Assets
<TABLE>
<CAPTION>
% OF TOTAL
INDUSTRY NET ASSETS
<S> <C>
Banking 6.2%
Health & Personal Care 6.0%
Broadcasting & Publishing 5.8%
Insurance 5.2%
Transportation 4.8%
Merchandising 4.5%
Food & Household Products 4.5%
Business & Public Services 4.4%
Forest Products & Paper 4.2%
Metals & Mining 4.0%
</TABLE>
Of course, there are special risks associated with foreign investments in
smaller companies which are heightened in developing markets. These include
political, social and economic uncertainties, price volatility, illiquidity,
currency fluctuation and limited
3
<PAGE> 5
product lines, markets, or financial and management resources. In addition,
developing markets are relatively small and less liquid. Although the short-term
price volatility of smaller companies and developing markets can be
disconcerting, declines of as much as 40% to 50% are not unusual in emerging
markets. For example, the Hong Kong market has increased 535% in the last 15
years, but has suffered six declines of more than 20% during that time.(1) These
special risks and other considerations are discussed in the Fund's prospectus.
This discussion reflects the strategies we employed for the Fund during the past
fiscal year, and includes our opinions as of the close of the period. Since
economic and market conditions are constantly changing, our strategies and
evaluations, conclusions and decisions regarding portfolio holdings may change
as new circumstances arise. Although past performance of a specific investment
or sector cannot guarantee future performance, such information can be useful in
analyzing securities we purchase or sell for the Fund.
Thank you for your continued support of the Templeton Global Smaller Companies
Fund. We welcome your comments and look forward to serving you in the future.
Sincerely,
/s/ Marc S. Joseph
- ---------------------------------------------
Marc S. Joseph
Portfolio Manager
Templeton Global Smaller Companies Fund, Inc.
1. SOURCE: BLOOMBERG. BASED ON QUARTERLY PERCENTAGE CHANGE OVER 15 YEARS ENDED
JUNE 30, 1996.
4
<PAGE> 6
PERFORMANCE SUMMARY
CLASS I
Templeton Global Smaller Companies Fund Class I shares provided a total return
of 11.69% for the one-year period ended August 31, 1996. Total return measures
the change in value of an investment, assuming reinvestment of dividends and
capital gains distributions, and does not include the initial sales charge.
While we expect market volatility in the short term, we have always maintained a
long-term perspective when managing the Fund, and we encourage shareholders to
view their investments in a similar manner. As you can see from the table on
page 6, the Fund delivered a cumulative total return of more than 176% for the
10-year period ended August 31, 1996.
As measured by net asset value, the price of the Fund decreased by 22 cents
($0.22), from $8.77 on August 31, 1995 to $8.55 on August 31, 1996. During the
reporting period, shareholders received distributions totaling 12 cents ($0.12)
per share in dividend income, 83.5 cents ($0.835) in long-term capital gains,
and 14.5 cents ($0.145) in short-term capital gains. Of course, past performance
is not predictive of future results, and distributions will vary depending on
income earned by the Fund, as well as any profits realized from the sale of
securities in the portfolio.
The graph on page 6 shows how a $10,000 investment in the Fund, over the past
ten years has kept your purchasing power well ahead of inflation, as measured by
the Consumer Price Index (CPI). It also compares the Fund's performance over the
same period with the performance of the unmanaged Morgan Stanley Capital
International (MSCI) World Index, which tracks 22 equity markets worldwide.
Please remember that the Fund's performance differs from that of the index
because, among other things, the index does not contain cash (the Fund generally
carries a certain percentage of cash at any given time), is not managed
according to any investment strategy and includes no sales charges or management
expenses. Of course, one cannot invest directly in an index.
5
<PAGE> 7
TEMPLETON GLOBAL SMALLER
COMPANIES FUND - CLASS I
Periods Ended August 31, 1996
<TABLE>
<CAPTION>
Since
Inception
One-Year Five-Year Ten-Year (6/1/81)
<S> <C> <C> <C> <C>
Cumulative
Total Return(1) 11.69% 77.43% 176.94% 694.11%
Average Annual
Total Return(2) 5.21% 10.84% 10.07% 14.11%
Value of $10,000
Investment(3) $10,521 $16,730 $26,104 $74,831
</TABLE>
1.CUMULATIVE TOTAL RETURN REPRESENTS THE CHANGE IN VALUE OF AN INVESTMENT OVER
THE PERIODS INDICATED AND DOES NOT INCLUDE THE MAXIMUM 5.75% INITIAL SALES
CHARGE. SEE NOTE BELOW.
2.AVERAGE ANNUAL TOTAL RETURN REPRESENTS THE AVERAGE ANNUAL CHANGE IN VALUE OF
AN INVESTMENT OVER THE SPECIFIED PERIODS, AND INCLUDES THE SALES CHARGE. SEE
NOTE BELOW.
3.THESE FIGURES REPRESENT THE VALUE OF A HYPOTHETICAL $10,000 INVESTMENT IN THE
FUND OVER THE SPECIFIED PERIODS AND INCLUDE THE INITIAL SALES CHARGE.
NOTE: PRIOR TO JULY 1, 1992, THE FUND'S SHARES WERE OFFERED AT A HIGHER INITIAL
SALES CHARGE. THUS, ACTUAL TOTAL RETURN TO PURCHASERS OF SHARES DURING THAT
PERIOD WOULD HAVE BEEN SOMEWHAT LOWER THAN NOTED ABOVE. ALL TOTAL RETURN
CALCULATIONS REFLECT THE DEDUCTION OF A PROPORTIONAL SHARE OF FUND EXPENSES ON
AN ANNUAL BASIS AND ASSUME THAT ALL DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS
WERE REINVESTED WHEN PAID. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE
WITH MARKET CONDITIONS, CURRENCIES AND THE ECONOMIC AND POLITICAL CLIMATES OF
COUNTRIES WHERE INVESTMENTS ARE MADE. DEVELOPING MARKETS INVOLVE HEIGHTENED
RISKS RELATED TO THE SAME FACTORS, IN ADDITION TO THOSE ASSOCIATED WITH THE
RELATIVELY SMALL SIZE AND LESSER LIQUIDITY OF THESE MARKETS. THUS YOUR SHARES,
WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR INITIAL COST. PAST
PERFORMANCE IS NOT PREDICTIVE OF FUTURE RESULTS.
TEMPLETON GLOBAL SMALLER
COMPANIES FUND - CLASS I
Total Return Index Comparison
$10,000 Investment (8/31/86 - 8/31/96)
SMALLER COS. CLASS 1
<TABLE>
<CAPTION>
Date T Glbl Sm. Co. MS World GD C P I
<S> <C> <C> <C>
9/1/86 $ 9,426 $10,000 $10,000
9/30/86 9,304 9,605 10,046
10/31/86 9,584 9,443 10,055
11/30/86 9,669 9,845 10,064
12/31/86 9,615 10,044 10,073
1/31/87 10,279 11,226 10,137
2/28/87 10,934 11,599 10,173
3/31/87 11,068 12,319 10,219
4/30/87 10,927 13,043 10,274
5/31/87 10,809 13,064 10,310
6/30/87 11,330 13,059 10,346
7/31/87 11,523 13,323 10,373
8/31/87 11,822 14,113 10,428
9/30/87 11,551 13,869 10,482
10/31/87 8,456 11,516 10,509
11/30/87 8,088 11,239 10,519
12/31/87 8,498 11,728 10,519
1/31/88 9,013 12,016 10,546
2/29/88 9,760 12,716 10,574
3/31/88 10,044 13,102 10,619
4/30/88 10,119 13,270 10,674
5/31/88 9,950 13,007 10,711
6/30/88 10,644 12,992 10,757
7/31/88 10,772 13,238 10,802
8/31/88 10,452 12,513 10,847
9/30/88 10,829 13,046 10,920
10/31/88 11,071 13,916 10,956
11/30/88 10,815 14,403 10,965
12/31/88 10,947 14,536 10,983
1/31/89 11,473 15,065 11,038
2/28/89 11,413 14,973 11,084
3/31/89 11,608 14,880 11,148
4/30/89 12,013 15,225 11,220
5/31/89 12,449 14,854 11,284
6/30/89 12,404 14,689 11,311
7/31/89 13,019 16,352 11,338
8/31/89 13,425 15,959 11,357
9/30/89 13,320 16,413 11,393
10/31/89 12,721 15,868 11,448
11/30/89 12,768 16,504 11,475
12/31/89 12,901 17,037 11,493
1/31/90 12,096 16,245 11,612
2/28/90 12,467 15,551 11,666
3/31/90 12,773 14,615 11,731
4/30/90 12,467 14,407 11,749
5/31/90 13,385 15,927 11,776
6/30/90 13,369 15,816 11,840
7/31/90 13,175 15,963 11,885
8/31/90 11,613 14,472 11,994
9/30/90 10,518 12,948 12,095
10/31/90 10,283 14,160 12,168
11/30/90 10,563 13,931 12,194
12/31/90 10,880 14,225 12,194
1/31/91 11,661 14,748 12,268
2/28/91 12,878 16,115 12,286
3/31/91 13,514 15,643 12,304
4/30/91 13,677 15,768 12,323
5/31/91 14,222 16,128 12,360
6/30/91 13,804 15,134 12,396
7/31/91 14,440 15,852 12,414
8/31/91 14,713 15,804 12,450
9/30/91 14,676 16,221 12,505
10/31/91 14,671 16,487 12,524
11/30/91 14,321 15,772 12,560
12/31/91 15,179 16,923 12,569
1/31/92 15,805 16,613 12,588
2/29/92 16,209 16,329 12,633
3/31/92 15,704 15,564 12,698
4/30/92 15,926 15,783 12,715
5/31/92 16,411 16,414 12,733
6/30/92 16,047 15,868 12,779
7/31/92 15,866 15,911 12,806
8/31/92 15,543 16,300 12,842
9/30/92 15,301 16,154 12,878
10/31/92 15,238 15,719 12,923
11/30/92 15,338 16,004 12,941
12/31/92 15,740 16,136 12,932
1/31/93 16,406 16,193 12,995
2/28/93 16,739 16,580 13,041
3/31/93 17,457 17,545 13,086
4/30/93 17,688 18,361 13,123
5/31/93 18,021 18,787 13,141
6/30/93 17,790 18,633 13,160
7/31/93 17,918 19,020 13,160
8/31/93 19,072 19,895 13,196
9/30/93 19,149 19,531 13,224
10/31/93 19,818 20,072 13,278
11/30/93 19,688 18,940 13,288
12/31/93 20,752 19,870 13,288
1/31/94 21,869 21,183 13,324
2/28/94 21,480 20,912 13,369
3/31/94 20,726 20,015 13,414
4/30/94 20,908 20,638 13,433
5/31/94 20,830 20,693 13,443
6/30/94 19,973 20,637 13,488
7/31/94 20,623 21,034 13,525
8/31/94 21,402 21,669 13,579
9/30/94 21,194 21,103 13,615
10/31/94 20,976 21,709 13,625
11/30/94 20,032 20,771 13,643
12/31/94 19,800 20,977 13,643
1/31/95 19,267 20,666 13,697
2/28/95 19,667 20,972 13,752
3/31/95 20,093 21,987 13,797
4/30/95 20,973 22,759 13,843
5/31/95 21,612 22,957 13,871
6/30/95 22,199 22,955 13,898
7/31/95 23,291 24,107 13,898
8/31/95 23,371 23,574 13,934
9/30/95 23,664 24,265 13,962
10/31/95 22,853 23,886 14,008
11/30/95 23,027 24,720 13,999
12/31/95 23,295 25,447 13,989
1/31/96 23,936 25,913 14,071
2/29/96 24,638 26,076 14,116
3/31/96 25,005 26,514 14,190
4/30/96 25,615 27,142 14,245
5/31/96 26,104 27,169 14,272
6/30/96 26,287 27,311 14,281
7/31/96 25,219 26,349 14,308
8/31/96 26,104 26,658 14,335
</TABLE>
1. INCLUDES ALL SALES CHARGES AND REPRESENTS THE CHANGE IN VALUE OF AN
INVESTMENT OVER THE PERIOD SHOWN. TOTAL RETURN ASSUMES REINVESTMENT OF
DIVIDENDS AND CAPITAL GAINS. PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE
RESULTS.
2. INDEX IS UNMANAGED AND INCLUDES REINVESTED DIVIDENDS.
3. SOURCE: U.S. BUREAU OF LABOR STATISTICS.
- ----------------------------------------------------------------------------
Under section 854(b)(2) of the Internal Revenue Code, the Templeton Global
Smaller Companies Fund hereby designates 8.64% of its ordinary income
dividends paid by the Fund during the fiscal year ended August 31, 1996, as
income qualifying for the corporate dividends received deduction.
- ----------------------------------------------------------------------------
6
<PAGE> 8
PERFORMANCE SUMMARY
CLASS II
Templeton Global Smaller Companies Fund Class II shares provided a total return
of 10.74% for the one-year period ended August 31, 1996. Total return measures
the change in value of an investment, assuming reinvestment of dividends and
capital gains distributions, and does not include sales charges.
As measured by net asset value, the price of the Fund's shares decreased by 28
cents ($0.28), from $8.75 on August 31, 1995 to $8.47 on August 31, 1996. During
the reporting period, shareholders received distributions totaling 10.43 cents
($0.1043) per share in dividend income, 83.5 cents ($0.835) in long-term capital
gains, and 14.5 cents ($0.145) in short-term capital gains. Of course, past
performance is not predictive of future results, and distributions will vary
depending on income earned by the Fund, as well as any profits realized from the
sale of securities in the portfolio.
The graph on the following page shows how a $10,000 investment in the Fund,
since inception, has kept your purchasing power well ahead of inflation, as
measured by the Consumer Price Index (CPI). It also compares the Fund's
performance over the same period with the performance of the unmanaged Morgan
Stanley Capital International (MSCI) World Index, which tracks 22 equity markets
worldwide. Please remember that the Fund's performance differs from that of the
index because, among other things, the index does not contain cash (the Fund
generally carries a certain percentage of cash at any given time), is not
managed according to any investment strategy and includes no sales charges or
management expenses. Of course, one cannot invest directly in an index.
7
<PAGE> 9
TEMPLETON GLOBAL SMALLER
COMPANIES FUND - CLASS II
Periods Ended 8/31/96
<TABLE>
<CAPTION>
Since
Inception
One-Year (5/1/95)
<S> <C> <C>
Cumulative Total Return(1) 10.74% 23.28%
Average Annual Total Return(2) 8.65% 15.37%
Value of $10,000 Investment(3) $10,865 $12,104
</TABLE>
1. CUMULATIVE TOTAL RETURN REPRESENTS THE CHANGE IN VALUE OF AN INVESTMENT OVER
THE PERIODS INDICATED AND DOES NOT INCLUDE THE 1.0% INITIAL SALES CHARGE AND
THE 1.0% CONTINGENT DEFERRED SALES CHARGE, APPLICABLE TO SHARES REDEEMED WITHIN
THE FIRST 18 MONTHS OF INVESTMENT.
2. AVERAGE ANNUAL TOTAL RETURN REPRESENTS THE AVERAGE ANNUAL CHANGE IN VALUE OF
AN INVESTMENT OVER THE SPECIFIED PERIODS, AND INCLUDES THE SALES CHARGES.
3. THESE FIGURES REPRESENT THE VALUE OF A HYPOTHETICAL $10,000 INVESTMENT IN THE
FUND OVER THE SPECIFIED PERIODS AND INCLUDE ALL SALES CHARGES.
ALL TOTAL RETURN CALCULATIONS REFLECT THE DEDUCTION OF A PROPORTIONAL SHARE OF
FUND EXPENSES ON AN ANNUAL BASIS AND ASSUME THAT ALL DIVIDENDS AND CAPITAL GAINS
DISTRIBUTIONS WERE REINVESTED WHEN PAID. INVESTMENT RETURN AND PRINCIPAL VALUE
WILL FLUCTUATE WITH MARKET CONDITIONS, CURRENCIES AND THE ECONOMIC AND POLITICAL
CLIMATES OF COUNTRIES WHERE INVESTMENTS ARE MADE. DEVELOPING MARKETS INVOLVE
HEIGHTENED RISKS RELATED TO THE SAME FACTORS, IN ADDITION TO THOSE ASSOCIATED
WITH THE RELATIVELY SMALL SIZE AND LESSER LIQUIDITY OF THESE MARKETS. THUS YOUR
SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR INITIAL COST. PAST
PERFORMANCE IS NOT PREDICTIVE OF FUTURE RESULTS.
TEMPLETON GLOBAL SMALLER
COMPANIES FUND - CLASS II
Total Return Index Comparison
$10,000 Investment (5/1/95 - 8/31/96)
Smaller Cos. Class 2
<TABLE>
<CAPTION>
Date T Glbl Sm. Co. MS World GD C P I
<S> <C> <C> <C>
5/1/95 $ 9,899 $10,000 $10,000
5/31/95 10,202 10,087 10,020
6/30/95 10,479 10,086 10,040
7/31/95 10,982 10,592 10,040
8/31/95 11,020 10,358 10,066
9/30/95 11,146 10,662 10,086
10/31/95 10,747 10,495 10,120
11/30/95 10,829 10,862 10,112
12/31/95 10,936 11,181 10,105
1/31/96 11,238 11,386 10,165
2/29/96 11,570 11,457 10,198
3/31/96 11,728 11,650 10,251
4/30/96 12,002 11,926 10,291
5/31/96 12,232 11,938 10,310
6/30/96 12,319 12,000 10,316
7/31/96 11,800 11,578 10,336
8/31/96 12,104 11,713 10,356
</TABLE>
1. INCLUDES ALL SALES CHARGES AND REPRESENTS THE CHANGE IN VALUE OF AN
INVESTMENT OVER THE PERIOD SHOWN. TOTAL RETURN ASSUMES REINVESTMENT OF DIVIDENDS
AND CAPITAL GAINS. PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE RESULTS.
2. INDEX IS UNMANAGED AND INCLUDES REINVESTED DIVIDENDS.
3. SOURCE: U.S. BUREAU OF LABOR STATISTICS.
- ---------------------------------------------------------------------------
Under section 854(b)(2) of the Internal Revenue Code, the Templeton Global
Smaller Companies Fund hereby designates 8.64% of its ordinary income
dividends paid by the Fund during the fiscal year ended August 31, 1996, as
income qualifying for the corporate dividends received deduction.
- ---------------------------------------------------------------------------
8
<PAGE> 10
TEMPLETON GLOBAL SMALLER
COMPANIES FUND -- CLASS I
If you had invested $10,000 in the Templeton Global Smaller Companies Fund at
its inception, your investment would be worth more than $74,000 today. This
chart illustrates the cumulative total return of an assumed $10,000 investment
in the Fund on June 1, 1981 (inception), with income dividends and capital gains
distributions reinvested through August 31, 1996(1).
Smaller Cos. Mountain
<TABLE>
<CAPTION>
Initial+ Initial+
Date Dividends Capital Total
Reinvested Gains Value
<S> <C> <C> <C>
6/1/81 $ 9,423 $ 9,423 $ 9,423
12/31/81 9,353 9,156 9,356
12/31/82 12,213 12,013 12,720
12/31/83 15,331 16,407 17,674
12/31/84 14,603 16,157 17,746
12/31/85 17,722 20,781 23,186
12/31/86 20,149 24,221 27,562
12/31/87 16,906 20,912 24,362
12/31/88 19,693 26,701 31,381
12/31/89 22,534 30,946 36,984
12/31/90 17,660 25,865 31,190
12/31/91 22,989 36,012 43,515
12/31/92 19,720 38,044 45,120
12/31/93 26,204 49,740 59,490
12/31/94 25,125 46,937 56,761
12/31/95 26,728 55,765 66,779
8/31/96 29,950 62,488 74,831
</TABLE>
1. THE AMOUNT OF CAPITAL GAINS DISTRIBUTIONS ACCEPTED IN SHARES WAS $44,881. THE
AMOUNT OF DIVIDENDS REINVESTED WAS $12,343. THE PERFORMANCE INFORMATION SHOWN
REPRESENTS PAST PERFORMANCE AND IS NOT PREDICTIVE OF FUTURE RESULTS. THIS WAS A
PERIOD OF GENERALLY RISING SECURITIES PRICES. FOR STANDARDIZED PERFORMANCE
FIGURES, PLEASE REFER TO THE PERFORMANCE SUMMARY BEGINNING ON PAGE 5.
9
<PAGE> 11
TEMPLETON GLOBAL SMALLER COMPANIES FUND, INC.
Financial Highlights
- --------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE--CLASS I
(For a share outstanding throughout the year)
<TABLE>
<CAPTION>
YEAR ENDED AUGUST 31
----------------------------------------------------------------
1996 1995 1994 1993 1992
---------- ---------- ---------- ---------- --------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $ 8.77 $ 8.24 $ 7.44 $ 7.70 $ 8.10
---------- ---------- ---------- ---------- --------
Income from investment operations:
Net investment income .16 .11 .09 .10 .15
Net realized and unrealized gain .72 .62 .81 1.23 .25
---------- ---------- ---------- ---------- --------
Total from investment operations .88 .73 .90 1.33 .40
---------- ---------- ---------- ---------- --------
Distributions:
Dividends from net investment income (.12) (.11) (.07) (.15) (.15)
Distributions from net realized gains (.98) (.09) (.03) (1.41) (.65)
Distributions in excess of realized gains -- -- -- (.03) --
---------- ---------- ---------- ---------- --------
Total distributions (1.10) (.20) (.10) (1.59) (.80)
---------- ---------- ---------- ---------- --------
Change in net asset value (.22) .53 .80 (.26) (.40)
---------- ---------- ---------- ---------- --------
Net asset value, end of year $ 8.55 $ 8.77 $ 8.24 $ 7.44 $ 7.70
========== ========== ========== ========== ========
TOTAL RETURN* 11.69% 9.20% 12.22% 22.71% 5.64%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (000) $1,544,214 $1,447,155 $1,409,494 $1,129,848 $950,409
Ratio of expenses to average net assets 1.27% 1.36% 1.36% 1.29% 1.33%
Ratio of net investment income to average net assets 1.93% 1.32% 1.17% 1.70% 1.96%
Portfolio turnover rate 32.71% 18.79% 28.06% 28.73% 48.97%
Average commission rate paid (per share) $ .0068
</TABLE>
* TOTAL RETURN DOES NOT REFLECT SALES COMMISSIONS.
10
<PAGE> 12
TEMPLETON GLOBAL SMALLER COMPANIES FUND, INC.
Financial Highlights (cont.)
- --------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE--CLASS II
(For a share outstanding throughout the period)
<TABLE>
<CAPTION>
FOR THE PERIOD
MAY 1, 1995+
YEAR ENDED THROUGH
AUGUST 31, 1996 AUGUST 31, 1995
--------------- ---------------
<S> <C> <C>
Net asset value, beginning of period $ 8.75 $ 7.87
------- ------
Income from investment operations:
Net investment income .13 --
Net realized and unrealized gain .67 .88
------- ------
Total from investment operations .80 .88
------- ------
Distributions:
Dividends from net investment income (.10) --
Distributions from net realized gains (.98) --
------- ------
Total distributions (1.08) --
------- ------
Change in net asset value (.28) .88
------- ------
Net asset value, end of period $ 8.47 $ 8.75
======= ======
TOTAL RETURN* 10.74% 11.18%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000) $15,483 $ 2,569
Ratio of expenses to average net assets 2.07% 2.11%**
Ratio of net investment income to average net assets 1.23% .16%**
Portfolio turnover rate 32.71% 18.79%
Average commission rate paid (per share) $ .0068
</TABLE>
* TOTAL RETURN DOES NOT REFLECT SALES COMMISSIONS OR THE CONTINGENT DEFERRED
SALES CHARGE. NOT ANNUALIZED FOR PERIODS OF LESS THAN ONE YEAR.
** ANNUALIZED.
+ COMMENCEMENT OF OFFERING OF SALES.
SEE NOTES TO FINANCIAL STATEMENTS.
11
<PAGE> 13
TEMPLETON GLOBAL SMALLER COMPANIES FUND, INC.
Investment Portfolio, August 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INDUSTRY ISSUE COUNTRY SHARES VALUE
<S> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS: 82.2%
- ---------------------------------------------------------------------------------------------------------------------------
AEROSPACE & MILITARY TECHNICAL SYSTEMS: 0.8%
British Aerospace PLC U.K. 545,000 $ 8,479,328
* Celsius AB, B Swe. 338,400 4,241,274
--------------
12,720,602
- ---------------------------------------------------------------------------------------------------------------------------
APPLIANCES & HOUSEHOLD DURABLES: 1.3%
Chofu Seisaku Co. Ltd. Jpn. 138,000 3,302,347
Fisher & Paykel Ltd. N.Z. 2,181,767 7,322,176
* Guangdong Kelon Electrical Hldgs Ltd., H, 144A Chn. 11,152,000 4,903,563
* Mohawk Industries U.S. 200,000 4,587,500
--------------
20,115,586
- ---------------------------------------------------------------------------------------------------------------------------
AUTOMOBILES: 0.8%
Jardine International Motor Holdings Ltd. H.K. 2,057,000 2,673,501
Qing Ling Motors Co. Ltd., H Chn. 10,525,000 4,049,386
* Tofas Turk Otomobil Fabrikasi AS, GDR Tur. 16,817,850 3,111,302
Weifu Fuel Injection Co. Ltd. Chn. 4,745,850 1,902,636
--------------
11,736,825
- ---------------------------------------------------------------------------------------------------------------------------
BANKING: 5.8%
Banco de Andalucia Sp. 110,000 15,202,716
Banco de Valencia SA Sp. 50,366 802,718
Banco Ganadero SA, ADR C Col. 76,307 1,545,217
Banco Pastor SA Sp. 5,314 316,272
Banco Popular Espanol SA Sp. 42,000 7,281,007
Bancorp Hawaii Inc. U.S. 174,067 6,592,788
BPI Socieda de Gestora de Participacoes Socias SA Port. 301,616 3,744,130
Foereningsbanken AB, A Swe. 215,000 759,700
Fokus Bank AS Nor. 774,300 4,324,450
Fokus Bank AS, 144A Nor. 223,400 1,247,684
* Glendale Federal Bank FSB U.S. 330,000 5,857,500
Mercantile Bancorporation Inc. U.S. 128,000 6,256,000
National Bank of Canada Can. 893,200 7,539,343
Union Bank of Norway, Primary Capital Cert. Nor. 314,000 8,352,041
Whitney Holding Corp. U.S. 208,865 6,422,599
Wing Hang Bank H.K. 3,500,000 13,533,786
--------------
89,777,951
- ---------------------------------------------------------------------------------------------------------------------------
BEVERAGES & TOBACCO: 0.6%
Sinocan Holdings Ltd. H.K. 19,164,000 9,108,012
- ---------------------------------------------------------------------------------------------------------------------------
BROADCASTING & PUBLISHING: 5.6%
* Century Communications Corp., A U.S. 743,182 5,852,558
* Cordiant PLC U.K. 1,096,480 1,754,738
</TABLE>
12
<PAGE> 14
TEMPLETON GLOBAL SMALLER COMPANIES FUND, INC.
Investment Portfolio, August 31, 1996 (cont.)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INDUSTRY ISSUE COUNTRY SHARES VALUE
<S> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS (CONT.)
- ---------------------------------------------------------------------------------------------------------------------------
BROADCASTING & PUBLISHING (cont.)
Grupo Radio Centro SA, ADR Mex. 100,000 $ 787,500
* Hollinger International Inc., A U.S. 180,000 1,957,500
Marieberg Tidnings AB, A Swe. 326,700 7,103,943
News International PLC Aus. 7,888,000 46,799,169
Oriental Press Group Limited H.K. 6,003,000 3,085,926
Sing Tao Holdings Ltd. H.K. 1,881,140 948,781
South China Morning Post Holdings Ltd. H.K. 12,150,000 8,563,531
* United International Holdings Inc., A U.S. 341,740 4,698,925
Wace Group PLC U.K. 2,711,300 5,693,607
--------------
87,246,178
- ---------------------------------------------------------------------------------------------------------------------------
BUILDING MATERIALS & COMPONENTS: 2.2%
Anglian Group PLC U.K. 283,730 854,969
Comercial Ind. Fin. Inmobiliari Agropecuaria, ADR, 144A Arg. 431,000 948,200
Cristaleria Espanola SA Sp. 82,550 5,044,997
Keumkang Co. Ltd. Kor. 29,300 1,829,994
* Mirgor SA Comercial Industrial Financiera Inmobi ADR C Arg. 359,000 789,800
Pioneer International Ltd. Aus. 3,000,000 8,662,015
Sarna Kunststoff Holding AG Swtz. 6,570 6,564,525
Schuttersveld Holding Neth. 55,448 2,203,895
Uralita SA Sp. 814,000 6,893,070
--------------
33,791,465
- ---------------------------------------------------------------------------------------------------------------------------
BUSINESS & PUBLIC SERVICES: 4.4%
Adecco SA Swtz. 104,856 29,534,440
Ahrend Groep NV Neth. 285,360 13,834,074
* Healthcare Services Group Inc. U.S. 309,000 2,858,250
Lex Service PLC U.K. 1,549,000 9,419,905
* Magellan Health Services Inc. U.S. 250,000 4,312,500
* Novacare Inc. U.S. 220,000 1,980,000
Scribona AB, A Swe. 225,400 2,229,375
Scribona AB, B Swe. 406,800 3,962,128
--------------
68,130,672
- ---------------------------------------------------------------------------------------------------------------------------
CHEMICALS: 2.2%
Crompton & Knowles Corp. U.S. 163,384 2,450,754
Energia e Industrias Aragonesas Eia S Sp. 1,636,989 7,611,165
European Vinyls Corp. EVC International NV Neth. 116,081 3,418,465
Gurit Heberlein AG Wattwil SG, br. Swtz. 4,000 7,933,333
Tessenderlo Chemie Bel. 22,000 7,900,951
* Tiszai Vegyi Kombinat RT, GDR, 144A Hun. 537,900 4,706,625
--------------
34,021,293
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
13
<PAGE> 15
TEMPLETON GLOBAL SMALLER COMPANIES FUND, INC.
Investment Portfolio, August 31, 1996 (cont.)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INDUSTRY ISSUE COUNTRY SHARES VALUE
<S> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS (CONT.)
- ---------------------------------------------------------------------------------------------------------------------------
CONSTRUCTION & HOUSING: 2.9%
Cubiertas y Mzov SA Sp. 23,051 $ 1,515,556
Dragados y Construcciones SA Sp. 208,000 2,625,444
Halla Engineering & Construction Corp. Kor. 122,080 3,546,541
Hollandsche Beton Groep NV Neth. 85,092 15,475,931
* Huarte SA Sp. 325,184 729,992
Kaufman & Broad Home Corp. U.S. 625,000 7,656,250
Kumagai Gumi Hong Kong Ltd. H.K. 5,854,000 5,450,863
* Kumagai Gumi Hong Kong Ltd., wts. H.K. 155,200 31,311
* Schuler Homes Inc. U.S. 1,032,000 6,772,500
Sociedade Construcoes Soares da Costa SA Port. 115,000 969,378
--------------
44,773,766
- ---------------------------------------------------------------------------------------------------------------------------
DATA PROCESSING & REPRODUCTION: 0.9%
* Cirrus Logic Inc. U.S. 102,000 1,581,000
* Quantum Corp. U.S. 360,000 5,535,000
Sligos SA Fr. 73,286 6,222,635
--------------
13,338,635
- ---------------------------------------------------------------------------------------------------------------------------
ELECTRICAL & ELECTRONICS: 0.6%
Dongfang Electrical Machinery Co. Ltd., H Chn. 9,084,000 2,672,629
G.P. Batteries International Ltd. Sing. 1,346,000 3,768,800
* G.P. Batteries International Ltd., wts. Sing. 336,500 227,138
* Plantronics Inc. U.S. 4,355 167,668
Techtronic Industries Co. Ltd. H.K. 17,420,621 2,635,904
--------------
9,472,139
- ---------------------------------------------------------------------------------------------------------------------------
ELECTRONIC COMPONENTS & INSTRUMENTS: 1.4%
Draka Holding NV Neth. 333,485 10,001,537
Swisslog Holding AG Swtz. 26,500 7,177,083
Twentsche Kabel Holdings NV Neth. 102,525 4,717,200
--------------
21,895,820
- ---------------------------------------------------------------------------------------------------------------------------
ENERGY EQUIPMENT & SERVICES: 0.6%
Helikopter Services Group ASA Nor. 492,000 5,718,208
Koninklijke Pakhoed NV Neth. 101,920 2,872,542
--------------
8,590,750
- ---------------------------------------------------------------------------------------------------------------------------
ENERGY SOURCES: 0.1%
Transportadora de Gas del Sur SA, ADR B Arg. 119,104 1,429,248
- ---------------------------------------------------------------------------------------------------------------------------
FINANCIAL SERVICES: 2.4%
A.G. Edwards Inc. U.S. 83,900 2,349,200
Alex Brown Inc. U.S. 95,300 4,765,000
</TABLE>
14
<PAGE> 16
TEMPLETON GLOBAL SMALLER COMPANIES FUND, INC.
Investment Portfolio, August 31, 1996 (cont.)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INDUSTRY ISSUE COUNTRY SHARES VALUE
<S> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS (CONT.)
- ---------------------------------------------------------------------------------------------------------------------------
FINANCIAL SERVICES (cont.)
Dah Sing Financial Holdings Ltd. H.K. 1,766,000 $ 5,778,183
* Fritz Companies U.S. 194,300 2,890,213
Invesco PLC U.K. 1,400,000 5,300,629
London Pacific Group Ltd. U.K. 292,952 1,031,408
Manhattan Card Co. Ltd. H.K. 20,130,639 9,046,747
Om Gruppen AB Swe. 195,000 5,064,667
Onbancorp Inc. U.S. 47,370 1,527,683
--------------
37,753,730
- ---------------------------------------------------------------------------------------------------------------------------
FOOD & HOUSEHOLD PRODUCTS: 4.5%
Bombril SA, Braz. 129,572,500 2,728,245
C.P. Pokphand Co. Ltd. H.K. 23,142,000 7,856,159
Cafe de Coral Holdings Ltd. H.K. 11,536,885 3,207,799
Chareon Pokphand Feedmill Public Co. Ltd., fgn. Thai. 30,800 135,104
* Consorcio de Alimentos Fabril Pacifico, 144A Per. 2,212,000 2,955,304
+ Ekco Group Inc. U.S. 1,296,000 6,966,000
Herdez SA de CV, A Mex. 2,962,000 914,089
Herdez SA de CV, B Mex. 2,833,400 971,558
* JP Foodservice Inc. U.S. 511,500 12,020,250
Lam Soon Foods Inc. H.K. 391,000 27,811
Lindt & Spruengli, partn. ctf. Swtz. 4,380 7,646,750
McBride PLC U.K. 3,800,000 7,742,510
National Foods Ltd. Aus. 8,000,000 8,733,210
Panamerican Beverages Inc., A Mex. 117,200 4,951,700
PT Japfa Comfeed Indonesia, fgn. Indo. 2,685,000 1,547,716
Vetropack AG Swtz. 713 2,198,417
--------------
70,602,622
- ---------------------------------------------------------------------------------------------------------------------------
FOREST PRODUCTS & PAPER: 4.1%
Boise Cascade Corp. U.S. 122,615 4,138,256
Cartiere Burgo SPA Itl. 810,400 3,694,482
+ Crown-Van Gelder Papier SA Neth. 74,720 6,637,278
* Empaques Ponderosa SA de CV, B Mex. 669,800 2,031,705
Fletcher Challenge Ltd. Forestry Division N.Z. 4,211,532 5,816,551
Hansol Paper Co. Ltd. Kor. 113,844 3,682,473
Hung Hing Printing Group Ltd. H.K. 17,300,000 4,642,418
* Mayr-Melnhof Karton AG Aust. 61,800 2,902,021
Metsa Serla OY, B Fin. 1,185,460 8,878,262
Munksjo AB Swe. 1,300,000 11,974,601
Primex Forest Products Ltd. Can. 300,000 1,534,695
* Shorewood Packaging Corp. U.S. 495,800 8,428,600
--------------
64,361,342
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
15
<PAGE> 17
TEMPLETON GLOBAL SMALLER COMPANIES FUND, INC.
Investment Portfolio, August 31, 1996 (cont.)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INDUSTRY ISSUE COUNTRY SHARES VALUE
<S> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS (CONT.)
- ---------------------------------------------------------------------------------------------------------------------------
HEALTH & PERSONAL CARE: 6.0%
Apothekers Cooperatie OPG VA, partn. ctf. Neth. 180,000 $ 4,542,005
* Coventry Corp. U.S. 250,000 3,296,875
* Esaote Biomedica SPA, ADR 144A Itl. 34,975 1,319,532
Gedeon Richter Ltd., GDR 144A Hun. 86,480 4,778,020
* Haemonetics Corp. U.S. 254,900 5,225,450
Internatio-Mueller NV Neth. 745,092 16,871,701
Medeva PLC U.K. 3,237,911 12,739,521
Pacific Chemical Co. Ltd. Kor. 110,000 1,906,622
* Physician Corp. of America U.S. 560,400 7,425,300
* Playtex Products Inc. U.S. 1,047,800 8,644,350
* Pliva DD, GDR, 144A Crtia. 90,050 4,232,350
* Quorum Health Group Inc. U.S. 232,500 5,870,625
* Revco DS Inc. U.S. 81,500 2,098,625
Schwarz Pharma AG Ord Ger. 86,300 6,298,206
* Sunrise Medical Inc. U.S. 381,100 6,240,513
Swank International Manufacturing Co. Ltd. H.K. 14,994,000 2,326,906
--------------
93,816,601
- ---------------------------------------------------------------------------------------------------------------------------
INDUSTRIAL COMPONENTS: 1.6%
* Banner Aerospace Inc. U.S. 370,200 2,915,325
Gencorp Inc. U.S. 641,000 8,893,875
Hoeganaes AB, B free Swe. 238,000 7,529,200
Walbro Corp. U.S. 305,000 5,985,625
--------------
25,324,025
- ---------------------------------------------------------------------------------------------------------------------------
INSURANCE: 5.2%
Allied Group U.S. 221,000 8,563,750
American Bankers Insurance Group Inc. U.S. 198,615 9,434,213
* American Travelers Corp. U.S. 375,000 11,671,875
Capital RE Corp. U.S. 120,000 4,560,000
CMAC Investment Corp. U.S. 130,000 8,125,000
Conseco Inc. U.S. 198,380 8,331,974
Enhance Financial Services Group Inc. U.S. 145,000 4,168,750
* Fairfax Financial Holdings Ltd. Can. 70,000 10,077,831
* Ing Groep NV Neth. 250,000 7,783,800
London Insurance Group Inc. Can. 200,000 4,516,388
* Mid-Atlantic Medical Services U.S. 250,000 3,375,000
--------------
80,608,581
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
16
<PAGE> 18
TEMPLETON GLOBAL SMALLER COMPANIES FUND, INC.
Investment Portfolio, August 31, 1996 (cont.)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INDUSTRY ISSUE COUNTRY SHARES VALUE
<S> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS (CONT.)
- ---------------------------------------------------------------------------------------------------------------------------
LEISURE & TOURISM: 0.5%
Helicopter Line (The) N.Z. 975,400 $ 1,957,293
Kuoni Reisen Holding AG, B Swtz. 2,598 6,018,700
--------------
7,975,993
- ---------------------------------------------------------------------------------------------------------------------------
MACHINERY & ENGINEERING: 3.4%
Apv Plc. U.K. 2,000,000 2,076,535
Bucher Holding AG Swtz. 4,226 3,239,933
Fives-Lille Fr. 132,750 11,166,807
* Howden Group PLC U.K. 3,358,800 3,775,759
IHC Caland NV Neth. 176,000 9,539,295
* Saurer AG Swtz. 11,660 4,547,400
Valmet (OY) Fin. 381,600 6,611,596
* Varity Corp. U.S. 240,000 12,060,000
--------------
53,017,325
- ---------------------------------------------------------------------------------------------------------------------------
MERCHANDISING: 4.5%
De Boer Winkelbedrijven NV Neth. 155,000 7,981,030
Det Danske Traelastkompagni AS Den. 107,000 8,232,208
* Eckerd Corp. U.S. 398,970 9,774,765
Giordano International Ltd. H.K. 3,069,674 2,540,694
+ Hechinger Co., A U.S. 1,700,000 6,587,500
Hudsons Bay Co. Can. 596,900 8,746,187
Kwik Save Group PLC U.K. 175,000 1,079,252
LI & Fung Ltd. H.K. 3,820,000 3,458,131
Macintosh NV Neth. 5,700 135,592
Moebel Walther AG Ger. 116,410 5,821,090
* Sa des Galeries Lafayette Fr. 5,540 1,586,217
* Sports Authority Inc. U.S. 213,450 5,096,119
Strawbridge & Clothier, A U.S. 240,225 4,324,050
* United Stationers Inc. U.S. 28,538 588,596
Ventures Stores Inc. U.S. 351,000 1,623,375
Wo Kee Hong Holdings Ltd. H.K. 35,774,000 3,423,571
* Wo Kee Hong Holdings Ltd., wts. H.K. 7,175,200 148,468
--------------
71,146,845
- ---------------------------------------------------------------------------------------------------------------------------
METALS & MINING: 4.0%
AK Steel Holding Corp. U.S. 270,000 10,057,500
Antofagasta Holdings PLC Chil. 1,188,400 5,844,681
Arbed SA Lux. 2,195 249,088
Boehler Uddeholm AG Aust. 105,150 8,199,145
Boehler Uddeholm AG, 144A Aust. 8,120 633,163
Capral Aluminium Ltd. Aus. 1,547,451 4,774,043
* Grupo Simec SA de CV, ADR Mex. 142,300 658,138
</TABLE>
17
<PAGE> 19
TEMPLETON GLOBAL SMALLER COMPANIES FUND, INC.
Investment Portfolio, August 31, 1996 (cont.)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INDUSTRY ISSUE COUNTRY SHARES VALUE
<S> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS (CONT.)
- ---------------------------------------------------------------------------------------------------------------------------
METALS & MINING (cont.)
PT Tambang Timah (Persero), fgn. Indo. 4,765,000 $ 7,629,697
Quanex Corp. U.S. 150,000 3,337,500
* Russell Metals Inc., conv., A Can. 833,509 1,918,773
SIG (Schweizerische Industrie Gesellschaft) Holdings AG Swtz. 6,325 15,285,417
Vallourec Fr. 117,798 4,656,792
--------------
63,243,937
- ---------------------------------------------------------------------------------------------------------------------------
MISCELLANEOUS MATERIALS & COMMODITIES: 0.5%
IMC Global Inc. U.S. 160,000 6,880,000
Korea Chemical Co Ltd Kor. 11,710 1,005,981
--------------
7,885,981
- ---------------------------------------------------------------------------------------------------------------------------
MULTI-INDUSTRY: 1.4%
Amer Group Ltd., A Fin. 220,000 5,262,628
* DESC SA, B Mex. 694,700 3,591,459
* DESC SA, C Mex. 14,470 75,189
La Cemento Nacional CA, GDR Ecu. 400 74,000
La Cemento Nacional CA, GDR, 144A Ecu. 11,775 2,178,375
Marine Wendel Fr. 50,147 4,475,775
Pioneer Industries International Holdings Ltd. H.K. 1,128,000 897,148
Zehnder Holding AG Swtz. 14,125 5,650,000
--------------
22,204,574
- ---------------------------------------------------------------------------------------------------------------------------
REAL ESTATE: 1.5%
Asean Resources Holdings Ltd. H.K. 7,256,730 1,651,710
* Asean Resources Holdings Ltd., wts. H.K. 725,673 6,475
* Catellus Development Corp. U.S. 550,000 5,225,000
New Asia Realty and Trust Co. Ltd., A H.K. 3,583,000 13,182,845
Tai Cheung Holdings Ltd. H.K. 3,630,000 2,793,210
--------------
22,859,240
- ---------------------------------------------------------------------------------------------------------------------------
TELECOMMUNICATIONS: 1.3%
* International Cabletel U.S. 198,153 4,805,210
* LCI International U.S. 134,700 4,765,012
* Millicom International Cellular SA Lux. 100,000 3,975,000
Telmex-Telefonos de Mexico SA, L Mex. 4,592,972 7,462,633
--------------
21,007,855
- ---------------------------------------------------------------------------------------------------------------------
TEXTILES & APPAREL: 2.2%
Fountain Set Holdings Ltd. H.K. 35,262,000 7,250,770
* Fruit of the Loom Inc., A U.S. 102,000 2,830,500
Gamma Holdings NV Neth. 180,000 8,444,444
Kellwood Co. U.S. 271,600 4,379,550
</TABLE>
18
<PAGE> 20
TEMPLETON GLOBAL SMALLER COMPANIES FUND, INC.
Investment Portfolio, August 31, 1996 (cont.)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INDUSTRY ISSUE COUNTRY SHARES VALUE
<S> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS (CONT.)
- ---------------------------------------------------------------------------------------------------------------------------
TEXTILES & APPAREL (cont.)
+ Tungtex (Holdings) Co. Ltd. H.K. 35,573,000 $ 3,266,321
Winsor Industrial Corp. Ltd. H.K. 3,328,000 2,948,180
Yizheng Chemical Fibre Co. Ltd., H Chn. 23,734,600 5,555,723
--------------
34,675,488
- ---------------------------------------------------------------------------------------------------------------------------
TRANSPORTATION: 4.8%
Airborne Freight Corp. U.S. 309,900 7,321,388
+ Anangel-American Shipholdings Ltd., ADR Gr. 399,800 3,498,250
APL Ltd. U.S. 100,000 2,362,500
Comair Holdings Inc. U.S. 162,500 3,900,000
IMC Holdings Ltd. H.K. 6,654,000 3,786,305
Koninklijke Nedlloyd NV Neth. 40,000 951,521
Malaysian International Shipping Corp. Bhd., fgn. Mal. 1,233,333 3,812,535
* OMI Corp. U.S. 1,070,000 8,560,000
Orient Overseas International Ltd. H.K. 3,218,000 2,372,144
PT Steady Safe, fgn. Indo. 8,186,666 6,816,396
+ Sea Containers Ltd., A U.K. 461,000 8,643,750
Singapore Bus Service (1978) Ltd., fgn. Sing. 300,100 1,988,653
Stena Line AB, B free Swe. 1,620,000 7,265,397
Stolt Nielsen SA Nor. 200,000 3,375,000
Stolt Nielsen SA, ADR Nor. 100,000 1,762,500
* Tranz Rail Holdings Ltd., ADR N.Z. 77,390 1,160,850
Unitor AS Nor. 470,000 6,599,012
--------------
74,176,201
- ---------------------------------------------------------------------------------------------------------------------------
UTILITIES ELECTRICAL & GAS: 2.4%
Central Costanera SA, ADR, 144A Arg. 21,500 661,125
Electricas Reunidas de Zaragoza Sp. 419,869 11,404,471
Electricidad de Caracas Venz. 4,294,786 3,486,372
Gesa-Gas y Electricidad SA Sp. 381,700 20,948,904
Guangdong Electric Power Development Co Ltd, B, 144A Chn. 250,000 184,287
Shandong Huaneng Power Chn. 160,300 1,502,813
--------------
38,187,972
- ---------------------------------------------------------------------------------------------------------------------------
WHOLESALE & INTERNATIONAL TRADE: 1.7%
Bergen Brunswig Corp., A U.S. 210,000 5,853,750
Computer 2000 AG Ger. 9,499 1,932,087
* Dahl International AB Swe. 245,000 3,699,593
</TABLE>
19
<PAGE> 21
TEMPLETON GLOBAL SMALLER COMPANIES FUND, INC.
Investment Portfolio, August 31, 1996 (cont.)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INDUSTRY ISSUE COUNTRY SHARES VALUE
<S> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS (CONT.)
- ---------------------------------------------------------------------------------------------------------------------------
WHOLESALE & INTERNATIONAL TRADE (cont.)
* Dahl International AB, 144A Swe. 255,000 $ 3,850,597
Sime Darby Hongkong Ltd. H.K. 11,067,000 11,664,539
--------------
27,000,566
--------------
TOTAL COMMON STOCKS (cost $995,803,058) 1,281,997,820
- ---------------------------------------------------------------------------------------------------------------------------
PREFERRED STOCKS: 3.1%
- ---------------------------------------------------------------------------------------------------------------------------
Ballast Nedam NV, ctf., conv., pfd. Neth. 89,890 4,276,609
Cia Brasileira de Petroleo Ipiranga, pfd. Braz. 7,790,000 100,402
Coteminas Cia Tecidos Norte de Minas, pfd. Braz. 19,929,100 6,765,325
* Herlitz AG, pfd. Ger. 12,000 1,224,448
Hollinger International Inc., conv., pfd. U.S. 339,000 3,644,250
Hugo Boss AG, pfd. Ger. 9,100 10,638,240
Telebras-Telecomunicacoes Brasileiras SA, pfd., ADR Braz. 170,342 12,669,186
Unibanco-Uniao de Bancos Brasileiros SA, pfd. Braz. 274,381,688 7,019,161
Weg SA, pfd. Braz. 5,807,000 2,713,952
--------------
TOTAL PREFERRED STOCKS (cost $32,355,387) 49,051,573
- ---------------------------------------------------------------------------------------------------------------------------
<CAPTION>
PRINCIPAL IN
LOCAL CURRENCY**
<S> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------
BOND: 0.7% (cost $10,690,625)
- ---------------------------------------------------------------------------------------------------------------------------
U.S. Treasury Note, 8.50%, 7/15/97 U.S. 10,000,000 10,214,100
- ---------------------------------------------------------------------------------------------------------------------------
SHORT TERM OBLIGATIONS: 14.0% (cost $217,836,885)
- ---------------------------------------------------------------------------------------------------------------------------
U.S. Treasury Bills, 4.96% to 5.115% with
maturities to 11/21/96 U.S. 218,795,000 217,912,745
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS: 100.0% (cost $1,256,685,955) 1,559,176,238
OTHER ASSETS, LESS LIABILITIES: 0.0% 521,123
--------------
TOTAL NET ASSETS: 100.0% $1,559,697,361
==============
</TABLE>
* NON-INCOME PRODUCING.
** CURRENCY OF COUNTRIES INDICATED.
+ SEE NOTE 5.
SEE NOTES TO FINANCIAL STATEMENTS.
20
<PAGE> 22
TEMPLETON GLOBAL SMALLER COMPANIES FUND, INC.
Financial Statements
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
August 31, 1996
<TABLE>
<S> <C>
Assets:
Investment in securities, at value
(identified cost $1,256,685,955) $1,559,176,238
Receivables:
Investment securities sold 4,373,922
Capital shares sold 592,763
Dividends and interest 2,931,327
-------------
Total assets 1,567,074,250
-------------
Liabilities:
Payables:
Investment securities purchased 4,383,679
Capital shares redeemed 846,286
Accrued expenses and other liabilities 2,146,924
-------------
Total liabilities 7,376,889
-------------
Net assets, at value $1,559,697,361
==============
Net assets consist of:
Undistributed net investment income $ 18,851,474
Net unrealized appreciation 302,490,283
Accumulated net realized gain 91,856,937
Net capital paid in on shares of
capital stock 1,146,498,667
-------------
Net assets, at value $1,559,697,361
==============
Class I:
Net asset value per share
($1,544,213,836 / 180,697,334
shares outstanding) $ 8.55
==============
Maximum offering price
($8.55 / 94.25%) $ 9.07
==============
Class II:
Net asset value per share
($15,483,525 / 1,827,886 shares
outstanding) $ 8.47
==============
Maximum offering price
($8.47 / 99.00%) $ 8.56
==============
</TABLE>
STATEMENT OF OPERATIONS
for the year ended August 31, 1996
<TABLE>
<S> <C> <C>
Investment income:
(net of $2,334,362
foreign taxes withheld)
Dividends $ 28,377,132
Interest 19,158,886
------------
Total income $ 47,536,018
Expenses:
Management fees (Note 3) 11,134,701
Administrative fees (Note
3) 1,688,684
Distribution fees (Note
3)
Class I 3,065,108
Class II 85,164
Transfer agent fees (Note
3) 1,663,500
Custodian fees 505,621
Reports to shareholders 570,000
Audit fees 40,500
Legal fees (Note 3) 54,000
Registration and filing
fees 85,000
Directors' fees and
expenses 80,000
Other 19,861
------------
Total expenses 18,992,139
------------
Net investment
income 28,543,879
Realized and unrealized
gain (loss):
Net realized gain (loss)
on:
Investments 159,583,289
Foreign currency
transactions (855,583)
------------
158,727,706
Net unrealized
depreciation
on investments (23,274,642)
------------
Net realized and
unrealized gain 135,453,064
------------
Net increase in net assets
resulting from operations $163,996,943
============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
21
<PAGE> 23
TEMPLETON GLOBAL SMALLER COMPANIES FUND, INC.
Financial Statements (cont.)
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
for the years ended August 31, 1996 and 1995
<TABLE>
<CAPTION>
1996 1995
------------- -------------
<S> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income $ 28,543,879 $ 17,572,179
Net realized gain from security and foreign currency transactions 158,727,706 113,468,314
Net unrealized depreciation (23,274,642) (13,200,708)
--------------- ---------------
Net increase in net assets resulting from operations 163,996,943 117,839,785
Distributions to shareholders:
From net investment income
Class I (20,150,116) (17,799,526)
Class II (50,894) --
From net realized gain
Class I (164,590,927) (15,254,111)
Class II (494,045) --
Capital share transactions (Note 2)
Class I 118,750,930 (47,033,692)
Class II 12,511,697 2,477,100
--------------- ---------------
Net increase in net assets 109,973,588 40,229,556
Net assets:
Beginning of year 1,449,723,773 1,409,494,217
--------------- ---------------
End of year $1,559,697,361 $1,449,723,773
============== ==============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
22
<PAGE> 24
TEMPLETON GLOBAL SMALLER COMPANIES FUND, INC.
Notes to Financial Statements
- --------------------------------------------------------------------------------
1. SUMMARY OF ACCOUNTING POLICIES
Templeton Global Smaller Companies Fund, Inc. (the Fund), formerly Templeton
Smaller Companies Growth Fund, Inc., is an open-end, diversified management
investment company registered under the Investment Company Act of 1940. The Fund
seeks to achieve its objectives by investing primarily in securities of smaller
companies globally. The following summarizes the Fund's significant accounting
policies.
A. SECURITIES VALUATIONS:
Securities listed or traded on a recognized national or foreign exchange or
NASDAQ are valued at the last reported sales prices on the principal exchange on
which the securities are traded. Over-the-counter securities and listed
securities for which no sale is reported are valued at the mean between the last
current bid and asked prices. Securities for which market quotations are not
readily available are valued at fair value as determined by management and
approved in good faith by the Board of Directors.
B. FOREIGN CURRENCY TRANSACTIONS:
Portfolio securities and other assets and liabilities denominated in foreign
currencies are translated into U.S. dollars based on the rate of exchange of
such currencies against U.S. dollars on the date of valuation. Purchases and
sales of portfolio securities and income items denominated in foreign currencies
are translated into U.S. dollar amounts on the respective dates of such
transactions. When the Fund purchases or sells foreign securities it customarily
enters into a foreign exchange contract to minimize foreign exchange risk
between the trade date and the settlement date of such transactions.
The Fund does not isolate that portion of the results of operations resulting
from changes in foreign exchange rates on investments from the fluctuations
arising from changes in market prices of securities held. Such fluctuations are
included with the net realized and unrealized gain or loss from investments.
Reported net 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, the differences between the amounts
of dividends, interest, and foreign withholding taxes recorded on the Fund's
books, and the U.S. dollar equivalent of the amounts actually received or paid.
Net unrealized foreign exchange gains and losses arise from changes in the value
assets and liabilities other than investments in securities at the end of the
fiscal period, resulting from changes in the exchange rate.
C. INCOME TAXES:
It is the Fund's policy to comply with the requirements of the Internal Revenue
Code applicable to regulated investment companies and to distribute all its
taxable income to its shareholders. Therefore, no provision has been made for
income taxes.
D. SECURITY TRANSACTIONS, INVESTMENT INCOME, DISTRIBUTIONS AND EXPENSES:
Security transactions are accounted for on a trade date basis. Dividend income
is recorded on the ex-dividend date. Certain dividend income from foreign
securities is recorded as soon as information is available to the Fund. Interest
income and estimated expenses are accrued daily. Distributions to shareholders
which are determined in accordance with income tax regulations, are recorded on
the ex-dividend date.
E. ACCOUNTING ESTIMATES:
The preparation of financial statements in accordance with generally accepted
accounting principles 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 expense during the reporting
period. Actual results could differ from those estimates.
2. TRANSACTIONS IN SHARES OF CAPITAL STOCK
The Fund offers two classes of shares: Class I and Class II shares. Shares of
each class are identical except for their initial sales load, a contingent
deferred sales charge on Class II shares, distribution fees, and voting rights
on matters affecting a single
23
<PAGE> 25
TEMPLETON GLOBAL SMALLER COMPANIES FUND, INC.
Notes to Financial Statements (cont.)
- --------------------------------------------------------------------------------
class. At August 31, 1996, there were 1.50 billion shares of capital stock
authorized ($0.20 par value). Transactions in the Fund's shares were as follows:
<TABLE>
<CAPTION>
CLASS I
------------------------------------------------------
1996 1995
------------------------- -------------------------
SHARES AMOUNT SHARES AMOUNT
---------- ------------- ---------- -------------
<S> <C> <C> <C> <C>
Shares sold 20,182,579 $ 165,480,309 15,070,799 $ 120,009,656
Shares issued on reinvestment of
distributions 20,586,393 160,467,664 3,752,881 28,274,671
Shares redeemed (25,112,503) (207,197,043) (24,757,808) (195,318,019)
----------- ------------- ----------- -------------
Net increase (decrease) 15,656,469 $ 118,750,930 (5,934,128) $ (47,033,692)
=========== ============= =========== =============
</TABLE>
<TABLE>
<CAPTION>
CLASS II
------------------------------------------------------
FOR THE PERIOD
MAY 1, 1995
YEAR ENDED THROUGH
AUGUST 31, 1996 AUGUST 31, 1995
------------------------- -------------------------
SHARES AMOUNT SHARES AMOUNT
---------- ------------- ---------- -------------
<S> <C> <C> <C> <C>
Shares sold 1,602,914 $ 13,112,922 300,812 $ 2,538,911
Shares issued on reinvestment of
distributions 64,332 497,295 -- --
Shares redeemed (133,035) (1,098,520) (7,137) (61,811)
----------- ------------- ----------- -------------
Net increase 1,534,211 $ 12,511,697 293,675 $ 2,477,100
=========== ============= =========== =============
</TABLE>
3. INVESTMENT MANAGEMENT FEES AND OTHER TRANSACTIONS WITH AFFILIATES
Certain officers of the Fund are also directors or officers of Templeton
Investment Counsel, Inc. (TICI), Templeton Global Investors, Inc. (TGII),
Franklin Templeton Distributors, Inc. (FTD), and Franklin Templeton Investor
Services, Inc. (FTIS), the Fund's investment manager, administrative manager,
principal underwriter, and transfer agent, respectively.
The Fund pays monthly an investment management fee to TICI equal, on an annual
basis, to 0.75% of the Fund's average daily net assets. The Fund pays TGII an
administrative fee of 0.15% per annum on the first $200 million of the Fund's
average daily net assets, 0.135% of the next $500 million, 0.10% of the next
$500 million, and 0.075% per annum of such average net assets in excess of $1.2
billion. For the year ended August 31, 1996, FTD received net commissions of
$436,675 from the sale of the Fund's shares and FTIS received fees of
$1,663,500.
Under the distribution plans for Class I and Class II shares, the Fund
reimburses FTD quarterly for FTD's costs and expenses in connection with any
activity that is primarily intended to result in sales of Fund shares, subject
to a maximum of 0.25% and 1.00% per annum of the average daily net assets of
Class I and Class II shares, respectively. Under the Class I distribution plan,
costs and expenses exceeding the maximum may be reimbursed in subsequent
periods. At August 31, 1996, unreimbursed expenses amount to $11,920. Class II
shares redeemed within 18 months are subject to a contingent deferred sales
charge. Contingent deferred sales charges of $1,455 were paid to FTD for the
year ended August 31, 1996.
An officer of the Fund is a partner of Dechert Price & Rhoads, legal counsel for
the Fund, which firm received fees of $54,000 for the year ended August 31,
1996.
24
<PAGE> 26
TEMPLETON GLOBAL SMALLER COMPANIES FUND, INC.
Notes to Financial Statements (cont.)
- --------------------------------------------------------------------------------
4. PURCHASES AND SALES OF SECURITIES
Purchases and sales of securities (excluding short-term securities) for the year
ended August 31, 1996 aggregated $420,647,511 and $378,149,667, respectively.
The cost of securities for federal income tax purposes is $1,258,160,831.
Realized gains and losses are reported on an identified cost basis.
At August 31, 1996, the aggregate gross unrealized appreciation and depreciation
of portfolio securities, based on cost for federal income tax purposes, was as
follows:
<TABLE>
<S> <C>
Unrealized appreciation $382,533,349
Unrealized depreciation (81,517,942)
------------
Net unrealized appreciation $301,015,407
============
</TABLE>
5. HOLDING OF 5% VOTING SECURITIES OF PORTFOLIO COMPANIES
The Investment Company Act of 1940 defines "affiliated companies" as investments
in portfolio companies in which the Fund owns 5% or more of the outstanding
voting securities. Investments in "affiliated companies" at August 31, 1996
amounted to $35,599,099. For the year ended August 31, 1996, dividends from
affiliated companies were $2,135,259 and net realized gain from disposition of
affiliated companies was $2,198,639.
25
<PAGE> 27
TEMPLETON GLOBAL SMALLER COMPANIES FUND, INC.
Independent Auditor's Report
- --------------------------------------------------------------------------------
The Board of Directors and Shareholders
Templeton Global Smaller Companies Fund, Inc.
We have audited the accompanying statement of assets and liabilities, including
the investment portfolio, of Templeton Global Smaller Companies Fund, Inc. as of
August 31, 1996, and the related statement of operations for the year then
ended, the statement of changes in net assets for each of the two years in the
period then ended, and the financial highlights for the periods indicated in the
accompanying financial statements. These financial statements and financial
highlights are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
August 31, 1996 by correspondence with the custodian and brokers. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Templeton Global Smaller Companies Fund Inc. as of August 31, 1996, the results
of its operations, the changes in its net assets and the financial highlights
for the periods indicated, in conformity with generally accepted accounting
principles.
/s/ McGladrey & Pullen, LLP
[McGladrey & Pullen, LLP]
New York, New York
September 27, 1996
26
<PAGE> 28
NOTES
-----
<PAGE> 29
LITERATURE REQUEST
- --------------------------------------------------------------------------------
For a free brochure and prospectus, which contain more complete information,
including charges and expenses, call Franklin Fund Information, toll free, at
1-800/DIAL BEN (1-800/342-5236). Please read the prospectus carefully before you
invest or send money. 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 determined by the presence of a regular beeping tone.
FRANKLIN TEMPLETON GROUP
GLOBAL GROWTH INCOME
Franklin Global Health Franklin Adjustable Rate
Care Fund Securities Fund
Franklin Templeton Franklin Adjustable U.S.
Japan Fund Government Securities Fund
Templeton Developing Franklin's AGE High
Markets Trust Income Fund
Templeton Foreign Fund Franklin Investment Grade
Templeton Foreign Smaller Income Fund
Companies Fund Franklin Short-Intermediate U.S.
Templeton Global Government Securities Fund
Infrastructure Fund Franklin U.S. Government
Templeton Global Securities Fund
Opportunities Trust Franklin Money Fund
Templeton Global Franklin Federal Money Fund
Real Estate Fund
Templeton Global Smaller FOR NON-U.S. INVESTORS:
Companies Fund
Templeton Greater Franklin Tax-Advantaged
European Fund High Yield Securities Fund
Templeton Growth Fund Franklin Tax-Advantaged
Templeton Latin America International Bond Fund
Fund Franklin Tax-Advantaged U.S.
Templeton Pacific Government Securities Fund
Growth Fund
Templeton World Fund FOR CORPORATIONS:
GLOBAL GROWTH AND INCOME Franklin Corporate Qualified
Dividend Fund
Franklin Global Utilities Fund
Franklin Templeton German FRANKLIN FUNDS SEEKING
Government Bond Fund TAX-FREE INCOME
Franklin Templeton
Global Currency Fund Federal Intermediate-Term
Templeton Global Bond Fund Tax-Free Income Fund
Templeton Growth and Federal Tax-Free Income Fund
Income Fund High Yield Tax-Free
Income Fund
GLOBAL INCOME Insured Tax-Free Income Fund
Puerto Rico Tax-Free
Franklin Global Government Income Fund
Income Fund Tax-Exempt Money Fund
Franklin Templeton Hard
Currency Fund FRANKLIN STATE-SPECIFIC
Franklin Templeton High FUNDS SEEKING
Income Currency Fund TAX-FREE INCOME
Templeton Americas
Government Securities Fund Alabama
Arizona*
GROWTH Arkansas**
California*
Franklin Blue Chip Fund Colorado
Franklin California Growth Fund Connecticut
Franklin DynaTech Fund Florida*
Franklin Equity Fund Georgia
Franklin Gold Fund Hawaii**
Franklin Growth Fund Indiana
Franklin MidCap Growth Fund Kentucky
Franklin Small Cap Growth Fund Louisiana
Maryland
GROWTH AND INCOME Massachusetts***
Michigan*
Franklin Asset Allocation Fund Minnesota***
Franklin Balance Sheet Missouri
Investment Fund New Jersey
Franklin Convertible New York*
Securities Fund North Carolina
Franklin Equity Income Fund Ohio***
Franklin Income Fund Oregon
Franklin MicroCap Value Fund Pennsylvania
Franklin Natural Resources Fund Tennessee**
Franklin Real Estate Texas
Securities Fund Virginia
Franklin Rising Dividends Fund Washington**
Franklin Strategic Income Fund
Franklin Utilities Fund VARIABLE ANNUITIES
Franklin Value Fund
Templeton American Trust, Inc. Franklin Valuemark(SM)
Franklin Templeton
Valuemark Income Plus
(an immediate annuity)
*Two or more fund options available: long-term portfolio, intermediate-term
portfolio, a portfolio of insured municipal securities, and/or a high yield
portfolio (CA) and a money market portfolio (CA and NY).
**The fund may invest up to 100% of its assets in bonds that pay interest
subject to the federal alternative minimum tax.
***Portfolio of insured municipal securities. 10/96.1
