UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-03143
Templeton Global Smaller Companies Fund
(Exact name of registrant as specified in charter)
300 S.E. 2nd Street, Fort Lauderdale, FL 33301-1923
(Address of principal executive offices) (Zip code)
Craig S. Tyle, One Franklin Parkway, San Mateo, CA 94403-1906
(Name and address of agent for service)
Registrant’s telephone number, including area code: (954) 527-7500
Date of fiscal year end: 8/31
Date of reporting period: 8/31/18
| Item 1. | Reports to Stockholders. |
|
|
Annual Report and Shareholder Letter
August 31, 2018 |
Sign up for electronic delivery at franklintempleton.com/edelivery
Franklin Templeton Investments
Why choose Franklin Templeton Investments?
Successful investing begins with ambition. And achievement only comes when you reach for it. That’s why we continually strive to deliver better outcomes for investors. No matter what your goals are, our deep, global investment expertise allows us to offer solutions that can help.
During our more than 70 years of experience, we’ve managed through all kinds of markets—up, down and those in between. We’re always preparing for what may come next. It’s because of this, combined with our strength as one of the world’s largest asset managers that we’ve earned the trust of millions of investors around the world.
Dear Shareholder:
CFA® is a trademark owned by CFA Institute.
|
Not FDIC Insured | May Lose Value | No Bank Guarantee
|
| franklintempleton.com | Not part of the annual report | 1 | ||
| 2 |
Annual Report | franklintempleton.com | ||
Templeton Global Smaller Companies Fund
1. Source: Morningstar.
The index is unmanaged and includes reinvestment of any income or distributions. The index does not reflect any fees, expenses or sales charges. One cannot invest directly in an index, and an index is not 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 15.
| franklintempleton.com | Annual Report | 3 | ||
TEMPLETON GLOBAL SMALLER COMPANIES FUND
2. Source: U.S. Bureau of Labor Statistics.
| 4 |
Annual Report | franklintempleton.com | ||
TEMPLETON GLOBAL SMALLER COMPANIES FUND
3. Not held at period-end.
4. Not a Fund holding.
See www.franklintempletondatasources.com for additional data provider information.
| franklintempleton.com | Annual Report | 5 | ||
TEMPLETON GLOBAL SMALLER COMPANIES FUND
| 6 |
Annual Report | franklintempleton.com | ||
TEMPLETON GLOBAL SMALLER COMPANIES FUND
Performance Summary as of August 31, 2018
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. 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.
Performance as of 8/31/181
Cumulative total return excludes sales charges. Average annual total return includes maximum sales charges. Sales charges will vary depending on the size of the investment and the class of share purchased. The maximum is 5.75% and the minimum is 0%. Class A: 5.75% maximum initial sales charge; Advisor Class: no sales charges. For other share classes, visit franklintempleton.com.
| Share Class | Cumulative Total Return2 |
Average Annual Total Return3 |
||||||
| A |
||||||||
| 1-Year |
+9.23% | +2.91% | ||||||
| 5-Year |
+42.09% | +6.01% | ||||||
| 10-Year |
+95.67% | +6.30% | ||||||
| Advisor |
||||||||
| 1-Year |
+9.50% | +9.50% | ||||||
| 5-Year |
+43.84% | +7.54% | ||||||
| 10-Year |
+100.53% | +7.21% | ||||||
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, go to franklintempleton.com or call (800) 342-5236.
See page 9 for Performance Summary footnotes.
| franklintempleton.com | Annual Report | 7 | ||
TEMPLETON GLOBAL SMALLER COMPANIES FUND
PERFORMANCE SUMMARY
Total Return Index Comparison for a Hypothetical $10,000 Investment1
Total return represents the change in value of an investment over the periods shown. It includes any 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.
Class A (9/1/08–8/31/18)
Advisor Class (9/1/08–8/31/18)
See page 9 for Performance Summary footnotes.
| 8 |
Annual Report | franklintempleton.com | ||
TEMPLETON GLOBAL SMALLER COMPANIES FUND
PERFORMANCE SUMMARY
Distributions (9/1/17–8/31/18)
| Share Class | Net Investment Income | Short-Term Capital Gain | Long-Term Capital Gain | Total | ||||||||||
| A |
$0.0653 | $0.0231 | $0.3620 | $0.4504 | ||||||||||
| C |
$ — | $0.0231 | $0.3620 | $0.3851 | ||||||||||
| R6 |
$0.1101 | $0.0231 | $0.3620 | $0.4952 | ||||||||||
| Advisor |
$0.0747 | $0.0231 | $0.3620 | $0.4598 | ||||||||||
| Total Annual Operating Expenses5 | ||||||||||||||
| Share Class | With Waiver | Without Waiver | ||||||||||||
|
A |
1.37% | 1.38% | ||||||||||||
| Advisor | 1.12% | 1.13% | ||||||||||||
Each class of shares is available to certain eligible investors and has different annual fees and expenses, as described in the prospectus.
All investments involve risks, including possible loss of principal. Smaller, midsized and relatively new or unseasoned companies can be particularly sensitive to changing economic conditions, and their prospects for growth are less certain than those of larger, more established companies. In addition, smaller company stocks have historically exhibited greater price volatility than larger company stocks, particularly over the short term. 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. The Fund is actively managed but there is no guarantee that the manager’s investment decisions will produce the desired results. The Fund’s prospectus also includes a description of the main investment risks.
1. The Fund has a fee waiver associated with any investment it makes in a Franklin Templeton money fund and/or other Franklin Templeton fund, contractually guaranteed through 12/31/18. Fund investment results reflect the fee waiver; without this waiver, the results would have been lower.
2. Cumulative total return represents the change in value of an investment over the periods indicated.
3. Average annual total return represents the average annual change in value of an investment over the periods indicated. Return for less than one year, if any, has not been annualized.
4. Source: Morningstar. The MSCI ACWI Small Cap Index is a free float-adjusted, market capitalization-weighted index designed to measure performance of small cap equity securities of global developed and emerging markets.
5. Figures are as stated in the Fund’s current prospectus and may differ from the expenses ratios disclosed in the Your Fund’s Expenses and Financial Highlights sections in this report. In periods of market volatility, assets may decline significantly, causing total annual Fund operating expenses to become higher than the figures shown.
See www.franklintempletondatasources.com for additional data provider information.
| franklintempleton.com | Annual Report | 9 | ||
TEMPLETON GLOBAL SMALLER COMPANIES FUND
As a Fund shareholder, you can incur two types of costs: (1) transaction costs, including sales charges (loads) on Fund purchases and redemptions; and (2) 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 table below 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 table below provides information about actual account values and actual expenses in the columns under the heading “Actual.” In these columns the Fund’s actual return, which includes the effect of Fund expenses, is used to calculate the “Ending Account Value” for each class of shares. 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): Divide your account value by $1,000 (if your account had an $8,600 value, then $8,600 ÷ $1,000 = 8.6). Then multiply the result by the number in the row for your class of shares under the headings “Actual” and “Expenses Paid During Period” (if Actual Expenses Paid During Period were $7.50, then 8.6 x $7.50 = $64.50). In this illustration, the actual expenses paid this period are $64.50.
Hypothetical Example for Comparison with Other Funds
Under the heading “Hypothetical” in the table, information is provided about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. This information may not be used to estimate the actual ending account balance or expenses you paid for the period, but it can help you compare ongoing costs of investing in the Fund with those of other funds. To do so, compare this 5% hypothetical example for the class of shares you hold with the 5% hypothetical examples that appear in the shareholder reports of other funds.
Please note that expenses shown in the table are meant to highlight ongoing costs and do not reflect any transactional costs. Therefore, information under the heading “Hypothetical” is useful in comparing ongoing costs only, and will not help you compare total costs of owning different funds. In addition, if transactional costs were included, your total costs would have been higher.
| Actual (actual return after expenses) |
Hypothetical (5% annual return before expenses) |
|||||||||||||||||
| Expenses | Expenses | Net | ||||||||||||||||
| Beginning | Ending | Paid During | Ending | Paid During | Annualized | |||||||||||||
| Share | Account | Account | Period | Account | Period | Expense | ||||||||||||
| Class | Value 3/1/18 | Value 8/31/18 | 3/1/18–8/31/181,2 | Value 8/31/18 | 3/1/18–8/31/181,2 | Ratio2 | ||||||||||||
| A |
$1,000 | $987.60 | $ 6.71 | $1,018.45 | $ 6.82 | 1.34% | ||||||||||||
| C |
$1,000 | $985.00 | $10.46 | $1,014.67 | $10.61 | 2.09% | ||||||||||||
| R6 |
$1,000 | $989.60 | $ 4.71 | $1,020.47 | $ 4.79 | 0.94% | ||||||||||||
| Advisor |
$1,000 | $988.60 | $ 5.46 | $1,019.71 | $ 5.55 | 1.09% | ||||||||||||
1. Expenses are equal to the annualized expense ratio for the six-month period as indicated above—in the far right column—multiplied by the simple average account value over the period indicated, and then multiplied by 184/365 to reflect the one-half year period.
2. Reflects expenses after fee waivers and expense reimbursements. Does not include acquired fund fees and expenses.
| 10 |
Annual Report | franklintempleton.com | ||
TEMPLETON GLOBAL SMALLER COMPANIES FUND
| Year Ended August 31, | ||||||||||||||||||||
| 2018 | 2017 | 2016 | 2015 | 2014 | ||||||||||||||||
| Class A |
||||||||||||||||||||
| Per share operating performance (for a share outstanding throughout the year) |
||||||||||||||||||||
| Net asset value, beginning of year |
$ 9.92 | $ 8.63 | $ 8.32 | $ 9.20 | $7.81 | |||||||||||||||
| Income from investment operationsa: |
||||||||||||||||||||
| Net investment incomeb |
0.07 | 0.06 | 0.04 | 0.05 | 0.03 | |||||||||||||||
| Net realized and unrealized gains (losses) |
0.86 | 1.29 | 0.29 | (0.83 | ) | 1.38 | ||||||||||||||
| Total from investment operations |
0.93 | 1.35 | 0.33 | (0.78 | ) | 1.41 | ||||||||||||||
| Less distributions from: |
||||||||||||||||||||
| Net investment income |
(0.07 | ) | (0.03 | ) | (0.02 | ) | (0.04 | ) | (0.02 | ) | ||||||||||
| Net realized gains |
(0.39 | ) | (0.03 | ) | — | (0.06 | ) | — | ||||||||||||
| Total distributions |
(0.46 | ) | (0.06 | ) | (0.02 | ) | (0.10 | ) | (0.02 | ) | ||||||||||
| Net asset value, end of year |
$10.39 | $ 9.92 | $ 8.63 | $ 8.32 | $ 9.20 | |||||||||||||||
| Total returnc |
9.23% | 15.73% | 3.95% | (8.44)% | 18.09% | |||||||||||||||
| Ratios to average net assets |
||||||||||||||||||||
| Expenses before waiver and payments by affiliates |
1.33% | 1.40% | 1.42% | 1.38% | 1.34% | |||||||||||||||
| Expenses net of waiver and payments by affiliates |
1.33% | d,e | 1.39% | d | 1.41% | 1.38% | e | 1.34% | ||||||||||||
| Net investment income |
0.72% | 0.65% | 0.47% | 0.52% | 0.28% | |||||||||||||||
| Supplemental data |
||||||||||||||||||||
| Net assets, end of year (000’s) |
$1,177,880 | $1,049,481 | $1,020,120 | $960,417 | $1,082,873 | |||||||||||||||
| Portfolio turnover rate |
32.61% | 23.49% | 28.73% | 22.16% | 25.64% | |||||||||||||||
aThe 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 repurchases of the Fund’s shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
bBased on average daily shares outstanding.
cTotal return does not reflect sales commissions or contingent deferred sales charges, if applicable.
dBenefit of expense reduction rounds to less than 0.01%.
eBenefit of waiver and payments by affiliates rounds to less than 0.01%.
| franklintempleton.com | The accompanying notes are an integral part of these financial statements. | Annual Report | 11 | ||
TEMPLETON GLOBAL SMALLER COMPANIES FUND
FINANCIAL HIGHLIGHTS
| Year Ended August 31, | ||||||||||||||||||||
| 2018 | 2017 | 2016 | 2015 | 2014 | ||||||||||||||||
| Class C |
||||||||||||||||||||
| Per share operating performance |
||||||||||||||||||||
| (for a share outstanding throughout the year) |
||||||||||||||||||||
| Net asset value, beginning of year |
$ 9.41 | $ 8.22 | $ 7.97 | $ 8.83 | $ 7.53 | |||||||||||||||
| Income from investment operationsa: |
||||||||||||||||||||
| Net investment income (loss)b |
(— | )c | (0.01 | ) | (0.02 | ) | (0.02 | ) | (0.04 | ) | ||||||||||
| Net realized and unrealized gains (losses) |
0.80 | 1.23 | 0.27 | (0.78 | ) | 1.34 | ||||||||||||||
| Total from investment operations |
0.80 | 1.22 | 0.25 | (0.80 | ) | 1.30 | ||||||||||||||
| Less distributions from: |
||||||||||||||||||||
| Net investment income |
— | — | — | — | — | |||||||||||||||
| Net realized gains |
(0.39 | ) | (0.03 | ) | — | (0.06 | ) | — | ||||||||||||
| Total distributions |
(0.39 | ) | (0.03 | ) | — | (0.06 | ) | — | ||||||||||||
| Net asset value, end of year |
$ 9.82 | $ 9.41 | $ 8.22 | $ 7.97 | $ 8.83 | |||||||||||||||
| Total returnd |
8.39% | 14.88% | 3.14% | (9.06)% | 17.26% | |||||||||||||||
| Ratios to average net assets |
||||||||||||||||||||
| Expenses before waiver and payments by affiliates |
2.08% | 2.15% | 2.17% | 2.13% | 2.09% | |||||||||||||||
| Expenses net of waiver and payments by affiliates |
2.08% | e,f | 2.14% | e | 2.16% | 2.13% | f | 2.09% | ||||||||||||
| Net investment income (loss) |
(0.03)% | (0.10)% | (0.28)% | (0.23)% | (0.47)% | |||||||||||||||
| Supplemental data |
||||||||||||||||||||
| Net assets, end of year (000’s) |
$38,345 | $30,579 | $33,802 | $36,829 | $47,636 | |||||||||||||||
| Portfolio turnover rate |
32.61% | 23.49% | 28.73% | 22.16% | 25.64% | |||||||||||||||
aThe 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 repurchases of the Fund’s shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
bBased on average daily shares outstanding.
cAmount rounds to less than $0.01 per share.
dTotal return does not reflect sales commissions or contingent deferred sales charges, if applicable.
eBenefit of expense reduction rounds to less than 0.01%.
fBenefit of waiver and payments by affiliates rounds to less than 0.01%.
| 12 |
Annual Report | The accompanying notes are an integral part of these financial statements. | franklintempleton.com | ||
TEMPLETON GLOBAL SMALLER COMPANIES FUND
FINANCIAL HIGHLIGHTS
| Year Ended August 31, | ||||||||||||||||||||
| 2018 | 2017 | 2016 | 2015 | 2014 | ||||||||||||||||
| Class R6 |
||||||||||||||||||||
| Per share operating performance (for a share outstanding throughout the year) |
||||||||||||||||||||
| Net asset value, beginning of year |
$ 9.97 | $ 8.68 | $ 8.37 | $ 9.25 | $ 7.84 | |||||||||||||||
| Income from investment operationsa: |
||||||||||||||||||||
| Net investment incomeb |
0.13 | 0.10 | 0.08 | 0.08 | 0.09 | |||||||||||||||
| Net realized and unrealized gains (losses) |
0.84 | 1.29 | 0.28 | (0.82 | ) | 1.38 | ||||||||||||||
| Total from investment operations |
0.97 | 1.39 | 0.36 | (0.74 | ) | 1.47 | ||||||||||||||
| Less distributions from: |
||||||||||||||||||||
| Net investment income |
(0.11 | ) | (0.07 | ) | (0.05 | ) | (0.08 | ) | (0.06 | ) | ||||||||||
| Net realized gains |
(0.39 | ) | (0.03 | ) | — | (0.06 | ) | — | ||||||||||||
| Total distributions |
(0.50 | ) | (0.10 | ) | (0.05 | ) | (0.14 | ) | (0.06 | ) | ||||||||||
| Net asset value, end of year |
$10.44 | $ 9.97 | $ 8.68 | $ 8.37 | $ 9.25 | |||||||||||||||
| Total return |
9.65% | 16.18% | 4.42% | (7.99)% | 18.72% | |||||||||||||||
| Ratios to average net assets |
||||||||||||||||||||
| Expenses before waiver and payments by affiliates |
0.95% | 0.96% | 0.95% | 0.94% | 0.92% | |||||||||||||||
| Expenses net of waiver and payments by affiliates |
0.94% | c | 0.93% | c | 0.94% | 0.94% | d | 0.92% | ||||||||||||
| Net investment income |
1.11% | 1.11% | 0.94% | 0.96% | 0.70% | |||||||||||||||
| Supplemental data |
||||||||||||||||||||
| Net assets, end of year (000’s) |
$101,384 | $22,318 | $20,690 | $22,148 | $26,371 | |||||||||||||||
| Portfolio turnover rate |
32.61% | 23.49% | 28.73% | 22.16% | 25.64% | |||||||||||||||
aThe 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 repurchases of the Fund’s shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
bBased on average daily shares outstanding.
cBenefit of expense reduction rounds to less than 0.01%.
dBenefit of waiver and payments by affiliates rounds to less than 0.01%.
| franklintempleton.com | The accompanying notes are an integral part of these financial statements. | Annual Report | 13 | ||
TEMPLETON GLOBAL SMALLER COMPANIES FUND
FINANCIAL HIGHLIGHTS
| Year Ended August 31, | ||||||||||||||||||||
| 2018 | 2017 | 2016 | 2015 | 2014 | ||||||||||||||||
| Advisor Class |
||||||||||||||||||||
| Per share operating performance |
||||||||||||||||||||
| (for a share outstanding throughout the year) |
||||||||||||||||||||
| Net asset value, beginning of year |
$ 9.97 | $ 8.67 | $ 8.36 | $ 9.24 | $ 7.84 | |||||||||||||||
| Income from investment operationsa: |
||||||||||||||||||||
| Net investment incomeb |
0.09 | 0.09 | 0.06 | 0.07 | 0.03 | |||||||||||||||
| Net realized and unrealized gains (losses) |
0.85 | 1.30 | 0.29 | (0.83 | ) | 1.41 | ||||||||||||||
| Total from investment operations |
0.94 | 1.39 | 0.35 | (0.76 | ) | 1.44 | ||||||||||||||
| Less distributions from: |
||||||||||||||||||||
| Net investment income |
(0.07 | ) | (0.06 | ) | (0.04 | ) | (0.06 | ) | (0.04 | ) | ||||||||||
| Net realized gains |
(0.39 | ) | (0.03 | ) | — | (0.06 | ) | — | ||||||||||||
| Total distributions |
(0.46 | ) | (0.09 | ) | (0.04 | ) | (0.12 | ) | (0.04 | ) | ||||||||||
| Net asset value, end of year |
$10.45 | $ 9.97 | $ 8.67 | $ 8.36 | $ 9.24 | |||||||||||||||
| Total return |
9.50% | 16.02% | 4.18% | (8.21)% | 18.40% | |||||||||||||||
| Ratios to average net assets |
||||||||||||||||||||
| Expenses before waiver and payments by affiliates |
1.08% | 1.15% | 1.17% | 1.13% | 1.09% | |||||||||||||||
| Expenses net of waiver and payments by affiliates |
1.08% | c,d | 1.14% | c | 1.16% | 1.13% | d | 1.09% | ||||||||||||
| Net investment income |
0.97% | 0.90% | 0.72% | 0.77% | 0.53% | |||||||||||||||
| Supplemental data |
||||||||||||||||||||
| Net assets, end of year (000’s) |
$81,450 | $108,279 | $50,213 | $42,778 | $62,955 | |||||||||||||||
| Portfolio turnover rate |
32.61% | 23.49% | 28.73% | 22.16% | 25.64% | |||||||||||||||
aThe 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 repurchases of the Fund’s shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
bBased on average daily shares outstanding.
cBenefit of expense reduction rounds to less than 0.01%.
dBenefit of waiver and payments by affiliates rounds to less than 0.01%.
| 14 |
Annual Report | The accompanying notes are an integral part of these financial statements. | franklintempleton.com | ||
TEMPLETON GLOBAL SMALLER COMPANIES FUND
Statement of Investments, August 31, 2018
| Industry | Shares/ Units |
Value | ||||||||||
|
Common Stocks and Other Equity Interests 92.6% |
|
|||||||||||
| Belgium 2.0% |
||||||||||||
| Barco NV |
|
Electronic Equipment, Instruments & Components |
|
146,444 | $ | 20,121,007 | ||||||
| Ontex Group NV |
Personal Products | 287,637 | 8,251,248 | |||||||||
|
|
|
|||||||||||
|
|
28,372,255 |
| ||||||||||
|
|
|
|||||||||||
| Brazil 1.5% |
||||||||||||
| Camil Alimentos SA |
Food Products | 6,991,600 | 11,834,571 | |||||||||
| M. Dias Branco SA |
Food Products | 893,800 | 9,304,026 | |||||||||
|
|
|
|||||||||||
|
|
21,138,597 |
| ||||||||||
|
|
|
|||||||||||
| Canada 5.0% |
||||||||||||
| aBadger Daylighting Ltd. |
Construction & Engineering | 814,100 | 18,093,883 | |||||||||
| Canaccord Genuity Group Inc. |
Capital Markets | 2,940,600 | 15,882,957 | |||||||||
| bCanada Goose Holdings Inc. |
Textiles, Apparel & Luxury Goods | 114,900 | 6,978,068 | |||||||||
| Mullen Group Ltd. |
Energy Equipment & Services | 1,009,300 | 12,426,318 | |||||||||
| The North West Co. Inc. |
Food & Staples Retailing | 308,200 | 6,816,881 | |||||||||
| Shawcor Ltd. |
Energy Equipment & Services | 442,400 | 9,300,483 | |||||||||
|
|
|
|||||||||||
|
|
69,498,590 |
| ||||||||||
|
|
|
|||||||||||
| China 0.6% |
||||||||||||
| Brilliance China Automotive Holdings Ltd. |
Automobiles | 5,028,000 | 7,968,751 | |||||||||
|
|
|
|||||||||||
| Colombia 1.0% |
||||||||||||
| bGran Tierra Energy Inc. |
Oil, Gas & Consumable Fuels | 4,194,200 | 14,492,122 | |||||||||
|
|
|
|||||||||||
| Denmark 0.5% |
||||||||||||
| bNilfisk Holding AS |
Machinery | 151,447 | 7,355,458 | |||||||||
|
|
|
|||||||||||
| Finland 3.6% |
||||||||||||
| Amer Sports OYJ |
Leisure Products | 827,456 | 27,798,406 | |||||||||
| Huhtamaki OYJ |
Containers & Packaging | 615,122 | 22,021,295 | |||||||||
|
|
|
|||||||||||
|
|
49,819,701 |
| ||||||||||
|
|
|
|||||||||||
| Germany 5.8% |
||||||||||||
| Gerresheimer AG |
Life Sciences Tools & Services | 235,015 | 19,636,067 | |||||||||
| Grand City Properties SA |
|
Real Estate Management & Development |
|
652,387 | 17,790,968 | |||||||
| Jenoptik AG |
|
Electronic Equipment, Instruments & Components |
|
495,940 | 19,486,889 | |||||||
| Rational AG |
Machinery | 14,086 | 11,229,769 | |||||||||
| bzooplus AG |
Internet & Direct Marketing Retail | 78,133 | 12,847,859 | |||||||||
|
|
|
|||||||||||
|
|
80,991,552 |
| ||||||||||
|
|
|
|||||||||||
| Hong Kong 3.1% |
||||||||||||
| Johnson Electric Holdings Ltd. |
Electrical Equipment | 3,337,500 | 9,779,659 | |||||||||
| Techtronic Industries Co. Ltd. |
Household Durables | 4,344,790 | 26,569,577 | |||||||||
| Value Partners Group Ltd. |
Capital Markets | 10,307,700 | 7,025,709 | |||||||||
|
|
|
|||||||||||
|
|
43,374,945 |
| ||||||||||
|
|
|
|||||||||||
| India 1.5% |
||||||||||||
| DCB Bank Ltd. |
Banks | 480,000 | 1,208,028 | |||||||||
| Dewan Housing Finance Corp. Ltd. |
Thrifts & Mortgage Finance | 2,048,236 | 19,259,274 | |||||||||
| Welspun India Ltd. |
Textiles, Apparel & Luxury Goods | 234,116 | 248,112 | |||||||||
|
|
|
|||||||||||
|
|
20,715,414 |
| ||||||||||
|
|
|
|||||||||||
| Indonesia 0.0%† |
||||||||||||
| b,cSakari Resources Ltd. |
Metals & Mining | 1,342,000 | 684,270 | |||||||||
|
|
|
|||||||||||
| franklintempleton.com | Annual Report | 15 | ||
TEMPLETON GLOBAL SMALLER COMPANIES FUND
STATEMENT OF INVESTMENTS
| Industry | Shares/ Units |
Value | ||||||||||
|
Common Stocks and Other Equity Interests (continued) |
|
|||||||||||
| Italy 4.2% |
||||||||||||
| aAzimut Holding SpA |
Capital Markets | 208,076 | $ | 3,305,612 | ||||||||
| Interpump Group SpA |
Machinery | 769,914 | 24,230,274 | |||||||||
| Technogym SpA |
Leisure Products | 2,297,989 | 22,880,296 | |||||||||
| aTod’s SpA |
Textiles, Apparel & Luxury Goods | 111,251 | 7,713,798 | |||||||||
|
|
|
|||||||||||
|
|
58,129,980 |
| ||||||||||
|
|
|
|||||||||||
| Japan 10.4% |
||||||||||||
| Asics Corp. |
Textiles, Apparel & Luxury Goods | 1,109,500 | 16,596,814 | |||||||||
| Bunka Shutter Co. Ltd. |
Building Products | 1,083,500 | 8,045,430 | |||||||||
| Dowa Holdings Co. Ltd. |
Metals & Mining | 444,200 | 13,293,416 | |||||||||
| Ezaki Glico Co. Ltd. |
Food Products | 135,800 | 6,832,474 | |||||||||
| Idec Corp. |
Electrical Equipment | 482,400 | 10,094,775 | |||||||||
| IDOM Inc. |
Specialty Retail | 1,813,600 | 6,137,560 | |||||||||
| Kobayashi Pharmaceutical Co. Ltd. |
Personal Products | 201,378 | 14,463,763 | |||||||||
| MEITEC Corp. |
Professional Services | 165,300 | 7,974,511 | |||||||||
| Morita Holdings Corp. |
Machinery | 375,900 | 8,099,587 | |||||||||
| Nihon Parkerizing Co. Ltd. |
Chemicals | 529,300 | 7,026,844 | |||||||||
| Shinoken Group Co. Ltd. |
Real Estate Management & Development | 411,200 | 6,458,251 | |||||||||
| TechnoPro Holdings Inc. |
Professional Services | 145,800 | 9,094,046 | |||||||||
| Tsumura & Co. |
Pharmaceuticals | 720,600 | 24,613,447 | |||||||||
| Zojirushi Corp. |
Household Durables | 555,100 | 7,444,300 | |||||||||
|
|
|
|||||||||||
|
|
146,175,218 |
| ||||||||||
|
|
|
|||||||||||
| Netherlands 2.1% |
||||||||||||
| Aalberts Industries NV |
Machinery | 85,400 | 3,660,844 | |||||||||
| Arcadis NV |
Construction & Engineering | 610,296 | 10,821,570 | |||||||||
| Beter Bed Holding NV |
Specialty Retail | 13,797 | 87,579 | |||||||||
| PostNL NV |
Air Freight & Logistics | 4,258,792 | 14,272,828 | |||||||||
|
|
|
|||||||||||
|
|
28,842,821 |
| ||||||||||
|
|
|
|||||||||||
| Norway 0.6% |
||||||||||||
| XXL ASA |
Specialty Retail | 1,394,403 | 7,759,065 | |||||||||
|
|
|
|||||||||||
| Poland 0.9% |
||||||||||||
| CCC SA |
Textiles, Apparel & Luxury Goods | 206,506 | 12,003,638 | |||||||||
|
|
|
|||||||||||
| South Korea 1.8% |
||||||||||||
| BNK Financial Group Inc. |
Banks | 1,715,645 | 12,825,815 | |||||||||
| DGB Financial Group Inc. |
Banks | 1,326,636 | 12,188,974 | |||||||||
|
|
|
|||||||||||
|
|
25,014,789 |
| ||||||||||
|
|
|
|||||||||||
| Spain 1.1% |
||||||||||||
| Construcciones y Auxiliar de Ferrocarriles SA |
Machinery | 342,899 | 15,240,226 | |||||||||
|
|
|
|||||||||||
| Sweden 3.3% |
||||||||||||
| Billerudkorsnas AB |
Containers & Packaging | 500,765 | 5,912,187 | |||||||||
| Cloetta AB, B |
Food Products | 2,298,176 | 6,893,787 | |||||||||
| Dometic Group AB |
Auto Components | 838,569 | 7,956,993 | |||||||||
| dThe Thule Group AB, Reg S |
Leisure Products | 1,097,430 | 25,985,181 | |||||||||
|
|
|
|||||||||||
|
|
46,748,148 |
| ||||||||||
|
|
|
|||||||||||
| Switzerland 3.5% |
||||||||||||
| Bucher Industries AG |
Machinery | 46,681 | 16,360,377 | |||||||||
| Logitech International SA |
Technology Hardware, Storage & Peripherals | 306,870 | 15,180,859 | |||||||||
| bLuxoft Holding Inc. |
IT Services | 184,800 | 8,611,680 | |||||||||
| Tecan Group AG |
Life Sciences Tools & Services | 39,257 | 9,377,465 | |||||||||
|
|
|
|||||||||||
|
|
49,530,381 |
| ||||||||||
|
|
|
|||||||||||
| 16 |
Annual Report | franklintempleton.com | ||
TEMPLETON GLOBAL SMALLER COMPANIES FUND
STATEMENT OF INVESTMENTS
| Industry | Shares/ Units |
Value | ||||||||
| Common Stocks and Other Equity Interests (continued) |
||||||||||
| Taiwan 4.2% |
||||||||||
| Chicony Electronics Co. Ltd. |
Technology Hardware, Storage & Peripherals | 6,221,432 | $ | 13,106,294 | ||||||
| Giant Manufacturing Co. Ltd. |
Leisure Products | 1,908,311 | 8,245,596 | |||||||
| King Yuan Electronics Co. Ltd. |
Semiconductors & Semiconductor Equipment | 20,063,000 | 14,197,525 | |||||||
| Merida Industry Co. Ltd. |
Leisure Products | 1,652,000 | 7,946,193 | |||||||
| Tripod Technology Corp. |
Electronic Equipment, Instruments & Components | 5,166,000 | 15,936,853 | |||||||
|
|
|
|||||||||
|
|
59,432,461 |
| ||||||||
|
|
|
|||||||||
| United Kingdom 4.9% |
||||||||||
| Bellway PLC |
Household Durables | 145,767 | 5,512,299 | |||||||
| Bovis Homes Group PLC |
Household Durables | 386,317 | 5,632,285 | |||||||
| Greggs PLC |
Hotels, Restaurants & Leisure | 756,705 | 10,424,329 | |||||||
| Janus Henderson Group PLC |
Capital Markets | 583,933 | 16,496,107 | |||||||
| Man Group PLC |
Capital Markets | 5,554,557 | 12,366,900 | |||||||
| Oxford Instruments PLC |
Electronic Equipment, Instruments & Components | 928,510 | 11,660,002 | |||||||
| SIG PLC |
Trading Companies & Distributors | 4,164,436 | 7,015,971 | |||||||
|
|
|
|||||||||
|
|
69,107,893 |
| ||||||||
|
|
|
|||||||||
| United States 31.0% |
||||||||||
| b,eAgrofresh Solutions Inc. |
Chemicals | 2,901,800 | 19,296,970 | |||||||
| Alamo Group Inc. |
Machinery | 229,510 | 21,872,303 | |||||||
| AllianceBernstein Holding LP |
Capital Markets | 923,465 | 27,750,123 | |||||||
| bBoston Beer Inc., A |
Beverages | 22,340 | 6,772,371 | |||||||
| Columbia Sportswear Co. |
Textiles, Apparel & Luxury Goods | 298,250 | 27,051,275 | |||||||
| bCommScope Holding Co. Inc. |
Communications Equipment | 640,200 | 20,287,938 | |||||||
| a,bDuluth Holdings Inc. |
Internet & Direct Marketing Retail | 395,800 | 11,454,452 | |||||||
| bFerro Corp. |
Chemicals | 1,109,840 | 24,360,988 | |||||||
| bFreshpet Inc. |
Food Products | 649,000 | 24,110,350 | |||||||
| bHibbett Sports Inc. |
Specialty Retail | 231,590 | 4,759,175 | |||||||
| Hillenbrand Inc. |
Machinery | 528,110 | 27,012,826 | |||||||
| Huntington Bancshares Inc. |
Banks | 1,466,399 | 23,770,328 | |||||||
| Hyster-Yale Materials Handling Inc. |
Machinery | 178,800 | 11,031,960 | |||||||
| Jones Lang LaSalle Inc. |
Real Estate Management & Development | 104,700 | 15,968,844 | |||||||
| bKnowles Corp. |
Electronic Equipment, Instruments & Components | 1,485,710 | 26,935,922 | |||||||
| LCI Industries |
Auto Components | 147,880 | 13,745,446 | |||||||
| bPatrick Industries Inc. |
Building Products | 190,935 | 12,219,840 | |||||||
| Simpson Manufacturing Co. Inc. |
Building Products | 280,340 | 21,521,702 | |||||||
| SpartanNash Co. |
Food & Staples Retailing | 441,320 | 9,422,182 | |||||||
| STORE Capital Corp. |
Equity Real Estate Investment Trusts (REITs) | 469,000 | 13,511,890 | |||||||
| bTexas Capital Bancshares Inc. |
Banks | 63,570 | 5,651,373 | |||||||
| bTrimas Corp. |
Machinery | 531,950 | 16,330,865 | |||||||
| bTutor Perini Corp. |
Construction & Engineering | 767,106 | 15,610,607 | |||||||
| United Insurance Holdings Corp. |
Insurance | 840,890 | 17,515,739 | |||||||
| Winnebago Industries Inc. |
Automobiles | 428,510 | 15,833,445 | |||||||
|
|
|
|||||||||
|
|
433,798,914 |
| ||||||||
|
|
|
|||||||||
| Total Common Stocks and Other Equity |
1,296,195,189 | |||||||||
|
|
|
|||||||||
| franklintempleton.com | Annual Report | 17 | ||
TEMPLETON GLOBAL SMALLER COMPANIES FUND
STATEMENT OF INVESTMENTS
| Industry | Shares | Value | ||||||||
| Management Investment Companies |
||||||||||
| United States 1.5% |
||||||||||
| iShares Russell 1000 ETF |
Diversified Financial Services | 131,200 | $ | 21,232,096 | ||||||
|
|
|
|||||||||
| Preferred Stocks (Cost $8,434,507) 0.6% |
||||||||||
| Brazil 0.6% |
||||||||||
| fAlpargatas SA, 4.614%, pfd |
Textiles, Apparel & Luxury Goods | 2,605,650 | 7,756,914 | |||||||
|
|
|
|||||||||
| Total Investments before Short Term Investments (Cost $990,399,012) |
1,325,184,199 | |||||||||
|
|
|
|||||||||
| Principal Amount |
||||||||||
| Short Term Investments 8.1% |
||||||||||
| U.S. Government and Agency Securities |
||||||||||
| United States 5.6% |
||||||||||
| gFHLB, 9/04/18 |
$ | 78,000,000 | 78,000,000 | |||||||
|
|
|
|||||||||
| Shares | ||||||||||
| hInvestments from Cash Collateral Received for Loaned Securities (Cost $34,569,390) 2.5% |
||||||||||
| Money Market Funds 2.5% |
||||||||||
| United States 2.5% |
||||||||||
| i,jInstitutional Fiduciary Trust Money Market Portfolio, 1.64% |
34,569,390 | 34,569,390 | ||||||||
|
|
|
|||||||||
| Total Investments (Cost $1,102,952,542) 102.8% |
1,437,753,589 | |||||||||
| Other Assets, less Liabilities (2.8)% |
(38,695,830 | ) | ||||||||
|
|
|
|||||||||
| Net Assets 100.0% |
$ | 1,399,057,759 | ||||||||
|
|
|
|||||||||
See Abbreviations on page 33.
†Rounds to less than 0.1% of net assets.
aA portion or all of the security is on loan at August 31, 2018. See Note 1(d).
bNon-income producing.
cFair valued using significant unobservable inputs. See Note 12 regarding fair value measurements.
dSecurity was purchased pursuant to Regulation S under the Securities Act of 1933, which exempts from registration securities offered and sold outside of the United States. Such a security cannot be sold in the United States without either an effective registration statement filed pursuant to the Securities Act of 1933, or pursuant to an exemption from registration. This security has been deemed liquid under guidelines approved by the Fund’s Board of Trustees. At August 31, 2018, the value of this security was $25,985,181, representing 1.9% of net assets.
eSee Note 9 regarding holdings of 5% voting securities.
fVariable rate security. The rate shown represents the yield at period end.
gThe security was issued on a discount basis with no stated coupon rate.
hSee Note 1(d) regarding securities on loan.
iSee Note 3(f) regarding investments in affiliated management investment companies.
jThe rate shown is the annualized seven-day effective yield at period end.
| 18 |
Annual Report | The accompanying notes are an integral part of these financial statements. | franklintempleton.com | ||
TEMPLETON GLOBAL SMALLER COMPANIES FUND
Statement of Assets and Liabilities
August 31, 2018
| Assets: |
||||
| Investments in securities: |
||||
| Cost - Unaffiliated issuers |
$ | 1,046,987,944 | ||
| Cost - Non-controlled affiliates (Note 3f and 9) |
55,964,598 | |||
|
|
|
|||
| Value - Unaffiliated issuers + |
$
|
1,383,887,229
|
| |
| Value - Non-controlled affiliates (Note 3f and 9) |
53,866,360 | |||
| Cash |
19,509 | |||
| Foreign currency, at value (cost $900,916) |
901,038 | |||
| Receivables: |
||||
| Capital shares sold |
2,602,942 | |||
| Dividends and interest |
2,562,674 | |||
| European Union tax reclaims |
975,466 | |||
| Other assets |
719 | |||
|
|
|
|||
| Total assets |
|
1,444,815,937 |
| |
|
|
|
|||
| Liabilities: |
||||
| Payables: |
||||
| Investment securities purchased |
7,231,663 | |||
| Capital shares redeemed |
1,567,101 | |||
| Management fees |
1,007,924 | |||
| Distribution fees |
281,319 | |||
| Transfer agent fees |
284,153 | |||
| Payable upon return of securities loaned |
34,569,390 | |||
| Deferred tax |
262,482 | |||
| Accrued expenses and other liabilities |
554,146 | |||
|
|
|
|||
| Total liabilities |
|
45,758,178 |
| |
|
|
|
|||
| Net assets, at value |
$ |
1,399,057,759 |
| |
|
|
|
|||
| Net assets consist of: |
||||
| Paid-in capital |
$ | 983,456,779 | ||
| Undistributed net investment income |
8,015,600 | |||
| Net unrealized appreciation (depreciation) |
334,449,871 | |||
| Accumulated net realized gain (loss) |
73,135,509 | |||
|
|
|
|||
| Net assets, at value |
$ |
1,399,057,759 |
| |
|
|
|
|||
| +Includes securities loaned |
$ | 32,916,321 |
| franklintempleton.com | The accompanying notes are an integral part of these financial statements. | Annual Report | 19 | ||
TEMPLETON GLOBAL SMALLER COMPANIES FUND
FINANCIAL STATEMENTS
Statement of Assets and Liabilities (continued)
August 31, 2018
| Class A: |
||||
| Net assets, at value |
$ | 1,177,879,602 | ||
|
|
|
|||
| Shares outstanding |
113,339,187 | |||
|
|
|
|||
| Net asset value per sharea |
$10.39 | |||
|
|
|
|||
| Maximum offering price per share (net asset value per share ÷ 94.25%) |
$11.02 | |||
|
|
|
|||
| Class C: |
||||
| Net assets, at value |
$ | 38,344,949 | ||
|
|
|
|||
| Shares outstanding |
3,905,511 | |||
|
|
|
|||
| Net asset value and maximum offering price per sharea |
$9.82 | |||
|
|
|
|||
| Class R6: |
||||
| Net assets, at value |
$ | 101,383,592 | ||
|
|
|
|||
| Shares outstanding |
9,708,942 | |||
|
|
|
|||
| Net asset value and maximum offering price per share |
$10.44 | |||
|
|
|
|||
| Advisor Class: |
||||
| Net assets, at value |
$ | 81,449,616 | ||
|
|
|
|||
| Shares outstanding |
7,790,846 | |||
|
|
|
|||
| Net asset value and maximum offering price per share |
$10.45 | |||
|
|
|
aRedemption price is equal to net asset value less contingent deferred sales charges, if applicable.
| 20 |
Annual Report | The accompanying notes are an integral part of these financial statements. | franklintempleton.com | ||
TEMPLETON GLOBAL SMALLER COMPANIES FUND
FINANCIAL STATEMENTS
Statement of Operations
for the year ended August 31, 2018
| Investment income: |
||||
| Dividends: (net of foreign taxes)* |
||||
| Unaffiliated issuers |
$ | 24,258,770 | ||
| Interest: |
||||
| Unaffiliated issuers |
910,011 | |||
| Income from securities loaned (net of fees and rebates) |
2,006,135 | |||
| Other income (Note 1e) |
171,630 | |||
|
|
|
|||
| Total investment income |
27,346,546 | |||
|
|
|
|||
| Expenses: |
||||
| Management fees (Note 3a) |
11,531,832 | |||
| Distribution fees: (Note 3c) |
||||
| Class A |
2,859,857 | |||
| Class C |
342,423 | |||
| Transfer agent fees: (Note 3e) |
||||
| Class A |
1,867,402 | |||
| Class C |
55,823 | |||
| Class R6 |
21,535 | |||
| Advisor Class |
120,160 | |||
| Custodian fees (Note 4) |
146,735 | |||
| Reports to shareholders |
207,078 | |||
| Registration and filing fees |
123,526 | |||
| Professional fees |
126,465 | |||
| Trustees’ fees and expenses |
147,286 | |||
| Other |
93,482 | |||
|
|
|
|||
| Total expenses |
17,643,604 | |||
| Expense reductions (Note 4) |
(2,056) | |||
| Expenses waived/paid by affiliates (Note 3f and 3g) |
(96,335) | |||
|
|
|
|||
| Net expenses |
17,545,213 | |||
|
|
|
|||
| Net investment income |
9,801,333 | |||
|
|
|
|||
| Realized and unrealized gains (losses): |
||||
| Net realized gain (loss) from: |
||||
| Investments: |
||||
| Unaffiliated issuers |
100,499,133 | |||
| Non-controlled affiliates (Note 3f and 9) |
(18,385,553) | |||
| Foreign currency transactions |
21,950 | |||
|
|
|
|||
| Net realized gain (loss) |
82,135,530 | |||
|
|
|
|||
| Net change in unrealized appreciation (depreciation) on: |
||||
| Investments: |
||||
| Unaffiliated issuers |
4,324,985 | |||
| Non-controlled affiliates (Note 3f and 9) |
14,794,545 | |||
| Translation of other assets and liabilities denominated in foreign currencies |
(259,667) | |||
| Change in deferred taxes on unrealized appreciation |
(262,482) | |||
|
|
|
|||
| Net change in unrealized appreciation (depreciation) |
18,597,381 | |||
|
|
|
|||
| Net realized and unrealized gain (loss) |
100,732,911 | |||
|
|
|
|||
| Net increase (decrease) in net assets resulting from operations |
$ | 110,534,244 | ||
|
|
|
|||
| *Foreign taxes withheld on dividends |
$ | 2,541,264 | ||
| franklintempleton.com | The accompanying notes are an integral part of these financial statements. | Annual Report | 21 | ||
TEMPLETON GLOBAL SMALLER COMPANIES FUND
FINANCIAL STATEMENTS
Statements of Changes in Net Assets
| Year Ended August 31, | ||||||||
| 2018 | 2017 | |||||||
| Increase (decrease) in net assets: |
||||||||
| Operations: |
||||||||
| Net investment income |
$ | 9,801,333 | $ | 7,558,565 | ||||
| Net realized gain (loss) |
82,135,530 | 58,985,967 | ||||||
| Net change in unrealized appreciation (depreciation) |
18,597,381 | 100,675,121 | ||||||
|
|
|
|||||||
| Net increase (decrease) in net assets resulting from operations |
110,534,244 | 167,219,653 | ||||||
|
|
|
|||||||
|
Distributions to shareholders from: |
||||||||
| Net investment income: |
||||||||
| Class A |
(6,823,698 | ) | (3,353,090 | ) | ||||
| Class R6 |
(958,371 | ) | (161,236 | ) | ||||
| Advisor Class |
(376,117 | ) | (448,360 | ) | ||||
| Net realized gains: |
||||||||
| Class A |
(40,242,055 | ) | (3,253,159 | ) | ||||
| Class C |
(1,232,674 | ) | (110,990 | ) | ||||
| Class R6 |
(3,352,122 | ) | (66,593 | ) | ||||
| Advisor Class |
(1,938,995 | ) | (226,507 | ) | ||||
|
|
|
|||||||
| Total distributions to shareholders |
(54,924,032 | ) | (7,619,935 | ) | ||||
|
|
|
|||||||
|
Capital share transactions: (Note 2) |
||||||||
| Class A |
79,737,756 | (111,116,466 | ) | |||||
| Class C |
6,554,723 | (7,472,806 | ) | |||||
| Class R6 |
79,686,105 | (1,330,905 | ) | |||||
| Advisor Class |
(33,188,615 | ) | 46,153,965 | |||||
|
|
|
|||||||
| Total capital share transactions |
132,789,969 | (73,766,212 | ) | |||||
|
|
|
|||||||
|
Net increase (decrease) in net assets |
188,400,181 | 85,833,506 | ||||||
| Net assets: |
||||||||
| Beginning of year |
1,210,657,578 | 1,124,824,072 | ||||||
|
|
|
|||||||
| End of year |
$ | 1,399,057,759 | $ | 1,210,657,578 | ||||
|
|
|
|||||||
|
Undistributed net investment income included in net assets: |
||||||||
| End of year |
$ | 8,015,600 | $ | 6,752,761 | ||||
|
|
|
|||||||
| 22 |
Annual Report | The accompanying notes are an integral part of these financial statements. | franklintempleton.com | ||
TEMPLETON GLOBAL SMALLER COMPANIES FUND
| franklintempleton.com | Annual Report | 23 | ||
TEMPLETON GLOBAL SMALLER COMPANIES FUND
NOTES TO FINANCIAL STATEMENTS
| 24 |
Annual Report | franklintempleton.com | ||
TEMPLETON GLOBAL SMALLER COMPANIES FUND
NOTES TO FINANCIAL STATEMENTS
| franklintempleton.com | Annual Report | 25 | ||
TEMPLETON GLOBAL SMALLER COMPANIES FUND
NOTES TO FINANCIAL STATEMENTS
2. Shares of Beneficial Interest
At August 31, 2018, there were an unlimited number of shares authorized (without par value). Transactions in the Fund’s shares were as follows:
| Year Ended August 31, | ||||||||||||||||||||||||
| 2018 | 2017 | |||||||||||||||||||||||
| Shares | Amount | Shares | Amount | |||||||||||||||||||||
|
Class A Shares: |
||||||||||||||||||||||||
| Shares sold |
14,149,187 | $ | 162,145,959 | 14,924,709 | $ | 136,796,821 | ||||||||||||||||||
| Shares issued in reinvestment of distributions |
4,297,909 | 45,085,065 | 720,606 | 6,283,688 | ||||||||||||||||||||
| Shares issued on reorganization (Note 10) |
5,814,856 | 48,100,274 | — | — | ||||||||||||||||||||
| Shares redeemed |
(16,669,577 | ) | (175,593,542 | ) | (28,057,800 | ) | (254,196,975 | ) | ||||||||||||||||
|
|
|
|||||||||||||||||||||||
| Net increase (decrease) |
7,592,375 | $ | 79,737,756 | (12,412,485 | ) | $ | (111,116,466 | ) | ||||||||||||||||
|
|
|
|||||||||||||||||||||||
| Class C Shares: |
||||||||||||||||||||||||
| Shares sold |
564,783 | $ | 7,457,199 | 434,042 | $ | 3,802,243 | ||||||||||||||||||
| Shares issued in reinvestment of distributions |
121,619 | 1,211,325 | 12,519 | 104,028 | ||||||||||||||||||||
| Shares issued on reorganization (Note 10) |
845,400 | 6,619,750 | — | — | ||||||||||||||||||||
| Shares redeemed |
(876,633 | ) | (8,733,551 | ) | (1,308,905 | ) | (11,379,077 | ) | ||||||||||||||||
|
|
|
|||||||||||||||||||||||
| Net increase (decrease) |
655,169 | $ | 6,554,723 | (862,344 | ) | $ | (7,472,806 | ) | ||||||||||||||||
|
|
|
|||||||||||||||||||||||
| 26 |
Annual Report | franklintempleton.com | ||
TEMPLETON GLOBAL SMALLER COMPANIES FUND
NOTES TO FINANCIAL STATEMENTS
| Year Ended August 31, | ||||||||||||||||
| 2018 | 2017 | |||||||||||||||
| Shares | Amount | Shares | Amount | |||||||||||||
| Class R6 Shares: |
||||||||||||||||
| Shares sold |
8,956,576 | $ | 95,486,197 | 157,156 | $ | 1,437,538 | ||||||||||
| Shares issued in reinvestment of distributions |
305,123 | 3,206,838 | — | — | ||||||||||||
| Shares issued on reorganization (Note 10) |
807 | 6,703 | — | — | ||||||||||||
| Shares redeemed |
(1,791,232 | ) | (19,013,633 | ) | (303,977 | ) | (2,768,443 | ) | ||||||||
|
Net increase (decrease) |
7,471,274 | $ | 79,686,105 | (146,821 | ) | $ | (1,330,905 | ) | ||||||||
| Advisor Class Shares: |
||||||||||||||||
| Shares sold |
2,685,793 | $ | 34,035,410 | 9,842,415 | $ | 89,120,658 | ||||||||||
| Shares issued in reinvestment of distributions |
172,678 | 1,818,303 | 66,899 | 584,698 | ||||||||||||
| Shares issued on reorganization (Note 10) |
2,591,586 | 21,560,132 | — | — | ||||||||||||
| Shares redeemed |
(8,524,790 | ) | (90,602,460 | ) | (4,832,765 | ) | (43,551,391 | ) | ||||||||
|
Net increase (decrease) |
(3,074,733 | ) | $ | (33,188,615 | ) | 5,076,549 | $ | 46,153,965 | ||||||||
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 Investments Corp. (FTIC) |
Subadvisor | |||
| Franklin Templeton Services, LLC (FT Services) |
Administrative manager | |||
| Franklin Templeton Distributors, Inc. (Distributors) |
Principal underwriter | |||
| Franklin Templeton Investor Services, LLC (Investor Services) |
Transfer agent |
a. Management Fees
The Fund pays an investment management fee to TIC based on the average daily net assets of the Fund as follows:
| Annualized Fee Rate | Net Assets | |||
| 0.900% | Up to and including $200 million | |||
| 0.885% | Over $200 million, up to and including $700 million | |||
| 0.850% | Over $700 million, up to and including $1 billion | |||
| 0.830% | Over $1 billion, up to and including $1.2 billion | |||
| 0.805% | Over $1.2 billion, up to and including $5 billion | |||
| 0.785% | Over $5 billion, up to and including $10 billion | |||
| 0.765% | Over $10 billion, up to and including $15 billion | |||
| 0.745% | Over $15 billion, up to and including $20 billion | |||
| 0.725% | In excess of $20 billion |
For the year ended August 31, 2018, the gross effective investment management fee rate was 0.863% of the Fund’s average daily net assets.
Under a subadvisory agreement, FTIC, an affiliate of TIC, provides subadvisory services to the Fund. The subadvisory fee is paid by TIC based on the Fund’s average daily net assets, and is not an additional expense of the Fund.
| franklintempleton.com | Annual Report | 27 | ||
TEMPLETON GLOBAL SMALLER COMPANIES FUND
NOTES TO FINANCIAL STATEMENTS
3. Transactions with Affiliates (continued)
b. Administrative Fees
Under an agreement with TIC, FT Services provides administrative services to the Fund. The fee is paid by TIC based on the Fund’s average daily net assets, and is not an additional expense of the Fund.
c. Distribution Fees
The Board has adopted distribution plans for each share class, with the exception of Class R6 and 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 C compensation distribution plan, 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. The plan year, for purposes of monitoring compliance with the maximum annual plan rates, is February 1 through January 31.
The maximum annual plan rates, based on the average daily net assets, for each class, are as follows:
| Class A |
0.25 | % | ||
| Class C |
1.00 | % |
d. Sales Charges/Underwriting Agreements
Front-end sales charges and contingent deferred sales charges (CDSC) do not represent expenses of the Fund. These charges are deducted from the proceeds of sales of Fund shares prior to investment or from redemption proceeds prior to remittance, as applicable. 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 brokers/dealers |
$ | 271,840 | ||
| CDSC retained |
$ | 7,112 |
e. Transfer Agent Fees
Each class of shares pays transfer agent fees to Investor Services for its performance of shareholder servicing obligations. Effective November 1, 2017, the fees are based on an annualized asset based fee of 0.02% plus a transaction based fee. Prior to November 1, 2017, the fees were account based fees that varied based on fund or account type. In addition, each class reimburses Investor Services for out of pocket expenses incurred and, except for Class R6, reimburses shareholder servicing fees paid to third parties. These fees are allocated daily based upon their relative proportion of such classes’ aggregate net assets. Class R6 pays Investor Services transfer agent fees specific to that class.
For the year ended August 31, 2018, the Fund paid transfer agent fees of $2,064,920, of which $686,567 was retained by Investor Services.
| 28 |
Annual Report | franklintempleton.com | ||
TEMPLETON GLOBAL SMALLER COMPANIES FUND
NOTES TO FINANCIAL STATEMENTS
f. Investments in Affiliated Management Investment Companies
The Fund invests in one or more affiliated management investment companies for purposes other than exercising a controlling influence over the management or policies. Management fees paid by the Fund are waived on assets invested in the affiliated management investment companies, as noted in the Statement of Operations, in an amount not to exceed the management and administrative fees paid directly or indirectly by each affiliate. During the year ended August 31, 2018, the Fund held investments in affiliated management investment companies as follows:
| Number of Shares Held at Beginning of Year |
Gross Additions |
Gross Reductions |
Number of Held at End of Year |
Value at End of Year |
Dividend Income |
Realized Gain (Loss) |
Net Change in Unrealized Appreciation (Depreciation) |
|||||||||||||||||||||||||
|
Non-Controlled Affiliates |
||||||||||||||||||||||||||||||||
| Institutional Fiduciary Trust Money Market Portfolio, 1.64% |
21,590,804 | 98,241,172 | (85,262,586 | ) | 34,569,390 | $ | 34,569,390 | $ | — | $ | — | $ | — | |||||||||||||||||||
g. Waiver and Expense Reimbursements
Investor Services has voluntarily agreed in advance to waive or limit its fees so that the Class R6 transfer agent fees do not exceed 0.02%. Investor Services may discontinue this waiver in the future.
h. Interfund Transactions
The Fund engaged in purchases and sales of investments with funds or other accounts that have common investment managers (or affiliated investment managers), directors, trustees or officers. During the year ended August 31, 2018, these purchase and sale transactions aggregated $0 and $3,778,487, respectively.
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, 2018, the custodian fees were reduced as noted in the Statement of Operations.
5. Income Taxes
The tax character of distributions paid during the years ended August 31, 2018 and 2017, was as follows:
| 2018 | 2017 | |||||||
| Distributions paid from: |
||||||||
| Ordinary income |
$10,963,409 | $3,962,686 | ||||||
| Long term capital gain |
43,960,623 | 3,657,249 | ||||||
|
|
$54,924,032 |
|
|
$7,619,935 |
| |||
| franklintempleton.com | Annual Report | 29 | ||
TEMPLETON GLOBAL SMALLER COMPANIES FUND
NOTES TO FINANCIAL STATEMENTS
5. Income Taxes (continued)
At August 31, 2018, 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 |
$ | 1,107,761,221 | ||
|
|
|
| ||
| Unrealized appreciation |
$ | 405,689,114 | ||
| Unrealized depreciation |
(75,696,746 | ) | ||
|
|
|
| ||
| Net unrealized appreciation (depreciation) |
$ |
329,992,368 |
| |
|
|
|
| ||
| Distributable earnings: |
||||
| Undistributed ordinary income |
$ | 16,805,222 | ||
| Undistributed long term capital gains |
68,221,378 | |||
|
|
|
| ||
| Total distributable earnings |
$ |
85,026,600 |
| |
|
|
|
| ||
Differences between income and/or capital gains as determined on a book basis and a tax basis are primarily due to differing treatments of passive foreign investment company shares and corporate actions.
The Fund utilized a tax accounting practice to treat a portion of the proceeds from capital shares redeemed as a distribution from realized capital gains.
6. Investment Transactions
Purchases and sales of investments (excluding short term securities) for the year ended August 31, 2018, aggregated $412,109,275 and $434,134,879, respectively.
At August 31, 2018, in connection with securities lending transactions, the Fund loaned equity investments and received $34,569,390 of cash collateral. The gross amount of recognized liability for such transactions is included in payable upon return of securities loaned in the Statement of Assets and Liabilities. The agreements can be terminated at any time.
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.
8. Other Derivative Information
For the year ended August 31, 2018, the average month end notional amount of options represented 20,000 shares.
See Note 1(c) regarding derivative financial instruments.
| 30 |
Annual Report | franklintempleton.com | ||
TEMPLETON GLOBAL SMALLER COMPANIES FUND
NOTES TO FINANCIAL STATEMENTS
9. 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. During the year ended August 31, 2018, investments in “affiliated companies” were as follows:
| Name of Issuer | Number of Shares Held at Beginning of Year |
Gross Additions |
Gross Reductions |
Number of of Year |
Value at End of Year |
Dividend Income |
Realized Gain (Loss) |
Net Change in Unrealized Appreciation (Depreciation) |
||||||||||||||||||||||||
|
Non-Controlled Affiliates |
||||||||||||||||||||||||||||||||
| Agrofresh Solutions Inc. |
— | 2,901,800 | — | 2,901,800 | $ | 19,296,970 | $ — | $ | — | $ (2,098,238 | ) | |||||||||||||||||||||
| JAKKS Pacific Inc. |
1,716,653 | — | (1,716,653) | — | — | — | (18,385,553 | ) | 16,892,783 | |||||||||||||||||||||||
| Total Affiliated Securities (Value is 1.4% of Net Assets) |
|
$ | 19,296,970 | $ — | $ | (18,385,553 | ) | $14,794,545 | ||||||||||||||||||||||||
10. Reorganization
On June 1, 2018, the Fund, pursuant to a plan of reorganization approved on May 11, 2018, by shareholders of Templeton Foreign Smaller Companies Fund (Acquired Fund), acquired 100% of the Acquired Fund’s net assets, primarily made up of investment securities, which included $20,455,833 of unrealized appreciation, through a tax-free exchange of 9,252,649 shares of the Fund (valued at $76,286,859). Immediately after the completion of the reorganization, the combined net assets of the Fund were $1,424,137,871.
The primary purpose for the reorganization was to combine the Acquired Fund with a larger fund that had lower annual fund operating expenses, better long-term performance, the same investment goals and similar principal investment strategies/risks. The estimated cost of the reorganization was $187,250 of which the Fund and the Acquired Fund each paid 25% and TIC paid 50%. The allocated portion of the Fund’s reorganization expenses are included with other expenses in the Statement of Operations.
Assuming the reorganization had been completed on September 1, 2017, the Fund’s pro forma results of operations, would have been as follows:
| Period | Net Investment Income |
Net Realized and Unrealized Gain (Loss) |
Net Increase (Decrease) in Net Assets from Operations |
|||||||||
| For the period September 1, 2017 through August 31, 2018 |
$10,201,924 | $108,344,330 | $118,546,254 | |||||||||
|
|
|
|||||||||||
Subsequent to the reorganization, the Fund has been managed as a single entity. Accordingly, it is impracticable to identify the amount of net investment income attributable to the Acquired Fund’s assets after the completion of the reorganization.
11. Credit Facility
The Fund, together with other U.S. registered and foreign investment funds (collectively, Borrowers), managed by Franklin Templeton Investments, are borrowers in a joint syndicated senior unsecured credit facility totaling $2 billion (Global Credit Facility) which matures on February 8, 2019. This Global Credit Facility provides a source of funds to the Borrowers for temporary and emergency purposes, including the ability to meet future unanticipated or unusually large redemption requests.
| franklintempleton.com | Annual Report | 31 | ||
TEMPLETON GLOBAL SMALLER COMPANIES FUND
NOTES TO FINANCIAL STATEMENTS
11. Credit Facility (continued)
Under the terms of the Global Credit Facility, the Fund shall, in addition to interest charged on any borrowings made by the Fund and other costs incurred by the Fund, pay its share of fees and expenses incurred in connection with the implementation and maintenance of the Global Credit Facility, based upon its relative share of the aggregate net assets of all of the Borrowers, including an annual commitment fee of 0.15% based upon the unused portion of the Global Credit Facility. These fees are reflected in other expenses in the Statement of Operations. During the year ended August 31, 2018, the Fund did not use the Global Credit Facility.
12. Fair Value Measurements
The Fund follows a fair value hierarchy that distinguishes between market data obtained from independent sources (observable inputs) and the Fund’s own market assumptions (unobservable inputs). These inputs are used in determining the value of the Fund’s financial instruments and are summarized in the following fair value hierarchy:
| • | Level 1 – quoted prices in active markets for identical financial instruments |
| • | Level 2 – other significant observable inputs (including quoted prices for similar financial instruments, interest rates, prepayment speed, credit risk, etc.) |
| • | Level 3 – significant unobservable inputs (including the Fund’s own assumptions in determining the fair value of financial instruments) |
The input levels are not necessarily an indication of the risk or liquidity associated with financial instruments at that level.
For movements between the levels within the fair value hierarchy, the Fund has adopted a policy of recognizing the transfers as of the date of the underlying event which caused the movement.
A summary of inputs used as of August 31, 2018, in valuing the Fund’s assets carried at fair value, is as follows:
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||
| Assets: |
||||||||||||||||
| Investments in Securities:a |
||||||||||||||||
| Equity Investments:b |
||||||||||||||||
| Indonesia |
$ | — | $ | — | $ | 684,270 | $ | 684,270 | ||||||||
| All Other Equity Investments |
1,324,499,929 | — | — | 1,324,499,929 | ||||||||||||
| Short Term Investments |
34,569,390 | 78,000,000 | — | 112,569,390 | ||||||||||||
|
|
|
|||||||||||||||
|
Total Investments in Securities |
$ | 1,359,069,319 | $ | 78,000,000 | $ | 684,270 | $ | 1,437,753,589 | ||||||||
|
|
|
|||||||||||||||
aFor detailed categories, see the accompanying Statement of Investments.
bIncludes common, preferred stocks and management investment companies as well as other equity interests.
A reconciliation of assets in which Level 3 inputs are used in determining fair value is presented when there are significant Level 3 financial instruments at the beginning and/or end of the year.
13. New Accounting Pronouncements
In August 2018, the Financial Accounting Standards Board issued Accounting Standards Update (ASU) No. 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurements. The amendments in the ASU modify the disclosure requirements on fair value measurements in Topic 820. The ASU is effective for interim and annual reporting periods beginning after December 15, 2019. Management is currently evaluating the impact, if any, of applying this provision.
| 32 |
Annual Report | franklintempleton.com | ||
TEMPLETON GLOBAL SMALLER COMPANIES FUND
NOTES TO FINANCIAL STATEMENTS
14. Subsequent Events
The Fund has evaluated subsequent events through the issuance of the financial statements and determined that no events have occurred that require disclosure, except for the following:
On February 27, 2018, the Board approved an automatic conversion feature for Class C that will convert shareholders’ Class C shares into Class A shares after they have been held for 10 years. The conversion feature will become effective on or about October 5, 2018. Further details are disclosed in the Fund’s Prospectus.
On May 18, 2018, the Board approved changes to certain front-end sales charges and dealer commissions on Class A shares. The changes will become effective on or about September 10, 2018. Further details are disclosed in the Fund’s Prospectus.
| Abbreviations | ||
| Selected Portfolio | ||
| ETF |
Exchange Traded Fund | |
| FHLB |
Federal Home Loan Bank | |
| franklintempleton.com | Annual Report | 33 | ||
TEMPLETON GLOBAL SMALLER COMPANIES FUND
Report of Independent Registered Public Accounting Firm
To the Board of Trustees and Shareholders of the Templeton Global Smaller Companies Fund
Opinion on the Financial Statements
We have audited the accompanying statement of assets and liabilities, including the statement of investments, of Templeton Global Smaller Companies Fund (the “Fund”) as of August 31, 2018, the related statement of operations for the year ended August 31, 2018, the statement of changes in net assets for each of the two years in the period ended August 31, 2018, including the related notes, and the financial highlights for each of the five years in the period ended August 31, 2018 (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Fund as of August 31, 2018, 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 ended August 31, 2018 and the financial highlights for each of the five years in the period ended August 31, 2018 in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits of these financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our procedures included confirmation of securities owned as of August 31, 2018 by correspondence with the custodian, transfer agent, and brokers; when replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
San Francisco, California
October 16, 2018
We have served as the auditor of one or more investment companies in the Franklin Templeton funds since 1948.
| 34 |
Annual Report | franklintempleton.com | ||
TEMPLETON GLOBAL SMALLER COMPANIES FUND
Under Section 852(b)(3)(C) of the Internal Revenue Code, the Fund hereby reports the maximum amount allowable but no less than $47,824,524 as a long term capital gain dividend for the fiscal year ended August 31, 2018.
Under Section 871(k)(2)(C) of the Internal Revenue Code, the Fund hereby reports the maximum amount allowable but no less than $2,805,223 as a short term capital gain dividend for purposes of the tax imposed under Section 871(a)(1)(A) of the Internal Revenue Code for the fiscal year ended August 31, 2018.
Under Section 854(b)(1)(A) of the Internal Revenue Code, the Fund hereby reports 28.49% of the ordinary income dividends as income qualifying for the dividends received deduction for the fiscal year ended August 31, 2018.
Under Section 854(b)(1)(B) of the Internal Revenue Code, the Fund hereby reports the maximum amount allowable but no less than $15,520,931 as qualified dividends for purposes of the maximum rate under Section 1(h)(11) of the Internal Revenue Code for the fiscal year ended August 31, 2018. Distributions, including qualified dividend income, paid during calendar year 2018 will be reported to shareholders on Form 1099-DIV by mid-February 2019. Shareholders are advised to check with their tax advisors for information on the treatment of these amounts on their individual income tax returns.
At August 31, 2017, more than 50% of the Fund’s total assets were invested in securities of foreign issuers. In most instances, foreign taxes were withheld from income paid to the Fund on these investments. As shown in the table below, the Fund hereby reports to shareholders the foreign source income and foreign taxes paid, pursuant to Section 853 of the Internal Revenue Code. This written statement will allow shareholders of record on December 21, 2017, 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 table provides a detailed analysis of foreign tax paid, foreign source income and foreign source qualified dividends as reported by the Fund, to Class A, Class C, Class R6 and Advisor Class shareholders of record.
| Foreign Tax Paid | Foreign Source | Foreign Source Qualified | ||||||||||
| Class | Per Share | Income Per Share | Dividends Per Share | |||||||||
| Class A |
$0.0166 | $0.0646 | $0.0454 | |||||||||
| Class C |
$0.0166 | $0.0155 | $0.0107 | |||||||||
| Class R6 |
$0.0166 | $0.0935 | $0.0656 | |||||||||
| Advisor Class |
$0.0166 | $0.0711 | $0.0500 | |||||||||
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 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 Source Qualified Dividends Per Share (Column 3) is the amount per share of foreign source qualified dividends, 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 February 2018, shareholders received Form 1099-DIV which included their share of taxes paid and foreign source income distributed during the calendar year 2017. The Foreign Source Income reported on Form 1099-DIV was not 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 2017 individual income tax returns.
1. Qualified dividends are taxed at reduced long term capital gains tax rates. 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.
| franklintempleton.com | Annual Report | 35 | ||
TEMPLETON GLOBAL SMALLER COMPANIES FUND
Special Meeting of Shareholders
MEETING OF SHAREHOLDERS: OCTOBER 30, 2017 AND RECONVENED ON DECEMBER 15, 2017
(UNAUDITED)
A Special Meeting of Shareholders of Templeton Global Smaller Companies Fund was held at the offices of Franklin Templeton Investments, One Franklin Parkway, San Mateo, California on October 30, 2017 and reconvened on December 15, 2017. The purpose of the meeting was to elect Trustees of Templeton Global Smaller Companies Fund and to vote to approve an amended fundamental investment restriction regarding investments in commodities for the Fund. At the meeting, (i) the following persons were elected by the shareholders to serve as Trustees of Templeton Global Smaller Companies Fund: Harris J. Ashton, Ann Torre Bates, Mary C. Choksi, Edith E. Holiday, Gregory E. Johnson, Rupert H. Johnson, Jr., J. Michael Luttig, David W. Niemiec, Larry D. Thompson, Constantine D. Tseretopoulos and Robert E. Wade; and (ii) the proposal to approve the amended fundamental investment restriction regarding investments in commodities was approved by shareholders. No other business was transacted at the meeting.
In connection with the meeting, management is aware that some shareholders received from the proxy solicitor numerous calls and mailings that may have been distracting. Management is taking steps to ensure that, in the future, for any new shareholder meeting solicitations that occur, such activity is not repeated. Management apologizes for any inconvenience that may have been caused as a result of such calls and mailings.
The results of the voting at the meeting are as follows:
Proposal 1. To elect a Board of Trustees:
| Name | For | Withheld | ||||||
| Harris J. Ashton |
61,742,942 | 2,577,547 | ||||||
| Ann Torre Bates |
61,788,129 | 2,532,360 | ||||||
| Mary C. Choksi |
61,745,795 | 2,574,694 | ||||||
| Edith E. Holiday |
61,769,458 | 2,551,031 | ||||||
| Gregory E. Johnson |
61,695,233 | 2,625,255 | ||||||
| Rupert H. Johnson, Jr |
61,742,727 | 2,577,762 | ||||||
| J. Michael Luttig |
61,680,806 | 2,639,683 | ||||||
| David W. Niemiec |
61,778,454 | 2,542,034 | ||||||
| Larry D. Thompson |
61,680,128 | 2,640,360 | ||||||
| Constantine D. Tseretopoulos |
61,832,488 | 2,488,000 | ||||||
| Robert E. Wade |
61,814,171 | 2,506,318 | ||||||
Total Trust Shares Outstanding*: 122,213,417
* As of the record date.
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TEMPLETON GLOBAL SMALLER COMPANIES FUND
SPECIAL MEETING OF SHAREHOLDERS
Proposal 2. To approve an amended fundamental investment restriction regarding investments in commodities:
| Shares | ||||
| For |
46,728,592 | |||
| Against |
2,384,056 | |||
| Abstain |
2,909,951 | |||
| Broker Non-Votes |
12,297,890 | |||
| Total Fund Shares Voted |
64,320,489 | |||
| Total Fund Shares Outstanding* |
122,213,417 | |||
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TEMPLETON GLOBAL SMALLER COMPANIES FUND
The name, year of birth and address of the officers and board members, as well as their affiliations, positions held with the Trust, principal occupations during at least 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
| Name, Year of Birth and Address
|
Position
|
Length of Time Served
|
Number of Portfolios in Fund Complex Overseen by Board Member*
|
Other Directorships Held During at Least the Past 5 Years
| ||||
| Harris J. Ashton (1932) 300 S.E. 2nd Street Fort Lauderdale, FL 33301-1923 |
Trustee | Since 1992 | 136 | Bar-S Foods (meat packing company) (1981-2010). | ||||
| Principal Occupation During at Least the 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).
| ||||||||
| Ann Torre Bates (1958) 300 S.E. 2nd Street Fort Lauderdale, FL 33301-1923 |
Trustee | Since 2008 | 38 | Ares Capital Corporation (specialty finance company) (2010-present), United Natural Foods, Inc. (distributor of natural, organic and specialty foods) (2013-present), Allied Capital Corporation (financial services) (2003-2010), SLM Corporation (Sallie Mae) (1997-2014) and Navient Corporation (loan management, servicing and asset recovery) (2014-2016). | ||||
| Principal Occupation During at Least the Past 5 Years: | ||||||||
| Director of various companies; and formerly, Executive Vice President and Chief Financial Officer, NHP Incorporated (manager of multifamily housing) (1995-1997); and Vice President and Treasurer, US Airways, Inc. (until 1995).
| ||||||||
| Mary C. Choksi (1950) 300 S.E. 2nd Street Fort Lauderdale, FL 33301-1923 |
Trustee | Since 2016 | 136 | Avis Budget Group Inc. (car rental) (2007-present), Omnicom Group Inc. (advertising and marketing communications services) (2011-present) and White Mountains Insurance Group, Ltd. (holding company) (2017-present). | ||||
| Principal Occupation During at Least the Past 5 Years: | ||||||||
| Director of various companies; and formerly, Founder and Senior Advisor, Strategic Investment Group (investment management group) (2015-2017); Founding Partner and Senior Managing Director, Strategic Investment Group (1987-2015); Founding Partner and Managing Director, Emerging Markets Management LLC (investment management firm) (1987-2011); and Loan Officer/Senior Loan Officer/Senior Pension Investment Officer, World Bank Group (international financial institution) (1977-1987).
| ||||||||
| Edith E. Holiday (1952) 300 S.E. 2nd Street Fort Lauderdale, FL 33301-1923 |
Lead Independent Trustee | Trustee since 2004 and Lead Independent Trustee since 2007 | 136 | Hess Corporation (exploration of oil and gas) (1993-present), Canadian National Railway (railroad) (2001-present), White Mountains Insurance Group, Ltd. (holding company) (2004-present), Santander Consumer USA Holdings, Inc. (consumer finance) (2016-present), RTI International Metals, Inc. (manufacture and distribution of titanium) (1999-2015) and H.J. Heinz Company (processed foods and allied products) (1994-2013). | ||||
| Principal Occupation During at Least the 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).
| ||||||||
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Independent Board Members (continued)
| Name, Year of Birth and Address
|
Position
|
Length of Time Served
|
Number of Portfolios in Fund Complex Overseen by Board Member*
|
Other Directorships Held During at Least the Past 5 Years
| ||||
| J. Michael Luttig (1954) 300 S.E. 2nd Street Fort Lauderdale, FL 33301-1923 |
Trustee | Since 2009 | 136 | Boeing Capital Corporation (aircraft financing) (2006-2013). | ||||
| Principal Occupation During at Least the Past 5 Years: | ||||||||
| Executive Vice President, General Counsel and member of the Executive Council, The Boeing Company (aerospace company) (2006-present); and formerly, Federal Appeals Court Judge, U.S. Court of Appeals for the Fourth Circuit (1991-2006).
| ||||||||
| David W. Niemiec (1949) 300 S.E. 2nd Street Fort Lauderdale, FL 33301-1923 |
Trustee | Since 2005 | 38 | Hess Midstream Partners LP (oil and gas midstream infrastructure) (2017-present). | ||||
| Principal Occupation During at Least the Past 5 Years: | ||||||||
| Advisor, Saratoga Partners (private equity fund); 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).
| ||||||||
| Larry D. Thompson (1945) 300 S.E. 2nd Street Fort Lauderdale, FL 33301-1923 |
Trustee | Since 2005 | 136 | The Southern Company (energy company) (2014-present; previously 2010-2012), Graham Holdings Company (education and media organization) (2011-present) and Cbeyond, Inc. (business communications provider) (2010-2012). | ||||
| Principal Occupation During at Least the Past 5 Years: | ||||||||
| Director of various companies; Counsel, Finch McCranie, LLP (law firm) (2015-present); Independent Compliance Monitor and Auditor, Volkswagen AG (manufacturer of automobiles and commercial vehicles) (2017-present); John A. Sibley Professor of Corporate and Business Law, University of Georgia School of Law (2015-present; previously 2011-2012); and formerly, Executive Vice President - Government Affairs, General Counsel and Corporate Secretary, PepsiCo, Inc. (consumer products) (2012-2014); Senior Vice President - Government Affairs, General Counsel and Secretary, PepsiCo, Inc. (2004-2011); 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 (1954) 300 S.E. 2nd Street Fort Lauderdale, FL 33301-1923 |
Trustee | Since 2004 | 24 | None | ||||
| Principal Occupation During at Least the Past 5 Years: | ||||||||
| Physician, Chief of Staff, owner and operator of the 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) 300 S.E. 2nd Street Fort Lauderdale, FL 33301-1923 |
Trustee | Since 2006 | 38 | El Oro Ltd (investments) (2003-present). | ||||
| Principal Occupation During at Least the Past 5 Years: |
||||||||
| Attorney at law engaged in private practice as a sole practitioner (1972-2008) and member of various boards.
| ||||||||
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TEMPLETON GLOBAL SMALLER COMPANIES FUND
Interested Board Members and Officers
| Name, Year of Birth and Address
|
Position
|
Length of Time Served
|
Number of Portfolios in
|
Other Directorships Held
| ||||
| **Gregory E. Johnson (1961) One Franklin Parkway San Mateo, CA 94403-1906 |
Trustee | Since 2007 | 150 | None | ||||
| Principal Occupation During at Least the Past 5 Years: |
||||||||
| Chairman of the Board, Member – Office of the Chairman, Director and Chief Executive Officer, Franklin Resources, Inc.; 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; Vice Chairman, Investment Company Institute; and formerly, President, Franklin Resources, Inc. (1994-2015).
| ||||||||
| **Rupert H. Johnson, Jr. (1940) One Franklin Parkway San Mateo, CA 94403-1906 |
Chairman of the Board, Trustee and Vice President | Chairman of the Board and Trustee since 2013 and Vice President since 1996 | 136 | None | ||||
| Principal Occupation During at Least the Past 5 Years: |
||||||||
| Vice Chairman, Member – Office of the Chairman and Director, Franklin Resources, Inc.; Director, Franklin Advisers, 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 40 of the investment companies in Franklin Templeton Investments.
| ||||||||
| Alison E. Baur (1964) One Franklin Parkway San Mateo, CA 94403-1906 |
Vice President | Since 2012 | Not Applicable | Not Applicable | ||||
| Principal Occupation During at Least the Past 5 Years: |
||||||||
| Deputy General Counsel, Franklin Templeton Investments; and officer of some of the other subsidiaries of Franklin Resources, Inc. and of 44 of the investment companies in Franklin Templeton Investments.
| ||||||||
| Norman J. Boersma (1957) Lyford Cay Nassau, Bahamas |
President and Chief Executive Officer – Investment Management | Since 2012 | Not Applicable | Not Applicable | ||||
| Principal Occupation During at Least the Past 5 Years: |
||||||||
| Chairman of the Board, President and Chief Executive Officer, Templeton Global Advisors Ltd.; Chief Investment Officer of Templeton Global Equity Group; officer of five of the investment companies in Franklin Templeton Investments; and formerly, Executive Vice President, Franklin Templeton Investments Corp. (1993-2014).
| ||||||||
| Aliya S. Gordon (1973) One Franklin Parkway San Mateo, CA 94403-1906 |
Vice President | Since 2009 | Not Applicable | Not Applicable | ||||
| Principal Occupation During at Least the Past 5 Years: |
||||||||
| Senior Associate General Counsel, Franklin Templeton Investments; and officer of 44 of the investment companies in Franklin Templeton Investments.
| ||||||||
| Steven J. Gray (1955) One Franklin Parkway San Mateo, CA 94403-1906 |
Vice President | Since 2009 | Not Applicable | Not Applicable | ||||
| Principal Occupation During at Least the Past 5 Years: | ||||||||
| Senior Associate General Counsel, Franklin Templeton Investments; Vice President, Franklin Templeton Distributors, Inc. and FASA, LLC; and officer of 44 of the investment companies in Franklin Templeton Investments.
| ||||||||
| Matthew T. Hinkle (1971) One Franklin Parkway San Mateo, CA 94403-1906 |
Chief Executive Officer – Finance and Administration | Since 2017 | Not Applicable | Not Applicable | ||||
| Principal Occupation During at Least the Past 5 Years: |
||||||||
| Senior Vice President, Franklin Templeton Services, LLC; officer of 44 of the investment companies in Franklin Templeton Investments; and formerly, Vice President, Global Tax (2012-April 2017) and Treasurer/Assistant Treasurer, Franklin Templeton Investments (2009-2017).
| ||||||||
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Interested Board Members and Officers (continued)
| Name, Year of Birth and Address
|
Position
|
Length of Time Served
|
Number of Portfolios in Fund Complex Overseen by Board Member*
|
Other Directorships Held During at Least the Past 5 Years
| ||||
| Robert G. Kubilis (1973) 300 S.E. 2nd Street Fort Lauderdale, FL 33301-1923 |
Chief Financial Officer, Chief Accounting Officer and Treasurer | Since 2017 | Not Applicable | Not Applicable | ||||
| Principal Occupation During at Least the Past 5 Years: | ||||||||
| Treasurer, U.S. Fund Administration & Reporting, Franklin Templeton Investments; and officer of 16 of the investment companies in Franklin Templeton Investments.
| ||||||||
| Robert Lim (1948) One Franklin Parkway San Mateo, CA 94403-1906 |
Vice President –AML Compliance | Since 2016 | Not Applicable | Not Applicable | ||||
| Principal Occupation During at Least the Past 5 Years: | ||||||||
| Vice President, Franklin Templeton Companies, LLC; Chief Compliance Officer, Franklin Templeton Distributors, Inc. and Franklin Templeton Investor Services, LLC; and officer of 44 of the investment companies in Franklin Templeton Investments.
| ||||||||
| Kimberly H. Novotny (1972) 300 S.E. 2nd Street Fort Lauderdale, FL 33301-1923 |
Vice President | Since 2013 | Not Applicable | Not Applicable | ||||
| Principal Occupation During at Least the Past 5 Years: | ||||||||
| Associate General Counsel, Franklin Templeton Investments; Vice President and Corporate Secretary, Fiduciary Trust International of the South; Vice President, Templeton Investment Counsel, LLC; Assistant Secretary, Franklin Resources, Inc.; and officer of 44 of the investment companies in Franklin Templeton Investments.
| ||||||||
| Robert C. Rosselot (1960) 300 S.E. 2nd Street Fort Lauderdale, FL 33301-1923 |
Chief Compliance Officer | Since 2013 | Not Applicable | Not Applicable | ||||
| Principal Occupation During at Least the Past 5 Years: | ||||||||
| Director, Global Compliance, Franklin Templeton Investments; Vice President, Franklin Templeton Companies, LLC; officer of 44 of the investment companies in Franklin Templeton Investments; and formerly, Senior Associate General Counsel, Franklin Templeton Investments (2007-2013); and Secretary and Vice President, Templeton Group of Funds (2004-2013).
| ||||||||
| Karen L. Skidmore (1952) One Franklin Parkway San Mateo, CA 94403-1906 |
Vice President | Since 2009 | Not Applicable | Not Applicable | ||||
| Principal Occupation During at Least the Past 5 Years: | ||||||||
| Senior Associate General Counsel, Franklin Templeton Investments; and officer of 44 of the investment companies in Franklin Templeton Investments.
| ||||||||
| Navid J. Tofigh (1972) One Franklin Parkway San Mateo, CA 94403-1906 |
Vice President | Since 2015 | Not Applicable | Not Applicable | ||||
| Principal Occupation During at Least the Past 5 Years: | ||||||||
| Associate General Counsel, Franklin Templeton Investments; and officer of 44 of the investment companies in Franklin Templeton Investments.
| ||||||||
| Craig S. Tyle (1960) One Franklin Parkway San Mateo, CA 94403-1906 |
Vice President | Since 2005 | Not Applicable | Not Applicable | ||||
| Principal Occupation During at Least the Past 5 Years: | ||||||||
| General Counsel and Executive Vice President, Franklin Resources, Inc.; and officer of some of the other subsidiaries of Franklin Resources, Inc. and of 44 of the investment companies in Franklin Templeton Investments.
| ||||||||
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TEMPLETON GLOBAL SMALLER COMPANIES FUND
Interested Board Members and Officers (continued)
| Name, Year of Birth and Address |
Position | Length of Time Served |
Number of Portfolios in Fund Complex Overseen by Board Member* |
Other Directorships Held During at Least the Past 5 Years | ||||
|
Lori A. Weber (1964) 300 S.E. 2nd Street Fort Lauderdale, FL 33301-1923 |
Vice President and Secretary |
Vice President since 2011 and Secretary since 2013 |
Not Applicable |
Not Applicable | ||||
|
Principal Occupation During at Least the Past 5 Years: | ||||||||
| Senior Associate General Counsel, Franklin Templeton Investments; Assistant Secretary, Franklin Resources, Inc.; Vice President and Secretary, Templeton Investment Counsel, LLC; and officer of 44 of the investment companies in Franklin Templeton Investments. | ||||||||
*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.
**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 Franklin Resources, Inc. (Resources), which is the parent company of the Fund’s investment manager and distributor. Rupert H. Johnson, Jr. is considered to be an interested person of the Fund under the federal securities laws due to his position as an officer and director and major shareholder of Resources.
Note 1: Rupert H. Johnson, Jr. is the uncle 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.
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 has determined that there is at least one such financial expert on the Audit Committee and has designated each of Ann Torre Bates and David W. Niemiec as an audit committee financial expert. The Board believes that Ms. Bates and Mr. Niemiec qualify as such an expert in view of their extensive business background and experience. Ms. Bates has served as a member of the Fund Audit Committee since 2008. She currently serves as a director of Ares Capital Corporation (2010-present) and United Natural Foods, Inc. (2013-present) and was formerly a director of Navient Corporation from 2014 to 2016, SLM Corporation from 1997 to 2014 and Allied Capital Corporation from 2003 to 2010, Executive Vice President and Chief Financial Officer of NHP Incorporated from 1995 to 1997 and Vice President and Treasurer of US Airways, Inc. until 1995. 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 and serves as a director of Hess Midstream Partners LP (2017-present). Mr. Niemiec was formerly a director of Emeritus Corporation from 1999 to 2010 and OSI Pharmaceuticals, Inc. from 2006 to 2010, 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 believes that Ms. Bates 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. Ms. Bates and Mr. Niemiec are independent Board members 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 (800) DIAL BEN/342-5236 to request the SAI.
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SHAREHOLDER INFORMATION
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SHAREHOLDER INFORMATION
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Annual Report and Shareholder Letter Templeton Global Smaller Companies Fund
Investment Manager Templeton Investment Counsel, LLC | |||
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Subadvisor | |||
| Franklin Templeton Investments Corp. | ||||
| Distributor | ||||
| Franklin Templeton Distributors, Inc. | ||||
| (800) DIAL BEN® / 342-5236 franklintempleton.com | ||||
| Shareholder Services | ||||
| (800) 632-2301 | ||||
| Authorized for distribution only when accompanied or preceded by a summary prospectus and/or prospectus. Investors should carefully consider a fund’s investment goals, risks, charges and expenses before investing. A prospectus contains this and other information; please read it carefully before investing.
To help ensure we provide you with quality service, all calls to and from our service areas are monitored and/or recorded. | ||||
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© 2018 Franklin Templeton Investments. All rights reserved. 103 A 10/18 | |||
| 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. |
| (c) | N/A |
| (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 $51,161 for the fiscal year ended August 31, 2018 and $50,335 for the fiscal year ended August 31, 2017.
| (b) | Audit-Related Fees |
The aggregate 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 were $3,102 for the fiscal year ended August 31, 2018 and $3,071 for the fiscal year ended August 31, 2017. The services for which these fees were paid included attestation services.
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.
| (c) | Tax Fees |
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.
There were no 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.
| (d) | All Other Fees |
The aggregate fees paid to the principal accountant for products and services rendered by the principal accountant to the registrant, other than the services reported in paragraphs (a)-(c) of Item 4 were $442 for the fiscal year ended August 31, 2018 and $0 for the fiscal year ended August 31, 2017. 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, other than the services reported in paragraphs (a)-(c) of Item 4 were $0 for the fiscal year ended August 31, 2018 and $14,000 for the fiscal year ended August 31, 2017. The services for which these fees were paid included benchmarking services in connection with the 2015 ICI Transfer Agent Survey.
(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 $3,544 for the fiscal year ended August 31, 2018 and $17,071 for the fiscal year ended August 31, 2017.
(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 changes in the Registrant’s internal controls or in other factors that could materially affect the internal controls over financial reporting subsequent to the date of their evaluation in connection with the preparation of this Shareholder Report on Form N-CSR.
Item 12. Disclosure of Securities Lending Activities for Closed-End Management Investment Company.
| Item 13. | Exhibits. |
(a)(1) Code of Ethics
(a)(2) Certifications pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 of Matthew T. Hinkle, Chief Executive Officer - Finance and Administration, and Robert G. Kubilis, Chief Financial Officer and Chief Accounting Officer
(b) Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 of Matthew T. Hinkle, Chief Executive Officer - Finance and Administration, and Robert G. Kubilis, Chief Financial Officer and Chief Accounting 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/ MATTHEW T. HINKLE | |
| Matthew T. Hinkle | ||
| Chief Executive Officer – | ||
| Finance and Administration |
Date: October 25, 2018
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/ MATTHEW T. HINKLE | |
| Matthew T. Hinkle | ||
| Chief Executive Officer – | ||
| Finance and Administration |
Date: October 25, 2018
| By | /s/ ROBERT G. KUBILIS | |
| Robert G. Kubilis | ||
| Chief Financial Officer and | ||
| Chief Accounting Officer |
Date: October 25, 2018