Templeton Foreign Smaller Companies Fund · Europe 40.8% Asia 32.9% North America 11.3% Australia & New Zealand 6.4% ... Economic and Market Overview Global financial markets generally

TempletonForeign Smaller Companies Fund

APRIL 30, 2011

SEMIANNUAL REPORTAND SHAREHOLDER LETTER

A series of Franklin Templeton International Trust

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I N T E R N A T I O N A L

Franklin Templeton InvestmentsGain From Our Perspective®

Franklin Templeton’s distinct multi-manager structure combines thespecialized expertise of three world-class investment management groups—Franklin, Templeton and Mutual Series.

Each of our portfolio management groups operates autonomously, relying on its own research and staying true to the unique investment disciplines that underlie its success.

Franklin. Founded in 1947, Franklin is a recognized leader in fixed income investingand also brings expertise in growth- and value-style U.S. equity investing.

Templeton. Founded in 1940, Templeton pioneered international investing and, in 1954, launched what has become the industry’s oldest global fund. Today, withoffices in over 25 countries, Templeton offers investors a truly global perspective.

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

Because our management groups work independently and adhere to differentinvestment approaches, Franklin, Templeton and Mutual Series funds typicallyhave distinct portfolios. That’s why our funds can be used to build trulydiversified allocation plans covering every major asset class.

At Franklin Templeton Investments, we seek to consistently provide investors with exceptional risk-adjusted returns over the long term, as well as the reliable,accurate and personal service that has helped us become one of the most trustednames in financial services.

TRUE DIVERSIFICATION

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Shareholder LetterDear Shareholder:

During the six months ended April 30, 2011, expanding global economiesgenerally maintained their forward momentum despite significant pressuresthat included surging commodity prices and government debt overload on several fronts. In this environment, global stock markets generally rose asinvestors maintained their confidence while continuing to focus on theimproved health of corporate balance sheets and a steady stream of positivecorporate earnings results.

Templeton Foreign Smaller Companies Fund’s semiannual report goes intogreater detail about prevailing conditions during the period under review. Inaddition, you will find Fund performance data, financial information and adiscussion from the portfolio managers. Please remember all securities marketsfluctuate, as do mutual fund share prices.

If you would like more frequent updates, franklintempleton.com provides dailyprices, monthly performance figures, portfolio holdings and other information.You can also access your account, buy and sell shares, read timely articles, andfind helpful financial planning tools. We hope you will take advantage of theseonline services.

Historically, patient investors have achieved rewarding results by evaluatingtheir goals, diversifying their assets globally and maintaining a disciplinedinvestment program, all hallmarks of the Templeton investment philosophydeveloped more than 50 years ago. We continue to recommend investors con-sult their financial advisors and review their portfolios to design a long-termstrategy and portfolio allocation that meet their individual needs, goals andrisk tolerance. We firmly believe most people benefit from professional adviceand that advice is invaluable as investors navigate current market conditions.

ContentsSemiannual Report

Templeton Foreign SmallerCompanies Fund . . . . . . . . . . . 3

Performance Summary . . . . . . 9

Your Fund’s Expenses . . . . . . . 12

Financial Highlights and Statement of Investments . . . . 14

Financial Statements . . . . . . . 22

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

Shareholder Information . . . . . 36 Shareholder Letter . . . . . . . . 1

2 | Not part of the semiannual report

We thank you for investing with Franklin Templeton, welcome your questionsand comments, and look forward to serving your investment needs in theyears ahead.

Sincerely,

Edward B. JamiesonPresident and Chief Executive Officer – Investment ManagementFranklin Templeton International Trust

This letter reflects our analysis and opinions as of April 30, 2011. The information is not a complete analysis of every aspect of any market, country, industry, security or fund. Statements of fact are from sources considered reliable.

Europe 40.8%Asia 32.9%North America 11.3%Australia & New Zealand 6.4%Latin America & Caribbean 2.7%Short-Term Investments &Other Net Assets 5.9%

Geographic BreakdownBased on Total Net Assets as of 4/30/11

Semiannual Report

This semiannual report for Templeton Foreign Smaller Companies Fund coversthe period ended April 30, 2011.

Performance Overview

For the six months under review, Templeton Foreign Smaller Companies Fund– Class A delivered a cumulative total return of +13.07%. The Fund under-performed international small capitalization stocks in developed and emerging

Templeton Foreign Smaller Companies FundYour Fund’s Goal and Main Investments: Templeton Foreign Smaller Companies

Fund seeks to provide long-term capital growth. Under normal market conditions, the Fund invests

at least 80% of its net assets in investments of smaller companies located outside the U.S., including

emerging markets.

The dollar value, number of shares or principal amount, and names of all portfolio holdings are listed in the Fund’sStatement of Investments (SOI). The SOI begins on page 18.

Performance data represent

past performance, which does

not guarantee future results.

Investment return and principal

value will fluctuate, and you may

have a gain or loss when you sell

your shares. Current performance

may differ from figures shown.

Please visit franklintempleton.comor call (800) 342-5236 for most

recent month-end performance.

Semiannual Report | 3

4 | Semiannual Report

Top 10 Sectors/Industries4/30/11

% of TotalNet Assets

Capital Markets 8.6%

Commercial Banks 6.9%

Household Durables 6.8%

Textiles, Apparel & Luxury Goods 6.1%

Energy Equipment & Services 4.5%

Machinery 4.2%

Electronic Equipment, Instruments & Components 3.8%

Personal Products 3.6%

Commercial Services & Supplies 3.6%

Leisure Equipment & Products 3.6%

1. Source: © 2011 Morningstar. All Rights Reserved. The information contained herein: (1) is proprietary to Morningstarand/or its content providers; (2) may not be copied or distributed; and (3) is not warranted to be accurate, complete ortimely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use ofthis information. The indexes are unmanaged and include reinvested dividends. One cannot invest directly in an index,and an index is not representative of the Fund’s portfolio.

markets as measured by its new benchmark, the Morgan Stanley CapitalInternational (MSCI) All Country (AC) World Ex USA Small Cap Index,which produced a +14.66% total return for the same period.1 In comparison,the Fund performed comparably to the +12.95% total return of its old bench-mark, the MSCI Europe, Australasia, Far East (EAFE) Index, which tracksstock performance in global developed markets excluding the U.S. and Canada.The MSCI AC World Ex USA Small Cap Index replaced the MSCI EAFE Indexbecause we believe it better represents the Fund’s portfolio composition. Pleasenote that index performance information is provided for reference and we donot attempt to track an index but rather undertake investments on the basis offundamental research. You can find the Fund’s long-term performance data inthe Performance Summary beginning on page 9.

Economic and Market Overview

Global financial markets generally remained firm during the six months underreview as economic and corporate earnings improvements offset European debtworries, escalating geopolitical turmoil in Middle East/North Africa (MENA)and a devastating natural disaster in Japan. Stock markets also benefited fromthe developed world’s continued policy support. The U.S. led the way as theFederal Reserve Board (Fed) ushered in another round of quantitative easingand the Obama administration extended Bush-era tax cuts at the beginning ofthe period. In Europe, where fiscal deficits continued to plague some nations,Ireland and Portugal were forced to accept bailouts and the European CentralBank (ECB) approved the creation of a 750 billion euro rescue facility to addressfuture sovereign funding shortfalls. The ECB’s extraordinary interventions indi-cated its commitment to preserving monetary union stability, but the decisionto raise interest rates toward the end of the period also signaled its vigilance onprice stability, the bank’s primary mandate. The ECB’s rate hike was notablefor its divergence from the U.S. Fed’s loose monetary policy, while in other partsof the world, particularly emerging markets, policymakers’ actions againstinflation broadly continued. At least 21 countries raised official interest ratesduring the period to forestall asset bubbles and growing inflationary pressures.

Rising commodity prices fueled global inflationary pressures — oil surpassed$100 per barrel for the first time since 2008 and agricultural commoditiesreached record-high prices. Geopolitical instability helped exacerbate pricepressures when civil conflict in MENA at the beginning of 2011 threatened


global oil supplies. Growing concerns about the creditworthiness of someadvanced economies eroded confidence in certain currencies, pressuring thedollar and sending precious metals’ prices to new highs. Finally, genuine globaleconomic growth and demand increases also helped support commodity prices.For the most part, global economic trends remained positive, led by emergingmarkets, where demand growth continued to surge despite restrictive monetarypolicy. Growth was less consistent in the developed world, where austerity pro-grams in parts of Europe and persistent weaknesses in U.S. labor and housingmarkets hampered an ongoing recovery. Nonetheless, a generally favorableeconomic backdrop combined with a corporate profit cycle that could poten-tially be one of the strongest in market history helped global stock marketsreach new post-crisis highs during the six months under review.

Investment Strategy

We take a bottom-up, value-oriented, long-term approach to investing. Wefocus our analysis on the market price of a company’s securities relative to ourevaluation of the company’s long-term earnings, asset value and cash flowpotential. We also consider a company’s price/earnings ratio, profit marginsand liquidation value. We are patient investors and may hold a security forseveral years as we wait for the market to recognize a company’s true worth.

Manager’s Discussion

Most of the Fund’s holdings increased in value during the period under review,led by Canaccord Financial, Barco and Emeco Holdings. Shares of CanaccordFinancial, a small independent Canadian brokerage firm, performed well as thecompany announced quarterly earnings results well above market expectations.Looking at the longer term, we believe Canaccord’s strong relationships withCanadian small capitalization equity issues and institutional clients could helpboost its market share business if financial market conditions further improve.In our assessment, Canaccord management has done a good job in streamliningthe company for the current business environment.

Based in Belgium, Barco is a leading imaging technology firm. Recent sales fig-ures reflected the impact of rapid growth in digital cinema technology, a trendthat encouraged the company to overcome previous capacity constraints andproduction bottlenecks to service the booming global demand in its industry.

Emeco is the leading supplier of heavy earthmoving equipment rentals to theAustralian mining industry. The company’s focus is on coal and gold extrac-tion, with a growing presence in iron ore. Its share price rose strongly duringthe period as the company’s fiscal second-half earnings results were buoyed by


rising demand and its recent exit from underperforming U.S. and Europeanoperations, while Australian mining industry sentiment revived with thedemise of a planned mineral tax.

It is important to recognize the effect of currency movements on the Fund’sperformance. In general, if the value of the U.S. dollar goes up compared witha foreign currency, an investment traded in that foreign currency will go downin value because it will be worth fewer U.S. dollars. This can have a negativeeffect on Fund performance. Conversely, when the U.S. dollar weakens in relation to a foreign currency, an investment traded in that foreign currencywill increase in value, which can contribute to Fund performance. For the sixmonths ended April 30, 2011, the U.S. dollar declined in value relative to mostcurrencies. As a result, the Fund’s performance was positively affected by theportfolio’s predominant investment in securities with non-U.S. currency expo-sure. However, one cannot expect the same result in future periods.

In contrast, some holdings disappointed during the six-month reportingperiod, including Downer EDI; Descente Limited; and Alapis HoldingIndustrial and Commercial.

Downer EDI provides engineering and infrastructure management services to the public and private rail, road, power, telecommunications and miningsectors in Australia, New Zealand and Asia. The share price declined due toconcerns regarding the future level of mining capital expenditure in Australiafollowing recent tax changes. Over the longer term, we believe the companyremains poised to benefit from favorable industry trends within its underlyingbusinesses that could enable it to generate attractive earnings growth.

Based in Osaka, Japan, Descente is a leading sports apparel manufacturer andwholesaler. During the period, Descente revised down its sales and profit fore-casts, exacerbating existing pressures on the stock stemming from a generallyweak overall market for consumer-related sporting goods and concerns aboutthe ramifications of geopolitical tensions between Japan and China. Lookingat the longer term, however, we considered that Descente’s business is cashgenerative and the company has a solid balance sheet, according to our analy-sis. The company owns well-known brands and, although its domestic marketis mature, we believe expansion overseas and continued success in internationalmarkets could provide future growth.

Greece-based Alapis, together with its subsidiaries, engages in the manufac-turing and distribution of pharmaceuticals and parapharmaceutical products,veterinary pharmaceuticals, cosmetics, detergents and organic products. Duringthe period, Alapis shares fell sharply in value due to worries about the impactof the Greek government’s recent efforts to cut health care costs and potential

Top 10 Equity Holdings4/30/11

Company % of TotalSector/Industry, Country Net Assets

Canaccord Financial Inc. 2.8%Capital Markets, Canada

Bank of Ayudhya Public Co. Ltd., fgn. 2.5%Commercial Banks, Thailand

Kobayashi Pharmaceutical Co. Ltd. 2.4%Personal Products, Japan

Barco NV 2.4%Electronic Equipment, Instruments & Components, Belgium

Panalpina Welttransport Holding AG 2.3%Air Freight & Logistics, Switzerland

TKH Group NV 2.1%Communications Equipment, Netherlands

Henderson Group PLC 2.1%Capital Markets, U.K.

Amer Sports OYJ 2.1%Leisure Equipment & Products, Finland

Emeco Holdings Ltd. 2.0%Trading Companies & Distributors, Australia

Sol Melia SA 2.0%Hotels, Restaurants & Leisure, Spain


problems for the company’s debt refinancing. However, Alapis sells low-costdrugs, and in our view the government’s austerity measures could thereforefuel demand for Alapis’ products rather than curtail it. We also believe themarket could eventually recognize the company’s fundamental strength andraise its valuation.

Thank you for your continued participation in Templeton Foreign SmallerCompanies Fund. We look forward to serving your future investment needs.

Martin Cobb

Harlan B. Hodes, CPA

Cindy L. Sweeting, CFA

Portfolio Management TeamTempleton Foreign Smaller Companies Fund

CFA® is a trademark owned by CFA Institute.

The foregoing information reflects our analysis, opinions and portfolio holdings as of April 30, 2011, the end of thereporting period. The way we implement our main investment strategies and the resulting portfolio holdings maychange depending on factors such as market and economic conditions. These opinions may not be relied upon asinvestment advice or an offer for a particular security. The information is not a complete analysis of every aspectof any market, country, industry, security or the Fund. Statements of fact are from sources considered reliable,but the investment manager makes no representation or warranty as to their completeness or accuracy. Althoughhistorical performance is no guarantee of future results, these insights may help you understand our investmentmanagement philosophy.


Martin Cobb assumed portfolio manager responsibilities for the Fund in February 2011. He

joined Franklin Templeton in 2003 and manages several global equity portfolios. His research

responsibilities are U.S. banks and financials, as well as the U. K. and the Republic of Ireland.

Prior to joining Franklin Templeton Investments, Mr. Cobb was an investment manager with

SVM Asset Management in Edinburgh, where he specialized in U.K. equities. Prior to this

position, he worked for First State Investments where, as senior portfolio manager, U.K.

equities, he managed their flagship U.K. equities fund as well as several global portfolios for

institutional and retail clients. He began his career in investment management with Baillie

Gifford as an equities analyst, after which he assumed responsibility for the management of

several institutional client portfolios.

Cindy L. Sweeting assumed portfolio manager responsibilities for the Fund in February 2011.

She is also executive vice president of Templeton Investment Counsel, LLC, and director of

portfolio management for the Templeton Global Equity Group. She has portfolio management

responsibility for other retail funds and institutional separate account relationships with global

and international mandates.

Ms. Sweeting has 28 years of experience in the investment industry. She joined Franklin

Templeton Investments in Templeton’s Nassau office in 1997, and has served as director of

research for the Templeton Global Equity Group, as well as president of Templeton Global

Advisers Limited. Prior to joining Templeton, she was the senior vice president of investments

with McDermott International Investments Co., Inc., in Nassau. At McDermott, she was

responsible for the investment department, which encompassed portfolio management and

pension administration.


Performance Summary as of 4/30/11

Price and Distribution Information

Class A (Symbol: FINEX) Change 4/30/11 10/31/10

Net Asset Value (NAV) +$1.94 $17.41 $15.47

Distributions (11/1/10–4/30/11)

Dividend Income $0.0746

Class B (Symbol: n/a) Change 4/30/11 10/31/10


Class C (Symbol: FCFSX) Change 4/30/11 10/31/10


Advisor Class (Symbol: FTFAX) Change 4/30/11 10/31/10


Distributions (11/1/10–4/30/11)

Dividend Income $0.1114

Your dividend income will vary depending on dividends or interest paid by securities in the Fund’sportfolio, adjusted for operating expenses of each class. Capital gain distributions are net profitsrealized from the sale of portfolio securities. The performance table does not reflect any taxes thata shareholder would pay on Fund dividends, capital gain distributions, if any, or any realized gainson the sale of Fund shares. Total return reflects reinvestment of the Fund’s dividends and capitalgain distributions, if any, and any unrealized gains or losses.

Performance Summary (continued)


Performance

Cumulative total return excludes sales charges. Average annual total returns and value of $10,000 investment includemaximum sales charges. Class A: 5.75% maximum initial sales charge; Class B: contingent deferred sales charge (CDSC) declining from 4% to 1% over six years, and eliminated thereafter; Class C: 1% CDSC in first year only; Advisor Class: no sales charges.

Class A 6-Month 1-Year 5-Year 10-Year

Cumulative Total Return1 +13.07% +23.55% +26.13% +161.57%

Average Annual Total Return2 +6.59% +16.44% +3.52% +9.44%

Value of $10,000 Investment3 $10,659 $11,644 $11,888 $24,656

Avg. Ann. Total Return (3/31/11)4 +14.79% +3.61% +9.57%

Total Annual Operating Expenses5 1.59%

Class B 6-Month 1-Year 5-Year 10-Year






Class C 6-Month 1-Year 5-Year 10-Year






Advisor Class 6-Month 1-Year 5-Year 10-Year






Performance data represent past performance, which does not guarantee future results. Investment return and principalvalue 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.


Performance Summary (continued)

Endnotes

Special risks are associated with foreign investing, including currency fluctuations, economic instability and political developments. Investmentsin emerging markets involve heightened risks related to the same factors, in addition to those associated with these markets’ smaller size andlesser liquidity. In addition, smaller company stocks have historically exhibited greater price volatility than large-company stocks, particularlyover the short term. The manager applies various techniques and analyses in making investment decisions for the Fund, but there can be noguarantee that these decisions will produce the desired results. The Fund’s prospectus also includes a description of the main investment risks.

Class B: These shares have higher annual fees and expenses than Class A shares.

Class C: Prior to 1/1/04, these shares were offered with an initial sales charge; thus actual total returns would have differed. These shareshave higher annual fees and expenses than Class A shares.

Advisor Class: Shares are available to certain eligible investors as described in the prospectus.

1. Cumulative total return represents the change in value of an investment over the periods indicated.

2. Average annual total return represents the average annual change in value of an investment over the periods indicated. Six-month return has notbeen annualized.

3. These figures represent the value of a hypothetical $10,000 investment in the Fund over the periods indicated.

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

5. Figures are as stated in the Fund’s prospectus current as of the date of this report. In periods of market volatility, assets may decline significantly,causing total annual Fund operating expenses to become higher than the figures shown.


Your Fund’s Expenses

As a Fund shareholder, you can incur two types of costs:

• Transaction costs, including sales charges (loads) on Fund purchases; and

• Ongoing Fund costs, including management fees, distribution and service (12b-1) fees, and otherFund expenses. All mutual funds have ongoing costs, sometimes referred to as operating expenses.

The following table shows ongoing costs of investing in the Fund and can help you understandthese costs and compare them with those of other mutual funds. The table assumes a $1,000investment held for the six months indicated.

Actual Fund Expenses

The first line (Actual) for each share class listed in the table provides actual account values andexpenses. The “Ending Account Value” is derived from the Fund’s actual return, which includesthe effect of Fund expenses.

You can estimate the expenses you paid during the period by following these steps. Of course,your account value and expenses will differ from those in this illustration:

1. Divide your account value by $1,000.If an account had an $8,600 value, then $8,600 ÷ $1,000 = 8.6.

2. Multiply the result by the number under the heading “Expenses Paid During Period.”If Expenses Paid During Period were $7.50, then 8.6 x $7.50 = $64.50.

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

Hypothetical Example for Comparison with Other Funds

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


Your Fund’s Expenses (continued)

Please note that expenses shown in the table are meant to highlight ongoing costs and do not reflectany transaction costs, such as sales charges. Therefore, the second line for each class is useful incomparing ongoing costs only, and will not help you compare total costs of owning different funds.In addition, if transaction costs were included, your total costs would have been higher. Please referto the Fund prospectus for additional information on operating expenses.

Beginning Account Ending Account Expenses Paid DuringClass A Value 11/1/10 Value 4/30/11 Period* 11/1/10–4/30/11

Actual $1,000 $1,130.70 $ 7.87

Hypothetical (5% return before expenses) $1,000 $1,017.41 $ 7.45

Class B

Actual $1,000 $1,126.80 $11.76

Hypothetical (5% return before expenses) $1,000 $1,013.74 $11.13

Class C

Actual $1,000 $1,126.30 $11.81

Hypothetical (5% return before expenses) $1,000 $1,013.69 $11.18

Advisor Class

Actual $1,000 $1,132.00 $ 6.55

Hypothetical (5% return before expenses) $1,000 $1,018.65 $ 6.21

*Expenses are calculated using the most recent six-month expense ratio, annualized for each class (A: 1.49%; B: 2.23%; C: 2.24%; and Advisor: 1.24%), multiplied by the average account value over the period, multiplied by 181/365 to reflect the one-half year period.

Franklin Templeton International TrustFinancial Highlights

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

Templeton Foreign Smaller Companies Fund

Six Months EndedApril 30, 2011 Year Ended October 31,

Class A (unaudited) 2010 2009 2008 2007 2006

Per share operating performance(for a share outstanding throughout the period)

Net asset value, beginning of period . . . . . . . . . . $15.47 $12.82 $ 8.58 $25.36 $23.20 $19.60

Income from investment operationsa:

Net investment incomeb . . . . . . . . . . . . . . . . . . 0.05 0.08 0.08 0.32 0.27 0.27

Net realized and unrealized gains (losses) . . . . . 1.96 2.68 4.66 (13.11) 6.07 4.07

Total from investment operations . . . . . . . . . . . . . 2.01 2.76 4.74 (12.79) 6.34 4.34

Less distributions from:

Net investment income . . . . . . . . . . . . . . . . . . . (0.07) (0.11) (0.45) (0.28) (0.46) (0.51)

Net realized gains . . . . . . . . . . . . . . . . . . . . . . — — (0.05) (3.71) (3.72) (0.23)

Total distributions . . . . . . . . . . . . . . . . . . . . . . . (0.07) (0.11) (0.50) (3.99) (4.18) (0.74)

Redemption feesc . . . . . . . . . . . . . . . . . . . . . . . . — — — —d —d —d

Net asset value, end of period . . . . . . . . . . . . . . . $17.41 $15.47 $12.82 $ 8.58 $25.36 $23.20

Total returne . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13.07% 21.71% 58.99% (55.75)% 31.50% 22.80%

Ratios to average net assetsf

Expensesg . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.49% 1.59% 1.71% 1.53% 1.40% 1.50%

Net investment income . . . . . . . . . . . . . . . . . . . . 0.58% 0.56% 0.83% 1.78% 1.15% 1.24%

Supplemental data

Net assets, end of period (000’s) . . . . . . . . . . . . . $172,724 $163,993 $144,167 $99,546 $503,289 $356,785

Portfolio turnover rate . . . . . . . . . . . . . . . . . . . . . 8.82% 19.65% 32.74% 12.68%h 27.72% 33.92%

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 ofthe Fund shares in relation to income earned and/or fluctuating market value of the investments of the Fund.bBased on average daily shares outstanding.cEffective September 1, 2008, the redemption fee was eliminated.dAmount rounds to less than $0.01 per share.eTotal return does not reflect sales commissions or contingent deferred sales charges, if applicable, and is not annualized for periods less than one year.fRatios are annualized for periods less than one year.gBenefit of expense reduction rounds to less than 0.01%.hExcludes the value of portfolio securities delivered as a result of a redemption in-kind.

Franklin Templeton International TrustFinancial Highlights (continued)

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



Class B (unaudited) 2010 2009 2008 2007 2006




Net investment income (loss)b . . . . . . . . . . . . . . (0.02) (0.03) 0.01 0.18 0.08 0.09




Net investment income . . . . . . . . . . . . . . . . . . . — (0.08) (0.35) (0.15) (0.30) (0.44)


Total distributions . . . . . . . . . . . . . . . . . . . . . . . — (0.08) (0.40) (3.86) (4.02) (0.67)



Total returne . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12.68% 20.91% 57.71% (56.07)% 30.49% 21.93%


Expensesg . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.23% 2.33% 2.45% 2.28% 2.15% 2.24%

Net investment income (loss) . . . . . . . . . . . . . . . (0.16)% (0.18)% 0.09% 1.03% 0.40% 0.50%

Supplemental data








Class C (unaudited) 2010 2009 2008 2007 2006




Net investment income (loss)b . . . . . . . . . . . . . . (0.01) (0.02) 0.01 0.19 0.08 0.11




Net investment income . . . . . . . . . . . . . . . . . . . — (0.08) (0.34) (0.16) (0.31) (0.45)


Total distributions . . . . . . . . . . . . . . . . . . . . . . . — (0.08) (0.39) (3.87) (4.03) (0.68)



Total returne . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12.63% 20.90% 57.73% (56.07)% 30.52% 21.91%


Expensesg . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.24% 2.34% 2.46% 2.26% 2.14% 2.25%

Net investment income (loss) . . . . . . . . . . . . . . . (0.17)% (0.19)% 0.08% 1.05% 0.41% 0.49%

Supplemental data








Advisor Class (unaudited) 2010 2009 2008 2007 2006




Net investment incomeb . . . . . . . . . . . . . . . . . . 0.07 0.11 0.10 0.36 0.34 0.32




Net investment income . . . . . . . . . . . . . . . . . . . (0.11) (0.13) (0.51) (0.32) (0.51) (0.59)


Total distributions . . . . . . . . . . . . . . . . . . . . . . . (0.11) (0.13) (0.56) (4.03) (4.23) (0.82)



Total returne . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13.20% 22.06% 59.33% (55.61)% 31.78% 23.14%


Expensesg . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.24% 1.34% 1.46% 1.28% 1.15% 1.25%

Net investment income . . . . . . . . . . . . . . . . . . . . 0.83% 0.81% 1.08% 2.03% 1.40% 1.49%

Supplemental data



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 ofthe Fund shares in relation to income earned and/or fluctuating market value of the investments of the Fund.bBased on average daily shares outstanding.cEffective September 1, 2008, the redemption fee was eliminated.dAmount rounds to less than $0.01 per share.eTotal return is not annualized for periods less than one year.fRatios are annualized for periods less than one year.gBenefit of expense reduction rounds to less than 0.01%.hExcludes the value of portfolio securities delivered as a result of a redemption in-kind.


Franklin Templeton International TrustStatement of Investments, April 30, 2011 (unaudited)

Templeton Foreign Smaller Companies Fund Industry Shares Value

Common Stocks 94.1%Australia 6.4%Billabong International Ltd. . . . . . . . . . . . . . . . . . . . . . . . Textiles, Apparel & Luxury Goods 441,229 $ 3,266,744Downer EDI Ltd. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Commercial Services & Supplies 937,137 3,803,225Emeco Holdings Ltd. . . . . . . . . . . . . . . . . . . . . . . . . . . . . Trading Companies & Distributors 4,136,350 4,967,966Pacific Brands Ltd. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Distributors 3,368,240 2,696,951

aPaperlinX Ltd. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Paper & Forest Products 2,698,168 858,251

15,593,137

Austria 1.8%aWienerberger AG . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Building Products 203,367 4,349,095

Bahamas 1.8%aSteiner Leisure Ltd. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Diversified Consumer Services 89,723 4,355,154

Belgium 2.4%aBarco NV . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Electronic Equipment, Instruments

& Components 66,325 5,796,386

Canada 9.7%aATS Automation Tooling Systems Inc. . . . . . . . . . . . . . . . . Machinery 540,859 3,917,196Canaccord Financial Inc. . . . . . . . . . . . . . . . . . . . . . . . . . Capital Markets 453,625 6,858,572Dorel Industries Inc., B . . . . . . . . . . . . . . . . . . . . . . . . . . Household Durables 97,021 3,227,195Genworth MI Canada Inc. . . . . . . . . . . . . . . . . . . . . . . . . . Thrifts & Mortgage Finance 25,201 690,643

bGenworth MI Canada Inc., 144A . . . . . . . . . . . . . . . . . . . . Thrifts & Mortgage Finance 101,159 2,772,300HudBay Minerals Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . Metals & Mining 137,400 2,193,635Mullen Group Ltd. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Energy Equipment & Services 175,300 3,933,036

23,592,577

Cayman Islands 0.9%Stella International Holdings Ltd. . . . . . . . . . . . . . . . . . . . Textiles, Apparel & Luxury Goods 1,009,500 2,292,959

China 2.5%People’s Food Holdings Ltd. . . . . . . . . . . . . . . . . . . . . . . . Food Products 5,399,101 3,352,794Sinotrans Ltd., H . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Air Freight & Logistics 11,577,998 2,832,556

6,185,350

Finland 3.1%Amer Sports OYJ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Leisure Equipment & Products 308,436 5,058,413Huhtamaki OYJ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Containers & Packaging 180,053 2,518,106

7,576,519

Germany 0.9%a Jenoptik AG . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Electronic Equipment, Instruments

& Components 271,600 2,215,076

Greece 1.4%Alapis Holding Industrial and Commercial SA . . . . . . . . . . . Pharmaceuticals 903,782 241,012Hellenic Exchanges SA Holding Clearing Settlement and Registry . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Diversified Financial Services 401,800 3,214,440

3,455,452


Franklin Templeton International TrustStatement of Investments, April 30, 2011 (unaudited) (continued)


Common Stocks (continued)Hong Kong 6.9%Asia Satellite Telecommunications Holdings Ltd. . . . . . . . . Diversified Telecommunication

Services 744,402 $ 1,577,716Dah Sing Financial Group . . . . . . . . . . . . . . . . . . . . . . . . . Commercial Banks 650,069 4,088,984Fountain Set (Holdings) Ltd. . . . . . . . . . . . . . . . . . . . . . . . Textiles, Apparel & Luxury Goods 6,512,566 1,635,228Giordano International Ltd. . . . . . . . . . . . . . . . . . . . . . . . . Specialty Retail 5,205,580 3,760,308Hung Hing Printing Group Ltd. . . . . . . . . . . . . . . . . . . . . . Containers & Packaging 1,030,260 417,877Lerado Group (Holding) Co. Ltd. . . . . . . . . . . . . . . . . . . . . Leisure Equipment & Products 5,344,318 949,648Texwinca Holdings Ltd. . . . . . . . . . . . . . . . . . . . . . . . . . . Textiles, Apparel & Luxury Goods 2,034,808 2,295,192Yue Yuen Industrial Holdings Ltd. . . . . . . . . . . . . . . . . . . . Textiles, Apparel & Luxury Goods 573,545 1,979,219

16,704,172

Japan 7.6%Asics Corp. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Textiles, Apparel & Luxury Goods 6,000 86,390Descente Ltd. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Textiles, Apparel & Luxury Goods 496,515 2,087,175en-japan Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Professional Services 1,545 2,274,075Kobayashi Pharmaceutical Co. Ltd. . . . . . . . . . . . . . . . . . . Personal Products 124,479 5,831,117

cMegane TOP Co. Ltd. . . . . . . . . . . . . . . . . . . . . . . . . . . . . Specialty Retail 174,284 1,718,777MEITEC Corp. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Professional Services 41,048 789,385

cShinko Plantech Co. Ltd. . . . . . . . . . . . . . . . . . . . . . . . . . Energy Equipment & Services 415,500 4,604,715USS Co. Ltd. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Specialty Retail 15,110 1,156,720

18,548,354

Netherlands 8.2%Aalberts Industries NV . . . . . . . . . . . . . . . . . . . . . . . . . . . Machinery 118,057 2,987,317Arcadis NV . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Construction & Engineering 97,690 2,522,604Mediq NV . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Health Care Providers & Services 207,886 4,481,154

aSBM Offshore NV . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Energy Equipment & Services 84,008 2,458,665aTKH Group NV . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Communications Equipment 166,155 5,192,716aUSG People NV . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Professional Services 116,764 2,311,956

19,954,412

Norway 1.2%Tomra Systems ASA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Commercial Services & Supplies 336,573 2,887,276

Singapore 0.1%aHuan Hsin Holdings Ltd. . . . . . . . . . . . . . . . . . . . . . . . . . Electronic Equipment, Instruments

& Components 1,985,075 348,728

South Korea 6.0%Binggrae Co. Ltd. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Food Products 44,770 2,685,781

aBS Financial Group Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . Diversified Financial Services 306,225 4,470,856Daegu Bank Co. Ltd. . . . . . . . . . . . . . . . . . . . . . . . . . . . . Commercial Banks 156,515 2,622,011INTOPS Co. Ltd. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Electronic Equipment, Instruments

& Components 48,182 836,478Sindoh Co. Ltd. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Office Electronics 50,366 2,488,839Youngone Corp. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Textiles, Apparel & Luxury Goods 137,199 1,444,538

14,548,503

Spain 3.3%Antena 3 de Television SA . . . . . . . . . . . . . . . . . . . . . . . . Media 334,141 3,098,887Sol Melia SA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Hotels, Restaurants & Leisure 376,985 4,914,829

8,013,716




Common Stocks (continued)Sweden 0.8%

a,dD. Carnegie & Co. AB . . . . . . . . . . . . . . . . . . . . . . . . . . . . Capital Markets 456,515 $ —Niscayah Group AB . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Commercial Services & Supplies 924,190 1,897,344

1,897,344

Switzerland 4.4%aPanalpina Welttransport Holding AG . . . . . . . . . . . . . . . . . Air Freight & Logistics 40,603 5,489,745Verwaltungs-und Privat-Bank AG . . . . . . . . . . . . . . . . . . . . Capital Markets 20,343 2,689,362

aVontobel Holding AG . . . . . . . . . . . . . . . . . . . . . . . . . . . . Capital Markets 62,612 2,550,497

10,729,604

Taiwan 5.6%D-Link Corp. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Communications Equipment 1,434,061 1,364,820Giant Manufacturing Co. Ltd. . . . . . . . . . . . . . . . . . . . . . . Leisure Equipment & Products 640,895 2,558,218KYE Systems Corp. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Computers & Peripherals 2,169,132 1,788,390

aTa Chong Bank Ltd. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Commercial Banks 9,799,200 3,928,562Taiwan Fu Hsing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Building Products 1,670,980 1,322,338Test-Rite International Co. Ltd. . . . . . . . . . . . . . . . . . . . . . Distributors 3,283,710 2,621,473

13,583,801

Thailand 4.2%Bank of Ayudhya Public Co. Ltd., fgn. . . . . . . . . . . . . . . . . Commercial Banks 6,366,400 6,022,126Glow Energy Public Co. Ltd., fgn. . . . . . . . . . . . . . . . . . . . Independent Power Producers

& Energy Traders 1,700,127 2,604,413Total Access Communication Public Co. Ltd., fgn. . . . . . . . Wireless Telecommunication

Services 994,650 1,666,039

10,292,578

Turkey 0.3%Aygaz AS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Gas Utilities 101,053 750,953

United Kingdom 13.0%Bellway PLC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Household Durables 380,137 4,492,355Bodycote PLC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Machinery 509,542 3,298,490Bovis Homes Group PLC . . . . . . . . . . . . . . . . . . . . . . . . . Household Durables 570,490 4,183,310Dignity PLC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Diversified Consumer Services 53,525 684,846Fiberweb PLC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Personal Products 2,304,525 2,901,458Future PLC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Media 3,851,264 1,246,386GAME Group PLC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Specialty Retail 1,715,715 1,504,568Henderson Group PLC . . . . . . . . . . . . . . . . . . . . . . . . . . . Capital Markets 1,893,831 5,135,716

cMicro Focus International PLC . . . . . . . . . . . . . . . . . . . . . Software 203,200 1,261,267Persimmon PLC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Household Durables 598,290 4,828,378

aSIG PLC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Trading Companies & Distributors 915,520 2,134,818

31,671,592

United States 1.6%aMF Global Holdings Ltd. . . . . . . . . . . . . . . . . . . . . . . . . . Capital Markets 470,800 3,959,428

Total Common Stocks (Cost $187,019,696) . . . . 229,302,166



Templeton Foreign Smaller Companies Fund Principal Amount Value

Short Term Investments (Cost $15,599,999) 6.4%U.S. Government and Agency Securities 6.4%United States 6.4%

eFHLB, 5/02/11 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $15,600,000 $ 15,599,999

Total Investments (Cost $202,619,695) 100.5% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 244,902,165

Other Assets, less Liabilities (0.5)% . . . . . . . . . . . (1,324,190)

Net Assets 100.0% . . . . . . . . . . . . . . . . . . . . . . . . . $243,577,975

See Abbreviations on page 35.

aNon-income producing.bSecurity was purchased pursuant to Rule 144A under the Securities Act of 1933 and may be sold in transactions exempt from registration only to qualified institutional buyers or ina public offering registered under the Securities Act of 1933. This security has been deemed liquid under guidelines approved by the Trust’s Board of Trustees. At April 30, 2011, thevalue of this security was $2,772,300, representing 1.14% of net assets.cA portion of the security purchased on a delayed delivery basis. See Note 1(c).dSecurity has been deemed illiquid because it may not be able to be sold within seven days.eThe security is traded on a discount basis with no stated coupon rate.


Franklin Templeton International TrustFinancial Statements

Statement of Assets and LiabilitiesApril 30, 2011 (unaudited)


Assets:Investments in securities:

Cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $202,619,695

Value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $244,902,165Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83,306Receivables:

Investment securities sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 790,540Capital shares sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,197,188Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 896,562

Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 247,869,761

Liabilities:Payables:

Investment securities purchased . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,055,716Capital shares redeemed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,927,130Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 254,771

Accrued expenses and other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54,169

Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,291,786

Net assets, at value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $243,577,975

Net assets consist of:Paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $225,557,376Undistributed net investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 525,024Net unrealized appreciation (depreciation) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42,298,721Accumulated net realized gain (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (24,803,146)

Net assets, at value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $243,577,975


Franklin Templeton International TrustFinancial Statements (continued)

Statement of Assets and Liabilities (continued)April 30, 2011 (unaudited)


Class A:Net assets, at value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $172,723,898

Shares outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,918,284

Net asset value per sharea . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $17.41

Maximum offering price per share (net asset value per share ÷ 94.25%) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $18.47

Class B:Net assets, at value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,865,315

Shares outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 111,638

Net asset value and maximum offering price per sharea . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $16.71

Class C:Net assets, at value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 20,037,493


Net asset value and maximum offering price per sharea . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $16.77

Advisor Class:Net assets, at value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 48,951,269


Net asset value and maximum offering price per share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $17.40

aRedemption price is equal to net asset value less contingent deferred sales charges, if applicable.



Statement of Operationsfor the six months ended April 30, 2011 (unaudited)

Templeton Foreign SmallerCompanies Fund

Investment income:Dividends (net of foreign taxes of $210,826) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,336,901Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,006

Total investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,342,907

Expenses:Management fees (Note 3a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,068,287Distribution fees: (Note 3c)

Class A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 206,774Class B . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,019Class C . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89,920

Transfer agent fees (Note 3e) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 203,857Custodian fees (Note 4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32,463Reports to shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25,292Registration and filing fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41,985Professional fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,621Trustees’ fees and expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,031Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,485

Total expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,711,734Expense reductions (Note 4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (40)

Net expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,711,694

Net investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 631,213

Realized and unrealized gains (losses):Net realized gain (loss) from:

Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,892,911Foreign currency transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93,203

Net realized gain (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,986,114

Net change in unrealized appreciation (depreciation) on:Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,162,004Translation of other assets and liabilities denominated in foreign currencies . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,951

Net change in unrealized appreciation (depreciation) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,176,955

Net realized and unrealized gain (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27,163,069

Net increase (decrease) in net assets resulting from operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $27,794,282



Statements of Changes in Net Assets

Templeton ForeignSmaller Companies Fund

Six Months EndedApril 30, 2011 Year Ended

(unaudited) October 31, 2010Increase (decrease) in net assets:

Operations:Net investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 631,213 $ 947,288Net realized gain (loss) from investments and foreign currency transactions . . . . . . . . . . . 6,986,114 1,667,814Net change in unrealized appreciation (depreciation) on investments and translation of

other assets and liabilities denominated in foreign currencies . . . . . . . . . . . . . . . . . . . . 20,176,955 33,064,454

Net increase (decrease) in net assets resulting from operations . . . . . . . . . . . . . . . . 27,794,282 35,679,556

Distributions to shareholders from:Net investment income:

Class A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (749,124) (1,237,655)Class B . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — (14,248)Class C . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — (90,278)Advisor Class . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (269,971) (188,106)

Total distributions to shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,019,095) (1,530,287)

Capital share transactions: (Note 2)Class A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (10,765,178) (6,410,149)Class B . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (544,176) (1,007,752)Class C . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 698,327 31,276Advisor Class . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,874,371 14,039,405

Total capital share transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 263,344 6,652,780

Net increase (decrease) in net assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27,038,531 40,802,049Net assets:

Beginning of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 216,539,444 175,737,395

End of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $243,577,975 $216,539,444

Undistributed net investment income included in net assets:End of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 525,024 $ 912,906


Franklin Templeton International TrustNotes to Financial Statements (unaudited)


1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

Franklin Templeton International Trust (Trust) is registered under the Investment Company Actof 1940, as amended, (1940 Act) as an open-end investment company, consisting of three sepa-rate funds. The Templeton Foreign Smaller Companies Fund (Fund) is included in this report.The financial statements of the remaining funds in the Trust are presented separately. The Fundoffers four classes of shares: Class A, Class B, Class C, and Advisor Class. Each class of sharesdiffers by its initial sales load, contingent deferred sales charges, distribution fees, voting rightson matters affecting a single class and its exchange privilege.

The following summarizes the Fund’s significant accounting policies.

a. Financial Instrument Valuation

The Fund’s investments in securities and other financial instruments are carried at fair valuedaily. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants on the measurement date. Under pro-cedures approved by the Trust’s Board of Trustees, the Fund may utilize independent pricingservices, quotations from securities and financial instrument dealers, and other market sourcesto determine fair value.

Equity securities listed on an exchange or on the NASDAQ National Market System are valuedat the last quoted sale price or the official closing price of the day, respectively. Foreign equitysecurities are valued as of the close of trading on the foreign stock exchange on which the secu-rity is primarily traded, or the NYSE, whichever is earlier. The value is then converted into itsU.S. dollar equivalent at the foreign exchange rate in effect at the close of the NYSE on the daythat the value of the security is determined. Over-the-counter securities are valued within therange of the most recent quoted bid and ask prices. Securities that trade in multiple markets oron multiple exchanges are valued according to the broadest and most representative market.Certain equity securities are valued based upon fundamental characteristics or relationships tosimilar securities.

Debt securities generally trade in the over-the-counter market rather than on a securities exchange.The Fund’s pricing services use multiple valuation techniques to determine fair value. In instanceswhere sufficient market activity exists, the pricing services may utilize a market-based approachthrough which quotes from market makers are used to determine fair value. In instances wheresufficient market activity may not exist or is limited, the pricing services also utilize proprietaryvaluation models which may consider market characteristics such as benchmark yield curves,option-adjusted spreads, credit spreads, estimated default rates, coupon rates, anticipated timingof principal repayments, underlying collateral, and other unique security features in order to esti-mate the relevant cash flows, which are then discounted to calculate the fair value. Securitiesdenominated in a foreign currency are converted into their U.S. dollar equivalent at the foreign


Franklin Templeton International TrustNotes to Financial Statements (unaudited) (continued)


1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (continued)

a. Financial Instrument Valuation (continued)

exchange rate in effect at the close of the NYSE on the date that the values of the foreign debtsecurities are determined.

The Fund has procedures to determine the fair value of securities and other financial instrumentsfor which market prices are not readily available or which may not be reliably priced. Underthese procedures, the Fund primarily employs a market-based approach which may use relatedor comparable assets or liabilities, recent transactions, market multiples, book values, and otherrelevant information for the investment to determine the fair value of the investment. The Fundmay also use an income-based valuation approach in which the anticipated future cash flows ofthe investment are discounted to calculate fair value. Discounts may also be applied due to thenature or duration of any restrictions on the disposition of the investments. Due to the inherentuncertainty of valuations of such investments, the fair values may differ significantly from thevalues that would have been used had an active market existed.

Trading in securities on foreign securities stock exchanges and over-the-counter markets may becompleted before the daily close of business on the NYSE. Occasionally, events occur between thetime at which trading in a foreign security is completed and the close of the NYSE that might callinto question the reliability of the value of a portfolio security held by the Fund. As a result, dif-ferences may arise between the value of the Fund’s portfolio securities as determined at the foreignmarket close and the latest indications of value at the close of the NYSE. In order to minimizethe potential for these differences, the investment manager monitors price movements followingthe close of trading in foreign stock markets through a series of country specific market proxies(such as baskets of American Depository Receipts, futures contracts and exchange traded funds).These price movements are measured against established trigger thresholds for each specificmarket proxy to assist in determining if an event has occurred that may call into question thereliability of the values of the foreign securities held by the Fund. If such an event occurs, thesecurities may be valued using fair value procedures, which may include the use of independentpricing services.

b. Foreign Currency Translation

Portfolio securities and other assets and liabilities denominated in foreign currencies are trans-lated into U.S. dollars based on the exchange rate of such currencies against U.S. dollars on thedate of valuation. The Fund may enter into foreign currency exchange contracts to facilitatetransactions denominated in a foreign currency. Purchases and sales of securities, income andexpense items denominated in foreign currencies are translated into U.S. dollars at the exchangerate in effect on the transaction date. Portfolio securities and assets and liabilities denominatedin foreign currencies contain risks that those currencies will decline in value relative to the U.S.dollar. Occasionally, events may impact the availability or reliability of foreign exchange rates





b. Foreign Currency Translation (continued)

used to convert the U.S. dollar equivalent value. If such an event occurs, the foreign exchangerate will be valued at fair value using procedures established and approved by the Trust’s Boardof Trustees.

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

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

c. Securities Purchased on a Delayed Delivery Basis

The Fund purchases securities on a delayed delivery basis, with payment and delivery scheduledfor a future date. These transactions are subject to market fluctuations and are subject to therisk that the value at delivery may be more or less than the trade date purchase price. Althoughthe Fund will generally purchase these securities with the intention of holding the securities, itmay sell the securities before the settlement date. Sufficient assets have been segregated for thesesecurities.

d. Income Taxes

It is the Fund’s policy to qualify as a regulated investment company under the Internal RevenueCode. The Fund intends to distribute to shareholders substantially all of its taxable income andnet realized gains to relieve it from federal income and excise taxes. As a result, no provision forU.S. federal income taxes is required. The Fund files U.S. income tax returns as well as tax returnsin certain other jurisdictions. The Fund records a provision for taxes in its financial statementsincluding penalties and interest, if any, for a tax position taken on a tax return (or expected tobe taken) when it fails to meet the more likely than not (a greater than 50% probability) thresh-old and based on the technical merits, the tax position may not be sustained upon examinationby the tax authorities. As of April 30, 2011, and for all open tax years, the Fund has determinedthat no provision for income tax is required in the Fund’s financial statements. Open tax yearsare those that remain subject to examination and are based on each tax jurisdiction statute oflimitation.





d. Income Taxes (continued)

The Fund may be subject to foreign taxation related to income received, capital gains on the sale of securities and certain foreign currency transactions in the foreign jurisdictions in which it invests. Foreign taxes, if any, are recorded based on the tax regulations and rates that exist inthe foreign markets in which the Fund invests. When a capital gain tax is determined to applythe Fund records an estimated deferred tax liability for unrealized gains on these securities in anamount that would be payable if the securities were disposed of on the valuation date.

e. Security Transactions, Investment Income, Expenses and Distributions

Security transactions are accounted for on trade date. Realized gains and losses on security trans-actions are determined on a specific identification basis. Interest income and estimated expensesare accrued daily. Amortization of premium and accretion of discount on debt securities areincluded in interest income. Dividend income is recorded on the ex-dividend date except thatcertain dividends from foreign securities are recognized as soon as the Fund is notified of the ex-dividend date. Distributions to shareholders are recorded on the ex-dividend date and aredetermined according to income tax regulations (tax basis). Distributable earnings determined on a tax basis may differ from earnings recorded in accordance with accounting principles generallyaccepted in the United States of America. These differences may be permanent or temporary.Permanent differences are reclassified among capital accounts to reflect their tax character.These reclassifications have no impact on net assets or the results of operations. Temporary differences are not reclassified, as they may reverse in subsequent periods.

Common expenses incurred by the Trust are allocated among the funds based on the ratio of netassets of each fund to the combined net assets of the Trust. Fund specific expenses are chargeddirectly to the fund that incurred the expense.

Realized and unrealized gains and losses and net investment income, not including class specificexpenses, are allocated daily to each class of shares based upon the relative proportion of netassets of each class. Differences in per share distributions, by class, are generally due to differ-ences in class specific expenses.

f. Accounting Estimates

The preparation of financial statements in accordance with accounting principles generallyaccepted in the United States of America requires management to make estimates and assumptionsthat affect the reported amounts of assets and liabilities at the date of the financial statements andthe amounts of income and expenses during the reporting period. Actual results could differ fromthose estimates.





g. Guarantees and Indemnifications

Under the Trust’s organizational documents, its officers and trustees are indemnified by the Trustagainst certain liabilities arising out of the performance of their duties to the Trust. Additionally,in the normal course of business, the Trust, on behalf of the Fund, enters into contracts with serv-ice providers that contain general indemnification clauses. The Trust’s maximum exposure underthese arrangements is unknown as this would involve future claims that may be made against theTrust that have not yet occurred. Currently, the Trust expects the risk of loss to be remote.

2. SHARES OF BENEFICIAL INTEREST

At April 30, 2011, there were an unlimited number of shares authorized (without par value).Transactions in the Fund’s shares were as follows:

Six Months Ended Year EndedApril 30, 2011 October 31, 2010

Shares Amount Shares AmountClass A Shares:

Shares sold . . . . . . . . . . . . . . . . 2,557,912 $ 41,738,720 5,262,860 $ 72,261,108Shares issued in reinvestment of

distributions . . . . . . . . . . . . . . 43,887 695,170 88,283 1,148,515Shares redeemed . . . . . . . . . . . . (3,281,657) (53,199,068) (6,001,418) (79,819,772)

Net increase (decrease) . . . . . . . (679,858) $(10,765,178) (650,275) $ (6,410,149)

Class B Shares:Shares sold . . . . . . . . . . . . . . . . 2,606 $40,584 8,040 $ 111,885Shares issued in reinvestment of

distributions . . . . . . . . . . . . . . — — 1,026 12,794Shares redeemed . . . . . . . . . . . . (37,450) (584,760) (88,122) (1,132,431)

Net increase (decrease) . . . . . . . (34,844) $ (544,176) (79,056) $ (1,007,752)

Class C Shares:Shares sold . . . . . . . . . . . . . . . . 267,370 $ 4,233,006 300,475 $ 3,994,518Shares issued in reinvestment of

distributions . . . . . . . . . . . . . . — — 6,504 81,432Shares redeemed . . . . . . . . . . . . (228,107) (3,534,679) (309,533) (4,044,674)

Net increase (decrease) . . . . . . . 39,263 $ 698,327 (2,554) $31,276

Advisor Class Shares:Shares sold . . . . . . . . . . . . . . . . 1,728,968 $ 28,372,742 2,234,716 $ 30,240,581Shares issued in reinvestment of

distributions . . . . . . . . . . . . . . 8,647 136,705 10,602 138,030Shares redeemed . . . . . . . . . . . . (1,067,678) (17,635,076) (1,229,255) (16,339,206)

Net increase (decrease) . . . . . . . 669,937 $ 10,874,371 1,016,063 $ 14,039,405




3. TRANSACTIONS WITH AFFILIATES

Franklin Resources, Inc. is the holding company for various subsidiaries that together arereferred to as Franklin Templeton Investments. Certain officers and trustees of the Trust are also officers and/or directors of the following subsidiaries:

Subsidiary Affiliation

Franklin Templeton Investments Corp. (FTIC) Investment managerTempleton Investment Counsel, LLC (TIC) Investment managerFranklin Templeton Services, LLC (FT Services) Administrative managerFranklin Templeton Distributors, Inc. (Distributors) Principal underwriterFranklin Templeton Investor Services, LLC (Investor Services) Transfer agent

a. Management Fees

The Fund pays an investment management fee to FTIC based on the average daily net assets ofthe Fund as follows:

Annualized Fee Rate Net Assets

1.000% Up to and including $100 million0.900% Over $100 million, up to and including $250 million0.800% Over $250 million, up to and including $500 million0.750% In excess of $500 million

Under a subadvisory agreement, TIC, an affiliate of FTIC, provides subadvisory services to theFund. The subadvisory fee is paid by FTIC based on the average daily net assets, and is not anadditional expense of the Fund.

b. Administrative Fees

Under an agreement with FTIC, FT Services provides administrative services to the Fund. The fee is paid by FTIC based on average daily net assets, and is not an additional expense of the Fund.

c. Distribution Fees

The Trust’s Board of Trustees has adopted distribution plans for each share class, with the excep-tion of Advisor Class shares, pursuant to Rule 12b-1 under the 1940 Act. Under the Fund’s Class Areimbursement distribution plan, the Fund reimburses Distributors for costs incurred in connec-tion with the servicing, sale and distribution of the Fund’s shares up to the maximum annual planrate. Under the Class A reimbursement distribution plan, costs exceeding the maximum for thecurrent plan year cannot be reimbursed in subsequent periods.




3. TRANSACTIONS WITH AFFILIATES (continued)

c. Distribution Fees (continued)

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

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

Class A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.25%Class B . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.00%Class C . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.00%

d. Sales Charges/Underwriting Agreements

Distributors has advised the Fund of the following commission transactions related to the salesand redemptions of the Fund’s shares for the period:

Sales charges retained net of commissions paid to unaffiliated broker/dealers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $39,443

Contingent deferred sales charges retained . . . . . . . . . . . . . . . . . . . . . $ 4,934

e. Transfer Agent Fees

For the period ended April 30, 2011, the Fund paid transfer agent fees of $203,857, of which$116,573 was retained by Investor Services.

4. EXPENSE OFFSET ARRANGEMENT

The Fund has entered into an arrangement with its custodian whereby credits realized as a result of uninvested cash balances are used to reduce a portion of the Fund’s custodian expenses.During the period ended April 30, 2011, the custodian fees were reduced as noted in theStatement of Operations.

5. INCOME TAXES

For tax purposes, capital losses may be carried over to offset future capital gains, if any. AtOctober 31, 2010, the Fund had tax basis capital losses of $31,789,260 expiring in 2017.During the year ended October 31, 2010, the Fund utilized $1,639,678 of capital loss carryforwards.




5. INCOME TAXES (continued)

At April 30, 2011, the cost of investments, net unrealized appreciation (depreciation) for incometax purposes were as follows:

Cost of investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $202,718,562

Unrealized appreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 68,612,738Unrealized depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . (26,429,135)

Net unrealized appreciation (depreciation) . . . . . . . . . . . . . $ 42,183,603

Net investment income (loss) differs for financial statement and tax purposes primarily due todiffering treatments of foreign currency transactions and passive foreign investment companyshares, non-deductible expenses and regulatory settlements.

Net realized gains (losses) differ for financial statement and tax purposes primarily due to differ-ing treatments of wash sales and foreign currency transactions.

6. INVESTMENT TRANSACTIONS

Purchases and sales of investments (excluding short term securities) for the period ended April 30,2011, aggregated $21,732,271 and $18,397,140, respectively.

7. CONCENTRATION OF RISK

Investing in foreign securities may include certain risks and considerations not typically associ-ated with investing in U.S. securities, such as fluctuating currency values and changing local andregional 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. 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 syndicatedsenior unsecured credit facility totaling $750 million (Global Credit Facility) which matures onJanuary 20, 2012. This Global Credit Facility provides a source of funds to the Borrowers fortemporary and emergency purposes, including the ability to meet future unanticipated or unusu-ally large redemption requests.

Under the terms of the Global Credit Facility, the Fund shall, in addition to interest charged onany borrowings made by the Fund and other costs incurred by the Fund, pay its share of feesand expenses incurred in connection with the implementation and maintenance of the Global




8. CREDIT FACILITY (continued)

Credit Facility, based upon its relative share of the aggregate net assets of all of the Borrowers,including an annual commitment fee of 0.08% based upon the unused portion of the GlobalCredit Facility, which is reflected in other expenses on the Statement of Operations. During theperiod ended April 30, 2011, the Fund did not use the Global Credit Facility.

9. FAIR VALUE MEASUREMENTS

The Fund follows a fair value hierarchy that distinguishes between market data obtained fromindependent sources (observable inputs) and the Fund’s own market assumptions (unobservableinputs). These inputs are used in determining the value of the Fund’s investments and are sum-marized in the following fair value hierarchy:

• Level 1 – quoted prices in active markets for identical securities

• Level 2 – other significant observable inputs (including quoted prices for similar securities,interest rates, prepayment speed, credit risk, etc.)

• Level 3 – significant unobservable inputs (including the Fund’s own assumptions in determining the fair value of investments)

The inputs or methodology used for valuing securities are not an indication of the risk associatedwith investing in those securities.

For movements between the levels within the fair value hierarchy, the Fund has adopted a policyof recognizing the transfers as of the date of the underlying event which caused the movement.

The following is a summary of the inputs used as of April 30, 2011, in valuing the Fund’s assetsand liabilities carried at fair value:

Level 1 Level 2 Level 3 Total

Assets:Investments in Securities:

Equity Investments:

Sweden . . . . . . . . . . . . . . . . . $ 1,897,344 $ — $ —a $ 1,897,344

Other Equity Investmentsb . . . . 227,404,822 — — 227,404,822

Short Term Investments . . . . . . . . — 15,599,999 — 15,599,999

Total Investments in Securities . . . . . . . . . . . . . $229,302,166 $15,599,999 $ — $244,902,165

aIncludes securities determined to have no value at April 30, 2011.bFor detailed country descriptions, see the accompanying Statement of Investments.




10. SUBSEQUENT EVENTS

The Fund has evaluated subsequent events through the issuance of the financial statements anddetermined that no events have occurred that require disclosure.

ABBREVIATIONS

Selected Portfolio

FHLB - Federal Home Loan Bank


Franklin Templeton International TrustShareholder Information


Board Review of Investment Management Agreement

At a meeting held April 19, 2011, the Board of Trustees (Board), including a majority of non-interested or independent Trustees, approved renewal of the investment management agreement foreach of the Funds within the Trust, including Templeton Foreign Smaller Companies Fund (Fund(s)).In reaching this decision, the Board took into account information furnished throughout the year atregular Board meetings, as well as information prepared specifically in connection with the annualrenewal review process. Information furnished and discussed throughout the year included invest-ment performance reports and related financial information for each Fund, as well as periodicreports on expenses, shareholder services, legal, compliance, pricing, brokerage commissions andexecution and other services provided by the Investment Manager (Manager) and its affiliates.Information furnished specifically in connection with the renewal process included a report for eachFund prepared by Lipper, Inc. (Lipper), an independent organization, as well as additional material,including a Fund profitability analysis prepared by management. The Lipper reports compared eachFund’s investment performance and expenses with those of other mutual funds deemed comparableto the Fund as selected by Lipper. The Fund profitability analysis report discussed the profitabilityto Franklin Templeton Investments from its overall U.S. fund operations, as well as on an individ-ual fund-by-fund basis. Additional material accompanying such profitability analysis includedinformation on a fund-by-fund basis listing portfolio managers and other accounts they manage,as well as information on management fees charged by the Manager and its affiliates to U.S.mutual funds and other accounts, including management’s explanation of differences where rele-vant. Such material also included a memorandum prepared by management describing projectinitiatives and capital investments relating to the services provided to the Funds by the FranklinTempleton Investments organization, as well as a memorandum relating to economies of scale anda comparative analysis concerning transfer agent fees charged each Fund.

In considering such materials, the independent Trustees received assistance and advice from andmet separately with independent counsel. While the investment management agreements for allFunds were considered at the same Board meeting, the Board dealt with each Fund separately. Inapproving continuance of the investment management agreement for each Fund, the Board, includ-ing a majority of independent Trustees, determined that the existing management fee structure wasfair and reasonable and that continuance of the investment management agreement was in the bestinterests of each Fund and its shareholders. While attention was given to all information furnished,the following discusses some primary factors relevant to the Board’s decision.

NATURE, EXTENT AND QUALITY OF SERVICE. The Board was satisfied with the natureand quality of the overall services provided by the Manager and its affiliates to the Fund and itsshareholders. In addition to investment performance and expenses discussed later, the Board’s


Franklin Templeton International TrustShareholder Information (continued)


Board Review of Investment Management Agreement (continued)

opinion was based, in part, upon periodic reports furnished it showing that the investment policiesand restrictions for the Fund were consistently complied with as well as other reports periodicallyfurnished the Board covering matters such as the compliance of portfolio managers and othermanagement personnel with the code of ethics adopted throughout the Franklin Templeton fundcomplex, the adherence to fair value pricing procedures established by the Board, and the accuracyof net asset value calculations. The Board also noted the extent of benefits provided Fund share-holders from being part of the Franklin Templeton family of funds, including the right to exchangeinvestments between the same class of funds without a sales charge, the ability to reinvest Funddividends into other funds and the right to combine holdings in other funds to obtain a reducedsales charge. Favorable consideration was given to management’s continuous efforts and expendi-tures in establishing back-up systems and recovery procedures to function in the event of a naturaldisaster, it being noted that such systems and procedures had functioned smoothly during the Floridahurricanes and blackouts experienced in previous years. Among other factors taken into accountby the Board were the Manager’s best execution trading policies, including a favorable report by anindependent portfolio trading analytical firm. Consideration was also given to the experience ofthe Fund’s portfolio management team, the number of accounts managed and general method ofcompensation. In this latter respect, the Board noted that a primary factor in management’s deter-mination of a portfolio manager’s bonus compensation was the relative investment performance of the funds he or she managed and that a portion of such bonus was required to be invested in apredesignated list of funds within such person’s fund management area so as to be aligned with theinterests of shareholders. The Board also took into account the quality of transfer agent and share-holder services provided Fund shareholders by an affiliate of the Manager and the continuousenhancements to the Franklin Templeton website. Particular attention was given to management’sconservative approach and diligent risk management procedures, including continuous monitoringof counterparty credit risk and attention given to derivatives and other complex instruments. TheBoard also took into account, among other things, management’s efforts in establishing a globalcredit facility for the benefit of the Fund and other accounts managed by Franklin TempletonInvestments to provide a source of cash for temporary and emergency purposes or to meet unusualredemption requests as well as the strong financial position of the Manager’s parent company andits commitment to the mutual fund business as evidenced by its subsidization of money market funds.

INVESTMENT PERFORMANCE. The Board placed significant emphasis on the investment per-formance of the Fund in view of its importance to shareholders. While consideration was given toperformance reports and discussions with portfolio managers at Board meetings throughout theyear, particular attention in assessing performance was given to the Lipper reports furnished for theagreement renewal. The Lipper reports prepared for the Fund showed the investment performance





of its Class A shares in comparison to a performance universe selected by Lipper. The performanceuniverse for the Fund consisted of the Fund and all retail and institutional international small/mid-cap value funds as selected by Lipper. Comparative performance within such universe was shownfor the one-year period ended January 31, 2011, and the previous 10 years ended that date. TheLipper report showed the Fund’s total return for the one-year period to be in the second-highestquintile of such performance universe, and on an annualized basis to also be in the second-highestquintile of such universe for each of the previous three-and five-year periods, and the middle quin-tile of such universe for the previous 10-year period. The Board was satisfied with the Fund’scomparative investment performance as set forth in the Lipper report.

COMPARATIVE EXPENSES. Consideration was given to a comparative analysis of the manage-ment fee and total expense ratio of the Fund compared with those of a group of other funds selectedby Lipper as constituting its appropriate Lipper expense group. Lipper expense data is based uponinformation taken from each fund’s most recent annual report, which reflects historical asset levelsthat may be quite different from those currently existing, particularly in a period of market volatil-ity. While recognizing such inherent limitation and the fact that expense ratios generally increase asassets decline and decrease as assets grow, the Board believed the independent analysis conductedby Lipper to be an appropriate measure of comparative expenses. In reviewing comparative costs,Lipper provides information on each Fund’s contractual investment management fee in comparisonwith the investment management fee that would have been charged by other funds within its Lipperexpense group assuming they were similar in size to the Fund, as well as the actual total expenseratio of the Fund in comparison with those of its Lipper expense group. The Lipper contractualinvestment management fee analysis includes administrative charges as being part of the investmentmanagement fee, and actual total expenses, for comparative consistency, are shown by Lipper forFund Class A shares. The results of such Lipper comparisons showed both the contractual invest-ment management fee rate and actual total expense ratio of the Fund to be in the middle quintileof its Lipper expense group. The Board found the comparative investment management fee andtotal expense ratio of this Fund as shown in the Lipper report to be acceptable.

MANAGEMENT PROFITABILITY. The Board also considered the level of profits realized bythe Manager and its affiliates in connection with the operation of the Fund. In this respect, theBoard reviewed the Fund profitability analysis that addresses the overall profitability of FranklinTempleton’s U.S. fund business, as well as its profits in providing management and other servicesto each of the individual funds during the 12-month period ended September 30, 2010, being themost recent fiscal year-end for Franklin Resources, Inc., the Manager’s parent. In reviewing theanalysis, attention was given to the methodology followed in allocating costs to the Fund, it beingrecognized that allocation methodologies are inherently subjective and various allocation method-ologies may each be reasonable while producing different results. In this respect, the Board noted





that, while being continuously refined and reflecting changes in the Manager’s own cost accounting,the allocation methodology was consistent with that followed in profitability report presentationsfor the Fund made in prior years and that the Fund’s independent registered public accounting firm had been engaged by the Manager to review the reasonableness of the allocation methodologiessolely for use by the Fund’s Board in reference to the profitability analysis. In reviewing and discussing such analysis, management discussed with the Board its belief that costs incurred inestablishing the infrastructure necessary for the type of mutual fund operations conducted by the Manager and its affiliates may not be fully reflected in the expenses allocated to the Fund indetermining its profitability, as well as the fact that the level of profits, to a certain extent, reflectedoperational cost savings and efficiencies initiated by management. The Board also took into accountmanagement’s expenditures in improving shareholder services provided the Fund, as well as theneed to meet additional regulatory and compliance requirements resulting from the Sarbanes-OxleyAct and recent SEC and other regulatory requirements. In addition, the Board considered a third-party study comparing the profitability of the Manager’s parent on an overall basis to other publiclyheld managers broken down to show profitability from management operations exclusive of distri-bution expenses, as well as profitability including distribution expenses. The Board also consideredthe extent to which the Manager and its affiliates might derive ancillary benefits from fund opera-tions, including revenues generated from transfer agent services and potential benefits resultingfrom allocation of fund brokerage and the use of commission dollars to pay for research. Basedupon its consideration of all these factors, the Board determined that the level of profits realized bythe Manager and its affiliates from providing services to the Fund was not excessive in view of thenature, quality and extent of services provided.

ECONOMIES OF SCALE. The Board also considered whether economies of scale are realized bythe Manager as the Fund grows larger and the extent to which this is reflected in the level of man-agement fees charged. While recognizing that any precise determination is inherently subjective,the Board noted that based upon the Fund profitability analysis, it appears that as some funds getlarger, at some point economies of scale do result in the Manager realizing a larger profit marginon management services provided such a fund. The Board also noted that economies of scale areshared with the Fund and its shareholders through management fee breakpoints so that as a fundgrows in size, its effective management fee rate declines. The fee schedule under the investmentmanagement agreement for the Fund provides an initial fee of 1% on the first $100 million of netassets; 0.90% on the next $150 million; 0.80% on the next $250 million; and 0.75% on net assetsin excess of $500 million. The Fund’s assets were approximately $226 million at December 31, 2010.The Board believed that to the extent economies of scale may be realized by the Manager and itsaffiliates, the schedule of fees under the investment management agreement for such Fund providesfor a sharing of benefits with the Fund and its shareholders.




Proxy Voting Policies and Procedures

The Fund’s investment manager has established Proxy Voting Policies and Procedures (Policies) thatthe Fund uses to determine how to vote proxies relating to portfolio securities. Shareholders mayview the Fund’s complete Policies online at franklintempleton.com. Alternatively, shareholders mayrequest copies of the Policies free of charge by calling the Proxy Group collect at (954) 527-7678or by sending a written request to: Franklin Templeton Companies, LLC, 300 S.E. 2nd Street,Fort Lauderdale, FL 33301, Attention: Proxy Group. Copies of the Fund’s proxy voting records arealso made available online at franklintempleton.com and posted on the U.S. Securities and ExchangeCommission’s website at sec.gov and reflect the most recent 12-month period ended June 30.

Quarterly Statement of Investments

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

Franklin Templeton FundsLiterature Request. To receive a summary prospectus and/or prospectus, please call us at (800) DIAL BEN/342-5236 or

visit franklintempleton.com. Investors should carefully consider a fund’s investment goals, risks, charges and expenses

before investing. The prospectus contains this and other information. Please carefully read a prospectus before investing.

To ensure the highest quality of service, we may monitor, record and access telephone calls to or from our service

departments. These calls can be identified by the presence of a regular beeping tone.

VALUEFranklin All Cap Value FundFranklin Balance Sheet Investment FundFranklin Large Cap Value FundFranklin MicroCap Value Fund1

Franklin MidCap Value FundFranklin Small Cap Value FundMutual Beacon FundMutual Quest FundMutual Recovery Fund2

Mutual Shares Fund

BLENDFranklin Focused Core Equity FundFranklin Large Cap Equity FundFranklin Rising Dividends Fund

GROWTHFranklin DynaTech FundFranklin Flex Cap Growth FundFranklin Growth FundFranklin Growth Opportunities FundFranklin Small Cap Growth FundFranklin Small-Mid Cap Growth Fund

SECTORFranklin Biotechnology Discovery FundFranklin Global Real Estate FundFranklin Gold & Precious Metals FundFranklin Natural Resources FundFranklin Real Estate Securities FundFranklin Utilities FundMutual Financial Services Fund

GLOBALFranklin World Perspectives FundMutual Global Discovery FundTempleton Global Opportunities TrustTempleton Global Smaller Companies FundTempleton Growth FundTempleton World Fund

1. The fund is closed to new investors. Existing shareholders and select retirement plans cancontinue adding to their accounts.2. The fund is a continuously offered, closed-end fund. Shares may be purchased daily; thereis no daily redemption. However, each quarter, pending board approval, the fund will authorizethe repurchase of 5%–25% of the outstanding number of shares. Investors may tender all ora portion of their shares during the tender period.3. Effective 5/1/10, the Franklin Templeton Target Funds changed their name to the FranklinTempleton Allocation Funds. The funds’ investment goals and principal investment strategiesremained unchanged.

4. An investment in the fund is neither insured nor guaranteed by the U.S. government or byany other entity or institution.5. For investors subject to the alternative minimum tax, a small portion of fund dividends maybe taxable. Distributions of capital gains are generally taxable.6. The fund invests primarily in insured municipal securities.7. The funds of the Franklin Templeton Variable Insurance Products Trust are generally availableonly through insurance company variable contracts.

AlabamaArizonaCalifornia (4 funds)ColoradoConnecticutFloridaGeorgiaKentuckyLouisianaMarylandMassachusettsMichigan

MinnesotaMissouriNew JerseyNew York (2 funds)North CarolinaOhioOregonPennsylvaniaTennesseeVirginia

INSURANCE FUNDSFranklin Templeton Variable Insurance Products Trust7

01/11 Not part of the semiannual report

INTERNATIONALFranklin India Growth FundFranklin International Growth FundFranklin International Small Cap Growth FundMutual European FundMutual International FundTempleton Asian Growth FundTempleton BRIC FundTempleton China World FundTempleton Developing Markets TrustTempleton Emerging Markets Small Cap FundTempleton Foreign FundTempleton Foreign Smaller Companies FundTempleton Frontier Markets Fund

HYBRIDFranklin Balanced FundFranklin Convertible Securities FundFranklin Equity Income FundFranklin Income FundTempleton Income Fund

ASSET ALLOCATIONFranklin Templeton Corefolio® Allocation FundFranklin Templeton Founding Funds Allocation FundFranklin Templeton Conservative Allocation Fund3

Franklin Templeton Growth Allocation Fund3

Franklin Templeton Moderate Allocation Fund3

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

FIXED INCOMEFranklin Adjustable U.S. Government Securities Fund4

Franklin Floating Rate Daily Access FundFranklin High Income FundFranklin Limited Maturity U.S. GovernmentSecurities Fund4

Franklin Low Duration Total Return FundFranklin Real Return FundFranklin Strategic Income FundFranklin Strategic Mortgage PortfolioFranklin Templeton Hard Currency FundFranklin Total Return FundFranklin U.S. Government Securities Fund4

Templeton Global Bond FundTempleton Global Total Return FundTempleton International Bond Fund

TAX-FREE INCOME5

NationalDouble Tax-Free Income FundFederal Tax-Free Income FundHigh Yield Tax-Free Income FundInsured Tax-Free Income Fund6

Limited-/ Intermediate-TermCalifornia Intermediate-Term Tax-Free Income FundFederal Intermediate-Term Tax-Free Income FundFederal Limited-Term Tax-Free Income FundNew York Intermediate-Term Tax-Free Income Fund

State-Specific

< GAIN FROM OUR PERSPECTIVE® >

VALUE BLEND GROWTH SECTOR GLOBAL INTERNAT IONAL HYBRID ASSET ALLOCAT ION F IXED INCOME TAX-FREE INCOME

© 2011 Franklin Templeton Investments. All rights reserved. 191 S 06/11

Semiannual Report and Shareholder Letter


Investment ManagerFranklin Templeton Investments Corp.

Subadvisor Templeton Investment Counsel, LLC

DistributorFranklin Templeton Distributors, Inc.(800) DIAL BEN®/342-5236franklintempleton.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 ensure the highest quality of service, telephone calls to or from our service departments may be monitored, recorded andaccessed. These calls can be identified by the presence of a regular beeping tone.

Documents

Templeton Foreign Smaller Companies Fund · Europe 40.8% Asia 32.9% North America 11.3% Australia & New Zealand 6.4% ... Economic and Market Overview Global financial markets generally