SEMI ANNUAL REPORT
FEBRUARY 28, 1998
TEMPLETON CAPITAL
ACCUMULATOR FUND, INC.
[FRANKLIN TEMPLETON LOGO]
PAGE
[FRANKLIN TEMPLETON CELEBRATING 50 YEARS LOGO]
Thank you for investing with Franklin Templeton. We encourage our investors to
maintain a long-term perspective, and to expect that mixed in with the good
years can be some bad years. It's important to remember that all securities
markets move both up and down, as do mutual fund share prices. We appreciate
your past support and look forward to serving your investment needs in the years
ahead.
In 1992, Sir John Templeton retired after a 50-year career of helping investors
manage their money. Currently he devotes all of his time and efforts to the John
Templeton Foundation. A major portion of his assets remain invested in the
Templeton funds, which are managed by many of the investment professionals he
selected and trained.
[PHOTO OF GARY P. MOTYL APPEARS HERE]
GARY P. MOTYL
Portfolio Manager
Templeton Capital Accumulator
Fund, Inc.
PAGE
SHAREHOLDER LETTER
Your Fund's Objective: Templeton Capital Accumulator Fund seeks long-term
capital growth by investing in stocks and debt obligations of companies and
governments of any nation.
Dear Shareholder:
We are pleased to bring you the semi-annual report of Templeton Capital
Accumulator Fund, which covers the period ended February 28, 1998. During this
time, stock markets provided something for every investor. Bulls could celebrate
the strong performance of the U.S. equity market, which was driven by subdued
inflation, healthy corporate earnings, and large capital inflows into mutual
funds. And bears could feast on the carnage inflicted on Asian developing
countries whose stocks posted sharp, double-digit declines due to currency
crises in the region. Within this environment, Templeton Capital Accumulator
Fund posted a six-month cumulative total return of 6.58%, as discussed in the
Performance Summary on page 6.
In the U.S., price-to-book value ratios were well-above and dividend yields were
well-below their averages for the last 20 years.(1) Because valuations were so
high, we found it difficult to
CONTENTS
Shareholder Letter ........ 1
Performance Summary ....... 6
Financial Highlights &
Statement of Investments .. 8
Financial Statements ...... 15
Notes to Financial
Statements ................ 18
[FUND CATEGORY PYRAMID]
(1). Source: Morgan Stanley Capital International(R) USA index. This index is
designed to measure the performance of the stock market of the United States.
You may find a complete listing of the Fund's portfolio holdings including the
number of shares and dollar value beginning on page 9 of this report.
PAGE
GEOGRAPHIC DISTRIBUTION
Based on Total Net Assets
2/28/98
European Stocks 46.6%
North American Stocks 18.6%
Asian Stocks 10.5%
Latin American Stocks 5.7%
Australian &
New Zealand Stocks 5.4%
Short Term
Investments &
Other Net Assets 13.2%
discover large numbers of undervalued U.S. securities. Since the Dow Jones(R)
Industrial Average rose 13.1% between August 31, 1997 and February 28, 1998, our
low U.S. exposure negatively impacted the Fund's performance.(2)
Throughout the six months under review, Europe appeared to be progressing toward
successful implementation of a single currency and greater economic integration.
In addition, many individual companies there exhibited solid underlying
fundamentals, and their stock valuations appeared to be very attractive compared
with their counterparts around the world. As a result, Europe remained our
largest geographic exposure, representing 46.6% of the Fund's total net assets
at the close of the period.
Although our holdings in Indonesia, Malaysia, South Korea, and Hong Kong did not
comprise a large portion of the Fund's portfolio, they suffered along with these
markets. And despite the fact that public funds were used to stabilize the
banking sector, and deregulation of the financial industry is expected, the
Japanese economy continued to falter. Fortunately, we had very little exposure
to Japan. Even assuming a healthy economic recovery, Japanese stocks remained
among the world's most expensive, and we do not anticipate increasing our
weighting unless valuations drop considerably.
During the six months under review, we established positions in several
companies that we believed offered solid, long-term value. For example, we
purchased shares of General Electric Co. Plc., a U.K. electrical and electronics
producer with exposure to the defense,
(2). Source: Standard & Poor's(R) Micropal. Price appreciation includes
reinvested dividends. Total return calculated by Wilshire Associates, Inc. An
index is an unmanaged group of securities that is used to measure market
performance.
2
PAGE
power generation and telecommunications areas. We also bought stock in Mayne
Nickless Ltd., A, an Australian transportation firm which has diversified into
the healthcare services business, and augmented our holdings of Telecomunicacoes
Brasileiras SA (Telebras), the large Brazilian telecommunications company.
On the sell side, we eliminated our positions in Brambles Industries Ltd., an
Australian transportation services company, and Merloni Elettrodomestici SpA, an
Italian appliance manufacturer. These stocks had performed well, and we sold
them at a profit when they reached our target prices.
Looking forward, we believe Asian economies and financial markets will take some
time to fully recover. Many Asian companies carried significant amounts of U.S.
dollar-denominated debt on their balance sheets, and as local currencies
depreciated against the U.S. dollar, these corporations found that they had to
devote a larger portion of their cash flow to service that debt. In our opinion,
many companies will find the burden too great, and will go out of business or
have to find additional financing, thus diluting shareholder value. But some
companies will benefit from the current turmoil, and we are striving to identify
stocks that have been driven to levels that may represent good long-term value.
Five years ago, investors asked us why they should invest in developed markets.
Wouldn't it be wiser to invest in emerging markets? That's where strong economic
growth and high stock market returns existed - at least until late 1993.
However, over the past few
TOP 10 EQUITY HOLDINGS
2/28/98
COMPANY, % OF TOTAL
INDUSTRY, COUNTRY NET ASSETS
Foreningssparbanken AB, A
Banking, Sweden 2.1%
Merita Ltd., A
Banking, Finland 1.7%
Telefonica de Espana SA
Telecommunications, Spain 1.6%
Nokia AB, A
Telecommunications, Finland 1.5%
Philips Electronics NV
Electrical & Electronics,
Netherlands 1.4%
Fiat SpA
Automobiles, Italy 1.3%
Windmere-Durable Holdings Inc.
Health & Personal Care, U.S. 1.2%
British Energy Ltd.
Utilities Electrical & Gas,
United Kingdom 1.2%
Dayton-Hudson Corp.
Merchandising, U.S. 1.1%
Societe Elf Aquitaine SA
Energy Sources, France 1.1%
3
PAGE
TOP 10 INDUSTRIES
2/28/98
% OF TOTAL
INDUSTRY NET ASSETS
Banking 10.8%
Telecommunications 9.4%
Utilities Electrical & Gas 5.2%
Electrical & Electronics 4.5%
Forest Products & Paper 4.5%
Insurance 4.3%
Merchandising 4.0%
Health & Personal Care 3.9%
Automobiles 3.7%
Chemicals 3.6%
years, many emerging markets have produced losses, while developed markets
(particularly the U.S.) have performed extremely well. Today, investors are
asking the opposite question, and now, as then, our answer is: It is not unusual
for overvalued markets or stocks to remain overvalued for a period of time, but
eventually overvaluation is corrected, and one of the best ways to reduce risk
is to invest intelligently in the most undervalued securities worldwide, whether
in developed or developing markets. We, therefore, remain committed to a
disciplined, value-oriented investment approach wherever we find what we believe
to be the most undervalued securities.
As always, we remind our shareholders that investments in foreign securities
involve special risks, such as adverse economic, social and political
developments in the countries where the Fund is invested, as well as currency
and market volatility. Emerging markets are represented in the Fund's portfolio,
and involve heightened risks associated with the same factors as well as those
related to their relatively small size and lesser liquidity. While short-term
volatility can be disconcerting, declines of as much as 40% to 50% are not
unusual in emerging markets. For example, the Hong Kong equity market has
increased 1,268% in the last 15 years, but has suffered five declines of more
than 20% during that time.(3) These risks and other considerations are discussed
in the Fund's prospectus.
This discussion reflects the strategies we employed for the Fund during the six
months under review, and includes our opinions as of the close of the period.
Because economic and market conditions are
4
PAGE
constantly changing, our strategies and our evaluations, conclusions and
decisions regarding portfolio holdings may change as new circumstances arise.
All figures shown are as of February 28, 1998, and the Fund's holdings can be
expected to change with market developments and management of the portfolio.
Although past performance of a specific investment or sector cannot guarantee
future performance, such information can be useful in analyzing the securities
we purchase or sell for the Fund.
We appreciate your support, and welcome any comments or suggestions you may
have.
Sincerely,
/s/ Gary P. Motyl
- ------------------
Gary P. Motyl, CFA
President
Templeton Capital Accumulator Fund, Inc.
(3). Source: Bloomberg. Market return is measured in local currency terms, and
includes reinvested dividends. Based on quarterly percentage price change over
15 years ended December 31, 1997.
5
PAGE
PERFORMANCE SUMMARY
Templeton Capital Accumulator Fund produced a 6.58% cumulative total return for
the six-month period ended February 28, 1998. Cumulative total return measures
the change in value of an investment, assuming reinvestment of dividends and
capital gains, if any, and does not include the sales and creation charges. We
have always maintained a long-term perspective when managing the Fund, and we
encourage shareholders to view their investments in a similar manner. As you can
see from the table on page 7, the Fund's shares delivered a cumulative total
return of more than 177% since its inception on March 1, 1991.
The Fund's share price, as measured by net asset value, increased $0.24, from
$10.97 on August 31, 1997, to $11.21 on February 28, 1998. During the reporting
period, shareholders received per-share distributions of 18.5 cents ($0.185) in
income dividends, 2.5 cents ($0.025) in short-term capital gains, and 25.5 cents
($0.255) in long-term capital gains. Distributions will vary depending on income
earned by the Fund and any profits realized from the sale of securities in the
portfolio, as well as the level of the Fund's operating expenses.
Past performance is not predictive of future results.
6
PAGE
TEMPLETON CAPITAL ACCUMULATOR FUND
Periods ended 2/28/98
<TABLE>
<CAPTION>
SINCE
INCEPTION
1-YEAR 3-YEAR 5-YEAR (3/1/91)
- -----------------------------------------------------------------------
<S> <C> <C> <C> <C>
Cumulative Total Return(1) 17.15% 69.18% 132.03% 177.33%
Average Annual Total Return(2) 17.15% 19.16% 18.33% 15.69%
Value of $10,000 Investment(3) $11,715 $16,918 $23,203 $27,733
</TABLE>
<TABLE>
<CAPTION>
2/28/94 2/28/95 2/29/96 2/28/97 2/28/98
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
One-Year Total Return(4) 40.15% -2.14% 18.68% 21.68% 17.15%
</TABLE>
(1). Cumulative total return represents the change in value of an investment
over the periods indicated and does not include any sales and creation charges.
(2). Average annual total return represents the average annual change in value
of an investment over the indicated periods.
(3). These figures represent the value of a hypothetical $10,000 investment in
the Fund over the periods indicated.
(4). One-year total return represents the change in value of an investment over
the one-year periods ended on the dates indicated.
All calculations assume reinvestment of dividends and capital gains at net asset
value. Calculations do not include the effect of paying sales and creation
charges applicable to purchases of Fund shares through Templeton Capital
Accumulation Plans, which may vary as discussed in the Plans' prospectus. For
the first year of a Plan, these charges can amount to 50% of the total amount
invested during the year. Total returns would have been lower if these charges
had been applied. Please refer to the Templeton Capital Accumulation Plans'
prospectus for information regarding applicable charges.
Investment return and principal value will fluctuate with market conditions,
currency volatility, and the economic, social and political climates of
countries where investments are made. Emerging markets involve heightened risks
related to the same factors, in addition to those associated with their
relatively small size and lesser liquidity. You may have a gain or loss when you
sell your shares.
Past expense waivers by the Fund's manager increased the Fund's total returns.
Without these waivers, the Fund's total returns would have been lower.
Past performance is not predictive of future results.
7
PAGE
TEMPLETON CAPITAL ACCUMULATOR FUND, INC.
Financial Highlights
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED AUGUST 31,
FEBRUARY 28, 1998 -----------------------------------------------------
(UNAUDITED) 1997 1996 1995 1994 1993
--------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE+
(For a share outstanding throughout the
period)
Net asset value, beginning of period......... $10.97 $9.08 $7.97 $8.10 $6.87 $5.48
--------------------------------------------------------------------------
Income from investment operations:
Net investment income....................... .04 .18 .19 .14 .09 .10
Net realized and unrealized gain............ .67 2.03 1.10 .12 1.30 1.44
--------------------------------------------------------------------------
Total from investment operations............. .71 2.21 1.29 .26 1.39 1.54
--------------------------------------------------------------------------
Less distributions from:
Net investment income....................... (.19) (.18) (.15) (.10) (.07) (.10)
Net realized gains.......................... (.28) (.14) (.03) (.29) (.09) (.05)
--------------------------------------------------------------------------
Total distributions.......................... (.47) (.32) (.18) (.39) (.16) (.15)
--------------------------------------------------------------------------
Net asset value, end of period............... $11.21 $10.97 $9.08 $7.97 $8.10 $6.87
==========================================================================
Total Return*................................ 6.58% 25.06% 16.50% 3.40% 20.64% 29.11%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's)............ $204,749 $172,683 $108,019 $65,538 $38,323 $18,365
Ratios to average net assets:
Expenses.................................... 1.00%** 1.00% 1.00% 1.00% 1.00% 1.00%
Expenses, excluding waiver and payments by
affiliate................................. 1.09%** 1.13% 1.16% 1.34% 1.58% 1.91%
Net investment income....................... .86%** 2.00% 2.56% 2.37% 1.58% 1.99%
Portfolio turnover rate...................... 3.59% 7.43% 11.08% 12.91% 15.25% 14.97%
Average commission rate paid***.............. $.0057 $.0110 $.0210 -- -- --
</TABLE>
*Total return is not annualized.
**Annualized.
***Relates to purchases and sales of equity securities. Prior to fiscal year
1996 disclosure of average commission rate was not required.
+Per share amounts for all periods prior to August 31, 1996 have been restated
to reflect a 2-for-1 stock split effective March 27, 1996.
See Notes to Financial Statements.
8
PAGE
TEMPLETON CAPITAL ACCUMULATOR FUND, INC.
STATEMENT OF INVESTMENTS, FEBRUARY 28, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
COUNTRY SHARES VALUE
--------------------------------------
<S> <C> <C> <C>
COMMON STOCKS 82.8%
AEROSPACE & MILITARY TECHNOLOGY .1%
Raytheon Co., A............................................. United States 1,594 $ 92,452
------------
APPLIANCES & HOUSEHOLD DURABLES 2.0%
Electrolux AB, B............................................ Sweden 22,250 1,696,881
Fisher & Paykel Ltd. ....................................... New Zealand 300,200 974,088
Sony Corp. ................................................. Japan 14,600 1,319,905
------------
3,990,874
------------
AUTOMOBILES 3.7%
Fiat SpA.................................................... Italy 742,500 2,613,673
Ford Motor Co. ............................................. United States 24,000 1,357,500
General Motors Corp. ....................................... United States 25,000 1,723,440
Volvo AB, B................................................. Sweden 71,000 1,921,798
------------
7,616,411
------------
BANKING 10.0%
ABN Amro Holding NV......................................... Netherlands 60,000 1,332,453
Australia & New Zealand Banking Group Ltd. ................. Australia 200,000 1,371,277
Bank of Montreal............................................ Canada 10,000 533,989
Bankinter SA................................................ Spain 22,500 1,443,021
Banque Nationale de Paris................................... France 28,000 1,694,319
Barclays Plc. .............................................. United Kingdom 22,100 657,560
BPI Socieda de Gestora de Participacoes Socias SA........... Portugal 25,171 903,609
Fokus Bank AS............................................... Norway 100,000 871,034
Foreningssparbanken AB, A................................... Sweden 136,800 4,207,389
HSBC Holdings Plc. ......................................... Hong Kong 55,200 1,597,004
*Korea Long Term Credit Bank................................ South Korea 164,120 994,973
Merita Ltd., A.............................................. Finland 600,000 3,487,263
Nationsbank Corp. .......................................... United States 11,600 794,600
*Philippine National Bank................................... Philippines 132,383 271,256
PT Bank Bali, fgn. ......................................... Indonesia 490,000 44,196
PT Bank Pan Indonesia TBK................................... Indonesia 420,300 28,177
*PT Bank Pan Indonesia TBK, wts. ........................... Indonesia 60,042 483
Thai Farmers Bank Public Co. Ltd., fgn. .................... Thailand 100,000 299,652
------------
20,532,255
------------
BROADCASTING & PUBLISHING .2%
News Corp. Ltd. ............................................ Australia 70,000 444,307
------------
BUILDING MATERIALS & COMPONENTS 2.0%
Pioneer International Ltd. ................................. Australia 675,815 1,949,802
Siam City Cement Public Co. Ltd., fgn. ..................... Thailand 153,802 446,580
Svedala Industri, A......................................... Sweden 100,000 1,775,333
------------
4,171,715
------------
</TABLE>
9
PAGE
TEMPLETON CAPITAL ACCUMULATOR FUND, INC.
STATEMENT OF INVESTMENTS, FEBRUARY 28, 1998 (UNAUDITED) (CONT.)
<TABLE>
<CAPTION>
COUNTRY SHARES VALUE
--------------------------------------
<S> <C> <C> <C>
COMMON STOCKS (CONT.)
BUSINESS & PUBLIC SERVICES 2.3%
Esselte AB, B............................................... Sweden 40,000 $ 817,653
Lex Service Plc. ........................................... United Kingdom 165,000 1,299,384
SGS Societe Generale de Surveillance Holdings Ltd., br. .... Switzerland 460 846,914
Waste Management Inc. ...................................... United States 18,000 450,000
Wheelabrator Technologies Inc. ............................. United States 76,000 1,239,750
------------
4,653,701
------------
CHEMICALS 3.6%
Akzo Nobel NV............................................... Netherlands 7,500 1,523,589
Courtaulds Plc. ............................................ United Kingdom 150,000 868,645
Great Lakes Chemical Corp. ................................. United States 22,000 1,069,750
*Methanex Corp. ............................................ Canada 76,000 619,427
Rhone-Poulenc SA, A......................................... France 46,000 2,122,437
Solvay SA................................................... Belgium 20,000 1,255,677
------------
7,459,525
------------
DATA PROCESSING & REPRODUCTION 1.7%
*3Com Corp. ................................................ United States 38,500 1,376,375
*Bay Networks Inc........................................... United States 59,000 1,998,625
------------
3,375,000
------------
ELECTRICAL & ELECTRONICS 4.6%
ABB AG, br. ................................................ Switzerland 652 889,192
Alcatel Alsthom Cie Generale D'Electricite SA............... France 6,661 867,469
GP Batteries International Ltd. ............................ Singapore 56,000 181,425
General Electric Co. Plc. .................................. United Kingdom 180,000 1,181,752
Hitachi Ltd. ............................................... Japan 165,000 1,240,444
Matsushita Electric Industrial Co. Ltd. .................... Japan 99,000 1,444,568
Motorola Inc. .............................................. United States 10,000 557,500
Philips Electronics NV...................................... Netherlands 37,940 2,950,796
------------
9,313,146
------------
ELECTRONIC COMPONENTS & INSTRUMENTS .7%
Intel Corp. ................................................ United States 16,000 1,435,000
------------
ENERGY SOURCES 3.2%
Norsk Hydro AS.............................................. Norway 20,000 873,674
Saga Petroleum AS, B........................................ Norway 49,070 731,789
Societe Elf Aquitaine SA.................................... France 20,000 2,279,043
Total SA, B................................................. France 13,000 1,427,937
YPF Sociedad Anonima, ADR................................... Argentina 37,500 1,185,938
------------
6,498,381
------------
</TABLE>
10
PAGE
TEMPLETON CAPITAL ACCUMULATOR FUND, INC.
STATEMENT OF INVESTMENTS, FEBRUARY 28, 1998 (UNAUDITED) (CONT.)
<TABLE>
<CAPTION>
COUNTRY SHARES VALUE
--------------------------------------
<S> <C> <C> <C>
COMMON STOCKS (CONT.)
FINANCIAL SERVICES 2.2%
Axa-UAP..................................................... France 21,257 $ 2,058,764
Industrial Credit & Inv. Corp. of India, GDR, 144A.......... India 76,300 1,192,188
Onbancorp Inc. ............................................. United States 18,000 1,307,250
------------
4,558,202
------------
FOOD & HOUSEHOLD PRODUCTS .7%
Archer-Daniels Midland Co. ................................. United States 40,000 897,500
IBP Inc. ................................................... United States 23,000 513,188
------------
1,410,688
------------
FOREST PRODUCTS & PAPER 4.5%
Asia Pulp & Paper Co. Ltd., ADR............................. Indonesia 45,000 537,188
Boise Cascade Corp. ........................................ United States 14,000 466,375
Enso OY, R.................................................. Finland 140,400 1,269,931
Georgia-Pacific Corp. ...................................... United States 16,000 939,000
Georgia-Pacific Timber Group................................ United States 16,000 365,000
*Hansol Paper Co. Ltd., GDS................................. South Korea 22,373 61,526
International Paper Co. .................................... United States 26,000 1,212,250
Mayr-Melnhof Karton AG...................................... Austria 11,000 640,466
Mo Och Domsjoe AB, B........................................ Sweden 34,000 990,436
Portucel Industrial Empresa Product Celulose, ADR, 144A..... Portugal 49,100 372,610
*PT Inti Indorayon Utama.................................... Indonesia 450,000 60,335
*Shorewood Packaging Corp. ................................. United States 27,500 673,750
Stora Kopparbergs Bergslags AB, B........................... Sweden 90,000 1,299,619
Unipapel SA................................................. Spain 12,000 327,826
------------
9,216,312
------------
HEALTH & PERSONAL CARE 3.9%
Astra AB, B................................................. Sweden 53,333 1,043,522
Medeva Plc. ................................................ United Kingdom 480,000 1,241,557
Novartis AG................................................. Switzerland 853 1,557,096
*Nycomed Amersham Plc. ..................................... United Kingdom 46,843 1,700,077
Windmere-Durable Holdings Inc. ............................. United States 90,000 2,475,000
------------
8,017,252
------------
INDUSTRIAL COMPONENTS 3.1%
BTR Plc. ................................................... United Kingdom 465,000 1,231,486
Exide Corp. ................................................ United States 40,500 898,594
Flowserve Corp. ............................................ United States 39,020 1,236,446
Goodyear Tire & Rubber Co. ................................. United States 23,000 1,589,875
*Granges AB................................................. Sweden 11,125 191,942
SKF AB, B................................................... Sweden 55,000 1,138,026
------------
6,286,369
------------
INSURANCE 4.3%
Aegon NV.................................................... Netherlands 17,500 1,994,521
American International Group Inc. .......................... United States 15,375 1,847,883
</TABLE>
11
PAGE
TEMPLETON CAPITAL ACCUMULATOR FUND, INC.
STATEMENT OF INVESTMENTS, FEBRUARY 28, 1998 (UNAUDITED) (CONT.)
<TABLE>
<CAPTION>
COUNTRY SHARES VALUE
--------------------------------------
<S> <C> <C> <C>
COMMON STOCKS (CONT.)
INSURANCE (CONT.)
ING Groep NV................................................ Netherlands 32,500 $ 1,721,696
Skandia Foersaekrings AB.................................... Sweden 35,000 1,977,871
Swiss Reinsurance Company Zurich............................ Switzerland 605 1,276,008
------------
8,817,979
------------
MACHINERY & ENGINEERING 2.3%
New Holland NV.............................................. Netherlands 62,800 1,554,300
SIG Swiss Industrial Company Holdings Ltd., bearer.......... Switzerland 500 1,411,524
Tata Engineering & Locomotive Co Telco, GDR, 144A........... India 105,000 847,875
VA Technologie AG........................................... Austria 6,000 832,291
------------
4,645,990
------------
MERCHANDISING 4.0%
Arcadia Group Plc. ......................................... United Kingdom 46,875 381,886
*Circuit City Stores Inc., Carmax Group..................... United States 92,000 851,000
Dairy Farm International Holdings Ltd. ..................... Hong Kong 450,000 540,000
Dayton-Hudson Corp. ........................................ United States 30,000 2,319,375
*Debenhams Plc. ............................................ United Kingdom 93,750 647,159
*K Mart Corp. .............................................. United States 60,000 802,500
Sa des Galeries Lafayette................................... France 898 582,522
Storehouse Plc. ............................................ United Kingdom 475,000 2,038,576
------------
8,163,018
------------
METALS & MINING 1.8%
*Industrias Penoles SA...................................... Mexico 165,000 696,815
Pechiney SA, A.............................................. France 34,000 1,509,496
RGC Ltd. ................................................... Australia 302,775 411,077
WMC Ltd. ................................................... Australia 300,000 1,014,202
------------
3,631,590
------------
MISCELLANEOUS MATERIALS & COMMODITIES .9%
Golden Hope Plantations Bhd., fgn. ......................... Malaysia 748,000 991,935
Unitor ASA.................................................. Norway 70,000 873,014
------------
1,864,949
------------
MULTI-INDUSTRY 2.7%
Cheung Kong Holdings Ltd. .................................. Hong Kong 160,000 1,121,085
Hicom Holdings Bhd. ........................................ Malaysia 814,300 480,426
Hutchison Whampoa Ltd. ..................................... Hong Kong 201,500 1,424,879
Jardine Matheson Holdings Ltd. ............................. Hong Kong 62,336 291,732
Metro Pacific Corp. MDI..................................... Philippines 10,112,000 422,022
Saha Union Public Co. Ltd., fgn. ........................... Thailand 800,000 706,156
Swire Pacific Ltd., A....................................... Hong Kong 170,000 1,023,184
Swire Pacific Ltd., B....................................... Hong Kong 100,000 100,743
------------
5,570,227
------------
</TABLE>
12
PAGE
TEMPLETON CAPITAL ACCUMULATOR FUND, INC.
STATEMENT OF INVESTMENTS, FEBRUARY 28, 1998 (UNAUDITED) (CONT.)
<TABLE>
<CAPTION>
COUNTRY SHARES VALUE
--------------------------------------
<S> <C> <C> <C>
COMMON STOCKS (CONT.)
REAL ESTATE .9%
*Catellus Development Corp. ................................ United States 50,000 $ 906,250
Equity Office Properties Trust.............................. United States 33,751 995,655
PT Jaya Properties.......................................... Indonesia 250,000 13,268
------------
1,915,173
------------
TELECOMMUNICATIONS 8.4%
Asia Satellite Telecommunications Hldgs. Ltd. .............. Hong Kong 215,000 397,094
British Telecommunications Plc. ............................ United Kingdom 174,000 1,754,391
Compania De Telecomunicaciones De Chile SA, Spons. ADR...... Chile 19,125 523,547
*Digital Telecommunications Philippines Inc. ............... Philippines 3,218,000 186,082
Jasmine International Public Co. Ltd., fgn. ................ Thailand 400,000 278,746
Nokia AB, A................................................. Finland 31,500 3,153,576
Philippine Long Distance Telephone Co. ..................... Philippines 30,000 810,811
PT Indosat TBK, ADR......................................... Indonesia 9,600 144,000
Telecom Argentina Stet-France SA, ADR....................... Argentina 49,200 1,805,025
Telecom Italia SpA.......................................... Italy 297,100 2,023,993
Telefonica de Argentina SA, B, ADR.......................... Argentina 36,600 1,317,600
Telefonica de Espana SA..................................... Spain 95,500 3,286,035
Telefonos de Mexico SA (Telmex), L, ADR..................... Mexico 25,000 1,267,188
Videsh Sanchar Nigam Ltd., GDR, 144A........................ India 17,400 228,375
------------
17,176,463
------------
TEXTILES & APPAREL 1.3%
Dawson International Plc. .................................. United Kingdom 265,000 224,843
Kellwood Co. ............................................... United States 30,500 989,344
PT Indorama Synthetics...................................... Indonesia 793,440 221,631
Shaw Industries Inc. ....................................... United States 108,000 1,282,500
------------
2,718,318
------------
TRANSPORTATION 2.1%
Cathay Pacific Airways Ltd. ................................ Hong Kong 150,000 128,834
Guangshen Railway Co. Ltd., ADR............................. China 74,000 957,375
Kvaerner Industrier AS, A................................... Norway 24,000 871,034
Mayne Nickless Ltd., A...................................... Australia 230,000 1,264,697
Qantas Airways Ltd., ADR, 144A.............................. Australia 65,000 1,108,250
------------
4,330,190
------------
UTILITIES ELECTRICAL & GAS 5.2%
British Energy Ltd. ........................................ United Kingdom 325,000 2,390,730
Endesa SA, br. ............................................. Spain 49,200 1,088,071
Evn Energie-Versorgung Niederoesterreich AG................. Austria 4,800 677,540
Iberdrola SA................................................ Spain 135,000 1,953,786
*Korea Electric Power Corp. ................................ South Korea 45,470 607,009
Nova Corp. ................................................. Canada 56,300 621,050
</TABLE>
13
PAGE
TEMPLETON CAPITAL ACCUMULATOR FUND, INC.
STATEMENT OF INVESTMENTS, FEBRUARY 28, 1998 (UNAUDITED) (CONT.)
<TABLE>
<CAPTION>
COUNTRY SHARES VALUE
--------------------------------------
<S> <C> <C> <C>
COMMON STOCKS (CONT.)
UTILITIES ELECTRICAL & GAS (CONT.)
Public Service Co. of New Mexico............................ United States 70,000 $ 1,631,875
VEBA AG..................................................... Germany 26,000 1,754,403
------------
10,724,464
------------
WHOLESALE & INTERNATIONAL TRADE .4%
Brierley Investments Ltd. .................................. New Zealand 1,200,000 813,830
------------
TOTAL COMMON STOCKS (COST $121,479,511)..................... 169,443,781
------------
PREFERRED STOCKS 4.0%
Banco Itau SA, pfd. ........................................ Brazil 2,700,000 1,595,894
Cia Vale do Rio Doce, ADR, pfd., A.......................... Brazil 46,000 1,001,283
Concessioni e Costruzioni Autostrade SpA, B, pfd. .......... Italy 490,000 1,834,228
News Corp. Ltd., pfd. ...................................... Australia 312,000 1,704,999
Telecomunicacoes Brasileiras SA (Telebras), pfd., ADR....... Brazil 16,427 2,011,281
------------
TOTAL PREFERRED STOCKS (COST $4,559,498).................... 8,147,685
------------
<CAPTION>
PRINCIPAL
AMOUNT**
--------
<S> <C> <C> <C>
SHORT TERM INVESTMENTS (COST $27,287,241) 13.3%
U.S. Treasury Bills, 4.93% to 5.18%, with maturities to
5/28/98................................................... United States $27,480,000 27,292,020
------------
TOTAL INVESTMENTS (COST $153,326,250) 100.1%................ 204,883,486
OTHER ASSETS, LESS LIABILITIES (.1%)........................ (134,646)
------------
TOTAL NET ASSETS 100.0%..................................... $204,748,840
============
</TABLE>
*Non-income producing.
**Securities traded in U.S. dollars.
See Notes to Financial Statements.
14
PAGE
TEMPLETON CAPITAL ACCUMULATOR FUND, INC.
Financial Statements
STATEMENT OF ASSETS AND LIABILITIES
FEBRUARY 28, 1998 (UNAUDITED)
<TABLE>
<S> <C>
Assets:
Investments in securities, at value (cost $153,326,250).... $204,883,486
Cash....................................................... 1,203
Receivables:
Capital shares sold....................................... 69,140
Dividends and interest.................................... 268,848
Other assets............................................... 87,117
------------
Total assets.......................................... 205,309,794
------------
Liabilities:
Payables:
Investment securities purchased........................... 213,240
Capital shares redeemed................................... 43,425
To affiliates............................................. 231,877
Other liabilities.......................................... 72,412
------------
Total liabilities..................................... 560,954
------------
Net assets, at value........................................ $204,748,840
============
Net assets consist of:
Undistributed net investment income........................ $ 249,286
Net unrealized appreciation................................ 51,557,236
Accumulated net realized loss.............................. (324,133)
Capital shares............................................. 153,266,451
------------
Net assets, at value........................................ $204,748,840
============
Net asset value per share ($204,748,840 / 18,270,222 shares
outstanding)............................................... $11.21
============
</TABLE>
See Notes to Financial Statements.
15
PAGE
TEMPLETON CAPITAL ACCUMULATOR FUND, INC.
Financial Statements (continued)
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED FEBRUARY 28, 1998 (UNAUDITED)
<TABLE>
<S> <C> <C>
Investment Income:
(net of foreign taxes of $95,910)
Dividends.................................................. $1,043,814
Interest................................................... 662,049
----------
Total investment income............................... $ 1,705,863
-----------
Expenses:
Management fees (Note 3)................................... 689,468
Administrative fees (Note 3)............................... 137,891
Custodian fees............................................. 27,210
Reports to shareholders.................................... 115,000
Registration and filing fees............................... 9,500
Professional fees (Note 3)................................. 19,248
Directors' fees and expenses............................... 5,300
Other...................................................... 946
----------
Total expenses........................................ 1,004,563
Expenses waived/paid by affiliate (Note 3)............ (87,117)
-----------
Net expenses...................................... 917,446
-----------
Net investment income........................... 788,417
-----------
Realized and unrealized gains:
Net realized gain from:
Investments............................................... 2,159,436
Foreign currency transactions............................. 3,740
----------
Net realized gain...................................... 2,163,176
Net unrealized appreciation on investments............. 9,403,559
-----------
Net realized and unrealized gain............................ 11,566,735
-----------
Net increase in net assets resulting from operations........ $12,355,152
===========
</TABLE>
See Notes to Financial Statements.
16
PAGE
TEMPLETON CAPITAL ACCUMULATOR FUND, INC.
Financial Statements (continued)
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
FEBRUARY 28, 1998 YEAR ENDED
(UNAUDITED) AUGUST 31, 1
---------------------------------
<S> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income..................................... $ 788,417 $ 2,859,233
Net realized gain from investments and foreign currency
transactions............................................. 2,163,176 2,277,880
Net unrealized appreciation on investments................ 9,403,559 25,677,851
------------------------------------
Net increase in net assets resulting from operations.... 12,355,152 30,814,964
Distributions to shareholders from:
Net investment income..................................... (3,043,950) (2,272,093)
Net realized gains........................................ (4,703,023) (1,748,572)
Capital share transactions (Note 2)........................ 27,457,368 37,870,430
------------------------------------
Net increase in net assets.............................. 32,065,547 64,664,729
Net assets:
Beginning of period........................................ 172,683,293 108,018,564
------------------------------------
End of period.............................................. $204,748,840 $172,683,293
====================================
Undistributed net investment income included in net assets:
End of period.............................................. $ 249,286 $ 2,504,819
====================================
</TABLE>
See Notes to Financial Statements.
17
PAGE
TEMPLETON CAPITAL ACCUMULATOR FUND, INC.
Notes to Financial Statements (unaudited)
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Templeton Capital Accumulator Fund, Inc. (the Fund) is registered under the
Investment Company Act of 1940 as a diversified, open-end investment company.
Shares of the Fund are offered to the general public only through Templeton
Capital Accumulation Plans. The Fund seeks long term capital growth by investing
in a portfolio primarily composed of common stocks in various nations throughout
the world. The following summarizes the Fund's significant accounting policies.
a. SECURITIES VALUATION:
Securities listed or traded on a recognized national exchange or NASDAQ are
valued at the latest reported sales price. Over-the-counter securities and
listed securities for which no sale is reported are valued within the range of
the latest quoted bid and asked prices. Securities for which market quotations
are not readily available are valued at fair value as determined by management
in accordance with procedures established by the Board of Directors.
b. FOREIGN CURRENCY TRANSLATION:
Portfolio securities and other assets and liabilities denominated in foreign
currencies are translated into U.S. dollars based on the exchange rate of such
currencies against U.S. dollars on the date of valuation. Purchases and sales of
securities and income items denominated in foreign currencies are translated
into U.S. dollars at the exchange rate in effect on the transaction date. When
the Fund purchases or sells foreign securities it will customarily enter into a
foreign exchange contract to minimize foreign exchange risk from the trade date
to the settlement date of such transactions.
The Fund does not separately report the effect of changes in foreign exchange
rates from changes in market prices on securities held. Such changes are
included in net realized and unrealized gain or loss from investments.
Realized foreign exchange gains or losses arise from sales of foreign
currencies, currency gains or losses realized between the trade and settlement
dates on securities transactions and the difference between the recorded amounts
of dividends, interest, and foreign withholding taxes, and the U.S. dollar
equivalent of the amounts actually received or paid. Net unrealized foreign
exchange gains and losses arise from changes in foreign exchange rates on
foreign currency denominated assets and liabilities other than investments in
securities held at the end of the reporting period.
c. INCOME TAXES:
No provision has been made for income taxes because the Fund's policy is to
qualify as a regulated investment company under the Internal Revenue Code and to
distribute all of its taxable income.
18
PAGE
TEMPLETON CAPITAL ACCUMULATOR FUND, INC.
Notes to Financial Statements (unaudited) (continued)
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONT.)
d. SECURITY TRANSACTIONS, INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS:
Security transactions are accounted for on trade date. Realized gains and losses
on security transactions are determined on a specific identification basis.
Certain income from foreign securities is recorded as soon as information is
available to the Fund. Interest income and estimated expenses are accrued daily.
Dividend income and distributions to shareholders are recorded on the
ex-dividend date.
e. ACCOUNTING ESTIMATES:
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the
financial statements and the amounts of income and expense during the reporting
period. Actual results could differ from those estimates.
2. CAPITAL STOCK
At February 28, 1998, there were 100 million shares of capital stock authorized
($0.01 par value). Transactions in the Fund's shares were as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
FEBRUARY-28, 1998 AUGUST 31, 1997
---------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT
---------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold................................................. 2,232,158 $24,252,740 4,160,931 $41,490,628
Shares issued on reinvestment of distributions.............. 709,161 7,741,115 438,969 4,009,606
Shares redeemed............................................. (419,021) (4,536,487) (751,000) (7,629,804)
---------------------------------------------------------
Net increase................................................ 2,522,298 $27,457,368 3,848,900 $37,870,430
=========================================================
</TABLE>
3. TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES
Certain officers of the Fund are also officers or directors of Templeton
Investment Counsel, Inc. (TICI) and Franklin Templeton Services, Inc. (FT
Services), the Fund's investment manager and administrative manager,
respectively.
The Fund pays an investment management fee to TICI of 0.75% per year of the
average daily net assets of the Fund. The Fund pays an administrative fee to FT
Services based on the Fund's average daily net assets as follows:
<TABLE>
<CAPTION>
ANNUALIZED
FEE RATE AVERAGE DAILY NET ASSETS
- -----------------------------------------------------------------
<S> <C>
0.15% First $200 million
0.135% Over $200 million, up to and including $700 million
0.10% Over $700 million, up to and including $1.2 billion
0.075% Over $1.2 billion
</TABLE>
19
PAGE
TEMPLETON CAPITAL ACCUMULATOR FUND, INC.
Notes to Financial Statements (unaudited) (continued)
3. TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES (CONT.)
TICI and FT Services agreed in advance to waive management fees and assume
payment of other expenses that exceed a total of 1% of the Fund's average daily
net assets, as reported in the Statement of Operations.
Included in professional fees are legal fees of $11,841 that were paid to a law
firm in which a partner is an officer of the Fund.
4. INCOME TAXES
The cost of securities for federal income tax purposes is the same as that shown
in the statement of investments. At February 28, 1998, the net unrealized
appreciation based on the cost of investments for income tax purposes was as
follows:
<TABLE>
<S> <C>
Unrealized appreciation..................................... $60,696,322
Unrealized depreciation..................................... (9,139,086)
-----------
Net unrealized appreciation................................. $51,557,236
===========
</TABLE>
5. INVESTMENT TRANSACTIONS
Purchases and sales of securities (excluding short-term securities) for the six
months ended February 28, 1998 aggregated $22,555,280 and $5,726,655,
respectively.
20
PAGE
LITERATURE REQUEST
For a free brochure and prospectus, which contain more complete information,
including charges and expenses, call Franklin Fund Information, toll free, at
1-800/DIAL BEN (1-800/342-5236). Please read the prospectus carefully before you
invest or send money. To ensure the highest quality of service, telephone calls
to or from our service departments may be monitored, recorded and accessed.
These calls can be determined by the presence of a regular beeping tone.
FRANKLIN TEMPLETON GROUP
GLOBAL GROWTH
Franklin Global Health Care Fund
Templeton Developing
Markets Trust
Templeton Foreign Fund
Templeton Foreign Smaller
Companies Fund
Templeton Global
Infrastructure Fund
Templeton Global
Opportunities Trust
Templeton Global
Real Estate Fund
Templeton Global
Smaller Companies Fund
Templeton Greater European Fund
Templeton Growth Fund
Templeton Latin America Fund
Templeton Pacific Growth Fund
Templeton World Fund
GLOBAL GROWTH AND INCOME
Franklin Global Utilities Fund
Franklin Templeton German
Government Bond Fund
Franklin Templeton Global
Currency Fund
Mutual European Fund
Templeton Global Bond Fund
Templeton Growth and
Income Fund
GLOBAL INCOME
Franklin Global Government
Income Fund
Franklin Templeton Hard
Currency Fund
Franklin Templeton High Income
Currency Fund
Templeton Americas Government
Securities Fund
GROWTH
Franklin Biotechnology
Discovery Fund
Franklin Blue Chip Fund
Franklin California Growth Fund
Franklin DynaTech Fund
Franklin Equity Fund
Franklin Gold Fund
Franklin Growth Fund
Franklin MidCap Growth Fund
Franklin Small Cap
Growth Fund
Mutual Discovery Fund
GROWTH AND INCOME
Franklin Asset Allocation Fund
Franklin Balance Sheet
Investment Fund*
Franklin Convertible
Securities Fund
Franklin Equity Income Fund
Franklin Income Fund
Franklin MicroCap Value Fund*
Franklin Natural Resources Fund
Franklin Real Estate
Securities Fund
Franklin Rising Dividends Fund
Franklin Strategic Income Fund
Franklin Utilities Fund
Franklin Value Fund
Mutual Beacon Fund
Mutual Financial Services Fund
Mutual Qualified Fund
Mutual Shares Fund
Templeton American Trust, Inc.
Fund Allocator Series
Franklin Templeton Conservative
Target Fund
Franklin Templeton Moderate
Target Fund
Franklin Templeton Growth
Target Fund
INCOME
Franklin Adjustable Rate
Securities Fund
Franklin Adjustable U.S.
Government Securities Fund
Franklin's AGE High Income Fund
Franklin Investment Grade
Income Fund
Franklin Short-Intermediate
U.S. Government Securities Fund
Franklin U.S. Government
Securities Fund
Franklin Money Fund
Franklin Federal Money Fund
For Corporations
Franklin Corporate Qualified
Dividend Fund
FRANKLIN FUNDS SEEKING
TAX-FREE INCOME
Federal Intermediate-Term
Tax-Free Income Fund
Federal Tax-Free Income Fund
High Yield Tax-Free Income Fund
Insured Tax-Free Income Fund
Puerto Rico Tax-Free
Income Fund
Tax-Exempt Money Fund
FRANKLIN STATE-SPECIFIC
FUNDS SEEKING
TAX-FREE INCOME
Alabama
Arizona**
Arkansas***
California**
Colorado
Connecticut
Florida**
Georgia
Hawaii***
Indiana
Kentucky
Louisiana
Maryland
Massachusetts+
Michigan**
Minnesota+
Missouri
New Jersey
New York**
North Carolina
Ohio+
Oregon
Pennsylvania
Tennessee***
Texas
Virginia
Washington***
VARIABLE ANNUITIES++
Franklin Valuemark(R)
Franklin Templeton
Valuemark Income Plus
(an immediate annuity)
* These funds are now closed to new accounts, with the exception of retirement
accounts.
** Two or more fund options available: long-term portfolio, intermediate-term
portfolio, a portfolio of insured municipal securities, and/or a high yield
portfolio (CA) and a money market portfolio (CA and NY).
*** The fund may invest up to 100% of its assets in bonds that pay interest
subject to the federal alternative minimum tax.
+ Portfolio of insured municipal securities.
++ Franklin Valuemark and Franklin Templeton Valuemark Income Plus are issued by
Allianz Life Insurance Company of North America or by its wholly owned
subsidiary, Preferred Life Insurance Company of New York, and distributed by
NALAC Financial Plans, LLC.
10/97.1
PAGE
PRINCIPAL UNDERWRITER
Franklin/Templeton Distributors, Inc.
777 Mariners Island Blvd.
San Mateo, California 94404-1585
SHAREHOLDER SERVICES
1-800/632-2301
FUND INFORMATION
1-800/342-5236
This report must be preceded or accompanied by the prospectus of Templeton
Capital Accumulator Fund, Inc. which contains more complete information
including risk factors, charges and expenses. Like any investment in securities,
the value of the Fund's portfolio will be subject to the risk of loss from
market, currency, economic, political and other factors, as well as investment
decisions by the investment manager which will not always be profitable or wise.
The Fund and its investors are not protected from such losses by the investment
manager. Therefore, investors who cannot accept this risk should not invest in
shares of the Fund.
To ensure the highest quality of service, telephone calls to
or from our service departments may be monitored, recorded and accessed. These
calls can be determined by the presence of a regular beeping tone.
[RECYCLE LOGO] Printed on recycled paper
TLCAP S98 04/98
