ANNUAL REPORT
Templeton Capital
Accumulator Fund, Inc.
August 31, 1999
[FRANKLIN TEMPLETON LOGO]
PAGE
[FRANKLIN TEMPLETON SEAL]
Thank you for investing with Franklin Templeton. We encourage our investors to
maintain a long-term perspective and 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 GOAL: TEMPLETON CAPITAL ACCUMULATOR FUND SEEKS LONG-TERM CAPITAL
GROWTH. UNDER NORMAL MARKET CONDITIONS, THE FUND INVESTS IN EQUITY SECURITIES
AND DEBT OBLIGATIONS OF COMPANIES AND GOVERNMENTS OF ANY NATION.
- --------------------------------------------------------------------------------
Dear Shareholder:
We are pleased to bring you this annual report of Templeton Capital Accumulator
Fund, covering the year ended August 31, 1999. We are also pleased to announce
that the Fund delivered a 32.01% one-year cumulative total return as shown in
the Performance Summary on page 5.
During the 12 months under review, continued strength in the U.S. economy and
economic recovery in Europe and Asia helped boost global stock prices, despite
the normally depressing effect of an uptick in interest rates. In many
countries, historically high stock valuations were supported by low inflation,
strong corporate profits, and heavy merger and acquisition activity. In the
U.S., many value investors were astounded by the craze
You will find a complete listing of the Fund's portfolio holdings, including
dollar value and number of shares or principal amount, beginning on page 8 of
this report.
CONTENTS
Shareholder Letter ............ 1
Performance Summary ........... 5
Financial Highlights &
Statement of Investments ...... 7
Financial Statements .......... 15
Notes to Financial
Statements .................... 18
Independent Auditors' Report .. 21
Tax Designation ............... 22
Change in Independent
Auditor ....................... 24
FUND CATEGORY
[PYRAMID GRAPHIC]
PAGE
GEOGRAPHIC DISTRIBUTION
Based on Total Net Assets
8/31/99
[PIE CHART]
European Stocks ....................... 45.5%
North American Stocks ................. 21.1%
Asian Stocks .......................... 13.5%
Latin American Stocks ................. 9.7%
Australian & New Zealand Stocks ....... 4.6%
Short-Term Investments &
Other Net Assets .................... 5.6%
for initial public offerings (IPOs) of Internet-related stocks at astronomical
valuations. While many of these IPOs may prove to be successful over the long
run, we recall that a large number of stocks launched in the personal computer
boom of the mid-1980s failed to live up to investors' expectations.
European stocks performed in a generally lackluster manner, restrained by a weak
euro which, following its New Year's Day introduction, faced severe pressure
against the U.S. dollar. But since an undertaking of such magnitude may be
expected to entail short-term economic and financial dislocations, we believed
it would be a mistake to adopt an overly negative outlook toward "Euroland." On
the positive side, increasing European merger and acquisition activity, more
privatizations, less stringent regulations governing share buybacks, and lower
corporate taxes could result in higher profitability and shareholder returns
over the longer term. In May, Olivetti SpA acquired a majority of stock in
Telecom Italia SpA, and in July, French oil giants, Total Fina SA and Societe
Elf Aquitaine SA, engaged in a takeover battle with each other. These, in our
opinion, were groundbreaking events indicating that many companies in Europe may
be repositioning themselves for the new global marketplace, and possibly adding
value to their shares.
During the Fund's fiscal year, our position in short-term investments and other
net assets declined from 16.9% of total net assets to just 5.6% as the Fund
became more fully invested. On August 31, 1999, the largest portfolio exposure
was to Europe, followed by North America, Asia, Latin America, and Australia and
New Zealand.
2
PAGE
Throughout the reporting period, we engaged in moderate buying and selling
activity for the Fund's portfolio. We purchased shares in Zurich Allied PLC
because we believed this insurance company, formed by the merger of U.K. and
Swiss firms, may be well positioned to increase earnings through product line
expansion and economies of scale. We also established holdings in Superior
Industries International Inc., a U.S. manufacturer of automotive alloy wheels
and aluminum components with advanced technology and what we considered a solid
balance sheet. And we eliminated our positions in Georgia Pacific Corp. and
International Paper Co. at a profit, as investor enthusiasm for cyclical
industries drove up their stock prices.
Looking forward, we remain committed to our disciplined investment process.
While elevated equity valuations in many parts of the world have made it more
challenging to identify bargain-priced stocks, we believe worthwhile
opportunities should become available as industries and individual companies
stumble and fall temporarily out of favor with investors. As others scramble to
pay high prices for popular stocks, we will continue to search diligently for
shares selling at what we believe to be a low price in relation to our
calculations of long-term earnings potential.
Of course, investing in foreign securities involves special risks, such as
adverse economic, social and political developments in the countries where the
Fund invests, as well as market and currency volatility. Emerging market
securities involve heightened risks related to the same factors, in addition to
those associated with the relatively small size and lesser liquidity of these
markets. Investing in any emerging market means accepting a
TOP 10 INDUSTRIES
8/31/99
% OF TOTAL
INDUSTRY NET ASSETS
- ----------------------------------------------------------------
Telecommunications 14.0%
Banking 11.1%
Utilities Electrical & Gas 5.9%
Electrical & Electronics 5.3%
Energy Sources 4.6%
Insurance 4.4%
Health & Personal Care 4.2%
Automobiles 4.0%
Transportation 3.8%
Forest Products & Paper 3.6%
3
PAGE
TOP 10 HOLDINGS
8/31/99
COMPANY % OF TOTAL
INDUSTRY, COUNTRY NET ASSETS
- -----------------------------------------------------------------
Compania de
Telecomunicaciones
de Chile SA, ADR,
Telecommunications, Chile 1.5%
Veba AG,
Utilities Electrical
& Gas, Germany 1.4%
Development Bank of
Singapore Ltd., fgn.,
Banking, Singapore 1.4%
Stora Enso OYJ,
Forest
Products & Paper, Finland 1.2%
Koninklijke Philips
Electronics NV,
Electrical
& Electronics, Netherlands 1.2%
Skandia Foersaekrings AB,
Insurance, Sweden 1.2%
Telefonos de Mexico SA
(Telmex), ADR,
Telecommunications, Mexico 1.2%
Societe Elf Aquitaine SA, Br.,
Energy Sources, France 1.2%
Dayton Hudson Corp.,
Merchandising, United States 1.2%
Burlington Northern
Santa Fe Corp.,
Transportation, United States 1.1%
certain amount of volatility and, in some cases, the consequences of severe
market corrections. For example, Mexico's equity market has increased 3,760% in
the last 15 years, but has suffered eight quarterly declines of more than 15%
during that time.(1) While short-term volatility can be disconcerting, declines
in excess of 50% are not unusual in such markets. The special risks associated
with these types of investments, as well as other considerations, are discussed
in the Fund's prospectus.
Please remember that this discussion reflects our views, opinions and portfolio
holdings as of August 31, 1999, the end of the reporting period. However, market
and economic conditions are changing constantly, which can be expected to affect
our investment strategies and the Fund's portfolio composition. Although past
performance is not predictive of future results, these insights may help you
better understand our investment and management philosophy.
We thank you for your participation in Templeton Capital Accumulator Fund and
welcome your comments and suggestions.
Sincerely,
/s/GARY P. MOTYL
Gary P. Motyl
Portfolio Manager
Templeton Capital Accumulator Fund, Inc.
(1) Source: Mexico Bolsa Index. Based on quarterly percentage price change over
15 years ended June 30, 1999. Market return is measured in U.S. dollar terms and
does not include reinvested dividends.
4
PAGE
PERFORMANCE SUMMARY AS OF 8/31/99
Distributions will vary based on earnings of the Fund's portfolio and any
profits realized from the sale of the portfolio's securities, as well as the
level of the Fund's operating expenses. Past distributions are not indicative of
future trends. All total returns include reinvested distributions at net asset
value.
PRICE AND DISTRIBUTION INFORMATION
<TABLE>
<CAPTION>
CHANGE 8/31/99 8/31/98
- ----------------------------------------------------------------
<S> <C> <C> <C>
Net Asset Value +$2.42 $12.11 $9.69
<CAPTION>
DISTRIBUTIONS (9/1/98 - 8/31/99)
--------------------------------
<S> <C>
Dividend Income $0.1800
Long-Term Capital Gain $0.3250
Short-Term Capital Gain $0.0350
TOTAL $0.5400
</TABLE>
PERFORMANCE
<TABLE>
<CAPTION>
INCEPTION
1-YEAR 5-YEAR (3/1/91)
- ------------------------------------------------------------------
<S> <C> <C> <C>
Cumulative Total Return(1) 32.01% 83.20% 216.46%
Average Annual Total Return(2) 32.01% 12.87% 14.51%
Value of $10,000 Investment(3) $13,201 $18,320 $31,646
</TABLE>
<TABLE>
<CAPTION>
8/31/95 8/31/96 8/31/97 8/31/98 8/31/99
- ------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
One-Year
Total Return(4) 3.40% 16.50% 25.06% -7.87% 32.01%
</TABLE>
Templeton Capital Accumulator Fund paid distributions derived from long-term
capital gains of 32.5 cents ($0.3250) per share in October 1998. The Fund hereby
designates such distributions as capital gain dividends per Internal Revenue
Code Section 852 (b)(3).
Past performance is not predictive of future results.
1. Cumulative total return represents the change in value of an investment over
the periods indicated.
2. Average annual total return represents the average annual change in value of
an investment over the periods indicated.
3. These figures represent the value of a hypothetical $10,000 investment in the
Fund over the periods indicated.
4. One-year total return represents the change in value of an investment over
the one-year periods ended on the specified dates.
Calculations do not include the effect of paying sales charges applicable to
purchases of Fund shares through Templeton Capital Accumulator 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 sales charges.
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.
Since markets can go down as well as up, investment return and principal value
will fluctuate with market conditions, currency volatility and the social,
economic and political climates of countries where the Fund invests. 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.
5
PAGE
AVERAGE ANNUAL TOTAL RETURN
8/31/99
- -----------------------------------------------------
1-Year 32.01%
5-Year 12.87%
Since Inception (3/1/91) 14.51%
TOTAL RETURN INDEX COMPARISON
FOR HYPOTHETICAL $10,000 INVESTMENT
Total return represents the change in value of an investment over the periods
shown assuming reinvestment of distributions at net asset value. It does 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 sales charges. The unmanaged index differs from the Fund in
composition, does not pay management fees or expenses and includes reinvested
dividends. 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.
One cannot invest directly in an index. Performance of the Fund's shares
exceeded the rate of inflation as measured by the Consumer Price Index
(CPI).
TOTAL RETURN INDEX COMPARISON
=============================
$10,000 INVESTMENT (3/1/91-8/31/99)
The following line graph compares the performance of Templeton Capital
Accumulator to that of the Morgan Stanley Capital International All Countries
World Free Index and the Consumer Price Index, based on a $10,000 investment
from 3/1/91 to 8/31/99.
TEMPLETON MSCI WORLD MSCI AC CPI
CAPITAL INDEX WORLD
ACCUMULATOR FREE INDEX
FUND*
- -------------------------------------------------------------
3/1/91 $10,000 $10,000 $10,000 $10,000
3/31/1991 $9,960 $9,716 $9,730 $10,013
04/30/1991 $10,050 $9,794 $9,812 $10,028
05/31/1991 $10,249 $10,017 $10,046 $10,057
06/30/1991 $9,841 $9,400 $9,434 $10,088
07/31/1991 $10,299 $9,846 $9,883 $10,102
08/31/1991 $10,378 $9,816 $9,863 $10,132
09/30/1991 $10,408 $10,075 $10,115 $10,177
10/31/1991 $10,441 $10,241 $10,291 $10,191
11/30/1991 $10,219 $9,796 $9,848 $10,221
12/31/1991 $10,700 $10,511 $10,579 $10,229
01/31/1992 $10,944 $10,318 $10,421 $10,243
02/29/1992 $11,096 $10,142 $10,264 $10,281
03/31/1992 $11,005 $9,666 $9,807 $10,332
04/30/1992 $11,238 $9,802 $9,938 $10,347
05/31/1992 $11,613 $10,193 $10,319 $10,362
06/30/1992 $11,349 $9,854 $9,951 $10,399
07/31/1992 $11,268 $9,881 $9,983 $10,422
08/31/1992 $11,106 $10,123 $10,207 $10,451
09/30/1992 $11,076 $10,032 $10,120 $10,480
10/31/1992 $10,945 $9,762 $9,872 $10,517
11/30/1992 $11,079 $9,939 $10,037 $10,532
12/31/1992 $11,411 $10,021 $10,132 $10,525
01/31/1993 $11,557 $10,057 $10,167 $10,577
02/28/1993 $11,953 $10,296 $10,406 $10,614
03/31/1993 $12,474 $10,896 $11,004 $10,652
04/30/1993 $12,776 $11,402 $11,504 $10,681
05/31/1993 $13,234 $11,667 $11,775 $10,696
06/30/1993 $13,151 $11,571 $11,698 $10,711
07/31/1993 $13,380 $11,811 $11,941 $10,710
08/31/1993 $14,339 $12,355 $12,507 $10,740
09/30/1993 $14,318 $12,128 $12,297 $10,762
10/31/1993 $15,027 $12,464 $12,661 $10,807
11/30/1993 $14,635 $11,761 $12,003 $10,815
12/31/1993 $15,921 $12,339 $12,652 $10,814
01/31/1994 $17,093 $13,155 $13,492 $10,844
02/28/1994 $16,752 $12,986 $13,297 $10,882
03/31/1994 $16,006 $12,429 $12,699 $10,919
04/30/1994 $16,198 $12,815 $13,044 $10,934
05/31/1994 $16,389 $12,850 $13,121 $10,940
06/30/1994 $15,889 $12,817 $13,058 $10,978
07/31/1994 $16,603 $13,063 $13,347 $11,007
08/31/1994 $17,274 $13,459 $13,822 $11,052
09/30/1994 $16,944 $13,108 $13,497 $11,081
10/31/1994 $17,158 $13,482 $13,843 $11,089
11/30/1994 $16,540 $12,900 $13,242 $11,104
12/31/1994 $16,348 $13,028 $13,288 $11,104
01/31/1995 $16,045 $12,835 $13,018 $11,148
02/28/1995 $16,393 $13,024 $13,157 $11,192
03/31/1995 $16,639 $13,654 $13,760 $11,229
04/30/1995 $17,076 $14,133 $14,260 $11,266
05/31/1995 $17,603 $14,257 $14,418 $11,289
06/30/1995 $17,749 $14,255 $14,421 $11,311
07/31/1995 $18,320 $14,971 $15,118 $11,311
08/31/1995 $17,861 $14,640 $14,787 $11,341
09/30/1995 $18,275 $15,069 $15,194 $11,363
10/31/1995 $17,837 $14,835 $14,940 $11,400
11/30/1995 $18,212 $15,353 $15,410 $11,392
12/31/1995 $18,768 $15,805 $15,874 $11,384
01/31/1996 $19,169 $16,093 $16,227 $11,451
02/29/1996 $19,455 $16,194 $16,295 $11,488
03/31/1996 $19,753 $16,467 $16,546 $11,548
04/30/1996 $20,624 $16,857 $16,950 $11,592
05/31/1996 $20,876 $16,874 $16,967 $11,614
06/30/1996 $20,899 $16,963 $17,060 $11,622
07/31/1996 $20,166 $16,367 $16,423 $11,644
08/31/1996 $20,807 $16,558 $16,626 $11,666
09/30/1996 $21,105 $17,209 $17,240 $11,703
10/31/1996 $21,410 $17,332 $17,308 $11,740
11/30/1996 $22,522 $18,307 $18,234 $11,762
12/31/1996 $23,080 $18,017 $17,970 $11,762
01/31/1997 $23,530 $18,236 $18,271 $11,799
02/28/1997 $23,673 $18,450 $18,520 $11,835
03/31/1997 $23,744 $18,088 $18,150 $11,864
04/30/1997 $23,744 $18,682 $18,733 $11,878
05/31/1997 $25,001 $19,839 $19,850 $11,871
06/30/1997 $26,235 $20,831 $20,866 $11,886
07/31/1997 $27,373 $21,794 $21,810 $11,900
08/31/1997 $26,021 $20,340 $20,280 $11,922
09/30/1997 $27,942 $21,447 $21,361 $11,952
10/31/1997 $25,868 $20,322 $20,089 $11,982
11/30/1997 $25,624 $20,684 $20,396 $11,975
12/31/1997 $25,655 $20,940 $20,664 $11,961
01/31/1998 $25,853 $21,527 $21,119 $11,982
02/28/1998 $27,733 $22,987 $22,564 $12,006
03/31/1998 $29,291 $23,961 $23,527 $12,030
04/30/1998 $29,564 $24,198 $23,747 $12,052
05/31/1998 $29,069 $23,899 $23,297 $12,073
06/30/1998 $28,599 $24,469 $23,716 $12,088
07/31/1998 $28,648 $24,433 $23,724 $12,102
08/31/1998 $23,972 $21,179 $20,400 $12,117
09/30/1998 $23,725 $21,557 $20,806 $12,131
10/31/1998 $25,848 $23,510 $22,706 $12,161
11/30/1998 $27,437 $24,912 $24,085 $12,161
12/31/1998 $27,857 $26,133 $25,203 $12,153
01/31/1999 $27,883 $26,709 $25,718 $12,183
02/28/1999 $27,517 $26,001 $25,072 $12,195
03/31/1999 $28,876 $27,088 $26,200 $12,232
04/30/1999 $31,516 $28,159 $27,332 $12,321
05/31/1999 $30,418 $27,134 $26,366 $12,321
06/30/1999 $32,143 $28,404 $27,679 $12,321
07/31/1999 $31,934 $28,323 $27,565 $12,358
08/31/1999 $31,646 $28,276 $27,532 $12,388
* Source: Morgan Stanley Capital International(R). Indexes are unmanaged and
include reinvested dividends. One cannot invest directly in an index, nor is an
index representative of the Fund's portfolio.
** Source: Consumer Price Index, U.S. Bureau of Labor Statistics (8/31/99). The
Consumer Price Index is a commonly used measure of inflation.
Past performance is not predictive of future results.
6
PAGE
TEMPLETON CAPITAL ACCUMULATOR FUND, INC.
Financial Highlights
<TABLE>
<CAPTION>
YEAR ENDED AUGUST 31,
-------------------------------------------------------
1999++ 1998 1997 1996 1995
-------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE+
(For a share outstanding throughout the year)
Net asset value, beginning of year.......................... $9.69 $10.97 $9.08 $7.97 $8.10
-------------------------------------------------------
Income from investment operations:
Net investment income...................................... .18 .18 .18 .19 .14
Net realized and unrealized gains (losses)................. 2.78 (1.00) 2.03 1.10 .12
-------------------------------------------------------
Total from investment operations............................ 2.96 (.82) 2.21 1.29 .26
-------------------------------------------------------
Less distributions from:
Net investment income...................................... (.18) (.18) (.18) (.15) (.10)
Net realized gains......................................... (.36) (.28) (.14) (.03) (.29)
-------------------------------------------------------
Total distributions......................................... (.54) (.46) (.32) (.18) (.39)
-------------------------------------------------------
Net asset value, end of year................................ $12.11 $9.69 $10.97 $9.08 $7.97
=======================================================
Total Return................................................ 32.01% (7.87)% 25.06% 16.50% 3.40%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (000's)............................. $291,136 $191,913 $172,683 $108,019 $65,538
Ratios to average net assets:
Expenses................................................... 1.11% 1.00% 1.00% 1.00% 1.00%
Expenses, excluding waiver and payments by affiliate....... 1.11% 1.09% 1.13% 1.16% 1.34%
Net investment income...................................... 1.60% 1.77% 2.00% 2.56% 2.37%
Portfolio turnover rate..................................... 13.96% 11.92% 7.43% 11.08% 12.91%
</TABLE>
+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.
++Based on average weighted shares outstanding.
See Notes to Financial Statements.
7
PAGE
TEMPLETON CAPITAL ACCUMULATOR FUND, INC.
STATEMENT OF INVESTMENTS, AUGUST 31, 1999
<TABLE>
<CAPTION>
COUNTRY SHARES VALUE
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCKS 90.9%
AEROSPACE & MILITARY TECHNOLOGY .4%
Boeing Co. ................................................. United States 28,500 $ 1,291,406
------------
APPLIANCES & HOUSEHOLD DURABLES 2.6%
Electrolux AB, B............................................ Sweden 111,250 2,236,046
Fisher & Paykel Ltd. ....................................... New Zealand 450,200 1,326,692
Guangdong Kelon Electrical Holdings. Ltd., H................ China 2,000,000 2,047,610
Sony Corp. ................................................. Japan 14,600 1,888,166
------------
7,498,514
------------
AUTOMOBILES 4.0%
Delphi Automotive Systems Corp. ............................ United States 17,473 327,619
Fiat SpA.................................................... Italy 43,750 1,420,518
Ford Motor Co. ............................................. United States 24,000 1,251,000
General Motors Corp. ....................................... United States 25,000 1,653,125
Superior Industries International Inc. ..................... United States 93,000 2,604,000
Volkswagen AG............................................... Germany 30,000 1,807,763
Volvo AB, B................................................. Sweden 90,000 2,517,254
------------
11,581,279
------------
BANKING 10.4%
ABN Amro Holding NV......................................... Netherlands 60,000 1,460,787
Australia & New Zealand Banking Group Ltd. ................. Australia 200,000 1,298,511
*Banca Nazionale del Lavoro SpA............................. Italy 625,000 2,033,932
Banco Bradesco SA, ADR...................................... Brazil 300,000 1,186,264
Bank Austria AG............................................. Austria 34,700 1,841,748
Bank Handlowy W Warszawie SA, GDR, 144A..................... Poland 80,000 1,180,000
Bank of America Corp. ...................................... United States 22,600 1,367,300
Bankinter SA................................................ Spain 45,000 1,834,222
Banque Nationale de Paris................................... France 28,000 2,141,220
BPI Socieda de Gestora de Participacoes Socias SA........... Portugal 25,171 505,414
Credicorp Ltd. ............................................. Peru 157,900 1,628,344
Development Bank of Singapore Ltd., fgn. ................... Singapore 348,900 3,997,964
Foreningssparbanken AB, A................................... Sweden 205,200 3,080,857
Kookmin Bank................................................ South Korea 125,344 1,751,949
Merita AS................................................... Finland 600,000 3,168,735
*Philippine National Bank................................... Philippines 132,383 437,106
*Thai Farmers Bank Public Co. Ltd., fgn. ................... Thailand 600,000 860,383
*Thai Farmers Bank Public Co. Ltd., fgn., rts., 9/17/99..... Thailand 600,000 547,517
------------
30,322,253
------------
BROADCASTING & PUBLISHING .8%
News Corp. Ltd. ............................................ Australia 70,000 510,675
*Wolters Kluwer NV.......................................... Netherlands 48,000 1,784,632
------------
2,295,307
------------
</TABLE>
8
PAGE
TEMPLETON CAPITAL ACCUMULATOR FUND, INC.
STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (CONT.)
<TABLE>
<CAPTION>
COUNTRY SHARES VALUE
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCKS (CONT.)
BUILDING MATERIALS & COMPONENTS 2.5%
Pioneer International Ltd. ................................. Australia 675,815 $ 1,722,381
*Siam City Cement Public Co. Ltd., fgn. .................... Thailand 153,802 569,414
Svedala Industri, A......................................... Sweden 100,000 2,094,685
Williams PLC................................................ United Kingdom 500,000 2,850,091
------------
7,236,571
------------
BUSINESS & PUBLIC SERVICES .8%
Esselte AB, B............................................... Sweden 40,000 336,602
Lex Service PLC............................................. United Kingdom 165,000 1,639,626
Waste Management Inc. ...................................... United States 20,300 442,794
------------
2,419,022
------------
CHEMICALS 3.0%
Akzo Nobel NV............................................... Netherlands 30,000 1,395,828
BASF AG..................................................... Germany 36,200 1,617,386
Bayer AG, Br. .............................................. Germany 41,000 1,762,556
Great Lakes Chemical Corp. ................................. United States 22,000 906,125
Imperial Chemical Industries PLC............................ United Kingdom 200,000 2,275,249
*Methanex Corp. ............................................ Canada 229,000 675,245
------------
8,632,389
------------
DATA PROCESSING & REPRODUCTION .8%
*3Com Corp. ................................................ United States 89,500 2,220,719
------------
ELECTRICAL & ELECTRONICS 5.3%
*ABB AG, Br. ............................................... Switzerland 10,569 1,077,749
Alcatel SA.................................................. France 15,161 2,321,991
G P Batteries International Ltd. ........................... Singapore 137,000 238,325
General Electric Co. PLC.................................... United Kingdom 240,000 2,404,206
Hitachi Ltd. ............................................... Japan 165,000 1,671,896
Koninklijke Philips Electronics NV.......................... Netherlands 34,904 3,596,393
Matsushita Electric Industrial Co. Ltd. .................... Japan 99,000 1,950,294
*Meto AG.................................................... Sweden 40,000 305,122
Motorola Inc. .............................................. United States 20,000 1,845,000
------------
15,410,976
------------
ELECTRONIC COMPONENTS & INSTRUMENTS .9%
Intel Corp. ................................................ United States 32,000 2,630,000
------------
ENERGY EQUIPMENT & SERVICES 1.4%
Sunoco Inc. ................................................ United States 85,000 2,767,812
Transcanada PipeLines Ltd. ................................. Canada 89,276 1,259,389
------------
4,027,201
------------
</TABLE>
9
PAGE
TEMPLETON CAPITAL ACCUMULATOR FUND, INC.
STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (CONT.)
<TABLE>
<CAPTION>
COUNTRY SHARES VALUE
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCKS (CONT.)
ENERGY SOURCES 4.7%
Norsk Hydro AS.............................................. Norway 27,000 $ 1,125,072
Occidental Petroleum Corp. ................................. United States 115,000 2,494,063
*Renaissance Energy Ltd. ................................... Canada 106,000 1,633,829
Shell Transport & Trading Co. PLC, ADR...................... United Kingdom 65,000 3,132,188
Societe Elf Aquitaine SA, Br. .............................. France 20,000 3,506,734
Total Fina SA, B............................................ France 13,000 1,675,205
------------
13,567,091
------------
FINANCIAL SERVICES 3.3%
AXA SA...................................................... France 21,257 2,644,916
ICICI Ltd. (DEMAT).......................................... India 582,498 1,078,092
ICICI Ltd., GDR, 144A....................................... India 101,100 955,395
ING Groep NV................................................ Netherlands 32,500 1,781,621
Mutual Risk Management Ltd. ................................ Bermuda 54,600 1,501,500
Nomura Securities Co. Ltd. ................................. Japan 120,000 1,756,578
------------
9,718,102
------------
FOOD & HOUSEHOLD PRODUCTS .5%
Archer-Daniels Midland Co. ................................. United States 55,125 716,625
Devro PLC................................................... United Kingdom 340,000 702,513
------------
1,419,138
------------
FOREST PRODUCTS & PAPER 3.6%
*Asia Pulp & Paper Co. Ltd., ADR............................ Indonesia 45,000 343,125
*Asia Pulp & Paper Co. Ltd., ADR, wts., 7/27/00............. Indonesia 9,000 12,375
Boise Cascade Corp. ........................................ United States 24,000 873,000
Fletcher Challenge Ltd. Forestry Division................... New Zealand 1,770,000 851,032
Hansol Paper Co. Ltd., GDS.................................. South Korea 37 266
Jefferson Smurfit Group PLC................................. United Kingdom 750,000 2,158,672
Mayr-Melnhof Karton AG...................................... Austria 11,000 527,489
Mo Och Domsjoe AB, B........................................ Sweden 34,000 1,037,414
Portucel Industrial Empresa Product Celulose, ADR, 144A..... Portugal 49,100 331,914
*Shorewood Packaging Corp. ................................. United States 41,250 608,438
Stora Enso OYJ, R........................................... Finland 140,400 1,868,540
Stora Enso OYJ, R, fgn. .................................... Finland 130,627 1,731,887
Unipapel SA, Br. ........................................... Spain 24,000 252,231
------------
10,596,383
------------
HEALTH & PERSONAL CARE 3.4%
Astrazeneca PLC............................................. United Kingdom 26,906 1,052,282
Medeva PLC.................................................. United Kingdom 480,000 930,038
Novartis AG................................................. Switzerland 453 651,799
Nycomed Amersham PLC........................................ United Kingdom 234,215 1,522,136
Pharmacia & Upjohn Inc. .................................... United States 47,000 2,455,750
Rhone-Poulenc SA, A......................................... France 46,000 2,231,128
</TABLE>
10
PAGE
TEMPLETON CAPITAL ACCUMULATOR FUND, INC.
STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (CONT.)
<TABLE>
<CAPTION>
COUNTRY SHARES VALUE
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCKS (CONT.)
HEALTH & PERSONAL CARE (CONT.)
*Windmere-Durable Holdings Inc. ............................ United States 90,000 $ 1,310,625
------------
10,153,758
------------
INDUSTRIAL COMPONENTS 1.3%
Exide Corp. ................................................ United States 40,500 448,031
Flowserve Corp. ............................................ United States 39,020 617,004
Goodyear Tire & Rubber Co. ................................. United States 23,000 1,290,875
Granges AB.................................................. Sweden 11,125 211,481
SKF AB, B................................................... Sweden 55,000 1,251,968
------------
3,819,359
------------
INSURANCE 5.2%
Ace Ltd. ................................................... Bermuda 74,000 1,586,375
American International Group Inc. .......................... United States 28,828 2,671,949
Muenchener Rueckversicherungs-Gesellschaft, Reg D........... Germany 12,600 2,408,872
Skandia Foersaekrings AB.................................... Sweden 175,000 3,559,753
Swiss Reinsurance Company Zurich............................ Switzerland 605 1,179,972
XL Capital Ltd., A.......................................... Bermuda 30,000 1,509,375
Zurich Allied PLC........................................... United Kingdom 173,000 2,104,396
------------
15,020,692
------------
MACHINERY & ENGINEERING 3.3%
IHC Caland NV............................................... Netherlands 37,000 1,741,062
Invensys PLC................................................ United Kingdom 302,643 1,549,932
New Holland NV.............................................. Netherlands 62,800 973,400
SIG Schweizerische Industrie-Gesellschaft Holding........... Switzerland 4,000 2,479,044
Tata Engineering & Locomotive Co. Telco, GDR, 144A.......... India 210,000 1,858,500
VA Technologie AG, Br. ..................................... Austria 12,000 1,058,358
------------
9,660,296
------------
MERCHANDISING 3.3%
Dayton Hudson Corp. ........................................ United States 60,000 3,480,000
Debenhams PLC............................................... United Kingdom 93,750 590,922
Hudsons Bay Co. ............................................ Canada 53,800 703,056
*K-Mart Corp. .............................................. United States 60,000 753,750
Marks & Spencer PLC......................................... United Kingdom 218,000 1,451,207
Safeway PLC................................................. United Kingdom 350,000 1,454,792
Storehouse.................................................. United Kingdom 655,000 1,205,922
------------
9,639,649
------------
METALS & MINING 1.8%
Goldfields Ltd. ............................................ Australia 125,210 86,958
Iluka Resources Ltd. ....................................... Australia 198,506 473,028
Industrias Penoles SA....................................... Mexico 298,400 784,258
</TABLE>
11
PAGE
TEMPLETON CAPITAL ACCUMULATOR FUND, INC.
STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (CONT.)
<TABLE>
<CAPTION>
COUNTRY SHARES VALUE
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCKS (CONT.)
METALS & MINING (CONT.)
Pechiney SA, A.............................................. France 34,000 $ 1,978,769
WMC Ltd. ................................................... Australia 400,000 1,760,317
------------
5,083,330
------------
MISC MATERIALS & COMMODITIES .4%
Golden Hope Plantations Bhd................................. Malaysia 748,000 614,147
Unitor ASA.................................................. Norway 70,000 517,362
------------
1,131,509
------------
MULTI-INDUSTRY 3.2%
Alfa SA de CV, A............................................ Mexico 384,500 1,455,352
Brierley Investments Ltd. .................................. New Zealand 1,200,000 285,383
Cheung Kong Holdings Ltd. .................................. Hong Kong 290,000 2,520,879
Foster Wheeler Corp. ....................................... United States 82,000 1,060,875
Hutchison Whampoa Ltd. ..................................... Hong Kong 201,500 1,965,657
Jardine Matheson Holdings Ltd. ............................. Hong Kong 62,336 297,966
*Metro Pacific Corp. MDI.................................... Philippines 10,112,000 367,014
Saha Union Public Co. Ltd., fgn. ........................... Thailand 800,000 286,794
Swire Pacific Ltd., A....................................... Hong Kong 170,000 877,897
Swire Pacific Ltd., B....................................... Hong Kong 100,000 77,912
------------
9,195,729
------------
REAL ESTATE 1.0%
*Catellus Development Corp. ................................ United States 50,000 684,375
Equity Office Properties Trust.............................. United States 33,751 862,760
Inversiones y Representacion SA............................. Argentina 447,836 1,298,854
------------
2,845,989
------------
TELECOMMUNICATIONS 12.3%
Asia Satellite Telecommunications Hldgs. Ltd. .............. Hong Kong 215,000 526,068
British Telecommunications PLC.............................. United Kingdom 174,000 2,660,739
*Cable & Wireless Optus Ltd. ............................... Australia 712,000 1,551,485
Compania de Telecomunicaciones de Chile SA, ADR............. Chile 189,725 4,268,813
Nippon Telegraph & Telephone Corp. ......................... Japan 200 2,243,604
Nokia Corp., A.............................................. Finland 34,800 2,903,829
Nortel Networks Corp. ...................................... Canada 70,800 2,907,225
Philippine Long Distance Telephone Co. ..................... Philippines 60,000 1,421,550
Portugal Telecom SA......................................... Portugal 41,500 1,735,395
PT Indosat TBK, ADR......................................... Indonesia 9,600 148,200
*Rostelecom, ADR............................................ Russia 56,000 381,500
Telecom Argentina Stet-France SA, ADR....................... Argentina 49,200 1,389,900
Telecom Italia SpA.......................................... Italy 297,100 3,002,852
Telefonica de Argentina SA, ADR............................. Argentina 65,600 1,951,600
*Telefonica SA.............................................. Spain 154,500 2,464,167
Telefonos de Mexico SA (Telmex), ADR........................ Mexico 47,500 3,532,812
</TABLE>
12
PAGE
TEMPLETON CAPITAL ACCUMULATOR FUND, INC.
STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (CONT.)
<TABLE>
<CAPTION>
COUNTRY SHARES VALUE
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCKS (CONT.)
TELECOMMUNICATIONS (CONT.)
Videsh Sanchar Nigam Ltd. .................................. India 50,000 $ 1,242,307
Videsh Sanchar Nigam Ltd., GDR, 144A........................ India 114,000 1,613,100
------------
35,945,146
------------
TEXTILES & APPAREL 1.0%
*Dawson International PLC................................... United Kingdom 265,000 153,398
Kellwood Co. ............................................... United States 30,500 728,188
Shaw Industries Inc. ....................................... United States 108,000 2,160,000
------------
3,041,586
------------
TRANSPORTATION 3.8%
Airborne Freight Corp. ..................................... United States 95,000 2,392,813
Autostrade Concessioni e Costruzioni SpA, A................. Italy 340,000 2,715,691
Burlington Northern Santa Fe Corp. ......................... United States 113,000 3,277,000
Cathay Pacific Airways Ltd. ................................ Hong Kong 150,000 254,985
Guangshen Railway Co. Ltd., H, ADR.......................... China 74,000 457,875
Kvaerner ASA, A............................................. Norway 24,000 532,144
Mayne Nickless Ltd., A...................................... Australia 445,000 1,443,176
------------
11,073,684
------------
UTILITIES ELECTRICAL & GAS 5.9%
*British Energy Ltd. ....................................... United Kingdom 616,146 2,722,608
Centrais Eletricas Brasileiras SA (Electrobras)............. Brazil 27,500,000 427,810
Centrais Eletricas Brasileiras SA (Eletrobras), ADR......... Brazil 166,000 1,291,207
*Centrais Geradoras do Sul do Brasil SA..................... Brazil 27,500,000 16,454
*Centrais Geradoras do Sul do Brasil SA, ADR................ Brazil 5,500 16,454
Endesa SA................................................... Spain 49,200 987,378
Evn AG...................................................... Austria 7,200 1,012,221
Gener SA, ADR............................................... Chile 45,000 824,063
Guangdong Electric Power Development Co Ltd., B,............ China 1,365,000 727,752
Iberdrola SA, Br............................................ Spain 135,000 1,939,266
Korea Electric Power Corp. ................................. South Korea 45,470 1,694,773
Nova Chemicals Corp. ....................................... Canada 5,855 127,718
Public Service Co. of New Mexico............................ United States 70,000 1,316,875
Veba AG..................................................... Germany 65,000 4,095,325
------------
17,199,904
------------
TOTAL COMMON STOCKS (COST $203,585,760)..................... 264,676,982
------------
PREFERRED STOCKS 3.5%
Banco Itau SA, pfd. ........................................ Brazil 4,400,000 2,037,461
Cia Vale do Rio Doce, A, ADR, pfd. ......................... Brazil 46,000 1,019,563
Embratel Participacoes SA, ADR, pfd. ....................... Brazil 65,127 696,045
News Corp. Ltd., pfd. ...................................... Australia 312,000 2,061,459
Tele Celular Sul Participacoes SA, ADR, pfd. ............... Brazil 6,512 123,728
Tele Centro Oeste Celular Participacoes SA, ADR, pfd. ...... Brazil 21,708 73,264
Tele Centro Sul Participacoes SA, ADR, pfd. ................ Brazil 13,025 712,305
</TABLE>
13
PAGE
TEMPLETON CAPITAL ACCUMULATOR FUND, INC.
STATEMENT OF INVESTMENTS, AUGUST 31, 1999 (CONT.)
<TABLE>
<CAPTION>
COUNTRY SHARES VALUE
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
PREFERRED STOCKS (CONT.)
Tele Leste Celular Participacoes SA, ADR, pfd. ............. Brazil 1,302 $ 33,526
Tele Nordeste Celular Participacoes SA, ADR, pfd. .......... Brazil 3,256 80,993
Tele Norte Celular Participacoes SA, ADR, pfd. ............. Brazil 1,302 27,912
Tele Norte Leste Participacoes SA, ADR, pfd. ............... Brazil 65,127 1,042,032
Tele Sudeste Celular Participacoes SA, ADR, pfd. ........... Brazil 13,025 305,273
*Telecomunicacoes Brasileiras SA (Telebras), ADR, pfd. ..... Brazil 65,127 3,054
Telemig Celular Participacoes SA, ADR, pfd. ................ Brazil 3,256 97,680
Telesp Celular Participacoes SA, ADR, pfd. ................. Brazil 26,050 602,406
Telesp Participacoes SA, ADR, pfd. ......................... Brazil 80,127 1,307,072
------------
TOTAL PREFERRED STOCKS (COST $10,625,349)................... 10,223,773
------------
<CAPTION>
PRINCIPAL
AMOUNT**
--------
<S> <C> <C> <C>
SHORT TERM INVESTMENTS (COST $17,742,444) 6.1%
U.S. Treasury Bills, 4.30% to 4.91%, with maturities to
2/03/00................................................... United States $17,994,000 17,743,188
------------
TOTAL INVESTMENTS (COST $231,953,553) 100.5%................ 292,643,943
OTHER ASSETS, LESS LIABILITIES (.5%)........................ (1,508,156)
------------
TOTAL NET ASSETS 100.0%..................................... $291,135,787
============
</TABLE>
*Non income producing.
**Securities denominated in U.S. dollars.
See Notes to Financial Statements.
14
PAGE
TEMPLETON CAPITAL ACCUMULATOR FUND, INC.
Financial Statements
STATEMENT OF ASSETS AND LIABILITIES
AUGUST 31, 1999
<TABLE>
<S> <C>
Assets:
Investments in securities, at value (cost $231,953,553).... $292,643,943
Cash....................................................... 124,183
Receivables:
Investment securities sold................................ 173,997
Capital shares sold....................................... 4,370
Dividends and interest.................................... 570,724
------------
Total assets.......................................... 293,517,217
------------
Liabilities:
Payables:
Investment securities purchased........................... 1,888,375
Capital shares redeemed................................... 154,357
To affiliates............................................. 222,473
Accrued expenses........................................... 116,225
------------
Total liabilities..................................... 2,381,430
------------
Net assets, at value........................................ $291,135,787
============
Net assets consist of:
Undistributed net investment income........................ $ 3,333,520
Net unrealized appreciation................................ 60,690,390
Accumulated net realized gain.............................. 11,926,889
Capital shares............................................. 215,184,988
------------
Net assets, at value........................................ $291,135,787
============
Net asset value and maximum offering price per share
($291,135,787 / 24,036,250 shares outstanding)............ $12.11
============
</TABLE>
See Notes to Financial Statements.
15
PAGE
TEMPLETON CAPITAL ACCUMULATOR FUND, INC.
Financial Statements (continued)
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED AUGUST 31, 1999
<TABLE>
<S> <C> <C>
Investment Income:
(net of foreign taxes of $603,650)
Dividends.................................................. $ 5,668,425
Interest................................................... 1,140,696
-----------
Total investment income............................... $ 6,809,121
Expenses:
Management fees (Note 3)................................... 1,881,919
Administrative fees (Note 3)............................... 368,745
Custodian fees............................................. 103,000
Reports to shareholders.................................... 334,400
Registration and filing fees............................... 25,600
Professional fees.......................................... 63,900
Directors' fees and expenses............................... 4,700
Other...................................................... 2,044
-----------
Total expenses........................................ 2,784,308
-----------
Net investment income........................... 4,024,813
-----------
Realized and unrealized gains (losses):
Net realized gain (loss) from:
Investments............................................... 12,041,979
Foreign currency transactions............................. (1,156)
-----------
Net realized gain..................................... 12,040,823
Net unrealized appreciation on investments............ 50,479,478
-----------
Net realized and unrealized gain............................ 62,520,301
-----------
Net increase in net assets resulting from operations........ $66,545,114
===========
</TABLE>
See Notes to Financial Statements.
16
PAGE
TEMPLETON CAPITAL ACCUMULATOR FUND, INC.
Financial Statements (continued)
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED AUGUST 31, 1999 AND 1998
<TABLE>
<CAPTION>
1999 1998
-------------------------------
<S> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income..................................... $ 4,024,813 $ 3,604,313
Net realized gain from investments and foreign currency
transactions............................................. 12,040,823 9,816,835
Net unrealized appreciation (depreciation) on
investments.............................................. 50,479,478 (31,942,765)
-------------------------------
Net increase (decrease) in net assets resulting from
operations............................................ 66,545,114 (18,521,617)
Distributions to shareholders from:
Net investment income..................................... (3,754,352) (3,044,916)
Net realized gains........................................ (7,440,093) (4,707,546)
Capital share transactions (Note 2)........................ 43,872,046 45,503,858
-------------------------------
Net increase in net assets.............................. 99,222,715 19,229,779
Net assets:
Beginning of year.......................................... 191,913,072 172,683,293
-------------------------------
End of year................................................ $291,135,787 $191,913,072
===============================
Undistributed net investment income included in net assets:
End of year................................................ $ 3,333,520 $ 3,064,216
===============================
</TABLE>
See Notes to Financial Statements.
17
PAGE
TEMPLETON CAPITAL ACCUMULATOR FUND, INC.
Notes to Financial Statements
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. Under
normal market conditions, the Fund invests in equity securities and debt
obligations of companies and governments of any nation. The following summarizes
the Fund's significant accounting policies.
a. SECURITY 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 (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 August 31, 1999, there were 100 million shares of capital stock authorized
($0.01 par value). Transactions in the Fund's shares were as follows:
<TABLE>
<CAPTION>
YEAR ENDED AUGUST 31,
-------------------------------------------------------------
1999 1998
-------------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT
--------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold................................................ 5,135,078 $ 56,136,687 4,444,049 $ 50,031,188
Shares issued on reinvestment of distributions............. 1,158,746 11,145,979 709,140 7,740,903
Shares redeemed............................................ (2,071,924) (23,410,620) (1,086,763) (12,268,233)
-------------------------------------------------------------
Net increase............................................... 4,221,900 $ 43,872,046 4,066,426 $ 45,503,858
=============================================================
</TABLE>
19
PAGE
TEMPLETON CAPITAL ACCUMULATOR FUND, INC.
Notes to Financial Statements (continued)
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>
4. INCOME TAXES
The cost of securities for income tax purposes is the same as that shown in the
Statement of Investments. At August 31, 1999, the net unrealized appreciation
based on the cost of investments for income tax purposes was as follows:
<TABLE>
<S> <C>
Unrealized appreciation..................................... $ 82,717,773
Unrealized depreciation..................................... (22,027,383)
------------
Net unrealized appreciation................................. $ 60,690,390
============
</TABLE>
5. INVESTMENT TRANSACTIONS
Purchases and sales of securities (excluding short-term securities) for the year
ended August 31, 1999 aggregated $83,908,823 and $31,584,707, respectively.
20
PAGE
TEMPLETON CAPITAL ACCUMULATOR FUND, INC.
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors and Shareholders
In our opinion, the accompanying statement of assets and liabilities, including
the statement of investments, and the related statements of operations and
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of the Templeton Capital Accumulator
Fund, Inc. (the "Fund") at August 31, 1999, the results of its operations, the
changes in its net assets and the financial highlights for the year then ended,
in conformity with generally accepted accounting principles. These financial
statements and financial highlights (hereafter referred to as "financial
statements") are the responsibility of the Fund's management; our responsibility
is to express an opinion on these financial statements based on our audit. We
conducted our audit of these financial statements in accordance with generally
accepted auditing standards which require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audit, which included confirmation of securities at August 31, 1999 by
correspondence with the custodian and brokers, provides a reasonable basis for
the opinion expressed above. The financial statements for the year ended August
31, 1998, including financial highlights for each of the four years in the
period then ended, were audited by other independent accountants whose report
dated September 29, 1998 expressed an unqualified opinion on those financial
statements.
PricewaterhouseCoopers LLP
Ft. Lauderdale, Florida
September 30, 1999
21
PAGE
TEMPLETON CAPITAL ACCUMULATOR FUND, INC.
Tax Designation
Under Section 852(b)(3)(C) of the Internal Revenue Code, the Fund hereby
designates $8,655,904 as a capital gain dividend for the fiscal year ended
August 31, 1999.
Under Section 854(b)(2) of the Internal Revenue Code, the Fund hereby designates
11.75% of the ordinary income dividends as income qualifying for the dividends
received deduction for the fiscal year ended August 31, 1999.
At August 31, 1999, more than 50% of the Fund's total assets were invested in
securities of foreign issuers. In most instances, foreign taxes were withheld
from dividends paid to the fund on these investments. The Fund intends to make
an election under Section 853 of the Internal Revenue Code. This election will
allow shareholders to treat their proportionate share of foreign taxes paid by
the Fund as having been paid directly by them.
The following table provides a breakdown by country of foreign source income and
foreign taxes paid, as designated by the Fund to shareholders in October 1999.
<TABLE>
<CAPTION>
FOREIGN TAX FOREIGN SOURCE
COUNTRY PAID PER SHARE INCOME PER SHARE
- ------------------------------------------------------------------------------------------------
<S> <C> <C>
Argentina................................................... $0.0000 $0.0068
Australia................................................... 0.0003 0.0091
Austria..................................................... 0.0005 0.0026
Belgium..................................................... 0.0000 0.0002
Bermuda..................................................... 0.0000 0.0010
Brazil...................................................... 0.0028 0.0148
Canada...................................................... 0.0002 0.0011
Chile....................................................... 0.0008 0.0018
China....................................................... 0.0000 0.0033
Finland..................................................... 0.0015 0.0073
France...................................................... 0.0015 0.0102
Germany..................................................... 0.0007 0.0051
Hong Kong................................................... 0.0000 0.0062
India....................................................... 0.0001 0.0053
Indonesia................................................... 0.0000 0.0002
Italy....................................................... 0.0007 0.0035
Japan....................................................... 0.0003 0.0015
Malaysia.................................................... 0.0004 0.0011
Mexico...................................................... 0.0001 0.0041
Netherlands................................................. 0.0014 0.0120
New Zealand................................................. 0.0003 0.0015
Norway...................................................... 0.0007 0.0037
Philippines................................................. 0.0001 0.0002
Poland...................................................... 0.0001 0.0006
Portugal.................................................... 0.0001 0.0006
Singapore................................................... 0.0005 0.0015
South Korea................................................. 0.0004 0.0020
Spain....................................................... 0.0009 0.0047
Sweden...................................................... 0.0033 0.0165
Switzerland................................................. 0.0008 0.0032
Thailand.................................................... 0.0001 0.0008
United Kingdom.............................................. 0.0048 0.0391
----------------------------------
TOTAL....................................................... $0.0234 $0.1716
==================================
</TABLE>
22
PAGE
TEMPLETON CAPITAL ACCUMULATOR FUND, INC.
Tax Designation (continued)
In January 2000, shareholders will receive Form 1099-DIV which will include
their share of taxes withheld and foreign source income distributed during the
calendar year 1999. Shareholders are advised to check with their tax advisors
for information on the treatment of these amounts on their individual income tax
returns.
23
PAGE
TEMPLETON CAPITAL ACCUMULATOR FUND, INC.
CHANGE IN INDEPENDENT AUDITOR
On August 13, 1999, McGladrey & Pullen, LLP (McGladrey) resigned as independent
auditors of the Fund. McGladrey resigned pursuant to their agreement to sell
their investment company practice to PricewaterhouseCoopers LLP (PwC). The
McGladrey partners and professionals previously serving the Fund, have joined
PwC and performed the August 31, 1999 audit.
None of the reports of McGladrey on the financial statements of the Fund,
including those of the past two fiscal years have ever contained an adverse
opinion or a disclaimer of opinion, or was qualified or modified as to
uncertainty, audit scope or accounting principles.
During the period McGladrey served the Fund, including the two most recent
fiscal years and subsequent interim period, there were no disagreements with
McGladrey on any matter of accounting principle or practices, financial
statement disclosure, or auditing scope or procedure, which disagreements, if
not resolved to the satisfaction of McGladrey would have caused it to make
reference to the subject matter of disagreement in connection with its report.
On August 31, 1999, the Fund, with the approval of its Board of Directors and
its Audit Committee, engaged PwC as its independent auditors.
24
PAGE
ANNUAL REPORT
PRINCIPAL UNDERWRITER
Franklin/Templeton Distributors, Inc.
1-800/DIAL BEN(R)
www.franklintempleton.com
SHAREHOLDER SERVICES
1-800/632-2301
This report must be preceded or accompanied by the current Templeton Capital
Accumulator Fund, Inc. prospectus, 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.
TLCAP A99 10/99 [RECYCLED LOGO] Printed on recycled paper
