SEMI ANNUAL
REPORT
FEBRUARY 28, 1999
TEMPLETON CAPITAL
ACCUMULATOR FUND, INC.
[LOGO] [FRANKLIN(R) TEMPLETON(R)]
PAGE
[LOGO] [Celebrating Over 50 Years]
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, which it seeks to achieve by investing in equity securities and debt
obligations of companies and governments of any nation.
- --------------------------------------------------------------------------------
Dear Shareholder:
Global stock market volatility during the six months ended February 28, 1999,
challenged the resolve of many investors. Continued turmoil in Asian equity
markets spread to Russia and Latin America, and many investors sought refuge in
developed markets, particularly in large, liquid growth stocks. In some ways the
period resembled the late 1980s, when limited exposure to Japan's bull market
caused many value funds to underperform their peers and benchmark indices. Like
the Japanese equity market of the late 1980s, equity markets in the U.S. and
many other developed countries reached all-time highs during the period and, in
our opinion, stock prices in many cases were not representative of their
long-term potential.
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 7 of
this report.
CONTENTS
Shareholder Letter ..... 1
Performance Summary .... 5
Financial Highlights &
Statement of Investments 6
Financial Statements ... 14
Notes to Financial
Statements ............. 17
FUND CATEGORY
[PYRAMID GRAPHIC]
GLOBAL
GROWTH
GROWTH & INCOME
INCOME
TAX-FREE INCOME
PAGE
GEOGRAPHIC DISTRIBUTION
Based on Total Net Assets 2/28/99
[PIE CHART]
[THIS CHART SHOWS IN PIE FORMAT THE GEOGRAPHIC DISTRIBUTION OF TEMPLETON CAPITAL
ACCUMULATOR FUND'S PORTFOLIO HOLDINGS ON FEBRUARY 28, 1999, BASED ON TOTAL NET
ASSETS.]
European Stocks............................ 47.7%
North American Stocks...................... 16.7%
Asian Stocks............................... 13.3%
Latin American Stocks...................... 10.6%
Australian & New Zealand Stocks............ 6.0%
Short-Term Investments & Other Net Assets.. 5.7%
Within this environment, Templeton Capital Accumulator Fund provided a 14.79%
six-month cumulative total return, as shown in the Performance Summary on page
5. The Morgan Stanley Capital International(R) (MSCI) All Country World Free
Index provided a 22.9% rate of return for the same period.(1) The Fund's
relative underperformance versus the index may be explained partly by the fact
that share prices of technology companies, especially those related to the
Internet, soared during the period, helping move the index ahead. Not investing
as heavily as the index in this sector, which is made up primarily of growth and
not value stocks, contributed to the Fund's underperforming the index.
Latin American equity markets experienced severe volatility during the reporting
period due largely to Brazil's currency devaluation. However, we cautiously
added to the Fund's holdings in Brazil, Argentina and Chile, and our Latin
American equity holdings increased from 8.3% of total net assets on August 31,
1998 to 10.6% on February 28, 1999.
In Europe, many equity markets recovered from sharp declines in August and
September and with the help of relatively low interest rates, remained buoyant
throughout the reporting period. Although we believe it has become increasingly
difficult to find value in Europe, we have been adding new holdings and
increasing existing positions where we believe there is long-term potential. We
purchased shares of Banca Nazionale del Lavoro, an Italian bank we believe could
benefit from Italy's rising
1. Source: Standard & Poor's(R) Micropal. The unmanaged MSCI All Country World
Free Index measures the performance of securities located in 48 countries,
including emerging markets in Latin America, Asia and Eastern Europe. It
includes reinvested dividends. One cannot invest directly in an index, nor is an
index representative of the Fund's portfolio.
2
PAGE
demand for financial services, and Muenchener Rueckversichgrungs, a German
reinsurance company. We also identified some opportunities in the United
Kingdom, such as Marks & Spencer, a retailer that had been adversely affected by
some operating problems which we believe are likely to be resolved over the next
18 to 24 months. On the sell side, we reduced our position in Nokia Corp., the
Finnish telecom equipment maker, as we took advantage of strong price action in
the stock.
We also added to some positions in the U.S., New Zealand and Asia. In the U.S.,
we increased the Fund's holdings of Boise Cascade, a forest products company,
and in New Zealand, we bought additional shares of household appliance
manufacturer Fisher & Paykel. We also initiated a position in Japan's Nippon
Telegraph & Telephone, which is beginning a large-scale restructuring program
that, in our opinion, could help to improve profitability over the next several
years.
It is important to remember that we have a distinct investment style, one which
has not always been in favor, but has been successful in the past. Although past
performance is no guarantee of future results, we will continue to follow our
investment style, confident in the potential it offers for the long term.
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 those
markets. Investing in any emerging market means accepting a certain amount of
volatility and, in some cases,
TOP 10 EQUITY HOLDINGS
2/28/99
[THIS CHART SHOWS IN TABLE FORMAT THE TOP 10 EQUITY HOLDINGS REPRESENTED IN
TEMPLETON CAPITAL ACCUMULATOR FUND'S AS OF FEBRUARY 28, 1999, BASED ON TOTAL NET
ASSETS.]
NAME, % OF TOTAL
INDUSTRY, COUNTRY NET ASSETS
- ----------------------------------------
Autostrade Concessioni
e Costruzioni SpA, A
Transportation, Italy 1.8%
Compania de
Telecomunicaciones de
Chile SA, ADR
Telecommunications, Chile 1.7%
Dayton-Hudson Corp.
Merchandising, U.S. 1.6%
Merita AS
Banking, Finland 1.5%
Nokia Corp., A
Telecommunications, Finland 1.4%
British Energy Ltd.
Utilities Electrical & Gas,
United Kingdom 1.4%
Skandia Foersaekrings AB
Insurance, Sweden 1.3%
Development Bank of
Singapore Ltd., fgn
Banking, Singapore 1.3%
Telecom Italia SpA
Telecommunications, Italy 1.3%
Foreningssparbanken AB, A
Banking, Sweden 1.3%
3
PAGE
TOP 10 INDUSTRIES
2/28/99
[THIS CHART SHOWS IN TABLE FORMAT THE TOP 10 INDUSTRIES REPRESENTED IN TEMPLETON
CAPITAL ACCUMULATOR FUND'S ON FEBRUARY 28, 1999, BASED ON TOTAL NET ASSETS.]
% OF TOTAL
INDUSTRY NET ASSETS
- ----------------------------------------
Telecommunications 15.0%
Banking 13.5%
Utilities Electrical & Gas 5.8%
Electrical & Electronics 5.2%
Forest Products & Paper 4.8%
Insurance 4.5%
Chemicals 4.5%
Merchandising 4.1%
Transportation 3.6%
Energy Sources 3.6%
severe market corrections. For example, Taiwan's equity market has increased
951% in the last 15 years, but has suffered six declines of more than 20% during
that time.(2) While short-term volatility can be disconcerting, declines in
excess of 50% are not unusual in such markets.
Please remember, this discussion reflects our views, opinions and portfolio
holdings as of February 28, 1999, the end of the reporting period. However,
market and economic conditions are changing constantly, which can be expected to
affect our strategies and the Fund's portfolio composition. Although past
performance is not predictive of future results, these insights may help give
you a better understanding of our investment and management philosophy. The
special risks associated with these types of investments, as well as other
considerations, are discussed in the Fund's prospectus.
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, CFA
President
Templeton Capital Accumulator Fund, Inc.
2. Source: Bloomberg. Based on quarterly percentage price change over 15 years
ended December 31, 1998. Market returns are measured in U.S. dollars and do not
include reinvested dividends.
4
PAGE
PERFORMANCE SUMMARY AS OF 2/28/99
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 (9/1/98 - 2/28/99)
<TABLE>
<CAPTION>
CHANGE 2/28/99 8/31/98
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Asset Value $ 0.84 $10.53 $ 9.69
</TABLE>
<TABLE>
<CAPTION>
DISTRIBUTIONS
---------------
<S> <C>
Dividend Income $0.1800
Long-Term Capital Gain $0.3250
Short-Term Capital Gain $0.0350
TOTAL $0.5400
</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).
PERFORMANCE
<TABLE>
<CAPTION>
INCEPTION
6-MONTH 1-YEAR 5-YEAR (3/1/91)
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Cumulative Total Return(1) 14.79% -0.78% 64.27% 175.17%
Average Annual Total Return(2) 14.79% -0.78% 10.44% 13.49%
Value of $10,000 Investment(3) $ 11,479 $ 9,922 $ 16,427 $ 27,517
</TABLE>
<TABLE>
<CAPTION>
2/28/95 2/28/96 2/28/97 2/28/98 2/28/99
<S> <C> <C> <C> <C> <C>
One-Year
Total Return(4) -2.14% 18.68% 21.68% 17.15% -0.78%
</TABLE>
1. Cumulative total return represents the change in value of an investment over
the periods indicated and does not include sales charges.
2. Average annual total return represents the average annual change in value of
an investment over the periods indicated. Six-month return has not been
annualized.
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 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.
- --------------------------------------------------------------------------------
Past performance is not predictive of future results.
5
PAGE
TEMPLETON CAPITAL ACCUMULATOR FUND, INC.
Financial Highlights
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED AUGUST 31,
FEBRUARY 28, 1999 --------------------------------------------------------------
(UNAUDITED) 1998 1997 1996 1995 1994
-------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE+
(For a share outstanding throughout
the period)
Net asset value, beginning of
period................................ $9.69 $10.97 $9.08 $7.97 $8.10 $6.87
-------------------------------------------------------------------------------------
Income from investment operations:
Net investment income................ .03 .18 .18 .19 .14 .09
Net realized and unrealized gains
(losses)........................... 1.35 (1.00) 2.03 1.10 .12 1.30
-------------------------------------------------------------------------------------
Total from investment operations...... 1.38 (.82) 2.21 1.29 .26 1.39
-------------------------------------------------------------------------------------
Less distributions from:
Net investment income................ (.18) (.18) (.18) (.15) (.10) (.07)
Net realized gains................... (.36) (.28) (.14) (.03) (.29) (.09)
-------------------------------------------------------------------------------------
Total distributions................... (.54) (.46) (.32) (.18) (.39) (.16)
-------------------------------------------------------------------------------------
Net asset value, end of period........ $10.53 $9.69 $10.97 $9.08 $7.97 $8.10
=====================================================================================
Total Return*......................... 14.79% (7.87)% 25.06% 16.50% 3.40% 20.64%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's)..... $240,852 $191,913 $172,683 $108,019 $65,538 $38,323
Ratios to average net assets:
Expenses............................. 1.12%** 1.00% 1.00% 1.00% 1.00% 1.00%
Expenses, excluding waiver and
payments by affiliate.............. 1.12%** 1.09% 1.13% 1.16% 1.34% 1.58%
Net investment income................ .65%** 1.77% 2.00% 2.56% 2.37% 1.58%
Portfolio turnover rate............... 2.65% 11.92% 7.43% 11.08% 12.91% 15.25%
</TABLE>
*Total return is not annualized.
**Annualized.
+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.
6
PAGE
TEMPLETON CAPITAL ACCUMULATOR FUND, INC.
STATEMENT OF INVESTMENTS, FEBRUARY 28, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
COUNTRY SHARES VALUE
--------------------------------------
<S> <C> <C> <C>
COMMON STOCKS 90.7%
AEROSPACE & MILITARY TECHNOLOGY .4%
Boeing Co. ................................................. United States 28,500 $ 1,013,531
------------
APPLIANCES & HOUSEHOLD DURABLES 2.5%
Electrolux AB, B............................................ Sweden 111,250 2,115,097
Fisher & Paykel Ltd. ....................................... New Zealand 450,200 1,651,651
Guangdong Kelon Electrical Holdings Ltd., H................. China 1,666,000 1,118,157
Sony Corp. ................................................. Japan 14,600 1,104,998
------------
5,989,903
------------
AUTOMOBILES 3.1%
*Circuit City Stores Inc., Carmax Group..................... United States 92,000 414,000
Fiat SpA.................................................... Italy 437,500 1,323,138
Ford Motor Co. ............................................. United States 24,000 1,423,500
General Motors Corp. ....................................... United States 25,000 2,064,063
Volvo AB, B................................................. Sweden 90,000 2,338,305
------------
7,563,006
------------
BANKING 12.9%
ABN Amro Holding NV......................................... Netherlands 60,000 1,221,801
Australia & New Zealand Banking Group Ltd. ................. Australia 200,000 1,291,572
*Banca Nazionale del Lavoro SpA............................. Italy 446,200 1,319,571
Banco Bradesco SA, ADR...................................... Brazil 300,000 1,205,897
Bank Austria AG............................................. Austria 34,700 1,866,513
Bank Handlowy W Warszawie SA, GDR, 144A..................... Poland 80,000 756,000
Bankamerica Corp. .......................................... United States 11,600 757,625
Bankinter SA................................................ Spain 45,000 1,615,347
Banque Nationale de Paris................................... France 28,000 2,234,590
BPI Socieda de Gestora de Participacoes Socias SA........... Portugal 25,171 873,711
Credicorp Ltd. ............................................. Peru 157,900 1,391,494
Development Bank of Singapore Ltd., fgn. ................... Singapore 440,000 3,193,961
Fokus Bank AS............................................... Norway 150,000 1,440,030
Foreningssparbanken AB, A................................... Sweden 136,800 3,136,080
HSBC Holdings PLC........................................... Hong Kong 83,200 2,341,015
Kookmin Bank................................................ South Korea 250,345 1,698,294
Merita AS................................................... Finland 600,000 3,510,621
*Philippine National Bank................................... Philippines 132,383 212,425
*Thai Farmers Bank Public Co. Ltd., fgn. ................... Thailand 600,000 1,004,823
------------
31,071,370
------------
BROADCASTING & PUBLISHING .2%
News Corp. Ltd. ............................................ Australia 70,000 491,170
------------
BUILDING MATERIALS & COMPONENTS 1.9%
Pioneer International Ltd. ................................. Australia 675,815 1,361,752
*Siam City Cement Public Co. Ltd., fgn. .................... Thailand 153,802 416,238
</TABLE>
7
PAGE
TEMPLETON CAPITAL ACCUMULATOR FUND, INC.
STATEMENT OF INVESTMENTS, FEBRUARY 28, 1999 (UNAUDITED) (CONT.)
<TABLE>
<CAPTION>
COUNTRY SHARES VALUE
--------------------------------------
<S> <C> <C> <C>
COMMON STOCKS (CONT.)
BUILDING MATERIALS & COMPONENTS (CONT.)
Svedala Industri, A......................................... Sweden 100,000 $ 1,564,983
Williams PLC................................................ United Kingdom 200,000 1,239,947
------------
4,582,920
------------
BUSINESS & PUBLIC SERVICES 1.1%
Esselte AB, B............................................... Sweden 40,000 640,665
Lex Service PLC............................................. United Kingdom 165,000 1,108,864
Waste Management Inc. ...................................... United States 20,300 992,163
------------
2,741,692
------------
CHEMICALS 4.5%
Akzo Nobel NV............................................... Netherlands 30,000 1,137,823
BASF AG..................................................... Germany 36,200 1,243,822
Bayer AG, Br. .............................................. Germany 41,000 1,440,255
Great Lakes Chemical Corp. ................................. United States 22,000 856,625
Imperial Chemical Industries PLC............................ United Kingdom 200,000 1,739,771
*Methanex Corp. ............................................ Canada 229,000 978,503
Rhone-Poulenc SA, A......................................... France 46,000 2,108,239
Solvay SA................................................... Belgium 20,000 1,374,389
------------
10,879,427
------------
DATA PROCESSING & REPRODUCTION .6%
*3Com Corp. ................................................ United States 48,500 1,524,719
------------
ELECTRICAL & ELECTRONICS 5.2%
ABB AG, Br. ................................................ Switzerland 652 796,411
Alcatel SA.................................................. France 15,161 1,631,020
Fuji Photo Film Co. Ltd. ................................... Japan 32,000 1,175,895
GP Batteries International Ltd. ............................ Singapore 118,000 205,575
General Electric Co. PLC.................................... United Kingdom 240,000 1,932,011
Hitachi Ltd. ............................................... Japan 165,000 1,042,984
Koninklijke Philips Electronics NV.......................... Netherlands 37,940 2,644,701
Matsushita Electric Industrial Co. Ltd. .................... Japan 99,000 1,656,258
Motorola Inc. .............................................. United States 20,000 1,405,000
------------
12,489,855
------------
ELECTRONIC COMPONENTS & INSTRUMENTS .8%
Intel Corp. ................................................ United States 16,000 1,919,000
------------
ENERGY EQUIPMENT & SERVICES .2%
Transcanada Pipelines Ltd. ................................. Canada 29,276 401,466
------------
ENERGY SOURCES 3.6%
Norsk Hydro AS.............................................. Norway 27,000 915,746
Saga Petroleum AS........................................... Norway 66,070 555,000
Shell Transport & Trading Co. PLC, ADR...................... United Kingdom 65,000 2,181,563
</TABLE>
8
PAGE
TEMPLETON CAPITAL ACCUMULATOR FUND, INC.
STATEMENT OF INVESTMENTS, FEBRUARY 28, 1999 (UNAUDITED) (CONT.)
<TABLE>
<CAPTION>
COUNTRY SHARES VALUE
--------------------------------------
<S> <C> <C> <C>
COMMON STOCKS (CONT.)
ENERGY SOURCES (CONT.)
Societe Elf Aquitaine SA, Br. .............................. France 20,000 $ 2,085,735
Total SA, B................................................. France 13,000 1,355,728
YPF Sociedad Anonima, ADR................................... Argentina 56,000 1,624,000
------------
8,717,772
------------
FINANCIAL SERVICES 2.8%
AXA-UAP..................................................... France 21,257 2,772,196
Industrial Credit & Inv. Corp. of India (ICICI)............. India 582,498 552,128
Industrial Credit & Inv. Corp. of India (ICICI), GDR,
144A...................................................... India 101,100 644,513
ING Groep NV................................................ Netherlands 32,500 1,819,529
Nomura Securities Co. Ltd. ................................. Japan 120,000 987,105
------------
6,775,471
------------
FOOD & HOUSEHOLD PRODUCTS .8%
Archer-Daniels Midland Co. ................................. United States 52,500 794,063
Devro PLC................................................... United Kingdom 340,000 988,594
------------
1,782,657
------------
FOREST PRODUCTS & PAPER 4.8%
*Asia Pulp & Paper Co. Ltd., ADR............................ Indonesia 45,000 309,375
Boise Cascade Corp. ........................................ United States 24,000 745,500
Fletcher Challenge Ltd. Forestry Division................... New Zealand 1,770,000 769,956
Georgia Pacific Corp. ...................................... United States 24,000 1,758,000
Georgia Pacific Timber Group................................ United States 16,000 326,000
*Hansol Paper Co. Ltd., GDS................................. South Korea 895 4,698
International Paper Co. .................................... United States 26,000 1,092,000
Jefferson Smurfit Group PLC................................. Irish Republic 600,900 1,270,687
Mayr-Melnhof Karton AG...................................... Austria 11,000 523,948
Mo Och Domsjoe AB, B........................................ Sweden 34,000 891,674
Portucel Industrial Empresa Product Celulose, ADR, 144A..... Portugal 49,100 288,364
*Shorewood Packaging Corp. ................................. United States 41,250 750,234
Stora Enso OYJ, R........................................... Finland 140,400 1,248,411
*Stora Enso OYJ, R, fgn. ................................... Finland 130,627 1,157,899
Unipapel SA, Br. ........................................... Spain 24,000 318,788
------------
11,455,534
------------
HEALTH & PERSONAL CARE 1.9%
Astra AB, B................................................. Sweden 53,333 1,056,357
Medeva PLC.................................................. United Kingdom 480,000 811,252
Novartis AG................................................. Switzerland 453 794,677
Nycomed Amersham PLC........................................ United Kingdom 234,215 1,538,455
*Windmere-Durable Holdings Inc. ............................ United States 90,000 450,000
------------
4,650,741
------------
</TABLE>
9
PAGE
TEMPLETON CAPITAL ACCUMULATOR FUND, INC.
STATEMENT OF INVESTMENTS, FEBRUARY 28, 1999 (UNAUDITED) (CONT.)
<TABLE>
<CAPTION>
COUNTRY SHARES VALUE
--------------------------------------
<S> <C> <C> <C>
COMMON STOCKS (CONT.)
INDUSTRIAL COMPONENTS 2.1%
Exide Corp. ................................................ United States 40,500 $ 607,500
Flowserve Corp. ............................................ United States 39,020 646,269
Goodyear Tire & Rubber Co. ................................. United States 23,000 1,063,750
Granges AB.................................................. Sweden 11,125 153,702
Lucas Varity PLC............................................ United Kingdom 420,000 1,909,183
SKF AB, B................................................... Sweden 55,000 759,873
------------
5,140,277
------------
INSURANCE 4.5%
American International Group Inc. .......................... United States 23,063 2,627,684
*Muenchener Rueckversicherungs-Gesellschaft, pp............. Germany 4,200 1,675,942
Skandia Foersaekrings AB.................................... Sweden 175,000 3,220,137
Swiss Reinsurance Company Zurich............................ Switzerland 605 1,354,836
XL Capital Ltd., A.......................................... Bermuda 30,000 1,837,500
------------
10,716,099
------------
MACHINERY & ENGINEERING 2.7%
BTR Siebe PLC............................................... United Kingdom 302,643 1,277,537
IHC Caland NV............................................... Netherlands 37,000 1,194,138
New Holland NV.............................................. Netherlands 62,800 624,075
SIG Schweizerische Industrie-Gesellschaft Holding........... Switzerland 4,000 2,089,645
Tata Engineering & Locomotive Co. Telco, GDR, 144A.......... India 210,000 879,900
VA Technologie AG, Br. ..................................... Austria 6,000 464,350
------------
6,529,645
------------
MERCHANDISING 4.1%
Arcadia Group PLC........................................... United Kingdom 46,875 156,570
Dayton-Hudson Corp. ........................................ United States 60,000 3,753,750
Debenhams PLC............................................... United Kingdom 93,750 657,070
*K-Mart Corp. .............................................. United States 60,000 1,050,000
Marks & Spencer PLC......................................... United Kingdom 172,000 1,160,040
Safeway PLC................................................. United Kingdom 350,000 1,513,889
Storehouse.................................................. United Kingdom 655,000 1,605,444
------------
9,896,763
------------
METALS & MINING 1.4%
Industrias Penoles SA....................................... Mexico 165,000 493,923
Pechiney SA, A.............................................. France 34,000 1,123,443
RGC Ltd. ................................................... Australia 302,775 85,543
Westralian Sands Ltd. ...................................... Australia 198,506 530,026
WMC Ltd. ................................................... Australia 400,000 1,241,897
------------
3,474,832
------------
</TABLE>
10
PAGE
TEMPLETON CAPITAL ACCUMULATOR FUND, INC.
STATEMENT OF INVESTMENTS, FEBRUARY 28, 1999 (UNAUDITED) (CONT.)
<TABLE>
<CAPTION>
COUNTRY SHARES VALUE
--------------------------------------
<S> <C> <C> <C>
COMMON STOCKS (CONT.)
MISC MATERIALS & COMMODITIES .5%
Golden Hope Plantations Bhd. ............................... Malaysia 748,000 $ 597,112
Unitor ASA.................................................. Norway 70,000 618,960
------------
1,216,072
------------
MULTI-INDUSTRY 3.1%
Alfa SA de CV, A............................................ Mexico 384,500 946,283
Brierley Investments Ltd. .................................. New Zealand 1,200,000 276,725
Cheung Kong Holdings Ltd. .................................. Hong Kong 290,000 1,974,444
Foster Wheeler Corp. ....................................... United States 82,000 1,025,000
*Hicom Holdings Bhd. ....................................... Malaysia 728,300 205,015
Hutchison Whampoa Ltd. ..................................... Hong Kong 201,500 1,397,906
Jardine Matheson Holdings Ltd. ............................. Hong Kong 62,336 163,320
*Metro Pacific Corp. MDI.................................... Philippines 10,112,000 498,461
Saha Union Public Co. Ltd., fgn. ........................... Thailand 800,000 316,184
Swire Pacific Ltd., A....................................... Hong Kong 170,000 695,557
Swire Pacific Ltd., B....................................... Hong Kong 100,000 60,985
------------
7,559,880
------------
REAL ESTATE 1.1%
*Catellus Development Corp. ................................ United States 50,000 721,875
Equity Office Properties Trust.............................. United States 33,751 869,088
Inversiones y Representacion SA............................. Argentina 447,837 1,043,877
------------
2,634,840
------------
TELECOMMUNICATIONS 13.1%
Asia Satellite Telecommunications Hldgs. Ltd. .............. Hong Kong 215,000 346,875
British Telecommunications PLC.............................. United Kingdom 174,000 3,011,871
*Cable & Wireless Optus Ltd. ............................... Australia 712,000 1,565,088
Compania de Telecomunicaciones de Chile SA, ADR............. Chile 189,725 4,197,666
*Digital Telecommunications Philippines Inc. ............... Philippines 3,218,000 87,576
*Jasmine International Public Co. Ltd., fgn. ............... Thailand 400,000 88,960
Nippon Telegraph & Telephone Corp. ......................... Japan 200 1,648,546
*Nokia Corp., A............................................. Finland 25,200 3,485,592
Northern Telecom, Ltd. ..................................... Canada 35,400 2,055,413
Philippine Long Distance Telephone Co. ..................... Philippines 60,000 1,394,095
PT Indosat TBK, ADR......................................... Indonesia 9,600 124,800
Rostelecom, ADR............................................. Russia 56,000 273,000
Telecom Argentina Stet-France SA, ADR....................... Argentina 49,200 1,331,475
Telecom Italia SpA.......................................... Italy 297,100 3,148,585
Telefonica De Argentina SA, ADR............................. Argentina 65,600 1,918,800
Telefonica SA............................................... Spain 51,500 2,351,831
Telefonos de Mexico SA (Telmex), L, ADR..................... Mexico 47,500 2,716,406
Videsh Sanchar Nigam Ltd. .................................. India 49,200 783,972
Videsh Sanchar Nigam Ltd., GDR, 144A........................ India 114,000 1,111,500
------------
31,642,051
------------
</TABLE>
11
PAGE
TEMPLETON CAPITAL ACCUMULATOR FUND, INC.
STATEMENT OF INVESTMENTS, FEBRUARY 28, 1999 (UNAUDITED) (CONT.)
<TABLE>
<CAPTION>
COUNTRY SHARES VALUE
--------------------------------------
<S> <C> <C> <C>
COMMON STOCKS (CONT.)
TEXTILES & APPAREL 1.4%
Dawson International PLC.................................... United Kingdom 265,000 $ 66,863
Kellwood Co. ............................................... United States 30,500 779,656
*PT Indorama Synthetics..................................... Indonesia 422,940 46,661
*Shaw Industries Inc. ...................................... United States 108,000 2,369,250
------------
3,262,430
------------
TRANSPORTATION 3.6%
Autostrade Concessioni e Costruzioni SpA, A................. Italy 490,000 4,388,726
Cathay Pacific Airways Ltd. ................................ Hong Kong 150,000 167,468
Guangshen Railway Co. Ltd., H, ADR.......................... China 74,000 416,250
Kvaerner ASA, A............................................. Norway 24,000 468,389
Mayne Nickless Ltd., A...................................... Australia 445,000 1,450,690
Qantas Airways Ltd., ADR, 144A.............................. Australia 65,000 1,715,370
------------
8,606,893
------------
UTILITIES ELECTRICAL & GAS 5.8%
British Energy Ltd. ........................................ United Kingdom 325,000 3,470,131
Centrais Eletricas Brasileiras SA (Electrobras)............. Brazil 27,500,000 365,000
Centrais Eletricas Brasileiras SA (Electrobras), ADR........ Brazil 166,000 1,101,636
*Centrais Geradoras Do Sul Do Brasil (Gerasul) SA........... Brazil 27,500,000 14,054
*Centrais Geradoras Do Sul Do Brasil (Gerasul) SA, ADR...... Brazil 5,500 14,054
Endesa SA, Br. ............................................. Spain 49,200 1,303,791
Evn AG...................................................... Austria 7,200 948,460
Gener SA, ADR............................................... Chile 40,700 610,500
Guangdong Electric Power Development Co. Ltd., B............ China 1,365,000 350,599
Iberdrola SA, Br. .......................................... Spain 135,000 2,111,806
*Korea Electric Power Corp. ................................ South Korea 45,470 1,074,036
Nova Chemicals Corp. ....................................... Canada 5,855 99,103
Public Service Co. of New Mexico............................ United States 70,000 1,076,250
Veba AG..................................................... Germany 26,000 1,372,853
------------
13,912,273
------------
TOTAL COMMON STOCKS (COST $179,368,492)..................... 218,642,289
------------
PREFERRED STOCKS 3.6%
Banco Itau SA, pfd. ........................................ Brazil 4,400,000 1,545,946
Cia Vale do Rio Doce, A, ADR, pfd. ......................... Brazil 46,000 588,845
*Embratel Participacoes SA, ADR, pfd. ...................... Brazil 65,127 887,355
News Corp. Ltd., pfd. ...................................... Australia 312,000 2,041,976
Tele Celular Sul Participacoes SA, ADR, pfd. ............... Brazil 6,512 105,006
Tele Centro Oeste Celular Participacoes SA, ADR, pfd. ...... Brazil 21,708 56,984
*Tele Centro Sul Participacoes SA, ADR, pfd. ............... Brazil 13,025 521,000
Tele Leste Celular Participacoes SA, ADR, pfd. ............. Brazil 1,302 27,261
Tele Nordeste Celular Participacoes SA, ADR, pfd. .......... Brazil 3,256 49,654
Tele Norte Celular Participacoes SA, ADR, pfd. ............. Brazil 1,302 31,655
*Tele Norte Leste Participacoes SA, ADR, pfd. .............. Brazil 65,127 651,270
Tele Sudeste Celular Participacoes SA, ADR, pfd. ........... Brazil 13,025 173,395
</TABLE>
12
PAGE
TEMPLETON CAPITAL ACCUMULATOR FUND, INC.
STATEMENT OF INVESTMENTS, FEBRUARY 28, 1999 (UNAUDITED) (CONT.)
<TABLE>
<CAPTION>
COUNTRY SHARES VALUE
--------------------------------------
<S> <C> <C> <C>
PREFERRED STOCKS (CONT.)
Telecomunicacoes Brasileiras SA (Telebras), ADR, pfd. ...... Brazil 65,127 $ 11,194
*Telemig Celular Participacoes SA, ADR, pfd. ............... Brazil 3,256 60,236
Telesp Celular Participacoes SA, ADR, pfd. ................. Brazil 26,050 547,050
Telesp Participacoes SA, ADR, pfd. ......................... Brazil 80,127 1,322,096
------------
TOTAL PREFERRED STOCKS (COST $10,625,349)................... 8,620,923
------------
PRINCIPAL
AMOUNT**
-----------
SHORT TERM INVESTMENTS (COST $17,509,516) 7.3%
U.S. Treasury Bills, 4.22% to 4.42%, with maturities to
5/27/99................................................... United States $17,592,000 17,506,400
------------
TOTAL INVESTMENTS (COST $207,503,357) 101.6%................ 244,769,612
OTHER ASSETS, LESS LIABILITIES (1.6%)....................... (3,917,803)
------------
TOTAL NET ASSETS 100.0%..................................... $240,851,809
============
</TABLE>
*Non-income producing.
**Securities denominated in U.S. dollars.
See Notes to Financial Statements.
13
PAGE
TEMPLETON CAPITAL ACCUMULATOR FUND, INC.
Financial Statements
STATEMENT OF ASSETS AND LIABILITIES
FEBRUARY 28, 1999 (UNAUDITED)
<TABLE>
<S> <C>
Assets:
Investments in securities, at value (cost $207,503,357).... $244,769,612
Cash....................................................... 34,547
Receivables:
Capital shares sold....................................... 27,071
Dividends and interest.................................... 582,324
------------
Total assets.......................................... 245,413,554
------------
Liabilities:
Payables:
Investment securities purchased........................... 4,214,233
Capital shares redeemed................................... 107,795
To affiliates............................................. 168,135
Accrued expenses........................................... 71,582
------------
Total liabilities..................................... 4,561,745
------------
Net assets, at value........................................ $240,851,809
============
Net assets consist of:
Undistributed net investment income........................ $ 16,335
Net unrealized appreciation................................ 37,266,255
Accumulated net realized gain.............................. 1,962,643
Capital shares............................................. 201,606,576
------------
Net assets, at value........................................ $240,851,809
============
Net asset value per share ($240,851,809 / 22,864,145 shares
outstanding).............................................. $10.53
============
</TABLE>
See Notes to Financial Statements.
14
PAGE
TEMPLETON CAPITAL ACCUMULATOR FUND, INC.
Financial Statements (continued)
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED FEBRUARY 28, 1999 (UNAUDITED)
<TABLE>
<S> <C> <C>
Investment Income:
(net of foreign taxes of $150,369)
Dividends.................................................. $1,423,225
Interest................................................... 541,122
----------
Total investment income............................... $ 1,964,347
Expenses:
Management fees (Note 3)................................... 830,511
Administrative fees (Note 3)............................... 164,368
Custodian fees............................................. 54,400
Reports to shareholders.................................... 142,100
Registration and filing fees............................... 12,300
Professional fees.......................................... 40,921
----------
Total expenses........................................ 1,244,600
-----------
Net investment income........................... 719,747
-----------
Realized and unrealized gains:
Net realized gain from:
Investments............................................... 2,012,662
Foreign currency transactions............................. 65,102
----------
Net realized gain..................................... 2,077,764
Net unrealized appreciation on investments............ 27,055,343
-----------
Net realized and unrealized gain............................ 29,133,107
-----------
Net increase in net assets resulting from operations........ $29,852,854
===========
</TABLE>
See Notes to Financial Statements.
15
PAGE
TEMPLETON CAPITAL ACCUMULATOR FUND, INC.
Financial Statements (continued)
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS ENDED
FEBRUARY 28, 1999 YEAR ENDED
(UNAUDITED) AUGUST 31, 1998
---------------------------------------
<S> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income..................................... $ 719,747 $ 3,604,313
Net realized gain from investments and foreign currency
transactions............................................ 2,077,764 9,816,835
Net unrealized appreciation (depreciation) on
investments.............................................. 27,055,343 (31,942,765)
---------------------------------------
Net increase (decrease) in net assets resulting from
operations............................................ 29,852,854 (18,521,617)
Distributions to shareholders from:
Net investment income..................................... (3,767,628) (3,044,916)
Net realized gains........................................ (7,440,124) (4,707,546)
Capital share transactions (Note 2)........................ 30,293,635 45,503,858
---------------------------------------
Net increase in net assets.............................. 48,938,737 19,229,779
Net assets:
Beginning of period........................................ 191,913,072 172,683,293
---------------------------------------
End of period.............................................. $240,851,809 $191,913,072
=======================================
Undistributed net investment income included in net assets:
End of period.............................................. $ 16,335 $ 3,064,216
======================================
</TABLE>
See Notes to Financial Statements.
16
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 through a
flexible policy of investing 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.
17
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, 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>
SIX MONTHS ENDED YEAR ENDED
FEBRUARY 28, 1999 AUGUST 31, 1998
-----------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT
-----------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold................................................. 2,620,785 $26,712,867 4,444,049 $ 50,031,188
Shares issued on reinvestment of distributions.............. 1,158,862 11,147,074 709,140 7,740,903
Shares redeemed............................................. (729,852) (7,566,306) (1,086,763) (12,268,233)
-----------------------------------------------------------
Net increase................................................ 3,049,795 $30,293,635 4,066,426 $ 45,503,858
===========================================================
</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.
18
PAGE
TEMPLETON CAPITAL ACCUMULATOR FUND, INC.
Notes to Financial Statements (unaudited) (continued)
3. TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES (CONT.)
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>
Legal fees of $29,538 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, 1999, the net unrealized
appreciation based on the cost of investments for income tax purposes was as
follows:
<TABLE>
<S> <C>
Unrealized appreciation..................................... $ 66,607,036
Unrealized depreciation..................................... (29,340,781)
------------
Net unrealized appreciation................................. $ 37,266,255
============
</TABLE>
5. INVESTMENT TRANSACTIONS
Purchases and sales of securities (excluding short-term securities) for the
period ended February 28, 1999 aggregated $43,783,627 and $5,324,947,
respectively.
19
PAGE
This page intentionally left blank.
PAGE
LITERATURE REQUEST
For a free brochure and prospectus, which contain more complete information,
including charges and expenses, call Franklin Templeton Fund Information at
1-800/DIAL BEN(R) (1-800/342-5236). Please read the prospectus carefully before
investing or sending 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
Mutual Discovery 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
Mutual European Fund
Templeton Global Bond Fund
Templeton Growth and
Income Fund
GLOBAL INCOME
Franklin Global Government
Income Fund
Franklin Templeton Global
Currency Fund
Franklin Templeton Hard
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
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 Utilities Fund
Franklin Value Fund
Mutual Beacon Fund
Mutual Financial Services Fund
Mutual Qualified Fund
Mutual Shares Fund
FUND ALLOCATOR SERIES
Franklin Templeton Conservative
Target Fund
Franklin Templeton Moderate
Target Fund
Franklin Templeton Growth
Target Fund
INCOME
Franklin Adjustable U.S.
Government Securities Fund
Franklin's AGE High Income Fund
Franklin Bond Fund
Franklin Floating Rate Trust
Franklin Investment Grade
Income Fund
Franklin Short-Intermediate
U.S. Government Securities Fund
Franklin Strategic Income Fund
Franklin U.S. Government
Securities Fund
Franklin Federal Money Fund
Franklin Money 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**
California**
Colorado
Connecticut
Florida**
Georgia
Kentucky
Louisiana
Maryland
Massachusetts+
Michigan+
Minnesota+
Missouri
New Jersey
New York**
North Carolina
Ohio+
Oregon
Pennsylvania
Tennessee***
Texas
Virginia
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
plan 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. The Franklin Valuemark Funds are managed by Franklin
Advisers, Inc. and its Templeton and Franklin affiliates.
01/99
PAGE
SEMIANNUAL REPORT
PRINCIPAL UNDERWRITER
Franklin/Templeton Distributors, Inc.
777 Mariners Island Blvd.
San Mateo, California 94404-1585
1-800/DIAL BEN(R)
www.franklin-templeton.com
SHAREHOLDER SERVICES
1-800/632-2301
FUND INFORMATION
1-800/342-5236
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 S99 04/99 [LOGO] Printed on recycled paper
