UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-6198
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TEMPLETON CAPITAL ACCUMULATOR FUND
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(Exact name of registrant as specified in charter)
500 EAST BROWARD BLVD., FORT LAUDERDALE, FL 33394-3091
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(Address of principal executive offices) (Zip code)
MURRAY L. SIMPSON, ONE FRANKLIN PARKWAY, SAN MATEO, CA 94403-1906
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(Name and address of agent for service)
Registrant's telephone number, including area code: (954) 527-7500
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Date of fiscal year end: 8/31
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Date of reporting period: 8/31/03
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ITEM 1. REPORTS TO STOCKHOLDERS
AUGUST 31, 2003
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ANNUAL REPORT AND SHAREHOLDER LETTER
GLOBAL
TEMPLETON CAPITAL
ACCUMULATOR FUND
[LOGO OMITTED]
FRANKLIN(R) TEMPLETON(R)
INVESTMENTS
Franklin o TEMPLETON o Mutual Series
Franklin Templeton Investments
GAIN FROM OUR PERSPECTIVE
Franklin Templeton's distinct multi-manager structure combines the
specialized expertise of three world-class investment management
groups--Franklin, Templeton and Mutual Series.
SPECIALIZED EXPERTISE
Each of our portfolio management groups operates autonomously, relying on its
own research and staying true to the unique investment disciplines that underlie
its success.
FRANKLIN. Founded in 1947, Franklin is a leader in tax-free investing and a
driving force in fixed income investing around the globe. They also bring
expertise in growth- and value-style U.S. equity investing.
TEMPLETON. Founded in 1940, Templeton pioneered international investing and, in
1954, launched what has become the industry's oldest global fund. Today, with
research offices in over 25 countries, they offer investors the broadest global
reach in the industry.
MUTUAL SERIES. Established in 1949, Mutual Series is dedicated to a unique style
of value investing, searching aggressively for opportunity among undervalued
stocks, arbitrage situations and distressed companies.
TRUE DIVERSIFICATION
Because our management groups work independently and adhere to distinctly
different investment approaches, Franklin, Templeton and Mutual Series funds
typically have a low overlap of securities. That's why our funds can be used to
build truly diversified portfolios covering every major asset class.
RELIABILITY YOU CAN TRUST
At Franklin Templeton Investments, we seek to consistently provide investors
with exceptional risk-adjusted returns over the long term, as well as the
reliable account services that have helped us become one of the most trusted
names in financial services.
MUTUAL FUNDS | RETIREMENT PLANS | 529 COLLEGE SAVINGS PLANS | SEPARATE ACCOUNTS
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Not part of the annual report
Contents
SHAREHOLDER LETTER ............................ 1
ANNUAL REPORT
Templeton Capital Accumulator Fund ............ 3
Performance Summary ........................... 6
Financial Highlights &
Statement of Investments ...................... 9
Financial Statements .......................... 15
Notes to Financial Statements ................. 18
Independent Auditors' Report .................. 22
Tax Designation ............................... 23
Board Members and Officers .................... 24
Proxy Voting Policies and Procedures .......... 30
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Annual Report
Templeton Capital Accumulator Fund
YOUR FUND'S GOAL AND PRIMARY INVESTMENTS: 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.
This annual report for Templeton Capital Accumulator Fund covers the fiscal year
ended August 31, 2003.
PERFORMANCE OVERVIEW
For the 12 months under review, Templeton Capital Accumulator Fund delivered a
10.86% cumulative total return, as shown in the Performance Summary beginning on
page 6. The Fund's benchmark, the Morgan Stanley Capital International (MSCI)
All Country (AC) World Free Index, posted a 12.16% total return for the same
period. 1
ECONOMIC AND MARKET OVERVIEW
In the first half of 2003, gross domestic product growth accelerated in the U.S.
and many emerging market economies; however, it lagged in Japan and the
12-nation euro zone mainly because of structural issues, including restrictive
labor practices that have limited the ability of companies in those countries to
lay off workers to control costs, and the relative weakening of the U.S. dollar
versus the euro, which has made European imports into the U.S. less competitive.
As the year progressed, investors appeared to downplay employment numbers and
sluggish euro-zone growth predictions, and instead seemed to focus on
stronger-than-expected earnings reports and corporate optimism for the second
half of 2003.
Although investor pessimism seemingly prevailed in the first half of the Fund's
fiscal year, investor optimism about a global economic recovery appeared to
dominate the second half. Initially, the main drivers of the pessimism were
fears of terrorist attacks, a potential war in Iraq and then the actual war,
tensions with North Korea, disruption in oil production in Venezuela, and the
spread of
[GRAPHIC OMITTED]
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC AS FOLLOWS:
GEOGRAPHIC DISTRIBUTION
Based on Total Net Assets as of 8/31/03
Europe ....................................... 41.7%
North America ................................ 21.1%
Asia ......................................... 14.7%
Australia .................................... 3.6%
Latin America ................................ 1.9%
Middle East & Africa ......................... 0.8%
Short-Term Investments & Other net Assets .... 16.2%
1. Source: Standard & Poor's Micropal. The unmanaged MSCI AC World Free Index is
market capitalization-weighted and measures total returns of equity securities
available to foreign (non-local) investors in developed and emerging markets
globally. The index includes reinvested dividends. One cannot invest directly in
an index, nor is an index representative of the Fund's portfolio.
THE DOLLAR VALUE, NUMBER OF SHARES OR PRINCIPAL AMOUNT, AND COMPLETE LEGAL
TITLES OF ALL PORTFOLIO HOLDINGS ARE LISTED IN THE FUND'S STATEMENT OF
INVESTMENTS (SOI). THE SOI BEGINS ON PAGE 10.
Annual Report | 3
TOP 10 SECTORS/INDUSTRIES
8/31/03
- --------------------------------------------------
% of Total
Net Assets
- --------------------------------------------------
Diversified Telecommunication Services 7.5%
- --------------------------------------------------
Pharmaceuticals 6.8%
- --------------------------------------------------
Insurance 5.9%
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Oil & Gas 5.3%
- --------------------------------------------------
Commercial Banks 5.0%
- --------------------------------------------------
Metals & Mining 4.2%
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Household Durables 4.1%
- --------------------------------------------------
Machinery 3.6%
- --------------------------------------------------
Paper & Forest Products 3.6%
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Food Products 3.4%
- --------------------------------------------------
severe acute respiratory syndrome. As these issues were either resolved or
perceived as less threatening to global economic recovery, investor sentiment
improved during the reporting period.
Global stock markets generally mirrored changes in investor sentiment. Many
global stock markets experienced a sell-off in the first half of the Fund's
fiscal year; however, they rebounded in the second half, with stock market
increases in 2003's second quarter representing the largest quarterly gain in
global equities since fourth quarter 1998. Beginning in March 2003, improving
sentiment appeared to prompt many investors to swap into economically sensitive
and financially leveraged companies, such as cyclicals, technology, small-cap
stocks and emerging markets equities that in preceding quarters had performed
poorly. For the Fund's fiscal year, most local stock market indexes in Asia,
Europe and the Americas posted double-digit total returns in U.S. dollars.
Stock markets benefited from low inflation and accommodative fiscal and monetary
policies in many countries, including the U.S. In addition, bonds as an
investment alternative appeared less attractive due to higher relative tax rates
on interest income compared with stock dividends.
INVESTMENT STRATEGY
Our investment strategy employs a "bottom-up," value-oriented, long-term
approach. We focus on the market price of a company's securities relative to our
evaluation of the company's long-term earnings, asset value and cash flow
potential. As we look worldwide, we consider specific companies, rather than
sectors or countries, while doing in-depth research to construct a bargain list
from which we buy.
MANAGER'S DISCUSSION
The Fund benefited from its holdings in the industrials sector, which performed
well during the reporting period relative to the Fund's benchmark. For example,
Volvo, a global truck manufacturer, and Atlas Copco, a global industrial
component producer, both increased in value during the period. Although the Fund
held an equal weighting in the energy sector compared with its benchmark, its
Husky Energy and Norsk Hydro holdings helped relative returns. Additionally, the
Fund's underweighted exposure in the weak consumer staples sector relative to
its benchmark contributed positively to performance.
4 | Annual Report
On the other hand, the Fund's underweighting in the information technology
sector, which outperformed most other sectors during the period, hurt relative
performance. Specific holdings that posted negative returns include Japanese
electronics company Sony and South Korean financial firm Kookmin Bank. However,
our analysis indicated that long-term fundamentals for both stocks were strong
and we continued to hold them.
It is important to note that there are special risks involved with global
investing related to market, currency, economic, social, political and other
factors. Emerging markets securities involve similar but heightened risks, in
addition to those associated with their relatively small size and lesser
liquidity. Investing in any emerging market means accepting a certain amount of
volatility and, in some cases, severe market corrections. These risks and other
considerations are discussed in the Fund's prospectus.
Thank you for your continued participation in Templeton Capital Accumulator
Fund. We look forward to serving your future investment needs.
/S/GARY P. MOTYL
Gary P. Motyl
Portfolio Manager
Templeton Capital Accumulator Fund
THIS DISCUSSION REFLECTS OUR ANALYSIS, OPINIONS AND PORTFOLIO HOLDINGS AS OF
AUGUST 31, 2003, THE END OF THE REPORTING PERIOD. OUR STRATEGIES AND THE FUND'S
PORTFOLIO COMPOSITION WILL CHANGE DEPENDING ON MARKET AND ECONOMIC CONDITIONS.
THESE OPINIONS MAY NOT BE RELIED UPON AS INVESTMENT ADVICE OR AN OFFER FOR A
PARTICULAR SECURITY. THE INFORMATION IS NOT A COMPLETE ANALYSIS OF EVERY ASPECT
OF ANY MARKET, COUNTRY, INDUSTRY, SECURITY OR THE FUND. STATEMENTS OF FACT ARE
FROM SOURCES CONSIDERED RELIABLE, BUT THE INVESTMENT MANAGER MAKES NO
REPRESENTATION OR WARRANTY AS TO THEIR COMPLETENESS OR ACCURACY. ALTHOUGH
HISTORICAL PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS, THESE INSIGHTS MAY
HELP YOU UNDERSTAND OUR INVESTMENT MANAGEMENT PHILOSOPHY.
TOP 10 EQUITY HOLDINGS
8/31/03
- ------------------------------------------
COMPANY % OF TOTAL
SECTOR/INDUSTRY, COUNTRY NET ASSETS
- ------------------------------------------
Samsung Electronics Co. Ltd. 2.3%
SEMICONDUCTORS & SEMICONDUCTOR
EQUIPMENT, SOUTH KOREA
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Mylan Laboratories Inc. 1.8%
PHARMACEUTICALS, U.S.
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BHP Billiton PLC 1.6%
METALS & MINING, AUSTRALIA
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Aventis SA 1.6%
PHARMACEUTICALS, FRANCE
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E.ON AG 1.5%
ELECTRIC UTILITIES, GERMANY
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Koninklijke Philips Electronics NV 1.5%
HOUSEHOLD DURABLES, NETHERLANDS
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Telefonica SA 1.5%
DIVERSIFIED TELECOMMUNICATION
SERVICES, SPAIN
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BCE Inc. 1.4%
DIVERSIFIED TELECOMMUNICATION
SERVICES, CANADA
- ------------------------------------------
Abbott Laboratories 1.3%
PHARMACEUTICALS, U.S.
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Procter & Gamble Co. 1.2%
HOUSEHOLD PRODUCTS, U.S.
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Annual Report | 5
Performance Summary as of 8/31/03
Your dividend income will vary depending on dividends or interest paid by
securities in the Fund's portfolio, adjusted for operating expenses. Capital
gain distributions are net profits realized from the sale of portfolio
securities. The performance table and graph do not reflect any taxes due on Fund
dividends, capital gain distributions, if any, or any realized gains on the sale
of Fund shares. Total return reflects the Fund's dividend income, capital gain
distributions, if any, and any unrealized gains or losses.
PRICE AND DISTRIBUTION INFORMATION
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CHANGE 8/31/03 8/31/02
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Net Asset Value (NAV) +$0.89 $10.18 $9.29
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DISTRIBUTIONS (9/1/02-8/31/03)
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Dividend Income $0.0988
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PERFORMANCE 1
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1-YEAR 5-YEAR 10-YEAR
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Cumulative Total Return 2 10.86% 32.90% 122.18%
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Average Annual Total Return 3 10.86% 5.85% 8.31%
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Value of $10,000 Investment 4 $11,086 $13,290 $22,218
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Avg. Ann. Total Return (9/30/03) 5 26.55% 6.05% 8.32%
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ONGOING MARKET VOLATILITY CAN SIGNIFICANTLY AFFECT SHORT-TERM PERFORMANCE; MORE
RECENT RETURNS MAY DIFFER FROM THOSE SHOWN. SINCE MARKETS CAN GO DOWN AS WELL AS
UP, INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE WITH MARKET CONDITIONS,
AND YOU MAY HAVE A GAIN OR LOSS WHEN YOU SELL YOUR SHARES.
FOR MORE CURRENT PERFORMANCE, SEE "FUNDS AND PERFORMANCE" AT
FRANKLINTEMPLETON.COM OR CALL 1-800/342-5236.
6 | Past performance does not guarantee future results. | Annual Report
Performance Summary (CONTINUED)
TOTAL RETURN INDEX COMPARISON FOR HYPOTHETICAL $10,000 INVESTMENT 1
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. One cannot invest directly in an index. The Consumer Price Index
(CPI), calculated by the U.S. Bureau of Labor Statistics, is a commonly used
measure of the inflation rate.
[GRAPHIC OMITTED]
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC AS FOLLOWS:
The following line graph compares the performance of Templeton Capital
Accumulator Fund - Class A with that of the MSCI AC World Free Index 6 and the
CPI 6 based on a $10,000 investment from 9/1/93 to 8/31/03.
Templeton Capital MSCI AC World
Accumulator Fund* Free Index CPI
----------------- ------------- -------
9/1/93 $10,000 $10,000 $10,000
9/30/93 $9,985 $9,832 $10,021
10/31/93 $10,480 $10,124 $10,062
11/30/93 $10,206 $9,597 $10,069
12/31/93 $11,103 $10,116 $10,069
1/31/94 $11,921 $10,787 $10,097
2/28/94 $11,683 $10,631 $10,131
3/31/94 $11,163 $10,154 $10,166
4/30/94 $11,296 $10,430 $10,180
5/31/94 $11,430 $10,491 $10,186
6/30/94 $11,081 $10,440 $10,221
7/31/94 $11,579 $10,671 $10,249
8/31/94 $12,047 $11,051 $10,290
9/30/94 $11,817 $10,792 $10,318
10/31/94 $11,966 $11,069 $10,325
11/30/94 $11,535 $10,588 $10,338
12/31/94 $11,401 $10,625 $10,338
1/31/95 $11,190 $10,409 $10,380
2/28/95 $11,432 $10,520 $10,421
3/31/95 $11,604 $11,002 $10,456
4/30/95 $11,909 $11,402 $10,490
5/31/95 $12,276 $11,528 $10,511
6/30/95 $12,378 $11,530 $10,532
7/31/95 $12,776 $12,088 $10,532
8/31/95 $12,456 $11,823 $10,559
9/30/95 $12,745 $12,149 $10,580
10/31/95 $12,439 $11,946 $10,615
11/30/95 $12,701 $12,321 $10,608
12/31/95 $13,089 $12,692 $10,601
1/31/96 $13,368 $12,975 $10,663
2/29/96 $13,568 $13,029 $10,698
3/31/96 $13,776 $13,229 $10,753
4/30/96 $14,383 $13,552 $10,794
5/31/96 $14,559 $13,566 $10,815
6/30/96 $14,575 $13,641 $10,822
7/31/96 $14,064 $13,131 $10,843
8/31/96 $14,511 $13,293 $10,863
9/30/96 $14,719 $13,784 $10,898
10/31/96 $14,931 $13,839 $10,932
11/30/96 $15,707 $14,579 $10,953
12/31/96 $16,096 $14,368 $10,953
1/31/97 $16,410 $14,609 $10,988
2/28/97 $16,510 $14,808 $11,022
3/31/97 $16,559 $14,512 $11,050
4/30/97 $16,559 $14,978 $11,064
5/31/97 $17,436 $15,872 $11,057
6/30/97 $18,296 $16,684 $11,070
7/31/97 $19,090 $17,438 $11,084
8/31/97 $18,147 $16,215 $11,105
9/30/97 $19,487 $17,079 $11,133
10/31/97 $18,040 $16,062 $11,160
11/30/97 $17,871 $16,308 $11,153
12/31/97 $17,892 $16,522 $11,140
1/31/98 $18,030 $16,886 $11,160
2/28/98 $19,341 $18,041 $11,181
3/31/98 $20,428 $18,811 $11,202
4/30/98 $20,618 $18,987 $11,222
5/31/98 $20,273 $18,627 $11,243
6/30/98 $19,945 $18,963 $11,257
7/31/98 $19,979 $18,969 $11,271
8/31/98 $16,719 $16,311 $11,285
9/30/98 $16,546 $16,636 $11,298
10/31/98 $18,026 $18,155 $11,326
11/30/98 $19,135 $19,257 $11,326
12/31/98 $19,428 $20,151 $11,319
1/31/99 $19,446 $20,563 $11,347
2/28/99 $19,191 $20,046 $11,360
3/31/99 $20,139 $20,948 $11,395
4/30/99 $21,979 $21,853 $11,478
5/31/99 $21,214 $21,081 $11,478
6/30/99 $22,417 $22,131 $11,478
7/31/99 $22,271 $22,040 $11,512
8/31/99 $22,070 $22,014 $11,540
9/30/99 $21,378 $21,776 $11,595
10/31/99 $21,860 $22,879 $11,616
11/30/99 $22,976 $23,590 $11,623
12/31/99 $25,102 $25,555 $11,623
1/31/00 $24,003 $24,177 $11,657
2/29/00 $24,543 $24,259 $11,727
3/31/00 $25,352 $25,854 $11,823
4/30/00 $24,312 $24,694 $11,830
5/31/00 $24,042 $24,053 $11,844
6/30/00 $24,986 $24,868 $11,906
7/31/00 $24,793 $24,138 $11,934
8/31/00 $25,699 $24,888 $11,934
9/30/00 $24,504 $23,521 $11,996
10/31/00 $24,277 $23,061 $12,017
11/30/00 $23,878 $21,633 $12,023
12/31/00 $24,951 $21,994 $12,017
1/31/01 $25,377 $22,550 $12,093
2/28/01 $24,716 $20,653 $12,141
3/31/01 $23,160 $19,262 $12,169
4/30/01 $24,333 $20,665 $12,217
5/31/01 $24,333 $20,435 $12,272
6/30/01 $23,842 $19,809 $12,293
7/31/01 $23,629 $19,497 $12,258
8/31/01 $23,138 $18,601 $12,258
9/30/01 $20,323 $16,902 $12,314
10/31/01 $20,837 $17,261 $12,272
11/30/01 $22,302 $18,322 $12,251
12/31/01 $22,695 $18,494 $12,203
1/31/02 $22,048 $17,987 $12,231
2/28/02 $22,264 $17,855 $12,279
3/31/02 $23,407 $18,662 $12,348
4/30/02 $23,170 $18,071 $12,417
5/31/02 $23,494 $18,096 $12,417
6/30/02 $22,329 $16,992 $12,424
7/31/02 $20,128 $15,567 $12,438
8/31/02 $20,042 $15,607 $12,479
9/30/02 $17,539 $13,895 $12,500
10/31/02 $18,421 $14,918 $12,521
11/30/02 $19,729 $15,734 $12,521
12/31/02 $18,748 $14,984 $12,493
1/31/03 $18,312 $14,547 $12,548
2/28/03 $17,810 $14,292 $12,645
3/31/03 $17,373 $14,238 $12,721
4/30/03 $19,206 $15,509 $12,693
5/31/03 $20,341 $16,412 $12,673
6/30/03 $20,800 $16,727 $12,686
7/31/03 $21,520 $17,098 $12,700
8/31/03 $22,218 $17,504 $12,749
Annual Report | Past performance does not guarantee future results. | 7
Performance Summary (CONTINUED)
ENDNOTES
THE FUND INVESTS IN FOREIGN SECURITIES, WHICH CAN INVOLVE EXPOSURE TO CURRENCY
VOLATILITY AND POLITICAL, ECONOMIC AND REGULATORY UNCERTAINTY. INVESTMENTS IN
DEVELOPING MARKETS INVOLVE HEIGHTENED RISKS RELATED TO THE SAME FACTORS, IN
ADDITION TO THOSE ASSOCIATED WITH THEIR SMALL SIZE AND LESSER LIQUIDITY. THESE
AND OTHER RISKS ARE DISCUSSED MORE FULLY IN THE FUND'S PROSPECTUS.
1. Calculations do not include the effect of paying sales and creation charges
applicable to purchases of Fund shares through Templeton Capital Accumulation
Plans, which may vary as discussed in the Plans' prospectuses. 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' prospectuses
for information regarding applicable sales charges. Past expense reductions by
the Fund's manager increased the Fund's total returns. Without these reductions,
the Fund's total returns would have been lower.
2. Cumulative total return represents the change in value of an investment over
the periods indicated.
3. Average annual total return represents the average annual change in value of
an investment over the periods indicated.
4. These figures represent the value of a hypothetical $10,000 investment in
the Fund over the periods indicated.
5. In accordance with SEC rules, we provide standardized average annual total
return information through the latest calendar quarter.
6. Source: Standard & Poor's Micropal. The MSCI AC World Free Index is
market capitalization-weighted and measures total returns of equity securities
available to foreign (non-local) investors in developed and emerging markets
globally.
8 | Past performance does not guarantee future results. | Annual Report
Templeton Capital Accumulator Fund
FINANCIAL HIGHLIGHTS
---------------------------------------------------------
YEAR ENDED AUGUST 31,
2003 2002 2001 2000 1999
---------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the year)
Net asset value, beginning of year ............................ $9.29 $10.85 $13.34 $12.11 $9.69
---------------------------------------------------------
Income from investment operations:
Net investment income a ...................................... .12 .12 .16 .16 .18
Net realized and unrealized gains (losses) ................... .87 (1.57) (1.45) 1.71 2.78
---------------------------------------------------------
Total from investment operations .............................. .99 (1.45) (1.29) 1.87 2.96
---------------------------------------------------------
Less distributions from:
Net investment income ........................................ (.10) (.11) (.16) (.15) (.18)
Net realized gains ........................................... -- -- (1.04) (.49) (.36)
---------------------------------------------------------
Total distributions ........................................... (.10) (.11) (1.20) (.64) (.54)
---------------------------------------------------------
Net asset value, end of year .................................. $10.18 $9.29 $10.85 $13.34 $12.11
---------------------------------------------------------
Total return b ................................................ 10.86% (13.38)% (9.96)% 16.44% 32.01%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (000's) ............................... $457,645 $354,042 $364,236 $370,029 $291,136
Ratios to average net assets:
Expenses ..................................................... 1.12% 1.11% 1.05% 1.03% 1.11%
Net investment income ........................................ 1.35% 1.13% 1.35% 1.24% 1.60%
Portfolio turnover rate ....................................... 21.32% 14.28% 22.37% 32.13% 13.96%
aBased on average weighted shares outstanding.
bTotal return is not annualized for periods less than one year.
Annual Report | See notes to financial statements. | 9
Templeton Capital Accumulator Fund
STATEMENT OF INVESTMENTS, AUGUST 31, 2003
- ---------------------------------------------------------------------------------------------------------------------------
INDUSTRY SHARES VALUE
- ---------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS 83.0%
AUSTRALIA 3.1%
Alumina Ltd. .............................. Metals & Mining 800,000 $ 2,614,887
Australia & New Zealand Banking
Group Ltd. ............................... Commercial Banks 200,000 2,267,961
BHP Billiton PLC .......................... Metals & Mining 1,145,014 7,525,242
a WMC Resources Ltd. ........................ Metals & Mining 600,000 1,584,466
---------------
13,992,556
---------------
BERMUDA 1.6%
Ace Ltd. .................................. Insurance 123,000 3,960,600
XL Capital Ltd., A ........................ Insurance 45,000 3,408,750
---------------
7,369,350
---------------
BRAZIL .5%
Embraer-Empresa Brasileira de Aeronautica
SA, ADR .................................. Aerospace & Defense 112,725 2,298,463
---------------
CANADA 4.0%
Alcan Inc. ................................ Metals & Mining 142,400 5,179,088
BCE Inc. .................................. Diversified Telecommunication Services 291,200 6,304,103
a Celestica Inc. ............................ Electronic Equipment & Instruments 183,000 3,213,697
Husky Energy Inc. ......................... Oil & Gas 245,000 3,505,929
---------------
18,202,817
---------------
CHILE .7%
Cia de Telecomunicaciones de Chile SA,
ADR ...................................... Diversified Telecommunication Services 261,725 3,410,277
---------------
CHINA .6%
China Mobile (Hong Kong) Ltd. ............. Wireless Telecommunication Services 1,101,000 2,830,370
---------------
FINLAND .8%
Stora Enso OYJ, R (EUR/FIM Traded) ........ Paper & Forest Products 140,400 1,828,161
Stora Enso OYJ, R (SEK Traded) ............ Paper & Forest Products 130,627 1,687,284
---------------
3,515,445
---------------
FRANCE 5.6%
Accor SA .................................. Hotels Restaurants & Leisure 54,680 2,130,577
Aventis SA ................................ Pharmaceuticals 147,920 7,184,635
AXA SA .................................... Insurance 178,712 3,168,757
Michelin SA, B ............................ Auto Components 111,080 4,509,885
Pechiney SA, A ............................ Metals & Mining 44,000 2,230,361
Suez SA ................................... Multi-Utilities & Unregulated Power 180,000 2,839,827
Total SA, B ............................... Oil & Gas 23,322 3,577,049
---------------
25,641,091
---------------
10 | Annual Report
Templeton Capital Accumulator Fund
STATEMENT OF INVESTMENTS, AUGUST 31, 2003 (CONTINUED)
- ---------------------------------------------------------------------------------------------------------------------------
INDUSTRY SHARES VALUE
- ---------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS (CONT.)
GERMANY 6.5%
BASF AG ................................... Chemicals 72,200 $ 3,353,051
Bayer AG, Br. ............................. Chemicals 100,000 2,143,100
Celesio AG ................................ Health Care Providers & Services 105,466 4,226,375
Deutsche Post AG .......................... Air Freight & Logistics 299,800 4,739,765
E.ON AG ................................... Electric Utilities 135,000 6,966,174
Hugo Boss AG .............................. Textiles Apparel & Luxury Goods 108,000 1,909,028
Muenchener
Rueckversicherungs-Gesellschaft .......... Insurance 16,960 1,739,888
Volkswagen AG ............................. Automobiles 96,600 4,740,753
---------------
29,818,134
---------------
HONG KONG 1.3%
Cheung Kong Holdings Ltd. ................. Real Estate 390,000 3,025,252
Hutchison Whampoa Ltd. .................... Industrial Conglomerates 221,650 1,634,094
Swire Pacific Ltd., A ..................... Diversified Financial Services 170,000 954,695
Swire Pacific Ltd., B ..................... Diversified Financial Services 100,000 85,905
---------------
5,699,946
---------------
INDIA .9%
ICICI Bank Ltd. ........................... Commercial Banks 291,249 1,140,471
ICICI Bank Ltd., ADR ...................... Commercial Banks 126,375 1,224,574
Satyam Computers Services Ltd. ............ IT Services 43,400 214,538
Satyam Computers Services Ltd., ADR ....... IT Services 140,100 1,668,591
---------------
4,248,174
---------------
ISRAEL .8%
a Check Point Software Technologies Ltd. .... Software 209,800 3,665,206
---------------
ITALY 1.5%
Eni SpA ................................... Oil & Gas 304,000 4,592,558
Riunione Adriatica di Sicurta SpA ......... Insurance 158,701 2,282,515
---------------
6,875,073
---------------
JAPAN 6.2%
East Japan Railway Co. .................... Road & Rail 520 2,197,120
Hitachi Ltd. .............................. Electronic Equipment & Instruments 317,000 1,727,905
Kikkoman Corp. ............................ Food Products 330,000 2,092,904
Komatsu Ltd. .............................. Machinery 771,000 4,400,806
a NEC Corp. ................................. Computers & Peripherals 400,000 2,982,516
Nintendo Co. Ltd. ......................... Software 28,600 2,380,065
Nippon Telegraph & Telephone Corp. ........ Diversified Telecommunication Services 793 3,493,332
Nomura Holdings Inc. ...................... Capital Markets 184,000 2,677,683
Sompo Japan Insurance Inc. ................ Insurance 610,000 3,758,913
Sony Corp. ................................ Household Durables 85,200 2,803,977
---------------
28,515,221
---------------
Annual Report | 11
Templeton Capital Accumulator Fund
STATEMENT OF INVESTMENTS, AUGUST 31, 2003 (CONTINUED)
- ---------------------------------------------------------------------------------------------------------------------------
INDUSTRY SHARES VALUE
- ---------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS (CONT.)
MEXICO .7%
Telefonos de Mexico SA de CV (Telmex),
L, ADR .................................. Diversified Telecommunication Services 112,500 $ 3,409,875
---------------
NETHERLANDS 3.5%
IHC Caland NV ............................ Energy Equipment & Services 42,000 2,121,142
ING Groep NV ............................. Diversified Financial Services 243,000 4,738,184
Koninklijke Philips Electronics NV ....... Household Durables 283,857 6,918,553
Wolters Kluwer NV ........................ Media 135,000 2,100,227
---------------
15,878,106
---------------
NORWAY 1.6%
Norsk Hydro ASA .......................... Oil & Gas 94,000 4,940,669
Norske Skogindustrier ASA, A ............. Paper & Forest Products 130,000 2,323,860
---------------
7,264,529
---------------
PORTUGAL .4%
Portugal Telecom SGPS SA ................. Diversified Telecommunication Services 240,300 1,735,971
---------------
SINGAPORE .7%
DBS Group Holdings Ltd. .................. Commercial Banks 433,900 3,118,912
---------------
SOUTH KOREA 5.0%
Kookmin Bank ............................. Commercial Banks 98,694 3,597,630
Korea Electric Power Corp. ............... Electric Utilities 90,470 1,481,919
KT Corp., ADR ............................ Diversified Telecommunication Services 125,800 2,371,330
LG Electronics Inc. ...................... Household Durables 93,600 5,084,150
Samsung Electronics Co. Ltd. ............. Semiconductors & Semiconductor Equipment 28,420 10,492,425
---------------
23,027,454
---------------
SPAIN 3.1%
Endesa SA ................................ Electric Utilities 74,200 1,155,162
Iberdrola SA, Br. ........................ Electric Utilities 202,000 3,433,089
Repsol YPF SA ............................ Oil & Gas 171,000 2,887,454
Telefonica SA ............................ Diversified Telecommunication Services 587,010 6,908,805
---------------
14,384,510
---------------
SWEDEN 4.7%
Atlas Copco AB, A ........................ Machinery 151,930 4,542,709
Electrolux AB, B ......................... Household Durables 186,250 4,154,383
Foreningssparbanken AB, A ................ Commercial Banks 205,200 2,687,342
Nordea AB, FDR ........................... Commercial Banks 612,000 3,144,560
Securitas AB ............................. Commercial Services & Supplies 194,500 2,384,377
Volvo AB, B .............................. Machinery 183,333 4,429,181
---------------
21,342,552
---------------
SWITZERLAND 3.7%
Adecco SA ................................ Commercial Services & Supplies 72,560 3,668,022
a Clariant AG .............................. Chemicals 136,000 1,844,990
Nestle SA ................................ Food Products 15,560 3,388,526
SIG Holding AG ........................... Machinery 25,000 3,213,023
Swiss Reinsurance Co. .................... Insurance 79,620 4,889,022
---------------
17,003,583
---------------
12 | Annual Report
Templeton Capital Accumulator Fund
STATEMENT OF INVESTMENTS, AUGUST 31, 2003 (CONTINUED)
- ---------------------------------------------------------------------------------------------------------------------------
INDUSTRY SHARES VALUE
- ---------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS (CONT.)
UNITED KINGDOM 10.0%
Abbey National PLC ........................ Commercial Banks 395,000 $ 3,292,656
Amersham PLC .............................. Health Care Equipment & Supplies 234,215 1,921,549
BAE Systems PLC ........................... Aerospace & Defense 910,610 2,459,415
Brambles Industries PLC ................... Commercial Services & Supplies 785,928 2,318,463
a British Airways PLC ....................... Airlines 748,000 2,212,493
Cable & Wireless PLC ...................... Diversified Telecommunication Services 1,196,000 2,251,214
Cadbury Schweppes PLC ..................... Food Products 383,920 2,319,758
a CellTech Group PLC ........................ Biotechnology 163,200 861,549
Hanson PLC ................................ Construction Materials 443,431 2,893,268
Imperial Chemical Industries PLC .......... Chemicals 490,909 1,506,404
Kidde PLC ................................. Electrical Equipment 1,200,000 1,841,160
Rolls-Royce Group PLC ..................... Aerospace & Defense 1,000,000 2,685,026
Shell Transport & Trading Co. PLC, ADR .... Oil & Gas 120,000 4,612,800
a Shire Pharmaceuticals Group PLC ........... Pharmaceuticals 334,200 2,526,812
Smiths Group PLC .......................... Industrial Conglomerates 182,870 2,036,356
Standard Chartered PLC .................... Commercial Banks 165,600 2,215,998
Unilever PLC .............................. Food Products 565,400 4,601,292
WPP Group PLC ............................. Media 336,000 3,063,919
---------------
45,620,132
---------------
UNITED STATES 15.5%
Abbott Laboratories ....................... Pharmaceuticals 150,000 6,045,000
Albertson's Inc. .......................... Food & Staples Retailing 105,000 2,207,100
American International Group Inc. ......... Insurance 65,240 3,886,347
a AT&T Wireless Services Inc. ............... Wireless Telecommunication Services 500,000 4,310,000
a BMC Software Inc. ......................... Software 148,350 2,177,778
Boise Cascade Corp. ....................... Paper & Forest Products 108,000 2,943,000
Bristol-Myers Squibb Co. .................. Pharmaceuticals 128,500 3,260,045
CIGNA Corp. ............................... Health Care Providers & Services 47,600 2,269,568
Electronic Data Systems Corp. ............. IT Services 2,000 43,660
Georgia-Pacific Corp. ..................... Paper & Forest Products 144,000 3,336,480
International Paper Co. ................... Paper & Forest Products 109,000 4,419,950
Kraft Foods Inc., A ....................... Food Products 110,000 3,267,000
Mylan Laboratories Inc. ................... Pharmaceuticals 225,000 8,190,000
Pfizer Inc. ............................... Pharmaceuticals 126,462 3,783,743
Procter & Gamble Co. ...................... Household Products 61,700 5,385,793
SBC Communications Inc. ................... Diversified Telecommunication Services 205,200 4,614,948
a Synopsys Inc. ............................. Software 46,500 3,171,765
Target Corp. .............................. Multiline Retail 106,460 4,322,276
Temple-Inland Inc. ........................ Containers & Packaging 10,500 522,690
a Toys R Us Inc. ............................ Specialty Retail 195,000 2,655,900
---------------
70,813,043
---------------
TOTAL COMMON STOCKS
(COST $333,224,234) ...................... 379,680,790
---------------
Annual Report | 13
Templeton Capital Accumulator Fund
STATEMENT OF INVESTMENTS, AUGUST 31, 2003 (CONTINUED)
- ---------------------------------------------------------------------------------------------------------------------------
INDUSTRY SHARES VALUE
- ---------------------------------------------------------------------------------------------------------------------------
PREFERRED STOCKS .8%
AUSTRALIA .5%
News Corp. Ltd., pfd. ........................ Media 312,000 $ 2,231,456
---------------
GERMANY .3%
Hugo Boss AG, pfd. ........................... Textiles Apparel & Luxury Goods 90,000 1,669,906
---------------
TOTAL PREFERRED STOCKS (COST $3,008,871) ..... 3,901,362
---------------
SHORT TERM INVESTMENTS (COST $73,964,485) 16.2%
b Franklin Institutional Fiduciary Trust
Money Market Portfolio ...................... 73,964,485 73,964,485
---------------
TOTAL INVESTMENTS (COST $410,197,590) 100.0% . 457,546,637
OTHER ASSETS, LESS LIABILITIES ............... 98,436
---------------
NET ASSETS 100.0% ............................ $ 457,645,073
---------------
CURRENCY ABBREVIATIONS: | EUR - Euro | FIM - Finnish Markka
| SEK - Swedish Krona
aNon-income producing.
bSee Note 6 regarding investments in the Franklin Institutional Fiduciary Trust
Money Market Portfolio.
14 | See notes to financial statements. | Annual Report
Templeton Capital Accumulator Fund
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
August 31, 2003
Assets:
Investments in securities:
Cost ..................................................................................................... $410,197,590
-------------
Value .................................................................................................... 457,546,637
Foreign currency, at value and cost ....................................................................... 245,614
Receivables:
Investment securities sold ............................................................................... 245,196
Capital shares sold ...................................................................................... 85,896
Dividends ................................................................................................ 927,510
-------------
Total assets ......................................................................................... 459,050,853
-------------
Liabilities:
Payables:
Investment securities purchased .......................................................................... 611,239
Capital shares redeemed .................................................................................. 50,008
Affiliates ............................................................................................... 350,688
Other liabilities ......................................................................................... 393,845
-------------
Total liabilities .................................................................................... 1,405,780
-------------
Net assets, at value ............................................................................... $457,645,073
-------------
Net assets consist of:
Undistributed net investment income ....................................................................... $ 4,612,910
Net unrealized appreciation (depreciation) ................................................................ 47,346,912
Accumulated net realized gain (loss) ...................................................................... (27,782,048)
Capital shares ............................................................................................ 433,467,299
-------------
Net assets, at value ............................................................................... $457,645,073
-------------
Net asset value and maximum offering price per share ($457,645,073 / 44,938,694 shares outstanding) ........ $10.18
-------------
Annual Report | See notes to financial statements. | 15
Templeton Capital Accumulator Fund
FINANCIAL STATEMENTS (CONTINUED)
STATEMENT OF OPERATIONS
for the year ended August 31, 2003
Dividend Income (net of foreign taxes of $991,914) ........................................................ $ 9,171,053
-------------
Expenses:
Management fees (Note 3) ................................................................................. 2,635,617
Administrative fees (Note 3) ............................................................................. 532,272
Distribution fees ( Note 3) .............................................................................. 406,387
Custodian fees ........................................................................................... 88,650
Reports to shareholders .................................................................................. 386,000
Professional fees ........................................................................................ 78,850
Trustees' fees and expenses .............................................................................. 26,400
Other .................................................................................................... 7,664
-------------
Total expenses ...................................................................................... 4,161,840
-------------
Net investment income ............................................................................. 5,009,213
-------------
Realized and unrealized gains (losses):
Net realized gain (loss) from:
Investments ............................................................................................. (15,945,173)
Foreign currency transactions ........................................................................... 31,996
-------------
Net realized gain (loss) ............................................................................ (15,913,177)
Net unrealized appreciation (depreciation) on:
Investments ............................................................................................. 58,466,103
Translation of assets and liabilities denominated in foreign currencies ................................. (40,713)
-------------
Net unrealized appreciation (depreciation) .......................................................... 58,425,390
-------------
Net realized and unrealized gain (loss) ................................................................... 42,512,213
-------------
Net increase (decrease) in net assets resulting from operations ........................................... $ 47,521,426
-------------
16 | See notes to financial statements. | Annual Report
Templeton Capital Accumulator Fund
FINANCIAL STATEMENTS (CONTINUED)
STATEMENTS OF CHANGES IN NET ASSETS
for the years ended August 31, 2003 and 2002
-----------------------------------
2003 2002
-----------------------------------
Increase (decrease) in net assets:
Operations:
Net investment income ................................................................... $ 5,009,213 $ 4,156,972
Net realized gain (loss) from investments and foreign currency transactions ............. (15,913,177) (6,669,397)
Net unrealized appreciation (depreciation) on investments and translation of assets and
liabilities denominated in foreign currencies .......................................... 58,425,390 (49,926,876)
-----------------------------------
Net increase (decrease) in net assets resulting from operations ..................... 47,521,426 (52,439,301)
Distributions to shareholders from net investment income .................................. (3,882,934) (3,898,590)
Capital share transactions (Note 2) ....................................................... 59,964,520 46,144,060
-----------------------------------
Net increase (decrease) in net assets ............................................... 103,603,012 (10,193,831)
Net assets:
Beginning of year ........................................................................ $354,042,061 364,235,892
-----------------------------------
End of year .............................................................................. $457,645,073 $354,042,061
-----------------------------------
Undistributed net investment income included in net assets:
End of year .............................................................................. $ 4,612,910 $ 3,474,272
-----------------------------------
Annual Report | See notes to financial statements. | 17
Templeton Capital Accumulator Fund
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Templeton Capital Accumulator 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 Trustees.
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.
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 denominated assets and liabilities other than investments in
securities held at the end of the reporting period.
C. FOREIGN CURRENCY CONTRACTS
When the Fund purchases or sells foreign securities it may enter into foreign
exchange contracts to minimize foreign exchange risk from the trade date to the
settlement date of the transactions. A foreign exchange contract is an agreement
between two parties to exchange different currencies at an agreed upon exchange
rate on a specified date. Realized and unrealized gains and losses are included
in the Statement of Operations.
18 | Annual Report
Templeton Capital Accumulator Fund
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
C. FOREIGN CURRENCY CONTRACTS (CONTINUED)
The risks of these contracts include movement in the values of the foreign
currencies relative to the U.S. dollar and the possible inability of the
counterparties to fulfill their obligations under the contracts.
D. 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 substantially all of its taxable income.
E. 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.
F. ACCOUNTING ESTIMATES
The preparation of financial statements in accordance with accounting principles
generally accepted in the United States of America 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 expenses during the reporting period. Actual results could differ from those
estimates.
G. GUARANTEES AND INDEMNIFICATIONS
Under the Fund's organizational documents, its officers and trustees are
indemnified against certain liability arising out of the performance of their
duties to the Fund. Additionally, in the normal course of business, the Fund
enters into contracts with service providers that contain general
indemnification clauses. The Fund's maximum exposure under these arrangements is
unknown as this would involve future claims that may be made against the Fund
that have not yet occurred. However, based on experience, the Fund expects the
risk of loss to be remote.
2. SHARES OF BENEFICIAL INTEREST
At August 31, 2003, there were an unlimited number of shares of beneficial
interest authorized ($0.01 par value). Transactions in the Fund's shares were as
follows:
-------------------------------------------------------------------
YEAR ENDED AUGUST 31,
2003 2002
-------------------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT
-------------------------------------------------------------------
Shares sold ...................... 8,128,145 $ 71,679,495 5,856,787 $ 59,954,071
Shares issued on reinvestment of
distributions ................... 451,611 3,825,788 393,394 3,838,352
Shares redeemed .................. (1,739,114) (15,540,763) (1,722,844) (17,648,363)
-------------------------------------------------------------------
Net increase (decrease) .......... 6,840,642 $ 59,964,520 4,527,337 $ 46,144,060
-------------------------------------------------------------------
Annual Report | 19
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
3. TRANSACTIONS WITH AFFILIATES
Certain officers of the Fund are also officers or directors of Templeton
Investment Counsel, LLC (TIC), Franklin Templeton Services, LLC (FT Services),
and Franklin/Templeton Distributors, Inc. (Distributors), the Fund's investment
manager, administrative manager and principal underwriter, respectively.
The Fund pays an investment management fee to TIC 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:
- ---------------------------------------------------------------------------
ANNUALIZED FEE RATE AVERAGE DAILY NET ASSETS
- ---------------------------------------------------------------------------
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
The Fund reimburses Distributors up to a blended rate of .10% of average daily
net assets per year attributable to Templeton Capital Accumulator Plan I and
..30% of average daily net assets per year attributable to Templeton Capital
Accumulator Plan II, for costs incurred in marketing the Fund's shares. Under
the distribution plan, costs and expenses exceeding the maximum may be
reimbursed in subsequent periods. At August 31, 2003, Distributors advised the
Fund that unreimbursed costs were $454,149. Distributors received net
commissions from sales of the Fund's shares for the year of $547,280.
4. INCOME TAXES
At August 31, 2003, the cost of investments, net unrealized appreciation
(depreciation) and undistributed ordinary income for income tax purposes were as
follows:
Cost of investments ........................................ $410,197,590
-------------
Unrealized appreciation .................................... 77,639,230
Unrealized depreciation .................................... (30,290,183)
-------------
Net unrealized appreciation (depreciation) ................. $ 47,349,047
-------------
Distributable earnings--ordinary income .................... $ 4,612,910
-------------
20 | Annual Report
Templeton Capital Accumulator Fund
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
4. INCOME TAXES (CONTINUED)
The tax character of distributions paid during the years ended August 31, 2003
and 2002, was as follows:
--------------------------
2003 2002
--------------------------
Distributions paid from:
Ordinary income ........................... $3,882,934 $3,898,590
--------------------------
Net investment income and net realized capital gains differ for financial
statement and tax purposes primarily due to differing treatments of losses
realized subsequent to October 31 on the sale of securities.
At August 31, 2003, the Fund had tax basis capital losses which may be carried
over to offset future capital gains. Such losses expire as follows:
Capital loss carryovers expiring in:
2010 ....................................................... $3,847,447
2011 ....................................................... 5,327,434
----------
$9,174,881
----------
At August 31, 2003, the Fund had deferred capital losses occurring subsequent to
October 31, 2002 of $18,607,167. For tax purposes, such losses will be reflected
in the year ending August 31, 2004.
5. INVESTMENT TRANSACTIONS
Purchases and sales of securities (excluding short-term securities) for the
period ended August 31, 2003 aggregated $80,562,170 and 70,031,255,
respectively.
6. INVESTMENTS IN FRANKLIN INSTITUTIONAL FIDUCIARY TRUST MONEY MARKET PORTFOLIO
The Fund may invest in the Franklin Institutional Fiduciary Trust Money Market
Portfolio (the Sweep Money Fund), an open-end investment company managed by
Franklin Advisers Inc. (an affiliate of the Investment Manager). Management fees
paid by the Fund are reduced on assets invested in the Sweep Money Fund in an
amount not to exceed the management fees paid by the Sweep Money Fund. The Fund
earned $477,093 of dividend income from investment in the Sweep Money Fund for
the year ended August 31, 2003.
Annual Report | 21
Templeton Capital Accumulator Fund
INDEPENDENT AUDITORS' REPORT
TO THE BOARD OF TRUSTEES AND SHAREHOLDERS OF TEMPLETON CAPITAL ACCUMULATOR FUND
In our opinion, the accompanying statement of assets and liabilities, including
the statement of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of the Templeton Capital Accumulator
Fund (the OFundO) at August 31, 2003, the results of its operations for the year
then ended, the changes in its net assets for each of the two years in the
period then ended and the financial highlights for each of the five years in the
period then ended, in conformity with accounting principles generally accepted
in the United States of America. These financial statements and financial
highlights (hereafter referred to as Ofinancial statementsO) are the
responsibility of the Fund's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with auditing standards
generally accepted in the United States of America, 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 audits, which included confirmation of securities at August
31, 2003 by correspondence with the custodian and brokers, provide a reasonable
basis for our opinion.
PricewaterhouseCoopers LLP
San Francisco, California
October 3, 2003
22 | Annual Report
Templeton Capital Accumulator Fund
TAX DESIGNATION (UNAUDITED)
Under Section 854(b)(2) of the Internal Revenue Code, the Fund hereby designates
37.74% of the ordinary income dividends as income qualifying for the dividends
received deduction for the fiscal year ended August 31, 2003.
Under Section 854(b)(2) of the Internal Revenue Code (Code), the Fund hereby
designates up to a maximum of $7,421,201 as qualified dividends for purposes of
the maximum rate under Section 1(h)(11) of the Code for the fiscal year ended
August 31, 2003. In January 2004, shareholders will receive Form 1099-DIV which
will include their share of qualified dividends distributed during the calendar
year 2003. Shareholders are advised to check with their tax advisors for
information on the treatment of these amounts on their individual income tax
returns.
At August 31, 2003, 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. As shown in the table
below, the Fund hereby designates to shareholders the foreign source income and
foreign taxes paid, pursuant to Section 853 of the Internal Revenue Code. This
designation will allow shareholders of record on October 23, 2003, to treat
their proportionate share of foreign taxes paid by the Fund as having been paid
directly by them. The shareholder shall consider these amounts as foreign taxes
paid in the tax year in which they receive the Fund distribution.
The following table provides a breakdown by country of foreign taxes paid and
foreign source income as designated by the fund to shareholders.
- --------------------------------------------------------------------------------
Foreign Tax Foreign Source
Country Paid Per Share Income Per Share
- --------------------------------------------------------------------------------
Australia ......................................... 0.0000 0.0031
Bermuda ........................................... 0.0000 0.0018
Brazil ............................................ 0.0002 0.0009
Canada ............................................ 0.0022 0.0086
Chile ............................................. 0.0000 0.0003
China ............................................. 0.0000 0.0009
Finland ........................................... 0.0004 0.0017
France ............................................ 0.0020 0.0087
Germany ........................................... 0.0030 0.0136
Hong Kong ......................................... 0.0000 0.0020
India ............................................. 0.0002 0.0013
Italy ............................................. 0.0015 0.0060
Japan ............................................. 0.0005 0.0028
Mexico ............................................ 0.0000 0.0016
Netherlands ....................................... 0.0017 0.0068
Norway ............................................ 0.0008 0.0032
Singapore ......................................... 0.0004 0.0010
South Korea ....................................... 0.0012 0.0045
Spain ............................................. 0.0008 0.0044
Sweden ............................................ 0.0024 0.0095
Switzerland ....................................... 0.0006 0.0024
United Kingdom .................................... 0.0037 0.0210
------------------------
TOTAL ............................................. $0.0216 $0.1061
========================
In January 2004, shareholders will receive Form 1099-DIV which will include
their share of taxes paid and foreign source income distributed during the
calendar year 2003. Shareholders are advised to check with their advisors for
information on the treatment of these amounts on their 2003 individual income
tax returns.
Annual Report | 23
BOARD MEMBERS AND OFFICERS
The name, age and address of the officers and board members, as well as their
affiliations, positions held with the Trust, principal occupations during the
past five years and number of U.S. registered portfolios overseen in the
Franklin Templeton Investments fund complex are shown below. Each board member
will serve until that person's successor is elected and qualified.
INDEPENDENT BOARD MEMBERS
- ---------------------------------------------------------------------------------------------------------------------------------
NUMBER OF PORTFOLIOS IN
LENGTH OF FUND COMPLEX OVERSEEN
NAME, AGE AND ADDRESS POSITION TIME SERVED BY BOARD MEMBER* OTHER DIRECTORSHIPS HELD
- ---------------------------------------------------------------------------------------------------------------------------------
HARRIS J. ASHTON (71) Trustee Since 1992 142 Director, Bar-S Foods (meat packing
500 East Broward Blvd. company).
Suite 2100
Fort Lauderdale, FL 33394-3091
- ---------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Director of various companies; and FORMERLY, Director, RBC Holdings, Inc. (bank holding company) (until 2002); and President,
Chief Executive Officer and Chairman of the Board, General Host Corporation (nursery and craft centers) (until 1998).
- ---------------------------------------------------------------------------------------------------------------------------------
FRANK J. CROTHERS (59) Trustee Since 2000 17 None
500 East Broward Blvd.
Suite 2100
Fort Lauderdale, FL 33394-3091
- ---------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Chairman, Atlantic Equipment & Power Ltd.; Chairman, Ventures Resources Corporation (Vice Chairman 1996-2003); Vice Chairman,
Caribbean Utilities Co. Ltd.; Director and President, Provo Power Company Ltd.; Director, Caribbean Electric Utility Services
Corporation (Chairman until 2002); and director of various other business and nonprofit organizations.
- ---------------------------------------------------------------------------------------------------------------------------------
S. JOSEPH FORTUNATO (71) Trustee Since 1992 143 None
500 East Broward Blvd.
Suite 2100
Fort Lauderdale, FL 33394-3091
- ---------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Attorney; and FORMERLY, member of the law firm of Pitney, Hardin, Kipp & Szuch.
- ---------------------------------------------------------------------------------------------------------------------------------
ANDREW H. HINES, JR. (80) Trustee Since 1991 28 None
500 East Broward Blvd.
Suite 2100
Fort Lauderdale, FL 33394-3091
- ---------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Consultant, Triangle Consulting Group; and Executive-in-Residence, Eckerd College (1991-2002); Chairman and Director, FORMERLY,
Precise Power Corporation (1990-1997); Director, Checkers Drive-In Restaurants, Inc. (1994-1997); and Chairman of the Board and
Chief Executive Officer, Florida Progress Corporation (holding company in the energy area) (1982-1990) and director of various of
its subsidiaries.
- ---------------------------------------------------------------------------------------------------------------------------------
24| Annual Report
- -----------------------------------------------------------------------------------------------------------------------------------
NUMBER OF PORTFOLIOS IN
LENGTH OF FUND COMPLEX OVERSEEN
NAME, AGE AND ADDRESS POSITION TIME SERVED BY BOARD MEMBER* OTHER DIRECTORSHIPS HELD
- -----------------------------------------------------------------------------------------------------------------------------------
EDITH E. HOLIDAY (51) Trustee Since 2000 92 Director, Amerada Hess Corporation
500 East Broward Blvd. (exploration and refining of oil and
Suite 2100 gas); Hercules Incorporated
Fort Lauderdale, FL 33394-3091 (chemicals, fibers and resins); Beverly
Enterprises, Inc. (health care);
H.J. Heinz Company (processed foods
and allied products); RTI International
Metals, Inc. (manufacture and
distribution of titanium); and
Canadian National Railway (railroad).
- -----------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Director or Trustee of various companies and trusts; and FORMERLY, Assistant to the President of the United States and Secretary of
the Cabinet (1990- 1993); General Counsel to the United States Treasury Department (1989-1990); and Counselor to the Secretary and
Assistant Secretary for Public Affairs and Public Liaison-United States Treasury Department (1988-1989).
- -----------------------------------------------------------------------------------------------------------------------------------
BETTY P. KRAHMER (74) Trustee Since 1990 21 None
500 East Broward Blvd.
Suite 2100
Fort Lauderdale, FL 33394-3091
- -----------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Director or Trustee of various civic associations; and FORMERLY, Economic Analyst, U.S. government.
- -----------------------------------------------------------------------------------------------------------------------------------
GORDON S. MACKLIN (75) Trustee Since 1993 142 Director, White Mountains Insurance
500 East Broward Blvd. Group, Ltd. (holding company);
Suite 2100 Martek Biosciences Corporation;
Fort Lauderdale, FL 33394-3091 MedImmune, Inc. (biotechnology);
Overstock.com (Internet services);
and Spacehab, Inc. (aerospace
services); and FORMERLY, Director, MCI
Communication Corporation
(subsequently known as MCI WorldCom,
Inc. and WorldCom, Inc.)
(communications services) (1988-2002).
- -----------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Deputy Chairman, White Mountains Insurance Group, Ltd. (holding company); and FORMERLY, Chairman, White River Corporation
(financial services) (1993-1998) and Hambrecht & Quist Group (investment banking) (1987-1992); and President, National Association
of Securities Dealers, Inc. (1970-1987).
- -----------------------------------------------------------------------------------------------------------------------------------
FRED R. MILLSAPS (74) Trustee Since 1990 28 None
500 East Broward Blvd.
Suite 2100
Fort Lauderdale, FL 33394-3091
- -----------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Director of various business and nonprofit organizations; manager of personal investments (1978-present); and FORMERLY, Chairman
and Chief Executive Officer, Landmark Banking Corporation (1969-1978); Financial Vice President, Florida Power and Light
(1965-1969); and Vice President, Federal Reserve Bank of Atlanta (1958-1965).
- -----------------------------------------------------------------------------------------------------------------------------------
Annual Report | 25
- ---------------------------------------------------------------------------------------------------------------------------------
NUMBER OF PORTFOLIOS IN
LENGTH OF FUND COMPLEX OVERSEEN
NAME, AGE AND ADDRESS POSITION TIME SERVED BY BOARD MEMBER* OTHER DIRECTORSHIPS HELD
- ---------------------------------------------------------------------------------------------------------------------------------
Frank A. Olson (71) Trustee Since May 2003 17 Director, Becton, Dickinson and Co.
500 East Broward Blvd. (medical technology); White
Suite 2100 Mountains Insurance Group Ltd.
Fort Lauderdale, FL 33394-3091 (holding company); and Amerada
Hess Corporation (exploration and
refining of oil and gas).
- ---------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Chairman of the Board, The Hertz Corporation (car rental) (since 1980) (Chief Executive Officer 1977-1999); and FORMERLY,
Chairman of the Board, President and Chief Executive Officer, UAL Corporation (airlines).
- ---------------------------------------------------------------------------------------------------------------------------------
CONSTANTINE D. TSERETOPOULOS Trustee Since 2000 17 None
(49)
500 East Broward Blvd.
Suite 2100
Fort Lauderdale, FL 33394-3091
- ---------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Physician, Lyford Cay Hospital (1987-present); director of various nonprofit Cardiology Fellow, University of organizations; and
FORMERLY, Maryland (1985-1987) and Internal Medicine Resident, Greater Baltimore Medical Center (1982-1985).
- ---------------------------------------------------------------------------------------------------------------------------------
INTERESTED BOARD MEMBERS AND OFFICERS
- ---------------------------------------------------------------------------------------------------------------------------------
NUMBER OF PORTFOLIOS IN
LENGTH OF FUND COMPLEX OVERSEEN
NAME, AGE AND ADDRESS POSITION TIME SERVED BY BOARD MEMBER* OTHER DIRECTORSHIPS HELD
- ---------------------------------------------------------------------------------------------------------------------------------
**Nicholas F. Brady (73) Trustee Since 1993 21 Director, Amerada Hess Corporation
500 East Broward Blvd. (exploration and refining of oil and
Suite 2100 gas); and C2, Inc. (operating and
Fort Lauderdale, FL 33394-3091 investment business); and FORMERLY,
Director, H.J. Heinz Company
(processed foods and allied
products) (1987-1988; 1993-2003).
- ---------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Chairman, Templeton Emerging Markets Investment Trust PLC, Darby Overseas Investments, Ltd., Darby Emerging Markets Investments
LDC and Darby Technology Ventures Group, LLC (investment firms) (1994-present); Director, Templeton Capital Advisors Ltd. and
Franklin Templeton Investment Fund; and FORMERLY, Secretary of the United States Department of the Treasury (1988-1993); Chairman
of the Board, Dillon, Read & Co., Inc. (investment banking) (until 1988); and U.S. Senator, New Jersey (April 1982-December 1982).
- ---------------------------------------------------------------------------------------------------------------------------------
**Charles B. Johnson (70) Trustee, Vice President 142 None
One Franklin Parkway Chairman of since 1992 and
San Mateo, CA 94403-1906 the Board Chairman of the
and Vice Board and Trustee
President since 1995
- ---------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Chairman of the Board, Chief Executive Officer, Member - Office of the Chairman and Director, Franklin Resources, Inc.; Vice
President, Franklin Templeton Distributors, Inc.; Director, Fiduciary Trust Company International; and officer and/or director or
trustee, as the case may be, of some of the other subsidiaries of Franklin Resources, Inc. and of 46 of the investment companies
in Franklin Templeton Investments.
- ---------------------------------------------------------------------------------------------------------------------------------
26| Annual Report
- ---------------------------------------------------------------------------------------------------------------------------------
NUMBER OF PORTFOLIOS IN
LENGTH OF FUND COMPLEX OVERSEEN
NAME, AGE AND ADDRESS POSITION TIME SERVED BY BOARD MEMBER* OTHER DIRECTORSHIPS HELD
- ---------------------------------------------------------------------------------------------------------------------------------
Harmon E. Burns (58) Vice President Since 1996 Not Applicable None
One Franklin Parkway
San Mateo, CA 94403-1906
- ---------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Vice Chairman, Member -- Office of the Chairman and Director, Franklin Resources, Inc.; Vice President and Director, Franklin
Templeton Distributors, Inc.; Executive Vice President, Franklin Advisers, Inc.; Director, Franklin Investment Advisory Services,
Inc.; and officer and/or director or trustee, as the case may be, of some of the other subsidiaries of Franklin Resources, Inc.
and of 49 of the investment companies in Franklin Templeton Investments.
- ---------------------------------------------------------------------------------------------------------------------------------
JEFFERY A. EVERETT (39) Vice President Since 2001 Not Applicable None
PO Box N-7759
Lyford Cay, Nassau, Bahamas
- ---------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
President and Director, Templeton Global Advisors Limited; officer of 15 of the investment companies in Franklin Templeton
Investments; and FORMERLY, Investment Officer, First Pennsylvania Investment Research (until 1989).
- ---------------------------------------------------------------------------------------------------------------------------------
MARTIN L. FLANAGAN (43) Vice President Since 1991 Not Applicable None
One Franklin Parkway
San Mateo, CA 94403-1906
- ---------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
President, Franklin Resources, Inc.; Senior Vice President and Chief Financial Officer, Franklin Mutual Advisers, LLC; Executive
Vice President, Chief Financial Officer and Director, Templeton Worldwide, Inc.; Executive Vice President and Chief Operating
Officer, Templeton Investment Counsel, LLC; President and Director, Franklin Advisers, Inc.; Executive Vice President, Franklin
Investment Advisory Services, Inc. and Franklin Templeton Investor Services, LLC; Chief Financial Officer, Franklin Advisory
Services, LLC; Chairman, Franklin Templeton Services, LLC; and officer and/or director or trustee, as the case may be, of some of
the other subsidiaries of Franklin Resources, Inc. and of 49 of the investment companies in Franklin Templeton Investments.
- ---------------------------------------------------------------------------------------------------------------------------------
JIMMY D. GAMBILL (56) Senior Vice Since 2002 Not Applicable None
500 East Broward Blvd. President and
Suite 2100 Chief Executive
Fort Lauderdale, FL 33394-3091 Officer --
Finance and
Administration
- ---------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
President, Franklin Templeton Services, LLC; Senior Vice President, Templeton Worldwide, Inc.; and officer of 51 of the
investment companies in Franklin Templeton Investments.
- ---------------------------------------------------------------------------------------------------------------------------------
DAVID P. GOSS (56) Vice President Since 2000 Not Applicable None
One Franklin Parkway
San Mateo, CA 94403-1906
- ---------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Associate General Counsel, Franklin Resources, Inc.; officer and director of one of the subsidiaries of Franklin Resources, Inc.;
officer of 51 of the investment companies in Franklin Templeton Investments; and FORMERLY, President, Chief Executive Officer and
Director, Property Resources Equity Trust (until 1999) and Franklin Select Realty Trust (until 2000).
- ---------------------------------------------------------------------------------------------------------------------------------
Annual Report | 27
- ---------------------------------------------------------------------------------------------------------------------------------
NUMBER OF PORTFOLIOS IN
LENGTH OF FUND COMPLEX OVERSEEN
NAME, AGE AND ADDRESS POSITION TIME SERVED BY BOARD MEMBER* OTHER DIRECTORSHIPS HELD
- ---------------------------------------------------------------------------------------------------------------------------------
BARBARA J. GREEN (55) Vice President Vice President Not Applicable None
One Franklin Parkway and Secretary since 2000 and
San Mateo, CA 94403-1906 Secretary since
1996
- ---------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Vice President and Deputy General Counsel, Franklin Resources, Inc.; Secretary and Senior Vice President, Templeton Worldwide,
Inc.; Secretary, Franklin Mutual Advisers, LLC; and officer of some of the other subsidiaries of Franklin Resources, Inc. and of
51 of the investment companies in Franklin Templeton Investments; and FORMERLY, Deputy Director, Division of Investment
Management, Executive Assistant and Senior Advisor to the Chairman, Counselor to the Chairman, Special Counsel and Attorney
Fellow, U.S. Securities and Exchange Commission (1986-1995); Attorney, Rogers & Wells (until 1986); and Judicial Clerk, U.S.
District Court (District of Massachusetts) (until 1979).
- ---------------------------------------------------------------------------------------------------------------------------------
RUPERT H. JOHNSON, JR. (63) Vice President Since 1996 Not Applicable None
One Franklin Parkway
San Mateo, CA 94403-1906
- ---------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Vice Chairman, Member - Office of the Chairman and Director, Franklin Resources, Inc.; Vice President and Director, Franklin
Templeton Distributors, Inc.; Director, Franklin Advisers, Inc. and Franklin Investment Advisory Services, Inc.; Senior Vice
President, Franklin Advisory Services, LLC; and officer and/or director or trustee, as the case may be, of some of the other
subsidiaries of Franklin Resources, Inc. and of 49 of the investment companies in Franklin Templeton Investments.
- ---------------------------------------------------------------------------------------------------------------------------------
JOHN R. KAY (63) Vice President Since 1994 Not Applicable None
500 East Broward Blvd.
Suite 2100
Fort Lauderdale, FL 33394-3091
- ---------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Vice President, Templeton Worldwide, Inc.; Assistant Vice President, Franklin Templeton Distributors, Inc.; Senior Vice
President, Franklin Templeton Services, LLC; and officer of one of the other subsidiaries of Franklin Resources, Inc. and of 32
of the investment companies in Franklin Templeton Investments; and FORMERLY, Vice President and Controller, Keystone Group, Inc.
- ---------------------------------------------------------------------------------------------------------------------------------
MICHAEL O. MAGDOL (66) Vice President Since 2002 Not Applicable Director, FTI Banque, Arch
600 Fifth Avenue - AML Chemicals, Inc. and Lingnan
Rockefeller Center Compliance Foundation
New York, NY 10048-0772
- ---------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Vice Chairman, Chief Banking Officer and Director, Fiduciary Trust Company International; and officer and/or director, as the
case may be, of some of the other subsidiaries of Franklin Resources, Inc. and of 47 of the investment companies in Franklin
Templeton Investments.
- ---------------------------------------------------------------------------------------------------------------------------------
GARY P. MOTYL (51) President President since Not Applicable None
500 East Broward Blvd. and Chief 1994 and Chief
Suite 2100 Executive Executive
Fort Lauderdale, FL 33394-3091 Officer - Officer -
Investment Investment
Management Management
since 2002
- ---------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
President and Portfolio Manager, Templeton Investment Counsel, LLC; officer and/or director of other subsidiaries of Franklin
Resources, Inc.; and FORMERLY, Research Analyst and Portfolio Manager, Landmark First National Bank (1979-1981); and Security
Analyst, Standard & Poor's Corporation (1974-1979).
- ---------------------------------------------------------------------------------------------------------------------------------
28| Annual Report
- ----------------------------------------------------------------------------------------------------------------------------------
NUMBER OF PORTFOLIOS IN
LENGTH OF FUND COMPLEX OVERSEEN
NAME, AGE AND ADDRESS POSITION TIME SERVED BY BOARD MEMBER* OTHER DIRECTORSHIPS HELD
- ----------------------------------------------------------------------------------------------------------------------------------
Bruce S. Rosenberg (41) Treasurer and Treasurer since Not Applicable None
500 East Broward Blvd. Chief Financial 2000 and Chief
Suite 2100 Officer Financial
Fort Lauderdale, FL 33394-3091 Officer
since 2002
- ----------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Vice President, Franklin Templeton Services, LLC; and officer of some of the other subsidiaries of Franklin Resources, Inc. and of
41 of the investment companies in Franklin Templeton Investments.
- ----------------------------------------------------------------------------------------------------------------------------------
Murray L. Simpson (66) Vice President Since 2000 Not Applicable None
One Franklin Parkway
San Mateo, CA 94403-1906
- ----------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Executive Vice President and General Counsel, Franklin Resources, Inc.; officer and/or director, as the case may be, of some of
the subsidiaries of Franklin Resources, Inc. and of 51 of the investment companies in Franklin Templeton Investments; and
FORMERLY, Chief Executive Officer and Managing Director, Templeton Franklin Investment Services (Asia) Limited (until 2000); and
Director, Templeton Asset Management Ltd. (until 1999).
- ----------------------------------------------------------------------------------------------------------------------------------
*We base the number of portfolios on each separate series of the U.S. registered
investment companies within the Franklin Templeton Investments fund complex.
These portfolios have a common investment adviser or affiliated investment
advisers.
** Charles B. Johnson is considered an interested person of the Trust under the
federal securities laws due to his position as an officer and director and major
shareholder of Franklin Resources, Inc. (Resources), which is the parent company
of the Trust's adviser and distributor. Nicholas F. Brady is considered an
interested person of the Trust under the federal securities laws due to his
business affiliations with Resources and Templeton Global Advisors Limited. On
August 4, 2003, Resources announced that it had signed a definitive agreement
under which it will acquire all of Darby Overseas Investments, Ltd. (Darby
Investments) and the remaining portion not currently owned by Resources of Darby
Overseas Partners, L.P. (Darby Partners). Mr. Brady will continue as Chairman of
Darby Investments, which is the corporate general partner of Darby Partners. In
addition, Darby Partners and Templeton Global Advisors Limited are limited
partners of Darby Emerging Markets Fund, L.P. (DEMF). Mr. Brady will also
continue to serve as Chairman of the corporate general partner of DEMF, and
Darby Partners and Darby Investments own 100% of the stock of the general
partner of DEMF. Resources also is an investor in Darby Technology Ventures
Group, LLC (DTV) in which Darby Partners is a significant investor and for which
Darby Partners has the right to appoint a majority of the directors. Templeton
Global Advisors Limited also is a limited partner in Darby--BBVA Latin America
Private Equity Fund, L.P. (DBVA), a private equity fund in which Darby Partners
is a significant investor, and the general partner of which Darby Partners
controls jointly with an unaffiliated third party. Mr. Brady is also a director
of Templeton Capital Advisors Ltd. (TCAL), which serves as investment manager to
certain unregistered funds. TCAL and Templeton Global Advisors Limited are both
indirect subsidiaries of Resources.
Note: Charles B. Johnson and Rupert H. Johnson, Jr. are brothers.
THE SARBANES-OXLEY ACT OF 2002 AND RULES ADOPTED BY THE SECURITIES AND EXCHANGE
COMMISSION REQUIRE THE FUND TO DISCLOSE WHETHER THE FUND'S AUDIT COMMITTEE
INCLUDES AT LEAST ONE MEMBER WHO IS AN AUDIT COMMITTEE FINANCIAL EXPERT WITHIN
THE MEANING OF SUCH ACT AND RULES. THE FUND'S BOARD OF TRUSTEES HAS DETERMINED
THAT THERE IS AT LEAST ONE SUCH FINANCIAL EXPERT ON THE AUDIT COMMITTEE AND HAS
DESIGNATED EACH OF FRED R. MILLSAPS AND FRANK A. OLSON AS AN AUDIT COMMITTEE
FINANCIAL EXPERT. THE BOARD BELIEVES THAT MESSRS. MILLSAPS AND OLSON QUALIFY AS
SUCH AN EXPERT IN VIEW OF THEIR EXTENSIVE BUSINESS BACKGROUND AND EXPERIENCE.
MR. MILLSAPS, WHO IS CURRENTLY A DIRECTOR OF VARIOUS BUSINESS AND NONPROFIT
ORGANIZATIONS, HAS SERVED AS A MEMBER AND CHAIRMAN OF THE FUND AUDIT COMMITTEE
SINCE 1991 AND WAS FORMERLY CHAIRMAN AND CHIEF EXECUTIVE OFFICER OF LANDMARK
BANKING CORPORATION AND FINANCIAL VICE PRESIDENT OF FLORIDA POWER AND LIGHT. MR.
OLSON, WHO CURRENTLY SERVES AS CHAIRMAN OF THE BOARD OF THE HERTZ CORPORATION
AND WAS ITS CHIEF EXECUTIVE OFFICER FROM 1977 TO 1999, IS A DIRECTOR AND AUDIT
COMMITTEE MEMBER OF AMERADA HESS CORPORATION AND WHITE MOUNTAINS INSURANCE
GROUP, LTD. AND A FORMER PRESIDENT AND CHIEF EXECUTIVE OFFICER OF UNITED
AIRLINES. AS A RESULT OF SUCH BACKGROUND AND EXPERIENCE, THE BOARD OF TRUSTEES
BELIEVES THAT MR. MILLSAPS AND MR. OLSON HAVE EACH ACQUIRED AN UNDERSTANDING OF
GENERALLY ACCEPTED ACCOUNTING PRINCIPLES AND FINANCIAL STATEMENTS, THE GENERAL
APPLICATION OF SUCH PRINCIPLES IN CONNECTION WITH THE ACCOUNTING ESTIMATES,
ACCRUALS AND RESERVES, AND ANALYZING AND EVALUATING FINANCIAL STATEMENTS THAT
PRESENT A BREADTH AND LEVEL OF COMPLEXITY OF ACCOUNTING ISSUES GENERALLY
COMPARABLE TO THOSE OF THE FUND, AS WELL AS AN UNDERSTANDING OF INTERNAL
CONTROLS AND PROCEDURES FOR FINANCIAL REPORTING AND AN UNDERSTANDING OF AUDIT
COMMITTEE FUNCTIONS. MESSRS. MILLSAPS AND OLSON ARE INDEPENDENT TRUSTEES AS THAT
TERM IS DEFINED UNDER THE APPLICABLE SECURITIES AND EXCHANGE COMMISSION RULES
AND RELEASES.
THE STATEMENT OF ADDITIONAL INFORMATION (SAI) INCLUDES ADDITIONAL INFORMATION
ABOUT THE BOARD MEMBERS AND IS AVAILABLE, WITHOUT CHARGE, UPON REQUEST.
SHAREHOLDERS MAY CALL 1-800/DIAL BEN (1-800/342-5236) TO REQUEST THE SAI.
Annual Report | 29
Templeton Capital Accumulator Fund
PROXY VOTING POLICIES AND PROCEDURES
The Fund has established Proxy Voting Policies and Procedures (OPoliciesO) that
the Fund uses to determine how to vote proxies relating to portfolio securities.
Shareholders may view the Fund's complete Policies online at
franklintempleton.com. Alternatively, shareholders may request copies of the
Policies free of charge by calling the Proxy Group collect at 1-954/847-2268 or
by sending a written request to: Franklin Templeton Companies, LLC, 500 East
Broward Boulevard, Suite 1500, Fort Lauderdale, FL 33394, Attention: Proxy
Group.
30 | Annual Report
[LOGO OMITTED]
FRANKLIN(R) TEMPLETON(R)
INVESTMENTS
One Franklin Parkway
San Mateo, CA 94403-1906
ANNUAL REPORT AND SHAREHOLDER LETTER
TEMPLETON CAPITAL
ACCUMULATOR FUND
AUDITORS
PricewaterhouseCoopers LLP
333 Market Street
San Francisco, CA 94105
PRINCIPAL UNDERWRITER
Franklin Templeton Distributors, Inc.
1-800/DIAL BEN(R)
franklintempleton.com
SHAREHOLDER SERVICES
1-800/632-2301
This report must be preceded or accompanied by the current Templeton Capital
Accumulator Fund 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 risks of loss from market,
currency, economic, political and other factors. 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
identified by the presence of a regular beeping tone.
TCAP A2003 10/03
ITEM 2. CODE OF ETHICS.
(A) THE REGISTRANT HAS ADOPTED A CODE OF ETHICS THAT APPLIES TO ITS PRINCIPAL
EXECUTIVE OFFICERS AND PRINCIPAL FINANCIAL AND ACCOUNTING OFFICER.
(C) N/A
(D) N/A
(F) PURSUANT TO ITEM 10(A), THE REGISTRANT IS ATTACHING AS AN EXHIBIT A COPY OF
ITS CODE OF ETHICS THAT APPLIES TO ITS PRINCIPAL EXECUTIVE OFFICERS FINANCIAL
AND ACCOUNTING OFFICER.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
(A)(1) THE REGISTRANT HAS AN AUDIT COMMITTEE FINANCIAL EXPERT SERVING ON ITS
AUDIT COMMITTEE.
(2) THE AUDIT COMMITTEE FINANCIAL EXPERTS ARE IS FRED R. MILLSAPS AND FRANK A.
OLSON, WHO ARE "INDEPENDENT" AS DEFINED UNDER THE RELEVANT SECURITIES AND
EXCHANGE COMMISSION RULES AND RELEASES.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES. N/A
ITEM 9. CONTROLS AND PROCEDURES.
(a) EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES. The Registrant maintains
disclosure controls and procedures that are designed to ensure that information
required to be disclosed in the Registrant's filings under the Securities
Exchange Act of 1934 and the Investment Company Act of 1940 is recorded,
processed, summarized and reported within the periods specified in the rules and
forms of the Securities and Exchange Commission. Such information is accumulated
and communicated to the Registrant's management, including its principal
executive officer and principal financial officer, as appropriate, to allow
timely decisions regarding required disclosure. The Registrant's management,
including the principal executive officer and the principal financial officer,
recognizes that any set of controls and procedures, no matter how well designed
and operated, can provide only reasonable assurance of achieving the desired
control objectives.
Within 90 days prior to the filing date of this Shareholder Report on Form
N-CSR, the Registrant had carried out an evaluation, under the supervision and
with the participation of the Registrant's management, including the
Registrant's principal executive officer and the Registrant's principal
financial officer, of the effectiveness of the design and operation of the
Registrant's disclosure controls and procedures. Based on such evaluation, the
Registrant's principal executive officer and principal financial officer
concluded that the Registrant's disclosure controls and procedures are
effective.
(B) CHANGES IN INTERNAL CONTROLS. There have been no significant changes in the
Registrant's internal controls or in other factors that could significantly
affect the internal controls subsequent to the date of their evaluation in
connection with the preparation of this Shareholder Report on Form N-CSR.
ITEM 10. EXHIBITS
(A) CODE OF ETHICS FOR PRINCIPAL EXECUTIVE AND SENIOR FINANCIAL OFFICERS.
(B)(1) CERTIFICATIONS PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
OF JIMMY D. GAMBILL, CHIEF EXECUTIVE OFFICER - FINANCE AND ADMINISTRATION, AND
BRUCE S. ROSENBERG, CHIEF FINANCIAL OFFICER
(B(2) CERTIFICATIONS PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
OF JIMMY D. GAMBILL, CHIEF EXECUTIVE OFFICER - FINANCE AND ADMINISTRATION, AND
BRUCE S. ROSENBERG, CHIEF FINANCIAL OFFICER
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
TEMPLETON CAPITAL ACCUMULATOR FUND
By /s/JIMMY D. GAMBILL
Chief Executive Officer - Finance and Administration
Date October 31, 2003
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By /s/JIMMY D. GAMBILL
Chief Executive Officer - Finance and Administration
Date October 31, 2003
By /s/BRUCE S. ROSENBERG
Chief Financial Officer
Date October 31, 2003