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 811-06198
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TEMPLETON CAPITAL ACCUMULATOR FUND
--------------------------------------
(Exact name of registrant as specified in charter)

500 EAST BROWARD BLVD., FORT LAUDERDALE, FL 33394-3091
--------------------------------------------------------
(Address of principal executive offices) (Zip code)

MURRAY L. SIMPSON, ONE FRANKLIN PARKWAY, SAN MATEO, CA 94403-1906
-----------------------------------------------------------------
(Name and address of agent for service)

Registrant's telephone number, including area code: (954) 527-7500
--------------

Date of fiscal year end: 8/31
----

Date of reporting period: 8/31/04
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ITEM 1. REPORTS TO STOCKHOLDERS

AUGUST 31, 2004

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ANNUAL REPORT AND SHAREHOLDER LETTER

GLOBAL
Templeton Capital
Accumulator Fund

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[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 recognized leader in fixed income
investing and also brings expertise in growth- and value-style U.S. equity
investing.

TEMPLETON. Founded in 1940, Templeton pioneered international investing and, in
1954, launched what has become the industry's oldest global fund. Today, with
research offices in over 25 countries, they offer investors the broadest global
reach in the industry.

MUTUAL SERIES. Founded 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

[GRAPHIC OMITTED]

Not part of the annual report

<page>

Contents

SHAREHOLDER LETTER ............................ 1

ANNUAL REPORT

Templeton Capital Accumulator Fund ............ 3

Performance Summary ........................... 6

Your Fund's Expenses .......................... 8

Financial Highlights and

Statement of Investments ...................... 10

Financial Statements .......................... 16

Notes to Financial Statements ................. 19

Report of Independent
Registered Public

Accounting Firm ............................... 26

Tax Designation ............................... 27

Board Members and Officers .................... 29

Shareholder Information ....................... 36

Annual Report

Templeton Capital Accumulator Fund

YOUR FUND'S GOAL AND MAIN INVESTMENTS: Templeton Capital Accumulator Fund seeks
long-term capital growth. Under normal market conditions, the Fund invests in
equity securities of companies of any nation.

[SIDEBAR]

PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE, WHICH DOES NOT GUARANTEE
FUTURE RESULTS. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE, AND YOU
MAY HAVE A GAIN OR LOSS WHEN YOU SELL YOUR SHARES. CURRENT PERFORMANCE MAY
DIFFER FROM FIGURES SHOWN. PLEASE CALL 1-800/632-2301 FOR MOST RECENT
MONTH-END PERFORMANCE.

We are pleased to bring you Templeton Capital Accumulator Fund's annual report
for the fiscal year ended August 31, 2004.

PERFORMANCE OVERVIEW

For the 12 months under review, Templeton Capital Accumulator Fund delivered a
16.72% cumulative total return. The Fund slightly outperformed its benchmark,
the Morgan Stanley Capital International (MSCI) All Country (AC) World Index,
which posted a 16.34% total return for the same period. 1 You can find the
Fund's long-term performance data in the Performance Summary beginning on page
6.

ECONOMIC AND MARKET OVERVIEW

The global economy expanded rapidly over the past few quarters, led by strong
economic growth in the U.S. and China. As of June 30, 2004, U.S. gross domestic
product (GDP) had increased for 11 consecutive quarters. In China, GDP grew at a
strong 9.1% pace in 2003. 2 Despite an effort by Chinese authorities to curb
this growth, China's economy expanded 9.7% in the first half of 2004, slightly
more moderate than the 9.9% rate reported for the fourth quarter of 2003. 2, 3
The continued economic strength reflected strong consumer and business
confidence in China, the U.S., Japan and Europe. The 12-nation euro zone lagged
other regions in the current recovery. However, the European Central Bank
recently projected euro zone growth may be between 1.6% and 2.2% in 2004,
compared with 0.5% in 2003. In addition, the outlook for emerging European
economies improved, led by double-digit growth in industrial production in
Turkey and Poland and steady

1. Source: Standard & Poor's Micropal. The MSCI AC World Index is a free
float-adjusted, market capitalization-weighted index designed to measure equity
market performance in global developed and emerging markets. The index is
unmanaged and includes reinvested dividends. One cannot invest directly in an
index, nor is an index representative of the Fund's portfolio.

2. Source: www.china.org.cn, "China GDP Speeds up; Pace Seen Continuing."

3. Source: Ministry of Foreign Affairs of the People's Republic of China,
www.china-embassy.org, "China's GDP rose 9.7 percent in the first half of 2004,"
7/16/04.

THE DOLLAR VALUE, NUMBER OF SHARES OR PRINCIPAL AMOUNT, AND NAMES OF ALL
PORTFOLIO HOLDINGS ARE LISTED IN THE FUND'S STATEMENT OF INVESTMENTS (SOI). THE
SOI BEGINS ON PAGE 11.

Annual Report | 3

growth in Russia. In Japan, the economy has been emerging from its decade-long
deflation. Japan's consumer and business confidence reached their highest levels
since 1991. In Latin America, although growth was slow relative to Asia and the
U.S., there was evidence of a rebound in industrial activity.

Regarding stock market performance, the global equity rally that began in March
2003 extended into the early part of this year propelled by strong liquidity,
reasonably solid economic growth and higher corporate earnings. However, by the
second quarter investor focus shifted to the challenges of rising commodity
prices, especially oil, Iraqi unrest and a potential slowdown in the Chinese
economy. The prospect of higher interest rates also damaged investor confidence.
These factors hindered global equity performance, and consequently most stock
markets traded within a relatively narrow range in the first eight months of
2004. However, stock market performance in aggregate was positive over the
fiscal year. The MSCI AC World Index's total return was 16.34% for the year
ended August 31, 2004. 1

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

During the Fund's fiscal year, the energy and utility sectors benefited Fund
performance as they each posted gains of about 30%. Conversely, information
technology stocks lagged considerably; however, the Fund was underweighted in
such stocks compared with the index, which helped relative performance. The Fund
benefited from strong stock selection in the health care sector, while poor
stock selection in the consumer discretionary sector hindered relative
performance. Among the Fund's largest gainers were Aventis (up 74%), Celesio
(+65%), Rolls-Royce Group (+63%) and ICICI Bank (+48%). Fund holdings that
detracted from performance included Mylan Laboratories (-27%), Volkswagen (-19%)
and Electrolux (-14%).

[GRAPHIC OMITTED]
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC AS FOLLOWS:

Europe 50.0%
North America 20.7%
Asia 16.6%
Australia & New Zealand 4.1%
Latin America 1.5%
Middle East & Africa 0.7%
Short-Term Investments & Other Net Assets 6.4%

TOP 10 SECTORS/INDUSTRIES
8/31/04

---------------------------------------------------------
% OF TOTAL
NET ASSETS
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Pharmaceuticals 7.4%
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Diversified Telecommunication Services 7.2%
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Insurance 7.2%
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Oil & Gas 7.0%
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Commercial Banks 6.1%
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Media 4.4%
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Health Care Providers & Services 4.2%
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Metals & Mining 4.0%
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Household Durables 3.3%
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Wireless Telecommunication Services 3.2%
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4 | Annual Report

During the reporting period, market dynamics provided us with numerous purchase
and sale opportunities. Interestingly, our buy and sell decisions were across
many sectors and geographic regions, illustrating our focus on individual stock
selection. We established several new positions over the past few months,
including Vodafone Group, a large, U.K.-based, global telecommunications
company; AMP, a major Australian life insurance and financial services group;
and Vestas Wind Systems, a manufacturer of wind-driven, electricity generating
equipment based in Denmark. We also added to a number of existing positions,
such as Michelin, a leading tire producer with global operations, and Securitas,
a Swedish security services provider with strong markets in Europe and the U.S.

On the sell side, we benefited from increased corporate merger activity in the
health care area during the period. We sold our positions in CellTech and
Amersham at a profit when they were the subjects of takeover bids. We also sold
some shares of Aventis, another Fund holding subject to a takeover bid, at a
profit as part of a tender offer late in the period. Elsewhere, we liquidated
our position in Clariant, a Swiss-based chemical company, at a loss because we
were concerned that the firm's long-term fundamentals would not meet our prior
expectations. We also reduced our positions in several stocks, including Husky
Energy and BHP Billiton, after solid price appreciation during the reporting
period.

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

/S/Gary P. Motyl, CFA
Gary P. Motyl, CFA
Portfolio Manager

Templeton Capital Accumulator Fund

THE FOREGOING INFORMATION REFLECTS OUR ANALYSIS, OPINIONS AND PORTFOLIO HOLDINGS
AS OF AUGUST 31, 2004, THE END OF THE REPORTING PERIOD. THE WAY WE IMPLEMENT OUR
MAIN INVESTMENT STRATEGIES AND THE RESULTING PORTFOLIO HOLDINGS MAY CHANGE
DEPENDING ON FACTORS SUCH AS 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
8/31/04
- ---------------------------------------------------------
COMPANY % OF TOTAL
SECTOR/INDUSTRY, COUNTRY NET ASSETS
- ---------------------------------------------------------
Samsung Electronics Co. Ltd. 2.2%
SEMICONDUCTORS & SEMICONDUCTOR
EQUIPMENT, SOUTH KOREA
- ---------------------------------------------------------
Shell Transport & Trading Co. PLC, ADR 1.8%
OIL & GAS, U.K.
- ---------------------------------------------------------
BHP Billiton PLC 1.6%
METALS & MINING, U.K.
- ---------------------------------------------------------
E.ON AG 1.6%
ELECTRIC UTILITIES, GERMANY
- ---------------------------------------------------------
Telefonica SA 1.6%
DIVERSIFIED TELECOMMUNICATION
SERVICES, SPAIN
- ---------------------------------------------------------
Sanofi-Aventis 1.5%
PHARMACEUTICALS, FRANCE
- ---------------------------------------------------------
AT&T Wireless Services Inc. 1.4%
WIRELESS TELECOMMUNICATION
SERVICES, U.S.
- ---------------------------------------------------------
Alcan Inc. 1.3%
METALS & MINING, CANADA
- ---------------------------------------------------------
Vodafone Group PLC 1.3%
WIRELESS TELECOMMUNICATION
SERVICES, U.K.
- ---------------------------------------------------------
Abbey National PLC 1.2%
COMMERCIAL BANKS, U.K.

Annual Report | 5

Performance Summary as of 8/31/04

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
<table>
<caption>
- -------------------------------------------------------------------------------------------------
CHANGE 8/31/04 8/31/03
- -------------------------------------------------------------------------------------------------
<s> <c> <c> <c> <c>
Net Asset Value (NAV) +$1.58 $11.76 $10.18
- -------------------------------------------------------------------------------------------------
DISTRIBUTIONS (9/1/03-8/31/04)
- -------------------------------------------------------------------------------------------------
Dividend Income $0.1105
</table>

PERFORMANCE 1

FUND RETURNS SHOWN IN THE FOLLOWING TABLE DO NOT INCLUDE THE EFFECT OF THE
SEPARATE SALES AND CREATION CHARGES ASSESSED THROUGH TEMPLETON CAPITAL
ACCUMULATION PLANS. IF THESE CHARGES WERE INCLUDED, THE FUND'S RETURNS WOULD
HAVE BEEN LOWER.

<table>
<caption>
- -----------------------------------------------------------------------------------------------------
FUND RETURNS 1-YEAR 5-YEAR 10-YEAR INCEPTION (3/1/91)
- -----------------------------------------------------------------------------------------------------
<s> <c> <c> <c> <c>
Cumulative Total Return 2 16.72% 17.51% 115.27% 271.86%
Average Annual Total Return 3 16.72% 3.28% 7.97% 10.21%
Value of $10,000 Investment 4 $11,672 $11,751 $21,527 $37,186
- -----------------------------------------------------------------------------------------------------
PLAN RETURNS* 1-YEAR 5-YEAR 10-YEAR INCEPTION (3/1/91)
- -----------------------------------------------------------------------------------------------------
Average Annual Total Return 3 -41.64% 1.13% 7.42% 9.91%**
Avg. Ann. Total Return (9/30/04) 5 -39.75% 2.40% 7.96% 10.10%***
</table>

*Plan returns include the effects of the separate sales and creation charges
assessed through Templeton Capital Accumulation Plans' $50/month 15-year plan.
The rate of deductions decreases proportionately as Plan sizes increase.

**Based on pro-rated sales charges from Fund inception through 8/31/04.

***Based on pro-rated sales charges from Fund inception through 9/30/04.

PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE, WHICH DOES NOT GUARANTEE
FUTURE RESULTS. INVESTMENT RETURNS AND PRINCIPAL VALUE WILL FLUCTUATE, AND YOU
MAY HAVE A GAIN OR LOSS WHEN YOU SELL YOUR SHARES. CURRENT PERFORMANCE MAY
DIFFER FROM FIGURES SHOWN. FOR MOST RECENT MONTH-END PERFORMANCE, CALL
1-800/632-2301.

For the first year of a Plan, sales and creation charges can amount to 50% of
the total amount invested during the year. Since shares of the Fund can only be
acquired through Templeton Capital Accumulation Plans, investors should read the
Plan prospectus for more complete information on the impact of the sales and
creation charges applicable to the Plan.

6 | 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 the separate sales and creation charges assessed 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. The unmanaged index differs from the Fund in composition, does not pay
management fees or expenses and includes reinvestment of any income or
distributions. 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:

Templeton Capital *MSCI AC
Accumulator Fund World Index 6 CPI 6
9/1/94 $10,000 $10,000 $10,000
9/30/94 $9,809 $9,765 $10,027
10/31/94 $9,933 $10,015 $10,034
11/30/94 $9,575 $9,581 $10,047
12/31/94 $9,464 $9,614 $10,047
1/31/95 $9,289 $9,418 $10,087
2/28/95 $9,490 $9,519 $10,128
3/31/95 $9,633 $9,955 $10,161
4/30/95 $9,886 $10,317 $10,195
5/31/95 $10,190 $10,431 $10,215
6/30/95 $10,275 $10,433 $10,235
7/31/95 $10,606 $10,938 $10,235
8/31/95 $10,340 $10,698 $10,262
9/30/95 $10,580 $10,993 $10,282
10/31/95 $10,326 $10,809 $10,315
11/30/95 $10,543 $11,149 $10,309
12/31/95 $10,865 $11,485 $10,302
1/31/96 $11,097 $11,740 $10,362
2/29/96 $11,263 $11,789 $10,396
3/31/96 $11,435 $11,970 $10,450
4/30/96 $11,939 $12,263 $10,490
5/31/96 $12,085 $12,275 $10,510
6/30/96 $12,098 $12,343 $10,517
7/31/96 $11,674 $11,882 $10,537
8/31/96 $12,045 $12,028 $10,557
9/30/96 $12,218 $12,473 $10,591
10/31/96 $12,394 $12,522 $10,624
11/30/96 $13,038 $13,192 $10,644
12/31/96 $13,361 $13,001 $10,644
1/31/97 $13,622 $13,219 $10,678
2/28/97 $13,704 $13,399 $10,711
3/31/97 $13,746 $13,131 $10,738
4/30/97 $13,746 $13,553 $10,752
5/31/97 $14,473 $14,361 $10,745
6/30/97 $15,187 $15,096 $10,758
7/31/97 $15,847 $15,779 $10,772
8/31/97 $15,064 $14,672 $10,792
9/30/97 $16,176 $15,454 $10,819
10/31/97 $14,975 $14,534 $10,846
11/30/97 $14,834 $14,757 $10,839
12/31/97 $14,852 $14,950 $10,826
1/31/98 $14,966 $15,279 $10,846
2/28/98 $16,055 $16,325 $10,866
3/31/98 $16,957 $17,021 $10,886
4/30/98 $17,115 $17,181 $10,906
5/31/98 $16,828 $16,855 $10,926
6/30/98 $16,556 $17,158 $10,940
7/31/98 $16,585 $17,164 $10,953
8/31/98 $13,878 $14,759 $10,966
9/30/98 $13,735 $15,053 $10,980
10/31/98 $14,964 $16,428 $11,007
11/30/98 $15,884 $17,425 $11,007
12/31/98 $16,127 $18,234 $11,000
1/31/99 $16,142 $18,607 $11,027
2/28/99 $15,930 $18,139 $11,040
3/31/99 $16,717 $18,955 $11,074
4/30/99 $18,245 $19,774 $11,154
5/31/99 $17,609 $19,075 $11,154
6/30/99 $18,608 $20,025 $11,154
7/31/99 $18,487 $19,943 $11,188
8/31/99 $18,320 $19,919 $11,215
9/30/99 $17,745 $19,704 $11,268
10/31/99 $18,146 $20,702 $11,289
11/30/99 $19,072 $21,346 $11,295
12/31/99 $20,836 $23,124 $11,295
1/31/00 $19,925 $21,877 $11,329
2/29/00 $20,373 $21,951 $11,396
3/31/00 $21,044 $23,394 $11,490
4/30/00 $20,181 $22,345 $11,497
5/31/00 $19,957 $21,765 $11,510
6/30/00 $20,741 $22,502 $11,570
7/31/00 $20,581 $21,841 $11,597
8/31/00 $21,332 $22,520 $11,597
9/30/00 $20,341 $21,284 $11,658
10/31/00 $20,152 $20,867 $11,678
11/30/00 $19,821 $19,574 $11,685
12/31/00 $20,711 $19,901 $11,678
1/31/01 $21,066 $20,405 $11,752
2/28/01 $20,517 $18,688 $11,799
3/31/01 $19,225 $17,430 $11,826
4/30/01 $20,198 $18,699 $11,872
5/31/01 $20,198 $18,491 $11,926
6/30/01 $19,791 $17,924 $11,946
7/31/01 $19,614 $17,642 $11,913
8/31/01 $19,207 $16,831 $11,913
9/30/01 $16,870 $15,294 $11,966
10/31/01 $17,297 $15,619 $11,926
11/30/01 $18,513 $16,579 $11,906
12/31/01 $18,839 $16,735 $11,859
1/31/02 $18,302 $16,276 $11,886
2/28/02 $18,481 $16,156 $11,933
3/31/02 $19,430 $16,886 $12,000
4/30/02 $19,233 $16,351 $12,067
5/31/02 $19,502 $16,374 $12,067
6/30/02 $18,535 $15,375 $12,074
7/31/02 $16,708 $14,086 $12,087
8/31/02 $16,636 $14,122 $12,128
9/30/02 $14,559 $12,573 $12,148
10/31/02 $15,291 $13,499 $12,168
11/30/02 $16,377 $14,237 $12,168
12/31/02 $15,563 $13,559 $12,141
1/31/03 $15,200 $13,163 $12,195
2/28/03 $14,784 $12,932 $12,289
3/31/03 $14,421 $12,883 $12,362
4/30/03 $15,943 $14,034 $12,336
5/31/03 $16,885 $14,851 $12,315
6/30/03 $17,266 $15,136 $12,329
7/31/03 $17,863 $15,472 $12,342
8/31/03 $18,443 $15,839 $12,389
9/30/03 $18,425 $15,940 $12,430
10/31/03 $19,716 $16,907 $12,416
11/30/03 $19,990 $17,166 $12,383
12/31/03 $21,491 $18,255 $12,369
1/31/04 $21,893 $18,567 $12,430
2/29/04 $22,424 $18,910 $12,497
3/31/04 $22,260 $18,809 $12,577
4/30/04 $21,802 $18,378 $12,617
5/31/04 $21,875 $18,533 $12,691
6/30/04 $22,278 $18,907 $12,732
7/31/04 $21,436 $18,307 $12,711
8/31/04 $21,527 $18,426 $12,718

AVERAGE ANNUAL TOTAL RETURN

- -------------------------------------
FUND RETURNS 1 8/31/04
- -------------------------------------
1-Year 16.72%
- -------------------------------------
5-Year 3.28%
- -------------------------------------
10-Year 7.97%

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 RELATIVELY SMALL SIZE AND LESSER
LIQUIDITY. THE FUND'S PROSPECTUS ALSO INCLUDES A DESCRIPTION OF THE MAIN
INVESTMENT RISKS.

1. 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 Index is a free
float-adjusted, market capitalization-weighted index designed to measure equity
market performance in global developed and emerging markets.

Annual Report | 7

YOUR FUND'S EXPENSES

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

O Transaction costs, including sales charges (loads) on Fund purchases and
redemption fees; and

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

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

ACTUAL FUND EXPENSES

The first line (Actual) for each share class listed in the table below provides
actual account values and expenses. The "Ending Account Value" is derived from
the Fund's actual return, which includes the effect of Fund expenses.

You can estimate the expenses you paid during the period, by following these
steps. OF COURSE, YOUR ACCOUNT VALUE AND EXPENSES WILL DIFFER FROM THOSE IN THIS
ILLUSTRATION:

1. Divide your account value by $1,000.
IF AN ACCOUNT HAD AN $8,600 VALUE, THEN $8,600 / $1,000 = 8.6.

2. Multiply the result by the number under the heading "Expenses Paid During
Period."
IF EXPENSES PAID DURING PERIOD WERE $7.50, THEN 8.6 X $7.50 = $64.50.

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

HYPOTHETICAL EXAMPLE FOR COMPARISON WITH OTHER FUNDS

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

8 | Annual Report

YOUR FUND'S EXPENSES (CONTINUED)

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

<table>
<caption>
- -----------------------------------------------------------------------------------------------------
BEGINNING ACCOUNT ENDING ACCOUNT EXPENSES PAID DURING
VALUE 2/29/04 VALUE 8/31/04 PERIOD* 2/29/04-8/31/04
- -----------------------------------------------------------------------------------------------------
<s> <c> <c> <c>
Actual $1,000 $960.00 $6.36
- -----------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000 $1,018.65 $6.55
</table>

*Expenses are equal to the annualized expense ratio of 1.29% multiplied by the
average account value over the period, multiplied by 184/366 to reflect the
one-half year period.

Annual Report | 9

TEMPLETON CAPITAL ACCUMULATOR FUND

FINANCIAL HIGHLIGHTS

<table>
<caption>
---------------------------------------------------------
YEAR ENDED AUGUST 31,
2004 2003 2002 2001 2000
---------------------------------------------------------
<s> <c> <c> <c> <c> <c>
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the year)
Net asset value, beginning of year ............................... $10.18 $9.29 $10.85 $13.34 $12.11
---------------------------------------------------------
Income from investment operations:
Net investment income a ......................................... .12 .12 .12 .16 .16
Net realized and unrealized gains (losses) ...................... 1.57 .87 (1.57) (1.45) 1.71
---------------------------------------------------------
Total from investment operations ................................. 1.69 .99 (1.45) (1.29) 1.87
---------------------------------------------------------
Less distributions from:
Net investment income ........................................... (.11) (.10) (.11) (.16) (.15)
Net realized gains .............................................. -- -- -- (1.04) (.49)
---------------------------------------------------------
Total distributions .............................................. (.11) (.10) (.11) (1.20) (.64)
---------------------------------------------------------
Net asset value, end of year ..................................... $11.76 $10.18 $9.29 $10.85 $13.34
---------------------------------------------------------

Total return b ................................................... 16.72% 10.86% (13.38)% (9.96)% 16.44%

RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (000's) .................................. $596,015 $457,645 $354,042 $364,236 $370,029
Ratios to average net assets:
Expenses ........................................................ 1.21% 1.12% 1.11% 1.05% 1.03%
Net investment income ........................................... 1.04% 1.35% 1.13% 1.35% 1.24%
Portfolio turnover rate .......................................... 12.93% 21.32% 14.28% 22.37% 32.13%

</table>

aBased on average daily shares outstanding.
bTotal return is not annualized for periods less than one year.

10 | See notes to financial statements. | Annual Report

TEMPLETON CAPITAL ACCUMULATOR FUND

STATEMENT OF INVESTMENTS, AUGUST 31, 2004

<table>
<caption>
- ---------------------------------------------------------------------------------------------------------------------------
INDUSTRY SHARES VALUE
- ---------------------------------------------------------------------------------------------------------------------------
<s> <c> <c> <c>
COMMON STOCKS 93.0%
AUSTRALIA 3.5%
Alumina Ltd. ........................... Metals & Mining 1,054,060 $ 4,041,681
AMP Ltd. ............................... Insurance 1,126,860 4,973,325
National Australia Bank Ltd. ........... Commercial Banks 362,220 6,816,580
Qantas Airways Ltd. .................... Airlines 1,276,080 3,072,764
WMC Resources Ltd. ..................... Metals & Mining 600,000 2,084,554
---------------
20,988,904
---------------
BERMUDA 1.5%
ACE Ltd. ............................... Insurance 137,470 5,299,469
XL Capital Ltd., A ..................... Insurance 50,300 3,531,060
---------------
8,830,529
---------------
BRAZIL .6%
Embraer-Empresa Brasileira de Aeronautica
SA, ADR ............................... Aerospace & Defense 125,985 3,344,902
---------------
CANADA 3.7%
Alcan Inc. ............................. Metals & Mining 159,160 6,893,220
Alcan Inc. (EUR Traded) ................ Metals & Mining 23,940 1,038,017
BCE Inc. ............................... Diversified Telecommunication Services 325,460 6,755,716
a Celestica Inc. ......................... Electronic Equipment & Instruments 204,530 2,921,413
Husky Energy Inc. ...................... Oil & Gas 205,420 4,362,213
---------------
21,970,579
---------------
CHILE .1%
Cia de Telecomunicaciones de Chile SA,
ADR ................................... Diversified Telecommunication Services 55,325 681,604
---------------
CHINA .4%
a BYD Co. Ltd., H ........................ Electrical Equipment 923,000 2,502,766
---------------
DENMARK .4%
a Vestas Wind Systems AS ................. Electrical Equipment 124,170 1,612,874
a Vestas Wind Systems AS, 144A ........... Electrical Equipment 41,390 537,625
---------------
2,150,499
---------------
FINLAND .8%
Stora Enso OYJ, R
(EUR/FIM Traded) ...................... Paper & Forest Products 203,900 2,723,325
Stora Enso OYJ, R (SEK Traded) ......... Paper & Forest Products 145,997 1,943,310
---------------
4,666,635
---------------
FRANCE 5.4%
Accor SA ............................... Hotels Restaurants & Leisure 61,110 2,577,071
AXA SA ................................. Insurance 210,901 4,303,422
Michelin SA, B ......................... Auto Components 137,430 7,260,320
Sanofi-Aventis ......................... Pharmaceuticals 130,141 9,236,588
Suez SA ................................ Multi-Utilities & Unregulated Power 201,170 3,894,607
Total SA, B ............................ Oil & Gas 26,062 5,070,884
---------------
32,342,892
---------------
</table>

Annual Report | 11

TEMPLETON CAPITAL ACCUMULATOR FUND

STATEMENT OF INVESTMENTS, AUGUST 31, 2004 (CONTINUED)

<table>
<caption>
- ---------------------------------------------------------------------------------------------------------------------------
INDUSTRY SHARES VALUE
- ---------------------------------------------------------------------------------------------------------------------------
<s> <c> <c> <c>
COMMON STOCKS (CONT.)
GERMANY 6.2%
BASF AG ................................ Chemicals 80,690 $ 4,364,776
Bayer AG, Br. .......................... Chemicals 111,770 2,859,315
Celesio AG ............................. Health Care Providers & Services 105,466 6,959,802
Deutsche Post AG ....................... Air Freight & Logistics 335,080 6,658,108
E. ON AG ............................... Electric Utilities 134,070 9,515,444
Muenchener Rueckversicherungs-
Gesellschaft .......................... Insurance 18,960 1,792,679
Muenchener Rueckversicherungs-
Gesellschaft, 144A .................... Insurance 5,417 512,181
Volkswagen AG .......................... Automobiles 107,970 4,159,556
---------------
36,821,861
---------------
HONG KONG 1.8%
Cheung Kong Holdings Ltd. .............. Real Estate 436,000 3,759,127
China Mobile (Hong Kong)
Ltd., fgn. ............................ Wireless Telecommunication Services 1,230,500 3,588,981
Hutchison Whampoa Ltd. ................. Industrial Conglomerates 247,650 1,944,700
Swire Pacific Ltd., A .................. Real Estate 190,000 1,345,842
Swire Pacific Ltd., B .................. Real Estate 112,500 137,741
---------------
10,776,391
---------------
INDIA 1.2%
ICICI Bank Ltd. ........................ Commercial Banks 325,519 1,892,569
ICICI Bank Ltd., ADR ................... Commercial Banks 80,185 978,257
Satyam Computers Services Ltd. ......... IT Services 394,520 2,890,479
Satyam Computers
Services Ltd., ADR .................... IT Services 71,700 1,406,754
---------------
7,168,059
---------------
ISRAEL .7%
a Check Point Software
Technologies Ltd. ..................... Software 234,490 4,112,955
---------------
ITALY 1.7%
Eni SpA ................................ Oil & Gas 339,760 6,941,040
Riunione Adriatica di S
icurta SpA ............................ Insurance 177,381 3,125,790
---------------
10,066,830
---------------
JAPAN 7.7%
East Japan Railway Co. ................. Road & Rail 581 3,250,572
Hitachi Ltd. ........................... Electronic Equipment & Instruments 955,000 5,986,970
Komatsu Ltd. ........................... Machinery 771,000 4,714,028
NEC Corp. .............................. Computers & Peripherals 447,000 2,855,228
Nintendo Co. Ltd. ...................... Software 32,000 3,440,703
Nippon Telegraph &
Telephone Corp. ....................... Diversified Telecommunication Services 1,118 4,828,757
Nomura Holdings Inc. ................... Capital Markets 206,000 2,830,635
Seiko Epson Corp. ...................... Computers & Peripherals 117,500 4,807,280
Sompo Japan Insurance Inc. ............. Insurance 682,000 6,363,552
Sony Corp. ............................. Household Durables 109,900 3,785,339
Takeda Pharmaceutical Co. Ltd. ......... Pharmaceuticals 62,800 2,826,844
---------------
45,689,908
---------------
</table>

12 | Annual Report

TEMPLETON CAPITAL ACCUMULATOR FUND

STATEMENT OF INVESTMENTS, AUGUST 31, 2004 (CONTINUED)

<table>
<caption>
- ---------------------------------------------------------------------------------------------------------------------------
INDUSTRY SHARES VALUE
- ---------------------------------------------------------------------------------------------------------------------------
<s> <c> <c> <c>
COMMON STOCKS (CONT.)
MEXICO .8%
Telefonos de Mexico SA de CV (Telmex),
L, ADR ................................ Diversified Telecommunication Services 151,360 $ 4,902,550
---------------
NETHERLANDS 3.4%
IHC Caland NV .......................... Energy Equipment & Services 80,950 3,885,962
ING Groep NV ........................... Diversified Financial Services 271,600 6,618,030
Koninklijke Philips
Electronics NV ........................ Household Durables 317,267 7,302,801
Wolters Kluwer NV ...................... Media 150,890 2,482,926
---------------
20,289,719
---------------
NORWAY 1.3%
Norsk Hydro ASA ........................ Oil & Gas 89,890 5,595,191
Norske Skogindustrier ASA, A ........... Paper & Forest Products 145,300 2,418,792
---------------
8,013,983
---------------
PORTUGAL .9%
Portugal Telecom SGPS SA ............... Diversified Telecommunication Services 553,710 5,632,386
---------------
SINGAPORE .7%
DBS Group Holdings Ltd. ................ Commercial Banks 484,900 4,417,320
---------------
SOUTH KOREA 4.3%
a Kookmin Bank ........................... Commercial Banks 110,304 3,524,059
Korea Electric Power Corp. ............. Electric Utilities 101,110 1,777,556
KT Corp., ADR .......................... Diversified Telecommunication Services 140,600 2,463,312
LG Electronics Inc. .................... Household Durables 104,610 4,995,051
Samsung Electronics Co. Ltd. ........... Semiconductors & Semiconductor Equipment 32,810 12,846,560
---------------
25,606,538
---------------
SPAIN 3.3%
Endesa SA .............................. Electric Utilities 82,930 1,533,949
Iberdrola SA, Br. ...................... Electric Utilities 225,770 4,606,823
Repsol YPF SA .......................... Oil & Gas 191,120 3,948,569
Telefonica SA .......................... Diversified Telecommunication Services 656,090 9,313,027
---------------
19,402,368
---------------
SWEDEN 5.0%
Atlas Copco AB, A ...................... Machinery 169,810 6,012,334
Electrolux AB, B ....................... Household Durables 208,170 3,809,948
Foreningssparbanken AB, A .............. Commercial Banks 159,350 3,033,097
Nordea Bank AB, FDR .................... Commercial Banks 684,060 5,229,130
Securitas AB, B ........................ Commercial Services & Supplies 379,700 4,712,893
Volvo AB, B ............................ Machinery 198,470 6,776,109
---------------
29,573,511
---------------
SWITZERLAND 2.7%
Adecco SA .............................. Commercial Services & Supplies 81,100 3,754,245
Lonza Group AG ......................... Chemicals 70,850 3,140,073
Nestle SA .............................. Food Products 17,390 4,107,334
Swiss Reinsurance Co. .................. Insurance 88,990 5,031,807
---------------
16,033,459
---------------
</table>

Annual Report | 13

TEMPLETON CAPITAL ACCUMULATOR FUND

STATEMENT OF INVESTMENTS, AUGUST 31, 2004 (CONTINUED)

<table>
<caption>
- ---------------------------------------------------------------------------------------------------------------------------
INDUSTRY SHARES VALUE
- ---------------------------------------------------------------------------------------------------------------------------
<s> <c> <c> <c>
COMMON STOCKS (CONT.)
TAIWAN .4%
Chunghwa Telecom Co. Ltd., ADR ......... Diversified Telecommunication Services 152,310 $ 2,598,409
---------------
UNITED KINGDOM 18.9%
Abbey National PLC ..................... Commercial Banks 685,240 7,371,618
Alliance Unichem ....................... Health Care Providers & Services 333,080 4,035,572
Amvescap PLC ........................... Capital Markets 213,052 1,111,482
BAE Systems PLC ........................ Aerospace & Defense 1,017,850 3,671,277
BHP Billiton PLC ....................... Metals & Mining 1,028,277 9,674,550
BP PLC ................................. Oil & Gas 586,250 5,196,710
Brambles Industries PLC ................ Commercial Services & Supplies 878,378 3,831,882
a British Airways PLC .................... Airlines 835,990 3,368,744
British Sky Broadcasting
Group PLC ............................. Media 640,000 5,503,346
Cadbury Schweppes PLC .................. Food Products 574,410 4,603,505
GlaxoSmithKline PLC .................... Pharmaceuticals 358,150 7,286,962
Hanson PLC ............................. Construction Materials 495,621 3,374,695
Kidde PLC .............................. Electrical Equipment 1,340,880 2,840,337
National Grid Transco PLC .............. Multi-Utilities & Unregulated Power 562,790 4,722,989
Pearson PLC ............................ Media 472,140 5,261,760
Rolls-Royce Group PLC .................. Aerospace & Defense 1,117,630 4,659,473
Shell Transport & Trading Co.
PLC, ADR .............................. Oil & Gas 242,900 10,760,470
a Shire Pharmaceuticals Group PLC ........ Pharmaceuticals 373,550 3,239,028
Smiths Group PLC ....................... Industrial Conglomerates 253,380 3,163,376
Standard Chartered PLC ................. Commercial Banks 185,080 3,139,714
Unilever PLC ........................... Food Products 631,940 5,411,302
Vodafone Group PLC ..................... Wireless Telecommunication Services 3,346,670 7,600,869
WPP Group PLC .......................... Media 336,000 2,998,057
---------------
112,827,718
---------------
UNITED STATES 15.6%
Abbott Laboratories .................... Pharmaceuticals 167,650 6,989,328
American International
Group Inc. ............................ Insurance 72,920 5,194,821
AmerisourceBergen Corp. ................ Health Care Providers & Services 78,610 4,252,801
a AMR Corp. .............................. Airlines 424,060 3,791,096
a AT&T Wireless Services Inc. ............ Wireless Telecommunication Services 558,840 8,170,241
a BMC Software Inc. ...................... Software 165,810 2,482,176
Boise Cascade Corp. .................... Specialty Retail 120,710 3,777,016
Bristol-Myers Squibb Co. ............... Pharmaceuticals 143,620 3,408,103
CIGNA Corp. ............................ Health Care Providers & Services 53,200 3,540,992
a DIRECTV Group Inc. ..................... Media 390,840 6,202,631
Electronic Data Systems Corp. .......... IT Services 2,240 43,053
a Hospira Inc. ........................... Health Care Equipment & Supplies 16,765 464,390
International Paper Co. ................ Paper & Forest Products 121,830 4,875,637
Kraft Foods Inc., A .................... Food Products 122,940 3,845,563
a Maxtor Corp. ........................... Computers & Peripherals 261,960 1,100,232
Mylan Laboratories Inc. ................ Pharmaceuticals 377,220 6,571,172
Pfizer Inc. ............................ Pharmaceuticals 141,342 4,617,643
SBC Communications Inc. ................ Diversified Telecommunication Services 229,350 5,914,937
a Synopsys Inc. .......................... Software 103,940 1,658,882
</table>

14 | Annual Report

TEMPLETON CAPITAL ACCUMULATOR FUND

STATEMENT OF INVESTMENTS, AUGUST 31, 2004 (CONTINUED)

<table>
<caption>
<s> <c> <c> <c>
CURRENCY ABBREVIATIONS: | EUR - Euro | FIM - Finnish Markka | SEK - Swedish Krona
</table>

aNon-income producing.
bSee Note 7 regarding investments in the Franklin Institutional Fiduciary Trust
Money Market Portfolio.

Annual Report | See notes to financial statements. | 15

TEMPLETON CAPITAL ACCUMULATOR FUND

FINANCIAL STATEMENTS

STATEMENT OF ASSETS AND LIABILITIES
August 31, 2004

Assets:
Investments in securities:
Cost - Unaffiliated issuers ................................ $455,313,537
Cost - Sweep money fund (Note 7) ........................... 37,361,578
-------------
Value - Unaffiliated issuers ............................... 558,050,617
Value - Sweep money fund (Note 7) .......................... 37,361,578
Foreign currency, at value (cost $3,949) .................... 3,950
Receivables:
Investment securities sold ................................. 583,932
Capital shares sold ........................................ 58,141
Dividends .................................................. 1,320,709
-------------
Total assets ........................................... 597,378,927
-------------
Liabilities:
Payables:
Investment securities purchased ............................ 107,347
Capital shares redeemed .................................... 88,929
Affiliates ................................................. 486,843
Deferred tax liability (Note 1f) ........................... 123,362
Funds advanced by custodian ................................ 274,174
Other liabilities .......................................... 283,324
-------------
Total liabilities ...................................... 1,363,979
-------------
Net assets, at value ................................. $596,014,948
-------------
Net assets consist of:
Undistributed net investment income ......................... $ 5,103,354
Net unrealized appreciation (depreciation) .................. 102,622,687
Accumulated net realized gain (loss) ........................ (10,880,450)
Capital shares .............................................. 499,169,357
-------------
Net assets, at value ................................. $596,014,948
-------------
Shares outstanding ........................................... 50,674,788
-------------
Net asset value and maximum offering price per share ......... $11.76
-------------

16 | See notes to financial statements. | Annual Report

TEMPLETON CAPITAL ACCUMULATOR FUND

FINANCIAL STATEMENTS (CONTINUED)

STATEMENT OF OPERATIONS
for the year ended August 31, 2004

<table>
<caption>
Investment income:
(net of foreign taxes of $1,432,822)
Dividends:
<s> <c>
Dividends - Unaffiliated issuers ............................................. $12,333,197
Sweep money fund (Note 7) .................................................... 259,874
Interest ...................................................................... 6,924
------------
Total investment income .................................................. 12,599,995
------------
Expenses:
Management fees (Note 3) ...................................................... 4,083,289
Administrative fees (Note 3) .................................................. 785,444
Distribution fees (Note 3) .................................................... 658,115
Transfer agent fees (Note 3) .................................................. 895,500
Custodian fees (Note 4) ....................................................... 173,001
Reports to shareholders ....................................................... 75,000
Registration and filing fees .................................................. 4,700
Professional fees ............................................................. 59,200
Trustees' fees and expenses ................................................... 28,000
Other ......................................................................... 23,300
------------
Total expenses ........................................................... 6,785,549
Expense reductions (Note 4) .............................................. (50)
------------
Net expenses ........................................................... 6,785,499
------------
Net investment income ................................................ 5,814,496
------------
Realized and unrealized gains (losses): Net realized gain (loss) from:
Investments .................................................................. 16,952,318
Foreign currency transactions ................................................ (287,715)
------------
Net realized gain (loss).................................................. 16,664,603
Net unrealized appreciation (depreciation) on:
Investments .................................................................. 55,388,033
Translation of assets and liabilities denominated in foreign currencies ...... 11,104
Deferred taxes (Note 1f) ..................................................... (123,362)
------------
Net unrealized appreciation (depreciation) ............................... 55,275,775
------------
Net realized and unrealized gain (loss) ........................................ 71,940,378
------------
Net increase (decrease) in net assets resulting from operations ................ $77,754,874
------------
</table>

Annual Report | See notes to financial statements. | 17

TEMPLETON CAPITAL ACCUMULATOR FUND

FINANCIAL STATEMENTS (CONTINUED)

STATEMENTS OF CHANGES IN NET ASSETS
for the years ended August 31, 2004 and 2003
<table>
<caption>
--------------------------------
2004 2003
--------------------------------
Increase (decrease) in net assets:
Operations:
<s> <c> <c>
Net investment income (loss) ........................................................... $ 5,814,496 $ 5,009,213
Net realized gain (loss) from investments and foreign
currency transactions ................................................................. 16,664,603 (15,913,177)
Net unrealized appreciation (depreciation) on investments, translation of assets and
liabilities denominated in foreign currencies, and deferred taxes ..................... 55,275,775 58,425,390
--------------------------------
Net increase (decrease) in net assets resulting from operations .................... 77,754,874 47,521,426
Distributions to shareholders from net investment income ................................. (5,087,057) (3,882,934)
Capital share transactions (Note 2) ...................................................... 65,702,058 59,964,520
--------------------------------
Net increase (decrease) in net assets .............................................. 138,369,875 103,603,012
Net assets:
Beginning of year ....................................................................... 457,645,073 $354,042,061
--------------------------------
End of year ............................................................................. $596,014,948 $457,645,073
--------------------------------
Undistributed net investment income included in net assets:
End of year ............................................................................. $ 5,103,354 $ 4,612,910
--------------------------------
</table>

18 | See notes to financial statements. | Annual Report

TEMPLETON CAPITAL ACCUMULATOR FUND

NOTES TO FINANCIAL STATEMENTS

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

Templeton Capital Accumulator Fund (the Fund) is registered under the Investment
Company Act of 1940 as a diversified, open-end investment company. Shares of the
Fund are offered to the general public only through Templeton Capital
Accumulation Plans. The Fund seeks long term capital growth. Under normal market
conditions, the Fund invests in equity securities of companies of any nation.
The following summarizes the Fund's significant accounting policies.

A. SECURITY VALUATION

Securities listed or traded on a recognized national exchange are valued at the
last reported sales price. Securities listed or traded on NASDAQ are valued at
their official closing 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 by independent pricing services or recognized dealers in
such securities. Foreign securities are valued at the close of trading of the
foreign exchange or the NYSE, whichever is earlier. If events occur that
materially affect the values of securities after the prices or foreign exchange
rates are determined, but prior to 4:00 p.m. Eastern time or the close of
trading on the NYSE, whichever is earlier, or if market quotations are deemed
not readily available or reliable, the securities will be valued at fair value.
Investments in open-end mutual funds are valued at the closing net asset value.
All security valuation procedures are approved 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, income and expense 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.

Annual Report | 19

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. Fund distributions to
shareholders are determined on a tax basis and may differ from net investment
income and realized gains for financial reporting purposes.

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. Interest income and estimated expenses are accrued daily. Dividend
income and distributions to shareholders are recorded on the ex-dividend date.

F. DEFERRED TAXES

The Fund is subject to a tax imposed on net realized gains of securities of
certain foreign countries. The Fund records an estimated deferred tax liability
for net unrealized gains on these securities as reflected in the accompanying
financial statements.

G. 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.

H. REDEMPTION FEES

Effective June 1, 2004, redemptions and exchanges of Fund shares held five
trading days or less may be subject to the Fund's redemption fee, which is 2% of
the amount redeemed. Such fees are retained by the Fund and accounted for as
additional paid-in capital. There were no redemption fees for the year.

I. 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.

20 | Annual Report

TEMPLETON CAPITAL ACCUMULATOR FUND

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

2. SHARES OF BENEFICIAL INTEREST

At August 31, 2004, there were an unlimited number of shares of beneficial
interest authorized (without par value). Transactions in the Fund's shares were
as follows:

<table>
<caption>
------------------------------------------------------------------
YEAR ENDED AUGUST 31,
2004 2003
SHARES AMOUNT SHARES AMOUNT
------------------------------------------------------------------
<s> <c> <c> <c> <c>
Shares sold ....................... 7,671,485 $88,767,548 8,128,145 $71,679,495
Shares issued in reinvestment of
distributions .................... 472,305 5,019,603 451,611 3,825,788
Shares redeemed ................... (2,407,696) (28,085,093) (1,739,114) (15,540,763)
------------------------------------------------------------------
Net increase (decrease) ........... 5,736,094 $65,702,058 6,840,642 $59,964,520
------------------------------------------------------------------
</table>

3. TRANSACTIONS WITH AFFILIATES

Certain officers of the Fund are also officers or directors of the following
entities:

<table>
<caption>
- ----------------------------------------------------------------------------------------------------
ENTITY AFFILIATION
- ----------------------------------------------------------------------------------------------------
<s> <c>
Templeton Investment Counsel, LLC (TIC) Investment manager
Franklin Templeton Services, LLC (FT Services) Administrative manager
Franklin Templeton/Distributors, Inc. (Distributors) Principal underwriter
Franklin Templeton Investor Services, LLC (Investor Services) Transfer agent
</table>

The Fund paid transfer agent fees of $895,500, of which $4,087 was paid to
Investor Services.

A. MANAGEMENT FEE

The Fund pays an investment management fee to TIC based on the Fund's average
daily net assets as follows:

- --------------------------------------------------------------------------------
ANNUALIZED FEE RATE NET ASSETS
- --------------------------------------------------------------------------------
0.750% Up to and including $1 billion 0.730% Over $1 billion, up to and
including $5 billion 0.710% Over $5 billion, up to and including $10
billion 0.690% Over $10 billion, up to and including $15 billion 0.670%
Over $15 billion, up to and including $20 billion 0.650% Over $20
billion

Prior to June 1, 2004, the Fund paid an investment management fee to TIC of
0.75% per year of the average daily net assets of the Fund.

Annual Report | 21

TEMPLETON CAPITAL ACCUMULATOR FUND

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

3. TRANSACTIONS WITH AFFILIATES (CONTINUED)

B. ADMINISTRATIVE FEES

The Fund pays an administrative fee to FT Services based on the Fund's average
daily net assets as follows:

- ------------------------------------------------------------------------------
ANNUALIZED FEE RATE NET ASSETS

0.150% First $200 million
0.135% Over $200 million, up to and including $700 million
0.100% Over $700 million, up to and including $1.2 billion
0.075% In excess of $1.2 billion

C. DISTRIBUTION FEES

The Fund reimburses Distributors up to 0.30% per year of its average daily net
assets for costs incurred in marketing the Fund's shares under a Rule 12b-1
plan.

Under the distribution plan, costs and expenses exceeding the maximum for the
current plan year may be reimbursed in subsequent periods. At August 31, 2004,
Distributors advised the Fund unreimbursed costs were $680,835.

D. SALES CHARGES/UNDERWRITING AGREEMENTS

Distributors has advised the Fund of the following commission transactions
related to the sale of the Fund's shares for the year:

Sales charges received ...................................... $754,699

4. EXPENSE OFFSET ARRANGEMENT

The Fund has entered into an arrangement with its custodian whereby credits
realized as a result of uninvested cash balances are used to reduce a portion of
the Fund's custodian expenses. During the year ended August 31, 2004, the
custodian fees were reduced as noted in the Statement of Operations.

5. INCOME TAXES

At August 31, 2004, 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
2012 ...................................................... 1,654,849
-----------
$10,829,730
-----------

22 | Annual Report

TEMPLETON CAPITAL ACCUMULATOR FUND

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

5. INCOME TAXES (CONTINUED)

At August 31, 2004, the Fund had deferred currency losses occurring subsequent
to October 31, 2003 of $50,720. For tax purposes, such losses will be reflected
in the year ending August 31, 2005.

At August 31, 2004, the cost of investments, net unrealized appreciation
(depreciation) and undistributed ordinary income for income tax purposes were as
follows:

Cost of investments ........................................... $492,675,115
-------------
Unrealized appreciation ....................................... $125,409,009
Unrealized depreciation ....................................... (22,671,929)
-------------
Net unrealized appreciation (depreciation) .................... $102,737,080
-------------
Distributable earnings--undistributed ordinary income ......... $5,103,354
-------------

The tax character of distributions paid during the years ended August 31, 2004
and 2003, was as follows:

--------------------------
2004 2003
--------------------------
Distributions paid from:
Ordinary income ........................... $5,087,057 $3,882,934

Net investment income (loss) and net realized gains (losses) differ for
financial statements and tax purposes primarily due to differing treatment of
foreign currency transactions.

6. INVESTMENT TRANSACTIONS

Purchases and sales of investments (excluding short-term securities) for the
year ended August 31, 2004 aggregated $179,912,675and 67,677,557, respectively.

7. 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.

8. REGULATORY MATTERS

MASSACHUSETTS ADMINISTRATIVE PROCEEDING

On September 20, 2004, Franklin Resources, Inc. (Franklin Resources, Inc. and
its subsidiaries are referred to collectively as the "Company") announced that
an agreement has been reached by two of its subsidiaries, Franklin Advisers,
Inc. ("Franklin Advisers") and Franklin Templeton Alternative Strategies, Inc.
("FTAS"), with the Securities Division of the Office of the Secretary of the
Commonwealth of Massachusetts (the "State of Massachusetts") related to an
administrative complaint filed on February 4, 2004. The administrative complaint
addressed one instance of market timing that was also a subject of the August 2,
2004 settlement that Franklin Advisers reached with the SEC, as described below.

Annual Report | 23

TEMPLETON CAPITAL ACCUMULATOR FUND

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

8. REGULATORY MATTERS (CONTINUED)

Under the terms of the settlement consent order issued by the State of
Massachusetts, Franklin Advisers and FTAS have consented to the entry of a
cease-and-desist order and agreed to pay a $5 million administrative fine to the
State of Massachusetts. The consent order has multiple sections, including
"Statements of Fact" and "Violations of Massachusetts Securities Laws." The
Company admitted the "Statements of Fact." The Company did not admit or deny the
"Violations of the Massachusetts Securities Laws." While Franklin Advisers and
FTAS did not admit or deny engaging in any wrongdoing, the Company believes that
it is in its best interest and the interests of its funds' shareholders to
settle this issue now and move forward.

U.S. SECURITIES AND EXCHANGE COMMISSION (SEC) SETTLEMENT

On August 2, 2004, the Company announced that an agreement has been reached by
Franklin Advisers with the SEC that resolves the issues resulting from the SEC's
investigation of market timing activity and the SEC issued an "Order instituting
administrative and cease-and-desist proceedings pursuant to sections 203(e) and
203(k) of the Investment Advisers Act of 1940 and sections 9(b) and 9(f) of the
Investment Company Act of 1940, making findings and imposing remedial sanctions
and a cease-and-desist order" (the "Order"). The SEC's Order concerns the
activities of a limited number of third parties that ended in 2000 and those
that are the subject of the Massachusetts administrative complaint described
above.

Under the terms of the SEC's Order, pursuant to which Franklin Advisers neither
admits nor denies any wrongdoing, Franklin Advisers has agreed to pay $50
million, of which $20 million is a civil penalty, to be distributed to
shareholders of certain funds in accordance with a plan to be developed by an
Independent Distribution Consultant. At this time, it is unclear which funds
will receive distributions or which shareholders of any particular fund will
receive distributions. The SEC Order also requires Franklin Advisers to, among
other things, enhance and periodically review compliance policies and
procedures.

OTHER GOVERNMENTAL INVESTIGATIONS

As part of ongoing investigations by the SEC, the U.S. Attorney for the Northern
District of California, the New York Attorney General, the California Attorney
General, the U.S. Attorney for the District of Massachusetts, the Florida
Department of Financial Services and the Commissioner of Securities, the West
Virginia Attorney General, the Vermont Department of Banking, Insurance,
Securities, and Health Care Administration and the National Association of
Securities Dealers, relating to certain practices in the mutual fund industry,
including late trading, market timing and payments to securities dealers who
sell fund shares, the Company and its subsidiaries, as well as certain current
or former executives and employees of the Company, have received requests for
information and/or subpoenas to testify or produce documents. The Company and
its current employees have been providing documents and information in response
to these requests and subpoenas. In addition, the Company has responded to
requests for similar kinds of information from regulatory authorities in some of
the foreign countries where the Company conducts its global asset management
business.

24 | Annual Report

TEMPLETON CAPITAL ACCUMULATOR FUND

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

8. REGULATORY MATTERS (CONTINUED)

OTHER GOVERNMENTAL INVESTIGATIONS (CONTINUED)
The staff of the SEC has also informed the Company that it is considering
recommending a civil action or proceeding against Franklin Advisers and Franklin
Templeton Distributors, Inc. ("FTDI") concerning payments to securities dealers
who sell fund shares (commonly referred to as "revenue sharing"). The staff of
the California Attorney General's Office ("CAGO") also has advised the Company
that the California Attorney General is authorized to bring a civil action
against the Company and FTDI arising from the same events. Even though the
Company currently believes that the charges the SEC staff and CAGO staff are
contemplating are unwarranted, it also believes that it is in the best interest
of the Company's and funds' shareholders to resolve these issues voluntarily, to
the extent the Company can reasonably do so. The Company continues to have
discussions towards resolving these governmental investigations.

OTHER LEGAL PROCEEDINGS

The Fund, in addition to other entities within Franklin Templeton Investments,
including the Company and certain of its subsidiaries, other funds, and current
and former officers, employees, and directors have been named in multiple
lawsuits in different federal courts in Nevada, California, Illinois, New York
and Florida, alleging violations of various federal securities laws and seeking,
among other things, monetary damages and costs. Specifically, the lawsuits claim
breach of duty with respect to alleged arrangements to permit market timing
and/or late trading activity, or breach of duty with respect to the valuation of
the portfolio securities of certain funds managed by Company subsidiaries,
resulting in alleged market timing activity. The majority of these lawsuits
duplicate, in whole or in part, the allegations asserted in the Massachusetts
administrative complaint described above. The lawsuits are styled as class
actions or derivative actions on behalf of either the named funds or the
Company.

Various subsidiaries of the Company have also been named in multiple lawsuits
filed in state courts in Illinois alleging breach of duty with respect to
valuation of the portfolio securities of certain funds managed by such
subsidiaries.

In addition, the Company and certain of its subsidiaries, as well as certain
current and former officers, employees, and directors have been named in
multiple lawsuits alleging violations of various securities laws and pendent
state law claims relating to the disclosure of directed brokerage payments
and/or payment of allegedly excessive advisory, commission, and distribution
fees. These lawsuits are styled as class actions and derivative actions brought
on behalf of certain funds.

The Company's management strongly believes that the claims made in each of these
lawsuits are without merit and intends to vigorously defend against them.

The Company cannot predict with certainty the eventual outcome of the foregoing
governmental investigations or class actions or other lawsuits. If the Company
finds that it bears responsibility for any unlawful or inappropriate conduct
that caused losses to the Fund, it is committed to making the Fund or its
shareholders whole, as appropriate.

Annual Report | 25

TEMPLETON CAPITAL ACCUMULATOR FUND

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

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 "Fund") at August 31, 2004, 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 "financial statements") 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 the standards of the
Public Company Accounting Oversight Board (United States). Those standards
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, 2004 by correspondence with the
custodian and brokers, provide a reasonable basis for our opinion.

PricewaterhouseCoopers LLP

San Francisco, California
October 13, 2004

26 | Annual Report

TEMPLETON CAPITAL ACCUMULATOR FUND

TAX DESIGNATION (UNAUDITED)

Under Section 854(b)(2) of the Internal Revenue Code (Code), the Fund hereby
designates up to a maximum of $13,159,851 as qualified dividends for purposes of
the maximum rate under Section 1(h)(11) of the Code for the fiscal year ended
August 31, 2004. In January 2005, shareholders will receive Form 1099-DIV which
will include their share of qualified dividends distributed during the calendar
year 2004. Shareholders are advised to check with their tax advisors for
information on the treatment of these amounts on their individual income tax
returns.

Under Section 854(b)(2) of the Code, the Fund hereby designates 28.07% of the
ordinary income dividends as income qualifying for the dividends received
deduction for the fiscal year ended August 31, 2004.

At August 31, 2004, 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 Code. This designation will
allow shareholders of record on October 21, 2004, 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 detailed analysis, by country, of foreign tax
paid, foreign source income, foreign qualified dividends, and adjusted foreign
source income as designated by the Fund to shareholders of record. As a service
to individual shareholders filing Form 1116, "Adjusted Foreign Source Income per
Share" in column 4 below reports foreign source income with the required
adjustments to foreign source qualified dividends. This information is provided
to simplify your reporting of foreign source income for line 1 of Form 1116.

<table>
<caption>
- -------------------------------------------------------------------------------------------------------------
CLASS A
ADJUSTED
FOREIGN TAX FOREIGN FOREIGN FOREIGN
PAID SOURCE INCOME QUALIFIED DIVIDENDS SOURCE INCOME
COUNTRY PER SHARE PER SHARE PER SHARE PER SHARE
- -------------------------------------------------------------------------------------------------------------
<s> <c> <c> <c> <c>
Australia .................................. 0.0003 0.0056 0.0056 0.0024
Bermuda .................................... 0.0000 0.0020 0.0017 0.0010
Brazil ..................................... 0.0003 0.0009 0.0009 0.0004
Canada ..................................... 0.0014 0.0047 0.0047 0.0020
Chile ...................................... 0.0000 0.0001 0.0001 0.0000
Finland .................................... 0.0005 0.0017 0.0009 0.0012
France ..................................... 0.0028 0.0102 0.0100 0.0045
Germany .................................... 0.0031 0.0123 0.0123 0.0053
Hong Kong .................................. 0.0000 0.0022 0.0000 0.0022
India ...................................... 0.0000 0.0004 0.0004 0.0002
Italy ...................................... 0.0013 0.0044 0.0044 0.0019
Japan ...................................... 0.0006 0.0036 0.0036 0.0015
Mexico ..................................... 0.0000 0.0015 0.0015 0.0006
Netherlands ................................ 0.0020 0.0067 0.0067 0.0029
Norway ..................................... 0.0008 0.0027 0.0027 0.0012
Portugal ................................... 0.0004 0.0014 0.0014 0.0006
Singapore .................................. 0.0004 0.0010 0.0000 0.0010
South Korea ................................ 0.0021 0.0065 0.0065 0.0028
Spain ...................................... 0.0015 0.0068 0.0061 0.0033
Sweden ..................................... 0.0039 0.0141 0.0141 0.0060
Switzerland ................................ 0.0008 0.0027 0.0027 0.0012
Taiwan ..................................... 0.0008 0.0020 0.0020 0.0009
United Kingdom ............................. 0.0048 0.0301 0.0300 0.0130
- -------------------------------------------------------------------------------------------------------------
TOTAL ...................................... $0.0278 $0.1236 $0.1183 $0.0561
- -------------------------------------------------------------------------------------------------------------
</table>

Annual Report | 27

TEMPLETON CAPITAL ACCUMULATOR FUND

TAX DESIGNATION (UNAUDITED) (CONTINUED)

Foreign Tax Paid per Share (Column 1) is the amount per share available to you,
as a tax credit or deduction (assuming you held your shares in the Fund for a
minimum of 16 days during the 30-day period beginning 15 days before the
ex-dividend date of the Fund's distribution to which the foreign taxes relate).

Foreign Source Income per Share (Column 2) is the amount per share of income
dividends paid to you that is attributable to foreign securities held by the
Fund, plus any foreign taxes withheld on these dividends. The amounts reported
include foreign source qualified dividends without adjustment for the lower U.S.
tax rates. Generally, this is the foreign source income to be reported by
certain trusts and corporate shareholders.

Foreign Qualified Dividends per Share (Column 3) is the amount per share of
foreign source qualified dividends the Fund paid to you, plus any foreign taxes
withheld on these dividends. These amounts represent the portion of the Foreign
Source Income reported to you in column 2 that were derived from qualified
foreign securities held by the Fund. If you are an individual shareholder who
does not meet the qualified dividend holding period requirements, you may find
this information helpful to calculate the foreign source income adjustment
needed to complete line 1 of Form 1116.

Adjusted Foreign Source Income per Share (Column 4) is the adjusted amount per
share of foreign source income the Fund paid to you. These amounts reflect the
Foreign Source Income reported in column 2 adjusted for the tax rate
differential on foreign source qualified dividends that may be required for
certain individual shareholders pursuant to Internal Revenue Code 904(b)(2)(B).
If you are an individual shareholder who meets the qualified dividend holding
period requirements, generally, these Adjusted Foreign Source Income amounts may
be reported directly on line 1 of Form 1116 without additional adjustment.

In January 2005, shareholders will receive Form 1099-DIV which will include
their share of taxes paid and foreign source income distributed during the
calendar year 2004. The Foreign Source Income reported on Form 1099-DIV has been
reduced to take into account the tax rate differential on foreign source
qualified dividend income pursuant to Internal Revenue Code 904(b)(2)(B).
Shareholders are advised to check with their tax advisors for information on the
treatment of these amounts on their 2004 individual income tax returns.

28 | Annual Report

BOARD MEMBERS AND OFFICERS

The name, age and address of the officers and board members, as well as their
affiliations, positions held with the Fund, 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

- --------------------------------------------------------------------------------------------------------------------------
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 (60) Trustee Since 2000 21 None
500 East Broward Blvd.
Suite 2100
Fort Lauderdale, FL 33394-3091

- --------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Chairman, Island Corporate Holdings Ltd. (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); director of various other business and nonprofit organizations; and FORMERLY, Chairman, Atlantic Equipment
& Power Ltd. (1977-2003).
- --------------------------------------------------------------------------------------------------------------------------
S. JOSEPH FORTUNATO (72) Trustee Since 1992 141 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.

- --------------------------------------------------------------------------------------------------------------------------
EDITH E. HOLIDAY (52) Trustee Since 2000 96 Director, Amerada Hess
500 East Broward Blvd. Corporation (exploration and
Suite 2100 refining of oil and gas); H.J.
Fort Lauderdale, FL 33394-3091 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).
- --------------------------------------------------------------------------------------------------------------------------
</table>

Annual Report | 29

<table>
<caption>
- ---------------------------------------------------------------------------------------------------------------------------
NUMBER OF PORTFOLIOS IN
LENGTH OF FUND COMPLEX OVERSEEN
NAME, AGE AND ADDRESS POSITION TIME SERVED BY BOARD MEMBER* OTHER DIRECTORSHIPS HELD
- ---------------------------------------------------------------------------------------------------------------------------
<s> <c> <c> <c>
GORDON S. MACKLIN (76) Trustee Since 1993 140 Director, White Mountains
500 East Broward Blvd. Insurance Group, Ltd. (holding
Suite 2100 company); Martek Biosciences
Fort Lauderdale, FL 33394-3091 Corporation; MedImmune, Inc.
(biotechnology); and
Overstock.com (Internet
services); and FORMERLY,
Director, MCI Communication
Corporation (subsequently
known as MCI WorldCom, Inc.
and WorldCom, Inc.)
(communications services)
(1988-2002) and Spacehab, Inc.
(aerospace services)
(1994-2003).

- --------------------------------------------------------------------------------------------------------------------------
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 (75) 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).
- --------------------------------------------------------------------------------------------------------------------------
FRANK A. OLSON (72) Trustee Since 2003 21 Director, Becton, Dickinson
500 East Broward Blvd. and Co. (medical technology);
Suite 2100 White Mountains Insurance
Fort Lauderdale, FL 33394-3091 Group Ltd. (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 (50) Trustee Since 2000 21 None
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
organizations; and FORMERLY, Cardiology Fellow, University of Maryland
(1985-1987) and Internal Medicine Resident, Greater Baltimore Medical Center
(1982-1985).
- --------------------------------------------------------------------------------------------------------------------------
</table>

30 | Annual Report

INTERESTED BOARD MEMBERS AND OFFICERS

<table>
<caption>
- ---------------------------------------------------------------------------------------------------------------------------
NUMBER OF PORTFOLIOS IN
LENGTH OF FUND COMPLEX OVERSEEN
NAME, AGE AND ADDRESS POSITION TIME SERVED BY BOARD MEMBER* OTHER DIRECTORSHIPS HELD
- ---------------------------------------------------------------------------------------------------------------------------
<s> <c> <c> <c>
**NICHOLAS F. BRADY (74) Trustee Since 1993 21 Director, Amerada Hess
500 East Broward Blvd. Corporation (exploration and
Suite 2100 refining of oil and gas); and
Fort Lauderdale, FL 33394-3091 C2, Inc. (operating and
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, 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, Chairman, Templeton Emerging Markets Investment Trust PLC (until 2003), 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 (71) Trustee, Vice President 140 None
One Franklin Parkway Chairman of the since 1992 and
San Mateo, CA 94403-1906 Board and Chairman of the
Vice President Board and Trustee
since 1995

- --------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Chairman of the Board, 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.
- --------------------------------------------------------------------------------------------------------------------------
HARMON E. BURNS (59) 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.
- --------------------------------------------------------------------------------------------------------------------------
JAMES M. DAVIS (52) Chief Since July 2004 Not Applicable None
One Franklin Parkway Compliance
San Mateo, CA 94403-1906 Officer

- --------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Officer of 51 of the investment companies in Franklin Templeton Investments; Director, Global Compliance, Franklin
Resources, Inc.; and FORMERLY, Director of Compliance, Franklin Resources, Inc. (1994-2001).
- --------------------------------------------------------------------------------------------------------------------------
</table>

Annual Report | 31

- --------------------------------------------------------------------------------------------------------------------------
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 (44) Vice President Since 1991 Not Applicable None
One Franklin Parkway
San Mateo, CA 94403-1906

- --------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Co-President and Chief Executive Officer, 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 (57) 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 (57) 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).
- --------------------------------------------------------------------------------------------------------------------------
</table>

32 | Annual Report

- --------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Vice President, Deputy General Counsel and Secretary, Franklin Resources, Inc.; Secretary and Senior Vice President,
Templeton Worldwide, Inc.; Secretary, Franklin Advisers, Inc., Franklin Advisory Services, LLC, Franklin Investment
Advisory Services, Inc., Franklin Mutual Advisers, LLC, Franklin Templeton Alternative Strategies, Inc., Franklin
Templeton Investor Services, LLC, Franklin Templeton Services, LLC, Franklin Templeton Distributors, Inc., Templeton
Investment Counsel, LLC, and Templeton/Franklin Investment Services, Inc.; 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. (64) 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 (64) 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 some of the other subsidiaries of Franklin Resources, Inc.
and of 35 of the investment companies in Franklin Templeton Investments; and FORMERLY, Vice President and Controller,
Keystone Group, Inc.
- --------------------------------------------------------------------------------------------------------------------------
DIOMEDES LOO-TAM (65) Treasurer Since March Not Applicable None
One Franklin Parkway 2004
San Mateo, CA 94403-1906

- --------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Officer of 15 of the investment companies in Franklin Templeton Investments;
Consultant, MyVest Corporation (software development company and investment
advisory services); and FORMERLY, Director and member of Audit and Valuation
Committees, Runkel Funds, Inc. (2002-2003); Treasurer/Controller of most of the
investment companies in Franklin Templeton Investments (1985-2000); and Senior
Vice President, Franklin Templeton Services, LLC (1997-2000).
- --------------------------------------------------------------------------------------------------------------------------
</table>

Annual Report | 33

- --------------------------------------------------------------------------------------------------------------------------
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 48 of the investment
companies in Franklin Templeton Investments.
- --------------------------------------------------------------------------------------------------------------------------
GARY P. MOTYL (52) President President Not Applicable None
500 East Broward Blvd. and Chief since 1994
Suite 2100 Executive and Chief
Fort Lauderdale, FL 33394-3091 Officer - Executive
Investment Officer -
Management Investment
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).
- --------------------------------------------------------------------------------------------------------------------------
MURRAY L. SIMPSON (67) 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).
- --------------------------------------------------------------------------------------------------------------------------
</table>

34 | Annual Report

- --------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Officer of 51 of the investment companies in Franklin Templeton Investments;
Senior Vice President, Franklin Templeton Services, LLC; and FORMERLY, Managing
Director, RSM McGladrey, Inc.; and Partner, McGladrey & Pullen, LLP.
- --------------------------------------------------------------------------------------------------------------------------
</table>

* 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 to be an interested person of the Fund 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 Fund's adviser and distributor. Nicholas F. Brady is considered
to be an interested person of the Fund under the federal securities laws due to
his ownership interest in a subsidiary of Resources, as well as his director
positions with such company and certain other related companies.

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 | 35

TEMPLETON CAPITAL ACCUMULATOR FUND

SHAREHOLDER INFORMATION

PROXY VOTING POLICIES AND PROCEDURES

The Fund has established Proxy Voting Policies and Procedures ("Policies") 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. Copies of the Fund's proxy voting records are also made available online
at franklintempleton.com and posted on the Securities and Exchange Commission's
website at sec.gov and reflect the 12-month period beginning July 1, 2003, and
ending June 30, 2004.

QUARTERLY STATEMENT OF INVESTMENTS

The Fund files a complete statement of investments with the Securities and
Exchange Commission for the first and third quarters for each fiscal year on
Form N-Q. Shareholders may view the filed Form N-Q by visiting the Commission's
website at sec.gov. The filed form may also be viewed and copied at the
Commission's Public Reference Room in Washington, DC. Information regarding the
operations of the Public Reference Room may be obtained by calling
1-800/SEC-0330.

36 | Annual Report

LITERATURE REQUEST

TO RECEIVE A BROCHURE AND PROSPECTUS, PLEASE CALL US AT 1-800/DIAL BEN(R)
(1-800/342-5236) OR VISIT FRANKLINTEMPLETON.COM. INVESTORS SHOULD CAREFULLY
CONSIDER A FUND'S INVESTMENT GOALS, RISKS, CHARGES AND EXPENSES BEFORE
INVESTING. THE PROSPECTUS CONTAINS THIS AND OTHER INFORMATION. PLEASE CAREFULLY
READ THE PROSPECTUS BEFORE INVESTING. TO ENSURE THE HIGHEST QUALITY OF SERVICE,
WE MAY MONITOR, RECORD AND ACCESS TELEPHONE CALLS TO OR FROM OUR SERVICE
DEPARTMENTS. THESE CALLS CAN BE IDENTIFIED BY THE PRESENCE OF A REGULAR BEEPING
TONE.

FRANKLIN TEMPLETON INVESTMENTS

INTERNATIONAL
Mutual European Fund
Templeton China World Fund
Templeton Developing Markets Trust
Templeton Foreign Fund
Templeton Foreign Smaller Companies Fund
Templeton International (Ex EM) Fund

GLOBAL
Mutual Discovery Fund
Templeton Capital Accumulator Fund
Templeton Global Long-Short Fund
Templeton Global Opportunities Trust
Templeton Global Smaller Companies Fund
Templeton Growth Fund
Templeton World Fund

GROWTH
Franklin Aggressive Growth Fund
Franklin Capital Growth Fund
Franklin Flex Cap Growth Fund
Franklin Small Cap Growth Fund II 1
Franklin Small-Mid Cap Growth Fund

VALUE
Franklin Balance Sheet
Investment Fund 2
Franklin Equity Income Fund
Franklin Large Cap Value Fund
Franklin MicroCap Value Fund 2
Franklin Small Cap Value Fund
Mutual Beacon Fund
Mutual Qualified Fund
Mutual Recovery Fund 3
Mutual Shares Fund

BLEND
Franklin Blue Chip Fund
Franklin Convertible Securities Fund
Franklin Growth Fund
Franklin Rising Dividends Fund
Franklin U.S. Long-Short Fund 4

SECTOR
Franklin Biotechnology Discovery Fund
Franklin DynaTech Fund
Franklin Global Communications Fund
Franklin Global Health Care Fund
Franklin Gold and Precious Metals Fund
Franklin Natural Resources Fund
Franklin Real Estate Securities Fund
Franklin Technology Fund
Franklin Utilities Fund
Mutual Financial Services Fund

ASSET ALLOCATION
Franklin Templeton Corefolio
Allocation Fund
Franklin Templeton Founding Funds
Allocation Fund
Franklin Templeton Perspectives
Allocation Fund

TARGET FUNDS
Franklin Templeton Conservative Target Fund
Franklin Templeton Growth Target Fund
Franklin Templeton Moderate Target Fund

INCOME
Franklin Adjustable U.S. Government Securities Fund 5
Franklin's AGE High Income Fund
Franklin Federal Money Fund 5, 6
Franklin Floating Rate Daily Access Fund
Franklin Floating Rate Trust 3
Franklin Income Fund
Franklin Limited Maturity
U.S. Government Securities Fund 5, 7
Franklin Money Fund 5, 6
Franklin Strategic Income Fund
Franklin Strategic Mortgage Portfolio
Franklin Templeton Hard Currency Fund
Franklin Total Return Fund
Franklin U.S. Government Securities Fund 5
Templeton Global Bond Fund

TAX-FREE INCOME 8
NATIONAL FUNDS
Double Tax-Free Income Fund
Federal Tax-Free Income Fund
High Yield Tax-Free Income Fund
Insured Tax-Free Income Fund 9
Tax-Exempt Money Fund 5, 6

LIMITED-TERM FUNDS
California Limited-Term Tax-Free Income Fund
Federal Limited-Term Tax-Free Income Fund
New York Limited-Term Tax-Free Income Fund

INTERMEDIATE-TERM FUNDS
California Intermediate-Term
Tax-Free Income Fund
Federal Intermediate-Term
Tax-Free Income Fund
New York Intermediate-Term
Tax-Free Income Fund

STATE-SPECIFIC
Alabama
Arizona
California 10
Colorado
Connecticut
Florida 10
Georgia
Kentucky
Louisiana
Maryland
Massachusetts 9
Michigan 9
Minnesota 9
Missouri
New Jersey
New York 10
North Carolina
Ohio 9
Oregon
Pennsylvania
Tennessee
Virginia

INSURANCE FUNDS
Franklin Templeton Variable Insurance
Products Trust 11

1. The fund is closed to new investors. Existing shareholders can continue
adding to their accounts.

2. The fund is only open to existing shareholders and select retirement plans.

3. The fund is a continuously offered, closed-end fund. Shares may be purchased
daily; there is no daily redemption. However, each quarter, pending board
approval, the fund will authorize the repurchase of 5%-25% of the outstanding
number of shares. Investors may tender all or a portion of their shares during
the tender period.

4. Upon reaching approximately $350 million in assets, the fund intends to close
to all investors.

5. An investment in the fund is neither insured nor guaranteed by the U.S.
government or by any other entity or institution.

6. Although the fund seeks to preserve the value of your investment at $1.00 per
share, it is possible to lose money by investing in the fund.

7. Formerly Franklin Short-Intermediate U.S. Government Securities Fund.
Effective 9/1/04, the fund's name changed; its investment goal and strategy
remained the same.

8. For investors subject to the alternative minimum tax, a small portion of fund
dividends may be taxable. Distributions of capital gains are generally taxable.

9. Portfolio of insured municipal securities.

10. These funds are available in two or more variations, including long-term
portfolios, portfolios of insured securities, a high-yield portfolio (CA) and
limited-term, intermediate-term and money market portfolios (CA and NY).

11. The funds of the Franklin Templeton Variable Insurance Products Trust are
generally available only through insurance company variable contracts.

09/04 Not part of the 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

INVESTMENT MANAGER
Templeton Investment Counsel, LLC

PRINCIPAL UNDERWRITER
Franklin Templeton Distributors, Inc.
1-800/DIAL BEN(R)
franklintempleton.com

SHAREHOLDER SERVICES

1-800/632-2301

Authorized for distribution only when accompanied or preceded by a prospectus.
Investors should carefully consider a fund's investment goals, risks, charges
and expenses before investing. Like any investment in securities, the value of
the Fund's portfolio will be subject to the risk of loss from market, currency,
economic, political and other factors. 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. The prospectus
contains this and other information; please read it carefully before investing.

To ensure the highest quality of service, telephone calls to or from our service
departments may be monitored, recorded and accessed. These calls can be
identified by the presence of a regular beeping tone.

TCAP A2004 10/04

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.

(d) N/A

(f) Pursuant to Item 11(a), the registrant is attaching as an exhibit a copy of
its code of ethics that applies to its principal executive officers and
principal 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 Fred R. Millsaps and Frank A.
Olson, they are "independent" as defined under the relevant Securities and
Exchange Commission Rules and Releases.

ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.

(a) Audit Fees
The aggregate fees paid to the principal accountant for professional services
rendered by the principal accountant for the audit of the registrant's annual
financial statements or for services that are normally provided by the principal
accountant in connection with statutory and regulatory filings or engagements
were $8,980 for the fiscal year ended August 31, 2004 and $29,317 for the fiscal
year ended August 31, 2003.

(b) Audit-Related Fees
There were no fees paid to the principal accountant for assurance and related
services rendered by the principal accountant to the registrant that are
reasonably related to the performance of the audit of the registrant's financial
statements and are not reported under paragraph (a) of Item 4.

The aggregate fees paid to the principal accountant for assurance and related
services rendered by the principal accountant to the registrant's investment
adviser and any entity controlling, controlled by or under common control with
the investment adviser that provides ongoing services to the registrant that are
reasonably related to the performance of the audit of the their financial
statements were $45,000 for the fiscal year ended August 31, 2004 and $3,614 for
the fiscal year ended August 31, 2003. The services for which these fees were
paid included attestation services.

(c) Tax Fees
There were no fees paid to the principal accountant for professional services
rendered by the principal accountant to the registrant for tax compliance, tax
advice and tax planning.

There were no fees paid to the principal accountant for professional services
rendered by the principal accountant to the registrant's investment adviser and
any entity controlling, controlled by or under common control with the
investment adviser that provides ongoing services to the registrant for tax
compliance, tax advice and tax planning.

(d) All Other Fees
The aggregate fees paid to the principal accountant for products and services
rendered by the principal accountant to the registrant not reported in
paragraphs (a)-(c) of Item 4 were $233 for the fiscal year ended August 31, 2004
and $0 for the fiscal year ended August 31, 2003. The services for which these
fees were paid included review of materials provided to the fund Board in
connection with the investment management contract renewal process.

The aggregate fees paid to the principal accountant for products and services
rendered by the principal accountant to the registrant's investment adviser and
any entity controlling, controlled by or under common control with the
investment adviser that provides ongoing services to the registrant not reported
in paragraphs (a)-(c) of Item 4 were $99,767 for the fiscal year ended August
31, 2004 and $12,994 for the fiscal year ended August 31, 2003. The services for
which these fees were paid included review of materials provided to the fund
Board in connection with the investment management contract renewal process,
subscription fees and a review of an ICI transfer agent survey.

(e) (1) The registrant's audit committee is directly responsible for approving
the services to be provided by the auditors, including:

(i) pre-approval of all audit and audit related services;

(ii) pre-approval of all non-audit related services to be provided to
the Fund by the auditors;

(iii) pre-approval of all non-audit related services to be provided to
the registrant by the auditors to the registrant's investment adviser or to any
entity that controls, is controlled by or is under common control with the
registrant's investment adviser and that provides ongoing services to the
registrant where the non-audit services relate directly to the operations or
financial reporting of the registrant; and

(iv) establishment by the audit committee, if deemed necessary or
appropriate, as an alternative to committee pre-approval of services to be
provided by the auditors, as required by paragraphs (ii) and (iii) above, of
policies and procedures to permit such services to be pre-approved by other
means, such as through establishment of guidelines or by action of a designated
member or members of the committee; provided the policies and procedures are
detailed as to the particular service and the committee is informed of each
service and such policies and procedures do not include delegation of audit
committee responsibilities, as contemplated under the Securities Exchange Act of
1934, to management; subject, in the case of (ii) through (iv), to any waivers,
exceptions or exemptions that may be available under applicable law or rules.

(e) (2) None of the services provided to the registrant described in paragraphs
(b)-(d) of Item 4 were pre-approved by the audit committee pursuant to paragraph
(c)(7)(i)(C) of Rule 2-01 of regulation S-X.

(f) No disclosures are required by this Item 4(f).

(g) The aggregate non-audit fees paid to the principal accountant for services
rendered by the principal accountant to the registrant and the registrant's
investment adviser and any entity controlling, controlled by or under common
control with the investment adviser that provides ongoing services to the
registrant were $145,000 for the fiscal year ended August 31, 2004 and $16,608
for the fiscal year ended August 31, 2003.

(h) No disclosures are required by this Item 4(h).

ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.

N/A

ITEM 6. SCHEDULE OF INVESTMENTS. N/A

ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.

N/A

ITEM 8. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANIES AND AFFILIATED PURCHASES.

N/A

ITEM 9. SUBMISSION OF MATTERS OF A VOTE OF SECURITY HOLDERS.

There have been no changes to the procedures by which shareholders may recommend
nominees to the Registrant's Board of Trustees that would require disclosure
herein.

ITEM 10. 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 11. EXHIBITS

(a) Code of Ethics

(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
Galen G. Vetter, 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
Galen G. Vetter, 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 29, 2004

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 29, 2004

By /s/GALEN G. VETTER
Chief Financial Officer
Date October 29, 2004