-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, VssXUu5YaW6i6saisyKsbfbgjTzpsnvA9eRfpjbq7fqsXeUm69r4odN6zFN7L8fe QYcTWawb6xYlx02tiACt2g== 0000869313-04-000004.txt : 20040430 0000869313-04-000004.hdr.sgml : 20040430 20040430135213 ACCESSION NUMBER: 0000869313-04-000004 CONFORMED SUBMISSION TYPE: N-CSRS PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20040229 FILED AS OF DATE: 20040430 EFFECTIVENESS DATE: 20040430 FILER: COMPANY DATA: COMPANY CONFORMED NAME: TEMPLETON CAPITAL ACCUMULATOR FUND CENTRAL INDEX KEY: 0000869313 IRS NUMBER: 593040143 STATE OF INCORPORATION: DE FISCAL YEAR END: 0831 FILING VALUES: FORM TYPE: N-CSRS SEC ACT: 1940 Act SEC FILE NUMBER: 811-06198 FILM NUMBER: 04768864 BUSINESS ADDRESS: STREET 1: BROWARD FINANCIAL CENTRE STREET 2: 500 EAST BROWARD BLVD STE 2100 CITY: FORT LAUDERDALE STATE: FL ZIP: 33394-3091 BUSINESS PHONE: 9545277500 MAIL ADDRESS: STREET 1: BROWARD FINANCIAL CERTRE STREET 2: 500 EAST BROWARD BLVD STE 2100 CITY: FORT LAUDERDALE STATE: FL ZIP: 33394-3091 FORMER COMPANY: FORMER CONFORMED NAME: TEMPLETON CAPITAL ACCUMULATOR FUND INC DATE OF NAME CHANGE: 19920703 N-CSRS 1 tcafsemiannualrpt04.txt TCAF SEMIANNUAL REPORT 2/29/04 FILING UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM N-CSRS CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES Investment Company Act file number 811-6198 ---------- 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: 2/29/04 ------- ITEM 1. REPORTS TO STOCKHOLDERS FEBRUARY 29, 2004 [GRAPHIC OMITTED] SEMIANNUAL REPORT AND SHAREHOLDER LETTER GLOBAL TEMPLETON CAPITAL ACCUMULATOR FUND [GRAPHIC OMITTED] [LOGO OMITTED] FRANKLIN[R] TEMPLETON[R] INVESTMENTS Franklin o TEMPLETON o Mutual Series page 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. Each of our portfolio management groups operates autonomously, relying on its own research and staying true to the unique investment disciplines that underlie its success. FRANKLIN. Founded in 1947, Franklin is a leader in tax-free investing and a driving force in fixed income investing around the globe. They also bring expertise in growth- and value-style U.S. equity investing. TEMPLETON. Founded in 1940, Templeton pioneered international investing and, in 1954, launched what has become the industry's oldest global fund. Today, with research offices in over 25 countries, they offer investors the broadest global reach in the industry. MUTUAL SERIES. Established in 1949, Mutual Series is dedicated to a unique style of value investing, searching aggressively for opportunity among undervalued stocks, arbitrage situations and distressed companies. 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. 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. SPECIALIZED EXPERTISE TRUE DIVERSIFICATION RELIABILITY YOU CAN TRUST MUTUAL FUNDS | RETIREMENT PLANS | 529 COLLEGE SAVINGS PLANS | SEPARATE ACCOUNTS [GRAPHIC OMITTED] Not part of the semiannual report page Contents SHAREHOLDER LETTER ........................................................ 1 SEMIANNUAL REPORT Templeton Capital Accumulator Fund ........................................ 3 Performance Summary ....................................................... 6 Financial Highlights and Statement of Investments .................................................. 7 Financial Statements ...................................................... 13 Notes to Financial Statements ............................................. 16 Proxy Voting Policies and Procedures ...................................... 21 - -------------------------------------------------------------------------------- Semiannual Report Templeton Capital Accumulator Fund YOUR FUND'S GOAL AND PRIMARY INVESTMENTS: Templeton Capital Accumulator Fund seeks long-term capital growth. Under normal market conditions, the Fund invests in equity securities of companies of any nation. We are pleased to bring you Templeton Capital Accumulator Fund's semiannual report for the period ended February 29, 2004. PERFORMANCE OVERVIEW For the six months under review, Templeton Capital Accumulator Fund delivered a 21.59% cumulative total return, as shown in the Performance Summary on page 6. The Fund outperformed its benchmark, the Morgan Stanley Capital International (MSCI) All Country (AC) World Index, which posted a 19.39% total return for the same period. 1 ECONOMIC AND MARKET OVERVIEW The global economy continued to improve during the six-month period ended February 29, 2004. This supported investor sentiment and contributed to strong total returns for most local stock market indexes. The MSCI World Index returned 18.97% and the MSCI Europe Australasia Far East (EAFE) Index returned 25.30% for the period under review. 2 A synchronized global recovery provided the foundation for a sharp improvement in corporate profitability. As of the end of 2003, corporate profits in the U.S. and the U.K. reached new highs, up 82% and 29% from their recession lows in 2001. 3 Corporate profits in Japan and Canada were still below their recent highs; however, they increased 32% and 47% from their respective recession low points in 2001. 3 [GRAPHIC OMITTED] EDGAR REPRESENTATION OF TEXT USED IN GRAPHIC AS FOLLOWS: GEOGRAPHIC DISTRIBUTION Based on Total Net Assets as of 2/29/04 Europe 49.5% North America 22.3% Asia 16.0% Australia & New Zealand 2.6% Latin America 2.1% Middle East & Africa 0.9% Short-Term Investments & Other Net Assets 6.6% 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: Standard & Poor's Micropal. The MSCI World Index is a free float-adjusted, market capitalization-weighted index designed to measure equity market performance in global developed markets. The MSCI EAFE Index is a free float-adjusted, market capitalization-weighted index designed to measure equity market performance in global developed markets excluding the U.S. and Canada. The indexes are unmanaged and include reinvested dividends. One cannot invest directly in an index, nor is an index representative of the Fund's portfolio. 3. Source: ISI Group. 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 8. Semiannual Report | 3 page TOP 10 SECTORS/INDUSTRIES 2/29/04 - -------------------------------------------------------------------------------- % OF TOTAL NET ASSETS - -------------------------------------------------------------------------------- Diversified Telecommunication Services 8.7% Insurance 7.1% Pharmaceuticals 7.1% Oil & Gas 6.0% Commercial Banks 5.4% Metals & Mining 4.5% Household Durables 4.0% Food Products 3.6% Machinery 3.5% Electric Utilities 3.1% China continued its role as a main driver in the current worldwide recovery. In 2003, 80% of the world's export growth resulted from greater demand in China. While Japan's exports to China grew 27% compared with the previous year, U.S. exports grew 54%. 3 As China continued to industrialize and build its infrastructure (roads, bridges and energy generation), global demand for commodities intensified, leading to higher prices of those commodities. In 2003, prices for aluminum contracts rose 19% over the previous year, silver 24%, zinc 33%, and copper 50%. 4 Historically, surges in commodity prices have generally coincided with labor shortages and wage inflation, leading to overall inflation and monetary tightening. However, the current abundant labor supply in the U.S., China and India, and China's ability to provide low-cost products to many large economies, have resulted in less inflationary pressure. In the currency market, the U.S. dollar appreciated versus the euro in the first two months of 2004. This was a reversal of the trend toward a lower dollar over the past several months. In 2003, the dollar declined 17% in value versus the euro. 5 In the short term, a lower dollar boosts total returns generated in currencies that have appreciated versus the dollar; however, it makes U.S. operations of foreign-based companies appear less profitable and eventually increases the cost of U.S. imports. INVESTMENT STRATEGY Our investment strategy employs a bottom-up, value-oriented, long-term approach. We focus on the market price of a company's securities relative to our evaluation of the company's long-term earnings, asset value and cash flow potential. As we look worldwide, we consider specific companies, rather than sectors or countries, while doing in-depth research to construct a bargain list from which we buy. MANAGER'S DISCUSSION The Fund's materials and industrials sectors holdings contributed to Fund performance during the six months under review as these sectors benefited from the strengthening global economy. 6 Stock selection in the health care and utilities 4. Sources: Reuters, Commodity Research Bureau Index; London Metal Exchange. 5. Source: European Central Bank. 6. The materials sector comprises chemicals, construction materials, containers & packaging, metals & mining, and paper & forest products in the SOI. The industrials sector comprises aerospace & defense, air freight & logistics, airlines, commercial services & supplies, electrical equipment, industrial conglomerates, machinery, and road & rail in the SOI. 4 | Semiannual Report page sectors also aided Fund returns. 7 The financials and consumer discretionary sectors performed well, but our stock selection and underweighting relative to the benchmark index somewhat restrained the Fund's performance. 8 We added several new positions during the reporting period including Australian airline Qantas Airways and Denmark-based Vestas Wind Systems, a leading wind-powered, electricity-generating equipment manufacturer. Qantas and Vestas boosted Fund returns during the period. French aluminum producer Pechiney was acquired by Canada's Alcan in a tender offer. Our holdings in Pechiney and Alcan delivered positive returns during the period. We reduced our position in Norsk Hydro, a Norwegian metals and energy company, following strong stock price performance over the reporting period. Thank you for your continued participation in Templeton Capital Accumulator Fund. We look forward to serving your future investment needs. [photo omitted] /S/Gary P. Motyl Gary P. Motyl, CFA Portfolio Manager Templeton Capital Accumulator Fund THIS DISCUSSION REFLECTS OUR ANALYSIS, OPINIONS AND PORTFOLIO HOLDINGS AS OF FEBRUARY 29, 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. 7. The health care sector comprises biotechnology, health care equipment & supplies, health care providers & services, and pharmaceuticals in the SOI. The utilities sector comprises electric utilities, and multi-utilities & unregulated power in the SOI. 8. The financials sector comprises capital markets, commercial banks, diversified financial services, insurance, and real estate in the SOI. The consumer discretionary sector comprises auto components; automobiles; hotels, restaurants & leisure; household durables; media; multiline retail; specialty retail; and textiles, apparel & luxury goods in the SOI. TOP 10 EQUITY HOLDINGS 2/29/04 - -------------------------------------------------------------------------------- COMPANY % OF TOTAL SECTOR/INDUSTRY, COUNTRY NET ASSETS - -------------------------------------------------------------------------------- Samsung Electronics Co. Ltd. 2.5% SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT, SOUTH KOREA Aventis SA 2.1% PHARMACEUTICALS, FRANCE BHP Billiton PLC 2.0% METALS & MINING, U.K Telefonica SA 1.8% DIVERSIFIED TELECOMMUNICATION SERVICES, SPAIN E.ON AG 1.7% ELECTRIC UTILITIES, GERMANY Koninklijke Philips Electronics NV 1.6% HOUSEHOLD DURABLES, NETHERLANDS Mylan Laboratories Inc. 1.5% PHARMACEUTICALS, U.S. Deutsche Post AG 1.4% AIR FREIGHT & LOGISTICS, GERMANY AT&T Wireless Services Inc. 1.3% WIRELESS TELECOMMUNICATION SERVICES, U.S. Alcan Inc. 1.3% METALS & MINING, CANADA Semiannual Report | 5 page Performance Summary as of 2/29/04 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 does 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
- -------------------------------------------------------------------------------------------------- CHANGE 2/29/04 8/31/03 - -------------------------------------------------------------------------------------------------- Net Asset Value (NAV) +$2.07 $12.25 $10.18 DISTRIBUTIONS (9/1/03-2/29/04) Dividend Income $0.1105 PERFORMANCE 1 - -------------------------------------------------------------------------------------------------- 6-MONTH 1-YEAR 5-YEAR 10-YEAR - -------------------------------------------------------------------------------------------------- Cumulative Total Return 2 21.59% 51.68% 40.77% 131.23% Average Annual Total Return 3 21.59% 51.68% 7.08% 8.74% Value of $10,000 Investment 4 $12,159 $15,168 $14,077 $23,123 Avg. Ann. Total Return (3/31/04) 5 54.35% 5.89% 9.16%
PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE. ONGOING MARKET VOLATILITY CAN SIGNIFICANTLY AFFECT SHORT-TERM PERFORMANCE; MORE RECENT RETURNS MAY DIFFER FROM THOSE SHOWN. SINCE MARKETS CAN GO DOWN AS WELL AS UP, INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE WITH MARKET CONDITIONS, AND YOU MAY HAVE A GAIN OR LOSS WHEN YOU SELL YOUR SHARES. FOR MOST RECENT MONTH-END PERFORMANCE, CALL FRANKLIN TEMPLETON INVESTMENTS AT 1-800/342-5236. 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. Calculations do not include the effect of paying sales and creation charges applicable to purchases of Fund shares through Templeton Capital Accumulation Plans, which may vary as discussed in the Plans' prospectuses. For the first year of a Plan, these charges can amount to 50% of the total amount invested during the year. Total returns would have been lower if these charges had been applied. Please refer to the Templeton Capital Accumulation Plans' prospectuses for information regarding applicable sales charges. Past expense reductions by the Fund's manager increased the Fund's total returns. Without these reductions, the Fund's total returns would have been lower. 2. Cumulative total return represents the change in value of an investment over the periods indicated. 3. Average annual total return represents the average annual change in value of an investment over the periods indicated. Six-month return has not been annualized. 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 | Past performance does not guarantee future results. | Semiannual Report page Templeton Capital Accumulator Fund FINANCIAL HIGHLIGHTS
- ------------------------------------------------------------------------------------------------------------------------------ SIX MONTHS ENDED FEBRUARY 29, 2004 YEAR ENDED AUGUST 31, (UNAUDITED) 2003 2002 2001 2000 1999 - ------------------------------------------------------------------------------------------------------------------------------ PER SHARE OPERATING PERFORMANCE (for a share outstanding throughout the period) Net asset value, beginning of period ...... $10.18 $9.29 $10.85 $13.34 $12.11 $9.69 ----------------------------------------------------------------------------- Income from investment operations: Net investment income (loss) a ........... (.01) .12 .12 .16 .16 .18 Net realized and unrealized gains (losses) 2.19 .87 (1.57) (1.45) 1.71 2.78 ----------------------------------------------------------------------------- Total from investment operations .......... 2.18 .99 (1.45) (1.29) 1.87 2.96 ----------------------------------------------------------------------------- Less distributions from: Net investment income .................... (.11) (.10) (.11) (.16) (.15) (.18) Net realized gains ....................... -- -- -- (1.04) (.49) (.36) ----------------------------------------------------------------------------- Total distributions ....................... (.11) (.10) (.11) (1.20) (.64) (.54) ----------------------------------------------------------------------------- Net asset value, end of period ............ $12.25 $10.18 $9.29 $10.85 $13.34 $12.11 ============================================================================= Total return b ............................ 21.59% 10.86% (13.38)% (9.96)% 16.44% 32.01% RATIOS/SUPPLEMENTAL DATA Net assets, end of period (000's) ......... $589,014 $457,645 $354,042 $364,236 $370,029 $291,136 Ratios to average net assets: Expenses ................................. 1.12% c 1.12% 1.11% 1.05% 1.03% 1.11% Net investment income (loss) ............. (.10)% c 1.35% 1.13% 1.35% 1.24% 1.60% Portfolio turnover rate ................... 1.32% 21.32% 14.28% 22.37% 32.13% 13.96%
aBased on average daily shares outstanding. bTotal return is not annualized for periods less than one year. cAnnualized. Semiannual Report | See notes to financial statements. | 7 page Templeton Capital Accumulator Fund STATEMENT OF INVESTMENTS, FEBRUARY 29, 2004 (UNAUDITED)
- ------------------------------------------------------------------------------------------------------------------------------------ INDUSTRY SHARES VALUE - ------------------------------------------------------------------------------------------------------------------------------------ COMMON STOCKS (CONT.) COMMON STOCKS 92.6% AUSTRALIA 2.2% Alumina Ltd. ............................. Metals & Mining 894,060 $ 3,793,973 Australia & New Zealand Banking Group Ltd. .................................... Commercial Banks 223,540 3,102,782 a Australia & New Zealand Banking Group Ltd., 144A .............................. Commercial Banks 40,643 564,133 Qantas Airways Ltd. ...................... Airlines 1,051,370 3,009,500 a WMC Resources Ltd. ....................... Metals & Mining 600,000 2,421,128 ------------- 12,891,516 ------------- BERMUDA 1.7% Ace Ltd. ................................. Insurance 137,470 6,180,651 XL Capital Ltd., A ....................... Insurance 50,300 3,855,998 ------------- 10,036,649 ------------- BRAZIL .6% Embraer-Empresa Brasileira de Aeronautica SA, ADR ................................. Aerospace & Defense 125,985 3,803,487 ------------- CANADA 4.2% Alcan Inc. (EUR Traded) .................. Metals & Mining 23,940 1,130,326 Alcan Inc. ............................... Metals & Mining 159,160 7,580,791 BCE Inc. ................................. Diversified Telecommunication Services 325,460 7,104,694 a Celestica Inc. ........................... Electronic Equipment & Instruments 204,530 3,506,011 Husky Energy Inc. ........................ Oil & Gas 273,820 5,214,161 ------------- 24,535,983 ------------- CHILE .8% Cia de Telecomunicaciones de Chile SA, ADR ..................................... Diversified Telecommunication Services 292,525 4,586,792 ------------- CHINA .1% a China Life Insurance Co. Ltd. ............ Insurance 946,000 674,512 ------------- DENMARK .4% Vestas Wind Systems AS ................... Electrical Equipment 124,170 2,360,174 ------------- FINLAND .7% Stora Enso OYJ, R (EUR/FIM Traded) ....... Paper & Forest Products 156,910 2,084,127 Stora Enso OYJ, R (SEK Traded) ........... Paper & Forest Products 145,997 1,951,412 ------------- 4,035,539 ------------- FRANCE 6.0% Accor SA ................................. Hotels Restaurants & Leisure 61,110 2,681,056 Aventis SA ............................... Pharmaceuticals 165,320 12,653,246 AXA SA ................................... Insurance 199,732 4,586,120 Michelin SA, B ........................... Auto Components 124,150 5,985,140 Suez SA .................................. Multi-Utilities & Unregulated Power 201,170 4,466,667 Total SA, B .............................. Oil & Gas 26,062 4,760,153 ------------- 35,132,382 ------------- 8 | Semiannual Report page Templeton Capital Accumulator Fund STATEMENT OF INVESTMENTS, FEBRUARY 29, 2004 (UNAUDITED) (CONTINUED) - ------------------------------------------------------------------------------------------------------------------------------------ INDUSTRY SHARES VALUE - ------------------------------------------------------------------------------------------------------------------------------------ COMMON STOCKS (CONT.) GERMANY 7.1% BASF AG .................................. Chemicals 80,690 $ 4,291,008 Bayer AG, Br. ............................ Chemicals 111,770 3,166,328 Celesio AG ............................... Health Care Providers & Services 105,466 5,545,670 Deutsche Post AG ......................... Air Freight & Logistics 335,080 7,993,658 E.ON AG .................................. Electric Utilities 150,880 10,188,895 Hugo Boss AG ............................. Textiles Apparel & Luxury Goods 120,710 2,759,668 Muenchener Rueckversicherungs- Gesellschaft ............................ Insurance 18,960 2,214,430 Muenchener Rueckversicherungs- Gesellschaft, 144A ...................... Insurance 5,417 632,678 Volkswagen AG ............................ Automobiles 107,970 5,111,212 ------------- 41,903,547 ------------- HONG KONG 2.1% Cheung Kong Holdings Ltd. ................ Real Estate 436,000 4,158,996 China Mobile (Hong Kong) Ltd., fgn. ...... Wireless Telecommunication Services 1,230,500 4,355,207 Hutchison Whampoa Ltd. ................... Industrial Conglomerates 247,650 2,083,940 Swire Pacific Ltd., A .................... Diversified Financial Services 190,000 1,330,319 Swire Pacific Ltd., B .................... Diversified Financial Services 112,500 130,799 ------------- 12,059,261 ------------- INDIA 1.1% ICICI Bank Ltd. .......................... Commercial Banks 325,519 1,955,921 ICICI Bank Ltd., ADR ..................... Commercial Banks 80,185 1,194,756 Satyam Computers Services Ltd. ........... IT Services 43,400 297,041 Satyam Computers Services Ltd., ADR ...... IT Services 140,100 2,874,852 ------------- 6,322,570 ------------- ISRAEL .9% a Check Point Software Technologies Ltd. ... Software 234,490 5,397,960 ------------- ITALY 1.7% Eni SpA .................................. Oil & Gas 339,760 6,657,325 Riunione Adriatica di Sicurta SpA ........ Insurance 177,381 3,222,184 ------------- 9,879,509 ------------- JAPAN 6.6% East Japan Railway Co. ................... Road & Rail 581 2,711,972 Hitachi Ltd. ............................. Electronic Equipment & Instruments 354,000 2,310,104 Kikkoman Corp. ........................... Food Products 330,000 2,506,864 Komatsu Ltd. ............................. Machinery 771,000 4,685,557 NEC Corp. ................................ Computers & Peripherals 447,000 3,289,292 Nintendo Co. Ltd. ........................ Software 32,000 3,075,234 Nippon Telegraph & Telephone Corp. ....... Diversified Telecommunication Services 886 4,103,203 Nomura Holdings Inc. ..................... Capital Markets 206,000 3,271,188 Seiko Epson Corp. ........................ Computers & Peripherals 94,100 3,307,194 Sompo Japan Insurance Inc. ............... Insurance 682,000 5,786,326 Sony Corp. ............................... Household Durables 95,200 3,886,070 ------------- 38,933,004 ------------- Semiannual Report | 9 page Templeton Capital Accumulator Fund STATEMENT OF INVESTMENTS, FEBRUARY 29, 2004 (UNAUDITED) (CONTINUED) - ------------------------------------------------------------------------------------------------------------------------------------ INDUSTRY SHARES VALUE - ------------------------------------------------------------------------------------------------------------------------------------ COMMON STOCKS (CONT.) MEXICO .7% Telefonos de Mexico SA de CV (Telmex), L, ADR ..................................... Diversified Telecommunication Services 125,740 $ 4,271,388 ------------- NETHERLANDS 3.9% IHC Caland NV ............................ Energy Equipment & Services 80,950 3,932,688 ING Groep NV ............................. Diversified Financial Services 271,600 6,641,263 Koninklijke Philips Electronics NV ....... Household Durables 317,267 9,638,282 Wolters Kluwer NV ........................ Media 150,890 2,694,096 ------------- 22,906,329 ------------- NORWAY 1.6% Norsk Hydro ASA .......................... Oil & Gas 89,890 6,454,964 Norske Skogindustrier ASA, A ............. Paper & Forest Products 145,300 2,961,957 ------------- 9,416,921 ------------- PORTUGAL 1.1% Portugal Telecom SGPS SA ................. Diversified Telecommunication Services 553,710 6,246,893 ------------- SINGAPORE .7% DBS Group Holdings Ltd. .................. Commercial Banks 484,900 4,187,417 ------------- SOUTH KOREA 5.0% Kookmin Bank ............................. Commercial Banks 110,304 4,605,380 Korea Electric Power Corp. ............... Electric Utilities 101,110 1,779,742 KT Corp., ADR ............................ Diversified Telecommunication Services 140,600 2,674,212 LG Electronics Inc. ...................... Household Durables 104,610 5,888,760 Samsung Electronics Co. Ltd. ............. Semiconductors & Semiconductor Equipment 31,760 14,718,708 ------------- 29,666,802 ------------- SPAIN 3.5% Endesa SA ................................ Electric Utilities 82,930 1,622,886 Iberdrola SA, Br. ........................ Electric Utilities 225,770 4,656,613 Repsol YPF SA ............................ Oil & Gas 191,120 3,918,194 a Telefonica SA ............................ Diversified Telecommunication Services 656,090 10,654,544 ------------- 20,852,237 ------------- SWEDEN 4.9% Atlas Copco AB, A ........................ Machinery 169,810 6,079,144 Electrolux AB, B ......................... Household Durables 208,170 4,390,356 Foreningssparbanken AB, A ................ Commercial Banks 229,350 4,344,100 Nordea Bank AB ........................... Commercial Banks 684,060 4,751,184 Securitas AB, B .......................... Commercial Services & Supplies 217,650 3,333,078 Volvo AB, B .............................. Machinery 198,470 6,238,680 ------------- 29,136,542 ------------- SWITZERLAND 3.6% Adecco SA ................................ Commercial Services & Supplies 81,100 4,032,491 a Clariant AG .............................. Chemicals 152,000 2,285,894 Nestle SA ................................ Food Products 17,390 4,586,945 SIG Holding AG ........................... Machinery 25,000 3,720,326 Swiss Reinsurance Co. .................... Insurance 88,990 6,404,225 ------------- 21,029,881 ------------- 10 | Semiannual Report page Templeton Capital Accumulator Fund STATEMENT OF INVESTMENTS, FEBRUARY 29, 2004 (UNAUDITED) (CONTINUED) - ------------------------------------------------------------------------------------------------------------------------------------ INDUSTRY SHARES VALUE - ------------------------------------------------------------------------------------------------------------------------------------ COMMON STOCKS (CONT.) TAIWAN .4% Chunghwa Telecom Co. Ltd., ADR ........... Diversified Telecommunication Services 152,310 $ 2,503,976 ------------- UNITED KINGDOM 14.6% Abbey National PLC ....................... Commercial Banks 441,490 3,973,697 Amersham PLC ............................. Health Care Equipment & Supplies 261,785 3,858,284 BAE Systems PLC .......................... Aerospace & Defense 1,017,850 3,593,690 BHP Billiton PLC ......................... Metals & Mining 1,279,734 11,732,181 BP PLC ................................... Oil & Gas 373,340 2,998,291 Brambles Industries PLC .................. Commercial Services & Supplies 878,378 3,415,054 a British Airways PLC ...................... Airlines 835,990 4,902,530 Cable & Wireless PLC ..................... Diversified Telecommunication Services 1,336,440 3,478,440 Cadbury Schweppes PLC .................... Food Products 429,080 3,535,520 a CellTech Group PLC ....................... Biotechnology 182,390 1,370,844 Hanson PLC ............................... Construction Materials 495,621 3,996,424 Imperial Chemical Industries PLC ......... Chemicals 548,639 2,397,782 Kidde PLC ................................ Electrical Equipment 1,340,880 2,370,211 National Grid Transco PLC ................ Multi-Utilities & Unregulated Power 562,790 4,491,040 Rolls-Royce Group PLC .................... Aerospace & Defense 1,117,630 4,563,025 Shell Transport & Trading Co. PLC, ADR ... Oil & Gas 134,120 5,645,111 a Shire Pharmaceuticals Group PLC .......... Pharmaceuticals 373,550 3,790,266 Smiths Group PLC ......................... Industrial Conglomerates 204,400 2,526,313 Standard Chartered PLC ................... Commercial Banks 185,080 3,187,422 Unilever PLC ............................. Food Products 631,940 6,596,757 WPP Group PLC ............................ Media 336,000 3,753,772 ------------- 86,176,654 ------------- UNITED STATES 16.4% Abbott Laboratories ...................... Pharmaceuticals 167,650 7,175,420 Albertson's Inc. ......................... Food & Staples Retailing 117,360 2,903,486 American International Group Inc. ........ Insurance 72,920 5,396,080 AmerisourceBergen Corp. .................. Health Care Providers & Services 67,860 3,937,916 a AT&T Wireless Services Inc. .............. Wireless Telecommunication Services 558,840 7,589,047 a BMC Software Inc. ........................ Software 165,810 3,249,876 Boise Cascade Corp. ...................... Specialty Retail 120,710 4,067,927 Bristol-Myers Squibb Co. ................. Pharmaceuticals 143,620 3,995,508 CIGNA Corp. .............................. Health Care Providers & Services 53,200 2,948,876 Electronic Data Systems Corp. ............ IT Services 2,240 42,896 Georgia-Pacific Corp. .................... Paper & Forest Products 160,940 5,158,127 International Paper Co. .................. Paper & Forest Products 121,830 5,392,196 Kraft Foods Inc., A ...................... Food Products 122,940 4,154,143 Mylan Laboratories Inc. .................. Pharmaceuticals 377,220 8,864,670 Pfizer Inc. .............................. Pharmaceuticals 141,342 5,180,184 Procter & Gamble Co. ..................... Household Products 61,700 6,324,867 SBC Communications Inc. .................. Diversified Telecommunication Services 229,350 5,506,694 a Synopsys Inc. ............................ Software 103,940 3,064,151 Target Corp. ............................. Multiline Retail 118,990 5,230,800 Temple-Inland Inc. ....................... Containers & Packaging 11,740 764,861 Semiannual Report | 11 page Templeton Capital Accumulator Fund STATEMENT OF INVESTMENTS, FEBRUARY 29, 2004 (UNAUDITED) (CONTINUED) - ------------------------------------------------------------------------------------------------------------------------------------ INDUSTRY SHARES VALUE - ------------------------------------------------------------------------------------------------------------------------------------ COMMON STOCKS (CONT.) UNITED STATES (CONT.) a Tenet Healthcare Corp. ................... Health Care Providers & Services 231,450 $ 2,782,029 Willis Group Holdings Ltd. ............... Insurance 75,990 2,914,217 ------------- 96,643,971 ------------- TOTAL COMMON STOCKS (COST $399,135,687) .. 545,591,896 ------------- PREFERRED STOCKS .8% AUSTRALIA .4% News Corp. Ltd., pfd. .................... Media 312,000 2,578,154 ------------- GERMANY .4% Hugo Boss AG, pfd. ....................... Textiles Apparel & Luxury Goods 100,590 2,349,679 ------------- TOTAL PREFERRED STOCKS (COST $3,209,951) . 4,927,833 ------------- ------------------ PRINCIPAL AMOUNT C ------------------ BONDS (COST $166,821) FRANCE Axa SA, cvt., zero cpn., 12/21/04 ........ Insurance 142,485 EUR 242,023 ------------- SHORT TERM INVESTMENTS (COST $38,757,439) 6.6% b Franklin Institutional Fiduciary Trust Money Market Portfolio .................. 38,757,439 38,757,439 ------------- TOTAL INVESTMENTS (COST $441,269,898) 100.0% 589,519,191 OTHER ASSETS, LESS LIABILITIES ........... (505,098) ------------- NET ASSETS 100.0% ........................ $589,014,093 ------------- CURRENCY ABBREVIATIONS: | EUR - Euro | FIM - Finnish Markka | SEK - Swedish Krona
aNon-income producing. bSee Note 6 regarding investments in the Franklin Institutional Fiduciary Trust Money Market Portfolio. cThe principal amount is stated in U.S. dollars unless otherwise indicated. 12 | See notes to financial statements. | Semiannual Report page Templeton Capital Accumulator Fund FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES February 29, 2004 (unaudited) Assets: Investments in securities: Cost .................................... $441,269,898 ------------- Value ................................... 589,519,191 Receivables: Capital shares sold ..................... 42,302 Dividends ............................... 709,302 ------------- Total assets ........................ 590,270,795 ------------- Liabilities: Payables: Capital shares redeemed ................. 67,999 Affiliates .............................. 453,938 Deferred tax liability (Note 1f) ........ 121,517 Other liabilities ........................ 613,248 ------------- Total liabilities ................... 1,256,702 ------------- Net assets, at value .............. $589,014,093 ============= Net assets consist of: Undistributed net investment income ...... $(723,561) Net unrealized appreciation (depreciation) 148,154,994 Accumulated net realized gain (loss) ..... (26,251,813) Capital shares ........................... 467,834,473 ------------- Net assets, at value ...................... $589,014,093 ============= Shares outstanding ........................ 48,069,842 ============= Net asset value per share ................. $12.25 ============= Semiannual Report | See notes to financial statements. | 13 page Templeton Capital Accumulator Fund FINANCIAL STATEMENTS (CONTINUED) STATEMENT OF OPERATIONS for the six months ended February 29, 2004 (unaudited)
Investment income: (Net of foreign taxes of $182,264) Dividends ...................................................................... $ 2,686,452 ------------- Expenses: Management fees (Note 3) ....................................................... 1,907,481 Administrative fees (Note 3) ................................................... 369,020 Distribution fees (Note 3) ..................................................... 302,456 Transfer agent fees (Note 3) ................................................... 3,000 Custodian fees ................................................................. 68,200 Reports to shareholders ........................................................ 242,300 Professional fees .............................................................. 21,400 Trustees' fees and expenses .................................................... 16,300 Other .......................................................................... 5,700 ------------- Total expenses ............................................................ 2,935,857 ------------- Net investment income ................................................... (249,405) ------------- Realized and unrealized gains (losses): Net realized gain (loss) from: Investments ................................................................... 1,741,412 Foreign currency transactions ................................................. (211,177) ------------- Net realized gain (loss) .................................................. 1,530,235 Net unrealized appreciation (depreciation) on: Investments ................................................................... 100,900,246 Translation of assets and liabilities denominated in foreign currencies ....... 29,353 Deferred taxes (Note 1f) ...................................................... (121,517) ------------- Net unrealized appreciation (depreciation) ................................ 100,808,082 ------------- Net realized and unrealized gain (loss) ......................................... 102,338,317 ------------- Net increase (decrease) in net assets resulting from operations ................. $102,088,912 =============
14 | See notes to financial statements. | Semiannual Report page Templeton Capital Accumulator Fund FINANCIAL STATEMENTS (CONTINUED) STATEMENTS OF CHANGES IN NET ASSETS for the six months ended February 29, 2004 (unaudited) and the year ended August 31, 2003
-------------------------------------------- SIX MONTHS ENDED YEAR ENDED FEBRUARY 29, 2004 AUGUST 31, 2003 -------------------------------------------- Increase (decrease) in net assets: Operations: Net investment income (loss) ................................................ $ (249,405) $ 5,009,213 Net realized gain (loss) from investments and foreign currency transactions . 1,530,235 (15,913,177) Net unrealized appreciation (depreciation) on investments, translation of assets and liabilities denominated in foreign currencies, and deferred taxes 100,808,082 58,425,390 -------------------------------------------- Net increase (decrease) in net assets resulting from operations ......... 102,088,912 47,521,426 Distributions to shareholders from net investment income ...................... (5,087,066) (3,882,934) Capital share transactions (Note 2) ........................................... 34,367,174 59,964,520 -------------------------------------------- Net increase (decrease) in net assets ................................... 131,369,020 103,603,012 Net assets: Beginning of period .......................................................... $457,645,073 $354,042,061 -------------------------------------------- End of period ................................................................ $589,014,093 $457,645,073 ============================================ Undistributed net investment income included in net assets: End of period ................................................................ $ (723,561) $ 4,612,910 ============================================
Semiannual Report | See notes to financial statements. | 15 page TEMPLETON CAPITAL ACCUMULATOR FUND NOTES TO FINANCIAL STATEMENTS (UNAUDITED) 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES Templeton Capital Accumulator Fund is registered under the Investment Company Act of 1940 as a diversified, open-end investment company. Shares of the Fund are offered to the general public only through Templeton Capital Accumulation Plans. The Fund seeks long term capital growth. Under normal market conditions, the Fund invests in equity securities and debt obligations of companies and governments of any nation. The following summarizes the Fund's significant accounting policies. A. SECURITY VALUATION Securities listed or traded on a recognized national exchange or NASDAQ are valued at the last reported sales price. Over-the-counter securities and listed securities for which no sale is reported are valued within the range of the latest quoted bid and asked prices. Investments in open-end mutual funds are valued at the closing net asset value. 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, or if market quotations are not readily available, the securities will be valued at fair value as determined following procedures 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 and income items denominated in foreign currencies are translated into U.S. dollars at the exchange rate in effect on the transaction date. The Fund does not separately report the effect of changes in foreign exchange rates from changes in market prices on securities held. Such changes are included in net realized and unrealized gain or loss from investments. Realized foreign exchange gains or losses arise from sales of foreign currencies, currency gains or losses realized between the trade and settlement dates on securities transactions, and the difference between the recorded amounts of dividends, interest and foreign withholding taxes, and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign exchange gains and losses arise from changes in foreign exchange rates on foreign denominated assets and liabilities other than investments in securities held at the end of the reporting period. C. FOREIGN CURRENCY CONTRACTS When the Fund purchases or sells foreign securities it may enter into foreign exchange contracts to minimize foreign exchange risk from the trade date to the settlement date of the transactions. A foreign exchange contract is an agreement between two parties to exchange different currencies at an agreed upon exchange rate on a specified date. Realized and unrealized gains and losses are included in the Statement of Operations. 16 | Semiannual Report page Templeton Capital Accumulator Fund NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED) 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) C. FOREIGN CURRENCY CONTRACTS (CONTINUED) The risks of these contracts include movement in the values of the foreign currencies relative to the U.S. dollar and the possible inability of the counterparties to fulfill their obligations under the contracts. D. INCOME TAXES No provision has been made for income taxes because the Fund's policy is to qualify as a regulated investment company under the Internal Revenue Code and to distribute substantially all of its taxable income. E. SECURITY TRANSACTIONS, INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS Security transactions are accounted for on trade date. Realized gains and losses on security transactions are determined on a specific identification basis. Certain income from foreign securities is recorded as soon as information is available to the Fund. Interest income and estimated expenses are accrued daily. Dividend income and distributions to shareholders are recorded on the ex-dividend date. F. 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. GUARANTEES AND INDEMNIFICATIONS Under the Trust's organizational documents, its officers and trustees are indemnified against certain liability arising out of the performance of their duties to the Trust. Additionally, in the normal course of business, the Trust enters into contracts with service providers that contain general indemnification clauses. The Trust's maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Trust that have not yet occurred. However, based on experience, the Trust expects the risk of loss to be remote. Semiannual Report | 17 page Templeton Capital Accumulator Fund NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED) 2. SHARES OF BENEFICIAL INTEREST At February 29, 2004, there were an unlimited number of shares of beneficial interest authorized (without par value). Transactions in the Fund's shares were as follows:
----------------------------------------------------------------- SIX MONTHS ENDED YEAR ENDED FEBRUARY 29, 2004 AUGUST 31, 2003 ----------------------------------------------------------------- SHARES AMOUNT SHARES AMOUNT ----------------------------------------------------------------- Shares sold ....................... 3,718,745 $ 41,333,779 8,128,145 $ 71,679,495 Shares issued in reinvestment of distributions ..................... 472,306 5,019,610 451,611 3,825,788 Shares redeemed ................... (1,059,903) (11,986,215) (1,739,114) (15,540,763) ----------------------------------------------------------------- Net increase (decrease) 3,131,148 $ 34,367,174 6,840,642 $ 59,964,520 =================================================================
3. TRANSACTIONS WITH AFFILIATES Certain officers of the Trust are also officers or trustees of the following entities: - -------------------------------------------------------------------------------- ENTITY AFFILIATION - -------------------------------------------------------------------------------- Templeton Investment Counsel, LLC (TIC) Investment manager Franklin Templeton Services, LLC (FT Services) Administrative manager Franklin Templeton Distributors, Inc. (Distributors) Principal underwriter The Fund pays an investment management fee to TIC of 0.75% per year of the average daily net assets of the Fund. The Fund pays an administrative fee to FT Services based on the Fund's average daily net assets as follows: - -------------------------------------------------------------------------------- ANNUALIZED FEE RATE 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% Over $1.2 billion The Fund reimburses Distributors up to a blended rate of .10% of average daily net assets per year attributable to Templeton Capital Accumulator Plan I and ..30% of average daily net assets per year attributable to Templeton Capital Accumulator Plan II, for costs incurred in marketing the Fund's shares under a Rule 12b-1 plan. Under the distribution plan, costs and expenses exceeding the maximum may be reimbursed in subsequent periods. At February 29, 2004, Distributors advised the Fund unreimbursed costs were $208,025. 18 | Semiannual Report page Templeton Capital Accumulator Fund NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED) 3. TRANSACTIONS WITH AFFILIATES (CONTINUED) Distributors has advised the Fund it received net commissions from sales of the Fund's shares for the period of $343,441. The Fund paid transfer agent fees of $3,000, of which $2,172 was paid to Investor Services. 4. INCOME TAXES At February 29, 2004, the cost of investments and net unrealized appreciation (depreciation) for income tax purposes were as follows: Cost of investments ........................................ $441,269,898 ------------- Unrealized appreciation .................................... 165,861,140 Unrealized depreciation .................................... (17,611,847) ------------- Net unrealized appreciation (depreciation) ................. $148,249,293 ============= Net investment income and net realized capital gains differ for financial statement and tax purposes primarily due to differing treatments of losses realized subsequent to October 31 on the sale of securities. At August 31, 2003, the Fund had tax basis capital losses which may be carried over to offset future capital gains. Such losses expire as follows: Capital loss carryovers expiring in: 2010 ...................................................... $3,847,447 2011 ...................................................... 5,327,434 ----------- $9,174,881 =========== At August 31, 2003, the Fund had deferred capital losses occurring subsequent to October 31, 2002 of $18,607,167. For tax purposes, such losses will be reflected in the year ending August 31, 2004. 5. INVESTMENT TRANSACTIONS Purchases and sales of investments (excluding short-term securities) for the period ended February 29, 2004 aggregated $71,882,464 and 6,451,920, respectively. 6. INVESTMENTS IN FRANKLIN INSTITUTIONAL FIDUCIARY TRUST MONEY MARKET PORTFOLIO The Fund may invest in the Franklin Institutional Fiduciary Trust Money Market Portfolio (the Sweep Money Fund), an open-end investment company managed by Franklin Advisers Inc. (an affiliate of the Investment Manager). Management fees paid by the Fund are reduced on assets invested in the Sweep Money Fund in an amount not to exceed the management fees paid by the Sweep Money Fund. The Fund earned $129,104 of dividend income from investment in the Sweep Money Fund for the period ended February 29, 2004. Semiannual Report | 19 page Templeton Capital Accumulator Fund NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED) 7. REGULATORY MATTERS On February 4, 2004, the Securities Division of the Office of the Secretary of the Commonwealth of Massachusetts filed an administrative complaint against Franklin Resources, Inc. and certain of its subsidiaries (the "Company"), alleging violations of the Massachusetts Uniform Securities Act. The complaint arises from activity that occurred in 2001 during which time an officer of a Company subsidiary was negotiating an agreement with an investor relating to investments in a mutual fund and a hedge fund. The Fund, in addition to other entities within Franklin Templeton Investments, including the Company and other funds, has been named in shareholder class and derivative lawsuits related to the matter described above, as well as actions seeking the return of certain management and other fees to the Fund. The Fund's management believes that the claims made in the lawsuit are without merit and it intends to defend vigorously against the allegations. It is anticipated that the Fund may be named in additional similar civil actions related to the matter described above. In addition, as part of ongoing investigations by the U.S. Securities and Exchange Commission (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 and the Attorney General of the State of West Virginia, relating to certain practices in the mutual fund industry, including late trading, market timing and sales compensation arrangements, 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 are 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. The Staff of the SEC has informed the Company that it intends to recommend that the Commission authorize an action against an affiliate of the Fund's investment adviser relating to the frequent trading issues that are the subject of the SEC's investigation. These issues were previously disclosed as being under investigation by government authorities and the subject of an internal inquiry by the Company in its Annual Report on Form 10-K and on its public website. The Company currently is in discussions with the SEC Staff in an effort to resolve the issues raised in their investigation. The Fund's management has been advised that the Company cannot predict the likelihood of whether those discussions will result in a settlement and, if so, the terms of such settlement. The impact, if any, of these matters on the Fund is uncertain at this time. If the Company finds that it bears responsibility for any unlawful or improper conduct, it has committed to making the Fund or its shareholders whole, as appropriate. 20 | Semiannual Report page Templeton Capital Accumulator Fund 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. Semiannual Report | 21 page This page intentionally left blank. page This page intentionally left blank. page This page intentionally left blank. page Literature Request For a brochure and prospectus, which contains more complete information, including charges, expenses and risks, call Franklin Templeton Investments at 1-800/DIAL BEN [R] (1-800/342-5236). Please read the prospectus carefully before investing or sending money. To ensure the highest quality of service, 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 Franklin Global Aggressive Growth Fund Franklin Global Growth Fund 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-Mid Cap Growth Fund Franklin Small Cap Growth Fund II 1 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 Utilities Fund Franklin Technology Fund Mutual Financial Services Fund ASSET ALLOCATION Franklin Templeton Corefolio Allocation Fund Franklin Templeton Founding Funds 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 Money Fund 5, 6 Franklin Short-Intermediate U.S. Government Securities Fund 5 Franklin Strategic Income Fund Franklin Strategic Mortgage Portfolio Franklin Templeton Hard Currency Fund page Franklin Total Return Fund Franklin U.S. Government Securities Fund 5 Templeton Global Bond Fund TAX-FREE INCOME 7 NATIONAL FUNDS Double Tax-Free Income Fund Federal Tax-Free Income Fund High Yield Tax-Free Income Fund Insured Tax-Free Income Fund 8 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 7 Alabama Arizona California 9 Colorado Connecticut Florida 9 Georgia Kentucky Louisiana Maryland Massachusetts 8 Michigan 8 Minnesota 8 Missouri New Jersey New York 9 North Carolina Ohio 8 Oregon Pennsylvania Tennessee Virginia INSURANCE FUNDS Franklin Templeton Variable Insurance Products Trust 10 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 as well as 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.No assurance exists that the fund's $1.00 per share price will be maintained. It is possible to lose money by investing in the fund. 7.For investors subject to the alternative minimum tax, a small portion of fund dividends may be taxable. Distributions of capital gains are generally taxable. 8.Portfolio of insured municipal securities. 9.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). 10.The funds of the Franklin Templeton Variable Insurance Products Trust are generally available only through insurance company variable contracts. 02/04 Not part of the semiannual report page [logo omitted] FRANKLIN[R] TEMPLETON[R] INVESTMENTS One Franklin Parkway San Mateo, CA 94403-1906 SEMIANNUAL 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 current Templeton Capital Accumulator Fund 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. To obtain a prospectus, which contains this and other information, talk to your financial advisor, call us at 1-800/DIAL BEN (R) (1-800/342-5236) or visit franklintempleton.com. Please read the prospectus 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 S2004 04/04 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. (C) N/A (D) N/A (F) PURSUANT TO ITEM 10(A), THE REGISTRANT IS ATTACHING AS AN EXHIBIT A COPY OF ITS CODE OF ETHICS THAT APPLIES TO ITS PRINCIPAL EXECUTIVE OFFICERS FINANCIAL AND ACCOUNTING OFFICER. ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT. (A)(1) THE REGISTRANT HAS AN AUDIT COMMITTEE FINANCIAL EXPERT SERVING ON ITS AUDIT COMMITTEE. (2) THE AUDIT COMMITTEE FINANCIAL EXPERTS ARE IS FRED R. MILLSAPS AND FRANK A. OLSON, WHO ARE "INDEPENDENT" AS DEFINED UNDER THE RELEVANT SECURITIES AND EXCHANGE COMMISSION RULES AND RELEASES. ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS N/A ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES. N/A ITEM 8. PURCHASE OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANIES AND AFFILIATED PURCHASERS. N/A ITEM 9. SUBMISSTION OF MATTERS OF A VOTE SECURITY HOLDERS. There have been no changes to the procedures by which shareholders may recommend nominees to the Registrant's Board of Directors 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 10. EXHIBITS (A) CODE OF ETHICS FOR PRINCIPAL EXECUTIVE AND SENIOR FINANCIAL OFFICERS. (B)(1) CERTIFICATIONS PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 OF JIMMY D. GAMBILL, CHIEF EXECUTIVE OFFICER - FINANCE AND ADMINISTRATION, AND DIOMEDES LOO-TAM, 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 DIOMEDES LOO-TAM, 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 April 30, 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 April 30, 2004 By /s/DIOMEDES LOO-TAM Chief Financial Officer Date April 30, 2004 EX-99.CODE ETH 2 codeethic04.txt CODE OF ETHICS FOR PRINCIPAL EXECUTIVE & SR. FIN. OFFICERS EXHIBIT (A) FRANKLIN TEMPLETON FUNDS CODE OF ETHICS FOR PRINCIPAL EXECUTIVE AND SENIOR FINANCIAL OFFICERS I. COVERED OFFICERS AND PURPOSE OF THE CODE This code of ethics (the "Code")/1/ is for the investment companies within the complex registered with the United States Securities & Exchange Commission ("SEC") (collectively, "FT Funds") applies to each FT Fund's Principal Executive Officers, Principal Financial Officer and Principal Accounting Officer (the "Covered Officers" each of whom are set forth in Exhibit A) for the purpose of promoting: o Honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships; o Full, fair, accurate, timely and understandable disclosure in reports and documents that a registrant files with, or submits to, the SEC and in other public communications made by or on behalf of the FT Funds; o Compliance with applicable laws and governmental rules and regulations; o The prompt internal reporting of violations of the Code to an appropriate person or persons identified in the Code; and o Accountability for adherence to the Code. Each Covered Officer should adhere to a high standard of business ethics and should be sensitive to situations that may give rise to actual as well as apparent conflicts of interest. II. COVERED OFFICERS SHOULD HANDLE ETHICALLY ACTUAL AND APPARENT CONFLICTS OF INTEREST OVERVIEW. A "conflict of interest" occurs when a Covered Officer's private interest interferes with the interests of, or his service to, the FT Funds. For example, a conflict of interest would arise if a Covered Officer, or a member of his family, receives improper personal benefits as a result of his position with the FT Funds. Certain conflicts of interest arise out of the relationships between Covered Officers and the FT Funds and already are subject to conflict of interest provisions in the Investment Company Act of 1940 ("Investment Company Act") and the Investment Advisers Act of 1940 ("Investment Advisers Act"). For example, Covered Officers may not individually engage in certain transactions (such as the purchase or sale of securities or other property) with the FT Funds because of their status as "affiliated persons" of the FT Funds. The FT Funds' and the investment advisers' compliance programs and procedures are designed to prevent, or identify and correct, violations of these provisions. This Code does not, and is not intended to, repeat or replace these programs and procedures, and such conflicts fall outside of the parameters of this Code. Although typically not presenting an opportunity for improper personal benefit, conflicts arise from, or as a result of, the contractual relationship between the FT Funds, the investment advisers and the fund administrator of which the Covered Officers are also officers or employees. As a result, this Code recognizes that the Covered Officers will, in the normal course of their duties (whether formally for the FT Funds, for the adviser, the administrator, or for all three), be involved in establishing policies and implementing decisions that will have different effects on the adviser, administrator and the FT Funds. The participation of the Covered Officers in such activities is inherent in the contractual relationship between the FT Funds, the adviser, and the administrator and is consistent with the performance by the Covered Officers of their duties as officers of the FT Funds. Thus, if performed in conformity with the provisions of the Investment Company Act and the Investment Advisers Act, such activities will be deemed to have been handled ethically. In addition, it is recognized by the FT Funds' Boards of Directors ("Boards") that the Covered Officers may also be officers or employees of one or more other investment companies covered by this or other codes. Other conflicts of interest are covered by the Code, even if such conflicts of interest are not subject to provisions in the Investment Company Act and the Investment Advisers Act. The following list provides examples of conflicts of interest under the Code, but Covered Officers should keep in mind that these examples are not exhaustive. The overarching principle is that the personal interest of a Covered Officer should not be placed improperly before the interest of the FT Funds. Each Covered Officer must: o Not use his personal influence or personal relationships improperly to influence investment decisions or financial reporting by the FT Funds whereby the Covered Officer would benefit personally to the detriment of the FT Funds; o Not cause the FT Funds to take action, or fail to take action, for the individual personal benefit of the Covered Officer rather than the benefit the FT Funds; o Not retaliate against any other Covered Officer or any employee of the Funds or their affiliated persons for reports of potential violations that are made in good faith; o Report at least annually the following affiliations or other relationships:/2/ o all directorships for public companies and all companies that are required to file reports with the SEC; o any direct or indirect business relationship with any independent directors; o any direct or indirect business relationship with any independent public accounting firm; and o any direct or indirect interest in any transaction with any FT Fund that will benefit the officer (not including benefits derived from the advisory, sub-advisory, distribution or service agreements with affiliates of Franklin Resources). There are some conflict of interest situations that should always be approved in writing by FT's General Counsel or Deputy General Counsel, if material. Examples of these include/3/: o Service as a director on the board of any public or private Company; o The receipt of any gifts in excess of $100; o The receipt of any entertainment from any Company with which the FT Funds has current or prospective business dealings unless such entertainment is business related, reasonable in cost, appropriate as to time and place, and not so frequent as to raise any question of impropriety. Notwithstanding the foregoing, the Covered Officers must obtain prior approval for any entertainment with a value in excess of $1000. o Any ownership interest in, or any consulting or employment relationship with, any of the FT Fund's service providers, other than an investment adviser, principal underwriter, administrator or any affiliated person thereof; o A direct or indirect financial interest in commissions, transaction charges or spreads paid by the FT Funds for effecting portfolio transactions or for selling or redeeming shares other than an interest arising from the Covered Officer's employment, such as compensation or equity ownership. FT's General Counsel or Deputy General Counsel will provide a report to the FT Funds Audit Committee of any approvals granted at the next regularly scheduled meeting. III. DISCLOSURE AND COMPLIANCE o Each Covered Officer should familiarize himself with the disclosure requirements generally applicable to the FT Funds; o Each Covered Officer should not knowingly misrepresent, or cause others to misrepresent, facts about the FT Funds to others, whether within or outside the FT Funds, including to the FT Funds' directors and auditors, and to governmental regulators and self-regulatory organizations; o Each Covered Officer should, to the extent appropriate within his area of responsibility, consult with other officers and employees of the FT Funds, the adviser and the administrator with the goal of promoting full, fair, accurate, timely and understandable disclosure in the reports and documents the FT Funds file with, or submit to, the SEC and in other public communications made by the FT Funds; and o It is the responsibility of each Covered Officer to promote compliance with the standards and restrictions imposed by applicable laws, rules and regulations. IV. REPORTING AND ACCOUNTABILITY Each Covered Officer must: o Upon adoption of the Code (or thereafter as applicable, upon becoming a Covered Officer), affirm in writing to the Board that he has received, read, and understands the Code (see Exhibit B); o Annually thereafter affirm to the Board that he has complied with the requirements of the Code; and o Notify FT's General Counsel or Deputy General Counsel promptly if he knows of any violation of this Code. Failure to do so is itself is a violation of this Code. FT's General Counsel and Deputy General Counsel are responsible for applying this Code to specific situations in which questions are presented under it and have the authority to interpret this Code in any particular situation./4/ However, the Independent Directors of the respective fund will consider any approvals or waivers5 sought by any Chief Executive Officers of the Funds. The FT Funds will follow these procedures in investigating and enforcing this Code: o FT's General Counsel or Deputy General Counsel will take all appropriate action to investigate any potential violations reported to him; o If, after such investigation, FT's General Counsel or Deputy General Counsel believes that no violation has occurred, FT's General Counsel is not required to take any further action; o Any matter that FT's General Counsel or Deputy General Counsel believes is a violation will be reported to the Independent Directors of the appropriate FT Fund; o If the Independent Directors concur that a violation has occurred, it will inform and make a recommendation to the Board of the appropriate Funds, which will consider appropriate action, which may include review of, and appropriate modifications to, applicable policies and procedures; notification to appropriate personnel of the investment adviser or its board; or a recommendation to dismiss the Covered Officer; o The Independent Directors will be responsible for granting waivers, as appropriate; and o Any changes to or waivers of this Code will, to the extent required, are disclosed as provided by SEC rules. V. OTHER POLICIES AND PROCEDURES This Code shall be the sole code of ethics adopted by the FT Funds for purposes of Section 406 of the Sarbanes-Oxley Act and the rules and forms applicable to registered investment companies there under. Insofar as other policies or procedures of the FT Funds, the FT Funds' advisers, principal underwriter, or other service providers govern or purport to govern the behavior or activities of the Covered Officers who are subject to this Code, they are superseded by this Code to the extent that they overlap or conflict with the provisions of this Code. The FT Code of Ethics and Policy Statement On Insider Trading, adopted by the FT Funds, FT investment advisers and FT Fund's principal underwriter pursuant to Rule 17j-l under the Investment Company Act and more detailed policies and procedures set forth in FT's Employee Handbook are separate requirements applying to the Covered Officers and others, and are not part of this Code. VI. AMENDMENTS Any amendments to this Code, other than amendments to Exhibit A, must be approved or ratified by a majority vote of the FT Funds' Board including a majority of independent directors. VII. CONFIDENTIALITY All reports and records prepared or maintained pursuant to this Code will be considered confidential and shall be maintained and protected accordingly. Except as otherwise required by law or this Code, such matters shall not be disclosed to anyone other than the FT Funds' Board and their counsel. VIII. INTERNAL USE The Code is intended solely for the internal use by the FT Funds and does not constitute an admission, by or on behalf of any FT Funds, as to any fact, circumstance, or legal conclusion. - --------------------- 1. Item 2 of Form N-CSR requires a registered management investment company to disclose annually whether, as of the end of the period covered by the report, it has adopted a code of ethics that applies to the registrant's principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, regardless of whether these officers are employed by the registrant or a third party. If the registrant has not adopted such a code of ethics, it must explain why it has not done so. The registrant must also: (1) file with the SEC a copy of the code as an exhibit to its annual report; (2) post the text of the code on its Internet website and disclose, in its most recent report on Form N-CSR, its Internet address and the fact that it has posted the code on its Internet website; or (3) undertake in its most recent report on Form N-CSR to provide to any person without charge, upon request, a copy of the code and explain the manner in which such request may be made. Disclosure is also required of amendments to, or waivers (including implicit waivers) from, a provision of the code in the registrant's annual report on Form N-CSR or on its website. If the registrant intends to satisfy the requirement to disclose amendments and waivers by posting such information on its website, it will be required to disclose its Internet address and this intention. 2. Reporting of these affiliations or other relationships may be made separately by completing the Directors and Officers Questionnaire and returning to FT's General Counsel or Deputy General Counsel. 3. Any activity or relationship that would present a conflict for a Covered Officer would likely also present a conflict for the Covered Officer if a member of the Covered Officer's immediate family engages in such an activity or has such a relationship. The Cover Person should also obtain written approval by FT's General Counsel in such situations. 4. FT's General Counsel and Deputy General Counsel are authorized to consult, as appropriate, with members of the Audit Committee, counsel to the FT Funds and counsel to the Independent Directors, and are encouraged to do so. 5 Item 2 of Form N-CSR defines "waiver" as "the approval by the registrant of a material departure from a provision of the code of ethics" and "implicit waiver," which must also be disclosed, as "the registrant's failure to take action within a reasonable period of time regarding a material departure from a provision of the code of ethics that has been made known to an executive officer" of the registrant. EXHIBIT A Persons Covered by the Franklin Templeton Funds Code of Ethics FRANKLIN GROUP OF FUNDS Edward B. Jamieson, President & Chief Executive Officer - Investment Management Charles B. Johnson, President & Chief Executive Officer - Investment Management Gregory E. Johnson, President & Chief Executive Officer - Investment Management Rupert H. Johnson, Jr. President & Chief Executive Officer - Investment Management William J. Lippman, President & Chief Executive Officer - Investment Management Christopher Molumphy President & Chief Executive Officer - Investment Management Jimmy D. Gambill, Senior Vice President & Chief Executive Officer - Finance and Administration Diomedes Loo-Tam Treasurer & Chief Financial Officer FRANKLIN MUTUAL SERIES FUNDS David Winters Chairman of the Board, President & Chief Executive Officer-Investment Management Jimmy D. Gambill Senior Vice President & Chief Executive Officer- Finance and Administration Diomedes Loo-Tam Treasurer & Chief Financial Officer TEMPLETON GROUP OF FUNDS Jeffrey A. Everett President & Chief Executive Officer - Investment Management Martin L. Flanagan President & Chief Executive Officer - Investment Management Mark Mobius President & Chief Executive Officer - Investment Management Christopher J. Molumphy President & Chief Executive Officer - Investment Management Gary P. Motyl President & Chief Executive Officer - Investment Management Donald F. Reed President & Chief Executive Officer - Investment Management Jimmy D. Gambill, Senior Vice President & Chief Executive Officer - Finance and Administration Diomedes Loo-Tam Treasurer & Chief Financial Officer EXHIBIT B ACKNOWLEDGMENT FORM FRANKLIN TEMPLETON FUNDS CODE OF ETHICS FOR PRINCIPAL EXECUTIVE AND SENIOR FINANCIAL OFFICERS. INSTRUCTIONS: 1. Complete all sections of this form. 2. Print the completed form, sign, and date. 3. Submit completed form to FT's General Counsel within 10 days of becoming a Covered Officer and by January 30th of each subsequent year. INTER-OFFICE MAIL: Murray Simpson, General Counsel, Legal SM-920/2 TELEPHONE: (650) 312-7331 Fax: (650) 312-2221 E-MAIL: Simpson, Murray (internal address); mlsimpson@frk.com (external address) - ---------------------------------------------------------------------------- COVERED OFFICER'S NAME: - ---------------------------------------------------------------------------- TITLE: - ---------------------------------------------------------------------------- DEPARTMENT: - ---------------------------------------------------------------------------- LOCATION: - ---------------------------------------------------------------------------- CERTIFICATION FOR YEAR ENDING: - ---------------------------------------------------------------------------- TO: FT GENERAL COUNSEL, LEGAL DEPARTMENT I hereby acknowledge receipt of a copy of Franklin Templeton Fund's code of ethics for Principal Executive Officers and Senior Financial Officers (the "Code") that I have read and understand. I will comply fully with all provisions of the Code to the extent they apply to me during the period of my employment. I further understand and acknowledge that any violation of the Code may subject me to disciplinary action, including termination of employment -------------------- --------------------- Signature Date signed EX-99.CERT 3 tcaf0204-302.txt CEO & CFO CERTIFICATIONS Exhibit B(1) I, Jimmy D. Gambill, certify that: 1. I have reviewed this report on Form N-CSR of Templeton Capital Accumulator Fund; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) for the registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and (c) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal half-year (the registrant's second fiscal half-year in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. April 23, 2004 /s/JIMMY D. GAMBILL - -------------------------- Jimmy D. Gambill Chief Executive Officer - Finance and Administration I, Diomedes Loo-Tam, certify that: 1. I have reviewed this report on Form N-CSR of Templeton Capital Accumulator Fund; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) for the registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and (c) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal half-year (the registrant's second fiscal half-year in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. April 23, 2004 /s/DIOMEDES LOO-TAM - ------------------------- Diomedes Loo-Tam Treasurer and Chief Financial Officer EX-99.906 CERT 4 tcaf0204-906.txt CEO & CFO CERTIFICATIONS EXHIBIT B(2) CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350 AS ADOPTED PURUSANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 I, Jimmy D. Gambill, Chief Executive Officer of the Templeton Capital Accumulator Fund (the "Registrant"), certify, pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge: 1. The periodic report on Form N-CSR of the Registrant for the period ended 02/29/04 (the "Form N-CSR") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and 2. The information contained in the Form N-CSR fairly presents, in all material respects, the financial condition and results of operations of the Registrant. Dated: April 23, 2004 /s/JIMMY D. GAMBILL ----------------------- Jimmy D. Gambill Chief Executive Officer-Finance and Administration A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to Registrant and will be retained by Registrant and furnished to the Securities and Exchange Commission or its staff upon request. CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350 AS ADOPTED PURUSANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 I, Diomedes Loo-Tam, Chief Financial Officer of the Templeton Capital Accumulator Fund (the "Registrant"), certify, pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge: 1. The periodic report on Form N-CSR of the Registrant for the period ended 02/29/04 (the "Form N-CSR") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and 2. The information contained in the Form N-CSR fairly presents, in all material respects, the financial condition and results of operations of the Registrant. Dated: April 23, 2004 /s/DIOMEDES LOO-TAM ----------------------- Diomedes Loo-Tam Treasurer and Chief Financial Officer A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to Registrant and will be retained by Registrant and furnished to the Securities and Exchange Commission or its staff upon request. -----END PRIVACY-ENHANCED MESSAGE-----