UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-00537
Franklin Custodian Funds
(Exact name of registrant as specified in charter)
One Franklin Parkway, San Mateo, CA 94403-1906
(Address of principal executive offices) (Zip code)
Craig S. Tyle, One Franklin Parkway, San Mateo, CA 94403-1906
(Name and address of agent for service)
Registrant’s telephone number, including area code: 650 312-2000
Date of fiscal year end: 9/30
Date of reporting period: 9/30/19
| Item 1. | Reports to Stockholders. |
| Franklin DynaTech Fund
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Franklin U.S. Government Securities Fund
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| Franklin Growth Fund
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Franklin Utilities Fund
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| Franklin Income Fund
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Sign up for electronic delivery at franklintempleton.com/edelivery
Internet Delivery of Fund Reports Unless You Request Paper Copies: Effective January 1, 2021, as permitted by the SEC, paper copies of the Fund’s shareholder reports will no longer be sent by mail, unless you specifically request them from the Fund or your financial intermediary. Instead, the reports will be made available on a website, and you will be notified by mail each time a report is posted and provided with a website link to access the report.
If you already elected to receive shareholder reports electronically, you will not be affected by this change and you need not take any action. If you have not signed up for electronic delivery, we would encourage you to join fellow shareholders who have. You may elect to receive shareholder reports and other communications electronically from the Fund by calling (800) 632-2301 or by contacting your financial intermediary.
You may elect to continue to receive paper copies of all your future shareholder reports free of charge by contacting your financial intermediary or, if you invest directly with a Fund, calling (800) 632-2301 to let the Fund know of your request. Your election to receive reports in paper will apply to all funds held in your account.
SHAREHOLDER LETTER
1. Source: Copyright © 2019, S&P Dow Jones Indices LLC. All rights reserved.
2. Source: Morningstar. The changes in index prices shown for the S&P 500 do not include reinvestments of income and distributions, which are included in their total returns, which were: S&P 500 +4.25% (index total return resulting in an increase from 5,763.42 to 6,008.59).
3. Sources: Morningstar and Bloomberg Barclays Indices. For the Bloomberg Index, only total return as shown is available, not price change without the inclusion of reinvested income and distributions.
See www.franklintempletondatasources.com for additional data provider information.
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Not FDIC Insured | May Lose Value | No Bank Guarantee
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| franklintempleton.com | Not part of the annual report | 1 | ||
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1. Source: Bureau of Labor Statistics.
2. Source: Morningstar.
See www.franklintempletondatasources.com for additional data provider information.
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1. Source: Morningstar.
The indexes are unmanaged and include reinvestment of any income or distributions. They do not reflect any fees, expenses or sales charges. One cannot invest directly in an index, and an index is not representative of the Fund’s portfolio.
Frank Russell Company is the source and owner of the trademarks, service marks and copyrights related to the Russell Indexes. Russell® is a trademark of Frank Russell Company.
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 44.
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FRANKLIN DYNATECH FUND
2. The information technology sector comprises electronic equipment; instruments and components; IT services; semiconductors and semiconductor equipment; software and technology hardware, storage and peripherals in the SOI. The real estate sector comprises equity real estate investment trusts (REITS) in the SOI.
3. The health care sector comprises biotechnology, health care equipment and supplies, health care providers and services, health care technology, life sciences tools and services, and pharmaceuticals in the SOI. The consumer discretionary sector comprises diversified consumer services; internet and direct marketing retail; and textiles, apparel and luxury goods in the SOI. The communication services sector comprises entertainment, interactive media and services and media in the SOI.
See www.franklintempletondatasources.com for additional data provider information.
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FRANKLIN DYNATECH FUND
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FRANKLIN DYNATECH FUND
Performance Summary as of September 30, 2019
The performance table and graphs do not reflect any taxes that a shareholder would pay on Fund dividends, capital gain distributions, if any, or any realized gains on the sale of Fund shares. Total return reflects reinvestment of the Fund’s dividends and capital gain distributions, if any, and any unrealized gains or losses. Your dividend income will vary depending on dividends or interest paid by securities in the Fund’s portfolio, adjusted for operating expenses of each class. Capital gain distributions are net profits realized from the sale of portfolio securities.
Performance as of 9/30/191
Cumulative total return excludes sales charges. Average annual total return includes maximum sales charges. Sales charges will vary depending on the size of the investment and the class of share purchased. The maximum is 5.50% and the minimum is 0%. Class A: 5.50% maximum initial sales charge; Advisor Class: no sales charges. For other share classes, visit franklintempleton.com.
| Share Class | Cumulative Total Return2 |
Average Annual Total Return3 | ||||
| A4 |
||||||
| 1-Year |
+4.77% | -0.99% | ||||
| 5-Year |
+106.18% | +14.27% | ||||
| 10-Year |
+336.02% | +15.21% | ||||
| Advisor |
||||||
| 1-Year |
+5.04% | +5.04% | ||||
| 5-Year |
+108.76% | +15.86% | ||||
| 10-Year |
+347.14% | +16.16% | ||||
Performance data represent past performance, which does not guarantee future results. Investment return and principal value will fluctuate, and you may have a gain or loss when you sell your shares. Current performance may differ from figures shown. For most recent month-end performance, go to franklintempleton.com or call (800) 342-5236.
See page 9 for Performance Summary footnotes.
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FRANKLIN DYNATECH FUND
PERFORMANCE SUMMARY
Total Return Index Comparison for a Hypothetical $10,000 Investment1
Total return represents the change in value of an investment over the periods shown. It includes any applicable maximum sales charge, Fund expenses, account fees and reinvested distributions. The unmanaged indexes include reinvestment of any income or distributions. They differ from the Fund in composition and do not pay management fees or expenses. One cannot invest directly in an index.
Class A (10/1/09–9/30/19)
Advisor Class (10/1/09–9/30/19)
See page 9 for Performance Summary footnotes.
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FRANKLIN DYNATECH FUND
PERFORMANCE SUMMARY
Distributions (10/1/18–9/30/19)
| Share Class | Long-Term Capital Gain |
|||
| A | $1.9118 | |||
| C | $1.9118 | |||
| R | $1.9118 | |||
| R6 | $1.9118 | |||
| Advisor | $1.9118 | |||
Total Annual Operating Expenses6
| Share Class | With Fee Waiver |
Without Fee Waiver | ||||
| A | 0.87% | 0.87% | ||||
| Advisor | 0.62% | 0.62% |
Each class of shares is available to certain eligible investors and has different annual fees and expenses, as described in the prospectus.
All investments involve risks, including possible loss of principal. Stocks historically have outperformed other asset classes over the long term, but tend to fluctuate more dramatically over the short term. Investments in fast-growing industries, like the technology and health care sectors (which have historically been volatile) could result in increased price fluctuation, especially over the short term, due to the rapid pace of product change and development and changes in government regulation of companies emphasizing scientific or technological advancement or regulatory approval for new drugs and medical instruments. The Fund may also invest in small- and mid-capitalization companies, which can be particularly sensitive to changing economic conditions, and their prospects for growth are less certain than those of larger, more established companies. The Fund is actively managed but there is no guarantee that the manager’s investment decisions will produce the desired results. The Fund’s prospectus also includes a description of the main investment risks.
1. The Fund has a fee waiver associated with any investment it makes in a Franklin Templeton money fund and/or other Franklin Templeton fund, contractually guaranteed through 1/31/20. Fund investment results reflect the fee waiver; without this waiver, the results 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. Return for less than one year, if any, has not been annualized.
4. Prior to 9/10/18, these shares were offered at a higher initial sales charge of 5.75%, thus actual returns (with sales charges) would have differed. Average annual total returns (with sales charges) have been restated to reflect the current maximum initial sales charge of 5.50%.
5. Source: Morningstar. The Russell 1000 Growth Index is market capitalization-weighted and measures performance of those Russell 1000 Index companies with higher price-to-book ratios and higher forecasted growth values. The S&P 500 is a market capitalization-weighted index of 500 stocks designed to measure total U.S. equity market performance.
6. Figures are as stated in the Fund’s current prospectus and may differ from the expense ratios disclosed in the Your Fund’s Expenses and Financial Highlights sections in this report. In periods of market volatility, assets may decline significantly, causing total annual Fund operating expenses to become higher than the figures shown.
See www.franklintempletondatasources.com for additional data provider information.
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FRANKLIN DYNATECH FUND
Your Fund’s Expenses
As a Fund shareholder, you can incur two types of costs: (1) transaction costs, including sales charges (loads) on Fund purchases and redemptions; and (2) ongoing Fund costs, including management fees, distribution and service (12b-1) fees, and other Fund expenses. All mutual funds have ongoing costs, sometimes referred to as operating expenses. The table below shows ongoing costs of investing in the Fund and can help you understand these costs and compare them with those of other mutual funds. The table assumes a $1,000 investment held for the six months indicated.
Actual Fund Expenses
The table below provides information about actual account values and actual expenses in the columns under the heading “Actual.” In these columns the Fund’s actual return, which includes the effect of Fund expenses, is used to calculate the “Ending Account Value” for each class of shares. You can estimate the expenses you paid during the period by following these steps (of course, your account value and expenses will differ from those in this illustration): Divide your account value by $1,000 (if your account had an $8,600 value, then $8,600 ÷ $1,000 = 8.6). Then multiply the result by the number in the row for your class of shares under the headings “Actual” and “Expenses Paid During Period” (if Actual Expenses Paid During Period were $7.50, then 8.6 x $7.50 = $64.50). In this illustration, the actual expenses paid this period are $64.50.
Hypothetical Example for Comparison with Other Funds
Under the heading “Hypothetical” in the table, information is provided about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. This information may not be used to estimate the actual ending account balance or expenses you paid for the period, but it can help you compare ongoing costs of investing in the Fund with those of other funds. To do so, compare this 5% hypothetical example for the class of shares you hold with the 5% hypothetical examples that appear in the shareholder reports of other funds.
Please note that expenses shown in the table are meant to highlight ongoing costs and do not reflect any transactional costs. Therefore, information under the heading “Hypothetical” is useful in comparing ongoing costs only, and will not help you compare total costs of owning different funds. In addition, if transactional costs were included, your total costs would have been higher.
| Actual (actual return after expenses) |
Hypothetical (5% annual return before expenses) |
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| Share Class |
Beginning Account Value 4/1/19 |
Ending Account Value 9/30/19 |
Expenses Paid During 4/1/19–9/30/191, 2 |
Ending Account Value 9/30/19 |
Expenses Paid During 4/1/19–9/30/191, 2 |
Net Annualized Expense Ratio2 | ||||||
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| A |
$1,000 | $1,038.00 | $4.39 | $1,020.76 | $4.36 | 0.86% | ||||||
| C |
$1,000 | $1,034.20 | $8.21 | $1,017.00 | $8.14 | 1.61% | ||||||
| R |
$1,000 | $1,036.80 | $5.67 | $1,019.50 | $5.62 | 1.11% | ||||||
| R6 |
$1,000 | $1,039.90 | $2.56 | $1,022.56 | $2.54 | 0.50% | ||||||
| Advisor |
$1,000 | $1,039.40 | $3.12 | $1,022.01 | $3.09 | 0.61% | ||||||
1. Expenses are equal to the annualized expense ratio for the six-month period as indicated above—in the far right column—multiplied by the simple average account value over the period indicated, and then multiplied by 183/365 to reflect the one-half year period.
2. Reflects expenses after fee waivers and expense reimbursements. Does not include acquired fund fees and expenses.
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1. Source: Morningstar.
The index is unmanaged and includes reinvestment of any income or distributions. It does not reflect any fees, expenses or sales charges. One cannot invest directly in an index, and an index is not representative of the Fund’s portfolio.
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 54.
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FRANKLIN GROWTH FUND
2. The IT sector comprises semiconductors and semiconductor equipment, software and services, and technology hardware and equipment in the SOI. The industrials sector comprises capital goods, commercial and professional services, and transportation in the SOI.
3. The consumer discretionary sector comprises automobile and components, consumer durables and apparel, consumer services and retailing in the SOI. The health care sector comprises health care equipment and services and pharmaceuticals, biotechnology and life sciences in the SOI.
See www.franklintempletondatasources.com for additional data provider information.
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FRANKLIN GROWTH FUND
| CFA® is a trademark owned by CFA Institute.
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FRANKLIN GROWTH FUND
Performance Summary as of September 30, 2019
The performance table and graphs do not reflect any taxes that a shareholder would pay on Fund dividends, capital gain distributions, if any, or any realized gains on the sale of Fund shares. Total return reflects reinvestment of the Fund’s dividends and capital gain distributions, if any, and any unrealized gains or losses. Your dividend income will vary depending on dividends or interest paid by securities in the Fund’s portfolio, adjusted for operating expenses of each class. Capital gain distributions are net profits realized from the sale of portfolio securities.
Performance as of 9/30/191
Cumulative total return excludes sales charges. Average annual total return includes maximum sales charges. Sales charges will vary depending on the size of the investment and the class of share purchased. The maximum is 5.50% and the minimum is 0%. Class A: 5.50% maximum initial sales charge; Advisor Class: no sales charges. For other share classes, visit franklintempleton.com.
| Share Class | Cumulative Total Return2 |
Average Annual Total Return3 | ||
| A4 |
||||
| 1-Year |
+3.79% | -1.92% | ||
| 5-Year |
+75.85% | +10.69% | ||
| 10-Year |
+248.55% | +12.66% | ||
| Advisor |
||||
| 1-Year |
+4.05% | +4.05% | ||
| 5-Year |
+78.07% | +12.23% | ||
| 10-Year |
+257.40% | +13.58% | ||
Performance data represent past performance, which does not guarantee future results. Investment return and principal value will fluctuate, and you may have a gain or loss when you sell your shares. Current performance may differ from figures shown. For most recent month-end performance, go to franklintempleton.com or call (800) 342-5236.
See page 16 for Performance Summary footnotes.
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FRANKLIN GROWTH FUND
PERFORMANCE SUMMARY
Total Return Index Comparison for a Hypothetical $10,000 Investment1
Total return represents the change in value of an investment over the periods shown. It includes any applicable maximum sales charge, Fund expenses, account fees and reinvested distributions. The unmanaged index includes reinvestment of any income or distributions. It differs from the Fund in composition and does not pay management fees or expenses. One cannot invest directly in an index.
Class A (10/1/09–9/30/19)
Advisor Class (10/1/09–9/30/19)
See page 16 for Performance Summary footnotes.
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FRANKLIN GROWTH FUND
PERFORMANCE SUMMARY
Distributions (10/1/18–9/30/19)
| Share Class | Net Investment Income |
Long-Term Capital Gain |
Total | |||||
| A |
$ | 0.4377 | $1.0435 | $1.4812 | ||||
| C | $ | — | $1.0435 | $1.0435 | ||||
| R | $ | 0.1413 | $1.0435 | $1.1848 | ||||
| R6 | $ | 0.7873 | $1.0435 | $1.8308 | ||||
| Advisor | $ | 0.6908 | $1.0435 | $1.7343 | ||||
|
Total Annual Operating Expenses6
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| Share Class | With Fee Waiver |
Without Fee Waiver |
||||||
| A |
0.84% | 0.84% | ||||||
| Advisor | 0.59% | 0.59% | ||||||
Each class of shares is available to certain eligible investors and has different annual fees and expenses, as described in the prospectus.
All investments involve risks, including possible loss of principal. Historically, the Fund has focused on larger companies. The Fund may also invest in small, relatively new and/or unseasoned companies, which involves additional risks, as the price of these securities can be volatile, particularly over the short term. The Fund may focus on particular sectors of the market from time to time, which can carry greater risks of adverse developments in such sectors. In addition, the Fund may invest up to 40% of its net assets in stocks of foreign companies, which involve special risks, including currency fluctuations and economic as well as political uncertainty. The Fund is actively managed but there is no guarantee that the manager’s investment decisions will produce the desired results. The Fund’s prospectus also includes a description of the main investment risks.
1. The Fund has a fee waiver associated with any investment it makes in a Franklin Templeton money fund and/or other Franklin Templeton fund, contractually guaranteed through 1/31/20. Fund investment results reflect the fee waiver; without this waiver, the results 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. Return for less than one year, if any, has not been annualized.
4. Prior to 9/10/18, these shares were offered at a higher initial sales charge of 5.75%, thus actual returns (with sales charges) would have differed. Average annual total returns (with sales charges) have been restated to reflect the current maximum initial sales charge of 5.50%.
5. Source: Morningstar. The S&P 500 is a market capitalization-weighted index of 500 stocks designed to measure total U.S. equity market performance.
6. Figures are as stated in the Fund’s current prospectus and may differ from the expense ratios disclosed in the Your Fund’s Expenses and Financial Highlights sections in this report. In periods of market volatility, assets may decline significantly, causing total annual Fund operating expenses to become higher than the figures shown.
See www.franklintempletondatasources.com for additional data provider information.
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FRANKLIN GROWTH FUND
Your Fund’s Expenses
As a Fund shareholder, you can incur two types of costs: (1) transaction costs, including sales charges (loads) on Fund purchases and redemptions; and (2) ongoing Fund costs, including management fees, distribution and service (12b-1) fees, and other Fund expenses. All mutual funds have ongoing costs, sometimes referred to as operating expenses. The table below shows ongoing costs of investing in the Fund and can help you understand these costs and compare them with those of other mutual funds. The table assumes a $1,000 investment held for the six months indicated.
Actual Fund Expenses
The table below provides information about actual account values and actual expenses in the columns under the heading “Actual.” In these columns the Fund’s actual return, which includes the effect of Fund expenses, is used to calculate the “Ending Account Value” for each class of shares. You can estimate the expenses you paid during the period by following these steps (of course, your account value and expenses will differ from those in this illustration): Divide your account value by $1,000 (if your account had an $8,600 value, then $8,600 ÷ $1,000 = 8.6). Then multiply the result by the number in the row for your class of shares under the headings “Actual” and “Expenses Paid During Period” (if Actual Expenses Paid During Period were $7.50, then 8.6 x $7.50 = $64.50). In this illustration, the actual expenses paid this period are $64.50.
Hypothetical Example for Comparison with Other Funds
Under the heading “Hypothetical” in the table, information is provided about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. This information may not be used to estimate the actual ending account balance or expenses you paid for the period, but it can help you compare ongoing costs of investing in the Fund with those of other funds. To do so, compare this 5% hypothetical example for the class of shares you hold with the 5% hypothetical examples that appear in the shareholder reports of other funds.
Please note that expenses shown in the table are meant to highlight ongoing costs and do not reflect any transactional costs. Therefore, information under the heading “Hypothetical” is useful in comparing ongoing costs only, and will not help you compare total costs of owning different funds. In addition, if transactional costs were included, your total costs would have been higher.
| Actual (actual return after expenses) |
Hypothetical (5% annual return before expenses) |
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| Share Class |
Beginning Account Value 4/1/19 |
Ending Account Value 9/30/19 |
Expenses Paid During Period 4/1/19–9/30/191, 2 |
Ending Account |
Expenses Paid During Period 4/1/19–9/30/191, 2 |
Net Annualized Expense Ratio2 | ||||||
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| A |
$1,000 | $1,061.50 | $4.29 | $1,020.91 | $4.20 | 0.83% | ||||||
| C |
$1,000 | $1,057.50 | $8.15 | $1,017.15 | $7.99 | 1.58% | ||||||
| R |
$1,000 | $1,060.20 | $5.58 | $1,019.65 | $5.47 | 1.08% | ||||||
| R6 |
$1,000 | $1,063.50 | $2.43 | $1,022.71 | $2.38 | 0.47% | ||||||
| Advisor |
$1,000 | $1,062.90 | $3.00 | $1,022.16 | $2.94 | 0.58% | ||||||
1. Expenses are equal to the annualized expense ratio for the six-month period as indicated above—in the far right column—multiplied by the simple average account value over the period indicated, and then multiplied by 183/365 to reflect the one-half year period.
2. Reflects expenses after fee waivers and expense reimbursements. Does not include acquired fund fees and expenses.
| franklintempleton.com | Annual Report | 17 | ||
1. Source: Morningstar.
2. Effective 9/10/18, Class A shares closed to new investors, were renamed Class A1 shares, and a new Class A share with a different expense structure became available. Class A performance shown has been calculated as follows: (a) for periods prior to 9/10/18, a restated figure is used based on the Fund’s Class A1 performance that includes any Rule 12b-1 rate differential that exists between Class A1 and Class A; and (b) for periods after 9/10/18, actual Class A performance is used, reflecting all charges and fees applicable to that class.
3. Source: Factset. The Fund’s Blended Benchmark was calculated internally and rebalanced monthly.
4. Source: Lipper, a Thomson Reuters Company. For the 12-month period ended 9/30/19, this category consisted of 600 funds. Lipper calculations do not include sales charges or expense subsidization by a fund’s manager. The Fund’s performance relative to the average may have differed if these and other factors had been considered. The indexes are unmanaged and include reinvestment of any income or distributions. They do not reflect any fees, expenses or sales charges. One cannot invest directly in an index, and an index is not representative of the Fund’s portfolio.
See www.franklintempletondatasources.com for additional data provider information.
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 65.
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FRANKLIN INCOME FUND
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FRANKLIN INCOME FUND
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FRANKLIN INCOME FUND
Performance Summary as of September 30, 2019
The performance tables and graphs do not reflect any taxes that a shareholder would pay on Fund dividends, capital gain distributions, if any, or any realized gains on the sale of Fund shares. Total return reflects reinvestment of the Fund’s dividends and capital gain distributions, if any, and any unrealized gains or losses. Your dividend income will vary depending on dividends or interest paid by securities in the Fund’s portfolio, adjusted for operating expenses of each class. Capital gain distributions are net profits realized from the sale of portfolio securities.
Performance as of 9/30/191
Cumulative total return excludes sales charges. Average annual total return includes maximum sales charges. Sales charges will vary depending on the size of the investment and the class of share purchased. The maximum is 3.75% and the minimum is 0%. Class A: 3.75% maximum initial sales charge; Advisor Class: no sales charges. For other share classes, visit franklintempleton.com.
| Share Class | Cumulative Total Return2 |
Average Annual Total Return3 | ||
| A4,5 |
||||
| 1-Year |
+4.40% | +0.49% | ||
| 5-Year |
+20.42% | +3.00% | ||
| 10-Year |
+104.43% | +7.00% | ||
| Advisor |
||||
| 1-Year |
+4.65% | +4.65% | ||
| 5-Year |
+21.54% | +3.98% | ||
| 10-Year |
+107.77% | +7.59% | ||
| Distribution | 30-Day Standardized Yield7 | |||||||
| Share Class | Rate6 | (with fee waiver) | (without fee waiver) | |||||
| A |
4.92% | 3.56% | 3.55% | |||||
| Advisor |
5.37% | 3.95% | 3.95% | |||||
Performance data represent past performance, which does not guarantee future results. Investment return and principal value will fluctuate, and you may have a gain or loss when you sell your shares. Current performance may differ from figures shown. For most recent month-end performance, go to franklintempleton.com or call (800) 342-5236.
See page 24 for Performance Summary footnotes.
| franklintempleton.com | Annual Report | 21 | ||
FRANKLIN INCOME FUND
PERFORMANCE SUMMARY
Total Return Index Comparison for a Hypothetical $10,000 Investment1
Total return represents the change in value of an investment over the periods shown. It includes any applicable maximum sales charge, Fund expenses, account fees and reinvested distributions. The unmanaged indexes include reinvestment of any income or distributions. They differ from the Fund in composition and do not pay management fees or expenses. One cannot invest directly in an index.
Class A (10/1/09–9/30/19)
Advisor Class (10/1/09–9/30/19)
See page 24 for Performance Summary footnotes.
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FRANKLIN INCOME FUND
PERFORMANCE SUMMARY
Net Asset Value
| Share Class (Symbol) | 9/30/19 | 9/30/18 | Change | |||
| A (FKIQX) | $2.30 | $2.32 | -$0.02 | |||
| A1 (FKINX) | $2.30 | $2.32 | -$0.02 | |||
| C (FCISX) | $2.34 | $2.35 | -$0.01 | |||
| R (FISRX) | $2.26 | $2.28 | -$0.02 | |||
| R6 (FNCFX) | $2.29 | $2.30 | -$0.01 | |||
| Advisor (FRIAX) | $2.28 | $2.30 | -$0.02 | |||
| Distributions (10/1/18–9/30/19) | ||||||
| Share Class | Net Investment Income |
|||||
| A | $0.1176 | |||||
| A1 | $0.1200 | |||||
| C | $0.1080 | |||||
| R | $0.1116 | |||||
| R6 | $0.1236 | |||||
| Advisor | $0.1224 | |||||
| Total Annual Operating Expenses11 | ||||||
| Share Class | With Fee Waiver |
Without Fee Waiver |
||||
| A | 0.72% | 0.72% | ||||
| Advisor | 0.47% | 0.47% | ||||
See page 24 for Performance Summary footnotes.
| franklintempleton.com | Annual Report | 23 | ||
FRANKLIN INCOME FUND
PERFORMANCE SUMMARY
Each class of shares is available to certain investors and has different annual fees and expenses, as described in the prospectus.
All investments involve risks, including possible loss of principal. The Fund’s portfolio includes a substantial portion of higher-yielding, lower-rated corporate bonds and some floating rate loans, which are also higher yielding and lower rated. These investments have more credit risk than investment-grade securities and are subject to increased risk of default and potential loss of principal. The Fund’s share price and yield will be affected by interest rate movements. Bond prices generally move in the opposite direction of interest rates. Thus, as prices of bonds in the Fund adjust to a rise in interest rates, the Fund’s share price may decline. Changes in the financial strength of a bond issuer or in a bond’s credit rating may affect its value. Stock prices fluctuate, sometimes rapidly and dramatically, due to factors affecting individual companies, particular industries or sectors, or general market conditions. Foreign investing involves additional risks such as currency and market volatility, as well as political and social instability. The Fund is actively managed but there is no guarantee that the manager’s investment decisions will produce the desired results. The Fund’s prospectus also includes a description of the main investment risks.
1. The Fund has a fee waiver associated with any investment it makes in a Franklin Templeton money fund and/or other Franklin Templeton fund, contractually guaranteed through 1/31/20. Fund investment results reflect the fee waiver; without this waiver, the results 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. Return for less than one year, if any, has not been annualized.
4. Effective 9/10/18, Class A shares closed to new investors, were renamed Class A1 shares, and a new Class A share with a different expense structure became available. Class A performance shown has been calculated as follows: (a) for periods prior to 9/10/18, a restated figure is used based on the Fund’s Class A1 performance that includes any Rule 12b-1 rate differential that exists between Class A1 and Class A; and (b) for periods after 9/10/18, actual Class A performance is used, reflecting all charges and fees applicable to that class.
5. Prior to 3/1/19, these shares were offered at a higher initial sales charge of 4.25%, thus actual returns (with sales charges) would have differed. Average annual total returns (with sales charges) have been restated to reflect the current maximum initial sales charge of 3.75%.
6. Distribution rate is based on an annualization of the respective class’s September dividend and the maximum offering price (NAV for Advisor Class) per share on 9/30/19.
7. The Fund’s 30-day standardized yield is calculated over a trailing 30-day period using the yield to maturity on bonds and/or the dividends accrued on stocks. It may not equal the Fund’s actual income distribution rate, which reflects the Fund’s past dividends paid to shareholders.
8. Source: Morningstar. The S&P 500 is a market capitalization-weighted index of 500 stocks designed to measure total U.S. equity market performance. The Bloomberg Barclays U.S. Aggregate Bond Index is a market capitalization-weighted index representing the U.S. investment-grade, fixed-rate, taxable bond market with index components for government and corporate, mortgage pass-through and asset-backed securities. All issues included are SEC registered, taxable, dollar denominated and nonconvertible, must have at least one year to final maturity and must be rated investment grade (Baa3/BBB-/BBB- or higher) using the middle rating of Moody’s, S&P and Fitch, respectively.
9. Source: Factset. The Blended 50% MSCI USD High Dividend Yield Index + 25% Bloomberg Barclays High Yield Very Liquid Index + 25% Bloomberg Barclays U.S. Aggregate Index measures performance of high dividend-paying global and developed and emerging stocks, noninvestment-grade corporate bonds and tracks performance of the U.S. investment-grade bond market.
10. Source: Lipper, a Thomas Reuters Company. The Lipper Mixed-Asset Target Allocation Moderate Funds Classification Average is calculated by averaging the total returns of all funds within the Lipper Mixed-Asset Target Allocation Moderate Funds classification in the Lipper Open-End underlying funds universe. Lipper Mixed-Asset Target Allocation Moderate Funds are defined as funds that, by portfolio practice, maintain a mix of between 40%–60% equity securities, with the remainder invested in bonds, cash and cash equivalents. For the one-year period ended 9/30/19, there were 600 funds in this category. Lipper calculations do not include sales charges or expense subsidization by a fund’s manager. The Fund’s performance relative to the average may have differed if these and other factors had been considered.
11. Figures are as stated in the Fund’s current prospectus and may differ from the expense ratios disclosed in the Your Fund’s Expenses and Financial Highlights sections in this report. In periods of market volatility, assets may decline significantly, causing total annual Fund operating expenses to become higher than the figures shown.
See www.franklintempletondatasources.com for additional data provider information.
| 24 |
Annual Report | franklintempleton.com | ||
FRANKLIN INCOME FUND
Your Fund’s Expenses
As a Fund shareholder, you can incur two types of costs: (1) transaction costs, including sales charges (loads) on Fund purchases and redemptions; and (2) ongoing Fund costs, including management fees, distribution and service (12b-1) fees, and other Fund expenses. All mutual funds have ongoing costs, sometimes referred to as operating expenses. The table below shows ongoing costs of investing in the Fund and can help you understand these costs and compare them with those of other mutual funds. The table assumes a $1,000 investment held for the six months indicated.
Actual Fund Expenses
The table below provides information about actual account values and actual expenses in the columns under the heading “Actual.” In these columns the Fund’s actual return, which includes the effect of Fund expenses, is used to calculate the “Ending Account Value” for each class of shares. You can estimate the expenses you paid during the period by following these steps (of course, your account value and expenses will differ from those in this illustration): Divide your account value by $1,000 (if your account had an $8,600 value, then $8,600 ÷ $1,000 = 8.6). Then multiply the result by the number in the row for your class of shares under the headings “Actual” and “Expenses Paid During Period” (if Actual Expenses Paid During Period were $7.50, then 8.6 x $7.50 = $64.50). In this illustration, the actual expenses paid this period are $64.50.
Hypothetical Example for Comparison with Other Funds
Under the heading “Hypothetical” in the table, information is provided about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. This information may not be used to estimate the actual ending account balance or expenses you paid for the period, but it can help you compare ongoing costs of investing in the Fund with those of other funds. To do so, compare this 5% hypothetical example for the class of shares you hold with the 5% hypothetical examples that appear in the shareholder reports of other funds.
Please note that expenses shown in the table are meant to highlight ongoing costs and do not reflect any transactional costs. Therefore, information under the heading “Hypothetical” is useful in comparing ongoing costs only, and will not help you compare total costs of owning different funds. In addition, if transactional costs were included, your total costs would have been higher.
| Actual (actual return after expenses) |
Hypothetical (5% annual return before expenses) |
|||||||||||
|
|
|
|||||||||||
| Share Class |
Beginning Account Value 4/1/19 |
Ending Account Value 9/30/19 |
Expenses Paid During 4/1/19–9/30/191, 2 |
Ending Account Value 9/30/19 |
Expenses Paid During 4/1/19–9/30/191, 2 |
Net Annualized Expense Ratio2 | ||||||
|
|
|
|
| |||||||||
| A |
$1,000 | $1,021.50 | $3.60 | $1,021.51 | $3.60 | 0.71% | ||||||
| A1 |
$1,000 | $1,017.60 | $3.09 | $1,022.01 | $3.09 | 0.61% | ||||||
| C |
$1,000 | $1,019.10 | $5.62 | $1,019.50 | $5.62 | 1.11% | ||||||
| R |
$1,000 | $1,016.10 | $4.85 | $1,020.26 | $4.86 | 0.96% | ||||||
| R6 |
$1,000 | $1,023.00 | $1.98 | $1,023.11 | $1.98 | 0.39% | ||||||
| Advisor |
$1,000 | $1,018.30 | $2.33 | $1,022.76 | $2.33 | 0.46% | ||||||
1. Expenses are equal to the annualized expense ratio for the six-month period as indicated above—in the far right column—multiplied by the simple average account value over the period indicated, and then multiplied by 183/365 to reflect the one-half year period.
2. Reflects expenses after fee waivers and expense reimbursements. Does not include acquired fund fees and expenses.
| franklintempleton.com | Annual Report | 25 | ||
Franklin U.S. Government Securities Fund
1. Securities owned by the Fund, but not shares of the Fund, are guaranteed by the U.S. government, its agencies or instrumentalities as to the timely payment of principal and interest. The Fund’s yield and share price are not guaranteed and will vary with market conditions.
2. Source: Morningstar.
3. Source: Lipper, a Thomson Reuters Company. For the 12-month period ended 9/30/19, there were 52 funds in this category. Lipper calculations do not include sales charges or expense subsidization by a fund’s manager. The Fund’s performance relative to the average may have differed if these and other factors had been considered. The indexes are unmanaged and include reinvestment of any income or distributions. They do not reflect any fees, expenses or sales charges. One cannot invest directly in an index, and an index is not representative of the Fund’s portfolio.
See www.franklintempletondatasources.com for additional data provider information.
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 88.
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Annual Report | franklintempleton.com | ||
FRANKLIN U.S. GOVERNMENT SECURITIES FUND
| franklintempleton.com | Annual Report | 27 | ||
FRANKLIN U.S. GOVERNMENT SECURITIES FUND
Performance Summary as of September 30, 2019
The performance tables and graphs do not reflect any taxes that a shareholder would pay on Fund dividends, capital gain distributions, if any, or any realized gains on the sale of Fund shares. Total return reflects reinvestment of the Fund’s dividends and capital gain distributions, if any, and any unrealized gains or losses. Your dividend income will vary depending on dividends or interest paid by securities in the Fund’s portfolio, adjusted for operating expenses of each class. Capital gain distributions are net profits realized from the sale of portfolio securities.
Performance as of 9/30/191
Cumulative total return excludes sales charges. Average annual total return includes maximum sales charges. Sales charges will vary depending on the size of the investment and the class of share purchased. The maximum is 3.75% and the minimum is 0%. Class A: 3.75% maximum initial sales charge; Advisor Class: no sales charges. For other share classes, visit franklintempleton.com.
| Share Class | Cumulative Total Return2 |
Average Annual Total Return3 | ||
| A4,5 |
||||
| 1-Year |
+6.70% | +2.70% | ||
| 5-Year |
+9.36% | +1.03% | ||
| 10-Year |
+27.88% | +2.10% | ||
| Advisor |
||||
| 1-Year |
+7.08% | +7.08% | ||
| 5-Year |
+10.22% | +1.97% | ||
| 10-Year |
+29.83% | +2.64% | ||
| Distribution | 30-Day Standardized Yield7 | |||||||
| Share Class | Rate6 | (with fee waiver) | (without fee waiver) | |||||
| A |
2.83% | 1.91% | 1.90% | |||||
| Advisor |
3.13% | 2.24% | 2.23% | |||||
Performance data represent past performance, which does not guarantee future results. Investment return and principal value will fluctuate, and you may have a gain or loss when you sell your shares. Current performance may differ from figures shown. For most recent month-end performance, go to franklintempleton.com or call (800) 342-5236.
See page 30 for Performance Summary footnotes.
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Annual Report | franklintempleton.com | ||
FRANKLIN U.S. GOVERNMENT SECURITIES FUND
PERFORMANCE SUMMARY
Total Return Index Comparison for a Hypothetical $10,000 Investment1
Total return represents the change in value of an investment over the periods shown. It includes any applicable maximum sales charge, Fund expenses, account fees and reinvested distributions. The unmanaged indexes include reinvestment of any income or distributions. They differ from the Fund in composition and do not pay management fees or expenses. One cannot invest directly in an index.
Class A (10/1/09–9/30/19)
Advisor Class (10/1/09–9/30/19)
See page 30 for Performance Summary footnotes.
| franklintempleton.com | Annual Report | 29 | ||
FRANKLIN U.S. GOVERNMENT SECURITIES FUND
PERFORMANCE SUMMARY
Distributions (10/1/18–9/30/19)
| Share Class | Net Investment Income | |
| A |
$0.1765 | |
| A1 | $0.1799 | |
| C | $0.1497 | |
| R | $0.1594 | |
| R6 | $0.1965 | |
| Advisor | $0.1891 |
Total Annual Operating Expenses11
| Share Class | With Fee Waiver |
Without Fee Waiver |
||||||
| A | 0.87% | 0.87% | ||||||
| Advisor | 0.62% | 0.62% | ||||||
Each class of shares is available to certain eligible investors and has different annual fees and expenses, as described in the prospectus.
All investments involve risks, including possible loss of principal. The Fund’s share price and yield will be affected by interest rate movements and mortgage prepayments. Bond prices generally move in the opposite direction of interest rates. Thus, as prices of bonds in the Fund adjust to a rise in interest rates, the Fund’s share price may decline. Changes in the financial strength of a bond issuer or in a bond’s credit rating may affect its value. The Fund is actively managed but there is no guarantee that the manager’s investment decisions will produce the desired results. The Fund’s prospectus also includes a description of the main investment risks.
1. The Fund has a fee waiver associated with any investment it makes in a Franklin Templeton money fund and/or other Franklin Templeton fund, contractually guaranteed through 1/31/20. Fund investment results reflect the fee waiver; without this waiver, the results 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. Return for less than one year, if any, has not been annualized.
4. Effective 9/10/18, Class A shares closed to new investors, were renamed Class A1 shares, and a new Class A share with a different expense structure became available. Class A performance shown has been calculated as follows: (a) for periods prior to 9/10/18, a restated figure is used based on the Fund’s Class A1 performance that includes any Rule 12b-1 rate differential that exists between Class A1 and Class A; and (b) for periods after 9/10/18, actual Class A performance is used, reflecting all charges and fees applicable to that class.
5. Prior to 3/1/19, these shares were offered at a higher initial sales charge of 4.25%, thus actual returns (with sales charges) would have differed. Average annual total returns (with sales charges) have been restated to reflect the current maximum initial sales charge of 3.75%.
6. Distribution rate is based on an annualization of the respective class’s September dividend and the maximum offering price (NAV for Advisor Class) per share on 9/30/19.
7. The Fund’s 30-day standardized yield is calculated over a trailing 30-day period using the yield to maturity on bonds and/or the dividends accrued on stocks. It may not equal the Fund’s actual income distribution rate, which reflects the Fund’s past dividends paid to shareholders.
8. Source: Morningstar. Bloomberg Barclays U.S. Government Intermediate Index, the intermediate component of the Bloomberg Barclays U.S. Government Index, which includes public obligations of the U.S. Treasury with at least one year to final maturity and publicly issued debt of U.S. government agencies, quasi-federal corporations, and corporate or foreign debt guaranteed by the U.S. government.
9. Source: Lipper, a Thomson Reuters Company. The Lipper GNMA Funds Classification Average is calculated by averaging the total sum for all funds within the Lipper GNMA Funds classification in the Lipper Open-End underlying funds universe for the period indicated. Lipper GNMA Funds are defined as funds that invest primarily in Government National Mortgage Association securities. For the one-year period ended 9/30/19, there were 52 funds in this category. Lipper calculations do not include sales charges or expense subsidization by a fund’s manager. The Fund’s performance relative to the average may have differed if these or other factors had been considered.
10. Source: Bureau of Labor Statistics, bls.gov/cpi. The Consumer Price Index (CPI) is a commonly used measure of the inflation rate.
11. Figures are as stated in the Fund’s current prospectus and may differ from the expense ratios disclosed in the Your Fund’s Expenses and Financial Highlights sections in this report. In periods of market volatility, assets may decline significantly, causing total annual Fund operating expenses to become higher than the figures shown.
See www.franklintempletondatasources.com for additional data provider information.
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Annual Report | franklintempleton.com | ||
FRANKLIN U.S. GOVERNMENT SECURITIES FUND
Your Fund’s Expenses
As a Fund shareholder, you can incur two types of costs: (1) transaction costs, including sales charges (loads) on Fund purchases and redemptions; and (2) ongoing Fund costs, including management fees, distribution and service (12b-1) fees, and other Fund expenses. All mutual funds have ongoing costs, sometimes referred to as operating expenses. The table below shows ongoing costs of investing in the Fund and can help you understand these costs and compare them with those of other mutual funds. The table assumes a $1,000 investment held for the six months indicated.
Actual Fund Expenses
The table below provides information about actual account values and actual expenses in the columns under the heading “Actual.” In these columns the Fund’s actual return, which includes the effect of Fund expenses, is used to calculate the “Ending Account Value” for each class of shares. You can estimate the expenses you paid during the period by following these steps (of course, your account value and expenses will differ from those in this illustration): Divide your account value by $1,000 (if your account had an $8,600 value, then $8,600 ÷ $1,000 = 8.6). Then multiply the result by the number in the row for your class of shares under the headings “Actual” and “Expenses Paid During Period” (if Actual Expenses Paid During Period were $7.50, then 8.6 x $7.50 = $64.50). In this illustration, the actual expenses paid this period are $64.50.
Hypothetical Example for Comparison with Other Funds
Under the heading “Hypothetical” in the table, information is provided about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. This information may not be used to estimate the actual ending account balance or expenses you paid for the period, but it can help you compare ongoing costs of investing in the Fund with those of other funds. To do so, compare this 5% hypothetical example for the class of shares you hold with the 5% hypothetical examples that appear in the shareholder reports of other funds.
Please note that expenses shown in the table are meant to highlight ongoing costs and do not reflect any transactional costs. Therefore, information under the heading “Hypothetical” is useful in comparing ongoing costs only, and will not help you compare total costs of owning different funds. In addition, if transactional costs were included, your total costs would have been higher.
| Actual (actual return after expenses) |
Hypothetical (5% annual return before expenses) |
|||||||||||
|
|
|
|||||||||||
| Share Class |
Beginning Value 4/1/19 |
Ending Account Value 9/30/19 |
Expenses Paid During 4/1/19–9/30/191, 2 |
Ending Account Value 9/30/19 |
Expenses Paid During 4/1/19–9/30/191, 2 |
Net Annualized Ratio2 | ||||||
|
|
|
|
| |||||||||
| A |
$1,000 | $1,033.10 | $4.49 | $1,020.66 | $4.46 | 0.88% | ||||||
| A1 |
$1,000 | $1,033.50 | $3.98 | $1,021.16 | $3.95 | 0.78% | ||||||
| C |
$1,000 | $1,031.10 | $6.52 | $1,018.65 | $6.48 | 1.28% | ||||||
| R |
$1,000 | $1,031.70 | $5.76 | $1,019.40 | $5.72 | 1.13% | ||||||
| R6 |
$1,000 | $1,036.50 | $2.55 | $1,022.56 | $2.54 | 0.50% | ||||||
| Advisor |
$1,000 | $1,034.10 | $3.21 | $1,021.91 | $3.19 | 0.63% | ||||||
1. Expenses are equal to the annualized expense ratio for the six-month period as indicated above—in the far right column—multiplied by the simple average account value over the period indicated, and then multiplied by 183/365 to reflect the one-half year period.
2. Reflects expenses after fee waivers and expense reimbursements. Does not include acquired fund fees and expenses.
| franklintempleton.com | Annual Report | 31 | ||
1. Source: Morningstar.
The indexes are unmanaged and include reinvestment of any income or distributions. They do not reflect any fees, expenses or sales charges. One cannot invest directly in an index, and an index is not representative of the Fund’s portfolio.
2. The utilities sector comprises electric utilities, gas utilities, multi-utilities and water utilities in the SOI.
See www.franklintempletondatasources.com for additional data provider information.
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 97.
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Annual Report | franklintempleton.com | ||
FRANKLIN UTILITIES FUND
| franklintempleton.com | Annual Report | 33 | ||
FRANKLIN UTILITIES FUND
Performance Summary as of September 30, 2019
The performance tables and graphs do not reflect any taxes that a shareholder would pay on Fund dividends, capital gain distributions, if any, or any realized gains on the sale of Fund shares. Total return reflects reinvestment of the Fund’s dividends and capital gain distributions, if any, and any unrealized gains or losses. Your dividend income will vary depending on dividends or interest paid by securities in the Fund’s portfolio, adjusted for operating expenses of each class. Capital gain distributions are net profits realized from the sale of portfolio securities.
Performance as of 9/30/191
Cumulative total return excludes sales charges. Average annual total return includes maximum sales charges. Sales charges will vary depending on the size of the investment and the class of share purchased. The maximum is 3.75% and the minimum is 0%. Class A: 3.75% maximum initial sales charge; Advisor Class: no sales charges. For other share classes, visit franklintempleton.com.
| Share Class | Cumulative Total Return2 |
Average Annual Total Return3 | ||
| A4,5 |
||||
| 1-Year |
+27.43% | +22.65% | ||
| 5-Year |
+72.76% | +10.71% | ||
| 10-Year |
+224.08% | +12.05% | ||
| Advisor |
||||
| 1-Year |
+27.78% | +27.78% | ||
| 5-Year |
+74.44% | +11.77% | ||
| 10-Year |
+229.84% | +12.68% | ||
| Distribution | 30-Day Standardized Yield7 | |||||||||
| Share Class | Rate6 | (with fee waiver) | (without fee waiver) | |||||||
| A |
1.96% | 2.16% | 2.16% | |||||||
| Advisor |
2.25% | 2.49% | 2.49% | |||||||
Performance data represent past performance, which does not guarantee future results. Investment return and principal value will fluctuate, and you may have a gain or loss when you sell your shares. Current performance may differ from figures shown. For most recent month-end performance, go to franklintempleton.com or call (800) 342-5236.
See page 37 for Performance Summary footnotes.
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Annual Report | franklintempleton.com | ||
FRANKLIN UTILITIES FUND
PERFORMANCE SUMMARY
Total Return Index Comparison for a Hypothetical $10,000 Investment1
Total return represents the change in value of an investment over the periods shown. It includes any applicable maximum sales charge, Fund expenses, account fees and reinvested distributions. The unmanaged indexes include reinvestment of any income or distributions. They differ from the Fund in composition and do not pay management fees or expenses. One cannot invest directly in an index.
Class A (10/1/09–9/30/19)
Advisor Class (10/1/09–9/30/19)
See page 37 for Performance Summary footnotes.
| franklintempleton.com | Annual Report | 35 | ||
FRANKLIN UTILITIES FUND
PERFORMANCE SUMMARY
Net Asset Value
| Share Class (Symbol) | 9/30/19 | 9/30/18 | Change | |||||||||||
| A (FKUQX) | $22.53 | $18.66 | +$3.87 | |||||||||||
| A1 (FKUTX) | $22.54 | $18.66 | +$3.88 | |||||||||||
| C (FRUSX) | $22.42 | $18.57 | +$3.85 | |||||||||||
| R (FRURX) | $22.45 | $18.59 | +$3.86 | |||||||||||
| R6 (FUFRX) | $22.73 | $18.81 | +$3.92 | |||||||||||
| Advisor (FRUAX) | $22.73 | $18.81 | +$3.92 | |||||||||||
|
Distributions (10/1/18–9/30/19)
|
|
|||||||||||||
| Share Class | Net Investment Income |
Short-Term Capital Gain |
Long-Term Capital Gain |
Total | ||||||||||
| A | $0.4942 | $0.0112 | $0.5657 | $1.0711 | ||||||||||
| A1 | $0.5143 | $0.0112 | $0.5657 | $1.0912 | ||||||||||
| C | $0.4156 | $0.0112 | $0.5657 | $0.9925 | ||||||||||
| R | $0.4451 | $0.0112 | $0.5657 | $1.0220 | ||||||||||
| R6 | $0.5611 | $0.0112 | $0.5657 | $1.1380 | ||||||||||
| Advisor | $0.5438 | $0.0112 | $0.5657 | $1.1207 | ||||||||||
|
Total Annual Operating Expenses9
|
|
|||||||||||||
| Share Class | With Fee Waiver |
Without Fee Waiver |
||||||||||||
| A | 0.84% | 0.84% | ||||||||||||
| Advisor | 0.59% | 0.59% | ||||||||||||
See page 37 for Performance Summary footnotes.
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Annual Report | franklintempleton.com | ||
FRANKLIN UTILITIES FUND
PERFORMANCE SUMMARY
Each class of shares is available to certain eligible investors and has different annual fees and expenses, as described in the prospectus.
All investments involve risks, including possible loss of principal. Investing in a fund concentrating in the utilities sector involves special risks, including increased susceptibility to adverse economic and regulatory developments affecting the sector. Stocks historically have outperformed other asset classes over the long term, but tend to fluctuate more dramatically over the short term. Securities issued by utility companies have been historically sensitive to interest rate changes. When interest rates fall, utility securities prices, and thus a utilities fund’s share price, tend to rise; when interest rates rise, their prices generally fall. The Fund is actively managed but there is no guarantee that the manager’s investment decisions will produce the desired results. The Fund’s prospectus also includes a description of the main investment risks.
1. The Fund has a fee waiver associated with any investment it makes in a Franklin Templeton money fund and/or other Franklin Templeton fund, contractually guaranteed through 1/31/20. Fund investment results reflect the fee waiver; without this waiver, the results 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. Return for less than one year, if any, has not been annualized.
4. Effective 9/10/18, Class A shares closed to new investors, were renamed Class A1 shares, and a new Class A share with a different expense structure became available. Class A performance shown has been calculated as follows: (a) for periods prior to 9/10/18, a restated figure is used based on the Fund’s Class A1 performance that includes any Rule 12b-1 rate differential that exists between Class A1 and Class A; and (b) for periods after 9/10/18, actual Class A performance is used, reflecting all charges and fees applicable to that class.
5. Prior to 3/1/19, these shares were offered at a higher initial sales charge of 4.25%, thus actual returns (with sales charges) would have differed. Average annual total returns (with sales charges) have been restated to reflect the current maximum initial sales charge of 3.75%.
6. Distribution rate is based on an annualization of the respective class’s current quarterly dividend and the maximum offering price (NAV for Advisor Class) per share on 9/30/19.
7. The Fund’s 30-day standardized yield is calculated over a trailing 30-day period using the yield to maturity on bonds and/or the dividends accrued on stocks. It may not equal the Fund’s actual income distribution rate, which reflects the Fund’s past dividends paid to shareholders.
8. Morningstar. The S&P 500 is a market capitalization-weighted index of 500 stocks designed to measure total U.S. equity market performance. The S&P 500 Utilities Index is market capitalization weighted and consists of all utility stocks in the S&P 500.
9. Figures are as stated in the Fund’s current prospectus and may differ from the expense ratios disclosed in the Your Fund’s Expenses and Financial Highlights sections in this report. In periods of market volatility, assets may decline significantly, causing total annual Fund operating expenses to become higher than the figures shown.
See www.franklintempletondatasources.com for additional data provider information.
| franklintempleton.com | Annual Report | 37 | ||
FRANKLIN UTILITIES FUND
Your Fund’s Expenses
As a Fund shareholder, you can incur two types of costs: (1) transaction costs, including sales charges (loads) on Fund purchases and redemptions; and (2) ongoing Fund costs, including management fees, distribution and service (12b-1) fees, and other Fund expenses. All mutual funds have ongoing costs, sometimes referred to as operating expenses. The table below shows ongoing costs of investing in the Fund and can help you understand these costs and compare them with those of other mutual funds. The table assumes a $1,000 investment held for the six months indicated.
Actual Fund Expenses
The table below provides information about actual account values and actual expenses in the columns under the heading “Actual.” In these columns the Fund’s actual return, which includes the effect of Fund expenses, is used to calculate the “Ending Account Value” for each class of shares. You can estimate the expenses you paid during the period by following these steps (of course, your account value and expenses will differ from those in this illustration): Divide your account value by $1,000 (if your account had an $8,600 value, then $8,600 ÷ $1,000 = 8.6). Then multiply the result by the number in the row for your class of shares under the headings “Actual” and “Expenses Paid During Period” (if Actual Expenses Paid During Period were $7.50, then 8.6 x $7.50 = $64.50). In this illustration, the actual expenses paid this period are $64.50.
Hypothetical Example for Comparison with Other Funds
Under the heading “Hypothetical” in the table, information is provided about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. This information may not be used to estimate the actual ending account balance or expenses you paid for the period, but it can help you compare ongoing costs of investing in the Fund with those of other funds. To do so, compare this 5% hypothetical example for the class of shares you hold with the 5% hypothetical examples that appear in the shareholder reports of other funds.
Please note that expenses shown in the table are meant to highlight ongoing costs and do not reflect any transactional costs. Therefore, information under the heading “Hypothetical” is useful in comparing ongoing costs only, and will not help you compare total costs of owning different funds. In addition, if transactional costs were included, your total costs would have been higher.
| Actual (actual return after expenses) |
Hypothetical (5% annual return before expenses) |
|||||||||||
|
|
|
|||||||||||
| Share Class |
Beginning Account Value 4/1/19 |
Ending Account Value 9/30/19 |
Expenses Paid During 4/1/19–9/30/191, 2 |
Ending Account Value 9/30/19 |
Expenses Paid During 4/1/19–9/30/191, 2 |
Net Annualized Expense Ratio2 | ||||||
|
|
|
|
| |||||||||
| A |
$1,000 | $1,123.00 | $4.36 | $1,020.96 | $4.15 | 0.82% | ||||||
| A1 |
$1,000 | $1,124.00 | $3.83 | $1,021.46 | $3.65 | 0.72% | ||||||
| C |
$1,000 | $1,121.50 | $6.49 | $1,018.95 | $6.17 | 1.22% | ||||||
| R |
$1,000 | $1,122.10 | $5.69 | $1,019.70 | $5.42 | 1.07% | ||||||
| R6 |
$1,000 | $1,125.80 | $2.66 | $1,022.56 | $2.54 | 0.50% | ||||||
| Advisor |
$1,000 | $1,124.80 | $3.04 | $1,022.21 | $2.89 | 0.57% | ||||||
1. Expenses are equal to the annualized expense ratio for the six-month period as indicated above—in the far right column—multiplied by the simple average account value over the period indicated, and then multiplied by 183/365 to reflect the one-half year period.
2. Reflects expenses after fee waivers and expense reimbursements. Does not include acquired fund fees and expenses.
| 38 |
Annual Report | franklintempleton.com | ||
FRANKLIN CUSTODIAN FUNDS
Franklin DynaTech Fund
| Year Ended September 30, | ||||||||||||||||||||
| 2019 | 2018 | 2017 | 2016 | 2015 | ||||||||||||||||
|
|
||||||||||||||||||||
| Class A |
||||||||||||||||||||
| Per share operating performance (for a share outstanding throughout the year) |
||||||||||||||||||||
| Net asset value, beginning of year |
$81.16 | $63.10 | $52.05 | $46.04 | $46.08 | |||||||||||||||
|
|
|
|||||||||||||||||||
| Income from investment operationsa: |
||||||||||||||||||||
| Net investment income (loss)b |
(0.20 | ) | (0.23 | ) | (0.18 | ) | (0.14 | ) | (0.21) | |||||||||||
| Net realized and unrealized gains (losses) |
3.79 | 19.45 | 12.92 | 7.35 | 1.78 | |||||||||||||||
|
|
|
|||||||||||||||||||
| Total from investment operations |
3.59 | 19.22 | 12.74 | 7.21 | 1.57 | |||||||||||||||
|
|
|
|||||||||||||||||||
| Less distributions from: |
||||||||||||||||||||
| Net realized gains |
(1.91 | ) | (1.16 | ) | (1.69 | ) | (1.20 | ) | (1.61) | |||||||||||
|
|
|
|||||||||||||||||||
| Net asset value, end of year |
$82.84 | $81.16 | $63.10 | $52.05 | $46.04 | |||||||||||||||
|
|
|
|||||||||||||||||||
| Total returnc |
4.77% | 30.88% | 25.67% | 15.73% | 3.40% | |||||||||||||||
| Ratios to average net assets |
||||||||||||||||||||
| Expenses before waiver and payments by affiliates |
0.86% | 0.86% | 0.92% | 0.91% | 0.89% | |||||||||||||||
| Expenses net of waiver and payments by affiliates |
0.85% | d | 0.86% | d,e | 0.91% | d | 0.90% | 0.89%e | ||||||||||||
| Net investment income (loss) |
(0.26)% | (0.32)% | (0.33)% | (0.30)% | (0.44)% | |||||||||||||||
| Supplemental data |
||||||||||||||||||||
| Net assets, end of year (000’s) |
$4,504,434 | $3,741,562 | $2,498,393 | $2,123,082 | $1,857,570 | |||||||||||||||
| Portfolio turnover rate |
20.01% | 17.22% | 19.85% | 22.42% | 31.02% | |||||||||||||||
aThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and repurchases of the Fund’s shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
bBased on average daily shares outstanding.
cTotal return does not reflect sales commissions or contingent deferred sales charges, if applicable.
dBenefit of expense reduction rounds to less than 0.01%.
eBenefit of waiver and payments by affiliates rounds to less than 0.01%.
| franklintempleton.com | The accompanying notes are an integral part of these financial statements. | Annual Report | 39 | ||
FRANKLIN CUSTODIAN FUNDS
FINANCIAL HIGHLIGHTS
Franklin DynaTech Fund (continued)
| Year Ended September 30, | ||||||||||||||||||||
| 2019 | 2018 | 2017 | 2016 | 2015 | ||||||||||||||||
|
|
||||||||||||||||||||
| Class C |
||||||||||||||||||||
| Per share operating performance (for a share outstanding throughout the year) |
||||||||||||||||||||
| Net asset value, beginning of year |
$68.07 | $53.49 | $44.71 | $40.00 | $40.53 | |||||||||||||||
|
|
|
|||||||||||||||||||
| Income from investment operationsa: |
||||||||||||||||||||
| Net investment income (loss)b |
(0.66 | ) | (0.65 | ) | (0.50 | ) | (0.43 | ) | (0.50) | |||||||||||
| Net realized and unrealized gains (losses) |
3.10 | 16.39 | 10.97 | 6.34 | 1.58 | |||||||||||||||
|
|
|
|||||||||||||||||||
| Total from investment operations |
2.44 | 15.74 | 10.47 | 5.91 | 1.08 | |||||||||||||||
|
|
|
|||||||||||||||||||
| Less distributions from: |
||||||||||||||||||||
| Net realized gains |
(1.91 | ) | (1.16 | ) | (1.69 | ) | (1.20 | ) | (1.61) | |||||||||||
|
|
|
|||||||||||||||||||
| Net asset value, end of year |
$68.60 | $68.07 | $53.49 | $44.71 | $40.00 | |||||||||||||||
|
|
|
|||||||||||||||||||
| Total returnc |
3.97% | 29.93% | 24.72% | 14.86% | 2.63% | |||||||||||||||
| Ratios to average net assets |
||||||||||||||||||||
| Expenses before waiver and payments by affiliates |
1.61% | 1.61% | 1.67% | 1.66% | 1.64% | |||||||||||||||
| Expenses net of waiver and payments by affiliates |
1.60% | d | 1.61% | d,e | 1.66% | d | 1.65% | 1.64%e | ||||||||||||
| Net investment income (loss) |
(1.01)% | (1.07)% | (1.08)% | (1.05)% | (1.19)% | |||||||||||||||
| Supplemental data |
||||||||||||||||||||
| Net assets, end of year (000’s) |
$597,927 | $611,221 | $374,502 | $318,896 | $270,961 | |||||||||||||||
| Portfolio turnover rate |
20.01% | 17.22% | 19.85% | 22.42% | 31.02% | |||||||||||||||
aThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and repurchases of the Fund’s shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
bBased on average daily shares outstanding.
cTotal return does not reflect sales commissions or contingent deferred sales charges, if applicable.
dBenefit of expense reduction rounds to less than 0.01%.
eBenefit of waiver and payments by affiliates rounds to less than 0.01%.
| 40 |
Annual Report | The accompanying notes are an integral part of these financial statements. | franklintempleton.com | ||
FRANKLIN CUSTODIAN FUNDS
FINANCIAL HIGHLIGHTS
Franklin DynaTech Fund (continued)
| Year Ended September 30, | ||||||||||||||||||||
| 2019 | 2018 | 2017 | 2016 | 2015 | ||||||||||||||||
|
|
||||||||||||||||||||
| Class R |
||||||||||||||||||||
| Per share operating performance (for a share outstanding throughout the year) |
||||||||||||||||||||
| Net asset value, beginning of year |
$78.88 | $61.51 | $50.90 | $45.16 | $45.35 | |||||||||||||||
|
|
|
|||||||||||||||||||
| Income from investment operationsa: |
||||||||||||||||||||
| Net investment income (loss)b |
(0.39 | ) | (0.40 | ) | (0.31 | ) | (0.26 | ) | (0.32) | |||||||||||
| Net realized and unrealized gains (losses) |
3.68 | 18.93 | 12.61 | 7.20 | 1.74 | |||||||||||||||
|
|
|
|||||||||||||||||||
| Total from investment operations |
3.29 | 18.53 | 12.30 | 6.94 | 1.42 | |||||||||||||||
|
|
|
|||||||||||||||||||
| Less distributions from: |
||||||||||||||||||||
| Net realized gains |
(1.91 | ) | (1.16 | ) | (1.69 | ) | (1.20 | ) | (1.61) | |||||||||||
|
|
|
|||||||||||||||||||
| Net asset value, end of year |
$80.26 | $78.88 | $61.51 | $50.90 | $45.16 | |||||||||||||||
|
|
|
|||||||||||||||||||
| Total return |
4.52% | 30.57% | 25.36% | 15.43% | 3.11% | |||||||||||||||
| Ratios to average net assets |
||||||||||||||||||||
| Expenses before waiver and payments by affiliates |
1.11% | 1.11% | 1.17% | 1.16% | 1.14% | |||||||||||||||
| Expenses net of waiver and payments by affiliates |
1.10% | c | 1.11% | c,d | 1.16% | c | 1.15% | 1.14%d | ||||||||||||
| Net investment income (loss) |
(0.51)% | (0.57)% | (0.58)% | (0.55)% | (0.69)% | |||||||||||||||
| Supplemental data |
||||||||||||||||||||
| Net assets, end of year (000’s) |
$123,721 | $95,925 | $47,860 | $38,862 | $43,001 | |||||||||||||||
| Portfolio turnover rate |
20.01% | 17.22% | 19.85% | 22.42% | 31.02% | |||||||||||||||
aThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and repurchases of the Fund’s shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
bBased on average daily shares outstanding.
cBenefit of expense reduction rounds to less than 0.01%.
dBenefit of waiver and payments by affiliates rounds to less than 0.01%.
| franklintempleton.com | The accompanying notes are an integral part of these financial statements. | Annual Report | 41 | ||
FRANKLIN CUSTODIAN FUNDS
FINANCIAL HIGHLIGHTS
Franklin DynaTech Fund (continued)
| Year Ended September 30, | ||||||||||||||||||||
| 2019 | 2018 | 2017 | 2016 | 2015 | ||||||||||||||||
|
|
||||||||||||||||||||
| Class R6 |
||||||||||||||||||||
| Per share operating performance (for a share outstanding throughout the year) |
||||||||||||||||||||
| Net asset value, beginning of year |
$84.31 | $65.28 | $53.56 | $47.15 | $46.97 | |||||||||||||||
|
|
|
|||||||||||||||||||
| Income from investment operationsa: |
||||||||||||||||||||
| Net investment income (loss)b |
0.07 | 0.04 | 0.06 | 0.06 | (0.01) | |||||||||||||||
| Net realized and unrealized gains (losses) |
3.99 | 20.15 | 13.35 | 7.55 | 1.80 | |||||||||||||||
|
|
|
|||||||||||||||||||
| Total from investment operations |
4.06 | 20.19 | 13.41 | 7.61 | 1.79 | |||||||||||||||
|
|
|
|||||||||||||||||||
| Less distributions from: |
||||||||||||||||||||
| Net realized gains |
(1.91 | ) | (1.16 | ) | (1.69 | ) | (1.20 | ) | (1.61) | |||||||||||
|
|
|
|||||||||||||||||||
| Net asset value, end of year |
$86.46 | $84.31 | $65.28 | $53.56 | $47.15 | |||||||||||||||
|
|
|
|||||||||||||||||||
| Total return |
5.15% | 31.38% | 26.17% | 16.21% | 3.81% | |||||||||||||||
| Ratios to average net assets |
||||||||||||||||||||
| Expenses before waiver and payments by affiliates |
0.51% | 0.50% | 0.49% | 0.49% | 0.48% | |||||||||||||||
| Expenses net of waiver and payments by affiliates |
0.50% | c | 0.50% | c,d | 0.48% | c | 0.48% | 0.48%d | ||||||||||||
| Net investment income (loss) |
0.09% | 0.04% | 0.10% | 0.12% | (0.03)% | |||||||||||||||
| Supplemental data |
||||||||||||||||||||
| Net assets, end of year (000’s) |
$2,473,942 | $1,688,595 | $457,846 | $359,505 | $362,627 | |||||||||||||||
| Portfolio turnover rate |
20.01% | 17.22% | 19.85% | 22.42% | 31.02% | |||||||||||||||
aThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and repurchases of the Fund’s shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
bBased on average daily shares outstanding.
cBenefit of expense reduction rounds to less than 0.01%.
dBenefit of waiver and payments by affiliates rounds to less than 0.01%.
| 42 |
Annual Report | The accompanying notes are an integral part of these financial statements. | franklintempleton.com | ||
FRANKLIN CUSTODIAN FUNDS
FINANCIAL HIGHLIGHTS
Franklin DynaTech Fund (continued)
| Year Ended September 30, | ||||||||||||||||||||
| 2019 | 2018 | 2017 | 2016 | 2015 | ||||||||||||||||
|
|
||||||||||||||||||||
| Advisor Class |
||||||||||||||||||||
| Per share operating performance (for a share outstanding throughout the year) |
||||||||||||||||||||
| Net asset value, beginning of year |
$83.56 | $64.78 | $53.25 | $46.96 | $46.87 | |||||||||||||||
|
|
|
|||||||||||||||||||
| Income from investment operationsa: |
||||||||||||||||||||
| Net investment income (loss)b |
(0.01 | ) | (0.06 | ) | (0.04 | ) | (0.03 | ) | (0.09) | |||||||||||
| Net realized and unrealized gains (losses) |
3.94 | 20.00 | 13.26 | 7.52 | 1.79 | |||||||||||||||
|
|
|
|||||||||||||||||||
| Total from investment operations |
3.93 | 19.94 | 13.22 | 7.49 | 1.70 | |||||||||||||||
|
|
|
|||||||||||||||||||
| Less distributions from: |
||||||||||||||||||||
| Net realized gains |
(1.91 | ) | (1.16 | ) | (1.69 | ) | (1.20 | ) | (1.61) | |||||||||||
|
|
|
|||||||||||||||||||
| Net asset value, end of year |
$85.58 | $83.56 | $64.78 | $53.25 | $46.96 | |||||||||||||||
|
|
|
|||||||||||||||||||
| Total return |
5.04% | 31.21% | 25.98% | 16.02% | 3.62% | |||||||||||||||
| Ratios to average net assets |
||||||||||||||||||||
| Expenses before waiver and payments by affiliates |
0.61% | 0.61% | 0.67% | 0.66% | 0.64% | |||||||||||||||
| Expenses net of waiver and payments by affiliates |
0.60% | c | 0.61% | c,d | 0.66% | c | 0.65% | 0.64%d | ||||||||||||
| Net investment income (loss) |
(0.01)% | (0.07)% | (0.08)% | (0.05)% | (0.19)% | |||||||||||||||
| Supplemental data |
||||||||||||||||||||
| Net assets, end of year (000’s) |
$1,154,604 | $680,066 | $712,762 | $203,443 | $176,090 | |||||||||||||||
| Portfolio turnover rate |
20.01% | 17.22% | 19.85% | 22.42% | 31.02% | |||||||||||||||
aThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and repurchases of the Fund’s shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
bBased on average daily shares outstanding.
cBenefit of expense reduction rounds to less than 0.01%.
dBenefit of waiver and payments by affiliates rounds to less than 0.01%.
| franklintempleton.com | The accompanying notes are an integral part of these financial statements. | Annual Report | 43 | ||
FRANKLIN CUSTODIAN FUNDS
Statement of Investments, September 30, 2019
Franklin DynaTech Fund
| Country | Shares | Value | ||||||||||||||
| Common Stocks 94.0% |
||||||||||||||||
| Aerospace & Defense 3.8% |
||||||||||||||||
| The Boeing Co. |
United States | 300,000 | $ | 114,141,000 | ||||||||||||
| Heico Corp. |
United States | 950,000 | 118,636,000 | |||||||||||||
| a Mercury Systems Inc. |
United States | 100,000 | 8,117,000 | |||||||||||||
| Raytheon Co. |
United States | 500,000 | 98,095,000 | |||||||||||||
|
|
|
|||||||||||||||
| 338,989,000 | ||||||||||||||||
|
|
|
|||||||||||||||
| Biotechnology 0.4% |
||||||||||||||||
| a Neurocrine Biosciences Inc. |
United States | 350,000 | 31,538,500 | |||||||||||||
| a Repligen Corp. |
United States | 10,000 | 766,900 | |||||||||||||
| a Veracyte Inc. |
United States | 100,000 | 2,400,000 | |||||||||||||
|
|
|
|||||||||||||||
| 34,705,400 | ||||||||||||||||
|
|
|
|||||||||||||||
| Capital Markets 3.9% |
||||||||||||||||
| a Assetmark Financial Holdings Inc. |
United States | 147,000 | 3,829,350 | |||||||||||||
| CME Group Inc. |
United States | 200,000 | 42,268,000 | |||||||||||||
| Intercontinental Exchange Inc. |
United States | 1,000,000 | 92,270,000 | |||||||||||||
| Moody’s Corp. |
United States | 350,000 | 71,690,500 | |||||||||||||
| MSCI Inc. |
United States | 500,000 | 108,875,000 | |||||||||||||
| Tradeweb Markets Inc. |
United States | 600,000 | 22,188,000 | |||||||||||||
|
|
|
|||||||||||||||
| 341,120,850 | ||||||||||||||||
|
|
|
|||||||||||||||
| Diversified Consumer Services 0.6% |
||||||||||||||||
| a Bright Horizons Family Solutions Inc. |
United States | 350,000 | 53,375,000 | |||||||||||||
|
|
|
|||||||||||||||
| Electronic Equipment, Instruments & Components 1.9% |
||||||||||||||||
| Amphenol Corp., A |
United States | 850,000 | 82,025,000 | |||||||||||||
| Keyence Corp. |
Japan | 50,000 | 30,939,278 | |||||||||||||
| a Keysight Technologies Inc. |
United States | 525,000 | 51,056,250 | |||||||||||||
|
|
|
|||||||||||||||
| 164,020,528 | ||||||||||||||||
|
|
|
|||||||||||||||
| Entertainment 0.5% |
||||||||||||||||
| a Netflix Inc. |
United States | 100,000 | 26,762,000 | |||||||||||||
| a Sea Ltd., ADR |
Taiwan | 600,000 | 18,570,000 | |||||||||||||
|
|
|
|||||||||||||||
| 45,332,000 | ||||||||||||||||
|
|
|
|||||||||||||||
| Equity Real Estate Investment Trusts (REITs) 4.1% |
||||||||||||||||
| American Tower Corp. |
United States | 500,000 | 110,565,000 | |||||||||||||
| Crown Castle International Corp. |
United States | 500,000 | 69,505,000 | |||||||||||||
| Equinix Inc. |
United States | 105,000 | 60,564,000 | |||||||||||||
| SBA Communications Corp., A |
United States | 500,000 | 120,575,000 | |||||||||||||
|
|
|
|||||||||||||||
| 361,209,000 | ||||||||||||||||
|
|
|
|||||||||||||||
| Health Care Equipment & Supplies 9.5% |
||||||||||||||||
| Abbott Laboratories |
United States | 1,250,000 | 104,587,500 | |||||||||||||
| a Alcon Inc. |
Switzerland | 270,000 | 15,738,300 | |||||||||||||
| Baxter International Inc. |
United States | 50,000 | 4,373,500 | |||||||||||||
| Becton, Dickinson and Co. |
United States | 250,000 | 63,240,000 | |||||||||||||
| Danaher Corp. |
United States | 900,000 | 129,987,000 | |||||||||||||
| a Edwards Lifesciences Corp. |
United States | 450,000 | 98,959,500 | |||||||||||||
| a IDEXX Laboratories Inc. |
United States | 500,000 | 135,965,000 | |||||||||||||
| a Intuitive Surgical Inc. |
United States | 165,000 | 89,088,450 | |||||||||||||
| 44 |
Annual Report | franklintempleton.com | ||
FRANKLIN CUSTODIAN FUNDS
STATEMENT OF INVESTMENTS
Franklin DynaTech Fund (continued)
| Country | Shares | Value | ||||||||||||||
| Common Stocks (continued) |
||||||||||||||||
| Health Care Equipment & Supplies (continued) |
||||||||||||||||
| a iRhythm Technologies Inc. |
United States | 350,000 | $ | 25,938,500 | ||||||||||||
| ResMed Inc. |
United States | 300,000 | 40,533,000 | |||||||||||||
| Siemens Healthineers AG |
Germany | 425,000 | 16,719,474 | |||||||||||||
| STERIS PLC |
United States | 50,000 | 7,224,500 | |||||||||||||
| Stryker Corp. |
United States | 500,000 | 108,150,000 | |||||||||||||
|
|
|
|||||||||||||||
| 840,504,724 | ||||||||||||||||
|
|
|
|||||||||||||||
| Health Care Providers & Services 0.6% |
||||||||||||||||
| a Guardant Health Inc. |
United States | 100,000 | 6,383,000 | |||||||||||||
| UnitedHealth Group Inc. |
United States | 200,000 | 43,464,000 | |||||||||||||
|
|
|
|||||||||||||||
| 49,847,000 | ||||||||||||||||
|
|
|
|||||||||||||||
| Health Care Technology 1.9% |
||||||||||||||||
| a Inspire Medical Systems Inc. |
United States | 550,000 | 33,561,000 | |||||||||||||
| a Veeva Systems Inc. |
United States | 900,000 | 137,421,000 | |||||||||||||
|
|
|
|||||||||||||||
| 170,982,000 | ||||||||||||||||
|
|
|
|||||||||||||||
| Industrial Conglomerates 1.0% |
||||||||||||||||
| Roper Technologies Inc. |
United States | 250,000 | 89,150,000 | |||||||||||||
|
|
|
|||||||||||||||
| Interactive Media & Services 6.6% |
||||||||||||||||
| a Adevinta ASA, A |
France | 1,000,000 | 11,584,263 | |||||||||||||
| a Alphabet Inc., A |
United States | 200,000 | 244,228,000 | |||||||||||||
| a Alphabet Inc., C |
United States | 62,170 | 75,785,230 | |||||||||||||
| a Facebook Inc., A |
United States | 450,000 | 80,136,000 | |||||||||||||
| Match Group Inc. |
United States | 725,000 | 51,794,000 | |||||||||||||
| a Pinterest Inc., A |
United States | 1,000,000 | 26,450,000 | |||||||||||||
| Tencent Holdings Ltd. |
China | 2,250,000 | 94,789,421 | |||||||||||||
| a Twitter Inc. |
United States | 50,000 | 2,060,000 | |||||||||||||
|
|
|
|||||||||||||||
| 586,826,914 | ||||||||||||||||
|
|
|
|||||||||||||||
| Internet & Direct Marketing Retail 9.8% |
||||||||||||||||
| a Alibaba Group Holding Ltd., ADR |
China | 550,000 | 91,976,500 | |||||||||||||
| a Amazon.com Inc. |
United States | 325,000 | 564,170,750 | |||||||||||||
| a Booking Holdings Inc. |
United States | 20,000 | 39,252,200 | |||||||||||||
| a Chewy Inc., A |
United States | 33,100 | 813,598 | |||||||||||||
| a Delivery Hero SE |
Germany | 350,000 | 15,548,513 | |||||||||||||
| a Etsy Inc. |
United States | 850,000 | 48,025,000 | |||||||||||||
| a MercadoLibre Inc. |
Argentina | 200,000 | 110,246,000 | |||||||||||||
| a,b Zalando SE, 144A |
Germany | 25,000 | 1,141,125 | |||||||||||||
|
|
|
|||||||||||||||
| 871,173,686 | ||||||||||||||||
|
|
|
|||||||||||||||
| IT Services 11.9% |
||||||||||||||||
| a Adyen NV |
Netherlands | 100,000 | 65,873,554 | |||||||||||||
| a Fiserv Inc. |
United States | 525,000 | 54,384,750 | |||||||||||||
| a InterXion Holding NV |
Netherlands | 650,000 | 52,949,000 | |||||||||||||
| Mastercard Inc., A |
United States | 1,000,000 | 271,570,000 | |||||||||||||
| a MongoDB Inc. |
United States | 500,000 | 60,240,000 | |||||||||||||
| a Network International Holdings Ltd. |
United Arab Emirates | 1,000,000 | 6,577,290 | |||||||||||||
| a Okta Inc., A |
United States | 300,000 | 29,538,000 | |||||||||||||
| a PagSeguro Digital Ltd., A |
Brazil | 25,000 | 1,157,750 | |||||||||||||
| franklintempleton.com | Annual Report | 45 | ||
FRANKLIN CUSTODIAN FUNDS
STATEMENT OF INVESTMENTS
Franklin DynaTech Fund (continued)
| Country | Shares | Value | ||||||||||||||
| Common Stocks (continued) |
||||||||||||||||
| IT Services (continued) |
||||||||||||||||
| a PayPal Holdings Inc. |
United States | 1,200,000 | $ | 124,308,000 | ||||||||||||
| a Shopify Inc., A |
Canada | 400,000 | 124,533,716 | |||||||||||||
| a Twilio Inc., A |
United States | 340,000 | 37,386,400 | |||||||||||||
| Visa Inc., A |
United States | 1,250,000 | 215,012,500 | |||||||||||||
| a Wix.com Ltd. |
Israel | 100,000 | 11,674,000 | |||||||||||||
|
|
|
|||||||||||||||
| 1,055,204,960 | ||||||||||||||||
|
|
|
|||||||||||||||
| Life Sciences Tools & Services 2.5% |
||||||||||||||||
| a 10X Genomics Inc., A |
United States | 30,200 | 1,522,080 | |||||||||||||
| a Evotec SE |
Germany | 300,000 | 6,676,727 | |||||||||||||
| a Illumina Inc. |
United States | 250,000 | 76,055,000 | |||||||||||||
| a IQVIA Holdings Inc. |
United States | 200,000 | 29,876,000 | |||||||||||||
| Thermo Fisher Scientific Inc. |
United States | 300,000 | 87,381,000 | |||||||||||||
| a Waters Corp. |
United States | 100,000 | 22,323,000 | |||||||||||||
|
|
|
|||||||||||||||
| 223,833,807 | ||||||||||||||||
|
|
|
|||||||||||||||
| Machinery 0.8% |
||||||||||||||||
| Fortive Corp. |
United States | 1,000,000 | 68,560,000 | |||||||||||||
|
|
|
|||||||||||||||
| Media 0.9% |
||||||||||||||||
| a Liberty Broadband Corp., A |
United States | 750,000 | 78,390,000 | |||||||||||||
|
|
|
|||||||||||||||
| Pharmaceuticals 1.8% |
||||||||||||||||
| AstraZeneca PLC |
United Kingdom | 800,000 | 71,413,388 | |||||||||||||
| a Catalent Inc. |
United States | 125,000 | 5,957,500 | |||||||||||||
| a Elanco Animal Health Inc. |
United States | 1,000,000 | 26,590,000 | |||||||||||||
| Merck KGaA |
Germany | 450,000 | 50,688,523 | |||||||||||||
| Zoetis Inc. |
United States | 50,000 | 6,229,500 | |||||||||||||
|
|
|
|||||||||||||||
| 160,878,911 | ||||||||||||||||
|
|
|
|||||||||||||||
| Professional Services 2.3% |
||||||||||||||||
| a CoStar Group Inc. |
United States | 160,000 | 94,912,000 | |||||||||||||
| TransUnion |
United States | 425,000 | 34,471,750 | |||||||||||||
| Verisk Analytics Inc. |
United States | 475,000 | 75,116,500 | |||||||||||||
|
|
|
|||||||||||||||
| 204,500,250 | ||||||||||||||||
|
|
|
|||||||||||||||
| Semiconductors & Semiconductor Equipment 5.8% |
||||||||||||||||
| Analog Devices Inc. |
United States | 600,000 | 67,038,000 | |||||||||||||
| ASML Holding NV, N.Y. shs |
Netherlands | 200,000 | 49,684,000 | |||||||||||||
| Intel Corp. |
United States | 800,000 | 41,224,000 | |||||||||||||
| KLA Corp. |
United States | 260,000 | 41,457,000 | |||||||||||||
| Lam Research Corp. |
United States | 350,000 | 80,888,500 | |||||||||||||
| Monolithic Power Systems |
United States | 400,000 | 62,252,000 | |||||||||||||
| NVIDIA Corp. |
United States | 450,000 | 78,331,500 | |||||||||||||
| Xilinx Inc. |
United States | 1,000,000 | 95,900,000 | |||||||||||||
|
|
|
|||||||||||||||
| 516,775,000 | ||||||||||||||||
|
|
|
|||||||||||||||
| Software 22.2% |
||||||||||||||||
| a Adobe Inc. |
United States | 500,000 | 138,125,000 | |||||||||||||
| a Altair Engineering Inc. |
United States | 500,000 | 17,310,000 | |||||||||||||
| a Alteryx Inc. |
United States | 575,000 | 61,772,250 | |||||||||||||
| a Anaplan Inc. |
United States | 450,000 | 21,150,000 | |||||||||||||
| 46 |
Annual Report | franklintempleton.com | ||
FRANKLIN CUSTODIAN FUNDS
STATEMENT OF INVESTMENTS
Franklin DynaTech Fund (continued)
| Country | Shares | Value | ||||||||||||||
| Common Stocks (continued) |
||||||||||||||||
| Software (continued) |
||||||||||||||||
| a ANSYS Inc. |
United States | 275,000 | $ | 60,874,000 | ||||||||||||
| a Aspen Technology Inc. |
United States | 500,000 | 61,540,000 | |||||||||||||
| a Atlassian Corp. PLC |
United States | 500,000 | 62,720,000 | |||||||||||||
| a Autodesk Inc. |
United States | 500,000 | 73,850,000 | |||||||||||||
| a Cadence Design Systems Inc. |
United States | 700,000 | 46,256,000 | |||||||||||||
| Constellation Software Inc. |
Canada | 50,000 | 49,956,581 | |||||||||||||
| a Coupa Software Inc. |
United States | 500,000 | 64,785,000 | |||||||||||||
| a Guidewire Software Inc. |
United States | 500,000 | 52,690,000 | |||||||||||||
| a Hubspot Inc. |
United States | 500,000 | 75,805,000 | |||||||||||||
| Intuit Inc. |
United States | 500,000 | 132,970,000 | |||||||||||||
| a Lightspeed POS Inc. |
Canada | 350,000 | 8,097,863 | |||||||||||||
| Microsoft Corp. |
United States | 2,500,000 | 347,575,000 | |||||||||||||
| a Q2 Holdings Inc. |
United States | 600,000 | 47,322,000 | |||||||||||||
| a RealPage Inc. |
United States | 100,000 | 6,286,000 | |||||||||||||
| a RingCentral Inc., A |
United States | 200,000 | 25,132,000 | |||||||||||||
| a salesforce.com Inc. |
United States | 1,000,000 | 148,440,000 | |||||||||||||
| a ServiceNow Inc. |
United States | 700,000 | 177,695,000 | |||||||||||||
| a Smartsheet Inc. A |
United States | 550,000 | 19,816,500 | |||||||||||||
| a Synopsys Inc. |
United States | 500,000 | 68,625,000 | |||||||||||||
| a Tyler Technologies Inc. |
United States | 165,000 | 43,312,500 | |||||||||||||
| a Workday Inc., A |
United States | 600,000 | 101,976,000 | |||||||||||||
| a Zendesk Inc. |
United States | 650,000 | 47,372,000 | |||||||||||||
|
|
|
|||||||||||||||
| 1,961,453,694 | ||||||||||||||||
|
|
|
|||||||||||||||
| Technology Hardware, Storage & Peripherals 1.0% |
||||||||||||||||
| Apple Inc. |
United States | 400,000 | 89,588,000 | |||||||||||||
|
|
|
|||||||||||||||
| Textiles, Apparel & Luxury Goods 0.2% |
||||||||||||||||
| NIKE Inc., B |
United States | 200,000 | 18,784,000 | |||||||||||||
|
|
|
|||||||||||||||
| Total Common Stocks (Cost $4,736,572,428) |
8,325,204,724 | |||||||||||||||
|
|
|
|||||||||||||||
| Short Term Investments 5.9% |
||||||||||||||||
| Money Market Funds (Cost $439,351,721) 5.0% |
||||||||||||||||
| c,d Institutional Fiduciary Trust Money Market Portfolio, 1.71% |
United States | 439,351,721 | 439,351,721 | |||||||||||||
|
|
|
|||||||||||||||
| franklintempleton.com | Annual Report | 47 | ||
FRANKLIN CUSTODIAN FUNDS
STATEMENT OF INVESTMENTS
Franklin DynaTech Fund (continued)
| Country | Principal Amount |
Value | ||||||||||||||
| Short Term Investments (continued) |
||||||||||||||||
| Repurchase Agreements (Cost $77,855,135) 0.9% |
||||||||||||||||
| e Joint Repurchase Agreement, 2.343%, 10/01/19 (Maturity
Value $77,860,203) |
United States | $ | 77,855,135 | $ | 77,855,135 | |||||||||||
|
|
|
|||||||||||||||
| Total Investments (Cost $5,253,779,284) 99.9% |
8,842,411,580 | |||||||||||||||
| Other Assets, less Liabilities 0.1% |
12,216,003 | |||||||||||||||
|
|
|
|||||||||||||||
| Net Assets 100.0% |
$ | 8,854,627,583 | ||||||||||||||
|
|
|
|||||||||||||||
See Abbreviations on page 133.
aNon-income producing.
bSecurity was purchased pursuant to Rule 144A under the Securities Act of 1933 and may be sold in transactions exempt from registration only to qualified institutional buyers or in a public offering registered under the Securities Act of 1933. This security has been deemed liquid under guidelines approved by the Trust’s Board of Trustees. At September 30, 2019, the value of this security was $1,141,125, representing less than 0.1% of net assets.
cSee Note 3(f) regarding investments in affiliated management investment companies.
dThe rate shown is the annualized seven-day effective yield at period end.
eSee Note 1(c) regarding joint repurchase agreement.
fThe security was issued on a discount basis with no stated coupon rate.
| 48 |
Annual Report | The accompanying notes are an integral part of these financial statements. | franklintempleton.com | ||
FRANKLIN CUSTODIAN FUNDS
Financial Highlights
Franklin Growth Fund
| Year Ended September 30, | ||||||||||||||||||||
| 2019 | 2018 | 2017 | 2016 | 2015 | ||||||||||||||||
|
|
||||||||||||||||||||
| Class A |
||||||||||||||||||||
| Per share operating performance (for a share outstanding throughout the year) |
||||||||||||||||||||
| Net asset value, beginning of year |
$107.59 | $ 91.61 | $78.54 | $72.40 | $70.51 | |||||||||||||||
|
|
|
|||||||||||||||||||
| Income from investment operationsa: |
||||||||||||||||||||
| Net investment incomeb |
0.46 | 0.41 | 0.40 | 0.47 | c | 0.29 | ||||||||||||||
| Net realized and unrealized gains (losses) |
3.47 | 18.18 | 15.56 | 8.51 | 1.79 | |||||||||||||||
|
|
|
|||||||||||||||||||
| Total from investment operations |
3.93 | 18.59 | 15.96 | 8.98 | 2.08 | |||||||||||||||
|
|
|
|||||||||||||||||||
| Less distributions from: |
||||||||||||||||||||
| Net investment income |
(0.44 | ) | (0.36 | ) | (0.39 | ) | (0.47 | ) | (0.19) | |||||||||||
| Net realized gains |
(1.04 | ) | (2.25 | ) | (2.50 | ) | (2.37 | ) | — | |||||||||||
|
|
|
|||||||||||||||||||
| Total distributions |
(1.48 | ) | (2.61 | ) | (2.89 | ) | (2.84 | ) | (0.19) | |||||||||||
|
|
|
|||||||||||||||||||
| Net asset value, end of year |
$110.04 | $107.59 | $91.61 | $78.54 | $72.40 | |||||||||||||||
|
|
|
|||||||||||||||||||
| Total returnd |
3.79% | 20.72% | 21.12% | 12.57% | 2.94% | |||||||||||||||
| Ratios to average net assets |
||||||||||||||||||||
| Expenses before waiver and payments by affiliates |
0.83% | 0.83% | 0.88% | 0.88% | 0.88% | |||||||||||||||
| Expenses net of waiver and payments by affiliatese |
0.83% | f | 0.83% | f | 0.87% | 0.86% | 0.88%f | |||||||||||||
| Net investment income |
0.45% | 0.41% | 0.47% | 0.63% | c | 0.38% | ||||||||||||||
| Supplemental data |
||||||||||||||||||||
| Net assets, end of year (000’s) |
$9,157,154 | $9,044,834 | $8,051,641 | $7,628,523 | $7,185,665 | |||||||||||||||
| Portfolio turnover rate |
4.91% | g | 6.05% | g | 5.60% | 7.53% | 5.05% | |||||||||||||
aThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and repurchases of the Fund’s shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
bBased on average daily shares outstanding.
cNet investment income per share includes approximately $0.10 per share related to income received in the form of special dividends in connection with certain Fund holdings. Excluding this amount, the ratio of net investment income to average net assets would have been 0.50%.
dTotal return does not reflect sales commissions or contingent deferred sales charges, if applicable.
eBenefit of expense reduction rounds to less than 0.01%.
fBenefit of waiver and payments by affiliates rounds to less than 0.01%.
gExcludes the value of portfolio securities delivered as a result of a redemption in-kind. See Note 11.
| franklintempleton.com | The accompanying notes are an integral part of these financial statements. | Annual Report | 49 | ||
FRANKLIN CUSTODIAN FUNDS
FINANCIAL HIGHLIGHTS
Franklin Growth Fund (continued)
| Year Ended September 30, | ||||||||||||||||||||
| 2019 | 2018 | 2017 | 2016 | 2015 | ||||||||||||||||
|
|
||||||||||||||||||||
| Class C |
||||||||||||||||||||
| Per share operating performance (for a share outstanding throughout the year) |
||||||||||||||||||||
| Net asset value, beginning of year |
$ 98.38 | $84.25 | $72.60 | $67.17 | $65.75 | |||||||||||||||
|
|
|
|||||||||||||||||||
| Income from investment operationsa: |
||||||||||||||||||||
| Net investment income (loss)b |
(0.29 | ) | (0.30 | ) | (0.21 | ) | (0.08 | )c | (0.26) | |||||||||||
| Net realized and unrealized gains (losses) |
3.16 | 16.68 | 14.36 | 7.88 | 1.68 | |||||||||||||||
|
|
|
|||||||||||||||||||
| Total from investment operations |
2.87 | 16.38 | 14.15 | 7.80 | 1.42 | |||||||||||||||
|
|
|
|||||||||||||||||||
| Less distributions from: |
||||||||||||||||||||
| Net realized gains |
(1.04 | ) | (2.25 | ) | (2.50 | ) | (2.37 | ) | — | |||||||||||
|
|
|
|||||||||||||||||||
| Net asset value, end of year |
$100.21 | $98.38 | $84.25 | $72.60 | $67.17 | |||||||||||||||
|
|
|
|||||||||||||||||||
| Total returnd |
3.02% | 19.82% | 20.21% | 11.74% | 2.16% | |||||||||||||||
| Ratios to average net assets |
||||||||||||||||||||
| Expenses before waiver and payments by affiliates |
1.58% | 1.58% | 1.63% | 1.63% | 1.63% | |||||||||||||||
| Expenses net of waiver and payments by affiliatese |
1.58% | f | 1.58% | f | 1.62% | 1.61% | 1.63%f | |||||||||||||
| Net investment income (loss) |
(0.30)% | (0.34)% | (0.28)% | (0.12)% | c | (0.37)% | ||||||||||||||
| Supplemental data |
||||||||||||||||||||
| Net assets, end of year (000’s) |
$704,217 | $1,060,258 | $930,751 | $846,965 | $777,570 | |||||||||||||||
| Portfolio turnover rate |
4.91% | g | 6.05% | g | 5.60% | 7.53% | 5.05% | |||||||||||||
aThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and repurchases of the Fund’s shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
bBased on average daily shares outstanding.
cNet investment income per share includes approximately $0.10 per share related to income received in the form of special dividends in connection with certain Fund holdings. Excluding this amount, the ratio of net investment income to average net assets would have been (0.25)%.
dTotal return does not reflect sales commissions or contingent deferred sales charges, if applicable.
eBenefit of expense reduction rounds to less than 0.01%.
fBenefit of waiver and payments by affiliates rounds to less than 0.01%.
gExcludes the value of portfolio securities delivered as a result of a redemption in-kind. See Note 11.
| 50 |
Annual Report | The accompanying notes are an integral part of these financial statements. | franklintempleton.com | ||
FRANKLIN CUSTODIAN FUNDS
FINANCIAL HIGHLIGHTS
Franklin Growth Fund (continued)
| Year Ended September 30, | ||||||||||||||||||||
| 2019 | 2018 | 2017 | 2016 | 2015 | ||||||||||||||||
|
|
||||||||||||||||||||
| Class R |
||||||||||||||||||||
| Per share operating performance (for a share outstanding throughout the year) |
||||||||||||||||||||
| Net asset value, beginning of year |
$107.00 | $ 91.13 | $78.14 | $71.93 | $70.05 | |||||||||||||||
|
|
|
|||||||||||||||||||
| Income from investment operationsa: |
||||||||||||||||||||
| Net investment incomeb |
0.21 | 0.16 | 0.19 | 0.29 | c | 0.10 | ||||||||||||||
| Net realized and unrealized gains (losses) |
3.46 | 18.09 | 15.51 | 8.45 | 1.78 | |||||||||||||||
|
|
|
|||||||||||||||||||
| Total from investment operations |
3.67 | 18.25 | 15.70 | 8.74 | 1.88 | |||||||||||||||
|
|
|
|||||||||||||||||||
| Less distributions from: |
||||||||||||||||||||
| Net investment income |
(0.14 | ) | (0.13 | ) | (0.21 | ) | (0.16 | ) | — | |||||||||||
| Net realized gains |
(1.04 | ) | (2.25 | ) | (2.50 | ) | (2.37 | ) | — | |||||||||||
|
|
|
|||||||||||||||||||
| Total distributions |
(1.18 | ) | (2.38 | ) | (2.71 | ) | (2.53 | ) | — | |||||||||||
|
|
|
|||||||||||||||||||
| Net asset value, end of year |
$109.49 | $107.00 | $91.13 | $78.14 | $71.93 | |||||||||||||||
|
|
|
|||||||||||||||||||
| Total return |
3.54% | 20.42% | 20.81% | 12.29% | 2.68% | |||||||||||||||
| Ratios to average net assets |
||||||||||||||||||||
| Expenses before waiver and payments by affiliates |
1.08% | 1.08% | 1.13% | 1.13% | 1.13% | |||||||||||||||
| Expenses net of waiver and payments by affiliatesd |
1.08% | e | 1.08% | e | 1.12% | 1.11% | 1.13%e | |||||||||||||
| Net investment income |
0.20% | 0.16% | 0.22% | 0.38% | c | 0.13% | ||||||||||||||
| Supplemental data |
||||||||||||||||||||
| Net assets, end of year (000’s) |
$435,331 | $524,960 | $510,317 | $477,221 | $501,813 | |||||||||||||||
| Portfolio turnover rate |
4.91% | f | 6.05% | f | 5.60% | 7.53% | 5.05% | |||||||||||||
aThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and repurchases of the Fund’s shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
bBased on average daily shares outstanding.
cNet investment income per share includes approximately $0.10 per share related to income received in the form of special dividends in connection with certain Fund holdings. Excluding this amount, the ratio of net investment income to average net assets would have been 0.25%.
dBenefit of expense reduction rounds to less than 0.01%.
eBenefit of waiver and payments by affiliates rounds to less than 0.01%.
fExcludes the value of portfolio securities delivered as a result of a redemption in-kind. See Note 11.
| franklintempleton.com | The accompanying notes are an integral part of these financial statements. | Annual Report | 51 | ||
FRANKLIN CUSTODIAN FUNDS
FINANCIAL HIGHLIGHTS
Franklin Growth Fund (continued)
| Year Ended September 30, | ||||||||||||||||||||
| 2019 | 2018 | 2017 | 2016 | 2015 | ||||||||||||||||
|
|
||||||||||||||||||||
| Class R6 |
||||||||||||||||||||
| Per share operating performance (for a share outstanding throughout the year) |
||||||||||||||||||||
| Net asset value, beginning of year |
$107.90 | $ 91.90 | $78.79 | $72.69 | $70.76 | |||||||||||||||
|
|
|
|||||||||||||||||||
| Income from investment operationsa: |
||||||||||||||||||||
| Net investment incomeb |
0.83 | 0.77 | 0.74 | 0.78 | c | 0.61 | ||||||||||||||
| Net realized and unrealized gains (losses) |
3.47 | 18.22 | 15.59 | 8.56 | 1.79 | |||||||||||||||
|
|
|
|||||||||||||||||||
| Total from investment operations |
4.30 | 18.99 | 16.33 | 9.34 | 2.40 | |||||||||||||||
|
|
|
|||||||||||||||||||
| Less distributions from: |
||||||||||||||||||||
| Net investment income |
(0.79 | ) | (0.74 | ) | (0.72 | ) | (0.87 | ) | (0.47) | |||||||||||
| Net realized gains |
(1.04 | ) | (2.25 | ) | (2.50 | ) | (2.37 | ) | — | |||||||||||
|
|
|
|||||||||||||||||||
| Total distributions |
(1.83 | ) | (2.99 | ) | (3.22 | ) | (3.24 | ) | (0.47) | |||||||||||
|
|
|
|||||||||||||||||||
| Net asset value, end of year |
$110.37 | $107.90 | $91.90 | $78.79 | $72.69 | |||||||||||||||
|
|
|
|||||||||||||||||||
| Total return |
4.16% | 21.17% | 21.61% | 13.05% | 3.37% | |||||||||||||||
| Ratios to average net assets |
||||||||||||||||||||
| Expenses before waiver and payments by affiliates |
0.48% | 0.47% | 0.46% | 0.46% | 0.46% | |||||||||||||||
| Expenses net of waiver and payments by affiliatesd |
0.48% | e | 0.46% | 0.45% | 0.44% | 0.46%e | ||||||||||||||
| Net investment income |
0.80% | 0.78% | 0.89% | 1.05% | c | 0.80% | ||||||||||||||
| Supplemental data |
||||||||||||||||||||
| Net assets, end of year (000’s) |
$2,545,800 | $2,634,455 | $1,700,993 | $1,247,825 | $1,163,362 | |||||||||||||||
| Portfolio turnover rate |
4.91% | f | 6.05% | f | 5.60% | 7.53% | 5.05% | |||||||||||||
aThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and repurchases of the Fund’s shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
bBased on average daily shares outstanding.
cNet investment income per share includes approximately $0.10 per share related to income received in the form of special dividends in connection with certain Fund holdings. Excluding this amount, the ratio of net investment income to average net assets would have been 0.92%.
dBenefit of expense reduction rounds to less than 0.01%.
eBenefit of waiver and payments by affiliates rounds to less than 0.01%.
fExcludes the value of portfolio securities delivered as a result of a redemption in-kind. See Note 11.
| 52 |
Annual Report | The accompanying notes are an integral part of these financial statements. | franklintempleton.com | ||
FRANKLIN CUSTODIAN FUNDS
FINANCIAL HIGHLIGHTS
Franklin Growth Fund (continued)
| Year Ended September 30, | ||||||||||||||||||||
| 2019 | 2018 | 2017 | 2016 | 2015 | ||||||||||||||||
|
|
||||||||||||||||||||
| Advisor Class |
||||||||||||||||||||
| Per share operating performance (for a share outstanding throughout the year) |
||||||||||||||||||||
| Net asset value, beginning of year |
$107.95 | $ 91.90 | $78.80 | $72.67 | $70.75 | |||||||||||||||
|
|
|
|||||||||||||||||||
| Income from investment operationsa: |
||||||||||||||||||||
| Net investment incomeb |
0.72 | 0.66 | 0.60 | 0.65 | c | 0.48 | ||||||||||||||
| Net realized and unrealized gains (losses) |
3.47 | 18.23 | 15.61 | 8.56 | 1.79 | |||||||||||||||
|
|
|
|||||||||||||||||||
| Total from investment operations |
4.19 | 18.89 | 16.21 | 9.21 | 2.27 | |||||||||||||||
|
|
|
|||||||||||||||||||
| Less distributions from: |
||||||||||||||||||||
| Net investment income |
(0.69 | ) | (0.59 | ) | (0.61 | ) | (0.71 | ) | (0.35) | |||||||||||
| Net realized gains |
(1.04 | ) | (2.25 | ) | (2.50 | ) | (2.37 | ) | — | |||||||||||
|
|
|
|||||||||||||||||||
| Total distributions |
(1.73 | ) | (2.84 | ) | (3.11 | ) | (3.08 | ) | (0.35) | |||||||||||
|
|
|
|||||||||||||||||||
| Net asset value, end of year |
$110.41 | $107.95 | $91.90 | $78.80 | $72.67 | |||||||||||||||
|
|
|
|||||||||||||||||||
| Total return |
4.05% | 21.02% | 21.43% | 12.85% | 3.20% | |||||||||||||||
| Ratios to average net assets |
||||||||||||||||||||
| Expenses before waiver and payments by affiliates |
0.58% | 0.58% | 0.63% | 0.63% | 0.63% | |||||||||||||||
| Expenses net of waiver and payments by affiliatesd |
0.58% | e | 0.58% | e | 0.62% | 0.61% | 0.63%e | |||||||||||||
| Net investment income |
0.70% | 0.66% | 0.72% | 0.88% | c | 0.63% | ||||||||||||||
| Supplemental data |
||||||||||||||||||||
| Net assets, end of year (000’s) |
$3,154,342 | $3,139,208 | $2,801,153 | $1,998,483 | $1,514,492 | |||||||||||||||
| Portfolio turnover rate |
4.91% | f | 6.05% | f | 5.60% | 7.53% | 5.05% | |||||||||||||
aThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and repurchases of the Fund’s shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
bBased on average daily shares outstanding.
cNet investment income per share includes approximately $0.10 per share related to income received in the form of special dividends in connection with certain Fund holdings. Excluding this amount, the ratio of net investment income to average net assets would have been 0.75%.
dBenefit of expense reduction rounds to less than 0.01%.
eBenefit of waiver and payments by affiliates rounds to less than 0.01%.
fExcludes the value of portfolio securities delivered as a result of a redemption in-kind. See Note 11.
| franklintempleton.com | The accompanying notes are an integral part of these financial statements. | Annual Report | 53 | ||
FRANKLIN CUSTODIAN FUNDS
Statement of Investments, September 30, 2019
Franklin Growth Fund
| Country | Shares | Value | ||||||||||||
|
Common Stocks 99.0% |
||||||||||||||
| Automobiles & Components 0.4% |
||||||||||||||
| BorgWarner Inc. |
United States | 1,633,318 | $ | 59,910,104 | ||||||||||
|
|
|
|||||||||||||
| Capital Goods 15.9% |
||||||||||||||
| 3M Co. |
United States | 846,356 | 139,140,927 | |||||||||||
| Allegion PLC |
United States | 692,923 | 71,821,469 | |||||||||||
| AMETEK Inc. |
United States | 692,923 | 63,624,190 | |||||||||||
| The Boeing Co. |
United States | 1,088,879 | 414,285,793 | |||||||||||
| BWX Technologies Inc. |
United States | 1,689,412 | 96,651,260 | |||||||||||
| Caterpillar Inc. |
United States | 544,440 | 68,768,216 | |||||||||||
| Deere & Co. |
United States | 494,945 | 83,487,323 | |||||||||||
| Emerson Electric Co. |
United States | 1,088,879 | 72,802,450 | |||||||||||
| Fortive Corp. |
United States | 519,692 | 35,630,084 | |||||||||||
| General Dynamics Corp. |
United States | 989,889 | 180,882,417 | |||||||||||
| Huntington Ingalls Industries Inc. |
United States | 296,967 | 62,894,641 | |||||||||||
| Illinois Tool Works Inc. |
United States | 989,889 | 154,907,730 | |||||||||||
| Ingersoll-Rand PLC |
United States | 1,088,879 | 134,160,782 | |||||||||||
| Lockheed Martin Corp. |
United States | 494,945 | 193,058,247 | |||||||||||
| Northrop Grumman Corp. |
United States | 1,088,879 | 408,100,960 | |||||||||||
| Raytheon Co. |
United States | 593,934 | 116,523,911 | |||||||||||
| Stanley Black & Decker Inc. |
United States | 745,329 | 107,632,961 | |||||||||||
| United Technologies Corp. |
United States | 1,050,607 | 143,428,868 | |||||||||||
|
|
|
|||||||||||||
| 2,547,802,229 | ||||||||||||||
|
|
|
|||||||||||||
| Commercial & Professional Services 3.5% |
||||||||||||||
| Equifax Inc. |
United States | 544,440 | 76,586,375 | |||||||||||
| a IHS Markit Ltd. |
United States | 3,520,639 | 235,460,336 | |||||||||||
| Republic Services Inc. |
United States | 184,700 | 15,985,785 | |||||||||||
| Verisk Analytics Inc. |
United States | 1,484,834 | 234,811,649 | |||||||||||
|
|
|
|||||||||||||
| 562,844,145 | ||||||||||||||
|
|
|
|||||||||||||
| Consumer Durables & Apparel 1.1% |
||||||||||||||
| NIKE Inc., B |
United States | 1,860,992 | 174,784,369 | |||||||||||
|
|
|
|||||||||||||
| Consumer Services 0.7% |
||||||||||||||
| Carnival Corp. |
United States | 1,187,867 | 51,921,667 | |||||||||||
| Graham Holdings Co., B |
United States | 79,192 | 52,539,932 | |||||||||||
|
|
|
|||||||||||||
| 104,461,599 | ||||||||||||||
|
|
|
|||||||||||||
| Diversified Financials 3.6% |
||||||||||||||
| American Express Co. |
United States | 593,934 | 70,250,513 | |||||||||||
| a Berkshire Hathaway Inc., A |
United States | 183 | 57,065,256 | |||||||||||
| BlackRock Inc. |
United States | 222,726 | 99,255,615 | |||||||||||
| The Charles Schwab Corp. |
United States | 2,969,667 | 124,221,171 | |||||||||||
| Intercontinental Exchange Inc. |
United States | 1,385,845 | 127,871,918 | |||||||||||
| T. Rowe Price Group Inc. |
United States | 890,901 | 101,785,439 | |||||||||||
|
|
|
|||||||||||||
| 580,449,912 | ||||||||||||||
|
|
|
|||||||||||||
| Energy 0.6% |
||||||||||||||
| Cabot Oil & Gas Corp., A |
United States | 3,365,622 | 59,133,978 | |||||||||||
| Concho Resources Inc. |
United States | 593,934 | 40,328,119 | |||||||||||
|
|
|
|||||||||||||
| 99,462,097 | ||||||||||||||
|
|
|
|||||||||||||
| 54 |
Annual Report | franklintempleton.com | ||
FRANKLIN CUSTODIAN FUNDS
STATEMENT OF INVESTMENTS
Franklin Growth Fund (continued)
| Country | Shares | Value | ||||||||||||
|
Common Stocks (continued) |
||||||||||||||
| Food, Beverage & Tobacco 3.6% |
||||||||||||||
| Brown-Forman Corp., B |
United States | 1,608,570 | $ | 100,986,025 | ||||||||||
| Constellation Brands Inc., A |
United States | 544,440 | 112,851,523 | |||||||||||
| Lamb Weston Holdings Inc. |
United States | 520,000 | 37,814,400 | |||||||||||
| Mondelez International Inc., A |
United States | 1,484,834 | 82,141,017 | |||||||||||
| a Monster Beverage Corp. |
United States | 2,672,700 | 155,176,962 | |||||||||||
| PepsiCo Inc. |
United States | 643,429 | 88,214,116 | |||||||||||
|
|
|
|||||||||||||
| 577,184,043 | ||||||||||||||
|
|
|
|||||||||||||
| Health Care Equipment & Services 7.9% |
||||||||||||||
| Abbott Laboratories |
United States | 1,336,351 | 111,812,488 | |||||||||||
| a ABIOMED Inc. |
United States | 197,979 | 35,218,484 | |||||||||||
| Baxter International Inc. |
United States | 395,957 | 34,634,359 | |||||||||||
| Becton, Dickinson and Co. |
United States | 76,915 | 19,456,418 | |||||||||||
| Danaher Corp. |
United States | 1,039,384 | 150,118,231 | |||||||||||
| a Edwards Lifesciences Corp. |
United States | 395,957 | 87,074,904 | |||||||||||
| a Haemonetics Corp. |
United States | 989,889 | 124,864,599 | |||||||||||
| a Intuitive Surgical Inc. |
United States | 445,451 | 240,512,358 | |||||||||||
| a Laboratory Corp. of America Holdings |
United States | 494,945 | 83,150,760 | |||||||||||
| Quest Diagnostics Inc. |
United States | 890,901 | 95,353,134 | |||||||||||
| Stryker Corp. |
United States | 395,957 | 85,645,499 | |||||||||||
| Teleflex Inc. |
United States | 494,945 | 168,157,564 | |||||||||||
| a Varian Medical Systems Inc. |
United States | 296,967 | 35,365,800 | |||||||||||
|
|
|
|||||||||||||
| 1,271,364,598 | ||||||||||||||
|
|
|
|||||||||||||
| Materials 5.3% |
||||||||||||||
| Air Products and Chemicals Inc. |
United States | 494,945 | 109,808,498 | |||||||||||
| Albemarle Corp. |
United States | 544,440 | 37,849,469 | |||||||||||
| a Axalta Coating Systems Ltd. |
United States | 3,365,622 | 101,473,503 | |||||||||||
| Celanese Corp. |
United States | 1,237,362 | 151,316,999 | |||||||||||
| Ecolab Inc. |
United States | 910,699 | 180,354,830 | |||||||||||
| International Flavors & Fragrances Inc. |
United States | 400,000 | 49,076,000 | |||||||||||
| Linde PLC |
United Kingdom | 569,187 | 110,262,905 | |||||||||||
| Martin Marietta Materials Inc. |
United States | 395,957 | 108,531,814 | |||||||||||
|
|
|
|||||||||||||
| 848,674,018 | ||||||||||||||
|
|
|
|||||||||||||
| Media & Entertainment 5.9% |
||||||||||||||
| a Alphabet Inc., A |
United States | 163,333 | 199,452,460 | |||||||||||
| a Alphabet Inc., C |
United States | 156,831 | 191,176,989 | |||||||||||
| Cable One Inc. |
United States | 79,192 | 99,362,202 | |||||||||||
| Comcast Corp., A |
United States | 795,018 | 35,839,411 | |||||||||||
| a Facebook Inc., A |
United States | 750,000 | 133,560,000 | |||||||||||
| a IAC/InterActiveCorp. |
United States | 296,967 | 64,729,897 | |||||||||||
| The Walt Disney Co. |
United States | 1,706,856 | 222,437,474 | |||||||||||
|
|
|
|||||||||||||
| 946,558,433 | ||||||||||||||
|
|
|
|||||||||||||
| Pharmaceuticals, Biotechnology & Life Sciences 11.4% |
||||||||||||||
| a 10X Genomics Inc., A |
United States | 54,500 | 2,746,800 | |||||||||||
| AbbVie Inc. |
United States | 455,350 | 34,479,102 | |||||||||||
| Agilent Technologies Inc. |
United States | 1,286,856 | 98,611,775 | |||||||||||
| Amgen Inc. |
United States | 989,889 | 191,553,420 | |||||||||||
| franklintempleton.com | Annual Report | 55 | ||
FRANKLIN CUSTODIAN FUNDS
STATEMENT OF INVESTMENTS
Franklin Growth Fund (continued)
| Country | Shares | Value | ||||||||||||
|
Common Stocks (continued) |
||||||||||||||
| Pharmaceuticals, Biotechnology & Life Sciences (continued) |
||||||||||||||
| AstraZeneca PLC, ADR |
United Kingdom | 1,979,778 | $ | 88,238,705 | ||||||||||
| a Catalent Inc. |
United States | 3,365,622 | 160,405,545 | |||||||||||
| a Elanco Animal Health Inc. |
United States | 1,487,105 | 39,542,122 | |||||||||||
| Eli Lilly & Co. |
United States | 1,240,175 | 138,688,770 | |||||||||||
| Gilead Sciences Inc. |
United States | 643,429 | 40,780,530 | |||||||||||
| a GW Pharmaceuticals PLC, ADR |
United Kingdom | 204,657 | 23,541,695 | |||||||||||
| a Illumina Inc. |
United States | 519,692 | 158,100,700 | |||||||||||
| Johnson & Johnson |
United States | 1,187,967 | 153,699,171 | |||||||||||
| Merck & Co. Inc. |
United States | 989,889 | 83,328,856 | |||||||||||
| a Mettler-Toledo International Inc. |
United States | 420,704 | 296,343,898 | |||||||||||
| a Neurocrine Biosciences Inc. |
United States | 494,945 | 44,599,494 | |||||||||||
| Pfizer Inc. |
United States | 2,733,084 | 98,199,708 | |||||||||||
| a PTC Therapeutics Inc. |
United States | 971,300 | 32,849,366 | |||||||||||
| a Waters Corp. |
United States | 618,682 | 138,108,383 | |||||||||||
|
|
|
|||||||||||||
| 1,823,818,040 | ||||||||||||||
|
|
|
|||||||||||||
| Real Estate 1.8% |
||||||||||||||
| American Tower Corp. |
United States | 615,000 | 135,994,950 | |||||||||||
| Crown Castle International Corp. |
United States | 218,900 | 30,429,289 | |||||||||||
| Equinix Inc. |
United States | 198,755 | 114,641,884 | |||||||||||
|
|
|
|||||||||||||
| 281,066,123 | ||||||||||||||
|
|
|
|||||||||||||
| Retailing 4.6% |
||||||||||||||
| a Alibaba Group Holding Ltd., ADR |
China | 475,544 | 79,525,223 | |||||||||||
| a Amazon.com Inc. |
United States | 346,462 | 601,426,851 | |||||||||||
| Expedia Group Inc. |
United States | 346,462 | 46,567,957 | |||||||||||
|
|
|
|||||||||||||
| 727,520,031 | ||||||||||||||
|
|
|
|||||||||||||
| Semiconductors & Semiconductor Equipment 3.6% |
||||||||||||||
| ASML Holding NV, N.Y. shs |
Netherlands | 643,429 | 159,840,632 | |||||||||||
| Intel Corp. |
United States | 1,088,879 | 56,109,935 | |||||||||||
| Lam Research Corp. |
United States | 29,697 | 6,863,274 | |||||||||||
| Monolithic Power Systems |
United States | 445,451 | 69,325,539 | |||||||||||
| NVIDIA Corp. |
United States | 500,000 | 87,035,000 | |||||||||||
| Texas Instruments Inc. |
United States | 1,385,845 | 179,106,608 | |||||||||||
| Versum Materials Inc. |
United States | 247,473 | 13,098,746 | |||||||||||
|
|
|
|||||||||||||
| 571,379,734 | ||||||||||||||
|
|
|
|||||||||||||
| Software & Services 13.8% |
||||||||||||||
| a Adobe Inc. |
United States | 150,000 | 41,437,500 | |||||||||||
| a Adyen NV |
Netherlands | 59,592 | 39,255,368 | |||||||||||
| a Atlassian Corp. PLC |
United States | 122,600 | 15,378,944 | |||||||||||
| a Autodesk Inc. |
United States | 791,912 | 116,965,402 | |||||||||||
| Automatic Data Processing Inc. |
United States | 692,923 | 111,851,631 | |||||||||||
| Intuit Inc. |
United States | 989,889 | 263,251,081 | |||||||||||
| Mastercard Inc., A |
United States | 1,385,845 | 376,353,927 | |||||||||||
| Microsoft Corp. |
United States | 3,365,622 | 467,922,427 | |||||||||||
| a PTC Inc. |
United States | 928,128 | 63,279,767 | |||||||||||
| a salesforce.com Inc. |
United States | 544,440 | 80,816,673 | |||||||||||
| a ServiceNow Inc. |
United States | 989,889 | 251,283,323 | |||||||||||
| 56 |
Annual Report | franklintempleton.com | ||
FRANKLIN CUSTODIAN FUNDS
STATEMENT OF INVESTMENTS
Franklin Growth Fund (continued)
| Country | Shares | Value | ||||||||||||
|
Common Stocks (continued) |
||||||||||||||
| Software & Services (continued) |
||||||||||||||
| a Twilio Inc., A |
United States | 397,509 | $ | 43,710,089 | ||||||||||
| a Tyler Technologies Inc. |
United States | 173,232 | 45,473,400 | |||||||||||
| Visa Inc., A |
United States | 1,385,845 | 238,379,198 | |||||||||||
| a Workday Inc., A |
United States | 340,228 | 57,825,151 | |||||||||||
|
|
|
|||||||||||||
| 2,213,183,881 | ||||||||||||||
|
|
|
|||||||||||||
| Technology Hardware & Equipment 8.3% |
||||||||||||||
| Amphenol Corp., A |
United States | 894,395 | 86,309,118 | |||||||||||
| Apple Inc. |
United States | 3,042,195 | 681,360,414 | |||||||||||
| Cisco Systems Inc. |
United States | 2,915,223 | 144,041,168 | |||||||||||
| Cognex Corp. |
United States | 385,906 | 18,959,562 | |||||||||||
| a Keysight Technologies Inc. |
United States | 643,429 | 62,573,470 | |||||||||||
| TE Connectivity Ltd. |
United States | 1,850,000 | 172,383,000 | |||||||||||
| a Trimble Inc. |
United States | 2,672,700 | 103,727,487 | |||||||||||
| a ViaSat Inc. |
United States | 692,923 | 52,190,960 | |||||||||||
|
|
|
|||||||||||||
| 1,321,545,179 | ||||||||||||||
|
|
|
|||||||||||||
| Transportation 5.7% |
||||||||||||||
| Alaska Air Group Inc. |
United States | 3,167,645 | 205,611,837 | |||||||||||
| Canadian National Railway Co. |
Canada | 989,889 | 88,951,426 | |||||||||||
| Canadian Pacific Railway Ltd. |
Canada | 494,945 | 110,105,465 | |||||||||||
| J.B. Hunt Transport Services Inc. |
United States | 494,945 | 54,765,664 | |||||||||||
| Kansas City Southern |
United States | 742,417 | 98,748,885 | |||||||||||
| a Lyft Inc., A |
United States | 301,800 | 12,325,512 | |||||||||||
| a Uber Technologies Inc. |
United States | 705,700 | 21,502,679 | |||||||||||
| Union Pacific Corp. |
United States | 2,009,475 | 325,494,760 | |||||||||||
|
|
|
|||||||||||||
| 917,506,228 | ||||||||||||||
|
|
|
|||||||||||||
| Utilities 1.3% |
||||||||||||||
| American Water Works Co. Inc. |
United States | 692,923 | 86,081,824 | |||||||||||
| NextEra Energy Inc. |
United States | 494,945 | 115,317,236 | |||||||||||
|
|
|
|||||||||||||
| 201,399,060 | ||||||||||||||
|
|
|
|||||||||||||
| Total Common Stocks (Cost $5,327,027,738) |
15,830,913,823 | |||||||||||||
|
|
|
|||||||||||||
| franklintempleton.com | Annual Report | 57 | ||
FRANKLIN CUSTODIAN FUNDS
STATEMENT OF INVESTMENTS
Franklin Growth Fund (continued)
| Country | Shares | Value | ||||||||||||
| Short Term Investments (Cost $195,726,982) 1.2% |
||||||||||||||
| Money Market Funds 1.2% |
||||||||||||||
| b,c Institutional Fiduciary Trust Money Market Portfolio, 1.71% |
United States | 195,726,982 | $ | 195,726,982 | ||||||||||
|
|
|
|||||||||||||
| Total Investments (Cost $5,522,754,720) 100.2% |
16,026,640,805 | |||||||||||||
| Other Assets, less Liabilities (0.2)% |
(29,796,831 | ) | ||||||||||||
|
|
|
|||||||||||||
| Net Assets 100.0% |
$ | 15,996,843,974 | ||||||||||||
|
|
|
|||||||||||||
See Abbreviations on page 133.
aNon-income producing.
bSee Note 3(f) regarding investments in affiliated management investment companies.
cThe rate shown is the annualized seven-day effective yield at period end.
| 58 |
Annual Report | The accompanying notes are an integral part of these financial statements. | franklintempleton.com | ||
FRANKLIN CUSTODIAN FUNDS
Financial Highlights
Franklin Income Fund
| Year Ended September 30, | ||||||||
| 2019 | 2018a | |||||||
| Class A |
||||||||
| Per share operating performance (for a share outstanding throughout the year) |
||||||||
| Net asset value, beginning of year |
$ 2.32 | $ 2.31 | ||||||
| Income from investment operationsb: |
||||||||
| Net investment income (loss)c |
0.08 | (0.04 | ) | |||||
| Net realized and unrealized gains (losses) |
0.02 | 0.05 | ||||||
| Total from investment operations |
0.10 | 0.01 | ||||||
| Less distributions from: |
||||||||
| Net investment income |
(0.12 | ) | — | |||||
| Net asset value, end of year |
$ 2.30 | $ 2.32 | ||||||
| Total returnd |
4.40% | 0.43% | ||||||
| Ratios to average net assetse |
||||||||
| Expensesf |
0.72% | 0.71% | ||||||
| Net investment income |
3.92% | 3.89% | ||||||
| Supplemental data |
||||||||
| Net assets, end of year (000’s) |
$7,427,468 | $107,057 | ||||||
| Portfolio turnover rate |
43.63% | 49.95% | ||||||
aFor the period September 10, 2018 (effective date) to September 30, 2018.
bThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and repurchases of the Fund’s shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
cBased on average daily shares outstanding.
dTotal return does not reflect sales commissions or contingent deferred sales charges, if applicable, and is not annualized for periods less than one year.
eRatios are annualized for periods less than one year.
fBenefit of waiver and payments by affiliates and expense reduction rounds to less than 0.01%.
| franklintempleton.com | The accompanying notes are an integral part of these financial statements. | Annual Report | 59 | ||
FRANKLIN CUSTODIAN FUNDS
FINANCIAL HIGHLIGHTS
Franklin Income Fund (continued)
| Year Ended September 30, | ||||||||||||||||||||
| 2019 | 2018 | 2017 | 2016 | 2015 | ||||||||||||||||
| Class A1 |
||||||||||||||||||||
| Per share operating performance (for a share outstanding throughout the year) |
||||||||||||||||||||
| Net asset value, beginning of year |
$ 2.32 | $ 2.39 | $ 2.25 | $ 2.10 | $ 2.48 | |||||||||||||||
| Income from investment operationsa: |
||||||||||||||||||||
| Net investment incomeb |
0.09 | 0.09 | 0.10 | 0.10 | 0.10 | |||||||||||||||
| Net realized and unrealized gains (losses) |
0.01 | (0.04 | ) | 0.16 | 0.17 | (0.36 | ) | |||||||||||||
| Total from investment operations |
0.10 | 0.05 | 0.26 | 0.27 | (0.26 | ) | ||||||||||||||
| Less distributions from: |
||||||||||||||||||||
| Net investment income |
(0.12 | ) | (0.12 | ) | (0.12 | ) | (0.12 | ) | (0.12 | ) | ||||||||||
| Net asset value, end of year |
$ 2.30 | $ 2.32 | $ 2.39 | $ 2.25 | $ 2.10 | |||||||||||||||
| Total returnc | 4.50% | 2.18% | 11.86% | 13.31% | (10.93)% | |||||||||||||||
| Ratios to average net assets |
||||||||||||||||||||
| Expenses before waiver and payments by affiliates |
0.62% | 0.61% | 0.62% | 0.61% | 0.61% | |||||||||||||||
| Expenses net of waiver and payments by affiliatesd |
0.62% | e | 0.61% | e | 0.61% | 0.61% | e | 0.61% | e | |||||||||||
| Net investment income |
4.02% | 3.99% | 4.22% | 4.57% | 4.43% | |||||||||||||||
| Supplemental data |
||||||||||||||||||||
| Net assets, end of year (000’s) |
$39,625,649 | $42,929,573 | $46,505,632 | $45,515,127 | $44,886,127 | |||||||||||||||
| Portfolio turnover rate |
43.63% | 49.95% | 34.12% | 61.26% | 44.81% | |||||||||||||||
aThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and repurchases of the Fund’s shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
bBased on average daily shares outstanding.
cTotal return does not reflect sales commissions or contingent deferred sales charges, if applicable.
dBenefit of expense reduction rounds to less than 0.01%.
eBenefit of waiver and payments by affiliates rounds to less than 0.01%.
| 60 |
Annual Report | The accompanying notes are an integral part of these financial statements. | franklintempleton.com | ||
FRANKLIN CUSTODIAN FUNDS
FINANCIAL HIGHLIGHTS
Franklin Income Fund (continued)
| Year Ended September 30, | ||||||||||||||||||||
| 2019 | 2018 | 2017 | 2016 | 2015 | ||||||||||||||||
| Class C |
||||||||||||||||||||
| Per share operating performance (for a share outstanding throughout the year) |
||||||||||||||||||||
| Net asset value, beginning of year |
$ 2.35 | $ 2.42 | $ 2.27 | $ 2.13 | $ 2.50 | |||||||||||||||
| Income from investment operationsa: |
||||||||||||||||||||
| Net investment incomeb |
0.08 | 0.08 | 0.09 | 0.09 | 0.09 | |||||||||||||||
| Net realized and unrealized gains (losses) |
0.02 | (0.04 | ) | 0.17 | 0.16 | (0.35 | ) | |||||||||||||
| Total from investment operations |
0.10 | 0.04 | 0.26 | 0.25 | (0.26 | ) | ||||||||||||||
| Less distributions from: |
||||||||||||||||||||
| Net investment income |
(0.11 | ) | (0.11 | ) | (0.11 | ) | (0.11 | ) | (0.11 | ) | ||||||||||
| Net asset value, end of year |
$ 2.34 | $ 2.35 | $ 2.42 | $ 2.27 | $ 2.13 | |||||||||||||||
| Total returnc | 4.35% | 1.61% | 11.63% | 12.07% | (10.89)% | |||||||||||||||
| Ratios to average net assets |
||||||||||||||||||||
| Expenses before waiver and payments by affiliates |
1.12% | 1.11% | 1.12% | 1.11% | 1.11% | |||||||||||||||
| Expenses net of waiver and payments by affiliatesd |
1.12% | e | 1.11% | e | 1.11% | 1.11% | e | 1.11% | e | |||||||||||
| Net investment income |
3.52% | 3.49% | 3.72% | 4.07% | 3.93% | |||||||||||||||
| Supplemental data |
||||||||||||||||||||
| Net assets, end of year (000’s) |
$13,488,627 | $19,895,441 | $23,036,875 | $23,841,466 | $24,091,638 | |||||||||||||||
| Portfolio turnover rate |
43.63% | 49.95% | 34.12% | 61.26% | 44.81% | |||||||||||||||
aThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and repurchases of the Fund’s shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
bBased on average daily shares outstanding.
cTotal return does not reflect sales commissions or contingent deferred sales charges, if applicable.
dBenefit of expense reduction rounds to less than 0.01%.
eBenefit of waiver and payments by affiliates rounds to less than 0.01%.
| franklintempleton.com | The accompanying notes are an integral part of these financial statements. | Annual Report | 61 | ||
FRANKLIN CUSTODIAN FUNDS
FINANCIAL HIGHLIGHTS
Franklin Income Fund (continued)
| Year Ended September 30, | ||||||||||||||||||||
| 2019 | 2018 | 2017 | 2016 | 2015 | ||||||||||||||||
| Class R |
||||||||||||||||||||
| Per share operating performance (for a share outstanding throughout the year) |
||||||||||||||||||||
| Net asset value, beginning of year |
$ 2.28 | $ 2.35 | $ 2.21 | $ 2.07 | $ 2.44 | |||||||||||||||
| Income from investment operationsa: |
||||||||||||||||||||
| Net investment incomeb |
0.08 | 0.08 | 0.09 | 0.09 | 0.10 | |||||||||||||||
| Net realized and unrealized gains (losses) |
0.01 | (0.04 | ) | 0.16 | 0.16 | (0.36 | ) | |||||||||||||
| Total from investment operations |
0.09 | 0.04 | 0.25 | 0.25 | (0.26 | ) | ||||||||||||||
| Less distributions from: |
||||||||||||||||||||
| Net investment income |
(0.11 | ) | (0.11 | ) | (0.11 | ) | (0.11 | ) | (0.11 | ) | ||||||||||
| Net asset value, end of year |
$ 2.26 | $ 2.28 | $ 2.35 | $ 2.21 | $ 2.07 | |||||||||||||||
| Total return | 4.20% | 1.86% | 11.67% | 12.62% | (10.99)% | |||||||||||||||
| Ratios to average net assets |
||||||||||||||||||||
| Expenses before waiver and payments by affiliates |
0.97% | 0.96% | 0.97% | 0.96% | 0.96% | |||||||||||||||
| Expenses net of waiver and payments by affiliatesc |
0.97% | d | 0.96% | d | 0.96% | 0.96% | d | 0.96% | d | |||||||||||
| Net investment income |
3.67% | 3.64% | 3.87% | 4.22% | 4.08% | |||||||||||||||
| Supplemental data |
||||||||||||||||||||
| Net assets, end of year (000’s) |
$265,531 | $296,098 | $361,603 | $396,107 | $416,653 | |||||||||||||||
| Portfolio turnover rate |
43.63% | 49.95% | 34.12% | 61.26% | 44.81% | |||||||||||||||
aThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and repurchases of the Fund’s shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
bBased on average daily shares outstanding.
cBenefit of expense reduction rounds to less than 0.01%.
dBenefit of waiver and payments by affiliates rounds to less than 0.01%.
| 62 |
Annual Report | The accompanying notes are an integral part of these financial statements. | franklintempleton.com | ||
FRANKLIN CUSTODIAN FUNDS
FINANCIAL HIGHLIGHTS
Franklin Income Fund (continued)
| Year Ended September 30, | ||||||||||||||||||||
| 2019 | 2018 | 2017 | 2016 | 2015 | ||||||||||||||||
| Class R6 |
||||||||||||||||||||
| Per share operating performance (for a share outstanding throughout the year) |
||||||||||||||||||||
| Net asset value, beginning of year |
$ 2.30 | $ 2.37 | $ 2.23 | $ 2.09 | $ 2.46 | |||||||||||||||
| Income from investment operationsa: |
||||||||||||||||||||
| Net investment incomeb |
0.10 | 0.10 | 0.11 | 0.10 | 0.11 | |||||||||||||||
| Net realized and unrealized gains (losses) |
0.01 | (0.05 | ) | 0.15 | 0.16 | (0.35 | ) | |||||||||||||
| Total from investment operations |
0.11 | 0.05 | 0.26 | 0.26 | (0.24 | ) | ||||||||||||||
| Less distributions from: |
||||||||||||||||||||
| Net investment income |
(0.12 | ) | (0.12 | ) | (0.12 | ) | (0.12 | ) | (0.13 | ) | ||||||||||
| Net asset value, end of year |
$ 2.29 | $ 2.30 | $ 2.37 | $ 2.23 | $ 2.09 | |||||||||||||||
| Total return | 5.17% | 2.40% | 12.15% | 13.15% | (10.39)% | |||||||||||||||
| Ratios to average net assets |
||||||||||||||||||||
| Expenses before waiver and payments by affiliates |
0.41% | 0.39% | 0.39% | 0.38% | 0.38% | |||||||||||||||
| Expenses net of waiver and payments by affiliatesc |
0.40% | 0.39% | d | 0.38% | 0.38% | d | 0.38% | d | ||||||||||||
| Net investment income |
4.24% | 4.21% | 4.45% | 4.80% | 4.66% | |||||||||||||||
| Supplemental data |
||||||||||||||||||||
| Net assets, end of year (000’s) |
$1,902,027 | $2,062,334 | $1,815,977 | $1,737,577 | $1,744,718 | |||||||||||||||
| Portfolio turnover rate |
43.63% | 49.95% | 34.12% | 61.26% | 44.81% | |||||||||||||||
aThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and repurchases of the Fund’s shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
bBased on average daily shares outstanding.
cBenefit of expense reduction rounds to less than 0.01%.
dBenefit of waiver and payments by affiliates rounds to less than 0.01%.
| franklintempleton.com | The accompanying notes are an integral part of these financial statements. | Annual Report | 63 | ||
FRANKLIN CUSTODIAN FUNDS
FINANCIAL HIGHLIGHTS
Franklin Income Fund (continued)
| Year Ended September 30, | ||||||||||||||||||||
| 2019 | 2018 | 2017 | 2016 | 2015 | ||||||||||||||||
| Advisor Class |
||||||||||||||||||||
| Per share operating performance (for a share outstanding throughout the year) |
||||||||||||||||||||
| Net asset value, beginning of year |
$ 2.30 | $ 2.37 | $ 2.23 | $ 2.09 | $ 2.46 | |||||||||||||||
| Income from investment operationsa: |
||||||||||||||||||||
| Net investment incomeb |
0.09 | 0.10 | 0.10 | 0.10 | 0.11 | |||||||||||||||
| Net realized and unrealized gains (losses) |
0.01 | (0.05 | ) | 0.16 | 0.16 | (0.36 | ) | |||||||||||||
| Total from investment operations |
0.10 | 0.05 | 0.26 | 0.26 | (0.25 | ) | ||||||||||||||
| Less distributions from: |
||||||||||||||||||||
| Net investment income |
(0.12 | ) | (0.12 | ) | (0.12 | ) | (0.12 | ) | (0.12 | ) | ||||||||||
| Net asset value, end of year |
$ 2.28 | $ 2.30 | $ 2.37 | $ 2.23 | $ 2.09 | |||||||||||||||
| Total return | 4.65% | 2.34% | 12.09% | 13.06% | (10.46)% | |||||||||||||||
| Ratios to average net assets |
||||||||||||||||||||
| Expenses before waiver and payments by affiliates |
0.47% | 0.46% | 0.47% | 0.46% | 0.46% | |||||||||||||||
| Expenses net of waiver and payments by affiliatesc |
0.47% | d | 0.46% | d | 0.46% | 0.46% | d | 0.46% | d | |||||||||||
| Net investment income |
4.17% | 4.14% | 4.37% | 4.72% | 4.58% | |||||||||||||||
| Supplemental data |
||||||||||||||||||||
| Net assets, end of year (000’s) |
$11,816,599 | $11,328,761 | $11,671,173 | $8,143,479 | $7,754,475 | |||||||||||||||
| Portfolio turnover rate |
43.63% | 49.95% | 34.12% | 61.26% | 44.81% | |||||||||||||||
aThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and repurchases of the Fund’s shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
bBased on average daily shares outstanding.
cBenefit of expense reduction rounds to less than 0.01%.
dBenefit of waiver and payments by affiliates rounds to less than 0.01%.
| 64 |
Annual Report | The accompanying notes are an integral part of these financial statements. | franklintempleton.com | ||
FRANKLIN CUSTODIAN FUNDS
Statement of Investments, September 30, 2019
Franklin Income Fund
| Country | Shares | Value | ||||||||||||||
| Common Stocks 29.5% |
||||||||||||||||
| Communication Services 1.3% |
||||||||||||||||
| a Alphabet Inc., A |
United States | 24,100 | $ | 29,429,474 | ||||||||||||
| BCE Inc. |
Canada | 5,000,000 | 241,939,138 | |||||||||||||
| Verizon Communications Inc. |
United States | 10,000,200 | 603,612,072 | |||||||||||||
| Vodafone Group PLC |
United Kingdom | 50,000,000 | 99,581,401 | |||||||||||||
|
|
|
|||||||||||||||
| 974,562,085 | ||||||||||||||||
|
|
|
|||||||||||||||
| Consumer Discretionary 0.8% |
||||||||||||||||
| Daimler AG |
Germany | 5,000,000 | 248,606,182 | |||||||||||||
| Ford Motor Co. |
United States | 7,500,000 | 68,700,000 | |||||||||||||
| b General Motors Co. |
United States | 8,200,000 | 307,336,000 | |||||||||||||
|
|
|
|||||||||||||||
| 624,642,182 | ||||||||||||||||
|
|
|
|||||||||||||||
| Consumer Staples 1.5% |
||||||||||||||||
| Anheuser-Busch InBev SA/NV, ADR |
Belgium | 2,500,000 | 237,875,000 | |||||||||||||
| The Coca-Cola Co. |
United States | 2,500,000 | 136,100,000 | |||||||||||||
| PepsiCo Inc. |
United States | 3,500,000 | 479,850,000 | |||||||||||||
| Philip Morris International Inc. |
United States | 2,501,700 | 189,954,081 | |||||||||||||
| Unilever PLC |
United Kingdom | 1,000,000 | 60,117,661 | |||||||||||||
|
|
|
|||||||||||||||
| 1,103,896,742 | ||||||||||||||||
|
|
|
|||||||||||||||
| Energy 5.8% |
||||||||||||||||
| Baker Hughes Co., A |
United States | 11,609,247 | 269,334,530 | |||||||||||||
| a,c Chesapeake Energy Corp. |
United States | 231,000,000 | 325,710,000 | |||||||||||||
| b Chevron Corp. |
United States | 3,000,000 | 355,800,000 | |||||||||||||
| Exxon Mobil Corp. |
United States | 6,500,000 | 458,965,000 | |||||||||||||
| Halliburton Co. |
United States | 15,000,000 | 282,750,000 | |||||||||||||
| Occidental Petroleum Corp. |
United States | 17,500,000 | 778,225,000 | |||||||||||||
| Royal Dutch Shell PLC, A, ADR |
United Kingdom | 15,000,000 | 882,750,000 | |||||||||||||
| Schlumberger Ltd. |
United States | 14,152,970 | 483,606,985 | |||||||||||||
| TC Energy Corp. |
Canada | 4,500,000 | 233,055,000 | |||||||||||||
| The Williams Cos. Inc. |
United States | 12,000,000 | 288,720,000 | |||||||||||||
|
|
|
|||||||||||||||
| 4,358,916,515 | ||||||||||||||||
|
|
|
|||||||||||||||
| Financials 4.7% |
||||||||||||||||
| Bank of America Corp. |
United States | 10,740,000 | 313,285,800 | |||||||||||||
| Barclays PLC |
United Kingdom | 200,000,000 | 369,803,526 | |||||||||||||
| BB&T Corp. |
United States | 3,500,000 | 186,795,000 | |||||||||||||
| JPMorgan Chase & Co. |
United States | 6,108,000 | 718,850,520 | |||||||||||||
| b MetLife Inc. |
United States | 5,341,404 | 251,900,613 | |||||||||||||
| Morgan Stanley |
United States | 5,000,000 | 213,350,000 | |||||||||||||
| Owl Rock Capital Corp. |
United States | 1,633,986 | 25,767,959 | |||||||||||||
| b Wells Fargo & Co. |
United States | 28,362,229 | 1,430,590,831 | |||||||||||||
|
|
|
|||||||||||||||
| 3,510,344,249 | ||||||||||||||||
|
|
|
|||||||||||||||
| Health Care 5.0% |
||||||||||||||||
| AstraZeneca PLC |
United Kingdom | 7,500,000 | 669,500,516 | |||||||||||||
| Bayer AG |
Germany | 2,000,000 | 141,011,257 | |||||||||||||
| b Bristol-Myers Squibb Co. |
United States | 12,000,000 | 608,520,000 | |||||||||||||
| b CVS Health Corp. |
United States | 7,500,000 | 473,025,000 | |||||||||||||
| b Gilead Sciences Inc. |
United States | 1,000,000 | 63,380,000 | |||||||||||||
| franklintempleton.com | Annual Report | 65 | ||
FRANKLIN CUSTODIAN FUNDS
STATEMENT OF INVESTMENTS
Franklin Income Fund (continued)
| Country | Shares | Value | ||||||||||||||
| Common Stocks (continued) |
||||||||||||||||
| Health Care (continued) |
||||||||||||||||
| Johnson & Johnson |
United States | 4,000,000 | $ | 517,520,000 | ||||||||||||
| b Merck & Co. Inc. |
United States | 8,000,000 | 673,440,000 | |||||||||||||
| a Mylan NV |
United States | 2,421,000 | 47,887,380 | |||||||||||||
| Pfizer Inc. |
United States | 15,000,000 | 538,950,000 | |||||||||||||
|
|
|
|||||||||||||||
| 3,733,234,153 | ||||||||||||||||
|
|
|
|||||||||||||||
| Industrials 0.9% |
||||||||||||||||
| 3M Co. |
United States | 3,930,000 | 646,092,000 | |||||||||||||
|
|
|
|||||||||||||||
| Information Technology 1.5% |
||||||||||||||||
| b Analog Devices Inc. |
United States | 1,000,000 | 111,730,000 | |||||||||||||
| Intel Corp. |
United States | 6,000,000 | 309,180,000 | |||||||||||||
| b International Business Machines Corp. |
United States | 1,429,689 | 207,905,374 | |||||||||||||
| b Texas Instruments Inc. |
United States | 3,764,000 | 486,459,360 | |||||||||||||
|
|
|
|||||||||||||||
| 1,115,274,734 | ||||||||||||||||
|
|
|
|||||||||||||||
| Materials 1.8% |
||||||||||||||||
| BASF SE |
Germany | 11,000,000 | 768,728,241 | |||||||||||||
| BHP Group PLC |
United Kingdom | 5,000,000 | 106,490,630 | |||||||||||||
| Corteva Inc. |
United States | 1,172,674 | 32,834,872 | |||||||||||||
| Dow Inc. |
United States | 1,172,674 | 55,877,916 | |||||||||||||
| DuPont de Nemours Inc. |
United States | 1,172,674 | 83,623,383 | |||||||||||||
| Rio Tinto PLC, ADR |
Australia | 5,800,000 | 302,122,000 | |||||||||||||
|
|
|
|||||||||||||||
| 1,349,677,042 | ||||||||||||||||
|
|
|
|||||||||||||||
| Real Estate 0.5% |
||||||||||||||||
| Host Hotels & Resorts Inc. |
United States | 20,000,000 | 345,800,000 | |||||||||||||
|
|
|
|||||||||||||||
| Utilities 5.7% |
||||||||||||||||
| Dominion Energy Inc. |
United States | 15,000,000 | 1,215,600,000 | |||||||||||||
| Duke Energy Corp. |
United States | 7,500,000 | 718,950,000 | |||||||||||||
| b Sempra Energy |
United States | 4,000,000 | 590,440,000 | |||||||||||||
| b The Southern Co. |
United States | 23,000,000 | 1,420,710,000 | |||||||||||||
| Xcel Energy Inc. |
United States | 4,500,000 | 292,005,000 | |||||||||||||
|
|
|
|||||||||||||||
| 4,237,705,000 | ||||||||||||||||
|
|
|
|||||||||||||||
| Total Common Stocks (Cost $19,082,382,338) |
22,000,144,702 | |||||||||||||||
|
|
|
|||||||||||||||
| d Equity-Linked Securities 15.0% |
||||||||||||||||
| Communication Services 0.8% |
||||||||||||||||
| e Goldman Sachs International into Alphabet Inc., 7.00%, A, 144A |
United States | 285,000 | 336,248,748 | |||||||||||||
| e Morgan Stanley BV into Comcast Corp., 7.00%, A, 144A |
United States | 6,475,000 | 269,857,487 | |||||||||||||
|
|
|
|||||||||||||||
| 606,106,235 | ||||||||||||||||
|
|
|
|||||||||||||||
| Consumer Discretionary 2.7% |
||||||||||||||||
| e Citigroup Global Markets Holdings Inc. into Amazon.com Inc., 9.00%, 144A |
United States | 277,000 | 490,423,698 | |||||||||||||
| e Citigroup Global Markets Holdings Inc. into Ford Motor Co., 10.00%, 144A |
United States | 49,600,000 | 461,757,747 | |||||||||||||
| e JP Morgan Chase Financial Co. LLC into Amazon.com Inc., 9.00%, 144A |
United States | 171,000 | 298,583,298 | |||||||||||||
| e Merrill Lynch International & Co. CV into Target Corp., 8.00%, 144A |
United States | 3,075,000 | 279,098,316 | |||||||||||||
| e Wells Fargo Bank NA into General Motors Co., 9.00%, 144A |
United States | 13,580,000 | 506,798,770 | |||||||||||||
|
|
|
|||||||||||||||
| 2,036,661,829 | ||||||||||||||||
|
|
|
|||||||||||||||
| 66 |
Annual Report | franklintempleton.com | ||
FRANKLIN CUSTODIAN FUNDS
STATEMENT OF INVESTMENTS
Franklin Income Fund (continued)
| Country | Shares | Value | ||||||||||||||
| d Equity-Linked Securities (continued) |
||||||||||||||||
| Energy 0.4% |
||||||||||||||||
| e Wells Fargo Bank National Assn. into Occidental Petroleum Corp., 9.00%, 144A |
United States | 5,685,000 | $ | 300,223,037 | ||||||||||||
|
|
|
|||||||||||||||
| Financials 1.8% |
||||||||||||||||
| e Citigroup Global Markets Holdings Inc. into MetLife Inc., 7.50%, 144A |
United States | 5,575,000 | 258,298,442 | |||||||||||||
| e Credit Suisse AG into Bank of America Corp., 7.00%, 144A |
United States | 10,400,000 | 307,262,571 | |||||||||||||
| e Royal Bank of Canada into MetLife Inc., 7.50%, 144A |
United States | 5,350,000 | 251,199,272 | |||||||||||||
| e Societe Generale SA into JPMorgan Chase & Co., 7.00%, 144A |
United States | 2,175,000 | 258,225,781 | |||||||||||||
| e Wells Fargo Bank NA into CVS Health Corp., 9.50%, 144A |
United States | 4,600,000 | 280,289,992 | |||||||||||||
|
|
|
|||||||||||||||
| 1,355,276,058 | ||||||||||||||||
|
|
|
|||||||||||||||
| Health Care 1.0% |
||||||||||||||||
| e Citigroup Global Markets Holdings Inc. into AbbVie Inc., 10.00%, 144A |
United States | 3,520,000 | 261,067,882 | |||||||||||||
| e Credit Suisse AG into CVS Health Corp., 8.50%, 144A |
United States | 4,000,000 | 244,399,500 | |||||||||||||
| e Credit Suisse AG London into Bristol-Myers Squibb Co., 8.50%, 144A |
United States | 5,405,000 | 262,768,599 | |||||||||||||
|
|
|
|||||||||||||||
| 768,235,981 | ||||||||||||||||
|
|
|
|||||||||||||||
| Industrials 1.3% |
||||||||||||||||
| e Credit Suisse AG/London into Cummins Inc., 8.00%, 144A |
United States | 1,700,000 | 281,073,247 | |||||||||||||
| e Merrill Lynch International & Co. CV into Deere & Co., 9.00%, 144A |
United States | 2,100,000 | 338,390,417 | |||||||||||||
| e Royal Bank of Canada into Boeing Co., 8.50%, 144A |
United States | 847,000 | 314,394,408 | |||||||||||||
|
|
|
|||||||||||||||
| 933,858,072 | ||||||||||||||||
|
|
|
|||||||||||||||
| Information Technology 5.9% |
||||||||||||||||
| e Barclays Bank PLC into Analog Devices Inc., 7.00%, 144A |
United States | 2,635,000 | 277,326,354 | |||||||||||||
| e Goldman Sachs International into Microsoft Corp., 6.50%, 144A |
United States | 4,750,000 | 579,791,693 | |||||||||||||
| e Goldman Sachs International into Texas Instruments Inc., 7.00%, 144A |
United States | 2,312,000 | 287,422,381 | |||||||||||||
| e JP Morgan Chase Financial Co. LLC into Broadcom Inc., 10.00%, 144A |
United States | 1,120,000 | 303,526,132 | |||||||||||||
| e JPMorgan Chase Bank NA into NVIDIA Corp., 10.00%, 144A |
United States | 1,786,000 | 307,198,480 | |||||||||||||
| e JPMorgan Chase Bank NA into Texas Instruments Inc., 9.00%, 144A |
United States | 2,236,000 | 274,478,080 | |||||||||||||
| e Merrill Lynch International & Co. CV into Apple Inc., 7.50%, 144A |
United States | 1,475,000 | 307,083,876 | |||||||||||||
| e Merrill Lynch International & Co. CV into Apple Inc., 8.50%, 144A |
United States | 1,725,000 | 345,682,201 | |||||||||||||
| e Merrill Lynch International & Co. CV into Applied Materials Inc., 8.50%, 144A |
United States | 6,750,000 | 292,518,837 | |||||||||||||
| e Morgan Stanley BV into Lam Research Corp., 9.00%, 144A |
United States | 1,530,000 | 282,413,549 | |||||||||||||
| e Morgan Stanley BV into Microchip Technology Inc., 9.00%, 144A |
United States | 3,325,000 | 276,746,719 | |||||||||||||
| e Morgan Stanley Finance LLC into Intel Corp., 8.50%, 144A |
United States | 7,300,000 | 367,748,107 | |||||||||||||
| e Royal Bank of Canada into Analog Devices Inc., 8.00%, 144A |
United States | 2,230,000 | 226,102,960 | |||||||||||||
| e Wells Fargo Bank National Assn. into Intel Corp., 8.00%, 144A |
United States | 5,200,000 | 270,458,136 | |||||||||||||
|
|
|
|||||||||||||||
| 4,398,497,505 | ||||||||||||||||
|
|
|
|||||||||||||||
| Materials 1.1% |
||||||||||||||||
| e Barclays Bank PLC into International Paper Co., 9.00%, 144A |
United States | 5,634,000 | 230,137,266 | |||||||||||||
| e Credit Suisse AG into Rio Tinto PLC, 10.00%, 144A |
Australia | 5,180,000 | 277,218,194 | |||||||||||||
| e UBS AG London into Newmont Goldcorp Corp., 8.00%, 144A |
United States | 7,266,000 | 270,692,861 | |||||||||||||
|
|
|
|||||||||||||||
| 778,048,321 | ||||||||||||||||
|
|
|
|||||||||||||||
| Total Equity-Linked Securities (Cost $10,532,415,800) |
11,176,907,038 | |||||||||||||||
|
|
|
|||||||||||||||
| franklintempleton.com | Annual Report | 67 | ||
FRANKLIN CUSTODIAN FUNDS
STATEMENT OF INVESTMENTS
Franklin Income Fund (continued)
| Country | Shares | Value | ||||||||||||||
| Convertible Preferred Stocks 2.1% |
||||||||||||||||
| Energy 0.1% |
||||||||||||||||
| c Chesapeake Energy Corp., 5.75%, cvt. pfd |
United States | 112,980 | $ | 44,721,438 | ||||||||||||
|
|
|
|||||||||||||||
| Financials 1.1% |
||||||||||||||||
| Bank of America Corp., 7.25%, cvt. pfd., L |
United States | 435,218 | 652,483,178 | |||||||||||||
| a FNMA, 5.375%, cvt. pfd |
United States | 4,250 | 188,912,500 | |||||||||||||
|
|
|
|||||||||||||||
| 841,395,678 | ||||||||||||||||
|
|
|
|||||||||||||||
| Industrials 0.0%† |
||||||||||||||||
| Fortive Corp., 5.00%, cvt. pfd., A |
United States | 31,266 | 28,205,997 | |||||||||||||
|
|
|
|||||||||||||||
| Information Technology 0.6% |
||||||||||||||||
| a Broadcom Inc, 8.00%, cvt. pfd., A |
United States | 420,000 | 430,662,036 | |||||||||||||
|
|
|
|||||||||||||||
| Utilities 0.3% |
||||||||||||||||
| Sempra Energy, 6.00%, cvt. pfd., A |
United States | 400,000 | 47,280,000 | |||||||||||||
| Sempra Energy, 6.75%, cvt. pfd., B |
United States | 739,000 | 86,950,740 | |||||||||||||
| a The Southern Co., 6.75%, cvt. pfd |
United States | 1,600,000 | 85,616,000 | |||||||||||||
|
|
|
|||||||||||||||
| 219,846,740 | ||||||||||||||||
|
|
|
|||||||||||||||
| Total Convertible Preferred Stocks (Cost $1,407,590,057) |
1,564,831,889 | |||||||||||||||
|
|
|
|||||||||||||||
| Preferred Stocks 0.3% |
||||||||||||||||
| Financials 0.3% |
||||||||||||||||
| a FHLMC, 8.375%, pfd., Z |
United States | 7,632,009 | 99,902,998 | |||||||||||||
| a FNMA, 8.25%, pfd., S |
United States | 5,500,000 | 73,425,000 | |||||||||||||
| JPMorgan Chase & Co., 6.00%, pfd., EE |
United States | 3,000,000 | 84,420,000 | |||||||||||||
|
|
|
|||||||||||||||
| Total Preferred Stocks (Cost $391,153,851) |
257,747,998 | |||||||||||||||
|
|
|
|||||||||||||||
| Units | ||||||||||||||||
| f Index-Linked Notes 0.3% |
||||||||||||||||
| Financials 0.3% |
||||||||||||||||
| e,g Credit Suisse AG, senior note, 144A, 8.29%, 2/08/21 |
United States | 33,000 | 96,101,323 | |||||||||||||
| e,h Morgan Stanley Finance LLC, senior note, 144A, 6.07%, 10/03/19 |
United States | 755,000 | 101,215,300 | |||||||||||||
|
|
|
|||||||||||||||
| Total Index-Linked Notes (Cost $199,585,600) |
197,316,623 | |||||||||||||||
|
|
|
|||||||||||||||
| Principal Amount* |
||||||||||||||||
| Convertible Bonds 0.4% |
||||||||||||||||
| Energy 0.2% |
||||||||||||||||
| c Chesapeake Energy Corp., cvt., senior note, 5.50%, 9/15/26 |
United States | 10,000,000 | 6,075,000 | |||||||||||||
| i Weatherford International Ltd., cvt., senior note, 5.875%, 7/01/21 |
United States | 505,000,000 | 178,012,500 | |||||||||||||
|
|
|
|||||||||||||||
| 184,087,500 | ||||||||||||||||
|
|
|
|||||||||||||||
| Health Care 0.2% |
||||||||||||||||
| e Bayer Capital Corp. BV, cvt., junior sub. note, 144A, 5.625%, 11/22/19 |
Germany | 150,000,000 | EUR | 132,593,360 | ||||||||||||
|
|
|
|||||||||||||||
| Total Convertible Bonds (Cost $614,311,527) |
316,680,860 | |||||||||||||||
|
|
|
|||||||||||||||
| 68 |
Annual Report | franklintempleton.com | ||
FRANKLIN CUSTODIAN FUNDS
STATEMENT OF INVESTMENTS
Franklin Income Fund (continued)
| Country | Principal Amount* |
|
Value | |||||||||||||
| Corporate Bonds 36.2% |
||||||||||||||||
| Communication Services 5.4% |
||||||||||||||||
| AMC Entertainment Holdings Inc., |
||||||||||||||||
| senior sub. bond, 5.75%, 6/15/25 |
United States | 37,325,000 | $ | 35,716,293 | ||||||||||||
| senior sub. note, 5.875%, 11/15/26 |
United States | 59,300,000 | 54,165,658 | |||||||||||||
| AT&T Inc., |
||||||||||||||||
| senior bond, 4.125%, 2/17/26 |
United States | 100,000,000 | 108,088,762 | |||||||||||||
| senior note, 3.00%, 6/30/22 |
United States | 100,000,000 | 102,153,870 | |||||||||||||
| CCO Holdings LLC/CCO Holdings Capital Corp., |
||||||||||||||||
| senior bond, 5.125%, 2/15/23 |
United States | 105,000,000 | 106,968,750 | |||||||||||||
| senior bond, 5.75%, 9/01/23 |
United States | 67,000,000 | 68,507,500 | |||||||||||||
| senior bond, 5.75%, 1/15/24 |
United States | 105,000,000 | 107,625,000 | |||||||||||||
| e senior bond, 144A, 5.50%, 5/01/26 |
United States | 60,000,000 | 62,994,000 | |||||||||||||
| e senior bond, 144A, 5.125%, 5/01/27 |
United States | 50,000,000 | 52,312,500 | |||||||||||||
| Comcast Corp., senior note, 3.95%, 10/15/25 |
United States | 50,000,000 | 54,481,472 | |||||||||||||
| e Diamond Sports Group LLC/Diamond Sports Finance Co., first lien, 144A, 5.375%, 8/15/26 |
United States | 40,000,000 | 41,600,000 | |||||||||||||
| senior note, 144A, 6.625%, 8/15/27 |
United States | 50,000,000 | 51,927,500 | |||||||||||||
| DISH DBS Corp., |
||||||||||||||||
| senior bond, 5.875%, 7/15/22 |
United States | 391,500,000 | 408,628,125 | |||||||||||||
| senior bond, 5.00%, 3/15/23 |
United States | 300,000,000 | 304,215,000 | |||||||||||||
| senior note, 5.875%, 11/15/24 |
United States | 128,200,000 | 127,559,000 | |||||||||||||
| Netflix Inc., |
||||||||||||||||
| senior bond, 4.375%, 11/15/26 |
United States | 105,000,000 | 106,632,750 | |||||||||||||
| senior bond, 4.875%, 4/15/28 |
United States | 84,300,000 | 85,981,785 | |||||||||||||
| senior bond, 5.875%, 11/15/28 |
United States | 60,000,000 | 65,328,000 | |||||||||||||
| e senior bond, 144A, 6.375%, 5/15/29 |
United States | 40,000,000 | 44,200,000 | |||||||||||||
| e Sirius XM Radio Inc., senior note, 144A, 4.625%, 5/15/23 |
United States | 88,400,000 | 90,530,440 | |||||||||||||
| Sprint Communications Inc., |
||||||||||||||||
| senior bond, 11.50%, 11/15/21 |
United States | 200,000,000 | 233,250,000 | |||||||||||||
| senior note, 7.00%, 8/15/20 |
United States | 102,500,000 | 106,057,775 | |||||||||||||
| senior note, 6.00%, 11/15/22 |
United States | 367,700,000 | 391,600,500 | |||||||||||||
| Sprint Corp., |
||||||||||||||||
| senior bond, 7.875%, 9/15/23 |
United States | 187,350,000 | 206,264,856 | |||||||||||||
| senior bond, 7.125%, 6/15/24 |
United States | 190,650,000 | 205,959,195 | |||||||||||||
| senior note, 7.625%, 3/01/26 |
United States | 96,300,000 | 106,531,875 | |||||||||||||
| e Sprint Spectrum Co. LLC, senior secured bond, first lien, 144A, 5.152%, 9/20/29 |
United States | 220,000,000 | 239,250,000 | |||||||||||||
| e Univision Communications Inc., |
||||||||||||||||
| senior secured note, first lien, 144A, 5.125%, 5/15/23 |
United States | 175,000,000 | 175,437,500 | |||||||||||||
| senior secured note, first lien, 144A, 5.125%, 2/15/25 |
United States | 160,020,000 | 156,219,525 | |||||||||||||
| Verizon Communications Inc., |
||||||||||||||||
| senior bond, 3.50%, 11/01/24 |
United States | 50,000,000 | 52,910,460 | |||||||||||||
| senior bond, 2.625%, 8/15/26 |
United States | 25,000,000 | 25,345,889 | |||||||||||||
|
|
|
|||||||||||||||
| 3,978,443,980 | ||||||||||||||||
|
|
|
|||||||||||||||
| franklintempleton.com | | Annual Report | 69 | ||
FRANKLIN CUSTODIAN FUNDS
STATEMENT OF INVESTMENTS
Franklin Income Fund (continued)
| Country | Principal Amount* |
|
Value | |||||||||||||
| Corporate Bonds (continued) |
||||||||||||||||
| Consumer Discretionary 2.4% |
||||||||||||||||
| e 24 Hour Holdings III LLC, senior note, 144A, 8.00%, 6/01/22 |
United States | 162,959,000 | $ | 136,274,464 | ||||||||||||
| Alibaba Group Holding Ltd., senior note, 3.40%, 12/06/27 |
China | 50,000,000 | 52,000,250 | |||||||||||||
| e Allison Transmission Inc., senior bond, 144A, 5.875%, 6/01/29 |
United States | 45,000,000 | 48,937,500 | |||||||||||||
| Ford Motor Co., |
||||||||||||||||
| senior bond, 4.75%, 1/15/43 |
United States | 67,500,000 | 58,620,931 | |||||||||||||
| senior note, 4.346%, 12/08/26 |
United States | 140,000,000 | 140,336,784 | |||||||||||||
| Ford Motor Credit Co. LLC, senior note, 3.336%, 3/18/21 |
United States | 48,000,000 | 48,236,501 | |||||||||||||
| senior note, 4.134%, 8/04/25 |
United States | 145,000,000 | 143,597,035 | |||||||||||||
| senior note, 4.389%, 1/08/26 |
United States | 16,365,000 | 16,302,056 | |||||||||||||
| senior note, 5.113%, 5/03/29 |
United States | 115,000,000 | 115,932,135 | |||||||||||||
| General Motors Co., senior bond, 5.15%, 4/01/38 |
United States | 165,000,000 | 166,900,219 | |||||||||||||
| General Motors Financial Co. Inc., senior note, 4.15%, 6/19/23 |
United States | 75,000,000 | 78,040,433 | |||||||||||||
| e Golden Nugget Inc., senior note, 144A, 6.75%, 10/15/24 |
United States | 60,000,000 | 61,650,000 | |||||||||||||
| e Hanesbrands Inc., |
||||||||||||||||
| senior bond, 144A, 4.875%, 5/15/26 |
United States | 54,000,000 | 57,321,000 | |||||||||||||
| senior note, 144A, 4.625%, 5/15/24 |
United States | 38,000,000 | 40,232,880 | |||||||||||||
| MGM Resorts International, senior note, 5.50%, 4/15/27 |
United States | 75,000,000 | 82,376,250 | |||||||||||||
| e Shea Homes LP/Shea Homes Funding Corp., |
||||||||||||||||
| senior bond, 144A, 6.125%, 4/01/25 |
United States | 100,500,000 | 103,515,000 | |||||||||||||
| senior note, 144A, 5.875%, 4/01/23 |
United States | 100,975,000 | 103,751,812 | |||||||||||||
| e Wynn Las Vegas LLC/Wynn Las Vegas Capital Corp., |
||||||||||||||||
| senior bond, 144A, 4.25%, 5/30/23 |
United States | 84,000,000 | 86,625,000 | |||||||||||||
| senior bond, 144A, 5.50%, 3/01/25 |
United States | 147,500,000 | 155,243,750 | |||||||||||||
| senior bond, 144A, 5.25%, 5/15/27 |
United States | 99,827,000 | 102,697,026 | |||||||||||||
|
|
|
|||||||||||||||
| 1,798,591,026 | ||||||||||||||||
|
|
|
|||||||||||||||
| Consumer Staples 0.9% |
||||||||||||||||
| Anheuser-Busch Cos. LLC/InBev Worldwide Inc., senior bond, 4.90%, 2/01/46 |
Belgium | 25,000,000 | 29,786,319 | |||||||||||||
| Anheuser-Busch InBev Worldwide Inc., senior bond, 4.00%, 4/13/28 |
Belgium | 25,000,000 | 27,621,965 | |||||||||||||
| BAT Capital Corp., |
||||||||||||||||
| senior note, 3.222%, 8/15/24 |
United Kingdom | 88,500,000 | 89,629,967 | |||||||||||||
| senior note, 3.557%, 8/15/27 |
United Kingdom | 170,000,000 | 171,094,239 | |||||||||||||
| Kraft Heinz Foods Co., |
||||||||||||||||
| senior bond, 3.95%, 7/15/25 |
United States | 60,000,000 | 62,859,380 | |||||||||||||
| senior bond, 4.625%, 1/30/29 |
United States | 40,000,000 | 43,342,302 | |||||||||||||
| e Post Holdings Inc., |
||||||||||||||||
| senior bond, 144A, 5.00%, 8/15/26 |
United States | 87,000,000 | 90,553,950 | |||||||||||||
| senior bond, 144A, 5.625%, 1/15/28 |
United States | 65,000,000 | 69,143,750 | |||||||||||||
| Walmart Inc., senior note, 3.40%, 6/26/23 |
United States | 50,000,000 | 52,678,005 | |||||||||||||
| senior note, 3.55%, 6/26/25 |
United States | 50,000,000 | 54,026,280 | |||||||||||||
|
|
|
|||||||||||||||
| 690,736,157 | ||||||||||||||||
|
|
|
|||||||||||||||
| 70 |
Annual Report | franklintempleton.com | ||
FRANKLIN CUSTODIAN FUNDS
STATEMENT OF INVESTMENTS
Franklin Income Fund (continued)
| Country | Principal Amount* |
|
Value | |||||||||||||
| Corporate Bonds (continued) |
||||||||||||||||
| Energy 5.2% |
||||||||||||||||
| Antero Resources Corp., |
||||||||||||||||
| senior note, 5.125%, 12/01/22 |
United States | 35,000,000 | $ | 30,887,500 | ||||||||||||
| j senior note, 5.625%, 6/01/23 |
United States | 42,000,000 | 36,540,000 | |||||||||||||
| e Ascent Resources Utica Holdings LLC/ARU Finance Corp., senior note, 144A, 10.00%, 4/01/22 |
United States | 79,490,000 | 79,863,603 | |||||||||||||
| Brazos Valley Longhorn LLC/Brazos Valley Longhorn Finance Corp., senior note, 6.875%, 2/01/25 |
United States | 92,181,000 | 79,967,018 | |||||||||||||
| Calumet Specialty Products Partners LP/Calumet Finance Corp., |
||||||||||||||||
| senior note, 6.50%, 4/15/21 |
United States | 446,754,000 | 447,290,105 | |||||||||||||
| j senior note, 7.625%, 1/15/22 |
United States | 161,165,000 | 156,330,050 | |||||||||||||
| j senior note, 7.75%, 4/15/23 |
United States | 127,085,000 | 118,506,763 | |||||||||||||
| e,k senior note, 144A, 11.00%, 4/15/25 |
United States | 285,000,000 | 285,712,500 | |||||||||||||
| c Chesapeake Energy Corp., |
||||||||||||||||
| senior bond, 8.00%, 6/15/27 |
United States | 200,000,000 | 135,500,000 | |||||||||||||
| senior note, 7.00%, 10/01/24 |
United States | 295,143,000 | 212,871,889 | |||||||||||||
| senior note, 8.00%, 1/15/25 |
United States | 545,000,000 | 396,487,500 | |||||||||||||
| senior note, 7.50%, 10/01/26 |
United States | 129,200,000 | 88,502,000 | |||||||||||||
| e senior note, 144A, 8.00%, 3/15/26 |
United States | 650,000,000 | 448,500,000 | |||||||||||||
| e CNX Resources Corp., senior note, 144A, 7.25%, 3/14/27 |
United States | 85,000,000 | 70,975,000 | |||||||||||||
| HighPoint Operating Corp., |
||||||||||||||||
| senior bond, 7.00%, 10/15/22 |
United States | 205,783,000 | 187,262,530 | |||||||||||||
| senior note, 8.75%, 6/15/25 |
United States | 175,845,000 | 158,260,500 | |||||||||||||
| Kinder Morgan Inc., |
||||||||||||||||
| senior bond, 7.75%, 1/15/32 |
United States | 118,000,000 | 162,597,886 | |||||||||||||
| e senior secured bond, first lien, 144A, 5.625%, 11/15/23 |
United States | 86,200,000 | 95,796,033 | |||||||||||||
| Matador Resources Co., senior note, 5.875%, 9/15/26 |
United States | 72,000,000 | 72,496,800 | |||||||||||||
| Sunoco LP/Sunoco Finance Corp., senior note, 5.50%, 2/15/26 |
United States | 74,775,000 | 78,227,362 | |||||||||||||
| Valaris PLC, |
||||||||||||||||
| senior bond, 5.75%, 10/01/44 |
United States | 50,000,000 | 21,625,000 | |||||||||||||
| senior note, 7.75%, 2/01/26 |
United States | 50,000,000 | 27,010,000 | |||||||||||||
| i Weatherford International Ltd., |
||||||||||||||||
| senior bond, 4.50%, 4/15/22 |
United States | 185,250,000 | 64,374,375 | |||||||||||||
| senior note, 5.125%, 9/15/20 |
United States | 131,343,000 | 45,970,050 | |||||||||||||
| senior note, 7.75%, 6/15/21 |
United States | 605,829,000 | 219,613,012 | |||||||||||||
| senior note, 8.25%, 6/15/23 |
United States | 226,600,000 | 81,576,000 | |||||||||||||
| senior note, 9.875%, 2/18/24 |
United States | 105,200,000 | 38,135,000 | |||||||||||||
| The Williams Cos. Inc., senior note, 4.55%, 6/24/24 |
United States | 46,858,000 | 50,483,891 | |||||||||||||
|
|
|
|||||||||||||||
| 3,891,362,367 | ||||||||||||||||
|
|
|
|||||||||||||||
| Financials 5.4% |
||||||||||||||||
| e Ashtead Capital Inc., secured bond, second lien, 144A, 4.375%, 8/15/27 |
United Kingdom | 42,500,000 | 43,760,337 | |||||||||||||
| Bank of America Corp., |
||||||||||||||||
| l junior sub. bond, AA, 6.10% to 3/17/25, FRN thereafter, Perpetual |
United States | 80,000,000 | 87,457,200 | |||||||||||||
| l junior sub. bond, U, 5.20% to 6/01/23, FRN thereafter, Perpetual |
United States | 75,000,000 | 77,491,125 | |||||||||||||
| l junior sub. bond, X, 6.25% to 9/05/24, FRN thereafter, Perpetual |
United States | 85,000,000 | 92,857,230 | |||||||||||||
| senior bond, 3.419% to 12/20/27, FRN thereafter, 12/20/28 |
United States | 135,000,000 | 140,977,201 | |||||||||||||
| senior note, 3.004% to 12/20/22, FRN thereafter, 12/20/23 |
United States | 100,000,000 | 102,184,099 | |||||||||||||
| franklintempleton.com | Annual Report | 71 | ||
FRANKLIN CUSTODIAN FUNDS
STATEMENT OF INVESTMENTS
Franklin Income Fund (continued)
| Country | Principal Amount* |
|
Value | |||||||||||||
| Corporate Bonds (continued) |
||||||||||||||||
| Financials (continued) |
||||||||||||||||
| Barclays PLC, |
||||||||||||||||
| senior note, 3.65%, 3/16/25 |
United Kingdom | 50,000,000 | $ | 51,340,750 | ||||||||||||
| senior note, 4.375%, 1/12/26 |
United Kingdom | 125,000,000 | 132,360,625 | |||||||||||||
| senior note, 4.61% to 2/14/22, FRN thereafter, 2/15/23 |
United Kingdom | 50,000,000 | 51,909,500 | |||||||||||||
| senior note, 3.932% to 5/07/24, FRN thereafter, 5/07/25 |
United Kingdom | 50,000,000 | 51,646,750 | |||||||||||||
| Capital One Financial Corp., |
||||||||||||||||
| senior sub. note, 4.20%, 10/29/25 |
United States | 123,000,000 | 131,192,056 | |||||||||||||
| sub. note, 3.75%, 7/28/26 |
United States | 110,200,000 | 114,707,560 | |||||||||||||
| Citigroup Inc., |
||||||||||||||||
| l junior sub. bond, 5.35% to 5/15/23, FRN thereafter, Perpetual |
United States | 156,195,000 | 159,361,073 | |||||||||||||
| l junior sub. bond, 5.90% to 2/15/23, FRN thereafter, Perpetual |
United States | 30,400,000 | 31,637,736 | |||||||||||||
| l junior sub. bond, 5.95% to 1/30/23, FRN thereafter, Perpetual |
United States | 209,000,000 | 213,544,391 | |||||||||||||
| l junior sub. bond, M, 6.30% to 5/15/24, FRN thereafter, Perpetual |
United States | 217,300,000 | 230,997,505 | |||||||||||||
| l junior sub. bond, O, 5.875% to 3/27/20, FRN thereafter, Perpetual |
United States | 177,000,000 | 178,609,815 | |||||||||||||
| l junior sub. bond, Q, 5.95% to 8/15/20, FRN thereafter, Perpetual |
United States | 120,000,000 | 122,555,400 | |||||||||||||
| sub. bond, 4.125%, 7/25/28 |
United States | 165,000,000 | 177,793,353 | |||||||||||||
| sub. note, 3.50%, 5/15/23 |
United States | 45,000,000 | 46,664,238 | |||||||||||||
| The Goldman Sachs Group Inc., |
||||||||||||||||
| senior note, 3.50%, 11/16/26 |
United States | 65,000,000 | 67,665,270 | |||||||||||||
| senior note, 2.876% to 10/31/21, FRN thereafter, 10/31/22 |
United States | 125,000,000 | 126,477,995 | |||||||||||||
| senior note, 3.272% to 9/29/24, FRN thereafter, 9/29/25 |
United States | 100,000,000 | 103,285,010 | |||||||||||||
| HSBC Holdings PLC, |
||||||||||||||||
| senior note, 3.40%, 3/08/21 |
United Kingdom | 25,000,000 | 25,386,625 | |||||||||||||
| senior note, 4.292% to 9/12/25, FRN thereafter, 9/12/26 |
United Kingdom | 125,000,000 | 134,219,375 | |||||||||||||
| l JPMorgan Chase & Co., |
||||||||||||||||
| junior sub. bond, 6.125% to 4/30/24, FRN thereafter, Perpetual |
United States | 60,000,000 | 65,057,100 | |||||||||||||
| junior sub. bond, 6.75% to 2/01/24, FRN thereafter, Perpetual |
United States | 100,000,000 | 111,071,500 | |||||||||||||
| m junior sub. bond, FRN, 5.736%, (3-month USD LIBOR + 3.47%), Perpetual |
United States | 369,616,000 | 371,910,207 | |||||||||||||
| junior sub. bond, Q, 5.15% to 5/01/23, FRN thereafter, Perpetual |
United States | 100,000,000 | 102,946,500 | |||||||||||||
| junior sub. bond, R, 6.00% to 8/01/23, FRN thereafter, Perpetual |
United States | 105,000,000 | 112,274,925 | |||||||||||||
| junior sub. bond, V, 5.00% to 7/30/19, FRN thereafter, Perpetual |
United States | 200,000,000 | 200,250,000 | |||||||||||||
| junior sub. bond, X, 6.10% to 10/01/24, FRN thereafter, Perpetual |
United States | 80,000,000 | 86,793,200 | |||||||||||||
| l Morgan Stanley, junior sub. bond, 5.55% to 7/15/20, FRN thereafter, Perpetual |
United States | 58,000,000 | 58,816,640 | |||||||||||||
| Prudential Financial Inc., junior sub. bond, 5.70% to 9/15/28, FRN thereafter, 9/15/48 |
United States | 100,000,000 | 110,992,000 | |||||||||||||
| l Wells Fargo & Co., junior sub. bond, S, 5.90% to 6/15/24, FRN thereafter, Perpetual |
United States | 125,000,000 | 134,269,062 | |||||||||||||
|
|
|
|||||||||||||||
| 4,050,463,353 | ||||||||||||||||
|
|
|
|||||||||||||||
| Health Care 12.7% |
||||||||||||||||
| AbbVie Inc., |
||||||||||||||||
| senior bond, 3.20%, 5/14/26 |
United States | 35,000,000 | 35,668,409 | |||||||||||||
| senior note, 2.90%, 11/06/22 |
United States | 35,000,000 | 35,695,575 | |||||||||||||
| 72 |
Annual Report | franklintempleton.com | ||
FRANKLIN CUSTODIAN FUNDS
STATEMENT OF INVESTMENTS
Franklin Income Fund (continued)
| Country | Principal Amount* |
|
Value | |||||||||||||
| Corporate Bonds (continued) |
||||||||||||||||
| Health Care (continued) |
||||||||||||||||
| Allergan Funding SCS, senior bond, 3.80%, 3/15/25 |
United States | 100,000,000 | $ | 104,641,700 | ||||||||||||
| AstraZeneca PLC, |
||||||||||||||||
| senior note, 2.375%, 11/16/20 |
United Kingdom | 25,000,000 | 25,082,125 | |||||||||||||
| senior note, 2.375%, 6/12/22 |
United Kingdom | 31,500,000 | 31,700,497 | |||||||||||||
| e Bausch Health Americas Inc., senior note, 144A, 9.25%, 4/01/26 |
United States | 200,000,000 | 227,748,000 | |||||||||||||
| e Bausch Health Cos. Inc., |
||||||||||||||||
| senior bond, 144A, 6.125%, 4/15/25 |
United States | 122,400,000 | 127,296,000 | |||||||||||||
| senior bond, 144A, 7.25%, 5/30/29 |
United States | 40,000,000 | 43,792,000 | |||||||||||||
| senior note, 144A, 5.50%, 3/01/23 |
United States | 70,526,000 | 71,672,047 | |||||||||||||
| senior note, 144A, 5.875%, 5/15/23 |
United States | 407,700,000 | 414,325,125 | |||||||||||||
| senior note, 144A, 9.00%, 12/15/25 |
United States | 105,000,000 | 118,256,250 | |||||||||||||
| senior note, 144A, 8.50%, 1/31/27 |
United States | 50,000,000 | 56,240,000 | |||||||||||||
| senior note, 144A, 7.00%, 1/15/28 |
United States | 40,000,000 | 43,184,000 | |||||||||||||
| senior note, first lien, 144A, 7.00%, 3/15/24 |
United States | 77,300,000 | 81,432,458 | |||||||||||||
| senior secured note, first lien, 144A, 6.50%, 3/15/22 |
United States | 50,500,000 | 52,267,500 | |||||||||||||
| senior secured note, first lien, 144A, 5.50%, 11/01/25 |
United States | 91,000,000 | 95,559,100 | |||||||||||||
| e Bayer U.S. Finance II LLC, senior note, 144A, 4.25%, 12/15/25 |
Germany | 75,000,000 | 80,133,488 | |||||||||||||
| e Bristol-Myers Squibb Co., |
||||||||||||||||
| senior bond, 144A, 3.40%, 7/26/29 |
United States | 60,000,000 | 64,208,192 | |||||||||||||
| senior bond, 144A, 4.25%, 10/26/49 |
United States | 40,000,000 | 46,649,310 | |||||||||||||
| CHS/Community Health Systems Inc., |
||||||||||||||||
| senior note, 7.125%, 7/15/20 |
United States | 39,980,000 | 38,580,700 | |||||||||||||
| senior note, 6.875%, 2/01/22 |
United States | 1,961,775,000 | 1,498,305,656 | |||||||||||||
| e senior note, 144A, 9.875%, 6/30/23 |
United States | 1,425,000,000 | 1,218,375,000 | |||||||||||||
| e senior note, 144A, 8.125%, 6/30/24 |
United States | 716,006,000 | 571,014,785 | |||||||||||||
| e senior secured note, 144A, 8.00%, 3/15/26 |
United States | 50,000,000 | 50,000,000 | |||||||||||||
| senior secured note, first lien, 6.25%, 3/31/23 |
United States | 330,000,000 | 329,043,000 | |||||||||||||
| Cigna Corp., |
||||||||||||||||
| senior note, 3.75%, 7/15/23 |
United States | 60,000,000 | 62,801,632 | |||||||||||||
| senior note, 4.125%, 11/15/25 |
United States | 60,000,000 | 64,692,764 | |||||||||||||
| CVS Health Corp., |
||||||||||||||||
| senior bond, 4.30%, 3/25/28 |
United States | 125,000,000 | 135,314,582 | |||||||||||||
| senior bond, 5.05%, 3/25/48 |
United States | 75,000,000 | 85,426,876 | |||||||||||||
| senior note, 4.10%, 3/25/25 |
United States | 75,000,000 | 80,136,387 | |||||||||||||
| DaVita Inc., |
||||||||||||||||
| senior bond, 5.125%, 7/15/24 |
United States | 190,700,000 | 194,275,625 | |||||||||||||
| senior bond, 5.00%, 5/01/25 |
United States | 129,500,000 | 129,500,000 | |||||||||||||
| e Endo DAC/Endo Finance LLC/Endo Finco Inc., |
||||||||||||||||
| senior bond, 144A, 6.00%, 2/01/25 |
United States | 82,900,000 | 49,118,250 | |||||||||||||
| senior note, 144A, 6.00%, 7/15/23 |
United States | 162,025,000 | 100,188,159 | |||||||||||||
| HCA Inc., |
||||||||||||||||
| senior bond, 5.875%, 5/01/23 |
United States | 110,000,000 | 121,275,000 | |||||||||||||
| senior bond, 5.625%, 9/01/28 |
United States | 127,500,000 | 142,392,000 | |||||||||||||
| senior note, 7.50%, 2/15/22 |
United States | 70,000,000 | 77,756,000 | |||||||||||||
| senior secured note, first lien, 5.00%, 3/15/24 |
United States | 124,800,000 | 136,425,351 | |||||||||||||
| franklintempleton.com | Annual Report | 73 | ||
FRANKLIN CUSTODIAN FUNDS
STATEMENT OF INVESTMENTS
Franklin Income Fund (continued)
| Country | Principal Amount* |
|
Value | |||||||||||||
| Corporate Bonds (continued) |
||||||||||||||||
| Health Care (continued) |
||||||||||||||||
| e Mallinckrodt International Finance SA/Mallinckrodt CB LLC, |
||||||||||||||||
| senior note, 144A, 4.875%, 4/15/20 |
United States | 184,252,000 | $ | 115,157,500 | ||||||||||||
| senior note, 144A, 5.75%, 8/01/22 |
United States | 263,610,000 | 98,853,750 | |||||||||||||
| senior note, 144A, 5.625%, 10/15/23 |
United States | 285,350,000 | 95,592,250 | |||||||||||||
| senior note, 144A, 5.50%, 4/15/25 |
United States | 137,500,000 | 41,250,000 | |||||||||||||
| Mylan NV, senior note, 3.95%, 6/15/26 |
United States | 150,000,000 | 155,286,750 | |||||||||||||
| e Par Pharmaceutical Inc., senior secured note, 144A, 7.50%, 4/01/27 |
United States | 90,000,000 | 82,125,000 | |||||||||||||
| Tenet Healthcare Corp., |
||||||||||||||||
| secured note, second lien, 5.125%, 5/01/25 |
United States | 133,300,000 | 135,472,790 | |||||||||||||
| senior note, 8.125%, 4/01/22 |
United States | 883,311,000 | 959,496,574 | |||||||||||||
| senior note, 6.75%, 6/15/23 |
United States | 565,000,000 | 595,470,450 | |||||||||||||
| senior note, 7.00%, 8/01/25 |
United States | 155,000,000 | 158,203,850 | |||||||||||||
| senior note, 6.875%, 11/15/31 |
United States | 48,840,000 | 44,688,600 | |||||||||||||
| e senior note, second lien, 144A, 6.25%, 2/01/27 |
United States | 50,000,000 | 52,057,500 | |||||||||||||
| senior secured note, first lien, 4.625%, 7/15/24 |
United States | 95,200,000 | 98,294,000 | |||||||||||||
|
|
|
|||||||||||||||
| 9,472,122,557 | ||||||||||||||||
|
|
|
|||||||||||||||
| Industrials 0.5% |
||||||||||||||||
| United Rentals North America Inc., |
||||||||||||||||
| senior bond, 4.875%, 1/15/28 |
United States | 116,000,000 | 121,075,000 | |||||||||||||
| senior note, 6.50%, 12/15/26 |
United States | 40,000,000 | 43,730,000 | |||||||||||||
| United Technologies Corp., |
||||||||||||||||
| senior bond, 4.50%, 6/01/42 |
United States | 40,000,000 | 48,072,623 | |||||||||||||
| senior note, 3.95%, 8/16/25 |
United States | 25,000,000 | 27,388,627 | |||||||||||||
| senior note, 3.125%, 5/04/27 |
United States | 40,000,000 | 42,020,251 | |||||||||||||
| e XPO Logistics Inc., senior note, 144A, 6.50%, 6/15/22 |
United States | 50,000,000 | 51,000,000 | |||||||||||||
|
|
|
|||||||||||||||
| 333,286,501 | ||||||||||||||||
|
|
|
|||||||||||||||
| Information Technology 0.5% |
||||||||||||||||
| Broadcom Corp./Broadcom Cayman Finance Ltd., senior bond, 3.50%, 1/15/28 |
United States | 40,000,000 | 39,062,937 | |||||||||||||
| e CommScope Inc., senior bond, 144A, 5.50%, 6/15/24 |
United States | 80,000,000 | 75,574,400 | |||||||||||||
| e Dell International LLC/EMC Corp., |
||||||||||||||||
| senior secured note, first lien, 144A, 5.45%, 6/15/23 |
United States | 60,000,000 | 65,374,467 | |||||||||||||
| senior secured note, first lien, 144A, 4.90%, 10/01/26 |
United States | 65,000,000 | 69,687,259 | |||||||||||||
| Microchip Technology Inc., senior secured note, 4.333%, 6/01/23 |
United States | 69,000,000 | 72,514,336 | |||||||||||||
| NCR Corp., |
||||||||||||||||
| senior note, 5.00%, 7/15/22 |
United States | 40,000,000 | 40,650,000 | |||||||||||||
| senior note, 6.375%, 12/15/23 |
United States | 35,000,000 | 36,050,000 | |||||||||||||
|
|
|
|||||||||||||||
| 398,913,399 | ||||||||||||||||
|
|
|
|||||||||||||||
| Materials 1.4% |
||||||||||||||||
| Ball Corp., senior bond, 4.00%, 11/15/23 |
United States | 60,000,000 | 62,925,000 | |||||||||||||
| e Cemex Finance LLC, senior secured note, first lien, 144A, 6.00%, 4/01/24 |
Mexico | 88,400,000 | 91,037,414 | |||||||||||||
| e Cemex SAB de CV, |
||||||||||||||||
| senior secured bond, 144A, 7.75%, 4/16/26 |
Mexico | 55,100,000 | 59,929,239 | |||||||||||||
| senior secured bond, first lien, 144A, 5.70%, 1/11/25 |
Mexico | 70,000,000 | 72,108,750 | |||||||||||||
| 74 |
Annual Report | franklintempleton.com | ||
FRANKLIN CUSTODIAN FUNDS
STATEMENT OF INVESTMENTS
Franklin Income Fund (continued)
| Country | Principal Amount* |
|
Value | |||||||||||||
| Corporate Bonds (continued) |
||||||||||||||||
| Materials (continued) |
||||||||||||||||
| DuPont de Nemours Inc., senior note, 4.493%, 11/15/25 |
United States | 50,000,000 | $ | 55,271,405 | ||||||||||||
| e FMG Resources (August 2006) Pty. Ltd., |
||||||||||||||||
| senior note, 144A, 4.75%, 5/15/22 |
Australia | 40,200,000 | 41,355,750 | |||||||||||||
| senior note, 144A, 5.125%, 3/15/23 |
Australia | 25,000,000 | 25,843,750 | |||||||||||||
| senior note, 144A, 5.125%, 5/15/24 |
Australia | 60,540,000 | 63,134,139 | |||||||||||||
| Freeport-McMoRan Inc., |
||||||||||||||||
| senior bond, 3.875%, 3/15/23 |
United States | 50,000,000 | 50,500,000 | |||||||||||||
| senior bond, 5.25%, 9/01/29 |
United States | 40,000,000 | 39,991,600 | |||||||||||||
| International Paper Co., |
||||||||||||||||
| senior bond, 3.00%, 2/15/27 |
United States | 50,000,000 | 50,929,819 | |||||||||||||
| senior bond, 4.40%, 8/15/47 |
United States | 40,000,000 | 41,670,478 | |||||||||||||
| LYB International Finance II BV, senior note, 3.50%, 3/02/27 |
United States | 50,000,000 | 51,653,867 | |||||||||||||
| e Mauser Packaging Solutions Holding Co., |
||||||||||||||||
| secured note, 144A, 5.50%, 4/15/24 |
United States | 75,000,000 | 77,610,000 | |||||||||||||
| senior note, 144A, 7.25%, 4/15/25 |
United States | 189,500,000 | 179,844,975 | |||||||||||||
| e Syngenta Finance NV, |
||||||||||||||||
| senior note, 144A, 4.441%, 4/24/23 |
Switzerland | 25,000,000 | 26,121,625 | |||||||||||||
| senior note, 144A, 5.182%, 4/24/28 |
Switzerland | 50,000,000 | 53,063,125 | |||||||||||||
|
|
|
|||||||||||||||
| 1,042,990,936 | ||||||||||||||||
|
|
|
|||||||||||||||
| Real Estate 0.6% |
||||||||||||||||
| American Tower Corp., senior bond, 3.375%, 10/15/26 |
United States | 50,000,000 | 52,102,903 | |||||||||||||
| Equinix Inc., senior bond, 5.375%, 5/15/27 |
United States | 80,000,000 | 86,450,000 | |||||||||||||
| Iron Mountain Inc., |
||||||||||||||||
| e senior note, 144A, 4.875%, 9/15/27 |
United States | 135,610,000 | 139,363,685 | |||||||||||||
| senior sub. bond, 5.75%, 8/15/24 |
United States | 129,254,000 | 130,869,675 | |||||||||||||
|
|
|
|||||||||||||||
| 408,786,263 | ||||||||||||||||
|
|
|
|||||||||||||||
| Utilities 1.2% |
||||||||||||||||
| Calpine Corp., |
||||||||||||||||
| senior note, 5.375%, 1/15/23 |
United States | 300,000,000 | 304,500,000 | |||||||||||||
| senior note, 5.50%, 2/01/24 |
United States | 186,500,000 | 189,064,375 | |||||||||||||
| Ferrellgas LP/Ferrellgas Finance Corp., |
||||||||||||||||
| senior note, 6.50%, 5/01/21 |
United States | 39,295,000 | 33,597,225 | |||||||||||||
| senior note, 6.75%, 1/15/22 |
United States | 92,500,000 | 78,740,625 | |||||||||||||
| senior note, 6.75%, 6/15/23 |
United States | 88,500,000 | 75,003,750 | |||||||||||||
| Sempra Energy, senior bond, 3.40%, 2/01/28 |
United States | 50,000,000 | 51,704,870 | |||||||||||||
| The Southern Co., junior sub. bond, 5.50% to 3/14/22, FRN thereafter, 3/15/57 |
United States | 46,857,000 | 48,773,050 | |||||||||||||
| Vistra Energy Corp., senior note, 5.875%, 6/01/23 |
United States | 100,000,000 | 102,525,000 | |||||||||||||
|
|
|
|||||||||||||||
| 883,908,895 | ||||||||||||||||
|
|
|
|||||||||||||||
| Total Corporate Bonds (Cost $27,820,363,368) |
26,949,605,434 | |||||||||||||||
|
|
|
|||||||||||||||
| franklintempleton.com | Annual Report | 75 | ||
FRANKLIN CUSTODIAN FUNDS
STATEMENT OF INVESTMENTS
Franklin Income Fund (continued)
| Country | Principal Amount* |
|
Value | |||||||||||||
| m,n Senior Floating Rate Interests 2.1% |
||||||||||||||||
| Communication Services 0.4% |
||||||||||||||||
| Diamond Sports Group LLC, Term Loan, 5.30%, (1-month USD LIBOR + 3.25%), 8/24/26 |
United States | 25,000,000 | $ | 25,179,750 | ||||||||||||
| Global Eagle Entertainment Inc., Initial Term Loans, 9.699% - 9.71%, (6-month USD LIBOR + 7.50%), 1/06/23 |
United States | 101,471,014 | 94,410,154 | |||||||||||||
| Securus Technologies Holdings Inc., Second Lien Initial Loan, 10.29%, (1-month USD LIBOR + 8.25%), 11/01/25 |
United States | 26,000,000 | 23,026,250 | |||||||||||||
| Sprint Communications Inc., 2018 Incremental Term Loans, 5.06%, (1-month USD LIBOR + 3.00%), 2/03/24 |
United States | 99,250,000 | 99,187,175 | |||||||||||||
| Univision Communications Inc., Term Loan, 4.794%, (1-month USD LIBOR + 2.75%), 3/15/24 |
United States | 62,809,206 | 61,149,221 | |||||||||||||
|
|
|
|||||||||||||||
| 302,952,550 | ||||||||||||||||
|
|
|
|||||||||||||||
| Consumer Discretionary 0.5% |
||||||||||||||||
| 24 Hour Fitness Worldwide Inc., Term Loan, 5.54%, (1-month USD LIBOR + 3.50%), 5/30/25 |
United States | 96,680,052 | 93,497,635 | |||||||||||||
| Academy Ltd., Initial Term Loan, 6.10%, (1-month USD LIBOR + 4.00%), 7/02/22 |
United States | 30,156,214 | 21,209,860 | |||||||||||||
| Belk Inc., Closing Date Term Loan, 6.80%, (3-month USD LIBOR + 4.75%), 12/12/22 |
United States | 140,867,482 | 103,615,781 | |||||||||||||
| Stars Group Holdings BV, Stars Group (US), USD Term Loan, 5.60%, (3-month USD LIBOR + 3.50%), 7/10/25 |
United States | 97,956,100 | 98,512,001 | |||||||||||||
| Tenneco Inc., Tranche B Term Loan, 5.04%, (1-month USD LIBOR + 3.00%), 10/01/25 |
United States | 22,193,996 | 20,910,916 | |||||||||||||
|
|
|
|||||||||||||||
| 337,746,193 | ||||||||||||||||
|
|
|
|||||||||||||||
| Energy 0.8% |
||||||||||||||||
| Weatherford International ltd, DIP Term, 5.07%, (1-month USD LIBOR + 3.00%), 7/03/20 |
United States | 615,071,055 | 615,071,055 | |||||||||||||
|
|
|
|||||||||||||||
| Health Care 0.2% |
||||||||||||||||
| Amneal Pharmaceuticals LLC, Initial Term Loans, 5.56%, (1-month USD LIBOR + 3.50%), 5/04/25 |
United States | 29,311,908 | 25,171,601 | |||||||||||||
| Endo Luxembourg Finance Co. I S.A.R.L. and Endo LLC, Initial Term Loans, 6.31%, (1-month USD LIBOR + 4.25%), 4/29/24 |
United States | 78,200,000 | 71,318,400 | |||||||||||||
| Valeant Pharmaceuticals International, First Incremental Term Loan, 4.79%, (1-month USD LIBOR + 2.75%), 11/27/25 |
United States | 43,750,000 | 43,886,719 | |||||||||||||
|
|
|
|||||||||||||||
| 140,376,720 | ||||||||||||||||
|
|
|
|||||||||||||||
| Industrials 0.2% |
||||||||||||||||
| Commercial Barge Line Co., Initial Term Loan, 10.79%, (1-month USD LIBOR + 8.75%), 11/12/20 |
United States | 35,612,164 | 20,316,740 | |||||||||||||
| Vertiv Group Corp., Term B Loans, 6.04%, (1-month USD LIBOR + 4.00%), 11/30/23 |
United States | 62,189,440 | 59,261,374 | |||||||||||||
| West Corp., Term B Loans, 6.04%, (1-month USD LIBOR + 4.00%), 10/10/24 |
United States | 39,508,316 | 35,294,083 | |||||||||||||
|
|
|
|||||||||||||||
| 114,872,197 | ||||||||||||||||
|
|
|
|||||||||||||||
| Information Technology 0.0%† |
||||||||||||||||
| Microchip Technology Inc., Initial Term Loan, 4.05%, (1-month USD LIBOR + 2.00%), 5/29/25 |
United States | 30,181,810 | 30,370,205 | |||||||||||||
|
|
|
|||||||||||||||
| 76 |
Annual Report | franklintempleton.com | ||
FRANKLIN CUSTODIAN FUNDS
STATEMENT OF INVESTMENTS
Franklin Income Fund (continued)
| Country | Principal Amount* |
|
Value | |||||||||||||
| m,n Senior Floating Rate Interests (continued) |
||||||||||||||||
| Materials 0.0%† |
||||||||||||||||
| BWAY Holding Co. Inc., Term Loan B, 5.59%, (3-month USD LIBOR + 3.25%), 4/03/24 |
United States | 28,131,944 | $ | 27,598,618 | ||||||||||||
|
|
|
|||||||||||||||
| Total Senior Floating Rate Interests |
1,568,987,538 | |||||||||||||||
|
|
|
|||||||||||||||
| U.S. Government and Agency Securities 10.9% |
||||||||||||||||
| U.S. Treasury Bond, |
||||||||||||||||
| 7.50%, 11/15/24 |
United States | 350,000,000 | 452,156,250 | |||||||||||||
| 6.875%, 8/15/25 |
United States | 400,000,000 | 518,203,124 | |||||||||||||
| 6.125%, 11/15/27 |
United States | 300,000,000 | 402,316,407 | |||||||||||||
| 6.125%, 8/15/29 |
United States | 100,000,000 | 140,398,438 | |||||||||||||
| 6.25%, 5/15/30 |
United States | 100,000,000 | 144,308,594 | |||||||||||||
| U.S. Treasury Note, |
||||||||||||||||
| 1.875%, 12/31/19 |
United States | 750,000,000 | 749,926,755 | |||||||||||||
| 2.25%, 3/31/20 |
United States | 1,000,000,000 | 1,001,855,470 | |||||||||||||
| 2.50%, 5/31/20 |
United States | 750,000,000 | 753,046,875 | |||||||||||||
| 2.50%, 6/30/20 |
United States | 500,000,000 | 502,343,750 | |||||||||||||
| 2.50%, 2/28/21 |
United States | 500,000,000 | 505,185,545 | |||||||||||||
| 2.375%, 3/15/21 |
United States | 750,000,000 | 756,767,580 | |||||||||||||
| 2.625%, 6/15/21 |
United States | 500,000,000 | 507,714,845 | |||||||||||||
| 2.75%, 8/15/21 |
United States | 350,000,000 | 356,904,296 | |||||||||||||
| 2.75%, 4/30/23 |
United States | 500,000,000 | 520,390,625 | |||||||||||||
| 2.75%, 5/31/23 |
United States | 500,000,000 | 520,869,140 | |||||||||||||
| 2.875%, 5/31/25 |
United States | 250,000,000 | 267,294,923 | |||||||||||||
|
|
|
|||||||||||||||
| Total U.S. Government and Agency Securities |
8,099,682,617 | |||||||||||||||
|
|
|
|||||||||||||||
| Mortgage-Backed Securities 0.5% |
||||||||||||||||
| Federal National Mortgage Association (FNMA) Fixed Rate 0.1% |
||||||||||||||||
| FNMA 30 Year, 4.00%, 6/01/49 |
United States | 76,451,329 | 79,418,439 | |||||||||||||
|
|
|
|||||||||||||||
| Government National Mortgage Association (GNMA) Fixed Rate 0.4% |
||||||||||||||||
| GNMA II SF 30 Year, 3.50%, 9/20/49 |
United States | 161,650,000 | 167,800,351 | |||||||||||||
| GNMA II SF 30 Year, 4.00%, 9/20/49 |
United States | 83,750,000 | 87,753,589 | |||||||||||||
|
|
|
|||||||||||||||
| Total Mortgage-Backed Securities |
334,972,379 | |||||||||||||||
|
|
|
|||||||||||||||
| Country | Shares | |||||||||||||||
| Escrows and Litigation Trusts 0.0% |
||||||||||||||||
| a,o Motors Liquidation Co., Escrow Account |
United States | 400,000,000 | — | |||||||||||||
| a,o Motors Liquidation Co., Escrow Account, cvt. pfd., C |
United States | 11,000,000 | — | |||||||||||||
|
|
|
|||||||||||||||
| Total Escrows and Litigation Trusts |
— | |||||||||||||||
|
|
|
|||||||||||||||
| franklintempleton.com | Annual Report | 77 | ||
FRANKLIN CUSTODIAN FUNDS
STATEMENT OF INVESTMENTS
Franklin Income Fund (continued)
| Number of Contracts |
Notional Amount |
Value | ||||||||||||||
| Options Purchased 0.5% |
||||||||||||||||
| Puts - Exchange-Traded |
||||||||||||||||
| S&P 500 Index, December Strike Price $2,700.00, Expires 12/18/20 |
5,000 | 500,000 | $ | 69,250,000 | ||||||||||||
| S&P 500 Index, June Strike Price $2,700.00, Expires 6/19/20 |
5,000 | 500,000 | 45,200,000 | |||||||||||||
| S&P 500 Index, March Strike Price $2,900.00, Expires 3/20/20 |
5,000 | 500,000 | 53,350,000 | |||||||||||||
| S&P 500 Index, September Strike Price $3,000.00, Expires 9/18/20 |
10,000 | 1,000,000 | 201,400,000 | |||||||||||||
|
|
|
|||||||||||||||
| Total Options Purchased |
369,200,000 | |||||||||||||||
|
|
|
|||||||||||||||
| Total Investments before Short Term Investments |
72,836,077,078 | |||||||||||||||
|
|
|
|||||||||||||||
| Country | Principal Amount* |
|||||||||||||||
| Short Term Investments 1.9% |
||||||||||||||||
| Corporate Bonds (Cost $19,750,889) 0.0%† |
||||||||||||||||
| CHS/Community Health Systems Inc., senior note, 8.00%, 11/15/19 |
United States | 19,819,000 | 19,831,387 | |||||||||||||
|
|
|
|||||||||||||||
| Total Investments before Money Market Funds and Repurchase Agreement |
72,855,908,465 | |||||||||||||||
|
|
|
|||||||||||||||
| Shares | ||||||||||||||||
| Money Market Funds (Cost $1,386,045,053) 1.9% |
||||||||||||||||
| p,q Institutional Fiduciary Trust Money Market Portfolio, 1.71% |
United States | 1,386,045,053 | 1,386,045,053 | |||||||||||||
|
|
|
|||||||||||||||
| r Investments from Cash Collateral Received for Loaned Securities 0.0%† |
||||||||||||||||
| Money Market Funds (Cost $23,902,000) 0.0%† |
||||||||||||||||
| p,q Institutional Fiduciary Trust Money Market Portfolio, 1.71% |
United States | 23,902,000 | 23,902,000 | |||||||||||||
|
|
|
|||||||||||||||
| 78 |
Annual Report | franklintempleton.com | ||
FRANKLIN CUSTODIAN FUNDS
STATEMENT OF INVESTMENTS
Franklin Income Fund (continued)
| Country | Principal Amount* |
Value | ||||||||||
| Short Term Investments (continued) |
||||||||||||
| Investments from Cash Collateral Received for Loaned Securities (continued) |
||||||||||||
| Repurchase Agreement (Cost $5,976,422) 0.0%† |
||||||||||||
| s Joint Repurchase Agreement, 2.30%, 10/01/19 (Maturity Value $5,976,804) |
||||||||||||
| BofA Securities Inc. |
||||||||||||
| Collateralized by U.S. Treasury Notes, Index Linked, 1.25%, 7/15/20 |
United States | 5,976,422 | $ | 5,976,422 | ||||||||
|
|
|
|||||||||||
| Total Investments from Cash Collateral Received for Loaned Securities (Cost $29,878,422) |
29,878,422 | |||||||||||
|
|
|
|||||||||||
| Total Investments (Cost $71,889,459,325) 99.7% |
74,271,831,940 | |||||||||||
| Options Written (0.2)% |
(119,615,000 | ) | ||||||||||
| Other Assets, less Liabilities 0.5% |
373,684,651 | |||||||||||
|
|
|
|||||||||||
| Net Assets 100.0% |
$ | 74,525,901,591 | ||||||||||
|
|
|
|||||||||||
| Number of Contracts |
Notional Amount |
|||||||||||
| t Options Written (0.2)% |
||||||||||||
| Calls - Exchange-Traded |
||||||||||||
| Analog Devices Inc., December Strike Price $125.00, Expires 12/20/19 |
10,000 | 1,000,000 | (1,250,000 | ) | ||||||||
| Bristol-Myers Squibb Co., October Strike Price $50.00, Expires 10/18/19 |
20,000 | 2,000,000 | (2,340,000 | ) | ||||||||
| Chevron Corp., December Strike Price $130.00, Expires 12/20/19 |
10,000 | 1,000,000 | (580,000 | ) | ||||||||
| CVS Health Corp., November Strike Price $67.50, Expires 11/15/19 |
25,000 | 2,500,000 | (1,800,000 | ) | ||||||||
| General Motors Co., December Strike Price $42.00, Expires 12/20/19 |
40,000 | 4,000,000 | (1,440,000 | ) | ||||||||
| Gilead Sciences Inc., November Strike Price $72.50, Expires 11/15/19 |
10,000 | 1,000,000 | (190,000 | ) | ||||||||
| International Business Machines Corp., October Strike Price $145.00, Expires 10/18/19 |
7,000 | 700,000 | (3,129,000 | ) | ||||||||
| International Business Machines Corp., October Strike Price $150.00, Expires 10/18/19 |
7,000 | 700,000 | (1,421,000 | ) | ||||||||
| Merck & Co. Inc., October Strike Price $87.50, Expires 10/18/19 |
10,000 | 1,000,000 | (320,000 | ) | ||||||||
| Metlife Inc., November Strike Price $50.00, Expires 11/15/19 |
20,000 | 2,000,000 | (820,000 | ) | ||||||||
| Sempra Energy, October Strike Price $145.00, Expires 10/18/19 |
10,000 | 1,000,000 | (3,800,000 | ) | ||||||||
| The Southern Co., October Strike Price $60.00, Expires 10/18/19 |
30,000 | 3,000,000 | (6,390,000 | ) | ||||||||
| Texas Instruments Inc., October Strike Price $125.00, Expires 10/18/19 |
10,000 | 1,000,000 | (5,500,000 | ) | ||||||||
| Wells Fargo & Co., October Strike Price $50.00, Expires 10/18/19 |
40,000 | 4,000,000 | (5,120,000 | ) | ||||||||
| Wells Fargo & Co., November Strike Price $50.00, Expires 11/15/19 |
20,000 | 2,000,000 | (3,800,000 | ) | ||||||||
| Wells Fargo & Co., November Strike Price $52.50, Expires 11/15/19 |
10,000 | 1,000,000 | (650,000 | ) | ||||||||
| Wells Fargo & Co., December Strike Price $55.00, Expires 12/20/19 |
10,000 | 1,000,000 | (440,000 | ) | ||||||||
|
|
|
|||||||||||
| (38,990,000 | ) | |||||||||||
|
|
|
|||||||||||
| Puts - Exchange-Traded |
||||||||||||
| Analog Devices Inc., December Strike Price $100.00, Expires 12/20/19 |
10,000 | 1,000,000 | (2,250,000 | ) | ||||||||
| The Boeing Co., October Strike Price $340.00, Expires 10/18/19 |
5,000 | 500,000 | (510,000 | ) | ||||||||
| Bristol-Myers Squibb Co., October Strike Price $45.00, Expires 10/18/19 |
30,000 | 3,000,000 | (210,000 | ) | ||||||||
| Broadcom Inc., November Strike Price $250.00, Expires 11/15/19 |
10,000 | 1,000,000 | (3,420,000 | ) | ||||||||
| General Motors Co., December Strike Price $33.00, Expires 12/20/19 |
40,000 | 4,000,000 | (2,520,000 | ) | ||||||||
| Gilead Sciences Inc., November Strike Price $62.50, Expires 11/15/19 |
10,000 | 1,000,000 | (1,850,000 | ) | ||||||||
| Home Depot Inc., November Strike Price $210.00, Expires 11/15/19 |
10,000 | 1,000,000 | (1,030,000 | ) | ||||||||
| franklintempleton.com | Annual Report | 79 | ||
FRANKLIN CUSTODIAN FUNDS
STATEMENT OF INVESTMENTS
Franklin Income Fund (continued)
| Number of Contracts |
Notional Amount |
Value | ||||||||||
| t Options Written (continued) |
||||||||||||
| Puts - Exchange-Traded (continued) |
||||||||||||
| The Home Depot Inc., November Strike Price $215.00, Expires 11/15/19 |
10,000 | 1,000,000 | $ | (1,460,000 | ) | |||||||
| Merck & Co. Inc., October Strike Price $75.00, Expires 10/18/19 |
10,000 | 1,000,000 | (100,000 | ) | ||||||||
| Morgan Stanley, November Strike Price $36.00, Expires 11/15/19 |
20,000 | 2,000,000 | (440,000 | ) | ||||||||
| The Procter & Gamble Co., November Strike Price $110.00, Expires 11/15/19 |
20,000 | 2,000,000 | (1,200,000 | ) | ||||||||
| S&P 500 Index, December Strike Price $2,450.00, Expires 12/20/19 |
5,000 | 500,000 | (3,850,000 | ) | ||||||||
| S&P 500 Index, June Strike Price $2,400.00, Expires 6/19/20 |
15,000 | 1,500,000 | (61,785,000 | ) | ||||||||
|
|
|
|||||||||||
| (80,625,000 | ) | |||||||||||
|
|
|
|||||||||||
| Total Options Written (Premiums received $156,672,971) |
$ | (119,615,000 | ) | |||||||||
|
|
|
|||||||||||
†Rounds to less than 0.1% of net assets.
*The principal amount is stated in U.S. dollars unless otherwise indicated.
aNon-income producing.
bA portion or all of the security is held in connection with written option contracts open at year end.
cSee Note 9 regarding holdings of 5% voting securities.
dSee Note 1(g) regarding equity-linked securities.
eSecurity was purchased pursuant to Rule 144A under the Securities Act of 1933 and may be sold in transactions exempt from registration only to qualified institutional buyers or in a public offering registered under the Securities Act of 1933. These securities have been deemed liquid under guidelines approved by the Trust’s Board of Trustees. At September 30, 2019, the aggregate value of these securities was $19,589,386,333, representing 26.3% of net assets.
fSee Note 1(f) regarding index-linked notes.
gSecurity pays variable interest based on the distribution of the SPXDIV Index and proceeds earned from related equity derivatives. The interest rate shown represents the rate at period end. Cash payment at maturity or upon early redemption is based on the performance of the S&P 500 Index.
hSecurity pays a fixed 2.00% coupon rate and a variable coupon based on the distribution of the Morgan Stanley Custom Enhanced SPX B DT Index 20 Delta. The coupon rate shown represents the combined rate at period end. Cash payment at maturity or upon early redemption is based on the performance of the Morgan Stanley Custom Enhanced SPX B Index 20 Delta.
iSee Note 7 regarding defaulted securities.
jA portion or all of the security is on loan at September 30, 2019. See Note 1(h).
kSecurity purchased on a when-issued basis. See Note 1(d).
lPerpetual security with no stated maturity date.
mThe coupon rate shown represents the rate at period end.
nSee Note 1(j) regarding senior floating rate interests.
oFair valued using significant unobservable inputs. See Note 13 regarding fair value measurements.
pSee Note 3(f) regarding investments in affiliated management investment companies.
qThe rate shown is the annualized seven-day effective yield at period end.
rSee Note 1(h) regarding securities on loan.
sSee Note 1(c) regarding joint repurchase agreement.
tSee Note 1(e) regarding written options.
| 80 |
Annual Report | franklintempleton.com | ||
FRANKLIN CUSTODIAN FUNDS
STATEMENT OF INVESTMENTS
Franklin Income Fund (continued)
At September 30, 2019, the Fund had the following futures contracts outstanding. See Note 1(e).
Futures Contracts
| Description | Type | Number of Contracts |
Notional Amount* |
Expiration Date |
Value/ Unrealized Appreciation (Depreciation) |
|||||||||||||||
| Interest Rate Contracts | ||||||||||||||||||||
| U.S. Treasury 10 Yr. Note | Short | 11,500 | $1,498,593,750 | 12/19/19 | $15,254,808 | |||||||||||||||
|
|
|
|||||||||||||||||||
*As of period end.
See Note 8 regarding other derivative information.
See Abbreviations on page 133.
| franklintempleton.com | The accompanying notes are an integral part of these financial statements. | Annual Report | 81 | ||
FRANKLIN CUSTODIAN FUNDS
Financial Highlights
Franklin U.S. Government Securities Fund
| Year Ended September 30, | ||||||||
| 2019 | 2018a | |||||||
| Class A |
||||||||
| Per share operating performance (for a share outstanding throughout the year) |
||||||||
| Net asset value, beginning of year |
$ 5.86 | $ 5.89 | ||||||
|
|
|
|||||||
| Income from investment operationsb: |
||||||||
| Net investment incomec |
0.14 | 0.01 | ||||||
| Net realized and unrealized gains (losses) |
0.25 | (0.02) | ||||||
|
|
|
|||||||
| Total from investment operations |
0.39 | (0.01) | ||||||
|
|
|
|||||||
| Less distributions from: |
||||||||
| Net investment income |
(0.18) | (0.02) | ||||||
|
|
|
|||||||
| Net asset value, end of year |
$ 6.07 | $ 5.86 | ||||||
|
|
|
|||||||
| Total returnd |
6.70% | (0.23)% | ||||||
| Ratios to average net assetse |
||||||||
| Expenses before waiver and payments by affiliates |
0.89% | 0.86% | ||||||
| Expenses net of waiver and payments by affiliatesf |
0.88% | 0.86% | g | |||||
| Net investment income |
2.36% | 2.40% | ||||||
| Supplemental data |
||||||||
| Net assets, end of year (000’s) |
$336,646 | $4,472 | ||||||
| Portfolio turnover rate |
41.34% | 44.67% | ||||||
| Portfolio turnover rate excluding mortgage dollar rollsh |
41.34% | 44.67% | ||||||
aFor the period September 10, 2018 (effective date) to September 30, 2018.
bThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and repurchases of the Fund’s shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
cBased on average daily shares outstanding.
dTotal return does not reflect sales commissions or contingent deferred sales charges, if applicable, and is not annualized for periods less than one year.
eRatios are annualized for periods less than one year.
fBenefit of expense reduction rounds to less than 0.01%.
gBenefit of waiver and payments by affiliates rounds to less than 0.01%.
hSee Note 1(i) regarding mortgage dollar rolls.
| 82 |
Annual Report | The accompanying notes are an integral part of these financial statements. | franklintempleton.com | ||
FRANKLIN CUSTODIAN FUNDS
FINANCIAL HIGHLIGHTS
Franklin U.S. Government Securities Fund (continued)
| Year Ended September 30, | ||||||||||||||||||||
| 2019 | 2018 | 2017 | 2016 | 2015 | ||||||||||||||||
| Class A1 |
||||||||||||||||||||
| Per share operating performance (for a share outstanding throughout the year) |
||||||||||||||||||||
| Net asset value, beginning of year |
$ 5.85 | $ 6.13 | $ 6.35 | $ 6.40 | $ 6.48 | |||||||||||||||
|
|
|
|||||||||||||||||||
| Income from investment operationsa: |
||||||||||||||||||||
| Net investment incomeb |
0.15 | 0.15 | 0.13 | 0.14 | 0.15 | |||||||||||||||
| Net realized and unrealized gains (losses) |
0.25 | (0.25 | ) | (0.16 | ) | 0.01 | (0.02) | |||||||||||||
|
|
|
|||||||||||||||||||
| Total from investment operations |
0.40 | (0.10 | ) | (0.03 | ) | 0.15 | 0.13 | |||||||||||||
|
|
|
|||||||||||||||||||
| Less distributions from: |
||||||||||||||||||||
| Net investment income |
(0.18 | ) | (0.18 | ) | (0.19 | ) | (0.20 | ) | (0.21) | |||||||||||
|
|
|
|||||||||||||||||||
| Net asset value, end of year |
$ 6.07 | $ 5.85 | $ 6.13 | $ 6.35 | $ 6.40 | |||||||||||||||
|
|
|
|||||||||||||||||||
| Total returnc |
6.94% | (1.60 | )% | (0.45 | )% | 2.35% | 2.07% | |||||||||||||
| Ratios to average net assets |
||||||||||||||||||||
| Expenses before waiver and payments by affiliates |
0.79% | 0.76% | 0.79% | 0.76% | 0.76% | |||||||||||||||
| Expenses net of waiver and payments by affiliatesd |
0.78% | 0.76% | e | 0.79% | e | 0.76% | e | 0.76% | e | |||||||||||
| Net investment income |
2.46% | 2.50% | 2.17% | 2.21% | 2.28% | |||||||||||||||
| Supplemental data |
||||||||||||||||||||
| Net assets, end of year (000’s) |
$2,885,194 | $3,099,373 | $3,581,769 | $4,235,819 | $4,167,639 | |||||||||||||||
| Portfolio turnover rate |
41.34% | 44.67% | 86.72% | 92.18% | 69.10% | |||||||||||||||
| Portfolio turnover rate excluding mortgage dollar rollsf |
41.34% | 44.67% | 86.72% | 92.18% | 58.70% | |||||||||||||||
aThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and repurchases of the Fund’s shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
bBased on average daily shares outstanding.
cTotal return does not reflect sales commissions or contingent deferred sales charges, if applicable.
dBenefit of expense reduction rounds to less than 0.01%.
eBenefit of waiver and payments by affiliates rounds to less than 0.01%.
fSee Note 1(i) regarding mortgage dollar rolls.
| franklintempleton.com | The accompanying notes are an integral part of these financial statements. | Annual Report | 83 | ||
FRANKLIN CUSTODIAN FUNDS
FINANCIAL HIGHLIGHTS
Franklin U.S. Government Securities Fund (continued)
| Year Ended September 30, | ||||||||||||||||||||
| 2019 | 2018 | 2017 | 2016 | 2015 | ||||||||||||||||
| Class C |
||||||||||||||||||||
| Per share operating performance (for a share outstanding throughout the year) |
||||||||||||||||||||
| Net asset value, beginning of year |
$ 5.81 | $ 6.08 | $ 6.30 | $ 6.36 | $ 6.44 | |||||||||||||||
|
|
|
|||||||||||||||||||
| Income from investment operationsa: |
||||||||||||||||||||
| Net investment incomeb |
0.12 | 0.12 | 0.10 | 0.11 | 0.11 | |||||||||||||||
| Net realized and unrealized gains (losses) |
0.25 | (0.24 | ) | (0.16 | ) | — | c | (0.01) | ||||||||||||
|
|
|
|||||||||||||||||||
| Total from investment operations |
0.37 | (0.12 | ) | (0.06 | ) | 0.11 | 0.10 | |||||||||||||
|
|
|
|||||||||||||||||||
| Less distributions from: |
||||||||||||||||||||
| Net investment income |
(0.15 | ) | (0.15 | ) | (0.16 | ) | (0.17 | ) | (0.18) | |||||||||||
|
|
|
|||||||||||||||||||
| Net asset value, end of year |
$ 6.03 | $ 5.81 | $ 6.08 | $ 6.30 | $ 6.36 | |||||||||||||||
|
|
|
|||||||||||||||||||
| Total returnd |
6.45% | (1.94 | )% | (0.96 | )% | 1.70% | 1.57% | |||||||||||||
| Ratios to average net assets |
||||||||||||||||||||
| Expenses before waiver and payments by affiliates |
1.29% | 1.26% | 1.29% | 1.26% | 1.26% | |||||||||||||||
| Expenses net of waiver and payments by affiliatese |
1.28% | 1.26% | f | 1.29% | f | 1.26% | f | 1.26%f | ||||||||||||
| Net investment income |
1.96% | 2.00% | 1.67% | 1.71% | 1.78% | |||||||||||||||
| Supplemental data |
||||||||||||||||||||
| Net assets, end of year (000’s) |
$389,021 | $571,525 | $797,394 | $1,034,410 | $1,040,294 | |||||||||||||||
| Portfolio turnover rate |
41.34% | 44.67% | 86.72% | 92.18% | 69.10% | |||||||||||||||
| Portfolio turnover rate excluding mortgage dollar rollsg |
41.34% | 44.67% | 86.72% | 92.18% | 58.70% | |||||||||||||||
aThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and repurchases of the Fund’s shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
bBased on average daily shares outstanding.
cAmount rounds to less than $0.01 per share.
dTotal return does not reflect sales commissions or contingent deferred sales charges, if applicable.
eBenefit of expense reduction rounds to less than 0.01%.
fBenefit of waiver and payments by affiliates rounds to less than 0.01%.
gSee Note 1(i) regarding mortgage dollar rolls.
| 84 |
Annual Report | The accompanying notes are an integral part of these financial statements. | franklintempleton.com | ||
FRANKLIN CUSTODIAN FUNDS
FINANCIAL HIGHLIGHTS
Franklin U.S. Government Securities Fund (continued)
| Year Ended September 30, | ||||||||||||||||||||
| 2019 | 2018 | 2017 | 2016 | 2015 | ||||||||||||||||
| Class R |
||||||||||||||||||||
| Per share operating performance (for a share outstanding throughout the year) |
||||||||||||||||||||
| Net asset value, beginning of year |
$ 5.85 | $ 6.12 | $ 6.34 | $ 6.40 | $ 6.48 | |||||||||||||||
|
|
|
|||||||||||||||||||
| Income from investment operationsa: |
||||||||||||||||||||
| Net investment incomeb |
0.13 | 0.13 | 0.11 | 0.12 | 0.13 | |||||||||||||||
| Net realized and unrealized gains (losses) |
0.25 | (0.24 | ) | (0.16 | ) | — | c | (0.02) | ||||||||||||
|
|
|
|||||||||||||||||||
| Total from investment operations |
0.38 | (0.11 | ) | (0.05 | ) | 0.12 | 0.11 | |||||||||||||
|
|
|
|||||||||||||||||||
| Less distributions from: |
||||||||||||||||||||
| Net investment income |
(0.16 | ) | (0.16 | ) | (0.17 | ) | (0.18 | ) | (0.19) | |||||||||||
|
|
|
|||||||||||||||||||
| Net asset value, end of year |
$ 6.07 | $ 5.85 | $ 6.12 | $ 6.34 | $ 6.40 | |||||||||||||||
|
|
|
|||||||||||||||||||
| Total return |
6.58% | (1.78 | )% | (0.81 | )% | 1.84% | 1.71% | |||||||||||||
| Ratios to average net assets |
||||||||||||||||||||
| Expenses before waiver and payments by affiliates |
1.14% | 1.11% | 1.13% | 1.11% | 1.11% | |||||||||||||||
| Expenses net of waiver and payments by affiliatesd |
1.13% | 1.11% | e | 1.13% | e | 1.11% | e | 1.11%e | ||||||||||||
| Net investment income |
2.11% | 2.15% | 1.83% | 1.86% | 1.93% | |||||||||||||||
| Supplemental data |
||||||||||||||||||||
| Net assets, end of year (000’s) |
$32,906 | $31,144 | $38,363 | $59,785 | $64,689 | |||||||||||||||
| Portfolio turnover rate |
41.34% | 44.67% | 86.72% | 92.18% | 69.10% | |||||||||||||||
| Portfolio turnover rate excluding mortgage dollar rollsf |
41.34% | 44.67% | 86.72% | 92.18% | 58.70% | |||||||||||||||
aThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and repurchases of the Fund’s shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
bBased on average daily shares outstanding.
cAmount rounds to less than $0.01 per share.
dBenefit of expense reduction rounds to less than 0.01%.
eBenefit of waiver and payments by affiliates rounds to less than 0.01%.
fSee Note 1(i) regarding mortgage dollar rolls.
| franklintempleton.com | The accompanying notes are an integral part of these financial statements. | Annual Report | 85 | ||
FRANKLIN CUSTODIAN FUNDS
FINANCIAL HIGHLIGHTS
Franklin U.S. Government Securities Fund (continued)
| Year Ended September 30, | ||||||||||||||||||||
| 2019 | 2018 | 2017 | 2016 | 2015 | ||||||||||||||||
| Class R6 |
||||||||||||||||||||
| Per share operating performance (for a share outstanding throughout the year) |
||||||||||||||||||||
| Net asset value, beginning of year |
$ 5.87 | $ 6.15 | $ 6.37 | $ 6.42 | $ 6.50 | |||||||||||||||
|
|
|
|||||||||||||||||||
| Income from investment operationsa: |
||||||||||||||||||||
| Net investment incomeb |
0.16 | 0.17 | 0.15 | 0.16 | 0.17 | |||||||||||||||
| Net realized and unrealized gains (losses) |
0.27 | (0.25 | ) | (0.16 | ) | 0.01 | (0.02) | |||||||||||||
|
|
|
|||||||||||||||||||
| Total from investment operations |
0.43 | (0.08 | ) | (0.01 | ) | 0.17 | 0.15 | |||||||||||||
|
|
|
|||||||||||||||||||
| Less distributions from: |
||||||||||||||||||||
| Net investment income |
(0.20 | ) | (0.20 | ) | (0.21 | ) | (0.22 | ) | (0.23) | |||||||||||
|
|
|
|||||||||||||||||||
| Net asset value, end of year |
$ 6.10 | $ 5.87 | $ 6.15 | $ 6.37 | $ 6.42 | |||||||||||||||
|
|
|
|||||||||||||||||||
| Total return |
7.39% | (1.33 | )% | (0.16 | )% | 2.63% | 2.35% | |||||||||||||
| Ratios to average net assets |
||||||||||||||||||||
| Expenses before waiver and payments by affiliates |
0.51% | 0.49% | 0.48% | 0.48% | 0.47% | |||||||||||||||
| Expenses net of waiver and payments by affiliatesc |
0.50% | 0.48% | 0.48% | d | 0.48% | d | 0.47%d | |||||||||||||
| Net investment income |
2.74% | 2.78% | 2.48% | 2.49% | 2.57% | |||||||||||||||
| Supplemental data |
||||||||||||||||||||
| Net assets, end of year (000’s) |
$573,957 | $694,813 | $446,174 | $624,619 | $375,644 | |||||||||||||||
| Portfolio turnover rate |
41.34% | 44.67% | 86.72% | 92.18% | 69.10% | |||||||||||||||
| Portfolio turnover rate excluding mortgage dollar rollse |
41.34% | 44.67% | 86.72% | 92.18% | 58.70% | |||||||||||||||
aThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and repurchases of the Fund’s shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
bBased on average daily shares outstanding.
cBenefit of expense reduction rounds to less than 0.01%.
dBenefit of waiver and payments by affiliates rounds to less than 0.01%.
eSee Note 1(i) regarding mortgage dollar rolls.
| 86 |
Annual Report | The accompanying notes are an integral part of these financial statements. | franklintempleton.com | ||
FRANKLIN CUSTODIAN FUNDS
FINANCIAL HIGHLIGHTS
Franklin U.S. Government Securities Fund (continued)
| Year Ended September 30, | ||||||||||||||||||||
| 2019 | 2018 | 2017 | 2016 | 2015 | ||||||||||||||||
|
|
||||||||||||||||||||
| Advisor Class |
||||||||||||||||||||
| Per share operating performance (for a share outstanding throughout the year) |
||||||||||||||||||||
| Net asset value, beginning of year |
$ 5.87 | $ 6.15 | $ 6.37 | $ 6.42 | $ 6.50 | |||||||||||||||
|
|
|
|||||||||||||||||||
| Income from investment operationsa: |
||||||||||||||||||||
| Net investment incomeb |
0.16 | 0.16 | 0.15 | 0.15 | 0.16 | |||||||||||||||
| Net realized and unrealized gains (losses) |
0.26 | (0.25 | ) | (0.17 | ) | 0.01 | (0.02) | |||||||||||||
|
|
|
|||||||||||||||||||
| Total from investment operations |
0.42 | (0.09 | ) | (0.02 | ) | 0.16 | 0.14 | |||||||||||||
|
|
|
|||||||||||||||||||
| Less distributions from: |
||||||||||||||||||||
| Net investment income |
(0.19 | ) | (0.19 | ) | (0.20 | ) | (0.21 | ) | (0.22) | |||||||||||
|
|
|
|||||||||||||||||||
| Net asset value, end of year |
$ 6.10 | $ 5.87 | $ 6.15 | $ 6.37 | $ 6.42 | |||||||||||||||
|
|
|
|||||||||||||||||||
| Total return |
7.08% | (1.45)% | (0.30)% | 2.49% | 2.21% | |||||||||||||||
| Ratios to average net assets |
||||||||||||||||||||
| Expenses before waiver and payments by affiliates |
0.64% | 0.61% | 0.64% | 0.61% | 0.61% | |||||||||||||||
| Expenses net of waiver and payments by affiliatesc |
0.63% | 0.61% | d | 0.64% | d | 0.61% | d | 0.61%d | ||||||||||||
| Net investment income |
2.61% | 2.65% | 2.32% | 2.36% | 2.43% | |||||||||||||||
| Supplemental data |
||||||||||||||||||||
| Net assets, end of year (000’s) |
$946,318 | $720,281 | $854,640 | $718,975 | $622,339 | |||||||||||||||
| Portfolio turnover rate |
41.34% | 44.67% | 86.72% | 92.18% | 69.10% | |||||||||||||||
| Portfolio turnover rate excluding mortgage dollar rollse |
41.34% | 44.67% | 86.72% | 92.18% | 58.70% | |||||||||||||||
aThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and repurchases of the Fund’s shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
bBased on average daily shares outstanding.
cBenefit of expense reduction rounds to less than 0.01%.
dBenefit of waiver and payments by affiliates rounds to less than 0.01%.
eSee Note 1(i) regarding mortgage dollar rolls.
| franklintempleton.com | The accompanying notes are an integral part of these financial statements. | Annual Report | 87 | ||
FRANKLIN CUSTODIAN FUNDS
Statement of Investments, September 30, 2019
Franklin U.S. Government Securities Fund
| Principal Amount |
Value | |||||||
| Mortgage-Backed Securities 97.7% |
||||||||
| Government National Mortgage Association (GNMA) Fixed Rate 97.7% |
||||||||
| GNMA I SF 30 Year, 3.50%, 4/15/43 - 5/15/43 |
$ | 24,003,366 | $ | 25,398,821 | ||||
| GNMA I SF 30 Year, 4.00%, 10/15/40 - 2/15/45 |
46,075,368 | 49,426,797 | ||||||
| GNMA I SF 30 Year, 4.00%, 8/15/44 |
15,242,982 | 16,417,840 | ||||||
| GNMA I SF 30 Year, 4.00%, 2/15/45 - 8/15/46 |
31,826,201 | 34,091,169 | ||||||
| GNMA I SF 30 Year, 4.50%, 2/15/39 - 10/15/39 |
44,538,463 | 48,760,378 | ||||||
| GNMA I SF 30 Year, 4.50%, 11/15/39 - 5/15/40 |
46,434,541 | 50,782,786 | ||||||
| GNMA I SF 30 Year, 4.50%, 6/15/40 - 7/15/40 |
46,079,458 | 50,216,801 | ||||||
| GNMA I SF 30 Year, 4.50%, 7/15/40 - 6/15/41 |
43,588,866 | 47,645,211 | ||||||
| GNMA I SF 30 Year, 5.00%, 2/15/33 - 12/15/33 |
46,742,920 | 51,599,590 | ||||||
| GNMA I SF 30 Year, 5.00%, 1/15/34 - 9/15/39 |
45,860,702 | 50,966,362 | ||||||
| GNMA I SF 30 Year, 5.00%, 8/15/39 |
16,789,819 | 18,864,820 | ||||||
| GNMA I SF 30 Year, 5.00%, 9/15/39 - 11/15/39 |
42,430,813 | 47,589,019 | ||||||
| GNMA I SF 30 Year, 5.00%, 10/15/39 |
15,390,269 | 17,298,438 | ||||||
| GNMA I SF 30 Year, 5.00%, 11/15/39 |
19,927,735 | 22,388,245 | ||||||
| GNMA I SF 30 Year, 5.00%, 11/15/39 - 3/15/40 |
45,738,551 | 51,321,115 | ||||||
| GNMA I SF 30 Year, 5.00%, 3/15/40 - 6/15/40 |
39,997,871 | 44,866,822 | ||||||
| GNMA I SF 30 Year, 5.00%, 6/15/40 |
12,819,795 | 14,400,629 | ||||||
| GNMA I SF 30 Year, 5.00%, 9/15/40 |
17,361,022 | 19,522,973 | ||||||
| GNMA I SF 30 Year, 5.50%, 5/15/28 - 7/15/33 |
46,376,027 | 51,618,347 | ||||||
| GNMA I SF 30 Year, 5.50%, 7/15/33 - 6/15/38 |
44,447,412 | 49,770,501 | ||||||
| GNMA I SF 30 Year, 5.50%, 6/15/38 - 2/15/40 |
35,316,347 | 39,924,906 | ||||||
| GNMA I SF 30 Year, 6.00%, 10/15/23 - 11/15/35 |
45,334,425 | 50,890,135 | ||||||
| GNMA I SF 30 Year, 6.00%, 12/15/35 - 9/15/38 |
44,951,182 | 51,213,403 | ||||||
| GNMA I SF 30 Year, 6.00%, 9/15/38 - 12/15/39 |
20,340,017 | 23,371,411 | ||||||
| GNMA I SF 30 Year, 6.50%, 5/15/23 - 8/15/37 |
33,942,777 | 37,990,578 | ||||||
| GNMA I SF 30 Year, 7.00%, 4/15/22 - 9/15/32 |
22,934,727 | 25,253,111 | ||||||
| GNMA I SF 30 Year, 7.25%, 12/15/25 - 1/15/26 |
69,767 | 70,959 | ||||||
| GNMA I SF 30 Year, 7.50%, 6/15/21 - 8/15/33 |
5,938,640 | 6,400,200 | ||||||
| GNMA I SF 30 Year, 7.70%, 1/15/21 - 10/15/21 |
12,341 | 12,366 | ||||||
| GNMA I SF 30 Year, 8.00%, 2/15/20 - 9/15/30 |
1,990,269 | 2,036,991 | ||||||
| GNMA I SF 30 Year, 8.50%, 11/15/19 - 5/15/25 |
282,120 | 287,016 | ||||||
| GNMA I SF 30 Year, 9.00%, 10/15/19 - 7/15/23 |
170,876 | 173,072 | ||||||
| GNMA I SF 30 Year, 9.50%, 11/15/19 - 8/15/22 |
137,984 | 138,587 | ||||||
| GNMA I SF 30 Year, 10.00%, 3/15/20 - 3/15/25 |
54,983 | 55,205 | ||||||
| GNMA I SF 30 Year, 10.50%, 8/15/20 - 10/15/21 |
7,336 | 7,358 | ||||||
| GNMA I SF 30 Year, 11.00%, 4/15/21 |
13 | 13 | ||||||
| GNMA II SF 30 Year, 3.00%, 2/20/45 - 5/20/49 |
38,024,687 | 39,220,693 | ||||||
| GNMA II SF 30 Year, 3.00%, 4/20/46 |
69,784,513 | 72,004,690 | ||||||
| GNMA II SF 30 Year, 3.00%, 7/20/47 |
217,537,246 | 223,716,778 | ||||||
| GNMA II SF 30 Year, 3.00%, 9/20/47 |
60,775,848 | 62,622,598 | ||||||
| GNMA II SF 30 Year, 3.00%, 10/20/47 |
105,895,767 | 108,900,925 | ||||||
| GNMA II SF 30 Year, 3.00%, 11/20/47 |
17,716,437 | 18,222,915 | ||||||
| GNMA II SF 30 Year, 3.00%, 1/20/48 |
32,397,449 | 33,305,271 | ||||||
| GNMA II SF 30 Year, 3.00%, 2/20/48 |
54,341,211 | 55,857,676 | ||||||
| GNMA II SF 30 Year, 3.00%, 4/20/48 |
18,609,197 | 19,129,327 | ||||||
| GNMA II SF 30 Year, 3.00%, 6/20/49 |
54,092,354 | 55,596,237 | ||||||
| 88 |
Annual Report | franklintempleton.com | ||
FRANKLIN CUSTODIAN FUNDS
STATEMENT OF INVESTMENTS
Franklin U.S. Government Securities Fund (continued)
| Principal Amount |
Value | |||||||
| Mortgage-Backed Securities (continued) |
||||||||
| Government National Mortgage Association (GNMA) Fixed Rate (continued) |
||||||||
| GNMA II SF 30 Year, 3.00%, 7/20/49 |
$ | 20,203,728 | $ | 20,755,368 | ||||
| GNMA II SF 30 Year, 3.00%, 8/20/49 |
47,671,971 | 48,973,600 | ||||||
| GNMA II SF 30 Year, 3.50%, 10/20/40 - 11/20/48 |
47,928,560 | 50,715,031 | ||||||
| GNMA II SF 30 Year, 3.50%, 7/20/42 |
43,000,722 | 45,687,105 | ||||||
| GNMA II SF 30 Year, 3.50%, 9/20/42 |
99,357,600 | 105,564,920 | ||||||
| GNMA II SF 30 Year, 3.50%, 10/20/42 |
20,509,138 | 21,790,458 | ||||||
| GNMA II SF 30 Year, 3.50%, 11/20/42 |
17,209,794 | 18,285,000 | ||||||
| GNMA II SF 30 Year, 3.50%, 4/20/43 |
20,910,873 | 22,217,391 | ||||||
| GNMA II SF 30 Year, 3.50%, 5/20/43 |
28,385,047 | 30,158,558 | ||||||
| GNMA II SF 30 Year, 3.50%, 6/20/43 |
32,788,590 | 34,837,260 | ||||||
| GNMA II SF 30 Year, 3.50%, 8/20/43 |
22,953,789 | 24,338,535 | ||||||
| GNMA II SF 30 Year, 3.50%, 9/20/47 |
619,659,243 | 644,890,200 | ||||||
| GNMA II SF 30 Year, 3.50%, 11/20/47 |
612,645,326 | 636,689,456 | ||||||
| GNMA II SF 30 Year, 3.50%, 12/20/48 - 7/20/49 |
7,172,193 | 7,436,097 | ||||||
| GNMA II SF 30 Year, 3.50%, 2/20/49 |
16,170,312 | 16,765,113 | ||||||
| GNMA II SF 30 Year, 3.50%, 8/20/49 |
270,788,478 | 281,174,440 | ||||||
| GNMA II SF 30 Year, 4.00%, 5/20/40 - 4/20/49 |
31,328,679 | 33,048,320 | ||||||
| GNMA II SF 30 Year, 4.00%, 11/20/40 |
28,199,187 | 30,059,608 | ||||||
| GNMA II SF 30 Year, 4.00%, 12/20/40 |
16,713,691 | 17,818,097 | ||||||
| GNMA II SF 30 Year, 4.00%, 1/20/41 |
18,394,236 | 19,611,682 | ||||||
| GNMA II SF 30 Year, 4.00%, 7/20/41 |
22,330,442 | 23,822,515 | ||||||
| GNMA II SF 30 Year, 4.00%, 9/20/41 |
26,546,927 | 28,189,558 | ||||||
| GNMA II SF 30 Year, 4.00%, 10/20/41 |
32,631,779 | 34,810,310 | ||||||
| GNMA II SF 30 Year, 4.00%, 11/20/41 |
30,086,057 | 32,094,145 | ||||||
| GNMA II SF 30 Year, 4.00%, 2/20/44 |
18,709,078 | 19,806,310 | ||||||
| GNMA II SF 30 Year, 4.00%, 12/20/48 |
35,331,040 | 36,821,309 | ||||||
| GNMA II SF 30 Year, 4.00%, 5/20/49 |
414,484,635 | 431,802,616 | ||||||
| GNMA II SF 30 Year, 4.00%, 7/20/49 |
93,528,939 | 97,583,489 | ||||||
| GNMA II SF 30 Year, 4.50%, 5/20/33 - 8/20/42 |
47,212,944 | 51,452,637 | ||||||
| GNMA II SF 30 Year, 4.50%, 12/20/39 |
18,836,142 | 20,545,819 | ||||||
| GNMA II SF 30 Year, 4.50%, 5/20/41 |
24,528,627 | 26,846,133 | ||||||
| GNMA II SF 30 Year, 4.50%, 6/20/41 |
29,424,693 | 32,186,554 | ||||||
| GNMA II SF 30 Year, 4.50%, 7/20/41 |
32,197,805 | 35,210,096 | ||||||
| GNMA II SF 30 Year, 4.50%, 9/20/41 |
43,536,595 | 47,660,748 | ||||||
| GNMA II SF 30 Year, 4.50%, 10/20/41 |
32,418,803 | 35,413,026 | ||||||
| GNMA II SF 30 Year, 4.50%, 2/20/44 |
17,382,077 | 18,643,922 | ||||||
| GNMA II SF 30 Year, 4.50%, 12/20/48 |
16,710,460 | 17,523,698 | ||||||
| GNMA II SF 30 Year, 4.50%, 1/20/49 |
306,205 | 320,483 | ||||||
| GNMA II SF 30 Year, 5.00%, 7/20/33 - 4/20/40 |
43,585,289 | 48,236,696 | ||||||
| GNMA II SF 30 Year, 5.00%, 9/20/33 |
18,416,087 | 20,413,694 | ||||||
| GNMA II SF 30 Year, 5.00%, 5/20/40 - 9/20/41 |
19,748,434 | 21,852,566 | ||||||
| GNMA II SF 30 Year, 5.50%, 6/20/34 - 5/20/35 |
44,730,647 | 50,571,507 | ||||||
| GNMA II SF 30 Year, 5.50%, 6/20/35 - 4/20/40 |
25,340,913 | 28,452,876 | ||||||
| GNMA II SF 30 Year, 6.00%, 10/20/23 - 1/20/38 |
43,344,148 | 49,879,269 | ||||||
| GNMA II SF 30 Year, 6.00%, 7/20/38 - 7/20/39 |
9,474,908 | 10,905,567 | ||||||
| GNMA II SF 30 Year, 6.50%, 6/20/24 - 1/20/39 |
17,658,962 | 20,280,075 | ||||||
| franklintempleton.com | Annual Report | 89 | ||
FRANKLIN CUSTODIAN FUNDS
STATEMENT OF INVESTMENTS
Franklin U.S. Government Securities Fund (continued)
| Principal Amount |
Value | |||||||
| Mortgage-Backed Securities (continued) |
||||||||
| Government National Mortgage Association (GNMA) Fixed Rate (continued) |
||||||||
| GNMA II SF 30 Year, 7.00%, 2/20/28 - 7/20/33 |
$ 4,549,147 | $ | 5,329,820 | |||||
| GNMA II SF 30 Year, 7.50%, 10/20/22 - 4/20/32 |
820,173 | 917,690 | ||||||
| GNMA II SF 30 Year, 8.00%, 5/20/24 - 6/20/30 |
419,477 | 479,701 | ||||||
| GNMA II SF 30 Year, 8.50%, 7/20/21 - 6/20/25 |
54,524 | 55,391 | ||||||
| GNMA II SF 30 Year, 9.00%, 10/20/21 - 11/20/21 |
8,308 | 8,397 | ||||||
| GNMA II SF 30 Year, 9.50%, 9/20/20 - 4/20/25 |
21,283 | 21,443 | ||||||
| GNMA II SF 30 Year, 10.00%, 7/20/20 - 3/20/21 |
15,124 | 15,269 | ||||||
| GNMA II SF 30 Year, 10.50%, 6/20/20 - 1/20/21 |
8,177 | 8,200 | ||||||
| GNMA II SF 30 Year, 11.00%, 1/20/21 |
1,414 | 1,418 | ||||||
|
|
|
|||||||
| Total Mortgage-Backed Securities (Cost $4,940,470,691) |
5,048,328,271 | |||||||
|
|
|
|||||||
| U.S. Government and Agency Securities (Cost $19,227,065) 0.4% |
||||||||
| U.S. Treasury Bond, 4.75%, 2/15/37 |
14,500,000 | 20,796,455 | ||||||
|
|
|
|||||||
| Total Investments before Short Term Investments |
5,069,124,726 | |||||||
| Shares | ||||||||
|
|
|
|||||||
| Short Term Investments (Cost $86,808,469) 1.7% |
||||||||
| Money Market Funds 1.7% |
||||||||
| a,b Institutional Fiduciary Trust Money Market Portfolio, 1.71% |
86,808,469 | 86,808,469 | ||||||
|
|
|
|||||||
| Total Investments (Cost $5,046,506,225) 99.8% |
5,155,933,195 | |||||||
| Other Assets, less Liabilities 0.2% |
8,109,360 | |||||||
|
|
|
|||||||
| Net Assets 100.0% |
$ | 5,164,042,555 | ||||||
|
|
|
|||||||
See Abbreviations on page 133.
aSee Note 3(f) regarding investments in affiliated management investment companies.
bThe rate shown is the annualized seven-day effective yield at period end.
| 90 |
Annual Report | The accompanying notes are an integral part of these financial statements. | franklintempleton.com | ||
FRANKLIN CUSTODIAN FUNDS
Financial Highlights
Franklin Utilities Fund
| Year Ended September 30, | ||||||||
| 2019 | 2018a | |||||||
| Class A |
||||||||
| Per share operating performance (for a share outstanding throughout the year) |
||||||||
| Net asset value, beginning of year |
$18.66 | $19.16 | ||||||
|
|
|
|||||||
| Income from investment operationsb: |
||||||||
| Net investment incomec |
0.53 | 0.02 | ||||||
| Net realized and unrealized gains (losses) |
4.41 | (0.52) | ||||||
|
|
|
|||||||
| Total from investment operations |
4.94 | (0.50) | ||||||
|
|
|
|||||||
| Less distributions from: |
||||||||
| Net investment income |
(0.49 | ) | — | |||||
| Net realized gains |
(0.58 | ) | — | |||||
|
|
|
|||||||
| Total distributions |
(1.07 | ) | — | |||||
|
|
|
|||||||
| Net asset value, end of year |
$22.53 | $18.66 | ||||||
|
|
|
|||||||
| Total returnd |
27.43% | (2.61)% | ||||||
| Ratios to average net assetse |
||||||||
| Expensesf |
0.83% | 0.84% | ||||||
| Net investment income |
2.51% | 2.62% | ||||||
| Supplemental data |
||||||||
| Net assets, end of year (000’s) |
$521,782 | $3,536 | ||||||
| Portfolio turnover rate |
7.90% | 4.58% | ||||||
aFor the period September 10, 2018 (effective date) to September 30, 2018.
bThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and repurchases of the Fund’s shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
cBased on average daily shares outstanding.
dTotal return does not reflect sales commissions or contingent deferred sales charges, if applicable, and is not annualized for periods less than one year.
eRatios are annualized for periods less than one year.
fBenefit of waiver and payments by affiliates and expense reduction rounds to less than 0.01%.
| franklintempleton.com | The accompanying notes are an integral part of these financial statements. | Annual Report | 91 | ||
FRANKLIN CUSTODIAN FUNDS
FINANCIAL HIGHLIGHTS
Franklin Utilities Fund (continued)
| Year Ended September 30, | ||||||||||||||||||||
| 2019 | 2018 | 2017 | 2016 | 2015 | ||||||||||||||||
|
|
||||||||||||||||||||
| Class A1 |
||||||||||||||||||||
| Per share operating performance (for a share outstanding throughout the year) |
||||||||||||||||||||
| Net asset value, beginning of year |
$18.66 | $19.18 | $17.85 | $16.08 | $16.58 | |||||||||||||||
|
|
|
|||||||||||||||||||
| Income from investment operationsa: |
||||||||||||||||||||
| Net investment incomeb |
0.53 | 0.50 | 0.53 | 0.48 | 0.49 | |||||||||||||||
| Net realized and unrealized gains (losses) |
4.44 | (0.17 | ) | 1.30 | 2.31 | (0.09) | ||||||||||||||
|
|
|
|||||||||||||||||||
| Total from investment operations |
4.97 | 0.33 | 1.83 | 2.79 | 0.40 | |||||||||||||||
|
|
|
|||||||||||||||||||
| Less distributions from: |
||||||||||||||||||||
| Net investment income |
(0.51 | ) | (0.54 | ) | (0.49 | ) | (0.50 | ) | (0.48) | |||||||||||
| Net realized gains |
(0.58 | ) | (0.31 | ) | (0.01 | ) | (0.52 | ) | (0.42) | |||||||||||
|
|
|
|||||||||||||||||||
| Total distributions |
(1.09 | ) | (0.85 | ) | (0.50 | ) | (1.02 | ) | (0.90) | |||||||||||
|
|
|
|||||||||||||||||||
| Net asset value, end of year |
$22.54 | $18.66 | $19.18 | $17.85 | $16.08 | |||||||||||||||
|
|
|
|||||||||||||||||||
| Total returnc |
27.61% | 1.68% | 10.38% | 18.23% | 2.19% | |||||||||||||||
| Ratios to average net assets |
||||||||||||||||||||
| Expensesd |
0.73% | e | 0.74% | e | 0.75% | e | 0.73% | e | 0.73% | |||||||||||
| Net investment income |
2.61% | 2.72% | 2.86% | 2.81% | 2.88% | |||||||||||||||
| Supplemental data |
||||||||||||||||||||
| Net assets, end of year (000’s) |
$4,176,487 | $3,654,795 | $4,182,780 | $4,180,124 | $3,524,835 | |||||||||||||||
| Portfolio turnover rate |
7.90% | 4.58% | 0.89% | 7.17% | 9.55% | |||||||||||||||
aThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and repurchases of the Fund’s shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
bBased on average daily shares outstanding.
cTotal return does not reflect sales commissions or contingent deferred sales charges, if applicable.
dBenefit of waiver and payments by affiliates rounds to less than 0.01%.
eBenefit of expense reduction rounds to less than 0.01%.
| 92 |
Annual Report | The accompanying notes are an integral part of these financial statements. | franklintempleton.com | ||
FRANKLIN CUSTODIAN FUNDS
FINANCIAL HIGHLIGHTS
Franklin Utilities Fund (continued)
| Year Ended September 30, | ||||||||||||||||||||
| 2019 | 2018 | 2017 | 2016 | 2015 | ||||||||||||||||
|
|
||||||||||||||||||||
| Class C |
||||||||||||||||||||
| Per share operating performance (for a share outstanding throughout the year) |
||||||||||||||||||||
| Net asset value, beginning of year |
$18.57 | $19.09 | $17.76 | $16.01 | $16.50 | |||||||||||||||
|
|
|
|||||||||||||||||||
| Income from investment operationsa: |
||||||||||||||||||||
| Net investment incomeb |
0.42 | 0.41 | 0.43 | 0.39 | 0.40 | |||||||||||||||
| Net realized and unrealized gains (losses) |
4.43 | (0.18 | ) | 1.30 | 2.30 | (0.08) | ||||||||||||||
|
|
|
|||||||||||||||||||
| Total from investment operations |
4.85 | 0.23 | 1.73 | 2.69 | 0.32 | |||||||||||||||
|
|
|
|||||||||||||||||||
| Less distributions from: |
||||||||||||||||||||
| Net investment income |
(0.42 | ) | (0.44 | ) | (0.39 | ) | (0.42 | ) | (0.39) | |||||||||||
| Net realized gains |
(0.58 | ) | (0.31 | ) | (0.01 | ) | (0.52 | ) | (0.42) | |||||||||||
|
|
|
|||||||||||||||||||
| Total distributions |
(1.00 | ) | (0.75 | ) | (0.40 | ) | (0.94 | ) | (0.81) | |||||||||||
|
|
|
|||||||||||||||||||
| Net asset value, end of year |
$22.42 | $18.57 | $19.09 | $17.76 | $16.01 | |||||||||||||||
|
|
|
|||||||||||||||||||
| Total returnc |
26.96% | 1.18% | 9.88% | 17.59% | 1.74% | |||||||||||||||
| Ratios to average net assets |
||||||||||||||||||||
| Expensesd |
1.23% | e | 1.24% | e | 1.25% | e | 1.23% | e | 1.23% | |||||||||||
| Net investment income |
2.11% | 2.22% | 2.36% | 2.31% | 2.38% | |||||||||||||||
| Supplemental data |
||||||||||||||||||||
| Net assets, end of year (000’s) |
$767,363 | $834,070 | $981,515 | $1,064,065 | $931,800 | |||||||||||||||
| Portfolio turnover rate |
7.90% | 4.58% | 0.89% | 7.17% | 9.55% | |||||||||||||||
aThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and repurchases of the Fund’s shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
bBased on average daily shares outstanding.
cTotal return does not reflect sales commissions or contingent deferred sales charges, if applicable.
dBenefit of waiver and payments by affiliates rounds to less than 0.01%.
eBenefit of expense reduction rounds to less than 0.01%.
| franklintempleton.com | The accompanying notes are an integral part of these financial statements. | Annual Report | 93 | ||
FRANKLIN CUSTODIAN FUNDS
FINANCIAL HIGHLIGHTS
Franklin Utilities Fund (continued)
| Year Ended September 30, | ||||||||||||||||||||
| 2019 | 2018 | 2017 | 2016 | 2015 | ||||||||||||||||
|
|
||||||||||||||||||||
| Class R |
||||||||||||||||||||
| Per share operating performance (for a share outstanding throughout the year) |
||||||||||||||||||||
| Net asset value, beginning of year |
$18.59 | $19.11 | $17.78 | $16.02 | $16.52 | |||||||||||||||
|
|
|
|||||||||||||||||||
| Income from investment operationsa: |
||||||||||||||||||||
| Net investment incomeb |
0.45 | 0.44 | 0.46 | 0.42 | 0.42 | |||||||||||||||
| Net realized and unrealized gains (losses) |
4.44 | (0.18 | ) | 1.30 | 2.30 | (0.09) | ||||||||||||||
|
|
|
|||||||||||||||||||
| Total from investment operations |
4.89 | 0.26 | 1.76 | 2.72 | 0.33 | |||||||||||||||
|
|
|
|||||||||||||||||||
| Less distributions from: |
||||||||||||||||||||
| Net investment income |
(0.45 | ) | (0.47 | ) | (0.42 | ) | (0.44 | ) | (0.41) | |||||||||||
| Net realized gains |
(0.58 | ) | (0.31 | ) | (0.01 | ) | (0.52 | ) | (0.42) | |||||||||||
|
|
|
|||||||||||||||||||
| Total distributions |
(1.03 | ) | (0.78 | ) | (0.43 | ) | (0.96 | ) | (0.83) | |||||||||||
|
|
|
|||||||||||||||||||
| Net asset value, end of year |
$22.45 | $18.59 | $19.11 | $17.78 | $16.02 | |||||||||||||||
|
|
|
|||||||||||||||||||
| Total return |
27.17% | 1.33% | 10.04% | 17.81% | 1.83% | |||||||||||||||
| Ratios to average net assets |
||||||||||||||||||||
| Expensesc |
1.08% | d | 1.09% | d | 1.10% | d | 1.08% | d | 1.08% | |||||||||||
| Net investment income |
2.26% | 2.37% | 2.51% | 2.46% | 2.53% | |||||||||||||||
| Supplemental data |
||||||||||||||||||||
| Net assets, end of year (000’s) |
$103,376 | $72,927 | $94,465 | $103,247 | $83,271 | |||||||||||||||
| Portfolio turnover rate |
7.90% | 4.58% | 0.89% | 7.17% | 9.55% | |||||||||||||||
aThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and repurchases of the Fund’s shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
bBased on average daily shares outstanding.
cBenefit of waiver and payments by affiliates rounds to less than 0.01%.
dBenefit of expense reduction rounds to less than 0.01%.
| 94 |
Annual Report | The accompanying notes are an integral part of these financial statements. | franklintempleton.com | ||
FRANKLIN CUSTODIAN FUNDS
FINANCIAL HIGHLIGHTS
Franklin Utilities Fund (continued)
| Year Ended September 30, | ||||||||||||||||||||
| 2019 | 2018 | 2017 | 2016 | 2015 | ||||||||||||||||
|
|
||||||||||||||||||||
| Class R6 |
||||||||||||||||||||
| Per share operating performance (for a share outstanding throughout the year) |
||||||||||||||||||||
| Net asset value, beginning of year |
$18.81 | $19.32 | $17.97 | $16.18 | $16.68 | |||||||||||||||
|
|
|
|||||||||||||||||||
| Income from investment operationsa: |
||||||||||||||||||||
| Net investment incomeb |
0.56 | 0.55 | 0.58 | 0.53 | 0.53 | |||||||||||||||
| Net realized and unrealized gains (losses) |
4.50 | (0.17 | ) | 1.31 | 2.32 | (0.09) | ||||||||||||||
|
|
|
|||||||||||||||||||
| Total from investment operations |
5.06 | 0.38 | 1.89 | 2.85 | 0.44 | |||||||||||||||
|
|
|
|||||||||||||||||||
| Less distributions from: |
||||||||||||||||||||
| Net investment income |
(0.56 | ) | (0.58 | ) | (0.53 | ) | (0.54 | ) | (0.52) | |||||||||||
| Net realized gains |
(0.58 | ) | (0.31 | ) | (0.01 | ) | (0.52 | ) | (0.42) | |||||||||||
|
|
|
|||||||||||||||||||
| Total distributions |
(1.14 | ) | (0.89 | ) | (0.54 | ) | (1.06 | ) | (0.94) | |||||||||||
|
|
|
|||||||||||||||||||
| Net asset value, end of year |
$22.73 | $18.81 | $19.32 | $17.97 | $16.18 | |||||||||||||||
|
|
|
|||||||||||||||||||
| Total return |
27.89% | 1.97% | 10.70% | 18.55% | 2.45% | |||||||||||||||
| Ratios to average net assets |
||||||||||||||||||||
| Expenses before waiver and payments by affiliates |
0.53% | 0.52% | 0.48% | 0.47% | 0.47% | |||||||||||||||
| Expenses net of waiver and payments by affiliates |
0.50% | c | 0.48% | c | 0.48% | c,d | 0.47% | c,d | 0.47%d | |||||||||||
| Net investment income |
2.84% | 2.98% | 3.13% | 3.07% | 3.14% | |||||||||||||||
| Supplemental data |
||||||||||||||||||||
| Net assets, end of year (000’s) |
$150,244 | $230,393 | $241,455 | $219,587 | $201,225 | |||||||||||||||
| Portfolio turnover rate |
7.90% | 4.58% | 0.89% | 7.17% | 9.55% | |||||||||||||||
aThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and repurchases of the Fund’s shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
bBased on average daily shares outstanding.
cBenefit of expense reduction rounds to less than 0.01%.
dBenefit of waiver and payments by affiliates rounds to less than 0.01%.
| franklintempleton.com | The accompanying notes are an integral part of these financial statements. | Annual Report | 95 | ||
FRANKLIN CUSTODIAN FUNDS
FINANCIAL HIGHLIGHTS
Franklin Utilities Fund (continued)
| Year Ended September 30, | ||||||||||||||||||||
| 2019 | 2018 | 2017 | 2016 | 2015 | ||||||||||||||||
|
|
||||||||||||||||||||
| Advisor Class |
||||||||||||||||||||
| Per share operating performance (for a share outstanding throughout the year) |
||||||||||||||||||||
| Net asset value, beginning of year |
$18.81 | $19.32 | $17.97 | $16.19 | $16.68 | |||||||||||||||
|
|
|
|||||||||||||||||||
| Income from investment operationsa: |
||||||||||||||||||||
| Net investment incomeb |
0.56 | 0.54 | 0.57 | 0.51 | 0.52 | |||||||||||||||
| Net realized and unrealized gains (losses) |
4.48 | (0.18 | ) | 1.30 | 2.32 | (0.09) | ||||||||||||||
|
|
|
|||||||||||||||||||
| Total from investment operations |
5.04 | 0.36 | 1.87 | 2.83 | 0.43 | |||||||||||||||
|
|
|
|||||||||||||||||||
| Less distributions from: |
||||||||||||||||||||
| Net investment income |
(0.54 | ) | (0.56 | ) | (0.51 | ) | (0.53 | ) | (0.50) | |||||||||||
| Net realized gains |
(0.58 | ) | (0.31 | ) | (0.01 | ) | (0.52 | ) | (0.42) | |||||||||||
|
|
|
|||||||||||||||||||
| Total distributions |
(1.12 | ) | (0.87 | ) | (0.52 | ) | (1.05 | ) | (0.92) | |||||||||||
|
|
|
|||||||||||||||||||
| Net asset value, end of year |
$22.73 | $18.81 | $19.32 | $17.97 | $16.19 | |||||||||||||||
|
|
|
|||||||||||||||||||
| Total return |
27.78% | 1.82% | 10.64% | 18.34% | 2.40% | |||||||||||||||
| Ratios to average net assets |
||||||||||||||||||||
| Expensesc |
0.58% | d | 0.59% | d | 0.60% | d | 0.58% | d | 0.58% | |||||||||||
| Net investment income |
2.76% | 2.87% | 3.01% | 2.96% | 3.03% | |||||||||||||||
| Supplemental data |
||||||||||||||||||||
| Net assets, end of year (000’s) |
$1,262,883 | $927,845 | $963,228 | $755,484 | $549,371 | |||||||||||||||
| Portfolio turnover rate |
7.90% | 4.58% | 0.89% | 7.17% | 9.55% | |||||||||||||||
aThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and repurchases of the Fund’s shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
bBased on average daily shares outstanding.
cBenefit of waiver and payments by affiliates rounds to less than 0.01%.
dBenefit of expense reduction rounds to less than 0.01%.
| 96 |
Annual Report | The accompanying notes are an integral part of these financial statements. | franklintempleton.com | ||
FRANKLIN CUSTODIAN FUNDS
Statement of Investments, September 30, 2019
Franklin Utilities Fund
| Country | Shares | Value | ||||||||
| Common Stocks 99.4% |
||||||||||
| Electric Utilities 57.3% |
||||||||||
| Alliant Energy Corp. |
United States | 3,856,870 | $ | 208,000,999 | ||||||
| American Electric Power Co. Inc. |
United States | 3,800,000 | 356,022,000 | |||||||
| Duke Energy Corp. |
United States | 3,000,000 | 287,580,000 | |||||||
| Edison International |
United States | 3,800,000 | 286,596,000 | |||||||
| Emera Inc. |
Canada | 2,000,000 | 87,835,083 | |||||||
| Entergy Corp. |
United States | 2,100,000 | 246,456,000 | |||||||
| Evergy Inc. |
United States | 4,100,000 | 272,896,000 | |||||||
| Eversource Energy |
United States | 2,650,000 | 226,495,500 | |||||||
| Exelon Corp. |
United States | 6,600,000 | 318,846,000 | |||||||
| FirstEnergy Corp. |
United States | 4,500,000 | 217,035,000 | |||||||
| NextEra Energy Inc. |
United States | 2,600,000 | 605,774,000 | |||||||
| OGE Energy Corp. |
United States | 1,400,000 | 63,532,000 | |||||||
| a PG&E Corp. |
United States | 400,000 | 4,000,000 | |||||||
| Pinnacle West Capital Corp. |
United States | 1,350,000 | 131,044,500 | |||||||
| PNM Resources Inc. |
United States | 2,000,070 | 104,163,646 | |||||||
| PPL Corp. |
United States | 2,200,000 | 69,278,000 | |||||||
| The Southern Co. |
United States | 3,800,000 | 234,726,000 | |||||||
| Xcel Energy Inc. |
United States | 4,300,000 | 279,027,000 | |||||||
|
|
|
|||||||||
| 3,999,307,728 | ||||||||||
|
|
|
|||||||||
| Gas Utilities 1.3% |
||||||||||
| Atmos Energy Corp. |
United States | 250,000 | 28,472,500 | |||||||
| Southwest Gas Holdings Inc. |
United States | 43,346 | 3,946,220 | |||||||
| Spire Inc. |
United States | 700,000 | 61,068,000 | |||||||
|
|
|
|||||||||
| 93,486,720 | ||||||||||
|
|
|
|||||||||
| Multi-Utilities 32.2% |
||||||||||
| Ameren Corp. |
United States | 1,100,000 | 88,055,000 | |||||||
| Black Hills Corp. |
United States | 500,000 | 38,365,000 | |||||||
| CenterPoint Energy Inc. |
United States | 5,700,000 | 172,026,000 | |||||||
| CMS Energy Corp. |
United States | 5,000,000 | 319,750,000 | |||||||
| Consolidated Edison Inc. |
United States | 1,400,000 | 132,258,000 | |||||||
| Dominion Energy Inc. |
United States | 4,250,000 | 344,420,000 | |||||||
| DTE Energy Co. |
United States | 1,600,000 | 212,736,000 | |||||||
| E.ON SE |
Germany | 4,000,000 | 38,883,271 | |||||||
| National Grid PLC |
United Kingdom | 5,999,933 | 65,051,747 | |||||||
| NiSource Inc. |
United States | 3,800,000 | 113,696,000 | |||||||
| NorthWestern Corp. |
United States | 596,800 | 44,789,840 | |||||||
| Public Service Enterprise Group Inc. |
United States | 3,000,000 | 186,240,000 | |||||||
| Sempra Energy |
United States | 2,200,000 | 324,742,000 | |||||||
| WEC Energy Group Inc. |
United States | 1,750,000 | 166,425,000 | |||||||
|
|
|
|||||||||
| 2,247,437,858 | ||||||||||
|
|
|
|||||||||
| Oil, Gas & Consumable Fuels 3.9% |
||||||||||
| a Cheniere Energy Inc. |
United States | 900,000 | 56,754,000 | |||||||
| Kinder Morgan Inc. |
United States | 1,800,000 | 37,098,000 | |||||||
| ONEOK Inc. |
United States | 568,200 | 41,870,658 | |||||||
| Targa Resources Corp. |
United States | 800,000 | 32,136,000 | |||||||
| franklintempleton.com | Annual Report | 97 | ||
FRANKLIN CUSTODIAN FUNDS
STATEMENT OF INVESTMENTS
Franklin Utilities Fund (continued)
| Country | Shares | Value | ||||||||
| Common Stocks (continued) |
||||||||||
| Oil, Gas & Consumable Fuels (continued) |
||||||||||
| The Williams Cos. Inc. |
United States | 4,400,000 | $ | 105,864,000 | ||||||
|
|
|
|||||||||
| 273,722,658 | ||||||||||
|
|
|
|||||||||
| Water Utilities 4.7% |
||||||||||
| American Water Works Co. Inc. |
United States | 1,500,000 | 186,345,000 | |||||||
| Aqua America Inc. |
United States | 1,750,000 | 78,452,500 | |||||||
| United Utilities Group PLC |
United Kingdom | 6,000,000 | 60,914,312 | |||||||
|
|
|
|||||||||
| 325,711,812 | ||||||||||
|
|
|
|||||||||
| Total Common Stocks (Cost $3,126,206,972) |
6,939,666,776 | |||||||||
|
|
|
|||||||||
| Principal Amount |
||||||||||
| Corporate Bonds (Cost $6,089,472) 0.1% |
||||||||||
| Multi-Utilities 0.1% |
||||||||||
| Aquila Inc., senior note, 8.27%, 11/15/21 |
United States | $ | 6,100,000 | 6,837,079 | ||||||
|
|
|
|||||||||
| Total Investments before Short Term Investments |
6,946,503,855 | |||||||||
|
|
|
|||||||||
| Shares | ||||||||||
| Short Term Investments (Cost $35,371,057) 0.5% |
||||||||||
| Money Market Funds 0.5% |
||||||||||
| b,c Institutional Fiduciary Trust Money Market Portfolio, 1.71% |
United States | 35,371,057 | 35,371,057 | |||||||
|
|
|
|||||||||
| Total Investments (Cost $3,167,667,501) 100.0% |
6,981,874,912 | |||||||||
| Other Assets, less Liabilities 0.0%† |
259,205 | |||||||||
|
|
|
|||||||||
| Net Assets 100.0% |
$ | 6,982,134,117 | ||||||||
|
|
|
|||||||||
†Rounds to less than 0.1% of net assets.
aNon-income producing.
bSee Note 3(f) regarding investments in affiliated management investment companies.
cThe rate shown is the annualized seven-day effective yield at period end.
|
|
| 98 |
Annual Report | The accompanying notes are an integral part of these financial statements. | franklintempleton.com | ||
FRANKLIN CUSTODIAN FUNDS
Statements of Assets and Liabilities
September 30, 2019
| Franklin DynaTech Fund |
Franklin Growth Fund |
Franklin Income Fund |
||||||||||
| Assets: |
||||||||||||
| +Investments in securities: |
||||||||||||
| Cost - Unaffiliated issuers |
$4,736,572,428 | $ 5,327,027,738 | $68,163,651,536 | |||||||||
| Cost - Non-controlled affiliates (Note 3f and 9) |
439,351,721 | 195,726,982 | 3,719,831,367 | |||||||||
| Cost - Unaffiliated repurchase agreements |
77,855,135 | — | 5,976,422 | |||||||||
|
|
|
|||||||||||
| Value - Unaffiliated issuers |
$8,325,204,724 | $15,830,913,823 | $71,197,540,638 | |||||||||
| Value - Non-controlled affiliates (Note 3f and 9) |
439,351,721 | 195,726,982 | 3,068,314,880 | |||||||||
| Value - Unaffiliated repurchase agreements |
77,855,135 | — | 5,976,422 | |||||||||
| Cash |
— | 1,204,958 | 48,810,386 | |||||||||
| Receivables: |
||||||||||||
| Investment securities sold |
— | — | 132,333,147 | |||||||||
| Capital shares sold |
30,039,800 | 14,892,624 | 60,864,948 | |||||||||
| Dividends and interest |
1,814,713 | 8,159,147 | 596,667,813 | |||||||||
| Variation margin on futures contracts |
— | — | 898,495 | |||||||||
| Other assets |
2,771 | 6,178 | 53,853 | |||||||||
|
|
|
|||||||||||
| Total assets |
8,874,268,864 | 16,050,903,712 | 75,111,460,582 | |||||||||
|
|
|
|||||||||||
| Liabilities: |
||||||||||||
| Payables: |
||||||||||||
| Investment securities purchased |
— | — | 298,972,439 | |||||||||
| Capital shares redeemed |
11,717,153 | 38,863,386 | 72,787,491 | |||||||||
| Management fees |
3,200,816 | 5,826,890 | 22,931,773 | |||||||||
| Distribution fees |
3,037,157 | 5,385,820 | 28,106,912 | |||||||||
| Transfer agent fees |
1,262,706 | 3,390,327 | 10,126,075 | |||||||||
| Options written, at value (premiums received $—, $— and $156,672,971, respectively) |
— | — | 119,615,000 | |||||||||
| Payable upon return of securities loaned |
— | — | 29,878,422 | |||||||||
| Accrued expenses and other liabilities |
423,449 | 593,315 | 3,140,879 | |||||||||
|
|
|
|||||||||||
| Total liabilities |
19,641,281 | 54,059,738 | 585,558,991 | |||||||||
|
|
|
|||||||||||
| Net assets, at value |
$8,854,627,583 | $15,996,843,974 | $74,525,901,591 | |||||||||
|
|
|
|||||||||||
| Net assets consist of: |
||||||||||||
| Paid-in capital |
$5,211,748,006 | $ 4,718,009,853 | $74,971,736,256 | |||||||||
| Total distributable earnings (loss) |
3,642,879,577 | 11,278,834,121 | (445,834,665 | ) | ||||||||
|
|
|
|||||||||||
| Net assets, at value |
$8,854,627,583 | $15,996,843,974 | $74,525,901,591 | |||||||||
|
|
|
|||||||||||
| +Includes securities loaned | $ — | $ — | $ 29,018,559 | |||||||||
| franklintempleton.com | The accompanying notes are an integral part of these financial statements. | Annual Report | 99 | ||
FRANKLIN CUSTODIAN FUNDS
FINANCIAL STATEMENTS
Statements of Assets and Liabilities (continued)
September 30, 2019
| Franklin DynaTech Fund |
Franklin Growth Fund |
Franklin Income Fund |
||||||||||
| Class A: | ||||||||||||
| Net assets, at value |
$4,504,433,747 | $9,157,153,548 | $ 7,427,467,722 | |||||||||
|
|
|
|||||||||||
| Shares outstanding |
54,372,823 | 83,219,133 | 3,231,941,018 | |||||||||
|
|
|
|||||||||||
| Net asset value per sharea |
$82.84 | $110.04 | $2.30 | |||||||||
|
|
|
|||||||||||
| Maximum offering price per share (net asset value per share ÷ 94.50%, 94.50% and 96.25%, respectively) |
$87.66 | $116.44 | $2.39 | |||||||||
|
|
|
|||||||||||
| Class A1: |
||||||||||||
| Net assets, at value |
$39,625,648,843 | |||||||||||
|
|
|
|||||||||||
| Shares outstanding |
17,199,182,611 | |||||||||||
|
|
|
|||||||||||
| Net asset value and maximum offering price per sharea |
$2.30 | |||||||||||
|
|
|
|||||||||||
| Maximum offering price per share (net asset value per share ÷ 96.25%) |
$2.39 | |||||||||||
|
|
|
|||||||||||
| Class C: |
||||||||||||
| Net assets, at value |
$ 597,926,958 | $ 704,217,257 | $13,488,626,968 | |||||||||
|
|
|
|||||||||||
| Shares outstanding |
8,715,583 | 7,027,465 | 5,772,286,501 | |||||||||
|
|
|
|||||||||||
| Net asset value and maximum offering price per sharea |
$68.60 | $100.21 | $2.34 | |||||||||
|
|
|
|||||||||||
| Class R: |
||||||||||||
| Net assets, at value |
$ 123,720,918 | $ 435,331,486 | $ 265,531,332 | |||||||||
|
|
|
|||||||||||
| Shares outstanding |
1,541,567 | 3,976,085 | 117,536,532 | |||||||||
|
|
|
|||||||||||
| Net asset value and maximum offering price per share |
$80.26 | $109.49 | $2.26 | |||||||||
|
|
|
|||||||||||
| Class R6: |
||||||||||||
| Net assets, at value |
$2,473,941,589 | $2,545,799,527 | $ 1,902,027,235 | |||||||||
|
|
|
|||||||||||
| Shares outstanding |
28,613,601 | 23,066,923 | 831,907,025 | |||||||||
|
|
|
|||||||||||
| Net asset value and maximum offering price per share |
$86.46 | $110.37 | $2.29 | |||||||||
|
|
|
|||||||||||
| Advisor Class: |
||||||||||||
| Net assets, at value |
$1,154,604,371 | $3,154,342,156 | $11,816,599,491 | |||||||||
|
|
|
|||||||||||
| Shares outstanding |
13,491,778 | 28,568,948 | 5,172,814,118 | |||||||||
|
|
|
|||||||||||
| Net asset value and maximum offering price per share |
$85.58 | $110.41 | $2.28 | |||||||||
|
|
|
|||||||||||
aRedemption price is equal to net asset value less contingent deferred sales charges, if applicable.
| 100 |
Annual Report | The accompanying notes are an integral part of these financial statements. | franklintempleton.com | ||
FRANKLIN CUSTODIAN FUNDS
FINANCIAL STATEMENTS
Statements of Assets and Liabilities (continued)
September 30, 2019
| Franklin U.S. Government Securities Fund |
Franklin Utilities Fund |
|||||||
| Assets: |
||||||||
| Investments in securities: |
||||||||
| Cost - Unaffiliated issuers |
$4,959,697,756 | $3,132,296,444 | ||||||
| Cost - Non-controlled affiliates (Note 3f and 9) |
86,808,469 | 35,371,057 | ||||||
|
|
|
|||||||
| Value - Unaffiliated issuers |
$5,069,124,726 | $6,946,503,855 | ||||||
| Value - Non-controlled affiliates (Note 3f and 9) |
86,808,469 | 35,371,057 | ||||||
| Foreign currency, at value (cost $— and $240, respectively) |
— | 239 | ||||||
| Receivables: |
||||||||
| Capital shares sold |
3,544,897 | 10,663,552 | ||||||
| Dividends and interest |
15,256,800 | 9,220,926 | ||||||
| Other assets |
2,140 | 2,480 | ||||||
|
|
|
|||||||
| Total assets |
5,174,737,032 | 7,001,762,109 | ||||||
|
|
|
|||||||
| Liabilities: |
||||||||
| Payables: |
||||||||
| Investment securities purchased |
— | 6,294,579 | ||||||
| Capital shares redeemed |
4,346,986 | 7,456,048 | ||||||
| Management fees |
1,901,432 | 2,628,968 | ||||||
| Distribution fees |
1,308,882 | 2,113,613 | ||||||
| Transfer agent fees |
1,092,690 | 835,806 | ||||||
| Distributions to shareholders |
1,533,853 | — | ||||||
| Accrued expenses and other liabilities |
510,634 | 298,978 | ||||||
|
|
|
|||||||
| Total liabilities |
10,694,477 | 19,627,992 | ||||||
|
|
|
|||||||
| Net assets, at value |
$5,164,042,555 | $6,982,134,117 | ||||||
|
|
|
|||||||
| Net assets consist of: |
||||||||
| Paid-in capital |
$5,617,364,187 | $3,057,037,664 | ||||||
| Total distributable earnings (loss) |
(453,321,632 | ) | 3,925,096,453 | |||||
|
|
|
|||||||
| Net assets, at value |
$5,164,042,555 | $6,982,134,117 | ||||||
|
|
|
|||||||
| franklintempleton.com | The accompanying notes are an integral part of these financial statements. | Annual Report | 101 | ||
FRANKLIN CUSTODIAN FUNDS
FINANCIAL STATEMENTS
Statements of Assets and Liabilities (continued)
September 30, 2019
| Franklin U.S. Government Securities Fund |
Franklin Utilities Fund |
|||||||
| Class A: |
||||||||
| Net assets, at value |
$ 336,646,484 | $ 521,781,716 | ||||||
|
|
|
|||||||
| Shares outstanding |
55,433,783 | 23,155,727 | ||||||
|
|
|
|||||||
| Net asset value per sharea |
$6.07 | $22.53 | ||||||
|
|
|
|||||||
| Maximum offering price per share (net asset value per share ÷ 96.25%) |
$6.31 | $23.41 | ||||||
|
|
|
|||||||
| Class A1: |
||||||||
| Net assets, at value |
$ 2,885,193,954 | $4,176,487,047 | ||||||
|
|
|
|||||||
| Shares outstanding |
474,992,880 | 185,267,842 | ||||||
|
|
|
|||||||
| Net asset value and maximum offering price per sharea |
$6.07 | $22.54 | ||||||
|
|
|
|||||||
| Maximum offering price per share (net asset value per share ÷ 96.25%) |
$6.31 | $23.42 | ||||||
|
|
|
|||||||
| Class C: |
||||||||
| Net assets, at value |
$ 389,020,900 | $ 767,362,656 | ||||||
|
|
|
|||||||
| Shares outstanding |
64,527,266 | 34,230,299 | ||||||
|
|
|
|||||||
| Net asset value and maximum offering price per sharea |
$6.03 | $22.42 | ||||||
|
|
|
|||||||
| Class R: |
||||||||
| Net assets, at value |
$ 32,905,726 | $ 103,375,705 | ||||||
|
|
|
|||||||
| Shares outstanding |
5,420,502 | 4,604,868 | ||||||
|
|
|
|||||||
| Net asset value and maximum offering price per share |
$6.07 | $22.45 | ||||||
|
|
|
|||||||
| Class R6: |
||||||||
| Net assets, at value |
$ 573,957,473 | $ 150,244,004 | ||||||
|
|
|
|||||||
| Shares outstanding |
94,143,869 | 6,611,061 | ||||||
|
|
|
|||||||
| Net asset value and maximum offering price per share |
$6.10 | $22.73 | ||||||
|
|
|
|||||||
| Advisor Class: |
||||||||
| Net assets, at value |
$ 946,318,018 | $1,262,882,989 | ||||||
|
|
|
|||||||
| Shares outstanding |
155,261,060 | 55,568,188 | ||||||
|
|
|
|||||||
| Net asset value and maximum offering price per share |
$6.10 | $22.73 | ||||||
|
|
|
|||||||
aRedemption price is equal to net asset value less contingent deferred sales charges, if applicable.
| 102 |
Annual Report | The accompanying notes are an integral part of these financial statements. | franklintempleton.com | ||
FRANKLIN CUSTODIAN FUNDS
FINANCIAL STATEMENTS
Statements of Operations
for the year ended September 30, 2019
| Franklin DynaTech Fund |
Franklin Growth Fund |
Franklin Income Fund | ||||||||||
| Investment income: | ||||||||||||
| Dividends: (net of foreign taxes)* |
||||||||||||
| Unaffiliated issuers |
$ | 38,661,339 | $ | 193,098,833 | $ | 991,498,948 | ||||||
| Non-controlled affiliates (Note 3f and 9) |
5,244,134 | 4,811,993 | 27,523,561 | |||||||||
| Interest: |
||||||||||||
| Unaffiliated issuers |
26,435 | — | 2,284,700,725 | |||||||||
| Non-controlled affiliates (Note 9) |
— | — | 126,424,405 | |||||||||
| Income from securities loaned: |
||||||||||||
| Unaffiliated issuers (net of fees and rebates) |
— | — | 70,930 | |||||||||
| Non-controlled affiliates (Note 3f) |
— | — | 115,507 | |||||||||
|
|
|
|||||||||||
| Total investment income |
43,931,908 | 197,910,826 | 3,430,334,076 | |||||||||
|
|
|
|||||||||||
| Expenses: |
||||||||||||
| Management fees (Note 3a) |
34,410,620 | 68,263,939 | 276,116,188 | |||||||||
| Distribution fees: (Note 3c) |
||||||||||||
| Class A |
9,945,036 | 21,974,870 | 12,165,991 | |||||||||
| Class A1 |
— | — | 60,741,626 | |||||||||
| Class C |
5,446,398 | 7,318,116 | 97,889,818 | |||||||||
| Class R |
530,560 | 2,283,762 | 1,363,295 | |||||||||
| Transfer agent fees: (Note 3e) |
||||||||||||
| Class A |
5,105,428 | 11,471,589 | 4,329,488 | |||||||||
| Class A1 |
— | — | 36,088,623 | |||||||||
| Class C |
699,115 | 957,322 | 13,426,182 | |||||||||
| Class R |
136,381 | 597,616 | 244,170 | |||||||||
| Class R6 |
504,554 | 682,462 | 494,757 | |||||||||
| Advisor Class |
1,102,031 | 3,938,875 | 10,042,288 | |||||||||
| Custodian fees (Note 4) |
107,820 | 127,600 | 871,034 | |||||||||
| Reports to shareholders |
957,900 | 944,110 | 3,904,626 | |||||||||
| Registration and filing fees |
453,131 | 324,484 | 996,617 | |||||||||
| Professional fees |
81,071 | 124,512 | 243,406 | |||||||||
| Trustees’ fees and expenses |
33,863 | 76,459 | 368,087 | |||||||||
| Other |
88,992 | 271,591 | 1,318,845 | |||||||||
|
|
|
|||||||||||
| Total expenses |
59,602,900 | 119,357,307 | 520,605,041 | |||||||||
| Expense reductions (Note 4) |
(264 | ) | (10,810 | ) | (1,101,739 | ) | ||||||
| Expenses waived/paid by affiliates (Note 3f and 3g) |
(952,070 | ) | (874,084 | ) | (3,873,737 | ) | ||||||
|
|
|
|||||||||||
| Net expenses |
58,650,566 | 118,472,413 | 515,629,565 | |||||||||
|
|
|
|||||||||||
| Net investment income (loss) |
(14,718,658 | ) | 79,438,413 | 2,914,704,511 | ||||||||
|
|
|
|||||||||||
| Realized and unrealized gains (losses): |
||||||||||||
| Net realized gain (loss) from: |
||||||||||||
| Investments:+ |
||||||||||||
| Unaffiliated issuers |
70,621,713 | 840,081,266 | 207,658,243 | |||||||||
| Non-controlled affiliates (Note 3f and 9) |
— | — | (71,492,802 | ) | ||||||||
| Written options |
— | — | 157,184,184 | |||||||||
| Foreign currency transactions |
108,121 | 4,701 | (917,150 | ) | ||||||||
| Futures contracts |
— | — | (78,797,490 | ) | ||||||||
| Swap contracts |
— | — | 1,944,731 | |||||||||
|
|
|
|||||||||||
| Net realized gain (loss) |
70,729,834 | 840,085,967 | 215,579,716 | |||||||||
|
|
|
|||||||||||
| Net change in unrealized appreciation (depreciation) on: |
||||||||||||
| Investments: |
||||||||||||
| franklintempleton.com | The accompanying notes are an integral part of these financial statements. | Annual Report | 103 | ||
FRANKLIN CUSTODIAN FUNDS
FINANCIAL STATEMENTS
Statements of Operations (continued)
for the year ended September 30, 2019
| Franklin DynaTech Fund |
Franklin Growth Fund |
Franklin Income Fund |
||||||||||
| Unaffiliated issuers |
$ | 345,438,844 | $ | (346,522,216) | $ | 679,780,841 | ||||||
| Non-controlled affiliates (Note 3f and 9) |
— | — | (675,424,682) | |||||||||
| Translation of other assets and liabilities denominated in foreign currencies |
2,644 | — | (91,848) | |||||||||
| Written options |
— | — | 33,247,542 | |||||||||
| Futures contracts |
— | — | 15,254,808 | |||||||||
|
|
|
|||||||||||
| Net change in unrealized appreciation (depreciation) |
345,441,488 | (346,522,216) | 52,766,661 | |||||||||
|
|
|
|||||||||||
| Net realized and unrealized gain (loss) |
416,171,322 | 493,563,751 | 268,346,377 | |||||||||
|
|
|
|||||||||||
| Net increase (decrease) in net assets resulting from operations |
$ | 401,452,664 | $ | 573,002,164 | $ | 3,183,050,888 | ||||||
|
|
|
|||||||||||
| *Foreign taxes withheld on dividends |
$ | 267,514 | $ | 680,616 | $ | 27,147,601 | ||||||
| +Includes gains from a redemption in-kind (Note 12) |
$ | — | $ | 52,349,028 | $ | — | ||||||
| 104 |
Annual Report | The accompanying notes are an integral part of these financial statements. | franklintempleton.com | ||
FRANKLIN CUSTODIAN FUNDS
FINANCIAL STATEMENTS
Statements of Operations (continued)
for the year ended September 30, 2019
| Franklin U.S. Government |
Franklin Utilities Fund |
|||||||
| Investment income: | ||||||||
| Dividends: (net of foreign taxes)* |
||||||||
| Unaffiliated issuers |
$ | — | $ | 206,785,002 | ||||
| Non-controlled affiliates (Note 3f and 9) |
2,940,395 | 860,141 | ||||||
| Interest: |
||||||||
| Unaffiliated issuers: |
||||||||
| Paydown gain (loss) |
(26,699,873 | ) | — | |||||
| Paid in cash |
192,450,577 | 506,115 | ||||||
| Income from securities loaned: |
||||||||
| Non-controlled affiliates (Note 3f) |
— | 10,604 | ||||||
|
|
|
|||||||
| Total investment income |
168,691,099 | 208,161,862 | ||||||
|
|
|
|||||||
| Expenses: |
||||||||
| Management fees (Note 3a) |
23,565,933 | 28,494,642 | ||||||
| Distribution fees: (Note 3c) |
||||||||
| Class A |
452,357 | 696,435 | ||||||
| Class A1 |
4,368,787 | 5,798,577 | ||||||
| Class C |
2,863,675 | 4,820,073 | ||||||
| Class R |
154,034 | 421,851 | ||||||
| Transfer agent fees: (Note 3e) |
||||||||
| Class A |
280,814 | 295,666 | ||||||
| Class A1 |
4,591,222 | 4,108,925 | ||||||
| Class C |
685,573 | 788,337 | ||||||
| Class R |
48,211 | 89,815 | ||||||
| Class R6 |
201,769 | 133,443 | ||||||
| Advisor Class |
1,282,602 | 1,104,198 | ||||||
| Custodian fees (Note 4) |
39,620 | 66,433 | ||||||
| Reports to shareholders |
349,247 | 373,040 | ||||||
| Registration and filing fees |
185,554 | 196,246 | ||||||
| Professional fees |
81,820 | 81,109 | ||||||
| Trustees’ fees and expenses |
25,213 | 29,693 | ||||||
| Other |
946,719 | 71,713 | ||||||
|
|
|
|||||||
| Total expenses |
40,123,150 | 47,570,196 | ||||||
| Expense reductions (Note 4) |
(1,073 | ) | (8,986 | ) | ||||
| Expenses waived/paid by affiliates (Note 3f and 3g) |
(522,049 | ) | (229,658 | ) | ||||
|
|
|
|||||||
| Net expenses |
39,600,028 | 47,331,552 | ||||||
|
|
|
|||||||
| Net investment income |
129,091,071 | 160,830,310 | ||||||
|
|
|
|||||||
| Realized and unrealized gains (losses): | ||||||||
| Net realized gain (loss) from: |
||||||||
| Investments: |
||||||||
| Unaffiliated issuers |
16,617,504 | 124,018,133 | ||||||
| Foreign currency transactions |
— | 7,418 | ||||||
|
|
|
|||||||
| Net realized gain (loss) |
16,617,504 | 124,025,551 | ||||||
|
|
|
|||||||
| Net change in unrealized appreciation (depreciation) on: | ||||||||
| Investments: |
||||||||
| Unaffiliated issuers |
206,765,016 | 1,246,307,577 | ||||||
| Translation of other assets and liabilities denominated in foreign currencies |
— | (3,208 | ) | |||||
|
|
|
|||||||
| franklintempleton.com | The accompanying notes are an integral part of these financial statements. | Annual Report | 105 | ||
FRANKLIN CUSTODIAN FUNDS
FINANCIAL STATEMENTS
Statements of Operations (continued)
for the year ended September 30, 2019
| Franklin U.S. Government |
Franklin Utilities Fund |
|||||||
| Net change in unrealized appreciation (depreciation) |
$206,765,016 | $1,246,304,369 | ||||||
|
|
|
|||||||
| Net realized and unrealized gain (loss) |
223,382,520 | 1,370,329,920 | ||||||
|
|
|
|||||||
| Net increase (decrease) in net assets resulting from operations |
$352,473,591 | $1,531,160,230 | ||||||
|
|
|
|||||||
| *Foreign taxes withheld on dividends |
$ — | $ 1,107,994 | ||||||
| 106 |
Annual Report | The accompanying notes are an integral part of these financial statements. | franklintempleton.com | ||
FRANKLIN CUSTODIAN FUNDS
FINANCIAL STATEMENTS
Statements of Changes in Net Assets
| Franklin DynaTech Fund | Franklin Growth Fund | |||||||||||||||
|
|
|
|||||||||||||||
| Year Ended September 30, | Year Ended September 30, | |||||||||||||||
|
|
|
|||||||||||||||
| 2019 | 2018 | 2019 | 2018 | |||||||||||||
|
|
||||||||||||||||
| Increase (decrease) in net assets: | ||||||||||||||||
| Operations: |
||||||||||||||||
| Net investment income (loss) |
$ (14,718,658 | ) | $ (15,041,017 | ) | $ 79,438,413 | $ 69,469,770 | ||||||||||
| Net realized gain (loss) |
70,729,834 | 176,786,945 | 840,085,967 | 307,934,328 | ||||||||||||
| Net change in unrealized appreciation (depreciation) |
345,441,488 | 1,253,016,993 | (346,522,216 | ) | 2,488,154,018 | |||||||||||
|
|
|
|||||||||||||||
| Net increase (decrease) in net assets resulting from operations |
401,452,664 | 1,414,762,921 | 573,002,164 | 2,865,558,116 | ||||||||||||
|
|
|
|||||||||||||||
| Distributions to shareholders: |
||||||||||||||||
| Class A |
(92,155,284 | ) | (46,020,971 | ) | (127,214,618 | ) | (226,847,781 | ) | ||||||||
| Class C |
(14,892,611 | ) | (8,263,863 | ) | (8,201,337 | ) | (24,694,013 | ) | ||||||||
| Class R |
(2,378,516 | ) | (916,852 | ) | (5,605,930 | ) | (13,125,428 | ) | ||||||||
| Class R6 |
(41,995,760 | ) | (16,654,639 | ) | (45,185,076 | ) | (66,654,737 | ) | ||||||||
| Advisor Class |
(16,868,687 | ) | (5,793,931 | ) | (50,860,743 | ) | (76,869,802 | ) | ||||||||
|
|
|
|||||||||||||||
| Total distributions to shareholders |
(168,290,858 | ) | (77,650,256 | ) | (237,067,704 | ) | (408,191,761 | ) | ||||||||
|
|
|
|||||||||||||||
| Capital share transactions: (Note 2) |
||||||||||||||||
| Class A |
650,491,224 | 479,666,303 | (100,470,621 | ) | (384,147,638 | ) | ||||||||||
| Class C |
(11,971,946 | ) | 121,107,638 | (348,123,281 | ) | (26,004,014 | ) | |||||||||
| Class R |
24,484,953 | 32,046,631 | (95,495,550 | ) | (68,853,353 | ) | ||||||||||
| Class R6 |
696,883,004 | 912,918,385 | (144,735,583 | ) | 556,753,865 | |||||||||||
| Advisor Class |
444,209,154 | (156,845,531 | ) | (53,980,770 | ) | (126,254,992 | ) | |||||||||
|
|
|
|||||||||||||||
| Total capital share transactions |
1,804,096,389 | 1,388,893,426 | (742,805,805 | ) | (48,506,132 | ) | ||||||||||
|
|
|
|||||||||||||||
| Net increase (decrease) in net assets |
2,037,258,195 | 2,726,006,091 | (406,871,345 | ) | 2,408,860,223 | |||||||||||
| Net assets: |
||||||||||||||||
| Beginning of year |
6,817,369,388 | 4,091,363,297 | 16,403,715,319 | 13,994,855,096 | ||||||||||||
|
|
|
|||||||||||||||
| End of year |
$8,854,627,583 | $6,817,369,388 | $15,996,843,974 | $16,403,715,319 | ||||||||||||
|
|
|
|||||||||||||||
| franklintempleton.com | The accompanying notes are an integral part of these financial statements. | Annual Report | 107 | ||
FRANKLIN CUSTODIAN FUNDS
FINANCIAL STATEMENTS
Statements of Changes in Net Assets (continued)
| Franklin Income Fund | Franklin U.S. Government Securities Fund | |||||||||||||||
|
|
|
|||||||||||||||
| Year Ended September 30, | Year Ended September 30, | |||||||||||||||
|
|
|
|||||||||||||||
| 2019 | 2018 | 2019 | 2018 | |||||||||||||
|
|
||||||||||||||||
| Increase (decrease) in net assets: | ||||||||||||||||
| Operations: |
||||||||||||||||
| Net investment income |
$ | 2,914,704,511 | $ | 3,098,037,753 | $ 129,091,071 | $ 135,106,995 | ||||||||||
| Net realized gain (loss) |
215,579,716 | 2,139,515,312 | 16,617,504 | (17,091,870 | ) | |||||||||||
| Net change in unrealized appreciation (depreciation) |
52,766,661 | (3,644,189,158 | ) | 206,765,016 | (204,522,890 | ) | ||||||||||
|
|
|
|||||||||||||||
| Net increase (decrease) in net assets resulting from operations |
3,183,050,888 | 1,593,363,907 | 352,473,591 | (86,507,765 | ) | |||||||||||
|
|
|
|||||||||||||||
| Distributions to shareholders: |
||||||||||||||||
| Class A |
(238,921,964 | ) | — | (5,700,515 | ) | (12,054 | ) | |||||||||
| Class A1 |
(2,139,823,753 | ) | (2,288,960,635 | ) | (88,940,105 | ) | (102,662,505 | ) | ||||||||
| Class M |
— | (106 | ) | — | (67 | ) | ||||||||||
| Class C |
(713,887,824 | ) | (972,575,550 | ) | (10,975,833 | ) | (17,064,880 | ) | ||||||||
| Class R |
(13,702,246 | ) | (15,730,910 | ) | (832,535 | ) | (917,007 | ) | ||||||||
| Class R6 |
(105,925,119 | ) | (112,761,533 | ) | (24,763,152 | ) | (20,832,132 | ) | ||||||||
| Advisor Class |
(609,231,978 | ) | (597,750,735 | ) | (26,064,423 | ) | (23,153,769 | ) | ||||||||
|
|
|
|||||||||||||||
| Total distributions to shareholders |
(3,821,492,884 | ) | (3,987,779,469 | ) | (157,276,563 | ) | (164,642,414 | ) | ||||||||
|
|
|
|||||||||||||||
| Capital share transactions: (Note 2) |
||||||||||||||||
| Class A |
7,250,036,688 | 107,124,173 | 324,210,864 | 4,483,084 | ||||||||||||
| Class A1 |
(2,920,848,622 | ) | (2,231,639,649 | ) | (323,855,335 | ) | (326,093,441 | ) | ||||||||
| Class M |
— | 229 | — | 108 | ||||||||||||
| Class C |
(6,197,626,508 | ) | (2,505,402,882 | ) | (197,618,270 | ) | (194,350,252 | ) | ||||||||
| Class R |
(27,415,311 | ) | (55,588,036 | ) | 615,002 | (5,634,672 | ) | |||||||||
| Class R6 |
(140,374,274 | ) | 309,451,485 | (150,358,443 | ) | 276,619,775 | ||||||||||
| Advisor Class |
581,307,127 | (1,525,738 | ) | 194,243,684 | (100,605,572 | ) | ||||||||||
|
|
|
|||||||||||||||
| Total capital share transactions |
(1,454,920,900 | ) | (4,377,580,418 | ) | (152,762,498 | ) | (345,580,970 | ) | ||||||||
|
|
|
|||||||||||||||
| Net increase (decrease) in net assets |
(2,093,362,896 | ) | (6,771,995,980 | ) | 42,434,530 | (596,731,149 | ) | |||||||||
| Net assets: |
||||||||||||||||
| Beginning of year |
76,619,264,487 | 83,391,260,467 | 5,121,608,025 | 5,718,339,174 | ||||||||||||
|
|
|
|||||||||||||||
| End of year |
$ | 74,525,901,591 | $ | 76,619,264,487 | $5,164,042,555 | $5,121,608,025 | ||||||||||
|
|
|
|||||||||||||||
| 108 |
Annual Report | The accompanying notes are an integral part of these financial statements. | franklintempleton.com | ||
FRANKLIN CUSTODIAN FUNDS
FINANCIAL STATEMENTS
Statements of Changes in Net Assets (continued)
| Franklin Utilities Fund | ||||||||
| Year Ended September 30, | ||||||||
| 2019 | 2018 | |||||||
|
|
||||||||
| Increase (decrease) in net assets: |
||||||||
| Operations: |
||||||||
| Net investment income |
$ | 160,830,310 | $ | 160,329,904 | ||||
| Net realized gain (loss) |
124,025,551 | 202,141,838 | ||||||
| Net change in unrealized appreciation (depreciation) |
1,246,304,369 | (290,378,391 | ) | |||||
|
|
|
|||||||
| Net increase (decrease) in net assets resulting from operations |
1,531,160,230 | 72,093,351 | ||||||
|
|
|
|||||||
| Distributions to shareholders: |
||||||||
| Class A |
(12,003,162 | ) | — | |||||
| Class A1 |
(210,886,943 | ) | (177,065,549 | ) | ||||
| Class M |
— | (70 | ) | |||||
| Class C |
(36,435,738 | ) | (37,179,447 | ) | ||||
| Class R |
(4,121,777 | ) | (3,557,682 | ) | ||||
| Class R6 |
(12,677,551 | ) | (10,987,844 | ) | ||||
| Advisor Class |
(56,945,571 | ) | (43,572,165 | ) | ||||
|
|
|
|||||||
| Total distributions to shareholders |
(333,070,742 | ) | (272,362,757 | ) | ||||
|
|
|
|||||||
| Capital share transactions: (Note 2) |
||||||||
| Class A |
460,752,617 | 3,570,602 | ||||||
| Class A1 |
(216,801,580 | ) | (400,697,038 | ) | ||||
| Class M |
— | 262 | ||||||
| Class C |
(211,431,033 | ) | (115,788,847 | ) | ||||
| Class R |
13,908,640 | (18,460,504 | ) | |||||
| Class R6 |
(118,348,388 | ) | (4,300,346 | ) | ||||
| Advisor Class |
132,397,828 | (3,930,299 | ) | |||||
|
|
|
|||||||
| Total capital share transactions |
60,478,084 | (539,606,170 | ) | |||||
|
|
|
|||||||
| Net increase (decrease) in net assets |
1,258,567,572 | (739,875,576 | ) | |||||
| Net assets: |
||||||||
| Beginning of year |
5,723,566,545 | 6,463,442,121 | ||||||
|
|
|
|||||||
| End of year |
$ | 6,982,134,117 | $ | 5,723,566,545 | ||||
|
|
|
|||||||
| franklintempleton.com | The accompanying notes are an integral part of these financial statements. | Annual Report | 109 | ||
FRANKLIN CUSTODIAN FUNDS
| 110 |
Annual Report | franklintempleton.com | ||
FRANKLIN CUSTODIAN FUNDS
NOTES TO FINANCIAL STATEMENTS
| franklintempleton.com | Annual Report | 111 | ||
FRANKLIN CUSTODIAN FUNDS
NOTES TO FINANCIAL STATEMENTS
| 112 |
Annual Report | franklintempleton.com | ||
FRANKLIN CUSTODIAN FUNDS
NOTES TO FINANCIAL STATEMENTS
| franklintempleton.com | Annual Report | 113 | ||
FRANKLIN CUSTODIAN FUNDS
NOTES TO FINANCIAL STATEMENTS
| 114 |
Annual Report | franklintempleton.com | ||
FRANKLIN CUSTODIAN FUNDS
NOTES TO FINANCIAL STATEMENTS
2. Shares of Beneficial Interest
At September 30, 2019, there were an unlimited number of shares authorized (without par value). Transactions in the Funds’ shares were as follows:
| Franklin | Franklin | |||||||||||||||
| DynaTech Fund | Growth Fund | |||||||||||||||
| Shares | Amount | Shares | Amount | |||||||||||||
| Class A Shares: |
||||||||||||||||
| Year ended September 30, 2019 |
||||||||||||||||
| Shares solda |
18,045,630 | $ | 1,406,354,947 | 12,734,660 | $ | 1,294,982,995 | ||||||||||
| Shares issued in reinvestment of distributions |
1,181,936 | 85,513,056 | 1,182,058 | 118,489,471 | ||||||||||||
| Shares redeemed |
(10,956,984 | ) | (841,376,779 | ) | (14,767,957 | ) | (1,513,943,087 | ) | ||||||||
| Net increase (decrease) |
8,270,582 | $ | 650,491,224 | (851,239 | ) | $ | (100,470,621 | ) | ||||||||
| Year ended September 30, 2018 |
||||||||||||||||
| Shares sold |
14,831,366 | $ | 1,079,518,288 | 11,280,920 | $ | 1,109,298,387 | ||||||||||
| Shares issued in reinvestment of distributions |
649,398 | 42,412,146 | 2,241,557 | 209,293,239 | ||||||||||||
| Shares redeemed |
(8,972,810 | ) | (642,264,131 | ) | (17,341,818 | ) | (1,702,739,264 | ) | ||||||||
| Net increase (decrease) |
6,507,954 | $ | 479,666,303 | (3,819,341 | ) | $ | (384,147,638 | ) | ||||||||
| franklintempleton.com | Annual Report | 115 | ||
FRANKLIN CUSTODIAN FUNDS
NOTES TO FINANCIAL STATEMENTS
2. Shares of Beneficial Interest (continued)
| Franklin | Franklin | |||||||||||||||
| DynaTech Fund | Growth Fund | |||||||||||||||
| Shares | Amount | Shares | Amount | |||||||||||||
| Class C Shares: |
||||||||||||||||
| Year ended September 30, 2019 |
||||||||||||||||
| Shares sold |
3,070,856 | $ | 199,977,771 | 1,283,911 | $ | 119,568,065 | ||||||||||
| Shares issued in reinvestment of distributions |
239,761 | 14,455,228 | 84,225 | 7,736,874 | ||||||||||||
| Shares redeemeda |
(3,574,686 | ) | (226,404,945 | ) | (5,118,036 | ) | (475,428,220 | ) | ||||||||
|
Net increase (decrease) |
(264,069 | ) | $ | (11,971,946 | ) | (3,749,900 | ) | $ | (348,123,281 | ) | ||||||
| Year ended September 30, 2018 |
||||||||||||||||
| Shares sold |
3,541,513 | $ | 216,395,204 | 2,015,126 | $ | 182,547,090 | ||||||||||
| Shares issued in reinvestment of distributions |
145,521 | 8,019,671 | 273,473 | 23,494,117 | ||||||||||||
| Shares redeemed |
(1,708,778 | ) | (103,307,237 | ) | (2,558,228 | ) | (232,045,221 | ) | ||||||||
|
Net increase (decrease) |
1,978,256 | $ | 121,107,638 | (269,629 | ) | $ | (26,004,014 | ) | ||||||||
|
Class R Shares: |
||||||||||||||||
| Year ended September 30, 2019 |
||||||||||||||||
| Shares sold |
718,232 | $ | 54,816,432 | 386,516 | $ | 39,100,757 | ||||||||||
| Shares issued in reinvestment of distributions |
33,480 | 2,351,628 | 54,920 | 5,489,301 | ||||||||||||
| Shares redeemed |
(426,266 | ) | (32,683,107 | ) | (1,371,370 | ) | (140,085,608 | ) | ||||||||
|
Net increase (decrease) |
325,446 | $ | 24,484,953 | (929,934 | ) | $ | (95,495,550 | ) | ||||||||
|
Year ended September 30, 2018 |
||||||||||||||||
| Shares sold |
728,247 | $ | 52,135,875 | 646,523 | $ | 63,137,515 | ||||||||||
| Shares issued in reinvestment of distributions |
14,081 | 895,541 | 137,299 | 12,777,077 | ||||||||||||
| Shares redeemed |
(304,303 | ) | (20,984,785 | ) | (1,477,753 | ) | (144,767,945 | ) | ||||||||
|
Net increase (decrease) |
438,025 | $ | 32,046,631 | (693,931 | ) | $ | (68,853,353 | ) | ||||||||
|
Class R6 Shares: |
||||||||||||||||
|
Year ended September 30, 2019 |
||||||||||||||||
| Shares sold |
14,600,444 | $ | 1,197,778,037 | 5,242,855 | $ | 533,528,077 | ||||||||||
| Shares issued in reinvestment of distributions |
557,220 | 41,953,067 | 416,642 | 41,768,390 | ||||||||||||
| Shares redeemed |
(6,571,287 | ) | (542,848,100 | ) | (7,008,411 | ) | (720,032,050 | ) | ||||||||
|
Net increase (decrease) |
8,586,377 | $ | 696,883,004 | (1,348,914 | ) | $ | (144,735,583 | ) | ||||||||
|
Year ended September 30, 2018 |
||||||||||||||||
| Shares sold |
17,913,232 | $ | 1,294,331,619 | 11,217,056 | $ | 1,090,829,917 | ||||||||||
| Shares issued in reinvestment of distributions |
246,188 | 16,654,639 | 664,503 | 62,044,590 | ||||||||||||
| Shares redeemed in-kind (Note 12) |
— | — | (596,870 | ) | (64,204,995 | ) | ||||||||||
| Shares redeemed |
(5,146,068 | ) | (398,067,873 | ) | (5,377,348 | ) | (531,915,647 | ) | ||||||||
|
Net increase (decrease) |
13,013,352 | $ | 912,918,385 | 5,907,341 | $ | 556,753,865 | ||||||||||
| 116 |
Annual Report | franklintempleton.com | ||
FRANKLIN CUSTODIAN FUNDS
NOTES TO FINANCIAL STATEMENTS
| Franklin | Franklin | |||||||||||||||
| DynaTech Fund | Growth Fund | |||||||||||||||
| Shares | Amount | Shares | Amount | |||||||||||||
|
Advisor Class Shares: |
||||||||||||||||
| Year ended September 30, 2019 |
||||||||||||||||
| Shares sold |
8,540,729 | $ | 696,364,989 | 8,275,911 | $ | 843,459,997 | ||||||||||
| Shares issued in reinvestment of distributions |
208,740 | 15,569,915 | 463,663 | 46,542,484 | ||||||||||||
| Shares redeemed in-kind (Note 12) |
— | — | (956,267 | ) | (87,335,163 | ) | ||||||||||
| Shares redeemed |
(3,396,410 | ) | (267,725,750 | ) | (8,294,264 | ) | (856,648,088 | ) | ||||||||
|
Net increase (decrease) |
5,353,059 | $ | 444,209,154 | (510,957 | ) | $ | (53,980,770 | ) | ||||||||
|
Year ended September 30, 2018 |
||||||||||||||||
| Shares sold |
5,333,633 | $ | 398,259,942 | 7,218,349 | $ | 715,181,948 | ||||||||||
| Shares issued in reinvestment of distributions |
79,332 | 5,323,142 | 772,474 | 72,226,322 | ||||||||||||
| Shares redeemed |
(8,277,537 | ) | (560,428,615 | ) | (9,391,141 | ) | (913,663,262 | ) | ||||||||
|
Net increase (decrease) |
(2,864,572 | ) | $ | (156,845,531 | ) | (1,400,318 | ) | $ | (126,254,992 | ) | ||||||
aMay include a portion of Class C shares that were automatically converted to Class A.
| Franklin | ||||||||||||||||
| Franklin | U.S. Government | |||||||||||||||
| Income Fund | Securities Fund | |||||||||||||||
| Shares | Amount | Shares | Amount | |||||||||||||
|
Class A Shares: |
||||||||||||||||
| Year ended September 30, 2019 |
||||||||||||||||
| Shares solda |
3,539,972,556 | $ | 8,051,972,021 | 63,345,656 | $ | 375,877,932 | ||||||||||
| Shares issued in reinvestment of distributions |
101,099,391 | 229,215,481 | 921,344 | 5,509,871 | ||||||||||||
| Shares redeemed |
(455,241,055 | ) | (1,031,150,814 | ) | (9,596,929 | ) | (57,176,939 | ) | ||||||||
|
Net increase (decrease) |
3,185,830,892 | $ | 7,250,036,688 | 54,670,071 | $ | 324,210,864 | ||||||||||
|
Year ended September 30, 2018b |
||||||||||||||||
| Shares sold |
47,757,868 | $ | 110,955,834 | 854,097 | $ | 5,012,817 | ||||||||||
| Shares issued in reinvestment of distributions |
— | — | 1,534 | 8,990 | ||||||||||||
| Shares redeemed |
(1,647,742 | ) | (3,831,661 | ) | (91,919 | ) | (538,723 | ) | ||||||||
|
Net increase (decrease) |
46,110,126 | $ | 107,124,173 | 763,712 | $ | 4,483,084 | ||||||||||
|
Class A1 Shares: |
||||||||||||||||
| Year ended September 30, 2019 |
||||||||||||||||
| Shares sold |
734,292,978 | $ | 1,667,920,670 | 31,667,964 | $ | 188,180,745 | ||||||||||
| Shares issued in reinvestment of distributions |
861,324,178 | 1,956,731,362 | 12,257,776 | 72,888,073 | ||||||||||||
| Shares redeemed |
(2,886,028,051 | ) | (6,545,500,654 | ) | (98,666,952 | ) | (584,924,153 | ) | ||||||||
|
Net increase (decrease) |
(1,290,410,895 | ) | $ | (2,920,848,622 | ) | (54,741,212 | ) | $ | (323,855,335 | ) | ||||||
|
Year ended September 30, 2018 |
||||||||||||||||
| Shares sold |
1,654,073,714 | $ | 3,876,349,005 | 91,619,493 | $ | 551,601,916 | ||||||||||
| Shares issued in reinvestment of distributions |
897,284,705 | 2,093,922,360 | 14,259,224 | 84,951,032 | ||||||||||||
| Shares redeemed |
(3,507,769,889 | ) | (8,201,911,014 | ) | (160,829,797 | ) | (962,646,389 | ) | ||||||||
|
Net increase (decrease) |
(956,411,470 | ) | $ | (2,231,639,649 | ) | (54,951,080 | ) | $ | (326,093,441 | ) | ||||||
| franklintempleton.com | Annual Report | 117 | ||
FRANKLIN CUSTODIAN FUNDS
NOTES TO FINANCIAL STATEMENTS
2. Shares of Beneficial Interest (continued)
| Franklin | ||||||||||||||||
| Franklin | U.S. Government | |||||||||||||||
| Income Fund | Securities Fund | |||||||||||||||
| Shares | Amount | Shares | Amount | |||||||||||||
|
Class M Shares:c |
||||||||||||||||
| Year ended September 30, 2018d |
||||||||||||||||
| Shares sold |
2,058 | $ | 5,000 | 829 | $ | 5,000 | ||||||||||
| Shares redeemed |
(2,058 | ) | (4,771 | ) | (829 | ) | (4,892 | ) | ||||||||
| Net increase (decrease) |
— | $ | 229 | — | $ | 108 | ||||||||||
|
Class C Shares: |
||||||||||||||||
| Year ended September 30, 2019 |
||||||||||||||||
| Shares sold |
604,815,133 | $ | 1,395,555,258 | 9,900,368 | $ | 58,656,797 | ||||||||||
| Shares issued in reinvestment of distributions |
282,624,044 | 650,966,785 | 1,677,007 | 9,894,309 | ||||||||||||
| Shares redeemeda |
(3,568,750,502 | ) | (8,244,148,551 | ) | (45,441,898 | ) | (266,169,376 | ) | ||||||||
| Net increase (decrease) |
(2,681,311,325 | ) | $ | (6,197,626,508 | ) | (33,864,523 | ) | $ | (197,618,270 | ) | ||||||
| Year ended September 30, 2018 |
||||||||||||||||
| Shares sold |
582,283,439 | $ | 1,382,849,638 | 7,433,473 | $ | 44,268,648 | ||||||||||
| Shares issued in reinvestment of distributions |
377,996,060 | 893,922,732 | 2,628,467 | 15,553,873 | ||||||||||||
| Shares redeemed |
(2,018,663,790 | ) | (4,782,175,252 | ) | (42,755,854 | ) | (254,172,773 | ) | ||||||||
| Net increase (decrease) |
(1,058,384,291 | ) | $ | (2,505,402,882 | ) | (32,693,914 | ) | $ | (194,350,252 | ) | ||||||
|
Class R Shares: |
||||||||||||||||
| Year ended September 30, 2019 |
||||||||||||||||
| Shares sold |
22,136,825 | $ | 49,568,022 | 1,880,919 | $ | 11,250,749 | ||||||||||
| Shares issued in reinvestment of distributions |
5,857,339 | 13,054,171 | 133,133 | 792,020 | ||||||||||||
| Shares redeemed |
(40,417,255 | ) | (90,037,504 | ) | (1,919,391 | ) | (11,427,767 | ) | ||||||||
| Net increase (decrease) |
(12,423,091 | ) | $ | (27,415,311 | ) | 94,661 | $ | 615,002 | ||||||||
| Year ended September 30, 2018 |
||||||||||||||||
| Shares sold |
22,303,807 | $ | 51,304,961 | 1,311,996 | $ | 7,841,271 | ||||||||||
| Shares issued in reinvestment of distributions |
6,461,113 | 14,805,328 | 144,887 | 862,596 | ||||||||||||
| Shares redeemed |
(52,753,780 | ) | (121,698,325 | ) | (2,397,338 | ) | (14,338,539 | ) | ||||||||
| Net increase (decrease) |
(23,988,860 | ) | $ | (55,588,036 | ) | (940,455 | ) | $ | (5,634,672 | ) | ||||||
|
Class R6 Shares: |
||||||||||||||||
| Year ended September 30, 2019 |
||||||||||||||||
| Shares sold |
83,989,939 | $ | 189,707,762 | 59,439,310 | $ | 354,899,398 | ||||||||||
| Shares issued in reinvestment of distributions |
44,158,383 | 99,481,277 | 4,115,777 | 24,590,060 | ||||||||||||
| Shares redeemed |
(191,415,233 | ) | (429,563,313 | ) | (87,769,171 | ) | (529,847,901 | ) | ||||||||
| Net increase (decrease) |
(63,266,911 | ) | $ | (140,374,274 | ) | (24,214,084 | ) | $ | (150,358,443 | ) | ||||||
| Year ended September 30, 2018 |
||||||||||||||||
| Shares sold |
241,446,374 | $ | 566,628,288 | 61,412,244 | $ | 370,212,496 | ||||||||||
| Shares issued in reinvestment of distributions |
46,333,019 | 107,151,115 | 3,488,682 | 20,828,159 | ||||||||||||
| Shares redeemed |
(157,691,667 | ) | (364,327,918 | ) | (19,140,378 | ) | (114,420,880 | ) | ||||||||
| Net increase (decrease) |
130,087,726 | $ | 309,451,485 | 45,760,548 | $ | 276,619,775 | ||||||||||
| 118 |
Annual Report | franklintempleton.com | ||
FRANKLIN CUSTODIAN FUNDS
NOTES TO FINANCIAL STATEMENTS
| Franklin | ||||||||||||||||
| Franklin | U.S. Government | |||||||||||||||
| Income Fund | Securities Fund | |||||||||||||||
| Shares | Amount | Shares | Amount | |||||||||||||
|
Advisor Class Shares: |
||||||||||||||||
| Year ended September 30, 2019 |
||||||||||||||||
| Shares sold |
1,215,772,185 | $ | 2,742,135,489 | 86,539,808 | $ | 515,721,436 | ||||||||||
| Shares issued in reinvestment of distributions |
241,618,818 | 544,234,079 | 4,124,300 | 24,667,003 | ||||||||||||
| Shares redeemed |
(1,205,298,748 | ) | (2,705,062,441 | ) | (58,081,812 | ) | (346,144,755 | ) | ||||||||
| Net increase (decrease) |
252,092,255 | $ | 581,307,127 | 32,582,296 | $ | 194,243,684 | ||||||||||
| Year ended September 30, 2018 |
||||||||||||||||
| Shares sold |
1,216,256,316 | $ | 2,822,041,342 | 40,864,155 | $ | 245,204,402 | ||||||||||
| Shares issued in reinvestment of distributions |
227,374,647 | 525,980,680 | 3,544,600 | 21,175,930 | ||||||||||||
| Shares redeemed |
(1,442,679,003 | ) | (3,349,547,760 | ) | (60,767,806 | ) | (366,985,904 | ) | ||||||||
| Net increase (decrease) |
951,960 | $ | (1,525,738 | ) | (16,359,051 | ) | $ | (100,605,572 | ) | |||||||
aMay include a portion of Class C shares that were automatically converted to Class A.
bFor the period September 10, 2018 (effective date) to September 30, 2018.
cClass M was closed to investors on June 8, 2018.
dFor the period January 25, 2018 (effective date) to June 8, 2018.
| Franklin | ||||||||
| Utilities Fund | ||||||||
|
|
|
|||||||
| Shares | Amount | |||||||
| Class A Shares: |
||||||||
| Year ended September 30, 2019 |
||||||||
| Shares solda |
27,331,039 | $ | 549,681,782 | |||||
| Shares issued in reinvestment of distributions |
567,087 | 11,254,351 | ||||||
| Shares redeemed |
(4,931,903 | ) | (100,183,516) | |||||
|
|
|
|||||||
| Net increase (decrease) |
22,966,223 | $ | 460,752,617 | |||||
|
|
|
|||||||
| Year ended September 30, 2018b |
||||||||
| Shares sold |
192,333 | $ | 3,622,735 | |||||
| Shares redeemed |
(2,829 | ) | (52,133) | |||||
|
|
|
|||||||
| Net increase (decrease) |
189,504 | $ | 3,570,602 | |||||
|
|
|
|||||||
| Class A1 Shares: |
||||||||
| Year ended September 30, 2019 |
||||||||
| Shares sold |
12,428,032 | $ | 244,772,010 | |||||
| Shares issued in reinvestment of distributions |
9,723,812 | 190,596,017 | ||||||
| Shares redeemed |
(32,697,882 | ) | (652,169,607) | |||||
|
|
|
|||||||
| Net increase (decrease) |
(10,546,038 | ) | $ | (216,801,580) | ||||
|
|
|
|||||||
| Year ended September 30, 2018 |
||||||||
| Shares sold |
24,701,743 | $ | 456,163,799 | |||||
| Shares issued in reinvestment of distributions |
8,528,408 | 161,849,791 | ||||||
| Shares redeemed |
(55,450,300 | ) | (1,018,710,628) | |||||
|
|
|
|||||||
| Net increase (decrease) |
(22,220,149 | ) | $ | (400,697,038) | ||||
|
|
|
|||||||
| franklintempleton.com | Annual Report | 119 | ||
FRANKLIN CUSTODIAN FUNDS
NOTES TO FINANCIAL STATEMENTS
2. Shares of Beneficial Interest (continued)
| Franklin | ||||||||
| Utilities Fund | ||||||||
| Shares | Amount | |||||||
| Class M Shares:c |
||||||||
| Year ended September 30, 2018d |
||||||||
| Shares sold |
276 | $ | 5,000 | |||||
| Shares redeemed |
(276 | ) | (4,738) | |||||
|
|
|
|||||||
| Net increase (decrease) |
— | $ | 262 | |||||
|
|
|
|||||||
| Class C Shares: |
||||||||
| Year ended September 30, 2019 |
||||||||
| Shares sold |
4,737,482 | $ | 94,764,608 | |||||
| Shares issued in reinvestment of distributions |
1,745,793 | 33,948,245 | ||||||
| Shares redeemeda |
(17,173,602 | ) | (340,143,886) | |||||
|
|
|
|||||||
| Net increase (decrease) |
(10,690,327 | ) | $ | (211,431,033) | ||||
|
|
|
|||||||
| Year ended September 30, 2018 |
||||||||
| Shares sold |
3,577,672 | $ | 66,427,917 | |||||
| Shares issued in reinvestment of distributions |
1,833,349 | 34,761,364 | ||||||
| Shares redeemed |
(11,911,335 | ) | (216,978,128) | |||||
|
|
|
|||||||
| Net increase (decrease) |
(6,500,314 | ) | $ | (115,788,847) | ||||
|
|
|
|||||||
| Class R Shares: |
||||||||
| Year ended September 30, 2019 |
||||||||
| Shares sold |
2,089,705 | $ | 41,924,174 | |||||
| Shares issued in reinvestment of distributions |
204,895 | 4,003,694 | ||||||
| Shares redeemed |
(1,612,008 | ) | (32,019,228) | |||||
|
|
|
|||||||
| Net increase (decrease) |
682,592 | $ | 13,908,640 | |||||
|
|
|
|||||||
| Year ended September 30, 2018 |
||||||||
| Shares sold |
977,147 | $ | 17,937,233 | |||||
| Shares issued in reinvestment of distributions |
181,427 | 3,446,022 | ||||||
| Shares redeemed |
(2,178,750 | ) | (39,843,759) | |||||
|
|
|
|||||||
| Net increase (decrease) |
(1,020,176 | ) | $ | (18,460,504) | ||||
|
|
|
|||||||
| Class R6 Shares: |
||||||||
| Year ended September 30, 2019 |
||||||||
| Shares sold |
3,594,861 | $ | 72,892,164 | |||||
| Shares issued in reinvestment of distributions |
643,860 | 12,661,539 | ||||||
| Shares redeemed |
(9,878,250 | ) | (203,902,091) | |||||
|
|
|
|||||||
| Net increase (decrease) |
(5,639,529 | ) | $ | (118,348,388) | ||||
|
|
|
|||||||
| Year ended September 30, 2018 |
||||||||
| Shares sold |
2,535,167 | $ | 47,060,404 | |||||
| Shares issued in reinvestment of distributions |
576,101 | 10,987,844 | ||||||
| Shares redeemed |
(3,356,319 | ) | (62,348,594) | |||||
|
|
|
|||||||
| Net increase (decrease) |
(245,051 | ) | $ | (4,300,346) | ||||
|
|
|
|||||||
| 120 |
Annual Report | franklintempleton.com | ||
FRANKLIN CUSTODIAN FUNDS
NOTES TO FINANCIAL STATEMENTS
| Franklin | ||||||||
| Utilities Fund | ||||||||
|
|
|
|||||||
| Shares | Amount | |||||||
| Advisor Class Shares: |
||||||||
| Year ended September 30, 2019 |
||||||||
| Shares sold |
21,320,610 | $ | 434,204,062 | |||||
| Shares issued in reinvestment of distributions |
2,659,178 | 52,686,480 | ||||||
| Shares redeemed |
(17,744,082 | ) | (354,492,714) | |||||
|
|
|
|||||||
| Net increase (decrease) |
6,235,706 | $ | 132,397,828 | |||||
|
|
|
|||||||
| Year ended September 30, 2018 |
||||||||
| Shares sold |
14,395,975 | $ | 268,529,702 | |||||
| Shares issued in reinvestment of distributions |
2,102,341 | 40,138,480 | ||||||
| Shares redeemed |
(17,010,198 | ) | (312,598,481) | |||||
|
|
|
|||||||
| Net increase (decrease) |
(511,882 | ) | $ | (3,930,299) | ||||
|
|
|
|||||||
aMay include a portion of Class C shares that were automatically converted to Class A.
bFor the period September 10, 2018 (effective date) to September 30, 2018.
cClass M was closed to investors on June 8, 2018.
dFor the period January 25, 2018 (effective date) to June 8, 2018.
3. Transactions with Affiliates
Franklin Resources, Inc. is the holding company for various subsidiaries that together are referred to as Franklin Templeton. Certain officers and trustees of the Trust are also officers and/or directors of the following subsidiaries:
| Subsidiary | Affiliation | |||
| Franklin Advisers, Inc. (Advisers) |
Investment manager | |||
| Franklin Templeton Institutional, LLC (FT Institutional) |
Investment manager | |||
| Franklin Templeton Services, LLC (FT Services) |
Administrative manager | |||
| Franklin Templeton Distributors, Inc. (Distributors) |
Principal underwriter | |||
| Franklin Templeton Investor Services, LLC (Investor Services) |
Transfer agent | |||
| franklintempleton.com | Annual Report | 121 | ||
FRANKLIN CUSTODIAN FUNDS
NOTES TO FINANCIAL STATEMENTS
3. Transactions with Affiliates (continued)
a. Management Fees
Franklin Income Fund and Franklin Utilities Fund pay an investment management fee to Advisers based on the month-end net assets of each of the Funds as follows:
| Annualized Fee Rate | Net Assets | |
| 0.625% |
Up to and including $100 million | |
| 0.500% |
Over $100 million, up to and including $250 million | |
| 0.450% |
Over $250 million, up to and including $7.5 billion | |
| 0.440% |
Over $7.5 billion, up to and including $10 billion | |
| 0.430% |
Over $10 billion, up to and including $12.5 billion | |
| 0.420% |
Over $12.5 billion, up to and including $15 billion | |
| 0.400% |
Over $15 billion, up to and including $17.5 billion | |
| 0.380% |
Over $17.5 billion, up to and including $20 billion | |
| 0.360% |
Over $20 billion, up to and including $35 billion | |
| 0.355% |
Over $35 billion, up to and including $50 billion | |
| 0.350% |
Over $50 billion, up to and including $65 billion | |
| 0.345% |
Over $65 billion, up to and including $80 billion | |
| 0.340% |
In excess of $80 billion |
Franklin DynaTech Fund, Franklin Growth Fund and Franklin U.S. Government Securities Fund pay an investment management fee to Advisers based on the month-end net assets of each of the Funds as follows:
| Annualized Fee Rate | Net Assets | |
| 0.625% |
Up to and including $100 million | |
| 0.500% |
Over $100 million, up to and including $250 million | |
| 0.450% |
Over $250 million, up to and including $7.5 billion | |
| 0.440% |
Over $7.5 billion, up to and including $10 billion | |
| 0.430% |
Over $10 billion, up to and including $12.5 billion | |
| 0.420% |
Over $12.5 billion, up to and including $15 billion | |
| 0.400% |
Over $15 billion, up to and including $17.5 billion | |
| 0.380% |
Over $17.5 billion, up to and including $20 billion | |
| 0.360% |
Over $20 billion, up to and including $35 billion | |
| 0.355% |
Over $35 billion, up to and including $50 billion | |
| 0.350% |
In excess of $50 billion |
For the year ended September 30, 2019, each Fund’s gross effective investment management fee rate based on average daily net assets was as follows:
| Franklin DynaTech Fund |
Franklin Growth Fund |
Franklin Income Fund |
Franklin U.S. Government Securities Fund |
Franklin Utilities Fund |
||||||||||||||
|
|
0.459% |
|
|
0.441% |
|
|
0.374% |
|
|
0.453% |
|
|
0.457% |
| ||||
| 122 |
Annual Report | franklintempleton.com | ||
FRANKLIN CUSTODIAN FUNDS
NOTES TO FINANCIAL STATEMENTS
Effective October 24, 2019, under a subadvisory agreement, FT Institutional, an affiliate of Advisers, will provide subadvisory services to Franklin U.S. Government Securities Fund. The subadvisory fee will be paid by Advisers based on the Fund’s average daily net assets, and will not be an additional expense of the Fund.
b. Administrative Fees
Under an agreement with Advisers, FT Services provides administrative services to the Funds. The fee is paid by Advisers based on each of the Funds’ average daily net assets, and is not an additional expense of the Funds.
c. Distribution Fees
The Board has adopted distribution plans for each share class, with the exception of Class R6 and Advisor Class shares, pursuant to Rule 12b-1 under the 1940 Act. Under the Funds’ Class A and A1 reimbursement distribution plans, the Funds reimburse Distributors for costs incurred in connection with the servicing, sale and distribution of each Fund’s shares up to the maximum annual plan rate for each class. Under the Class A and A1 reimbursement distribution plans, costs exceeding the maximum for the current plan year cannot be reimbursed in subsequent periods. In addition, under the Funds’ Class C and R compensation distribution plans, the Funds pay Distributors for costs incurred in connection with the servicing, sale and distribution of each Fund’s shares up to the maximum annual plan rate for each class. The plan year, for purposes of monitoring compliance with the maximum annual plan rates, is February 1 through January 31 for each Fund.
The maximum annual plan rates, based on the average daily net assets, for each class, are as follows:
| Franklin DynaTech Fund |
Franklin Growth Fund |
Franklin Income Fund |
Franklin U.S. Government Securities Fund |
Franklin Utilities Fund | ||||||||||||||
| Reimbursement Plans: |
||||||||||||||||||
| Class A |
0.25% | 0.25% | 0.25% | 0.25% | 0.25% | |||||||||||||
| Class A1 |
—% | —% | 0.15% | 0.15% | 0.15% | |||||||||||||
| Compensation Plans: |
||||||||||||||||||
| Class C |
1.00% | 1.00% | 0.65% | 0.65% | 0.65% | |||||||||||||
| Class R |
0.50% | 0.50% | 0.50% | 0.50% | 0.50% | |||||||||||||
d. Sales Charges/Underwriting Agreements
Front-end sales charges and contingent deferred sales charges (CDSC) do not represent expenses of the Funds. These charges are deducted from the proceeds of sales of fund shares prior to investment or from redemption proceeds prior to remittance, as applicable. Distributors has advised the Funds of the following commission transactions related to the sales and redemptions of the Funds’ shares for the year:
| Franklin DynaTech Fund |
Franklin Growth Fund |
Franklin Income Fund |
Franklin U.S. Government Securities Fund |
Franklin Utilities Fund | ||||||||||||||
| Sales charges retained net of commissions paid to unaffiliated brokers/dealers |
$1,948,791 | $1,347,568 | $3,272,500 | $84,688 | $189,110 | |||||||||||||
| CDSC retained |
$ 103,500 | $ 69,748 | $ 817,809 | $33,351 | $ 22,459 | |||||||||||||
Effective March 1, 2019, certain front-end sales charges on Class A and A1 shares, if any, were lowered. Further details are disclosed in the Funds’ Prospectus.
| franklintempleton.com | Annual Report | 123 | ||
FRANKLIN CUSTODIAN FUNDS
NOTES TO FINANCIAL STATEMENTS
3. Transactions with Affiliates (continued)
e. Transfer Agent Fees
Each class of shares pays transfer agent fees to Investor Services for its performance of shareholder servicing obligations. The fees are based on an annualized asset based fee of 0.02% plus a transaction based fee. In addition, each class reimburses Investor Services for out of pocket expenses incurred and, except for Class R6, reimburses shareholder servicing fees paid to third parties. These fees are allocated daily based upon their relative proportion of such classes’ aggregate net assets. Class R6 pays Investor Services transfer agent fees specific to that class.
For the year ended September 30, 2019, the Funds paid transfer agent fees as noted in the Statements of Operations of which the following amounts were retained by Investor Services:
| Franklin DynaTech Fund |
Franklin Growth Fund |
Franklin Income Fund |
Franklin U.S. Government |
Franklin Utilities Fund |
||||||||||||||||
| Transfer agent fees |
$3,263,368 | $7,054,587 | $27,027,775 | $3,723,605 | $3,020,909 | |||||||||||||||
f. Investments in Affiliated Management Investment Companies
Certain or all Funds invest in one or more affiliated management investment companies for purposes other than exercising a controlling influence over the management or policies. Management fees paid by the Funds are waived on assets invested in the affiliated management investment companies, as noted in the Statements of Operations, in an amount not to exceed the management and administrative fees paid directly or indirectly by each affiliate. During the year ended September 30, 2019, investments in affiliated management investment companies were as follows:
| Value at of Year |
Purchases | Sales | Realized Gain (Loss) |
Net Change in Unrealized Appreciation (Depreciation) |
Value at End of Year |
Number of Held at End |
Investment Income |
|||||||||||||||||||||||||||||||||
|
Franklin DynaTech Fund |
|
|||||||||||||||||||||||||||||||||||||||
| Non-Controlled Affiliates |
|
|||||||||||||||||||||||||||||||||||||||
| Dividends | ||||||||||||||||||||||||||||||||||||||||
|
|
|
|||||||||||||||||||||||||||||||||||||||
| Institutional Fiduciary Trust Money Market Portfolio, 1.71% |
$ | 125,141,525 | $ | 1,901,802,709 | $ | (1,587,592,513 | ) | $ — | $ — | $ | 439,351,721 | 439,351,721 | $ | 5,244,134 | ||||||||||||||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||||||
| Franklin Growth Fund |
|
|||||||||||||||||||||||||||||||||||||||
| Non-Controlled Affiliates |
|
|||||||||||||||||||||||||||||||||||||||
| Dividends | ||||||||||||||||||||||||||||||||||||||||
|
|
|
|||||||||||||||||||||||||||||||||||||||
| Institutional Fiduciary Trust Money Market Portfolio, 1.71% |
$ | 224,477,141 | $ | 1,246,406,265 | $ | (1,275,156,424 | ) | $ — | $ — | $ | 195,726,982 | 195,726,982 | $ | 4,811,993 | ||||||||||||||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||||||
| Franklin Income Fund |
|
|||||||||||||||||||||||||||||||||||||||
| Non-Controlled Affiliates |
|
|||||||||||||||||||||||||||||||||||||||
| Dividends | ||||||||||||||||||||||||||||||||||||||||
|
|
|
|||||||||||||||||||||||||||||||||||||||
| Institutional Fiduciary Trust Money Market Portfolio, 1.71% |
$ | 351,285,912 | $ | 18,895,140,807 | $ | (17,860,381,666 | ) | $ — | $ — | $ | 1,386,045,053 | 1,386,045,053 | $ | 21,027,211 | ||||||||||||||||||||||||||
| 124 |
Annual Report | franklintempleton.com | ||
FRANKLIN CUSTODIAN FUNDS
NOTES TO FINANCIAL STATEMENTS
| Value at of Year |
Purchases | Sales | Realized Gain (Loss) |
Net Change in Unrealized Appreciation (Depreciation) |
Value at End of Year |
Number of Held at End |
Investment Income |
|||||||||||||||||||||||||||||||||
|
Franklin Income Fund (continued) |
|
|||||||||||||||||||||||||||||||||||||||
| Non-Controlled Affiliates (continued) |
|
|||||||||||||||||||||||||||||||||||||||
| |
Income from securities loaned |
| ||||||||||||||||||||||||||||||||||||||
|
|
|
|||||||||||||||||||||||||||||||||||||||
| Institutional Fiduciary Trust Money Market Portfolio, 1.71% |
$ | 12,623,000 | $ | 67,294,000 | $ | (56,015,000 | ) | $ — | $ — | $ | 23,902,000 | 23,902,000 | $ | 115,507 | ||||||||||||||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||||||
| Total Affiliated Securities |
$ | 363,908,912 | $ | 18,962,434,807 | $ | (17,916,396,666 | ) | $ — | $ — | $ | 1,409,947,053 | $ | 21,142,718 | |||||||||||||||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||||||
| Franklin U.S. Government Securities Fund |
|
|||||||||||||||||||||||||||||||||||||||
| Non-Controlled Affiliates |
|
|||||||||||||||||||||||||||||||||||||||
| Dividends | ||||||||||||||||||||||||||||||||||||||||
|
|
|
|||||||||||||||||||||||||||||||||||||||
| Institutional Fiduciary Trust Money Market Portfolio, 1.71% |
$ | 93,109,667 | $ | 1,163,313,178 | $ | (1,169,614,376 | ) | $ — | $ — | $ | 86,808,469 | 86,808,469 | $ | 2,940,395 | ||||||||||||||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||||||
| Franklin Utilities Fund |
|
|||||||||||||||||||||||||||||||||||||||
| Non-Controlled Affiliates |
|
|||||||||||||||||||||||||||||||||||||||
| Dividends | ||||||||||||||||||||||||||||||||||||||||
|
|
|
|||||||||||||||||||||||||||||||||||||||
| Institutional Fiduciary Trust Money Market Portfolio, 1.71% |
$ | 17,808,342 | $ | 809,185,993 | $ | (791,623,278 | ) | $ — | $ — | $ | 35,371,057 | 35,371,057 | $ | 860,141 | ||||||||||||||||||||||||||
| |
Income from securities loaned |
| ||||||||||||||||||||||||||||||||||||||
|
|
|
|||||||||||||||||||||||||||||||||||||||
| Institutional Fiduciary Trust Money Market Portfolio, 1.71% |
— | 73,907,858 | (73,907,858 | ) | — | — | — | — | 10,604 | |||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||||||
| Total Affiliated Securities |
$ | 17,808,342 | $ | 883,093,851 | $ | (865,531,136 | ) | $ — | $ — | $ | 35,371,057 | $ | 870,745 | |||||||||||||||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||||||
g. Waiver and Expense Reimbursements
For Franklin Income Fund, Investor Services has contractually agreed in advance to waive or limit its fees so that the Class R6 transfer agent fees do not exceed 0.02% based on the average net assets of the class until January 31, 2020. For Franklin DynaTech Fund, Franklin Growth Fund, Franklin U.S. Government Securities Fund and Franklin Utilities Fund, Investor Services has contractually agreed in advance to waive or limit its fees so that the Class R6 transfer agent fees do not exceed 0.03% based on the average net assets of the class until January 31, 2020.
Prior to February 1, 2019, expenses of Franklin Income Fund for Class R6 were limited to 0.01% based on the average net assets of the class.
Prior to February 1, 2019, expenses of Franklin DynaTech Fund, Franklin Growth Fund, Franklin U.S. Government Securities Fund and Franklin Utilities Fund for Class R6 were limited to 0.02% based on the average net assets of the class.
| franklintempleton.com | Annual Report | 125 | ||
FRANKLIN CUSTODIAN FUNDS
NOTES TO FINANCIAL STATEMENTS
3. Transactions with Affiliates (continued)
h. Other Affiliated Transactions
At September 30, 2019, one or more of the funds in Franklin Fund Allocator Series owned a percentage of the following Funds’ outstanding shares:
| Franklin DynaTech Fund |
Franklin Growth Fund |
Franklin Income Fund |
Franklin U.S. Government | |||
| 1.8% |
5.1% | 1.7% | 5.6% |
i. Interfund Transactions
Franklin Income Fund engaged in purchases and sales of investments with funds or other accounts that have common investment managers (or affiliated investment managers), directors, trustees or officers. During the year ended September 30, 2019, these purchase and sale transactions aggregated $31,420,250 and $0, respectively.
4. Expense Offset Arrangement
The Funds have entered into an arrangement with their custodian whereby credits realized as a result of uninvested cash balances are used to reduce a portion of the Funds’ custodian expenses. During the year ended September 30, 2019, the custodian fees were reduced as noted in the Statements of Operations.
5. Income Taxes
For tax purposes, capital losses may be carried over to offset future capital gains.
At September 30, 2019, the capital loss carryforwards were as follows:
| Franklin Income Fund |
Franklin U.S. Government |
|||||||
|
Capital loss carryforwards not subject to expiration: |
||||||||
| Short term |
$ | 1,721,032,147 | $221,741,390 | |||||
| Long term |
738,314,568 | 340,183,847 | ||||||
|
|
|
|||||||
|
Total capital loss carryforwards |
$ |
2,459,346,715 |
|
|
$561,925,237 |
| ||
|
|
|
|||||||
On September 30, 2019, Franklin U.S. Government Securities Fund had expired capital loss carryforwards of $4,445,156, which were reclassified to paid-in capital.
For tax purposes, the Funds may elect to defer any portion of a post-October capital loss or late-year ordinary loss to the first day of the following fiscal year. At September 30, 2019, Franklin DynaTech Fund deferred late-year ordinary losses of $14,297,131.
| 126 |
Annual Report | franklintempleton.com | ||
FRANKLIN CUSTODIAN FUNDS
NOTES TO FINANCIAL STATEMENTS
The tax character of distributions paid during the years ended September 30, 2019 and 2018, was as follows:
| Franklin DynaTech Fund |
Franklin Growth Fund |
|||||||||||||||
|
|
|
|||||||||||||||
| 2019 | 2018 | 2019 | 2018 | |||||||||||||
| Distributions paid from: |
||||||||||||||||
| Ordinary income |
$ | — | $ | — | $ | 77,950,588 | $ | 64,350,332 | ||||||||
| Long term capital gain |
168,290,858 | 77,650,256 | 159,117,116 | 343,841,429 | ||||||||||||
| $ | 168,290,858 | $ | 77,650,256 | $ | 237,067,704 | $ | 408,191,761 | |||||||||
| Franklin Income Fund |
Franklin U.S. Government Securities Fund |
|||||||||||||||
|
|
|
|||||||||||||||
| 2019 | 2018 | 2019 | 2018 | |||||||||||||
| Distributions paid from: |
||||||||||||||||
| Ordinary income |
$ | 3,821,492,884 | $ | 3,987,779,469 | $ | 157,276,563 | $ | 164,642,414 | ||||||||
|
|
|
|||||||||||||||
| Franklin Utilities Fund |
||||||||
|
|
|
|
|
|||||
| 2019 | 2018 | |||||||
| Distributions paid from: |
||||||||
| Ordinary income |
$ | 159,770,655 | $ | 169,581,554 | ||||
| Long term capital gain |
173,300,087 | 102,781,203 | ||||||
| $ | 333,070,742 | $ | 272,362,757 | |||||
At September 30, 2019, the cost of investments, net unrealized appreciation (depreciation), undistributed ordinary income and undistributed long term capital gains for income tax purposes were as follows:
| Franklin | Franklin | Franklin | ||||||||||
| DynaTech Fund | Growth Fund | Income Fund | ||||||||||
|
|
||||||||||||
| Cost of investments |
$ | 5,256,885,741 | $ | 5,527,334,041 | $ | 72,092,210,863 | ||||||
| Unrealized appreciation |
$ | 3,612,648,236 | $ | 10,696,391,727 | $ | 7,006,677,634 | ||||||
| Unrealized depreciation |
(27,122,397 | ) | (197,084,963 | ) | (4,931,398,119 | ) | ||||||
| Net unrealized appreciation (depreciation) |
$ | 3,585,525,839 | $ | 10,499,306,764 | $ | 2,075,279,515 | ||||||
| Distributable earnings: |
||||||||||||
| Undistributed ordinary income |
$ | — | $ | 55,199,560 | $ | 22,461,916 | ||||||
| Undistributed long term capital gains |
71,650,551 | 724,326,295 | — | |||||||||
| Total distributable earnings |
$ | 71,650,551 | $ | 779,525,855 | $ | 22,461,916 | ||||||
| franklintempleton.com | Annual Report | 127 | ||
FRANKLIN CUSTODIAN FUNDS
NOTES TO FINANCIAL STATEMENTS
5. Income Taxes (continued)
| Franklin U.S. Government |
Franklin Utilities Fund |
|||||||
| Cost of investments |
$5,048,581,494 | $ | 3,167,655,376 | |||||
| Unrealized appreciation |
$ 119,403,900 | $ | 3,823,127,484 | |||||
| Unrealized depreciation |
(12,052,199 | ) | (8,907,948 | ) | ||||
| Net unrealized appreciation (depreciation) |
$ 107,351,701 | $ | 3,814,219,536 | |||||
| Distributable earnings: |
||||||||
| Undistributed ordinary income |
$ 2,785,756 | $ | 21,310,394 | |||||
| Undistributed long term capital gains |
— | 89,565,814 | ||||||
| Total distributable earnings |
$ 2,785,756 | $ | 110,876,208 | |||||
Differences between income and/or capital gains as determined on a book basis and a tax basis are primarily due to differing treatments of paydown losses, bond discounts and premiums, corporate actions, equity-linked securities, wash sales and gains realized on in-kind shareholder redemptions.
Franklin Growth Fund and Franklin Utilities Fund utilized a tax accounting practice to treat a portion of the proceeds from capital shares redeemed as a distribution from realized capital gains.
6. Investment Transactions
Purchases and sales of investments (excluding short term securities and in-kind transactions) for the year ended September 30, 2019, were as follows:
| Franklin DynaTech Fund |
Franklin Growth Fund |
Franklin Income Fund |
Franklin U.S. Government |
Franklin Utilities Fund |
||||||||||||||||
| Purchases |
$2,695,184,796 | $ 751,866,127 | $31,487,818,452 | $2,087,593,482 | $487,386,909 | |||||||||||||||
| Sales |
$1,450,116,687 | $1,383,278,076 | $32,949,123,459 | $2,235,963,692 | $615,817,011 | |||||||||||||||
At September 30, 2019, in connection with securities lending transactions, Franklin Income Fund loaned corporate bonds and received $29,878,422 of cash collateral. The gross amount of recognized liability for such transactions is included in payable upon return of securities loaned in the Statement of Assets and Liabilities. The agreements can be terminated at any time.
7. Credit Risk and Defaulted Securities
At September 30, 2019, Franklin Income Fund had 31.8% of its portfolio invested in high yield securities, senior secured floating rate loans, or other securities rated below investment grade and unrated securities, if any. These securities may be more sensitive to economic conditions causing greater price volatility and are potentially subject to a greater risk of loss due to default than higher rated securities.
Franklin Income Fund held defaulted securities and/or other securities for which the income has been deemed uncollectible. At September 30, 2019, the aggregate value of these securities was $627,680,937, representing 0.8% of the Fund’s net assets. The Fund discontinues accruing income on securities for which income has been deemed uncollectible and provides an estimate for losses on interest receivable. The securities have been identified in the accompanying Statement of Investments.
| 128 |
Annual Report | franklintempleton.com | ||
FRANKLIN CUSTODIAN FUNDS
NOTES TO FINANCIAL STATEMENTS
8. Other Derivative Information
At September 30, 2019, investments in derivative contracts are reflected in the Statements of Assets and Liabilities as follows:
| Asset Derivatives |
Liability Derivatives |
|||||||||||||
| Derivative Contracts Not Accounted for as Hedging Instruments |
Statements of Assets and Liabilities Location |
Fair Value | Statements of Assets and Liabilities Location |
Fair Value | ||||||||||
|
|
||||||||||||||
| Franklin Income Fund |
||||||||||||||
| Interest rate contracts |
Variation margin on futures |
$ | 15,254,808 | a | Variation margin on futures contracts |
$ | — | |||||||
| Equity contracts |
Investments in securities, at value | 369,200,000 | b | Options written, at value | 119,615,000 | |||||||||
|
|
|
|
|
|||||||||||
| Totals |
$ | 384,454,808 | $ | 119,615,000 | ||||||||||
|
|
|
|
|
|||||||||||
aThis amount reflects the cumulative appreciation (depreciation) of futures contracts as reported in the Statement of Investments. Only the variation margin receivable/payable at year end is separately reported within the Statements of Assets and Liabilities. Prior variation margin movements were recorded to cash upon receipt or payment.
bPurchased option contracts are included in investments in securities, at value in the Statements of Assets and Liabilities.
For the year ended September 30, 2019, the effect of derivative contracts in the Statements of Operations was as follows:
| Derivative Contracts Not Accounted for as Hedging Instruments |
Statements of Operations Location |
Net Realized Gain (Loss) for the Year |
Statements of Operations Location |
Net Change in Unrealized | ||||||
| Net realized gain (loss) from: | Net change in unrealized appreciation (depreciation) on: | |||||||||
| Franklin Income Fund |
||||||||||
| Interest rate contracts |
Futures contracts | $(78,797,490) | Futures contracts | $15,254,808 | ||||||
| Credit contracts |
Swap contracts | 1,944,731 | Swap contracts | — | ||||||
| Equity contracts |
Investments | (45,179,361) | a | Investments | (63,190,762)a | |||||
| Written options | 157,184,184 | Written options | 33,247,542 | |||||||
| Totals |
$ 35,152,064 | $(14,688,412) | ||||||||
|
|
|
|
| |||||||
aPurchased option contracts are included in net realized gain (loss) from investments and net change in unrealized appreciation (depreciation) on investments in the Statements of Operations.
For the year ended September 30, 2019, the average month end notional amount of futures contracts, options and swap contracts represented $447,433,894, 46,488,615 shares and $46,153,846, respectively.
See Note 1(e) regarding derivative financial instruments.
| franklintempleton.com | Annual Report | 129 | ||
FRANKLIN CUSTODIAN FUNDS
NOTES TO FINANCIAL STATEMENTS
9. Holdings of 5% Voting Securities of Portfolio Companies
The 1940 Act defines “affiliated companies” to include investments in portfolio companies in which a fund owns 5% or more of the outstanding voting securities. During the year ended September 30, 2019, investments in “affiliated companies” were as follows:
| Name of Issuer | Value at of Year |
Purchases | Sales | Realized Gain (Loss) |
Net Change in Unrealized Appreciation (Depreciation) |
Value at End of Year |
Number of Shares/Principal at End of Year |
Investment Income |
||||||||||||||||||||||||
| Franklin Income Fund |
|
|||||||||||||||||||||||||||||||
| Non-Controlled Affiliates |
|
|||||||||||||||||||||||||||||||
| Dividends | ||||||||||||||||||||||||||||||||
| Talos Energy Inc. |
$ | 181,082,282 | $ | — | $ | (132,423,891 | ) | $ | (66,146,896 | ) | $ | 17,488,505 | $ | — | a | — | $ | — | ||||||||||||||
| Chesapeake Energy Corp. |
— | 442,992,135 | b | (22,711,571 | ) | (6,185,255 | ) | (88,385,309 | ) | 325,710,000 | 231,000,000 | — | ||||||||||||||||||||
| Chesapeake Energy Corp., cvt. pfd., 5.75% |
60,676,870 | 10,698,000 | — | — | (26,653,432 | ) | 44,721,438 | 112,980 | 6,496,350 | |||||||||||||||||||||||
|
|
|
|
|
|||||||||||||||||||||||||||||
| $ | 241,759,152 | $ | 453,690,135 | $ | (155,135,462 | ) | $ | (72,332,151 | ) | $ | (97,550,236 | ) | $ | 370,431,438 | $ | 6,496,350 | ||||||||||||||||
|
|
|
|
|
|||||||||||||||||||||||||||||
| Interest | ||||||||||||||||||||||||||||||||
|
|
|
|||||||||||||||||||||||||||||||
| Chesapeake Energy Corp., cvt., senior note, 5.50%, 9/15/26 |
133,756,650 | 23,376,653 | b | (112,087,784 | )b | (1,595 | ) | $ | (38,968,924 | ) | 6,075,000 | 10,000,000 | 6,958,478 | |||||||||||||||||||
| Chesapeake Energy Corp., senior bond, 8.00%, 6/15/27 |
255,500,000 | 83,519,806 | b | (117,000,000 | )b | — | (86,519,806 | ) | 135,500,000 | 200,000,000 | 19,557,778 | |||||||||||||||||||||
| Chesapeake Energy Corp., senior note, 7.00%, 10/01/24 |
— | 277,576,228 | b | — | — | (64,704,339 | ) | 212,871,889 | 295,143,000 | 19,973,510 | ||||||||||||||||||||||
| Chesapeake Energy Corp., senior note, 8.00%, 1/15/25 |
424,145,000 | 158,409,081 | b | (30,781,250 | ) | 840,944 | (156,126,275 | ) | 396,487,500 | 545,000,000 | 44,638,889 | |||||||||||||||||||||
| Chesapeake Energy Corp., senior note, 7.50%, 10/01/26 |
50,062,500 | 74,204,022 | b | — | — | (35,764,522 | ) | 88,502,000 | 129,200,000 | 9,729,083 | ||||||||||||||||||||||
| Chesapeake Energy Corp., senior note, 144A, 8.00%, 3/15/26 |
— | 644,290,580 | b | — | — | (195,790,580 | ) | 448,500,000 | 650,000,000 | 25,566,667 | ||||||||||||||||||||||
|
|
|
|
|
|||||||||||||||||||||||||||||
| $ | 863,464,150 | $ | 1,261,376,370 | $ | (259,869,034 | ) | $ | 839,349 | $ | (577,874,446 | ) | $ | 1,287,936,389 | $ | 126,424,405 | |||||||||||||||||
|
|
|
|
|
|||||||||||||||||||||||||||||
| Total Affiliated Securities (Value is 2.2% of Net Assets) |
$ | 1,105,223,302 | $ | 1,715,066,505 | $ | (415,004,496 | ) | $ | (71,492,802 | ) | $ | (675,424,682 | ) | $ | 1,658,367,827 | $ | 132,920,755 | |||||||||||||||
|
|
|
|
|
|||||||||||||||||||||||||||||
aAs of September 30, 2019, no longer held by the fund.
bMay include accretion, amortization, partnership adjustments, and/or corporate actions.
10. Upcoming Reorganization
On July 17, 2019, the Board for Franklin Strategic Series approved a proposal to reorganize Franklin Select U.S. Equity Fund with and into Franklin Growth Fund, subject to approval by the shareholders of Franklin Select U.S. Equity Fund.
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FRANKLIN CUSTODIAN FUNDS
NOTES TO FINANCIAL STATEMENTS
11. Credit Facility
The Funds, together with other U.S. registered and foreign investment funds (collectively, Borrowers), managed by Franklin Templeton, are borrowers in a joint syndicated senior unsecured credit facility totaling $2 billion (Global Credit Facility) which matures on February 7, 2020. This Global Credit Facility provides a source of funds to the Borrowers for temporary and emergency purposes, including the ability to meet future unanticipated or unusually large redemption requests.
Under the terms of the Global Credit Facility, the Funds shall, in addition to interest charged on any borrowings made by the Funds and other costs incurred by the Funds, pay their share of fees and expenses incurred in connection with the implementation and maintenance of the Global Credit Facility, based upon their relative share of the aggregate net assets of all of the Borrowers, including an annual commitment fee of 0.15% based upon the unused portion of the Global Credit Facility. These fees are reflected in other expenses in the Statements of Operations. During the year ended September 30, 2019, the Funds did not use the Global Credit Facility.
12. Redemptions In-Kind
During the year ended September 30, 2019 and year ended September 30, 2018, the Franklin Growth Fund realized $52,349,028 and $42,189,159, respectively, of net gains resulting from redemptions in-kind in which a shareholder redeemed fund shares for cash and securities held by the Fund. Because such gains are not taxable to the Fund and are not distributed to remaining shareholders, they are reclassified from accumulated net realized gains to paid-in capital.
13. Fair Value Measurements
The Funds follow a fair value hierarchy that distinguishes between market data obtained from independent sources (observable inputs) and the Funds’ own market assumptions (unobservable inputs). These inputs are used in determining the value of the Funds’ financial instruments and are summarized in the following fair value hierarchy:
| • | Level 1 – quoted prices in active markets for identical financial instruments |
| • | Level 2 – other significant observable inputs (including quoted prices for similar financial instruments, interest rates, prepayment speed, credit risk, etc.) |
| • | Level 3 – significant unobservable inputs (including the Funds’ own assumptions in determining the fair value of financial instruments) |
The input levels are not necessarily an indication of the risk or liquidity associated with financial instruments at that level.
A summary of inputs used as of September 30, 2019, in valuing the Funds’ assets and liabilities carried at fair value, is as follows:
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||
| Franklin DynaTech Fund |
||||||||||||||||
| Assets: |
||||||||||||||||
| Investments in Securities:a |
||||||||||||||||
| Equity Investments |
$ | 8,325,204,724 | $ | — | $ | — | $ | 8,325,204,724 | ||||||||
| Short Term Investments |
439,351,721 | 77,855,135 | — | 517,206,856 | ||||||||||||
|
|
|
|||||||||||||||
| Total Investments in Securities |
$ | 8,764,556,445 | $ | 77,855,135 | $ | — | $ | 8,842,411,580 | ||||||||
|
|
|
|||||||||||||||
| franklintempleton.com | Annual Report | 131 | ||
FRANKLIN CUSTODIAN FUNDS
NOTES TO FINANCIAL STATEMENTS
13. Fair Value Measurements (continued)
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||
| Franklin Growth Fund |
||||||||||||||||
| Assets: |
||||||||||||||||
| Investments in Securities:a |
||||||||||||||||
| Equity Investments |
$ | 15,830,913,823 | $ | — | $ | — | $ | 15,830,913,823 | ||||||||
| Short Term Investments |
195,726,982 | — | — | 195,726,982 | ||||||||||||
|
|
|
|||||||||||||||
| Total Investments in Securities |
$ | 16,026,640,805 | $ | — | $ | — | $ | 16,026,640,805 | ||||||||
|
|
|
|||||||||||||||
| Franklin Income Fund |
||||||||||||||||
| Assets: |
||||||||||||||||
| Investments in Securities:a |
||||||||||||||||
| Equity Investments:b |
||||||||||||||||
| Energy |
$ | 4,358,916,515 | $ | 44,721,438 | $ | — | $ | 4,403,637,953 | ||||||||
| Financials |
4,420,575,425 | 188,912,500 | — | 4,609,487,925 | ||||||||||||
| All Other Equity Investments |
14,809,598,711 | — | — | 14,809,598,711 | ||||||||||||
| Equity-Linked Securities |
— | 11,176,907,038 | — | 11,176,907,038 | ||||||||||||
| Index-Linked Notes |
— | 197,316,623 | — | 197,316,623 | ||||||||||||
| Convertible Bonds |
— | 316,680,860 | — | 316,680,860 | ||||||||||||
| Corporate Bonds |
— | 26,949,605,434 | — | 26,949,605,434 | ||||||||||||
| Senior Floating Rate Interests |
— | 1,568,987,538 | — | 1,568,987,538 | ||||||||||||
| U.S. Government and Agency Securities |
— | 8,099,682,617 | — | 8,099,682,617 | ||||||||||||
| Mortgage-Backed Securities |
— | 334,972,379 | — | 334,972,379 | ||||||||||||
| Escrows and Litigation Trusts |
— | — | — | c | — | |||||||||||
| Options Purchased |
369,200,000 | — | — | 369,200,000 | ||||||||||||
| Short Term Investments |
1,409,947,053 | 25,807,809 | — | 1,435,754,862 | ||||||||||||
|
|
|
|||||||||||||||
| Total Investments in Securities |
$ | 25,368,237,704 | $ | 48,903,594,236 | $ | — | $ | 74,271,831,940 | ||||||||
|
|
|
|||||||||||||||
| Other Financial Instruments: |
||||||||||||||||
| Futures Contracts |
$ | 15,254,808 | $ | — | $ | — | $ | 15,254,808 | ||||||||
|
|
|
|||||||||||||||
| Liabilities: |
||||||||||||||||
| Other Financial Instruments: |
||||||||||||||||
| Options Written |
$ | 119,615,000 | $ | — | $ | — | $ | 119,615,000 | ||||||||
|
|
|
|||||||||||||||
| Franklin U.S. Government Securities Fund |
||||||||||||||||
| Assets: |
||||||||||||||||
| Investments in Securities:a |
||||||||||||||||
| Mortgage-Backed Securities |
$ | — | $ | 5,048,328,271 | $ | — | $ | 5,048,328,271 | ||||||||
| U.S. Government and Agency Securities |
— | 20,796,455 | — | 20,796,455 | ||||||||||||
| Short Term Investments |
86,808,469 | — | — | 86,808,469 | ||||||||||||
|
|
|
|||||||||||||||
| Total Investments in Securities |
$ | 86,808,469 | $ | 5,069,124,726 | $ | — | $ | 5,155,933,195 | ||||||||
|
|
|
|||||||||||||||
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FRANKLIN CUSTODIAN FUNDS
NOTES TO FINANCIAL STATEMENTS
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||
| Franklin Utilities Fund |
||||||||||||||||
| Assets: |
||||||||||||||||
| Investments in Securities:a |
||||||||||||||||
| Equity Investments |
$ | 6,939,666,776 | $ | — | $ | — | $ | 6,939,666,776 | ||||||||
| Corporate Bonds |
— | 6,837,079 | — | 6,837,079 | ||||||||||||
| Short Term Investments |
35,371,057 | — | — | 35,371,057 | ||||||||||||
| Total Investments in Securities |
$ | 6,975,037,833 | $ | 6,837,079 | $ | — | $ | 6,981,874,912 | ||||||||
aFor detailed categories, see the accompanying Statement of Investments.
bIncludes common, preferred and convertible preferred stocks.
cIncludes securities determined to have no value at September 30, 2019.
A reconciliation of assets in which Level 3 inputs are used in determining fair value is presented when there are significant Level 3 financial instruments at the beginning and/or end of the year.
14. Subsequent Events
The Funds have evaluated subsequent events through the issuance of the financial statements and determined that no events have occurred that require disclosure other than those already disclosed in the financial statements.
Abbreviations
| Currency | Selected Portfolio | |||||||
| EUR | Euro | ADR | American Depositary Receipt | |||||
| USD |
United States Dollar | DIP | Debtor-In-Possession | |||||
| FHLMC | Federal Home Loan Mortgage Corp. | |||||||
| FRN | Floating Rate Note | |||||||
| LIBOR | London InterBank Offered Rate | |||||||
| SF | Single Family | |||||||
| SPX B | S&P 500 Index Buy-Write | |||||||
| SPX B DT | S&P 500 Index Buy-Write Distribution | |||||||
| SPXDIV | S&P 500 Dividend Points | |||||||
| franklintempleton.com | Annual Report | 133 | ||
FRANKLIN CUSTODIAN FUNDS
Report of Independent Registered Public Accounting Firm
To the Board of Trustees of Franklin Custodian Funds and Shareholders of Franklin DynaTech Fund, Franklin Growth Fund, Franklin Income Fund, Franklin U.S. Government Securities Fund, and Franklin Utilities Fund
Opinions on the Financial Statements
We have audited the accompanying statements of assets and liabilities, including the statements of investments, of Franklin DynaTech Fund, Franklin Growth Fund, Franklin Income Fund, Franklin U.S. Government Securities Fund, and Franklin Utilities Fund (the “Funds”) as of September 30, 2019, the related statements of operations for the year ended September 30, 2019, the statements of changes in net assets for each of the two years in the period ended September 30, 2019, including the related notes, and the financial highlights for each of the periods indicated therein (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of each of the Funds as of September 30, 2019, the results of each of their operations for the year then ended, the changes in each of their net assets for each of the two years in the period ended September 30, 2019 and each of the financial highlights for each of the periods indicated therein in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinions
These financial statements are the responsibility of the Funds’ management. Our responsibility is to express an opinion on the Funds’ financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Funds in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits of these financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our procedures included confirmation of securities owned as of September 30, 2019 by correspondence with the custodian, transfer agent and brokers; when replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinions.
PricewaterhouseCoopers LLP
San Francisco, California
November 14, 2019
We have served as the auditor of one or more investment companies in the Franklin Templeton Group of Funds since 1948.
| 134 |
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FRANKLIN CUSTODIAN FUNDS
Under Section 852(b)(3)(C) of the Internal Revenue Code, the Funds hereby report the maximum amount allowable but no less than the following amounts as long term capital gain dividends for the fiscal year ended September 30, 2019:
| Franklin DynaTech Fund |
Franklin Growth Fund |
Franklin Utilities Fund |
||||||
| $168,290,858 |
$222,080,082 | $183,865,898 | ||||||
Under Section 871(k)(2)(C) of the Internal Revenue Code, the Funds hereby report the maximum amount allowable but no less than the following amounts as short term capital gain dividends for purposes of the tax imposed under Section 871(a)(1)(A) of the Internal Revenue Code for the fiscal year ended September 30, 2019:
| Franklin Utilities Fund |
| $3,431,078 |
Under Section 854(b)(1)(A) of the Internal Revenue Code, the Funds hereby report the following percentage amounts of the ordinary income dividends as income qualifying for the dividends received deduction for the fiscal year ended September 30, 2019:
| Franklin Growth Fund |
Franklin Income Fund |
Franklin Utilities Fund | ||
| 100.00% |
18.24% | 100.00% | ||
Under Section 854(b)(1)(B) of the Internal Revenue Code, the Funds hereby report the maximum amount allowable but no less than the following amounts as qualified dividends for purposes of the maximum rate under Section 1(h)(11) of the Internal Revenue Code for the fiscal year ended September 30, 2019:
| Franklin DynaTech Fund |
Franklin Growth Fund |
Franklin Income Fund |
Franklin Utilities Fund | |||
| $34,541,136 |
$188,680,509 | $984,769,240 | $207,895,510 | |||
Distributions, including qualified dividend income, paid during calendar year 2019 will be reported to shareholders on Form 1099-DIV by mid-February 2020. Shareholders are advised to check with their tax advisors for information on the treatment of these amounts on their individual income tax returns.
Under Section 871(k)(1)(C) of the Internal Revenue Code, the Funds hereby report the maximum amount allowable but no less than the following amounts as interest related dividends for purposes of the tax imposed under Section 871(a)(1)(A) of the Internal Revenue Code for the fiscal year ended September 30, 2019:
| Franklin Income Fund |
Franklin U.S. Government Securities Fund |
|||||
| $1,976,162,882 |
$155,007,707 | |||||
| franklintempleton.com | Annual Report | 135 | ||
FRANKLIN CUSTODIAN FUNDS
The name, year of birth and address of the officers and board members, as well as their affiliations, positions held with the Trust, principal occupations during at least the past five years and number of U.S. registered portfolios overseen in the Franklin Templeton fund complex, are shown below. Generally, each board member serves until that person’s successor is elected and qualified.
Independent Board Members
|
Name, Year of Birth and Address
|
Position
|
Length of Time Served
|
Number of Portfolios in by Board Member*
|
Other Directorships Held During at Least the Past 5 Years
| ||||
|
Harris J. Ashton (1932) One Franklin Parkway San Mateo, CA 94403-1906 |
Trustee |
Since 1976 |
135 |
Bar-S Foods (meat packing company) (1981-2010). | ||||
| Principal Occupation During at Least the Past 5 Years: | ||||||||
| Director of various companies; and formerly, Director, RBC Holdings, Inc. (bank holding company) (until 2002); and President, Chief Executive Officer and Chairman of the Board, General Host Corporation (nursery and craft centers) (until 1998).
| ||||||||
| Terrence J. Checki (1945) One Franklin Parkway San Mateo, CA 94403-1906 |
Trustee | Since 2017 | 114 | Hess Corporation (exploration of oil and gas) (2014-present). | ||||
| Principal Occupation During at Least the Past 5 Years: | ||||||||
| Member of the Council on Foreign Relations (1996-present); Member of the National Committee on U.S.-China Relations (1999-present); member of the Board of Trustees of the Economic Club of New York (2013-present); member of the Board of Trustees of the Foreign Policy Association (2005-present) and member of various other boards of trustees and advisory boards; and formerly, Executive Vice President of the Federal Reserve Bank of New York and Head of its Emerging Markets and Internal Affairs Group and Member of Management Committee (1995-2014); and Visiting Fellow at the Council on Foreign Relations (2014).
| ||||||||
| Mary C. Choksi (1950) One Franklin Parkway San Mateo, CA 94403-1906 |
Trustee | Since 2014 | 135 | Avis Budget Group Inc. (car rental) (2007-present), Omnicom Group Inc. (advertising and marketing communications services) (2011-present) and White Mountains Insurance Group, Ltd. (holding company) (2017-present). | ||||
| Principal Occupation During at Least the Past 5 Years: | ||||||||
| Director of various companies; and formerly, Founder and Senior Advisor, Strategic Investment Group (investment management group) (2015-2017); Founding Partner and Senior Managing Director, Strategic Investment Group (1987-2015); Founding Partner and Managing Director, Emerging Markets Management LLC (investment management firm) (1987-2011); and Loan Officer/Senior Loan Officer/Senior Pension Investment Officer, World Bank Group (international financial institution) (1977-1987).
| ||||||||
| Edith E. Holiday (1952) One Franklin Parkway San Mateo, CA 94403-1906 |
Lead Independent Trustee | Trustee since 1998 and Lead Independent Trustee since March 2019 |
135 | Hess Corporation (exploration of oil and gas) (1993-present), Canadian National Railway (railroad) (2001-present), White Mountains Insurance Group, Ltd. (holding company) (2004-present), Santander Consumer USA Holdings, Inc. (consumer finance) (2016-present), RTI International Metals, Inc. (manufacture and distribution of titanium) (1999-2015) and H.J. Heinz Company (processed foods and allied products) (1994-2013). | ||||
| Principal Occupation During at Least the Past 5 Years: | ||||||||
| Director or Trustee of various companies and trusts; and formerly, Assistant to the President of the United States and Secretary of the Cabinet (1990-1993); General Counsel to the United States Treasury Department (1989-1990); and Counselor to the Secretary and Assistant Secretary for Public Affairs and Public Liaison-United States Treasury Department (1988-1989).
| ||||||||
| 136 |
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FRANKLIN CUSTODIAN FUNDS
Independent Board Members (continued)
|
Name, Year of Birth and Address
|
Position
|
Length of Time Served
|
Number of Portfolios in by Board Member*
|
Other Directorships Held During at Least the Past 5 Years
| ||||
|
J. Michael Luttig (1954) One Franklin Parkway San Mateo, CA 94403-1906 |
Trustee |
Since 2009 |
135 |
Boeing Capital Corporation (aircraft financing) (2006-2013). | ||||
| Principal Occupation During at Least the Past 5 Years: | ||||||||
| Executive Vice President, Counselor and Senior Advisor to Boeing Chairman and Board of Directors, The Boeing Company (aerospace company) (May 2019); and formerly, General Counsel and member of the Executive Council, The Boeing Company (2006-2019) and Federal Appeals Court Judge, U.S. Court of Appeals for the Fourth Circuit (1991-2006).
| ||||||||
| Larry D. Thompson (1945) One Franklin Parkway San Mateo, CA 94403-1906 |
Trustee | Since 2007 | 135 | The Southern Company (energy company) (2014-present; previously 2010-2012), Graham Holdings Company (education and media organization) (2011-present) and Cbeyond, Inc. (business communications provider) (2010-2012). | ||||
| Principal Occupation During at Least the Past 5 Years: | ||||||||
| Director of various companies; Counsel, Finch McCranie, LLP (law firm) (2015-present); Independent Compliance Monitor and Auditor, Volkswagen AG (manufacturer of automobiles and commercial vehicles) (2017-present); John A. Sibley Professor of Corporate and Business Law, University of Georgia School of Law (2015-present; previously 2011-2012); and formerly, Executive Vice President - Government Affairs, General Counsel and Corporate Secretary, PepsiCo, Inc. (consumer products) (2012-2014); Senior Vice President - Government Affairs, General Counsel and Secretary, PepsiCo, Inc. (2004-2011); Senior Fellow of The Brookings Institution (2003-2004); Visiting Professor, University of Georgia School of Law (2004); and Deputy Attorney General, U.S. Department of Justice (2001-2003).
| ||||||||
|
Interested Board Members and Officers |
||||||||
|
Name, Year of Birth and Address
|
Position
|
Length of Time Served
|
Number of Portfolios in Fund Complex Overseen by Board Member*
|
Other Directorships Held During at Least the Past 5 Years
| ||||
| **Gregory E. Johnson (1961) One Franklin Parkway San Mateo, CA 94403-1906 |
Trustee | Since 2013 | 147 | None | ||||
| Principal Occupation During at Least the Past 5 Years: | ||||||||
| Chairman of the Board, Member - Office of the Chairman, Director and Chief Executive Officer, Franklin Resources, Inc.; officer and/or director or trustee, as the case may be, of some of the other subsidiaries of Franklin Resources, Inc. and of 42 of the investment companies in Franklin Templeton; Vice Chairman, Investment Company Institute; and formerly, President, Franklin Resources, Inc. (1994-2015).
| ||||||||
| **Rupert H. Johnson, Jr. (1940) One Franklin Parkway San Mateo, CA 94403-1906 |
Chairman of the Board, Trustee and Vice President | Chairman of the Board since 2013, Trustee since 1983 and Vice President since 1982 | 135 | None | ||||
| Principal Occupation During at Least the Past 5 Years: | ||||||||
| Vice Chairman, Member - Office of the Chairman and Director, Franklin Resources, Inc.; Director, Franklin Advisers, Inc.; and officer and/or director or trustee, as the case may be, of some of the other subsidiaries of Franklin Resources, Inc. and of 40 of the investment companies in Franklin Templeton.
| ||||||||
| Alison E. Baur (1964) One Franklin Parkway San Mateo, CA 94403-1906 |
Vice President | Since 2012 | Not Applicable | Not Applicable | ||||
| Principal Occupation During at Least the Past 5 Years: | ||||||||
| Deputy General Counsel, Franklin Templeton; and officer of some of the other subsidiaries of Franklin Resources, Inc. and of 44 of the investment companies in Franklin Templeton.
| ||||||||
| franklintempleton.com | Annual Report | 137 | ||
FRANKLIN CUSTODIAN FUNDS
Interested Board Members and Officers (continued)
|
Name, Year of Birth and Address
|
Position
|
Length of Time Served
|
Number of Portfolios in by Board Member*
|
Other Directorships Held During at Least the Past 5 Years
| ||||
| Gaston Gardey (1967) One Franklin Parkway San Mateo, CA 94403-1906 |
Treasurer, Chief Financial Officer and Chief Accounting Officer | Since 2009 | Not Applicable | Not Applicable | ||||
| Principal Occupation During at Least the Past 5 Years: | ||||||||
| Treasurer, U.S. Fund Administration & Reporting and officer of 26 of the investment companies in Franklin Templeton.
| ||||||||
| Aliya S. Gordon (1973) One Franklin Parkway San Mateo, CA 94403-1906 |
Vice President | Since 2009 | Not Applicable | Not Applicable | ||||
| Principal Occupation During at Least the Past 5 Years: | ||||||||
| Senior Associate General Counsel, Franklin Templeton; Vice President and Secretary, Franklin Resources, Inc.; and officer of 44 of the investment companies in Franklin Templeton.
| ||||||||
| Steven J. Gray (1955) One Franklin Parkway San Mateo, CA 94403-1906 |
Vice President since 2009 and Co-Secretary since January 2019 | Vice President since 2009 and Co-Secretary since January 2019 | Not Applicable | Not Applicable | ||||
| Principal Occupation During at Least the Past 5 Years: | ||||||||
| Senior Associate General Counsel, Franklin Templeton; Vice President, Franklin Templeton Distributors, Inc. and FASA, LLC; and officer of 44 of the investment companies in Franklin Templeton.
| ||||||||
| Matthew T. Hinkle (1971) One Franklin Parkway San Mateo, CA 94403-1906 |
Chief Executive Officer – Finance and Administration | Since 2017 | Not Applicable | Not Applicable | ||||
| Principal Occupation During at Least the Past 5 Years: | ||||||||
| Senior Vice President, Franklin Templeton Services, LLC; officer of 44 of the investment companies in Franklin Templeton; and formerly,Vice President, Global Tax (2012-April 2017) and Treasurer/Assistant Treasurer, Franklin Templeton (2009-2017).
| ||||||||
| Robert Lim (1948) One Franklin Parkway San Mateo, CA 94403-1906 |
Vice President – AML Compliance | Since 2016 | Not Applicable | Not Applicable | ||||
| Principal Occupation During at Least the Past 5 Years: | ||||||||
| Vice President, Franklin Templeton Companies, LLC; Chief Compliance Officer, Franklin Templeton Distributors, Inc. and Franklin Templeton Investor Services, LLC; and officer of 44 of the investment companies in Franklin Templeton.
| ||||||||
| Kimberly H. Novotny (1972) 300 S.E. 2nd Street Fort Lauderdale, FL 33301-1923 |
Vice President | Since 2013 | Not Applicable | Not Applicable | ||||
| Principal Occupation During at Least the Past 5 Years: | ||||||||
| Senior Associate General Counsel, Franklin Templeton; Vice President and Corporate Secretary, Fiduciary Trust International of the South; Vice President, Templeton Investment Counsel, LLC; Assistant Secretary, Franklin Resources, Inc.; and officer of 44 of the investment companies in Franklin Templeton.
| ||||||||
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FRANKLIN CUSTODIAN FUNDS
Interested Board Members and Officers (continued)
|
Name, Year of Birth and Address
|
Position
|
Length of Time Served
|
Number of Portfolios in by Board Member*
|
Other Directorships Held During at Least the Past 5 Years
| ||||
| Edward D. Perks (1970) One Franklin Parkway San Mateo, CA 94403-1906 |
President and Chief Executive Officer – Investment Management | Since December 2018 | Not Applicable | Not Applicable | ||||
| Principal Occupation During at Least the Past 5 Years: | ||||||||
| President and Director, Franklin Advisers, Inc.; and officer of nine of the investment companies in Franklin Templeton (since December 2018).
| ||||||||
| Robert C. Rosselot (1960) 300 S.E. 2nd Street Fort Lauderdale, FL 33301-1923 |
Chief Compliance Officer and Secretary | Since 2013 | Not Applicable | Not Applicable | ||||
| Principal Occupation During at Least the Past 5 Years: | ||||||||
| Director, Global Compliance, Franklin Templeton; Vice President, Franklin Templeton Companies, LLC; officer of 44 of the investment companies in Franklin Templeton; and formerly, Senior Associate General Counsel, Franklin Templeton (2007-2013); and Secretary and Vice President, Templeton Group of Funds (2004-2013).
| ||||||||
| Navid J. Tofigh (1972) One Franklin Parkway San Mateo, CA 94403-1906 |
Vice President | Since 2015 | Not Applicable | Not Applicable | ||||
| Principal Occupation During at Least the Past 5 Years: | ||||||||
| Associate General Counsel and officer of 44 of the investment companies in Franklin Templeton.
| ||||||||
| Craig S. Tyle (1960) One Franklin Parkway San Mateo, CA 94403-1906 |
Vice President | Since 2005 | Not Applicable | Not Applicable | ||||
| Principal Occupation During at Least the Past 5 Years: | ||||||||
| General Counsel and Executive Vice President, Franklin Resources, Inc.; and officer of some of the other subsidiaries of Franklin Resources, Inc. and of 44 of the investment companies in Franklin Templeton.
| ||||||||
| Lori A. Weber (1964) 300 S.E. 2nd Street Fort Lauderdale, FL 33301-1923 |
Vice President and Co- Secretary | Vice President since 2011 and Co-Secretary since January 2019 | Not Applicable | Not Applicable | ||||
| Principal Occupation During at Least the Past 5 Years: | ||||||||
| Senior Associate General Counsel, Franklin Templeton; Assistant Secretary, Franklin Resources, Inc.; Vice President and Secretary, Templeton Investment Counsel, LLC; and officer of 44 of the investment companies in Franklin Templeton.
| ||||||||
*We base the number of portfolios on each separate series of the U.S. registered investment companies within the Franklin Templeton fund complex. These portfolios have a common investment manager or affiliated investment managers.
**Gregory E. Johnson is considered to be an interested person of the Fund under the federal securities laws due to his position as an officer and director of Franklin Resources, Inc. (Resources), which is the parent company of the Fund’s investment manager and distributor. Rupert H. Johnson, Jr. is considered to be an interested person of the Fund under the federal securities laws due to his position as an officer and director and major shareholder of Resources.
Note 1: Rupert H. Johnson, Jr. is the uncle of Gregory E. Johnson.
Note 2: Effective March 12, 2019, John B. Wilson ceased to be a trustee of the Trust.
Note 3: Officer information is current as of the date of this report. It is possible that after this date, information about officers may change.
The Sarbanes-Oxley Act of 2002 and Rules adopted by the Securities and Exchange Commission require the Fund to disclose whether the Fund’s Audit Committee includes at least one member who is an audit committee financial expert within the meaning of such Act and Rules. The Fund’s Board has determined that there is at least one such financial expert on the Audit Committee and has designated Mary C. Choksi as its audit committee financial expert. The Board believes that Ms. Choksi qualifies as such an expert in view of her extensive business background and experience. She currently serves as a director of Avis Budget Group, Inc. (2007-present) and formerly, Founder and Senior Advisor, Strategic Investment Group (1987 to 2017). Ms. Choksi has been a Member of the
| franklintempleton.com | Annual Report | 139 | ||
FRANKLIN CUSTODIAN FUNDS
Fund’s Audit Committee since 2014. As a result of such background and experience, the Board believes that Ms. Choksi has acquired an understanding of generally accepted accounting principles and financial statements, the general application of such principles in connection with the accounting estimates, accruals and reserves, and analyzing and evaluating financial statements that present a breadth and level of complexity of accounting issues generally comparable to those of the Fund, as well as an understanding of internal controls and procedures for financial reporting and an understanding of audit committee functions. Ms. Choksi is an independent Board member as that term is defined under the relevant Securities and Exchange Commission Rules and Releases.
The Statement of Additional Information (SAI) includes additional information about the board members and is available, without charge, upon request. Shareholders may call (800) DIAL BEN/342-5236 to request the SAI.
| 140 |
Annual Report | franklintempleton.com | ||
FRANKLIN CUSTODIAN FUNDS
| franklintempleton.com | Annual Report | 141 | ||
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Authorized for distribution only when accompanied or preceded by a summary prospectus and/or prospectus. Investors should carefully consider a fund’s investment goals, risks, charges and expenses before investing. A prospectus contains this and other information; please read it carefully before investing.
To help ensure we provide you with quality service, all calls to and from our service areas are monitored and/or recorded.
|
Annual Report and Shareholder Letter | |||||||
| Franklin Custodian Funds | ||||||||
|
Investment Manager |
Distributor |
Shareholder Services | ||||||
| Franklin Advisers, Inc. | Franklin Templeton Distributors, Inc. | (800) 632-2301 | ||||||
| (800) DIAL BEN® / 342-5236 | ||||||||
| franklintempleton.com | ||||||||
| © 2019 Franklin Templeton Investments. All rights reserved. | FCF A 11/19 | |||||||
| Annual Report | 1 | |||
1. Source: Morningstar. Frank Russell Company is the source and owner of the trademarks, service marks and copyrights related to the Russell Indexes. Russell® is a trademark of Frank Russell Company.
The index is unmanaged and includes reinvestment of any income or distributions. It does not reflect any fees, expenses or sales charges. One cannot invest directly in an index, and an index is not representative of the Fund’s portfolio.
2. Source: Bureau of Labor Statistics.
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 10.
| 2 |
Annual Report | |||
FRANKLIN FOCUSED GROWTH FUND
3. Source: Morningstar.
4. The IT sector comprises IT services, semiconductors and semiconductor equipment, and software in the SOI. The real estate sector comprises equity real estate investment trusts in the SOI. The consumer staples sector comprises food and staples retailing and personal products in the SOI.
| Annual Report | 3 | |||
FRANKLIN FOCUSED GROWTH FUND
5. The communication services sector comprises entertainment, interactive media and services, and media in the SOI. The consumer discretionary sector comprises internet and direct marketing retail; and textiles, apparel and luxury goods in the SOI. The Fund held no positions in the energy sector at period-end.
See www.franklintempletondatasources.com for additional data provider information.
| 4 |
Annual Report | |||
FRANKLIN FOCUSED GROWTH FUND
Performance Summary as of September 30, 2019
The performance table and graph do not reflect any taxes that a shareholder would pay on Fund dividends, capital gain distributions, if any, or any realized gains on the sale of Fund shares. Total return reflects reinvestment of the Fund’s dividends and capital gain distributions, if any, and any unrealized gains or losses. 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.
Performance as of 9/30/191
Cumulative total return excludes sales charges. Average annual total return includes maximum sales charges. Sales charges will vary depending on the size of the investment and the class of share purchased. Advisor Class shares are offered without sales charges.
| Share Class | Cumulative Total Return2 |
Average Annual Total Return3 | ||||
| Advisor |
||||||
| 1-Year |
+2.80% | +2.80% | ||||
| 3-Year |
+62.88% | +17.66% | ||||
| Since Inception (4/12/16) |
+77.86% | +18.06% | ||||
Performance data represent past performance, which does not guarantee future results. Investment return and principal value will fluctuate, and you may have a gain or loss when you sell your shares. Current performance may differ from figures shown.
See page 7 for Performance Summary footnotes.
| Annual Report | 5 | |||
FRANKLIN FOCUSED GROWTH FUND
PERFORMANCE SUMMARY
Total Return Index Comparison for a Hypothetical $10,000 Investment1
Total return represents the change in value of an investment over the periods shown. It includes any applicable maximum sales charge, Fund expenses, account fees and reinvested distributions. The unmanaged index includes reinvestment of any income or distributions. It differs from the Fund in composition and does not pay management fees or expenses. One cannot invest directly in an index.
Advisor Class (4/12/16–9/30/19)
See page 7 for Performance Summary footnotes.
| 6 |
Annual Report | |||
FRANKLIN FOCUSED GROWTH FUND
PERFORMANCE SUMMARY
Distributions (10/1/18–9/30/19)
| Share Class | Net Investment Income |
Long-Term Capital Gain |
Total | |||||||||
| Advisor | $0.0109 | $0.0731 | $0.0840 | |||||||||
Total Annual Operating Expenses5
| Share Class | With Fee Waiver |
Without Fee Waiver |
||||||
| Advisor | 1.01% | 2.24% | ||||||
All investments involve risks, including possible loss of principal. The market values of securities or other investments owned by the Fund will go up or down, sometimes rapidly or unpredictably. Growth stock prices reflect projections of future earnings or revenues, and can, therefore, fall dramatically if the company fails to meet those projections. To the extent the Fund focuses on particular countries, regions, industries, sectors or types of investment from time to time, it may be subject to greater risks of adverse developments in such areas of focus than a fund that invests in a wider variety of countries, regions, industries, sectors or investments. Foreign securities involve more risks than investing in U.S. securities, including currency fluctuations and economic and political uncertainties. From time to time, the trading market for a particular security or type of security or other investments in which the Fund invests may become less liquid or even illiquid. Reduced liquidity will have an adverse impact on the Fund’s ability to sell such securities or other investments when necessary to meet the Fund’s liquidity needs or in response to a specific economic event and will also generally lower the value of a security or other investments. The Fund may also invest in small- and mid-capitalization companies, which can be particularly sensitive to changing economic conditions, and their prospects for growth are less certain than those of larger, more established companies. The Fund is actively managed but there is no guarantee that the manager’s investment decisions will produce the desired results. The Fund’s prospectus also includes a description of the main investment risks.
1. The Fund has an expense reduction contractually guaranteed through 1/31/20. Fund investment results reflect the expense reduction; without this reduction the results 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. Return for less than one year, if any, has not been annualized.
4. Source: Morningstar. The Russell 1000 Growth Index is market capitalization weighted and measures performance of those Russell 1000 Index companies with higher price-to-book ratios and higher forecasted growth values.
5. Figures are as stated in the Fund’s current prospectus and may differ from the expense ratios disclosed in the Your Fund’s Expenses and Financial Highlights sections in this report. In periods of market volatility, assets may decline significantly, causing total annual Fund operating expenses to become higher than the figures shown.
See www.franklintempletondatasources.com for additional data provider information.
| Annual Report | 7 | |||
FRANKLIN FOCUSED GROWTH FUND
As a Fund shareholder, you can incur two types of costs: (1) transaction costs, including sales charges (loads) on Fund purchases and redemptions; and (2) ongoing Fund costs, including management fees, distribution and service (12b-1) fees, and other Fund expenses. All mutual funds have ongoing costs, sometimes referred to as operating expenses. The table below shows ongoing costs of investing in the Fund and can help you understand these costs and compare them with those of other mutual funds. The table assumes a $1,000 investment held for the six months indicated.
Actual Fund Expenses
The table below provides information about actual account values and actual expenses in the columns under the heading “Actual.” In these columns the Fund’s actual return, which includes the effect of Fund expenses, is used to calculate the “Ending Account Value.” You can estimate the expenses you paid during the period by following these steps (of course, your account value and expenses will differ from those in this illustration): Divide your account value by $1,000 (if your account had an $8,600 value, then $8,600 ÷ $1,000 = 8.6). Then multiply the result by the number in the row for your class of shares under the headings “Actual” and “Expenses Paid During Period” (if Actual Expenses Paid During Period were $7.50, then 8.6 x $7.50 = $64.50). In this illustration, the actual expenses paid this period are $64.50.
Hypothetical Example for Comparison with Other Funds
Under the heading “Hypothetical” in the table, information is provided about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. This information may not be used to estimate the actual ending account balance or expenses you paid for the period, but it can help you compare ongoing costs of investing in the Fund with those of other funds. To do so, compare this 5% hypothetical example for the class of shares you hold with the 5% hypothetical examples that appear in the shareholder reports of other funds.
Please note that expenses shown in the table are meant to highlight ongoing costs and do not reflect any transactional costs. Therefore, information under the heading “Hypothetical” is useful in comparing ongoing costs only, and will not help you compare total costs of owning different funds. In addition, if transactional costs were included, your total costs would have been higher.
| Actual (actual return after expenses) |
Hypothetical (5% annual return before expenses) |
|||||||||||
|
|
|
|||||||||||
| Share Class |
Beginning Account Value 4/1/19 |
Ending Account |
Expenses Paid During Period 4/1/19–9/30/191, 2 |
Ending Account Value 9/30/19 |
Expenses Paid During Period 4/1/19–9/30/191, 2 |
Net Annualized Ratio2 | ||||||
|
|
|
|
| |||||||||
| Advisor |
$1,000 | $1,037.10 | $5.11 | $1,020.05 | $5.06 | 1.00% | ||||||
1. Expenses are equal to the annualized expense ratio for the six-month period as indicated above—in the far right column—multiplied by the simple average account value over the period indicated, and then multiplied by 183/365 to reflect the one-half year period.
2. Reflects expenses after fee waivers and expense reimbursements. Does not include acquired fund fees and expenses.
| 8 |
Annual Report | |||
FRANKLIN CUSTODIAN FUNDS
Franklin Focused Growth Fund
| Year Ended September 30, | ||||||||||||||||
| 2019 | 2018 | 2017 | 2016a | |||||||||||||
| Advisor Class |
||||||||||||||||
| Per share operating performance |
||||||||||||||||
| (for a share outstanding throughout the year) |
||||||||||||||||
| Net asset value, beginning of year |
$17.24 | $13.36 | $10.93 | $10.00 | ||||||||||||
| Income from investment operationsb: |
||||||||||||||||
| Net investment income (loss)c |
(0.06 | ) | (0.05 | ) | (0.02 | ) | (0.01 | ) | ||||||||
| Net realized and unrealized gains (losses) |
0.52 | 3.93 | 2.49 | 0.94 | ||||||||||||
| Total from investment operations |
0.46 | 3.88 | 2.47 | 0.93 | ||||||||||||
| Less distributions from: |
||||||||||||||||
| Net investment income |
(0.01 | ) | — | (0.01 | ) | — | ||||||||||
| Net realized gains |
(0.07 | ) | — | (0.03 | ) | — | ||||||||||
| Total distributions |
(0.08 | ) | — | (0.04 | ) | — | ||||||||||
| Net asset value, end of year |
$17.62 | $17.24 | $13.36 | $10.93 | ||||||||||||
| Total returnd |
2.80% | 29.04% | 22.78% | 9.30% | ||||||||||||
| Ratios to average net assetse |
||||||||||||||||
| Expenses before waiver and payments by affiliates |
2.41% | 2.23% | 2.31% | 4.76% | ||||||||||||
| Expenses net of waiver and payments by affiliates |
1.00% | 1.00% | f | 1.00% | f | 1.00% | ||||||||||
| Net investment income (loss) |
(0.36)% | (0.34)% | (0.20)% | (0.18)% | ||||||||||||
| Supplemental data |
||||||||||||||||
| Net assets, end of year (000’s) |
$4,404 | $4,310 | $3,341 | $2,732 | ||||||||||||
| Portfolio turnover rate |
28.65% | 14.47% | 28.48% | 7.46% | ||||||||||||
aFor the period April 12, 2016 (commencement of operations) to September 30, 2016.
bThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and repurchases of the Fund’s shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
cBased on average daily shares outstanding.
dTotal return is not annualized for periods less than one year.
eRatios are annualized for periods less than one year, except for non-recurring expenses, if any.
fBenefit of expense reduction rounds to less than 0.01%.
| The accompanying notes are an integral part of these financial statements. | Annual Report | 9 | |||
FRANKLIN CUSTODIAN FUNDS
Statement of Investments, September 30, 2019
Franklin Focused Growth Fund
| Country | Shares | Value | ||||||||||
| Common Stocks 97.7% |
||||||||||||
| Aerospace & Defense 3.9% |
||||||||||||
| The Boeing Co. |
United States | 300 | $ | 114,141 | ||||||||
| Raytheon Co. |
United States | 300 | 58,857 | |||||||||
|
|
|
|||||||||||
| 172,998 | ||||||||||||
|
|
|
|||||||||||
| Capital Markets 2.1% |
||||||||||||
| CME Group Inc. |
United States | 400 | 84,536 | |||||||||
| Tradeweb Markets Inc. |
United States | 200 | 7,396 | |||||||||
|
|
|
|||||||||||
| 91,932 | ||||||||||||
|
|
|
|||||||||||
| Entertainment 1.8% |
||||||||||||
| a Netflix Inc. |
United States | 300 | 80,286 | |||||||||
|
|
|
|||||||||||
| Equity Real Estate Investment Trusts (REITs) 2.5% |
||||||||||||
| American Tower Corp. |
United States | 500 | 110,565 | |||||||||
|
|
|
|||||||||||
| Food & Staples Retailing 2.3% |
||||||||||||
| Costco Wholesale Corp. |
United States | 350 | 100,839 | |||||||||
|
|
|
|||||||||||
| Health Care Equipment & Supplies 9.9% |
||||||||||||
| Abbott Laboratories |
United States | 1,000 | 83,670 | |||||||||
| a Alcon Inc. |
Switzerland | 800 | 46,632 | |||||||||
| Danaher Corp. |
United States | 700 | 101,101 | |||||||||
| a IDEXX Laboratories Inc. |
United States | 350 | 95,175 | |||||||||
| a Intuitive Surgical Inc. |
United States | 200 | 107,986 | |||||||||
|
|
|
|||||||||||
| 434,564 | ||||||||||||
|
|
|
|||||||||||
| Industrial Conglomerates 1.2% |
||||||||||||
| Roper Technologies Inc. |
United States | 150 | 53,490 | |||||||||
|
|
|
|||||||||||
| Interactive Media & Services 9.2% |
||||||||||||
| a Alphabet Inc., A |
United States | 150 | 183,171 | |||||||||
| a Facebook Inc., A |
United States | 650 | 115,752 | |||||||||
| Tencent Holdings Ltd. |
China | 2,500 | 105,322 | |||||||||
|
|
|
|||||||||||
| 404,245 | ||||||||||||
|
|
|
|||||||||||
| Internet & Direct Marketing Retail 11.8% |
||||||||||||
| a Alibaba Group Holding Ltd., ADR |
China | 500 | 83,615 | |||||||||
| a Amazon.com Inc. |
United States | 220 | 381,900 | |||||||||
| a MercadoLibre Inc. |
Argentina | 100 | 55,123 | |||||||||
|
|
|
|||||||||||
| 520,638 | ||||||||||||
|
|
|
|||||||||||
| IT Services 12.7% |
||||||||||||
| a Adyen NV |
Netherlands | 100 | 65,874 | |||||||||
| Mastercard Inc., A |
United States | 650 | 176,520 | |||||||||
| a PayPal Holdings Inc. |
United States | 800 | 82,872 | |||||||||
| a Shopify Inc., A |
Canada | 200 | 62,267 | |||||||||
| Visa Inc., A |
United States | 1,000 | 172,010 | |||||||||
|
|
|
|||||||||||
| 559,543 | ||||||||||||
|
|
|
|||||||||||
| Life Sciences Tools & Services 1.5% |
||||||||||||
| a 10X Genomics Inc., A |
United States | 100 | 5,040 | |||||||||
| a Illumina Inc. |
United States | 200 | 60,844 | |||||||||
|
|
|
|||||||||||
| 65,884 | ||||||||||||
|
|
|
|||||||||||
| 10 |
Annual Report | |||
FRANKLIN CUSTODIAN FUNDS
STATEMENT OF INVESTMENTS
Franklin Focused Growth Fund (continued)
| Country | Shares | Value | ||||||||||
| Common Stocks (continued) |
||||||||||||
| Machinery 1.5% |
||||||||||||
| Fortive Corp. |
United States | 1,000 | $ | 68,560 | ||||||||
|
|
|
|||||||||||
| Media 1.9% |
||||||||||||
| a Charter Communications Inc., A |
United States | 200 | 82,424 | |||||||||
|
|
|
|||||||||||
| Personal Products 2.3% |
||||||||||||
| Estee Lauder Cos. Inc., A |
United States | 500 | 99,475 | |||||||||
|
|
|
|||||||||||
| Pharmaceuticals 1.5% |
||||||||||||
| a Elanco Animal Health Inc. |
United States | 2,500 | 66,475 | |||||||||
|
|
|
|||||||||||
| Professional Services 2.5% |
||||||||||||
| Verisk Analytics Inc. |
United States | 700 | 110,698 | |||||||||
|
|
|
|||||||||||
| Semiconductors & Semiconductor Equipment 6.0% |
||||||||||||
| Analog Devices Inc. |
United States | 800 | 89,384 | |||||||||
| NVIDIA Corp. |
United States | 350 | 60,924 | |||||||||
| Xilinx Inc. |
United States | 1,200 | 115,080 | |||||||||
|
|
|
|||||||||||
| 265,388 | ||||||||||||
|
|
|
|||||||||||
| Software 21.5% |
||||||||||||
| a Adobe Inc. |
United States | 750 | 207,188 | |||||||||
| Microsoft Corp. |
United States | 2,750 | 382,332 | |||||||||
| a salesforce.com Inc. |
United States | 1,200 | 178,128 | |||||||||
| a ServiceNow Inc. |
United States | 700 | 177,695 | |||||||||
|
|
|
|||||||||||
| 945,343 | ||||||||||||
|
|
|
|||||||||||
| Textiles, Apparel & Luxury Goods 1.6% |
||||||||||||
| NIKE Inc., B |
United States | 750 | 70,440 | |||||||||
|
|
|
|||||||||||
| Total Common Stocks (Cost $2,600,223) |
4,303,787 | |||||||||||
|
|
|
|||||||||||
| Short Term Investments (Cost $116,522) 2.7% |
||||||||||||
| Money Market Funds 2.7% |
||||||||||||
| b,c Institutional Fiduciary Trust Money Market Portfolio, 1.71% |
United States | 116,522 | 116,522 | |||||||||
|
|
|
|||||||||||
| Total Investments (Cost $2,716,745) 100.4% |
4,420,309 | |||||||||||
| Other Assets, less Liabilities (0.4)% |
(16,133 | ) | ||||||||||
|
|
|
|||||||||||
| Net Assets 100.0% |
$ | 4,404,176 | ||||||||||
|
|
|
|||||||||||
See Abbreviations on page 21.
aNon-income producing.
bSee Note 3(e) regarding investments in affiliated management investment companies.
cThe rate shown is the annualized seven-day effective yield at period end.
| The accompanying notes are an integral part of these financial statements. | Annual Report | 11 | |||
FRANKLIN CUSTODIAN FUNDS
Statement of Assets and Liabilities
September 30, 2019
Franklin Focused Growth Fund
| Assets: |
||||
| Investments in securities: |
||||
| Cost - Unaffiliated issuers |
$ 2,600,223 | |||
| Cost - Non-controlled affiliates (Note 3e) |
116,522 | |||
|
|
|
|||
| Value - Unaffiliated issuers |
$ 4,303,787 | |||
| Value - Non-controlled affiliates (Note 3e) |
116,522 | |||
| Receivables: |
||||
| Dividends |
594 | |||
| Affiliates |
23,241 | |||
| Other assets |
2 | |||
|
|
|
|||
| Total assets |
4,444,146 | |||
|
|
|
|||
| Liabilities: |
||||
| Payables: |
||||
| Transfer agent fees |
74 | |||
| Professional fees |
38,316 | |||
| Accrued expenses and other liabilities |
1,580 | |||
|
|
|
|||
| Total liabilities |
39,970 | |||
|
|
|
|||
| Net assets, at value |
$4,404,176 | |||
|
|
|
|||
| Net assets consist of: |
||||
| Paid-in capital |
$2,486,477 | |||
| Total distributable earnings (loss) |
1,917,699 | |||
|
|
|
|||
| Net assets, at value |
$4,404,176 | |||
|
|
|
|||
| Shares outstanding |
250,000 | |||
|
|
|
|||
| Net asset value and maximum offering price per share |
$17.62 | |||
|
|
|
|||
| 12 |
Annual Report | The accompanying notes are an integral part of these financial statements. | |||
FRANKLIN CUSTODIAN FUNDS
FINANCIAL STATEMENTS
Statement of Operations
for the year ended September 30, 2019
Franklin Focused Growth Fund
| Investment income: |
||||
| Dividends: |
||||
| Unaffiliated issuers |
$ 25,136 | |||
| Non-controlled affiliates (Note 3e) |
1,580 | |||
|
|
|
|||
| Total investment income |
26,716 | |||
|
|
|
|||
| Expenses: |
||||
| Management fees (Note 3a) |
35,481 | |||
| Transfer agent fees (Note 3d) |
821 | |||
| Custodian fees (Note 4) |
126 | |||
| Reports to shareholders |
6,396 | |||
| Professional fees |
50,194 | |||
| Other |
7,434 | |||
|
|
|
|||
| Total expenses |
100,452 | |||
| Expenses waived/paid by affiliates (Note 3f) |
(58,723 | ) | ||
|
|
|
|||
| Net expenses |
41,729 | |||
|
|
|
|||
| Net investment income (loss) |
(15,013 | ) | ||
|
|
|
|||
| Realized and unrealized gains (losses): |
||||
| Net realized gain (loss) from: |
||||
| Investments: |
||||
| Unaffiliated issuers |
242,341 | |||
| Foreign currency transactions |
280 | |||
|
|
|
|||
| Net realized gain (loss) |
242,621 | |||
|
|
|
|||
| Net change in unrealized appreciation (depreciation) on: |
||||
| Investments: |
||||
| Unaffiliated issuers |
(112,364 | ) | ||
|
|
|
|||
| Net realized and unrealized gain (loss) |
130,257 | |||
|
|
|
|||
| Net increase (decrease) in net assets resulting from operations |
$ 115,244 | |||
|
|
|
|||
| The accompanying notes are an integral part of these financial statements. | Annual Report | 13 | |||
FRANKLIN CUSTODIAN FUNDS
FINANCIAL STATEMENTS
Statements of Changes in Net Assets
Franklin Focused Growth Fund
| Year Ended September 30, | ||||||||
|
|
|
|||||||
| 2019 | 2018 | |||||||
|
|
||||||||
| Increase (decrease) in net assets: |
||||||||
| Operations: |
||||||||
| Net investment income (loss) |
$ | (15,013 | ) | $ | (13,077 | ) | ||
| Net realized gain (loss) |
242,621 | 33,371 | ||||||
| Net change in unrealized appreciation (depreciation) |
(112,364 | ) | 949,113 | |||||
|
|
|
|||||||
| Net increase (decrease) in net assets resulting from operations |
115,244 | 969,407 | ||||||
|
|
|
|||||||
| Distributions to shareholders |
(21,000 | ) | — | |||||
|
|
|
|||||||
| Net increase (decrease) in net assets |
94,244 | 969,407 | ||||||
| Net assets: |
||||||||
| Beginning of year |
4,309,932 | 3,340,525 | ||||||
|
|
|
|||||||
| End of year |
$ | 4,404,176 | $ | 4,309,932 | ||||
|
|
|
|||||||
| 14 |
Annual Report | The accompanying notes are an integral part of these financial statements. | |||
FRANKLIN CUSTODIAN FUNDS
Franklin Focused Growth Fund
| Annual Report | 15 | |||
FRANKLIN CUSTODIAN FUNDS
NOTES TO FINANCIAL STATEMENTS
| 16 |
Annual Report | |||
FRANKLIN CUSTODIAN FUNDS
NOTES TO FINANCIAL STATEMENTS
2. Shares of Beneficial Interest
At September 30, 2019, there were an unlimited number of shares authorized (without par value). During the years ended September 30, 2019 and 2018, there were no transactions of the Fund’s shares.
3. Transactions with Affiliates
Franklin Resources, Inc. is the holding company for various subsidiaries that together are referred to as Franklin Templeton. Certain officers and trustees of the Trust are also officers and/or directors of the following subsidiaries:
| Subsidiary | Affiliation | |||
| Franklin Advisers, Inc. (Advisers) |
Investment manager | |||
| Franklin Templeton Services, LLC (FT Services) |
Administrative manager | |||
| Franklin Templeton Distributors, Inc. (Distributors) |
Principal underwriter | |||
| Franklin Templeton Investor Services, LLC (Investor Services) |
Transfer agent | |||
| Annual Report | 17 | |||
FRANKLIN CUSTODIAN FUNDS
NOTES TO FINANCIAL STATEMENTS
Franklin Focused Growth Fund (continued)
3. Transactions with Affiliates (continued)
a. Management Fees
The Fund pays an investment management fee to Advisers based on the average daily net assets of the Fund as follows:
| Annualized Fee Rate | Net Assets | |
| 0.850% |
Up to and including $500 million | |
| 0.800% |
Over $500 million, up to and including $1 billion | |
| 0.750% |
Over $1 billion, up to and including $3 billion | |
| 0.730% |
Over $3 billion, up to and including $5 billion | |
| 0.700% |
In excess of $5 billion |
b. Administrative Fees
Under an agreement with Advisers, FT Services provides administrative services to the Fund. The fee is paid by Advisers based on the Fund’s average daily net assets, and is not an additional expense of the Fund.
c. Distribution Fees
The Board has adopted distribution plans for each share class, with the exception of Class R6 and Advisor Class shares, pursuant to Rule 12b-1 under the 1940 Act. Under the Fund’s Class A reimbursement distribution plan, the Fund reimburses Distributors for costs incurred in connection with the servicing, sale and distribution of the Fund’s shares up to the maximum annual plan rate. Under the Class A reimbursement distribution plan, costs exceeding the maximum for the current plan year cannot be reimbursed in subsequent periods. In addition, under the Fund’s Class C and R compensation distribution plans, the Fund pays Distributors for costs incurred in connection with the servicing, sale and distribution of the Fund’s shares up to the maximum annual plan rate for each class. The plan year, for purposes of monitoring compliance with the maximum annual plan rates, is February 1 through January 31.
The maximum annual plan rates, based on the average daily net assets, for each class, are as follows:
| Class A |
0.25 | % | ||
| Class C |
1.00 | % | ||
| Class R |
0.50 | % | ||
d. Transfer Agent Fees
Each class of shares pays transfer agent fees to Investor Services for its performance of shareholder servicing obligations. The fees are based on an annualized asset based fee of 0.02% plus a transaction based fee. In addition, each class reimburses Investor Services for out of pocket expenses incurred and, except for Class R6, reimburses shareholder servicing fees paid to third parties. These fees are allocated daily based upon their relative proportion of such classes’ aggregate net assets. Class R6 pays Investor Services transfer agent fees specific to that class.
For the year ended September 30, 2019, the Fund paid transfer agent fees of $821, which were retained by Investor Services.
| 18 |
Annual Report | |||
FRANKLIN CUSTODIAN FUNDS
NOTES TO FINANCIAL STATEMENTS
Franklin Focused Growth Fund (continued)
e. Investments in Affiliated Management Investment Companies
The Fund invests in one or more affiliated management investment companies for purposes other than exercising a controlling influence over the management or policies. Management fees paid by the Fund are waived on assets invested in the affiliated management investment companies, as noted in the Statement of Operations, in an amount not to exceed the management and administrative fees paid directly or indirectly by each affiliate. During the year ended September 30, 2019, the Fund held investments in affiliated management investment companies as follows:
| Value at Beginning of Year |
Purchases | Sales | Realized Gain (Loss) |
Net Change in Unrealized Appreciation (Depreciation) |
Value at End of Year |
Number of Shares Held at End of Year |
Dividend Income |
|||||||||||||||||||||||||
| Non-Controlled Affiliates |
||||||||||||||||||||||||||||||||
| Institutional Fiduciary Trust Money Market Portfolio, 1.71% |
$89,859 | $493,785 | $(467,122) | $ — | $ — | $116,522 | 116,522 | $1,580 | ||||||||||||||||||||||||
|
|
|
|
|
|||||||||||||||||||||||||||||
f. Waiver and Expense Reimbursements
Advisers has contractually agreed in advance to waive or limit its fees and to assume as its own expense certain expenses otherwise payable by the Fund so that the expenses (excluding distribution fees, acquired fund fees and expenses and certain non-routine expenses or costs, including those relating to litigation, indemnification, reorganizations, and liquidations) of the Fund does not exceed 1.00%, based on the average net assets of each class until January 31, 2020. Total expenses waived or paid are not subject to recapture subsequent to the Fund’s fiscal year end.
g. Other Affiliated Transactions
At September 30, 2019, Franklin Resources, Inc. owned 100% of the Fund’s outstanding shares. Investment activities of this shareholder could have a material impact on the Fund.
4. Expense Offset Arrangement
The Fund has entered into an arrangement with its custodian whereby credits realized as a result of uninvested cash balances are used to reduce a portion of the Fund’s custodian expenses. During the year ended September 30, 2019, there were no credits earned.
5. Income Taxes
The tax character of distributions paid during the years ended September 30, 2019 and 2018, was as follows:
| 2019 | 2018 | |||||||
|
|
|
|||||||
| Distributions paid from: |
||||||||
| Ordinary income |
$ | 2,725 | $ | — | ||||
| Long term capital gain |
18,275 | — | ||||||
|
|
|
|||||||
| $ | 21,000 | $ | — | |||||
|
|
|
|||||||
| Annual Report | 19 | |||
FRANKLIN CUSTODIAN FUNDS
NOTES TO FINANCIAL STATEMENTS
Franklin Focused Growth Fund (continued)
5. Income Taxes (continued)
At September 30, 2019, the cost of investments, net unrealized appreciation (depreciation), undistributed ordinary income and undistributed long term capital gains for income tax purposes were as follows:
| Cost of investments |
$ | 2,716,745 | ||
|
|
|
| ||
| Unrealized appreciation |
$ | 1,736,738 | ||
| Unrealized depreciation |
(33,174 | ) | ||
|
|
|
| ||
| Net unrealized appreciation (depreciation) |
$ | 1,703,564 | ||
|
|
|
| ||
| Distributable earnings: |
||||
| Undistributed ordinary income |
$ | 5,444 | ||
| Undistributed long term capital gains |
208,691 | |||
|
|
|
| ||
| Total distributable earnings |
$ | 214,135 | ||
|
|
|
| ||
6. Investment Transactions
Purchases and sales of investments (excluding short term securities) for the year ended September 30, 2019, aggregated $1,183,102 and $1,248,776, respectively.
7. Credit Facility
The Fund, together with other U.S. registered and foreign investment funds (collectively, Borrowers), managed by Franklin Templeton, are borrowers in a joint syndicated senior unsecured credit facility totaling $2 billion (Global Credit Facility) which matures on February 7, 2020. This Global Credit Facility provides a source of funds to the Borrowers for temporary and emergency purposes, including the ability to meet future unanticipated or unusually large redemption requests.
Under the terms of the Global Credit Facility, the Fund shall, in addition to interest charged on any borrowings made by the Fund and other costs incurred by the Fund, pay its share of fees and expenses incurred in connection with the implementation and maintenance of the Global Credit Facility, based upon its relative share of the aggregate net assets of all of the Borrowers, including an annual commitment fee of 0.15% based upon the unused portion of the Global Credit Facility. These fees are reflected in other expenses in the Statement of Operations. During the year ended September 30, 2019, the Fund did not use the Global Credit Facility.
8. Fair Value Measurements
The Fund follows a fair value hierarchy that distinguishes between market data obtained from independent sources (observable inputs) and the Fund’s own market assumptions (unobservable inputs). These inputs are used in determining the value of the Fund’s financial instruments and are summarized in the following fair value hierarchy:
| • | Level 1 – quoted prices in active markets for identical financial instruments |
| • | Level 2 – other significant observable inputs (including quoted prices for similar financial instruments, interest rates, prepayment speed, credit risk, etc.) |
| • | Level 3 – significant unobservable inputs (including the Fund’s own assumptions in determining the fair value of financial instruments) |
The input levels are not necessarily an indication of the risk or liquidity associated with financial instruments at that level.
| 20 |
Annual Report | |||
FRANKLIN CUSTODIAN FUNDS
NOTES TO FINANCIAL STATEMENTS
Franklin Focused Growth Fund (continued)
At September 30, 2019, all of the Fund’s investments in financial instruments carried at fair value were valued using Level 1 inputs. For detailed categories, see the accompanying Statement of Investments.
9. Subsequent Events
The Fund has evaluated subsequent events through the issuance of the financial statements and determined that no events have occurred that require disclosure.
| Abbreviations
| ||
| Selected Portfolio | ||
| ADR | American Depositary Receipt | |
| Annual Report | 21 | |||
FRANKLIN CUSTODIAN FUNDS
Report of Independent Registered Public Accounting Firm
To the Board of Trustees of Franklin Custodian Funds and Shareholders of Franklin Focused Growth Fund
Opinion on the Financial Statements
We have audited the accompanying statement of assets and liabilities, including the statement of investments, of Franklin Focused Growth Fund (the “Fund”) as of September 30, 2019, the related statement of operations for the year ended September 30, 2019, the statement of changes in net assets for each of the two years in the period ended September 30, 2019, including the related notes, and the financial highlights for each of the periods indicated therein (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Fund as of September 30, 2019, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period ended September 30, 2019 and the financial highlights for each of the periods indicated therein in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits of these financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our procedures included confirmation of securities owned as of September 30, 2019 by correspondence with the custodian and transfer agent. We believe that our audits provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
San Francisco, California
November 14, 2019
We have served as the auditor of one or more investment companies in the Franklin Templeton Group of Funds since 1948.
| 22 |
Annual Report | |||
FRANKLIN CUSTODIAN FUNDS
Franklin Focused Growth Fund
Under Section 852(b)(3)(C) of the Internal Revenue Code, the Fund hereby reports the maximum amount allowable but no less than $18,275 as a long term capital gain dividend for the fiscal year ended September 30, 2019.
Under Section 871(k)(2)(C) of the Internal Revenue Code, the Fund hereby reports the maximum amount allowable but no less than $2,725 as a short term capital gain dividend for purposes of the tax imposed under Section 871(a)(1)(A) of the Internal Revenue Code for the fiscal year ended September 30, 2019.
Under Section 854(b)(1)(A) of the Internal Revenue Code, the Fund hereby reports 100.00% of the ordinary income dividends as income qualifying for the dividends received deduction for the fiscal year ended September 30, 2019.
Under Section 854(b)(1)(B) of the Internal Revenue Code, the Fund hereby reports the maximum amount allowable but no less than $23,005 as qualified dividends for purposes of the maximum rate under Section 1(h)(11) of the Internal Revenue Code for the fiscal year ended September 30, 2019. Distributions, including qualified dividend income, paid during calendar year 2019 will be reported to shareholders on Form 1099-DIV by mid-February 2020. Shareholders are advised to check with their tax advisors for information on the treatment of these amounts on their individual income tax returns.
| Annual Report | 23 | |||
FRANKLIN CUSTODIAN FUNDS
The name, year of birth and address of the officers and board members, as well as their affiliations, positions held with the Trust, principal occupations during at least the past five years and number of U.S. registered portfolios overseen in the Franklin Templeton fund complex, are shown below. Generally, each board member serves until that person’s successor is elected and qualified.
Independent Board Members
|
Name, Year of Birth and Address
|
Position | Length of Time Served |
Number of Portfolios in Fund Complex Overseen by Board Member* |
Other Directorships Held During at Least the Past 5 Years | ||||
|
Harris J. Ashton (1932) One Franklin Parkway San Mateo, CA 94403-1906 |
Trustee | Since 1976 | 135 | Bar-S Foods (meat packing company) (1981-2010). | ||||
| Principal Occupation During at Least the Past 5 Years: | ||||||||
| Director of various companies; and formerly, Director, RBC Holdings, Inc. (bank holding company) (until 2002); and President, Chief Executive Officer and Chairman of the Board, General Host Corporation (nursery and craft centers) (until 1998).
| ||||||||
| Terrence J. Checki (1945) One Franklin Parkway San Mateo, CA 94403-1906 |
Trustee | Since 2017 | 114 | Hess Corporation (exploration of oil and gas) (2014-present). | ||||
| Principal Occupation During at Least the Past 5 Years: | ||||||||
| Member of the Council on Foreign Relations (1996-present); Member of the National Committee on U.S.-China Relations (1999-present); member of the Board of Trustees of the Economic Club of New York (2013-present); member of the Board of Trustees of the Foreign Policy Association (2005-present) and member of various other boards of trustees and advisory boards; and formerly, Executive Vice President of the Federal Reserve Bank of New York and Head of its Emerging Markets and Internal Affairs Group and Member of Management Committee (1995-2014); and Visiting Fellow at the Council on Foreign Relations (2014).
| ||||||||
| Mary C. Choksi (1950) One Franklin Parkway San Mateo, CA 94403-1906 |
Trustee | Since 2014 | 135 | Avis Budget Group Inc. (car rental) (2007-present), Omnicom Group Inc. (advertising and marketing communications services) (2011-present) and White Mountains Insurance Group, Ltd. (holding company) (2017-present). | ||||
| Principal Occupation During at Least the Past 5 Years: | ||||||||
| Director of various companies; and formerly, Founder and Senior Advisor, Strategic Investment Group (investment management group) (2015-2017); Founding Partner and Senior Managing Director, Strategic Investment Group (1987-2015); Founding Partner and Managing Director, Emerging Markets Management LLC (investment management firm) (1987-2011); and Loan Officer/Senior Loan Officer/Senior Pension Investment Officer, World Bank Group (international financial institution) (1977-1987).
| ||||||||
| Edith E. Holiday (1952) One Franklin Parkway San Mateo, CA 94403-1906 |
Lead Independent Trustee | Trustee since 1998 and Lead Independent Trustee since March 2019 | 135 | Hess Corporation (exploration of oil and gas) (1993-present), Canadian National Railway (railroad) (2001-present), White Mountains Insurance Group, Ltd. (holding company) (2004-present), Santander Consumer USA Holdings, Inc. (consumer finance) (2016-present), RTI International Metals, Inc. (manufacture and distribution of titanium) (1999-2015) and H.J. Heinz Company (processed foods and allied products) (1994-2013). | ||||
| Principal Occupation During at Least the Past 5 Years: | ||||||||
| Director or Trustee of various companies and trusts; and formerly, Assistant to the President of the United States and Secretary of the Cabinet (1990-1993); General Counsel to the United States Treasury Department (1989-1990); and Counselor to the Secretary and Assistant Secretary for Public Affairs and Public Liaison-United States Treasury Department (1988-1989).
| ||||||||
| 24 |
Annual Report | |||
FRANKLIN CUSTODIAN FUNDS
Independent Board Members (continued)
|
Name, Year of Birth and Address
|
Position | Length of Time Served |
Number of Portfolios in Fund Complex Overseen by Board Member* |
Other Directorships Held During at Least the Past 5 Years | ||||
| J. Michael Luttig (1954) One Franklin Parkway San Mateo, CA 94403-1906 |
Trustee | Since 2009 | 135 | Boeing Capital Corporation (aircraft financing) (2006-2013). | ||||
| Principal Occupation During at Least the Past 5 Years: | ||||||||
| Executive Vice President, Counselor and Senior Advisor to Boeing Chairman and Board of Directors, The Boeing Company (aerospace company) (May 2019); and formerly, General Counsel and member of the Executive Council, The Boeing Company (2006-2019) and Federal Appeals Court Judge, U.S. Court of Appeals for the Fourth Circuit (1991-2006).
| ||||||||
| Larry D. Thompson (1945) One Franklin Parkway San Mateo, CA 94403-1906 |
Trustee | Since 2007 | 135 | The Southern Company (energy company) (2014-present; previously 2010-2012), Graham Holdings Company (education and media organization) (2011-present) and Cbeyond, Inc. (business communications provider) (2010-2012). | ||||
| Principal Occupation During at Least the Past 5 Years: | ||||||||
| Director of various companies; Counsel, Finch McCranie, LLP (law firm) (2015-present); Independent Compliance Monitor and Auditor, Volkswagen AG (manufacturer of automobiles and commercial vehicles) (2017-present); John A. Sibley Professor of Corporate and Business Law, University of Georgia School of Law (2015-present; previously 2011-2012); and formerly, Executive Vice President - Government Affairs, General Counsel and Corporate Secretary, PepsiCo, Inc. (consumer products) (2012-2014); Senior Vice President - Government Affairs, General Counsel and Secretary, PepsiCo, Inc. (2004-2011); Senior Fellow of The Brookings Institution (2003-2004); Visiting Professor, University of Georgia School of Law (2004); and Deputy Attorney General, U.S. Department of Justice (2001-2003).
| ||||||||
| Interested Board Members and Officers | ||||||||
| Name, Year of Birth and Address |
Position | Length of Time Served |
Number of Portfolios in Fund Complex Overseen by Board Member* |
Other Directorships Held During at Least the Past 5 Years | ||||
| **Gregory E. Johnson (1961) One Franklin Parkway San Mateo, CA 94403-1906 |
Trustee | Since 2013 | 147 | None | ||||
| Principal Occupation During at Least the Past 5 Years: | ||||||||
| Chairman of the Board, Member - Office of the Chairman, Director and Chief Executive Officer, Franklin Resources, Inc.; officer and/or director or trustee, as the case may be, of some of the other subsidiaries of Franklin Resources, Inc. and of 42 of the investment companies in Franklin Templeton; Vice Chairman, Investment Company Institute; and formerly, President, Franklin Resources, Inc. (1994-2015).
| ||||||||
| **Rupert H. Johnson, Jr. (1940) One Franklin Parkway San Mateo, CA 94403-1906 |
Chairman of the Board, Trustee and Vice President | Chairman of the Board since 2013, Trustee since 1983 and Vice President since 1982 | 135 | None | ||||
| Principal Occupation During at Least the Past 5 Years: | ||||||||
| Vice Chairman, Member - Office of the Chairman and Director, Franklin Resources, Inc.; Director, Franklin Advisers, Inc.; and officer and/or director or trustee, as the case may be, of some of the other subsidiaries of Franklin Resources, Inc. and of 40 of the investment companies in Franklin Templeton.
| ||||||||
| Alison E. Baur (1964) One Franklin Parkway San Mateo, CA 94403-1906 |
Vice President | Since 2012 | Not Applicable | Not Applicable | ||||
| Principal Occupation During at Least the Past 5 Years: | ||||||||
| Deputy General Counsel, Franklin Templeton; and officer of some of the other subsidiaries of Franklin Resources, Inc. and of 44 of the investment companies in Franklin Templeton.
| ||||||||
| Annual Report | 25 | |||
FRANKLIN CUSTODIAN FUNDS
Interested Board Members and Officers (continued)
|
Name, Year of Birth and Address
|
Position | Length of Time Served |
Number of Portfolios in Fund Complex Overseen by Board Member* |
Other Directorships Held During at Least the Past 5 Years | ||||
| Gaston Gardey (1967) One Franklin Parkway San Mateo, CA 94403-1906 |
Treasurer, Chief Financial Officer and Chief Accounting Officer | Since 2009 | Not Applicable | Not Applicable | ||||
| Principal Occupation During at Least the Past 5 Years: | ||||||||
| Treasurer, U.S. Fund Administration & Reporting and officer of 26 of the investment companies in Franklin Templeton.
| ||||||||
| Aliya S. Gordon (1973) One Franklin Parkway San Mateo, CA 94403-1906 |
Vice President | Since 2009 | Not Applicable | Not Applicable | ||||
| Principal Occupation During at Least the Past 5 Years: | ||||||||
| Senior Associate General Counsel, Franklin Templeton; Vice President and Secretary, Franklin Resources, Inc.; and officer of 44 of the investment companies in Franklin Templeton.
| ||||||||
| Steven J. Gray (1955) One Franklin Parkway San Mateo, CA 94403-1906 |
Vice President since 2009 and Co-Secretary since January 2019 | Vice President since 2009 and Co-Secretary since January 2019 | Not Applicable | Not Applicable | ||||
| Principal Occupation During at Least the Past 5 Years: | ||||||||
| Senior Associate General Counsel, Franklin Templeton; Vice President, Franklin Templeton Distributors, Inc. and FASA, LLC; and officer of 44 of the investment companies in Franklin Templeton.
| ||||||||
| Matthew T. Hinkle (1971) One Franklin Parkway San Mateo, CA 94403-1906 |
Chief Executive Officer – Finance and Administration | Since 2017 | Not Applicable | Not Applicable | ||||
| Principal Occupation During at Least the Past 5 Years: | ||||||||
| Senior Vice President, Franklin Templeton Services, LLC; officer of 44 of the investment companies in Franklin Templeton; and formerly, Vice President, Global Tax (2012-April 2017) and Treasurer/Assistant Treasurer, Franklin Templeton (2009-2017).
| ||||||||
| Robert Lim (1948) One Franklin Parkway San Mateo, CA 94403-1906 |
Vice President – AML Compliance | Since 2016 | Not Applicable | Not Applicable | ||||
| Principal Occupation During at Least the Past 5 Years: | ||||||||
| Vice President, Franklin Templeton Companies, LLC; Chief Compliance Officer, Franklin Templeton Distributors, Inc. and Franklin Templeton Investor Services, LLC; and officer of 44 of the investment companies in Franklin Templeton.
| ||||||||
| Kimberly H. Novotny (1972) 300 S.E. 2nd Street Fort Lauderdale, FL 33301-1923 |
Vice President | Since 2013 | Not Applicable | Not Applicable | ||||
| Principal Occupation During at Least the Past 5 Years: | ||||||||
| Senior Associate General Counsel, Franklin Templeton; Vice President and Corporate Secretary, Fiduciary Trust International of the South; Vice President, Templeton Investment Counsel, LLC; Assistant Secretary, Franklin Resources, Inc.; and officer of 44 of the investment companies in Franklin Templeton.
| ||||||||
| 26 |
Annual Report | |||
FRANKLIN CUSTODIAN FUNDS
Interested Board Members and Officers (continued)
|
Name, Year of Birth and Address
|
Position | Length of Time Served |
Number of Portfolios in Fund Complex Overseen by Board Member* |
Other Directorships Held During at Least the Past 5 Years | ||||
| Edward D. Perks (1970) One Franklin Parkway San Mateo, CA 94403-1906 |
President and Chief Executive Officer – Investment Management | Since December 2018 | Not Applicable | Not Applicable | ||||
| Principal Occupation During at Least the Past 5 Years: | ||||||||
| President and Director, Franklin Advisers, Inc.; and officer of nine of the investment companies in Franklin Templeton (since December 2018).
| ||||||||
| Robert C. Rosselot (1960) 300 S.E. 2nd Street Fort Lauderdale, FL 33301-1923 |
Chief Compliance Officer and Secretary | Since 2013 | Not Applicable | Not Applicable | ||||
| Principal Occupation During at Least the Past 5 Years: | ||||||||
| Director, Global Compliance, Franklin Templeton; Vice President, Franklin Templeton Companies, LLC; officer of 44 of the investment companies in Franklin Templeton; and formerly, Senior Associate General Counsel, Franklin Templeton (2007-2013); and Secretary and Vice President, Templeton Group of Funds (2004-2013).
| ||||||||
| Navid J. Tofigh (1972) One Franklin Parkway San Mateo, CA 94403-1906 |
Vice President | Since 2015 | Not Applicable | Not Applicable | ||||
| Principal Occupation During at Least the Past 5 Years: | ||||||||
| Associate General Counsel and officer of 44 of the investment companies in Franklin Templeton.
| ||||||||
| Craig S. Tyle (1960) One Franklin Parkway San Mateo, CA 94403-1906 |
Vice President | Since 2005 | Not Applicable | Not Applicable | ||||
| Principal Occupation During at Least the Past 5 Years: | ||||||||
| General Counsel and Executive Vice President, Franklin Resources, Inc.; and officer of some of the other subsidiaries of Franklin Resources, Inc. and of 44 of the investment companies in Franklin Templeton.
| ||||||||
| Lori A. Weber (1964) 300 S.E. 2nd Street Fort Lauderdale, FL 33301-1923 |
Vice President and Co- Secretary | Vice President since 2011 and Co-Secretary since January 2019 | Not Applicable | Not Applicable | ||||
Principal Occupation During at Least the Past 5 Years:
Senior Associate General Counsel, Franklin Templeton; Assistant Secretary, Franklin Resources, Inc.; Vice President and Secretary, Templeton Investment Counsel, LLC; and officer of 44 of the investment companies in Franklin Templeton.
*We base the number of portfolios on each separate series of the U.S. registered investment companies within the Franklin Templeton fund complex. These portfolios have a common investment manager or affiliated investment managers.
**Gregory E. Johnson is considered to be an interested person of the Fund under the federal securities laws due to his position as an officer and director of Franklin Resources, Inc. (Resources), which is the parent company of the Fund’s investment manager and distributor. Rupert H. Johnson, Jr. is considered to be an interested person of the Fund under the federal securities laws due to his position as an officer and director and major shareholder of Resources.
Note 1: Rupert H. Johnson, Jr. is the uncle of Gregory E. Johnson.
Note 2: Effective March 12, 2019, John B. Wilson ceased to be a trustee of the Trust.
Note 3: Officer information is current as of the date of this report. It is possible that after this date, information about officers may change.
The Sarbanes-Oxley Act of 2002 and Rules adopted by the Securities and Exchange Commission require the Fund to disclose whether the Fund’s Audit Committee includes at least one member who is an audit committee financial expert within the meaning of such Act and Rules. The Fund’s Board has determined that there is at least one such financial expert on the Audit Committee and has designated Mary C. Choksi as its audit committee financial expert. The Board believes that Ms. Choksi qualifies as such an expert in view of her extensive business background and experience. She currently serves as a director of Avis Budget Group, Inc. (2007-present) and formerly, Founder and Senior Advisor, Strategic Investment Group (1987 to 2017). Ms. Choksi has been a Member of the
| Annual Report | 27 | |||
FRANKLIN CUSTODIAN FUNDS
Fund’s Audit Committee since 2014. As a result of such background and experience, the Board believes that Ms. Choksi has acquired an understanding of generally accepted accounting principles and financial statements, the general application of such principles in connection with the accounting estimates, accruals and reserves, and analyzing and evaluating financial statements that present a breadth and level of complexity of accounting issues generally comparable to those of the Fund, as well as an understanding of internal controls and procedures for financial reporting and an understanding of audit committee functions. Ms. Choksi is an independent Board member as that term is defined under the relevant Securities and Exchange Commission Rules and Releases.
The Statement of Additional Information (SAI) includes additional information about the board members and is available, without charge, upon request. Shareholders may call (800) DIAL BEN/342-5236 to request the SAI.
| 28 |
Annual Report | |||
FRANKLIN CUSTODIAN FUNDS
FRANKLIN FOCUSED GROWTH FUND
| Annual Report | 29 | |||
| 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 13(a)(1), the Registrant is attaching as an exhibit a copy of its code of ethics that applies to its principal executive officers and principal financial and accounting officer.
| Item 3. | Audit Committee Financial Expert. |
(a)(1) The Registrant has an audit committee financial expert serving on its audit committee.
(2) The audit committee financial expert is Mary C. Choksi and she is “independent” as defined under the relevant Securities and Exchange Commission Rules and Releases.
| Item 4. | Principal Accountant Fees and Services. |
(a) Audit Fees
The aggregate fees paid to the principal accountant for professional services rendered by the principal accountant for the audit of the registrant’s annual financial statements or for services that are normally provided by the principal accountant in connection with statutory and regulatory filings or engagements were $475,596 for the fiscal year ended September 30, 2019 and $571,475 for the fiscal year ended September 30, 2018.
(b) Audit-Related Fees
The aggregate fees paid to the principal accountant for assurance and related services rendered by the principal accountant to the registrant that are reasonably related to the performance of the audit of the registrant’s financial statements and are not reported under paragraph (a) of Item 4 were $9,399 for the fiscal year ended September 30, 2019 and $9,306 for the fiscal year ended September 30, 2018. The services for which these fees were paid included attestation services.
There were no fees paid to the principal accountant for assurance and related services rendered by the principal accountant to the registrant’s investment adviser and any entity controlling, controlled by or under common control with the investment adviser that provides ongoing services to the registrant that are reasonably related to the performance of the audit of their financial statements.
(c) Tax Fees
There were no fees paid to the principal accountant for professional services rendered by the principal accountant to the registrant for tax compliance, tax advice and tax planning.
The aggregate fees paid to the principal accountant for professional services rendered by the principal accountant to the registrant’s investment adviser and any entity controlling, controlled by or under common control with the investment adviser that provides ongoing services to the registrant for tax compliance, tax advice and tax planning were $20,000 for the fiscal year ended September 30, 2019 and $5,000 for the fiscal year ended September 30, 2018. The services for which these fees were paid included professional fees in connection with tax treatment of equipment lease transactions, professional fees in connection with an Indonesia withholding tax refund claim and tax consulting services related to the operating agreement and term sheet for the launch of a new fund.
(d) All Other Fees
The aggregate fees paid to the principal accountant for products and services rendered by the principal accountant to the registrant not reported in paragraphs (a)-(c) of Item 4 were $0 for the fiscal year ended September 30, 2019 and $39,976 for the fiscal year ended September 30, 2018. The services for which these fees were paid included review of materials provided to the fund Board in connection with the investment management contract renewal process.
The aggregate fees paid to the principal accountant for products and services rendered by the principal accountant to the registrant’s investment adviser and any entity controlling, controlled by or under common control with the investment adviser that provides ongoing services to the registrant not reported in paragraphs (a)-(c) of Item 4 were $114,908 for the fiscal year ended September 30, 2019 and $16,500 for the fiscal year ended September 30, 2018. The services for which these fees were paid included valuation services related to fair value engagement, the issuance of an Auditor’s Certificate for South Korean regulatory shareholders disclosures, benchmarking services in connection with the ICI TA Survey and assets under management certification.
(e) (1) The registrant’s audit committee is directly responsible for approving the services to be provided by the auditors, including:
(i) pre-approval of all audit and audit related services;
(ii) pre-approval of all non-audit related services to be provided to the Fund by the auditors;
(iii) pre-approval of all non-audit related services to be provided to the registrant by the auditors to the registrant’s investment adviser or to any entity that controls, is controlled by or is under common control with the registrant’s investment adviser and that provides ongoing services to the registrant where the non-audit services relate directly to the operations or financial reporting of the registrant; and
(iv) establishment by the audit committee, if deemed necessary or appropriate, as an alternative to committee pre-approval of services to be provided by the auditors, as required by paragraphs (ii) and (iii) above, of policies and procedures to permit such services to be pre-approved by other means, such as through
establishment of guidelines or by action of a designated member or members of the committee; provided the policies and procedures are detailed as to the particular service and the committee is informed of each service and such policies and procedures do not include delegation of audit committee responsibilities, as contemplated under the Securities Exchange Act of 1934, to management; subject, in the case of (ii) through (iv), to any waivers, exceptions or exemptions that may be available under applicable law or rules.
(e) (2) None of the services provided to the registrant described in paragraphs (b)-(d) of Item 4 were approved by the audit committee pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of regulation S-X.
(f) No disclosures are required by this Item 4(f).
(g) The aggregate non-audit fees paid to the principal accountant for services rendered by the principal accountant to the registrant and the registrant’s investment adviser and any entity controlling, controlled by or under common control with the investment adviser that provides ongoing services to the registrant were $144,307 for the fiscal year ended September 30, 2019 and $70,782 for the fiscal year ended September 30, 2018.
(h) The registrant’s audit committee of the board has considered whether the provision of non-audit services that were rendered to the registrant’s investment adviser (not including any sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser), and any entity controlling, controlled by, or under common control with the investment adviser that provides ongoing services to the registrant that were not pre-approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X is compatible with maintaining the principal accountant’s independence.
| Item 5. | Audit Committee of Listed Registrants. N/A |
| Item 6. | Schedule of Investments. N/A |
| Item 7. | Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies. N/A |
| Item 8. | Portfolio Managers of Closed-End Management Investment Companies. N/A |
| Item 9. | Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers. N/A |
| Item 10. | Submission of Matters to a Vote of Security Holders. |
There have been no changes to the procedures by which shareholders may recommend nominees to the Registrant’s Board of Trustees that would require disclosure herein.
| Item 11. | Controls and Procedures. |
(a) Evaluation of Disclosure Controls and Procedures. The Registrant maintains disclosure controls and procedures that are designed to provide reasonable assurance that information required to be disclosed in the Registrant’s filings under the Securities Exchange Act of 1934, as amended, 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 changes in the Registrant’s internal control over financial reporting that occurred during the period covered by this report that has materially affected, or is reasonably likely to materially affect the internal control over financial reporting.
| Item 12. | Disclosure of Securities Lending Activities for Closed-End Management Investment Company. N/A |
| Item 13. | Exhibits. |
(a)(1) Code of Ethics
(a)(2) Certifications pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 of Matthew T. Hinkle, Chief Executive Officer - Finance and Administration, and Gaston Gardey, Chief Financial Officer and Chief Accounting Officer
(b) Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 of Matthew T. Hinkle, Chief Executive Officer - Finance and Administration, and Gaston Gardey, Chief Financial Officer and Chief Accounting 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.
| FRANKLIN CUSTODIAN FUNDS | ||
| By | /S/ MATTHEW T. HINKLE | |
| Matthew T. Hinkle | ||
| Chief Executive Officer - Finance and Administration | ||
| Date November 29, 2019 | ||
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/ MATTHEW T. HINKLE | |
| Matthew T. Hinkle | ||
| Chief Executive Officer - Finance and Administration | ||
| Date November 29, 2019 | ||
| By | /S/ GASTON GARDEY | |
| Gaston Gardey | ||
| Chief Financial Officer and Chief Accounting Officer | ||
| Date November 29, 2019 | ||
