N-CSR

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM N-CSR

CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES

Investment Company Act file number_811-00537

__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: _9/30/10

Item 1. Reports to Stockholders.

SEPTEMBER 30, 2010 ANNUAL REPORT AND SHAREHOLDER LETTER Franklin DynaTech Fund Franklin Growth Fund Franklin Income Fund Franklin U.S. Government Securities Fund Franklin Utilities Fund Sign up for electronic delivery on franklintempleton.com FRANKLIN CUSTODIAN FUNDS

Contents

Shareholder Letter	1
Annual Report
Economic and Market Overview	3
Franklin DynaTech Fund	5
Franklin Growth Fund	15
Franklin Income Fund	25
Franklin U.S. Government Securities Fund	38
Franklin Utilities Fund	49
Financial Highlights and Statements of Investments	59
Financial Statements	111
Notes to Financial Statements	120
Report of Independent Registered Public Accounting Firm	143
Tax Designation	144
Board Members and Officers	145
Shareholder Information	150

| 1

Annual Report

Economic and Market Overview

During the 12-month period ended September 30, 2010, the U.S. economy recovered unevenly from the recession, supported by a combination of fundamental improvement in business conditions and government intervention and stimulus. Economic activity as measured by gross domestic product (GDP) expanded at a 5.0% annualized rate in 2009’s fourth quarter. As the effects of temporary stimulus measures faded, construction, industrial production and exports cooled somewhat. As a result, GDP growth slowed to an annualized 3.7% pace in 2010’s first quarter, and then downshifted further to 1.7% annualized in the second quarter and an estimated annualized 2.0% pace in the third quarter.

Challenges such as mixed economic data, elevated debt concerns surrounding the U.S. budget deficit and a growing lack of job prospects for the unemployed also hindered consumer confidence and the economy’s advance. During much of the period, home prices rose in many regions due to low interest rates, a first-time homebuyer tax credit program, and prices dipping to levels that lured buyers. Later in the period, home sales stalled as the homebuyer tax credit program ended, foreclosures mounted and the housing sector overall remained weak.

Amid signs of a demand-led recovery, crude oil prices rose from $71 per barrel at the end of September 2009 to a 17-month high of $87 in early April. But as doubts surfaced about the recovery’s sustainability, oil prices drifted down as low as $66 in late May. Despite an abundant oil supply, a falling U.S. dollar and speculative buying pushed prices to $80 per barrel by the end of September. The September 2010 inflation rate was an annualized 1.1%¹ Core inflation, which excludes volatile food and energy costs, rose at a 0.8% annualized rate and toward period-end reached a 44-year low level.¹ Despite a lack of significant job gains, the unemployment rate, which had risen from 9.8% at the beginning of the period to a 26-year high of 10.1% in October 2009, was 9.6% in Septe mber 2010 as the labor force participation rate fell.¹

1. Source: Bureau of Labor Statistics.

Annual Report     | 3

Given few inflationary pressures and uncertainty surrounding the economic recovery, the Federal Open Market Committee (FOMC) made no major changes to its monetary policy. It repeatedly stated it will keep the federal funds target rate in the exceptionally low 0% to 0.25% range “for an extended period” and eventually shifted its focus to its outlook and the status of its current holdings. In September, the FOMC revealed concerns about the subdued recovery and said inflation was below the pace “consistent with its mandate.” Having already lowered interest rates effectively to zero, the FOMC stood ready to buy government debt to stimulate the economy and promote a low level of inflation consistent with healthy economic growth.

Investor confidence shifted with each release of encouraging or discouraging economic, regulatory or political news, stoking considerable volatility among equities. Ultimately, stock market gains made in the first half of the fiscal year gave way to a directionless, nearly flat trend during the latter half as many investors sought the relative safety of precious metals and U.S. Treasury securities. Wary investors favored short-term Treasuries, and Treasury yields dipped to very low levels during the period. The two-year Treasury bill yield decreased from 0.95% to 0.42% over the 12-month period, while the 10-year Treasury note yield fell from 3.31% to 2.53%. Overall, the blue chip stocks of the Dow Jones Industrial Average delivered a +14.12% total return, while the broader Standard & Poor’s 500 Index (S&P 500) posted a +10.16% total return and the technology-heavy NASDAQ Composite Index produced a +12.61% return.² Performance among the major sectors varied widely, with consumer discretionary, industrials and telecommunication services posting solid gains, while financials had a loss and energy and health care underperformed.

The foregoing information reflects our analysis and opinions as of September 30, 2010. The information is not a complete analysis of every aspect of any market, country, industry, security or fund. Statements of fact are from sources considered reliable.

2. Source: © 2010 Morningstar. All Rights Reserved. The information contained herein: (1) is proprietary to Morningstar and/or its content providers; (2) may not be copied or distributed; and (3) is not warranted to be accurate, complete or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information. Past performance is no guarantee of future results. The Dow Jones Industrial Average is price weighted based on the average market price of 30 blue-chip stocks that are generally industry leaders. The S&P 500 is a market capitalization-weighted index of 500 stocks designed to measure total U.S. equity market performance. STANDARD & POOR’S^®, S&P^® and S&P 500^® are registered trademarks of Standard & Poor’s Financial Services LLC. Standard & Poor’s does not sponsor, endorse, sell or promote any S&P index-based product. The NASDAQ Composite Index is a broad-based market capitalization-weighted index designed to measure all NASDAQ domestic and international based common type stocks listed on The NASDAQ Stock Market.

4 |     Annual Report

Franklin DynaTech Fund

Your Fund’s Goal and Main Investments: Franklin DynaTech Fund seeks capital appreciation by investing substantially in equity securities of companies emphasizing scientific or technological development or that are in fast-growing industries.

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. Please visit franklintempleton.comor call (800) 342-5236 for most recent month-end performance.

We are pleased to bring you Franklin DynaTech Fund’s annual report for the fiscal year ended September 30, 2010.

Performance Overview

Franklin DynaTech Fund – Class A delivered a +17.07% cumulative total return for the 12 months under review. For the same period, the Fund out-performed the Russell 1000 Growth Index, which produced a +12.65% total return.¹ The Fund performed comparably to the NASDAQ 100 Index, which posted a +16.23% total return.² Also for comparison, the Fund out-performed the Standard & Poor’s 500 Index’s (S&P 500’s) +10.16% total return and the NASDAQ Composite Index’s +12.61% total return.³ The Russell 1000 Growth Index replaced the NASDAQ 100 Index as the Fund’s new broad benchmark because we believe the new benchmark better represents the Fund’s portfolio composition. You can find the Fund ’s long-term performance data in the Performance Summary beginning on page 8.

Investment Strategy

We use fundamental, bottom-up research to seek companies meeting our criteria of growth potential, quality and valuation. In seeking sustainable growth characteristics, we look for companies we believe can produce sustainable earnings and cash flow growth, evaluating the long-term market opportunity and competitive

1.	Source: © 2010 Morningstar. All Rights Reserved. The information contained herein: (1) is proprietary to Morningstar and/or its content providers; (2) may not be copied or distributed; and (3) is not warranted to be accurate, complete or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information. 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 index return includes reinvested dividends.
2.	Source: © 2010 Morningstar. The NASDAQ 100 Index is a modified market capitalization-weighted index of the largest and most active domestic and international non-financial companies listed on The NASDAQ Stock Market. The index reflects companies across major industry groups including computer hardware and software, telecommunications, retail/wholesale trade and biotechnology. Return for this index is price-only and does not include reinvested dividends.
3.	Source: © 2010 Morningstar. The S&P 500 is a market capitalization-weighted index of 500 stocks designed to measure total U.S. equity market performance and includes reinvested dividends. The NASDAQ Composite Index is a broad-based, market capitalization-weighted index designed to measure all NASDAQ domestic and international based common type stocks listed on The NASDAQ Stock Market and includes reinvested dividends.

The indexes are unmanaged. 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 64.

Annual Report     | 5

Portfolio Breakdown Franklin DynaTech Fund Based on Total Net Assets as of 9/30/10

structure of an industry to target leaders and emerging leaders. We define quality companies as those with strong and improving competitive positions in attractive markets. We also believe important attributes of quality are experienced and talented management teams as well as financial strength reflected in the capital structure, gross and operating margins, free cash flow generation and returns on capital employed. Our valuation analysis includes a range of potential outcomes based on an assessment of multiple scenarios. In assessing value, we consider whether security prices fully reflect the balance of the sustainable growth opportunities relative to business and financial risks.

Manager’s Discussion

The information technology (IT) sector contributed significantly to Fund performance during the reporting period, driven by global demand for technology.⁴ A key contributor was Silicon Valley-based computers and peripherals industry leader Apple, which continued its pipeline of successful innovations. Apple’s release of the iPad tablet computer, selling over 4.19 million units in the past quarter, boosted the company’s value and benefited Fund performance. In September, Apple also announced the new, updated Apple TV, which allows viewers to watch high-definition movies and TV for a minimal cost. Another Silicon Valley-based IT company, Salesforce.com, was a leading contributor to the Fund. A software industry provider of applications for sales and customer services, Salesforce.com advanced as its business grew globally. China-bas ed Internet software and services industry company Baidu also helped Fund results. Baidu, a Chinese-language Internet search engine with more than 70% of the local search market, had strong second quarter results. In addition, semiconductor company ARM Holdings aided Fund performance. Based in the U.K., ARM Holdings manufactures chips that allow tasks to be processed simultaneously.

The Fund’s consumer discretionary sector holdings supported the Fund’s results.⁵ In particular, Priceline.com performed well over the 12-month period as its presence grew in Europe and cost-conscious consumers favored online travel sites. Priceline.com is an Internet and catalog retail industry company that helps users obtain discount rates for travel-related items such as airline tickets and hotel stays.

In contrast, several holdings detracted from Fund performance. Biotechnology company Gilead Sciences, in the health care sector, lost value and was sold during the period.⁶ Gilead makes products to treat infectious diseases including

4.	The information technology sector comprises communications equipment; computers and peripherals; electronic equipment, instruments and components; Internet software and services; IT services; semiconductors and semiconductor equipment; and software in the SOI.
5.	The consumer discretionary sector comprises diversified consumer services; hotels, restaurants and leisure; and Internet and catalog retail in the SOI.
6.	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.

6 |     Annual Report

hepatitis, HIV and infections related to AIDS. The financials sector also hurt performance largely due to the Fund’s holding in global investment banking and securities firm The Goldman Sachs Group.⁷ Its share price declined amid investor concerns about federal inquires into the company’s business practices. While the IT sector overall benefited the Fund, some individual companies weighed on performance such as semiconductor company and chip designer Silicon Laboratories, Chinese search engine Sohu.com (sold by period-end) and wireless technology developer QUALCOMM.

As managers of Franklin DynaTech Fund, at period-end we were encouraged by the relative abundance of leading science and technology companies that we believe have strong long-term growth prospects trading at what we perceive to be attractive valuations. We believe it is these innovative, thought-leading companies that may promote economic advancement over the longer term.

Thank you for your continued participation in Franklin DynaTech Fund. We look forward to serving your future investment needs.

Matthew J. Moberg, CPA

Rupert H. Johnson, Jr.

Portfolio Management Team

Franklin DynaTech Fund

The foregoing information reflects our analysis, opinions and portfolio holdings as of September 30, 2010, the end of the reporting period. The way we implement our main investment strategies and the resulting portfolio holdings may change depending on factors such as market and economic conditions. These opinions may not be relied upon as investment advice or an offer for a particular security. The information is not a complete analysis of every aspect of any market, country, industry, security or the Fund. Statements of fact are from sources considered reliable, but the investment manager makes no representation or warranty as to their completeness or accuracy. Although historical performance is no guarantee of future results, these insights may help you understand our investment management philosophy.

7. The financials sector comprises capital markets, commercial banks, consumer finance and diversified financial services in the SOI.

Top 10 Holdings
Franklin DynaTech Fund
9/30/10

Company	% of Total
Sector/Industry, Country	Net Assets
Apple Inc.		7.6	%
Computers & Peripherals, U.S.
Google Inc., A		3.8	%
Internet Software & Services, U.S.
Intel Corp.		3.1	%
Semiconductors & Semiconductor Equipment, U.S.
Baidu Inc.		3.0	%
Internet Software & Services, China
FMC Technologies Inc.		3.0	%
Energy Equipment & Services, U.S.
Teva Pharmaceutical Industries Ltd., ADR		2.7	%
Pharmaceuticals, Israel
ARM Holdings PLC		2.4	%
Semiconductors & Semiconductor Equipment, U.K.
Salesforce.com Inc.		2.4	%
Software, U.S.
Visa Inc., A		2.4	%
IT Services, U.S.
Priceline.com Inc.		2.4	%
Internet & Catalog Retail, U.S.

Annual Report     | 7

Performance Summary as of 9/30/10

Franklin DynaTech Fund

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. 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.

Price Information

Class A (Symbol: FKDNX)	Change		9/30/10		9/30/09
Net Asset Value (NAV)		+$3.96	$	27.16	$	23.20

Class B (Symbol: FDNBX)	Change		9/30/10		9/30/09
Net Asset Value (NAV)		+$3.50	$	25.10	$	21.60

Class C (Symbol: FDYNX)	Change		9/30/10		9/30/09
Net Asset Value (NAV)		+$3.47	$	24.81	$	21.34

Class R (Symbol: n/a)	Change		9/30/10		9/30/09
Net Asset Value (NAV)		+$3.89	$	27.02	$	23.13

Advisor Class (Symbol: n/a)	Change		9/30/10		9/30/09
Net Asset Value (NAV)		+$4.05	$	27.33	$	23.28

8 |     Annual Report

Performance Summary (continued)

Performance

Cumulative total return excludes sales charges. Average annual total returns and value of $10,000 investment include maximum sales charges. Class A: 5.75% maximum initial sales charge;Class B: contingent deferred sales charge (CDSC) declining from 4% to 1% over six years, and eliminated thereafter; Class C: 1% CDSC in first year only; Class R/Advisor Class: no sales charges.

Class A			1-Year			5-Year			10-Year
Cumulative Total Return1				+17.07	%		+22.38	%		+11.06	%
Average Annual Total Return2				+10.32	%		+2.90	%		+0.46	%
Value of $10,000 Investment3			$	11,032		$	11,536		$	10,469
Total Annual Operating Expenses4	1.18	%
Class B			1-Year			5-Year			10-Year
Cumulative Total Return1				+16.20	%		+17.84	%		+4.50	%
Average Annual Total Return2				+12.20	%		+2.98	%		+0.44	%
Value of $10,000 Investment3			$	11,220		$	11,584		$	10,450
Total Annual Operating Expenses4	1.93	%
Class C			1-Year			5-Year			10-Year
Cumulative Total Return1				+16.26	%		+17.86	%		+3.08	%
Average Annual Total Return2				+15.26	%		+3.34	%		+0.30	%
Value of $10,000 Investment3			$	11,526		$	11,786		$	10,308
Total Annual Operating Expenses4	1.93	%
Class R						1-Year			Inception (12/1/08)
Cumulative Total Return1							+16.82	%		+72.54	%
Average Annual Total Return2							+16.82	%		+34.72	%
Value of $10,000 Investment3						$	11,682		$	17,254
Total Annual Operating Expenses4	1.43	%
Advisor Class5			1-Year			5-Year			10-Year
Cumulative Total Return1				+17.40	%		+23.12	%		+11.74	%
Average Annual Total Return2				+17.40	%		+4.25	%		+1.12	%
Value of $10,000 Investment3			$	11,740		$	12,312		$	11,174
Total Annual Operating Expenses4	0.93	%

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.

Annual Report     | 9

Performance Summary (continued)

Total Return Index Comparison for a Hypothetical $10,000 Investment

Total return represents the change in value of an investment over the periods shown. It includes any current, applicable, maximum sales charge, Fund expenses, account fees and reinvested distributions. The indexes are unmanaged. They differ from the Fund in composition and do not pay management fees or expenses. One cannot invest directly in an index.

Average Annual Total Return

Class A	9/30/10
1-Year		+10.32	%
5-Year		+2.90	%
10-Year		+0.46	%

Average Annual Total Return

Class B	9/30/10
1-Year		+12.20	%
5-Year		+2.98	%
10-Year		+0.44	%

10 |     Annual Report

Performance Summary (continued)

Average Annual Total Return

Class C	9/30/10
1-Year		+15.26	%
5-Year		+3.34	%
10-Year		+0.30	%

Aggregate Total Return

Class R	9/30/10
1-Year		+16.82	%
Since Inception (12/1/08)		+34.72	%

Annual Report     | 11

Performance Summary (continued)

Average Annual Total Return

Advisor Class5	9/30/10
1-Year		+17.40	%
5-Year		+4.25	%
10-Year		+1.12	%

Endnotes

The Fund’s investments in fast-growing industries, including the technology and telecommunications 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. The Fund may also invest in small-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’s prospectus also includes a description of the main investment risks.

Class B:	These shares have higher annual fees and expenses than Class A shares.
Class C:	Prior to 1/1/04, these shares were offered with an initial sales charge; thus actual total returns would have differed. These shares have higher annual fees and expenses than Class A shares.
Class R:	Shares are available to certain eligible investors as described in the prospectus. These shares have higher annual fees and expenses than Class A shares.
Advisor Class:	Shares are available to certain eligible investors as described in the prospectus.

1.	Cumulative total return represents the change in value of an investment over the periods indicated.
2.	Average annual total return represents the average annual change in value of an investment over the periods indicated.
3.	These figures represent the value of a hypothetical $10,000 investment in the Fund over the periods indicated.
4.	Figures are as stated in the Fund’s prospectus current as of the date of this report. In periods of market volatility, assets may decline significantly, causing total annual Fund operating expenses to become higher than the figures shown.
5.	Effective 5/15/08, the Fund began offering Advisor Class shares, which do not have sales charges or a Rule 12b-1 plan. Performance quotations for this class reflect the following methods of calculation: (a) For periods prior to 5/15/08, a restated figure is used based upon the Fund’s Class A performance, excluding the effect of Class A’s maximum initial sales charge, but reflecting the effect of the Class A Rule 12b-1 fees; and (b) for periods after 5/14/08 actual Advisor Class performance is used reflecting all charges and fees applicable to that class. Since 5/15/08 (commencement of sales), the cumulative and average annual total returns of Advisor Class shares were -4.18% and -1.78%.
6.	Source: © 2010 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 index return includes reinvested dividends. The NASDAQ 100 Index is a modified market capitalization-weighted index of the largest and most active domestic and international non-financial companies listed on The NASDAQ Stock Market. The index reflects companies across major industry groups including computer hardware and software, telecommunications, retail/wholesale trade and biotechnology. Return for this index is price-only and does not include reinvested dividends. The S&P 500 is a market capitalization-weighted index of 500 stocks designed to measure total U.S. equity market performance. Index return includes reinvested dividends. The NASDAQ Composite Index is a broad-based, market capitalization-weighted index designed to m easure all NASDAQ domestic and international based common type stocks listed on The NASDAQ Stock Market and includes reinvested dividends.

12 |     Annual Report

Your Fund’s Expenses

Franklin DynaTech Fund

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

• Transaction costs, including sales charges (loads) on Fund purchases; and

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

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

Actual Fund Expenses

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

You can estimate the expenses you paid during the period by following these steps. Of course, your account value and expenses will differ from those in this illustration:

1.	Divide your account value by $1,000.
	If an account had an $8,600 value, then $8,600 ÷ $1,000 = 8.6.
2.	Multiply the result by the number under the heading “Expenses Paid During Period.”
	If Expenses Paid During Period were $7.50, then 8.6 x $7.50 = $64.50.

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

Hypothetical Example for Comparison with Other Funds

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

Annual Report     | 13

Your Fund’s Expenses (continued)

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

	Beginning Account		Ending Account		Expenses Paid During
	Value 4/1/10		Value 9/30/10		Period* 4/1/10–9/30/10
Class A
Actual	$	1,000	$	1,022.60	$	4.82
Hypothetical (5% return before expenses)	$	1,000	$	1,020.31	$	4.81
Class B
Actual	$	1,000	$	1,018.70	$	8.55
Hypothetical (5% return before expenses)	$	1,000	$	1,016.60	$	8.54
Class C
Actual	$	1,000	$	1,018.90	$	8.60
Hypothetical (5% return before expenses)	$	1,000	$	1,016.55	$	8.59
Class R
Actual	$	1,000	$	1,021.60	$	6.08
Hypothetical (5% return before expenses)	$	1,000	$	1,019.05	$	6.07
Advisor Class
Actual	$	1,000	$	1,024.00	$	3.55
Hypothetical (5% return before expenses)	$	1,000	$	1,021.56	$	3.55

* Expenses are calculated using the most recent six-month expense ratio, annualized for each class (A: 0.95%; B: 1.69%; C: 1.70%; R: 1.20%; and Advisor: 0.70%), multiplied by the average account value over the period, multiplied by 183/365 to reflect the one-half year period.

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Franklin Growth Fund

Your Fund’s Goal and Main Investments: Franklin Growth Fund seeks capital appreciation by investing substantially in equity securities of companies that are leaders in their industries.

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. Please visit franklintempleton.comor call (800) 342-5236 for most recent month-end performance.

We are pleased to bring you Franklin Growth Fund’s annual report for the fiscal year ended September 30, 2010.

Performance Overview

Franklin Growth Fund – Class A delivered a +13.52% cumulative total return for the 12 months under review. The Fund outperformed its benchmark, the Standard & Poor’s 500 Index (S&P 500), which posted a +10.16% total return for the same period.¹ You can find the Fund’s long-term performance data in the Performance Summary beginning on page 18.

Investment Strategy

We use fundamental, bottom-up research to seek companies meeting our criteria of growth potential, quality and valuation. In seeking sustainable growth characteristics, we look for companies we believe can produce sustainable earnings and cash flow growth, evaluating the long-term market opportunity and competitive structure of an industry to target leaders and emerging leaders. We define quality companies as those with strong and improving competitive positions in attractive markets. We also believe important attributes of quality are experienced and talented management teams as well as financial strength reflected in the capital structure, gross and operating margins, free cash flow generation and returns on capital employed. Our valuation analysis includes a range of potential outcomes based on an assessment of multiple scenarios. In assessing value, we consider whether security prices fully reflect the b alance of the sustainable growth opportunities relative to business and financial risks.

1. Source: © 2010 Morningstar. All Rights Reserved. The information contained herein: (1) is proprietary to Morningstar and/or its content providers; (2) may not be copied or distributed; and (3) is not warranted to be accurate, complete or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information. The S&P 500 is a market capitalization-weighted index of 500 stocks designed to measure total U.S. equity market performance. The index is unmanaged and includes reinvested dividends. 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 72.

Annual Report     | 15

Portfolio Breakdown Franklin Growth Fund Based on Total Net Assets as of 9/30/10

Manager’s Discussion

Franklin Growth Fund owned shares of 151 companies at period-end. We continue to invest in a broad array of companies of all sizes and in varied industries.

During the 12 months under review, every sector represented in the Fund posted positive results with most individual holdings gaining in value. In terms of contribution to Fund performance, leading sectors included industrials, information technology and health care.² Within industrials, notable contributors included aerospace and defense contractor Boeing, railroad operator Union Pacific, facilities maintenance products and services company W. W. Grainger, and diversified global technology company Emerson Electric. Among information technology investments, computer hardware and electronic devices maker Apple was a significant contributor, as was information technology services and software provider International Business Machines. Health care sector holdings Millipore (sold by period-end) and Waters, which each make a variety of testing and pr ocessing products for the biotechnology and pharmaceuticals industries, helped performance. In addition, Allergan, a leading manufacturer of eye care, skin care and aesthetic products, boosted results.

The Fund had some individual detractors from performance. Information technology holdings Research In Motion, which makes the BlackBerry smart-phone, Internet services provider Yahoo! and technology company Computer Sciences hindered results. Biotechnology company Amgen in the health care sector, and industrials sector holding AMR, parent company of American Airlines, also hurt results. We sold AMR by period-end.

2. The industrials sector comprises capital goods, commercial and professional services, and transportation in the SOI. The information technology sector comprises semiconductors and semiconductor equipment, software and services, and technology hardware and equipment in the SOI. The health care sector comprises health care equipment and services; and pharmaceuticals, biotechnology and life sciences in the SOI.

16 |     Annual Report

Thank you for your continued participation in Franklin Growth Fund. We look forward to serving your future investment needs.

V. Jerry Palmieri

Serena Perin Vinton, CFA

Portfolio Management Team

Franklin Growth Fund

CFA^® is a trademark owned by CFA Institute.

The foregoing information reflects our analysis, opinions and portfolio holdings as of September 30, 2010, the end of the reporting period. The way we implement our main investment strategies and the resulting portfolio holdings may change depending on factors such as market and economic conditions. These opinions may not be relied upon as investment advice or an offer for a particular security. The information is not a complete analysis of every aspect of any market, country, industry, security or the Fund. Statements of fact are from sources considered reliable, but the investment manager makes no representation or warranty as to their completeness or accuracy. Although historical performance is no guarantee of future results, these insights may help you understand our investment management philosophy.

Top 10 Holdings
Franklin Growth Fund
9/30/10

Company	% of Total
Sector/Industry	Net Assets
Apple Inc.		6.3	%
Technology Hardware & Equipment
International Business Machines Corp.		2.1	%
Software & Services
3M Co.		2.0	%
Capital Goods
Johnson & Johnson		2.0	%
Pharmaceuticals, Biotechnology & Life Sciences
The Boeing Co.		1.9	%
Capital Goods
W. W. Grainger Inc.		1.8	%
Capital Goods
Allergan Inc.		1.7	%
Pharmaceuticals, Biotechnology & Life Sciences
General Dynamics Corp.		1.7	%
Capital Goods
Northrop Grumman Corp.		1.7	%
Capital Goods
United Technologies Corp.		1.7	%
Capital Goods

Annual Report     | 17

Performance Summary as of 9/30/10

Franklin Growth Fund

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. 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.

Price and Distribution Information

Class A (Symbol: FKGRX)			Change		9/30/10		9/30/09
Net Asset Value (NAV)				+$4.63	$	41.11	$	36.48
Distributions (10/1/09–9/30/10)
Dividend Income	$	0.2820

Class B (Symbol: FKGBX)			Change		9/30/10		9/30/09
Net Asset Value (NAV)				+$4.41	$	39.34	$	34.93
Distributions (10/1/09–9/30/10)
Dividend Income	$	0.0257

Class C (Symbol: FRGSX)			Change		9/30/10		9/30/09
Net Asset Value (NAV)				+$4.31	$	38.92	$	34.61
Distributions (10/1/09–9/30/10)
Dividend Income	$	0.0672

Class R (Symbol: FGSRX)			Change		9/30/10		9/30/09
Net Asset Value (NAV)				+$4.57	$	40.94	$	36.37
Distributions (10/1/09–9/30/10)
Dividend Income	$	0.2255

Advisor Class (Symbol: FCGAX)			Change		9/30/10		9/30/09
Net Asset Value (NAV)				+$4.65	$	41.18	$	36.53
Distributions (10/1/09–9/30/10)
Dividend Income	$	0.3576

18 |     Annual Report

Performance Summary (continued)

Performance

Cumulative total return excludes sales charges. Average annual total return and value of $10,000 investment include maximum sales charges. Class A: 5.75% maximum initial sales charge;Class B: contingent deferred sales charge (CDSC) declining from 4% to 1% over six years, and eliminated thereafter; Class C: 1% CDSC in first year only;Class R/Advisor Class: no sales charges.

Class A			1-Year			5-Year			10-Year
Cumulative Total Return1				+13.52	%		+21.16	%		+22.60	%
Average Annual Total Return2				+6.98	%		+2.69	%		+1.46	%
Value of $10,000 Investment3			$	10,698		$	11,421		$	11,556
Total Annual Operating Expenses4	1.00	%
Class B			1-Year			5-Year			10-Year
Cumulative Total Return1				+12.70	%		+16.71	%		+15.48	%
Average Annual Total Return2				+8.70	%		+2.78	%		+1.45	%
Value of $10,000 Investment3			$	10,870		$	11,471		$	11,548
Total Annual Operating Expenses4	1.75	%
Class C			1-Year			5-Year			10-Year
Cumulative Total Return1				+12.69	%		+16.71	%		+13.75	%
Average Annual Total Return2				+11.69	%		+3.14	%		+1.30	%
Value of $10,000 Investment3			$	11,169		$	11,671		$	11,375
Total Annual Operating Expenses4	1.75	%
Class R			1-Year			5-Year			Inception (1/1/02)
Cumulative Total Return1				+13.26	%		+19.66	%		+31.36	%
Average Annual Total Return2				+13.26	%		+3.65	%		+3.17	%
Value of $10,000 Investment3			$	11,326		$	11,966		$	13,136
Total Annual Operating Expenses4	1.25	%
Advisor Class			1-Year			5-Year			10-Year
Cumulative Total Return1				+13.82	%		+22.68	%		+25.66	%
Average Annual Total Return2				+13.82	%		+4.17	%		+2.31	%
Value of $10,000 Investment3			$	11,382		$	12,268		$	12,566
Total Annual Operating Expenses4	0.75	%

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.

Annual Report     | 19

Performance Summary (continued)

Total Return Index Comparison for a Hypothetical $10,000 Investment

Total return represents the change in value of an investment over the periods shown. It includes any current, 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.

Average Annual Total Return

Class A	9/30/10
1-Year		+6.98	%
5-Year		+2.69	%
10-Year		+1.46	%

Average Annual Total Return

Class B	9/30/10
1-Year		+8.70	%
5-Year		+2.78	%
10-Year		+1.45	%

20 |     Annual Report

Performance Summary (continued)

Average Annual Total Return

Class C	9/30/10
1-Year		+11.69	%
5-Year		+3.14	%
10-Year		+1.30	%

Average Annual Total Return

Class R	9/30/10
1-Year		+13.26	%
5-Year		+3.65	%
Since Inception (1/1/02)		+3.17	%

Annual Report     | 21

Performance Summary (continued)

Average Annual Total Return

Advisor Class	9/30/10
1-Year		+13.82	%
5-Year		+4.17	%
10-Year		+2.31	%

Endnotes

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. 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 portfolio includes investments in the technology sector, which has been one of the most volatile sectors of the market. The Fund’s prospectus also includes a description of the main investment risks.

Class B:	These shares have higher annual fees and expenses than Class A shares.
Class C:	Prior to 1/1/04, these shares were offered with an initial sales charge; thus actual total returns would have differed. These shares have higher annual fees and expenses than Class A shares.
Class R:	Shares are available to certain eligible investors as described in the prospectus. These shares have higher annual fees and expenses than Class A shares.
Advisor Class:	Shares are available to certain eligible investors as described in the prospectus.

1.	Cumulative total return represents the change in value of an investment over the periods indicated.
2.	Average annual total return represents the average annual change in value of an investment over the periods indicated.
3.	These figures represent the value of a hypothetical $10,000 investment in the Fund over the periods indicated.
4.	Figures are as stated in the Fund’s prospectus current as of the date of this report. In periods of market volatility, assets may decline significantly, causing total annual Fund operating expenses to become higher than the figures shown.
5.	Source: © 2010 Morningstar. The S&P 500 is a market capitalization-weighted index of 500 stocks designed to measure total U.S. equity market performance.

22 |     Annual Report

Your Fund’s Expenses

Franklin Growth Fund

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

• Transaction costs, including sales charges (loads) on Fund purchases; and

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

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

Actual Fund Expenses

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

You can estimate the expenses you paid during the period by following these steps. Of course, your account value and expenses will differ from those in this illustration:

1.	Divide your account value by $1,000.
	If an account had an $8,600 value, then $8,600 ÷ $1,000 = 8.6.
2.	Multiply the result by the number under the heading “Expenses Paid During Period.”
	If Expenses Paid During Period were $7.50, then 8.6 x $7.50 = $64.50.

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

Hypothetical Example for Comparison with Other Funds

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

Annual Report     | 23

Your Fund’s Expenses (continued)

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

	Beginning Account		Ending Account		Expenses Paid During
	Value 4/1/10		Value 9/30/10		Period* 4/1/10–9/30/10
Class A
Actual	$	1,000	$	988.70	$	4.49
Hypothetical (5% return before expenses)	$	1,000	$	1,020.56	$	4.56
Class B
Actual	$	1,000	$	985.00	$	8.26
Hypothetical (5% return before expenses)	$	1,000	$	1,016.75	$	8.39
Class C
Actual	$	1,000	$	984.80	$	8.21
Hypothetical (5% return before expenses)	$	1,000	$	1,016.80	$	8.34
Class R
Actual	$	1,000	$	987.50	$	5.73
Hypothetical (5% return before expenses)	$	1,000	$	1,019.30	$	5.82
Advisor Class
Actual	$	1,000	$	989.90	$	3.24
Hypothetical (5% return before expenses)	$	1,000	$	1,021.81	$	3.29

* Expenses are calculated using the most recent six-month expense ratio, annualized for each class (A: 0.90%; B: 1.66%; C: 1.65%; R: 1.15%; and Advisor: 0.65%), multiplied by the average account value over the period, multiplied by 183/365 to reflect the one-half year period.

24 |     Annual Report

Franklin Income Fund

Your Fund’s Goal and Main Investments: Franklin Income Fund seeks to maximize income while maintaining prospects for capital appreciation by investing, under normal market conditions, in a diversified portfolio of debt and equity securities.

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. Please visit franklintempleton.comor call (800) 342-5236 for most recent month-end performance.

We are pleased to bring you Franklin Income Fund’s annual report for the fiscal year ended September 30, 2010.

Performance Overview

Franklin Income Fund – Class A posted a +13.90% cumulative total return for the 12 months under review. The Fund outperformed its equity benchmark, the Standard & Poor’s 500 Index (S&P 500), which delivered a +10.16% total return; outperformed its fixed income benchmark, the Barclays Capital (BC) U.S. Aggregate Index, which returned +8.16%; and outperformed its peers as measured by the Lipper Mixed-Asset Target Allocation Moderate Funds Classification Average, which produced a +9.26% total return, for the same period.¹ You can find the Fund’s long-term performance data in the Performance Summary beginning on page 29.

Investment Strategy

By generally performing independent analysis of debt, convertible and equity securities, we search for undervalued or out-of-favor securities we believe offer opportunities for income today and significant growth tomorrow. We consider

1. Source: © 2010 Morningstar. All Rights Reserved. The information contained herein: (1) is proprietary to Morningstar and/or its content providers; (2) may not be copied or distributed; and (3) is not warranted to be accurate, complete or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information. The S&P 500 is a market capitalization-weighted index of 500 stocks designed to measure total U.S. equity market performance. The BC U.S. Aggregate 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 m iddle rating of Moody’s, Standard & Poor’s and Fitch, respectively.

Source: Lipper Inc. 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 12-month period ended 9/30/10, there were 500 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. 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 83.

Annual Report     | 25

Dividend Distributions*
Franklin Income Fund
10/1/09–9/30/10

	Dividend per Share (cents)
Month	Class A		Class B		Class B1**		Class C		Class R		Advisor Class
October		1.25		1.10		1.16		1.17		1.19		1.27
November		1.25		1.10		1.16		1.17		1.19		1.27
December		1.25		1.11		1.13		1.16		1.19		1.28
January		1.25		1.11		1.13		1.16		1.19		1.28
February		1.20		1.06		1.08		1.11		1.14		1.23
March		1.20		1.05		1.08		1.11		1.14		1.23
April		1.20		1.05		1.08		1.11		1.14		1.23
May		1.20		1.05		1.08		1.11		1.14		1.23
June		1.20		1.05		1.11		1.11		1.13		1.22
July		1.20		1.05		1.11		1.11		1.13		1.22
August		1.20		1.05		1.11		1.11		1.13		1.22
September		1.20		1.06		1.12		1.12		1.15		1.22
Total		14.60		12.84		13.35		13.55		13.86		14.90

*	All Fund distributions will vary depending upon current market conditions, and past distributions are not indicative of future trends.
**	On November 1, 2001, the Fund closed Class B to new investors and changed the name to Class B1; a new Class B became available to investors.

such factors as a company’s experience and managerial strength; its responsiveness to changes in interest rates and business conditions; debt maturity schedules and borrowing requirements; a company’s changing financial condition and market recognition of the change; and a security’s relative value based on such factors as anticipated cash flow, interest or dividend coverage, asset coverage and earnings.

Manager’s Discussion

At the start of the period, the Fund’s overall asset allocation favored fixed income securities and reflected our view of the attractive relative valuations that came out of the 2008 financial crisis. We began the period with 66.4% of total net assets in fixed income securities, 30.5% in equity securities and 3.1% in short-term investments and other net assets (cash). As we found opportunities for profit taking in fixed income, particularly in corporate debt securities trading at significant premiums to par value, the Fund’s asset allocation became more balanced and ended the period at 58.5% of total net assets in fixed income securities, 38.8% in equity securities and 2.7% in cash.

26 |     Annual Report

During the period under review, the Fund’s strong performance was driven by a combination of strong gains from stock and corporate bond holdings. Stock holdings that performed well included high-dividend-paying companies such as telecommunications service provider Verizon Communications, integrated energy company ConocoPhillips and electric utility The Southern Co. The Fund’s corporate bond holdings, including investment-grade and high yield bonds, benefited from lower corporate credit spreads as well as lower overall long-term interest rates. Yield spreads over Treasuries for investment-grade corporate bonds declined from 218 basis points (bps; 100 basis points equal one percentage point) to 175 bps and spreads for high yield corporate bonds declined from 764 bps to 620 bps.²

Within fixed income, strong contributors to performance included Ford Motor Credit Co. (FMCC), Freescale Semiconductor, JPMorgan Chase & Co. and Chesapeake Energy. FMCC, a wholly owned subsidiary of Ford Motor Company, provides dealer and customer financing. FMCC’s strong fundamental performance during the reporting period and improved access to funding markets prompted independent credit rating agency Moody’s Investors Service to upgrade the holding’s rating from Caa1 at the start of the year to Ba2 at period-end. Freescale Semiconductor, a global leader in the design and manufacture of embedded semiconductors for the automobile, consumer, industrial and networking markets, benefited from improved demand for the company’s products and access to capital markets that enabled the company to extend its upcoming debt maturities and put a more stable capital structure in place. Despite con tinued economic uncertainty and the impact of financial regulatory reform on banks, the junior debt securities of financial services firm JPMorgan Chase & Co. performed well as overall interest rates trended lower. Although natural gas prices weakened during the period, our holding in independent natural gas producer Chesapeake Energy benefited from access to capital through convertible preferred stock offerings and joint venture agreements. This activity enabled the company to selectively repay debts and improved the company’s overall credit profile.

Although corporate bonds generally supported Fund performance during the period, the Fund had several detractors including power generation company Dynegy Holdings. This holding’s performance suffered after Dynegy agreed to be acquired in a leveraged buyout by The Blackstone Group.

2. Sources: Barclays Capital; Credit Suisse.

Portfolio Breakdown Franklin Income Fund Based on Total Net Assets as of 9/30/10

Annual Report     | 27

Top 5 Equity Holdings
Franklin Income Fund
9/30/10

Company	% of Total
Sector/Industry	Net Assets
Bank of America Corp.		2.1	%
Financials
Wells Fargo & Co.		1.8	%
Financials
Exxon Mobil Corp.		1.8	%
Energy
Merck & Co. Inc.		1.7	%
Health Care
The Southern Co.		1.4	%
Utilities

Top 5 Bond Holdings*
Franklin Income Fund
9/30/10

Company	% of Total
Sector/Industry	Net Assets
Texas Competitive Electric Holdings Co. LLC		3.8	%
Utilities
CIT Group Inc.		3.8	%
Financials
First Data Corp.		2.9	%
Information Technology
Freescale Semiconductor Inc.		2.3	%
Information Technology
HCA Inc.		2.2	%
Health Care

* Does not include convertible bonds.

Although select dividend-paying sectors and stocks drove strong Fund performance during the reporting period, some sectors negatively impacted results. Common stock holdings in the financials sector, including JPMorgan Chase & Co. and Wells Fargo & Co. detracted from results, mainly due to investors’ fears of renewed economic downturn, heightened regulatory risk and financial sector reform. Despite these challenges, we continue to believe the major banks are well positioned with strong market positions that should enable them to build reserves in excess of regulatory requirements.

We continue to stay focused on opportunities across the capital structure to help us meet the Fund’s investment objective of maximizing income while maintaining prospects for long-term capital appreciation from a wide range of securities including fixed income, equity and convertible securities.

Thank you for your continued participation in Franklin Income Fund. We look forward to serving your future investment needs.

Edward Perks, CFA

Charles B. Johnson

Portfolio Management Team

Franklin Income Fund

The foregoing information reflects our analysis, opinions and portfolio holdings as of September 30, 2010, the end of the reporting period. The way we implement our main investment strategies and the resulting portfolio holdings may change depending on factors such as market and economic conditions. These opinions may not be relied upon as investment advice or an offer for a particular security. The information is not a complete analysis of every aspect of any market, country, industry, security or the Fund. Statements of fact are from sources considered reliable, but the investment manager makes no representation or warranty as to their completeness or accuracy. Although historical performance is no guarantee of future results, these insights may help you understand our investment management philosophy.

28 |     Annual Report

Performance Summary as of 9/30/10

Franklin Income Fund

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. 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.

Price and Distribution Information

Class A (Symbol: FKINX)			Change		9/30/10		9/30/09
Net Asset Value (NAV)				+$0.12	$	2.11	$	1.99
Distributions (10/1/09–9/30/10)
Dividend Income	$	0.1460

Class B (Symbol: FBICX)			Change		9/30/10		9/30/09
Net Asset Value (NAV)				+$0.12	$	2.10	$	1.98
Distributions (10/1/09–9/30/10)
Dividend Income	$	0.1284

Class B1 (Symbol: FICBX)			Change		9/30/10		9/30/09
Net Asset Value (NAV)				+$0.13	$	2.12	$	1.99
Distributions (10/1/09–9/30/10)
Dividend Income	$	0.1335

Class C (Symbol: FCISX)			Change		9/30/10		9/30/09
Net Asset Value (NAV)				+$0.13	$	2.13	$	2.00
Distributions (10/1/09–9/30/10)
Dividend Income	$	0.1355

Class R (Symbol: FISRX)			Change		9/30/10		9/30/09
Net Asset Value (NAV)				+$0.13	$	2.09	$	1.96
Distributions (10/1/09–9/30/10)
Dividend Income	$	0.1386

Advisor Class (Symbol: FRIAX)			Change		9/30/10		9/30/09
Net Asset Value (NAV)				+$0.12	$	2.10	$	1.98
Distributions (10/1/09–9/30/10)
Dividend Income	$	0.1490

Annual Report     | 29

Performance Summary (continued)

Performance

Cumulative total return excludes sales charges. Average annual total return and value of $10,000 investment include maximum sales charges. Class A: 4.25% maximum initial sales charge; Class B/B1: contingent deferred sales charge (CDSC) declining from 4% to 1% over six years, and eliminated thereafter; Class C: 1% CDSC in first year only;< B>Class R/Advisor Class: no sales charges.

Class A			1-Year			5-Year			10-Year
Cumulative Total Return1				+13.90	%		+24.03	%		+95.36	%
Average Annual Total Return2				+8.97	%		+3.51	%		+6.48	%
Value of $10,000 Investment3			$	10,897		$	11,880		$	18,739
Distribution Rate4	6.55	%
30-Day Standardized Yield5	6.02	%
Total Annual Operating Expenses6	0.68	%
Class B			1-Year			5-Year			Inception (11/1/01)
Cumulative Total Return1				+12.99	%		+18.93	%		+79.67	%
Average Annual Total Return2				+8.99	%		+3.23	%		+6.80	%
Value of $10,000 Investment3			$	10,899		$	11,725		$	17,967
Distribution Rate4	6.06	%
30-Day Standardized Yield5	5.43	%
Total Annual Operating Expenses6	1.53	%
Class B1			1-Year			5-Year			10-Year
Cumulative Total Return1				+13.73	%		+21.37	%		+87.68	%
Average Annual Total Return2				+9.73	%		+3.66	%		+6.50	%
Value of $10,000 Investment3			$	10,973		$	11,968		$	18,768
Distribution Rate4	6.34	%
30-Day Standardized Yield5	5.80	%
Total Annual Operating Expenses6	1.17	%
Class C			1-Year			5-Year			10-Year
Cumulative Total Return1				+13.76	%		+21.30	%		+86.00	%
Average Annual Total Return2				+12.76	%		+3.94	%		+6.40	%
Value of $10,000 Investment3			$	11,276		$	12,130		$	18,600
Distribution Rate4	6.31	%
30-Day Standardized Yield5	5.78	%
Total Annual Operating Expenses6	1.18	%

30 |     Annual Report

Performance Summary (continued)

Performance (continued)

Class R			1-Year			5-Year			Inception (1/1/02)
Cumulative Total Return1				+14.23	%		+22.18	%		+81.01	%
Average Annual Total Return2				+14.23	%		+4.09	%		+7.02	%
Value of $10,000 Investment3			$	11,423		$	12,218		$	18,101
Distribution Rate4	6.60	%
30-Day Standardized Yield5	5.92	%
Total Annual Operating Expenses6	1.03	%
Advisor Class			1-Year			5-Year			10-Year
Cumulative Total Return1				+14.15	%		+25.09	%		+98.91	%
Average Annual Total Return2				+14.15	%		+4.58	%		+7.12	%
Value of $10,000 Investment3			$	11,415		$	12,509		$	19,891
Distribution Rate4	6.97	%
30-Day Standardized Yield5	6.43	%
Total Annual Operating Expenses6	0.53	%

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.

Annual Report     | 31

Performance Summary (continued)

Total Return Index Comparison for a Hypothetical $10,000 Investment

Total return represents the change in value of an investment over the periods shown. It includes any current, 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.

Average Annual Total Return

Class A	9/30/10
1-Year		+8.97	%
5-Year		+3.51	%
10-Year		+6.48	%

Average Annual Total Return

Class B	9/30/10
1-Year		+8.99	%
5-Year		+3.23	%
Since Inception (11/1/01)		+6.80	%

32 |     Annual Report

Performance Summary (continued)

Average Annual Total Return

Class B1	9/30/10
1-Year		+9.73	%
5-Year		+3.66	%
10-Year		+6.50	%

Average Annual Total Return

Class C	9/30/10
1-Year		+12.76	%
5-Year		+3.94	%
10-Year		+6.40	%

Annual Report     | 33

Performance Summary (continued)

Average Annual Total Return

Class R	9/30/10
1-Year		+14.23	%
5-Year		+4.09	%
Since Inception (1/1/02)		+7.02	%

Average Annual Total Return

Advisor Class	9/30/10
1-Year		+14.15	%
5-Year		+4.58	%
10-Year		+7.12	%

34 |     Annual Report

Performance Summary (continued)

Endnotes

The Fund’s portfolio includes a substantial portion of higher yielding, lower rated corporate bonds because of the relatively higher yields they offer. These securities carry a greater degree of credit risk relative to investment-grade securities. 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. While stocks have historically outperformed other asset classes over the long term, they tend to fluctuate more dramatically over the shorter term. The Fund’s prospectus also includes a description of the main investment risks.

Class B:	These shares have higher annual fees and expenses than Class A shares.
Class B1 (formerly Class B):	These shares have higher annual fees and expenses than Class A shares. Effective 11/1/01, closed to new investors.
Class C:	Prior to 1/1/04, these shares were offered with an initial sales charge; thus actual total returns would have differed. These shares have higher annual fees and expenses than Class A shares.
Class R:	Shares are available to certain eligible investors as described in the prospectus. These shares have higher annual fees and expenses than Class A shares.
Advisor Class:	Shares are available to certain eligible investors as described in the prospectus.

1. Cumulative total return represents the change in value of an investment over the periods indicated.

2. Average annual total return represents the average annual change in value of an investment over the periods indicated.

3. These figures represent the value of a hypothetical $10,000 investment in the Fund over the periods indicated.

4. Distribution rate is based on an annualization of the respective class’s September dividend and the maximum offering price (NAV for Classes B, B1, C, R and Advisor) per share on 9/30/10.

5. The 30-day standardized yield for the 30 days ended 9/30/10 reflects an estimated yield to maturity (assuming all portfolio securities are held to maturity). It should be regarded as an estimate of the Fund’s rate of investment income, and it may not equal the Fund’s actual income distribution rate (which reflects the Fund’s past dividends paid to shareholders) or the income reported in the Fund’s financial statements.

6. Figures are as stated in the Fund’s prospectus current as of the date of this report. In periods of market volatility, assets may decline significantly, causing total annual Fund operating expenses to become higher than the figures shown.

7. Source: © 2010 Morningstar. The S&P 500 is a market capitalization-weighted index of 500 stocks designed to measure total U.S. equity market performance. The BC U.S. Aggregate 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, Standard & Poor’s and Fitch, respectively.

8. Source: Lipper, Inc. 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 12-month period ended 9/30/10, there were 500 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.

Annual Report     | 35

Your Fund’s Expenses

Franklin Income Fund

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

• Transaction costs, including sales charges (loads) on Fund purchases; and

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

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

Actual Fund Expenses

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

You can estimate the expenses you paid during the period by following these steps. Of course, your account value and expenses will differ from those in this illustration:

1.	Divide your account value by $1,000.
	If an account had an $8,600 value, then $8,600 ÷ $1,000 = 8.6.
2.	Multiply the result by the number under the heading “Expenses Paid During Period.”
	If Expenses Paid During Period were $7.50, then 8.6 x $7.50 = $64.50.

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

Hypothetical Example for Comparison with Other Funds

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

36 |     Annual Report

Your Fund’s Expenses (continued)

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

	Beginning Account		Ending Account		Expenses Paid During
	Value 4/1/10		Value 9/30/10		Period* 4/1/10–9/30/10
Class A
Actual	$	1,000	$	1,040.50	$	3.32
Hypothetical (5% return before expenses)	$	1,000	$	1,021.81	$	3.29
Class B
Actual	$	1,000	$	1,036.20	$	7.66
Hypothetical (5% return before expenses)	$	1,000	$	1,017.55	$	7.59
Class B1
Actual	$	1,000	$	1,042.40	$	5.84
Hypothetical (5% return before expenses)	$	1,000	$	1,019.35	$	5.77
Class C
Actual	$	1,000	$	1,037.60	$	5.87
Hypothetical (5% return before expenses)	$	1,000	$	1,019.30	$	5.82
Class R
Actual	$	1,000	$	1,044.10	$	5.12
Hypothetical (5% return before expenses)	$	1,000	$	1,020.05	$	5.06
Advisor Class
Actual	$	1,000	$	1,041.50	$	2.56
Hypothetical (5% return before expenses)	$	1,000	$	1,022.56	$	2.54

* Expenses are calculated using the most recent six-month expense ratio, annualized for each class (A: 0.65%; B: 1.50%; B1: 1.14%; C: 1.15%; R: 1.00%; and Advisor: 0.50%), multiplied by the average account value over the period, multiplied by 183/365 to reflect the one-half year period.

Annual Report     | 37

Franklin U.S. Government Securities Fund

Your Fund’s Goal and Main Investments: Franklin U.S. Government Securities Fund seeks income by investing at least 80% of its net assets in U.S. government securities. The Fund presently invests substantially all of its assets in Government National Mortgage Association obligations (Ginnie Maes).

Since 1983, the Fund has invested substantially in Ginnie Mae securities, which carry a guarantee backed by the full faith and credit of the U.S. government as to the timely payment of interest and principal.¹ Issued by the Government National Mortgage Association (GNMA), Ginnie Maes have been among the highest yielding U.S. government obligations available.

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. Please visitfranklintempleton.com or call (800) 342-5236 for most recent month-end performance.

This annual report for Franklin U.S. Government Securities Fund covers the fiscal year ended September 30, 2010.

Performance Overview

Franklin U.S. Government Securities Fund – Class A posted a cumulative total return of +5.94% for the 12 months under review. The Fund underperformed the +6.62% total return of its peers as measured by the Lipper GNMA Funds Classification Average.² In comparison, the Barclays Capital (BC) U.S. Government: Intermediate Index returned +6.19% for the same period.³ The Fund’s return reflects the effect of management fees and expenses, while the BC U.S. Government: Intermediate Index does not have such costs. You can find the Fund’s long-term performance data in the Performance Summary beginning on page 42.

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 timely payment of principal and interest. The Fund’s yield and share price are not guaranteed and will vary with market conditions.

2. Source: Lipper Inc. The Lipper GNMA Funds Classification Average is calculated by averaging the total return 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 GNMA securities. For the 12-month period ended 9/30/10, there were 66 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.

3. Source: ^© 2010 Morningstar. All Rights Reserved. The information contained herein: (1) is proprietary to Morningstar and/or its content providers; (2) may not be copied or distributed; and (3) is not warranted to be accurate, complete or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information. The BC U.S. Government: Intermediate Index is the intermediate component of the BC 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.

The indexes are unmanaged and include reinvestment of any income or distributions. 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 102.

38 |     Annual Report

Dividend Distributions*
Franklin U.S. Government Securities Fund
10/1/09–9/30/10

	Dividend per Share
Month	Class A	Class B	Class C	Class R	Advisor Class
October	2.39 cents	2.10 cents	2.13 cents	2.20 cents	2.47 cents
November	2.39 cents	2.10 cents	2.13 cents	2.20 cents	2.47 cents
December	2.21 cents	1.92 cents	1.92 cents	2.00 cents	2.29 cents
January	2.21 cents	1.92 cents	1.92 cents	2.00 cents	2.29 cents
February	2.21 cents	1.92 cents	1.92 cents	2.00 cents	2.29 cents
March	2.21 cents	1.91 cents	1.93 cents	2.00 cents	2.28 cents
April	2.21 cents	1.91 cents	1.93 cents	2.00 cents	2.28 cents
May	2.21 cents	1.91 cents	1.93 cents	2.00 cents	2.28 cents
June	2.21 cents	1.92 cents	1.93 cents	2.00 cents	2.28 cents
July	2.21 cents	1.92 cents	1.93 cents	2.00 cents	2.28 cents
August	2.21 cents	1.92 cents	1.93 cents	2.00 cents	2.28 cents
September	2.21 cents	1.91 cents	1.93 cents	2.01 cents	2.30 cents
Total	26.88 cents	23.36 cents	23.53 cents	24.41 cents	27.79 cents

* All Fund distributions will vary depending upon current market conditions, and past distributions are not indicative of future trends.

Investment Strategy

We currently invest the Fund’s assets predominantly in GNMA (Ginnie Mae) obligations. We analyze securities using proprietary models to help us identify attractive investment opportunities. The Fund’s short-term investments may include short-term government securities and cash or cash equivalents.

Manager’s Discussion

During the first half of the 12-month reporting period, the economy gradually improved as financial systems seemed to stabilize and U.S. gross domestic product growth rates were positive. The economy also experienced other indicators of growth, including a manufacturing rebound, productivity gains and a potential bottoming in the housing market. However, markets fluctuated throughout the second half of the period as signs of economic strength dissipated and a stubbornly high unemployment level and below-trend growth rates persisted. Although the continued subdued inflationary environment kept concerns over potential interest rate increases at bay, we remained cautious about longer term U.S. prospects due to record fiscal deficits and low current yields.

Annual Report     | 39

Ginnie Mae (GNMA) mortgage-backed securities (MBS) remained relatively attractive in this environment as the GNMA current coupon yielded 3.22% at period-end, an attractive income opportunity over both 5- and 10-year Treasuries, which yielded 1.26% and 2.53%.

The Federal Reserve Board’s Agency MBS Purchase Program continued to support the mortgage sector until it expired in March 2010. The conclusion of this program had a limited impact on the MBS market, as existing demand levels absorbed low mortgage issuance activity. Despite historically low interest rates, prepayment risk for higher coupon MBS remained relatively contained as home price depreciation, loss of home equity and tighter underwriting standards continued to inhibit mortgage holders’ ability to refinance their homes.

During the period, GNMA MBS outperformed their conventional Fannie Mae (FNMA) and Freddie Mac (FHLMC) MBS counterparts. Within the sector, higher coupon GNMAs (6.0% and 6.5%) were the best performers, while lower- and mid-coupon (4.5% and 5.0%) GNMAs lagged. GNMA I securities (comprising single-issuer pools) outperformed GNMA II securities (comprising multiple-issuer pools) in 5.5% and 6.0% coupons. We slightly decreased the Fund’s allocation to GNMA II securities, as we felt GNMA Is offered better value on a historical price spread basis. We increased the portfolio’s allocation to some lower coupon MBS (4.5%). Our heaviest allocation was in 5.0% through 6.0% coupon securities.

Franklin U.S. Government Securities Fund takes a consistent and disciplined approach to our investment strategy and invests entirely in Ginnie Mae mortgage pass-throughs, which remained the only MBS backed by the full faith and credit of the U.S. government.¹ The Fund takes a collateral-intensive research approach to uncover opportunities across the GNMA universe. We believe our experience and continual investment in new technologies can help us identify specified pools and individual securities that offer strong cash flow fundamentals and valuations.

40 |     Annual Report

Thank you for your continued participation in Franklin U.S. Government Securities Fund. We welcome your comments and questions and look forward to serving your investment needs in the years ahead.

Roger A. Bayston, CFA

Paul Varunok

Portfolio Management Team
Franklin U.S. Government Securities Fund

The foregoing information reflects our analysis, opinions and portfolio holdings as of September 30, 2010, the end of the reporting period. The way we implement our main investment strategies and the resulting portfolio holdings may change depending on factors such as market and economic conditions. These opinions may not be relied upon as investment advice or an offer for a particular security. The information is not a complete analysis of every aspect of any market, country, industry, security or the Fund. Statements of fact are from sources considered reliable, but the investment manager makes no representation or warranty as to their completeness or accuracy. Although historical performance is no guarantee of future results, these insights may help you understand our investment management philosophy.

Annual Report     | 41

Performance Summary as of 9/30/10

Franklin U.S. Government Securities Fund

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. 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.

Price and Distribution Information

Class A (Symbol: FKUSX)			Change		9/30/10		9/30/09
Net Asset Value (NAV)				+$0.12	$	6.81	$	6.69
Distributions (10/1/09–9/30/10)
Dividend Income	$	0.2688

Class B (Symbol: FUGBX)			Change		9/30/10		9/30/09
Net Asset Value (NAV)				+$0.12	$	6.80	$	6.68
Distributions (10/1/09–9/30/10)
Dividend Income	$	0.2336

Class C (Symbol: FRUGX)			Change		9/30/10		9/30/09
Net Asset Value (NAV)				+$0.11	$	6.77	$	6.66
Distributions (10/1/09–9/30/10)
Dividend Income	$	0.2353

Class R (Symbol: FUSRX)			Change		9/30/10		9/30/09
Net Asset Value (NAV)				+$0.12	$	6.81	$	6.69
Distributions (10/1/09–9/30/10)
Dividend Income	$	0.2441

Advisor Class (Symbol: FUSAX)			Change		9/30/10		9/30/09
Net Asset Value (NAV)				+$0.12	$	6.83	$	6.71
Distributions (10/1/09–9/30/10)
Dividend Income	$	0.2779

42 |     Annual Report

Performance Summary (continued)

Performance

Cumulative total return excludes sales charges. Average annual total return includes maximum sales charges. Class A: 4.25% maximum initial sales charge; Class B: contingent deferred sales charge (CDSC) declining from 4% to 1% over six years, and eliminated thereafter; Class C: 1% CDSC in first year only; Class R/Advisor Class: < /I>no sales charges.

Class A			1-Year			5-Year			10-Year
Cumulative Total Return1				+5.94	%		+31.82	%		+71.63	%
Average Annual Total Return2				+1.39	%		+4.77	%		+5.10	%
Distribution Rate3	3.73	%
30-Day Standardized Yield4	3.38	%
Total Annual Operating Expenses5	0.75	%
Class B			1-Year			5-Year			10-Year
Cumulative Total Return1				+5.39	%		+28.49	%		+64.68	%
Average Annual Total Return2				+1.39	%		+4.81	%		+5.11	%
Distribution Rate3	3.37	%
30-Day Standardized Yield4	3.04	%
Total Annual Operating Expenses5	1.26	%
Class C			1-Year			5-Year			10-Year
Cumulative Total Return1				+5.28	%		+28.48	%		+62.84	%
Average Annual Total Return2				+4.28	%		+5.14	%		+5.00	%
Distribution Rate3	3.42	%
30-Day Standardized Yield4	3.03	%
Total Annual Operating Expenses5	1.26	%
Class R			1-Year			5-Year			Inception (1/1/02)
Cumulative Total Return1				+5.55	%		+29.44	%		+49.43	%
Average Annual Total Return2				+5.55	%		+5.30	%		+4.70	%
Distribution Rate3	3.54	%
30-Day Standardized Yield4	3.18	%
Total Annual Operating Expenses5	1.11	%
Advisor Class			1-Year			5-Year			10-Year
Cumulative Total Return1				+6.06	%		+32.59	%		+73.85	%
Average Annual Total Return2				+6.06	%		+5.80	%		+5.69	%
Distribution Rate3	4.04	%
30-Day Standardized Yield4	3.67	%
Total Annual Operating Expenses5	0.61	%

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.

Annual Report     | 43

Performance Summary (continued)

Total Return Index Comparison for a Hypothetical $10,000 Investment

Total return represents the change in value of an investment over the periods shown. It includes any current, 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.

Average Annual Total Return

Class A	9/30/10
1-Year		+1.39	%
5-Year		+4.77	%
10-Year		+5.10	%

Average Annual Total Return

Class B	9/30/10
1-Year		+1.39	%
5-Year		+4.81	%
10-Year		+5.11	%

44 |     Annual Report

Performance Summary (continued)

Average Annual Total Return

Class C	9/30/10
1-Year		+4.28	%
5-Year		+5.14	%
10-Year		+5.00	%

Average Annual Total Return

Class R	9/30/10
1-Year		+5.55	%
5-Year		+5.30	%
Since Inception (1/1/02)		+4.70	%

Annual Report     | 45

Performance Summary (continued)

Average Annual Total Return

Advisor Class	9/30/10
1-Year		+6.06	%
5-Year		+5.80	%
10-Year		+5.69	%

Endnotes

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. The Fund’s prospectus also includes a description of the main investment risks.

Class B:	These shares have higher annual fees and expenses than Class A Shares.
Class C:	Prior to 1/1/04, these shares were offered with an initial sales charge; thus actual total returns would have differed. These shares have higher annual fees and expenses than Class A shares.
Class R:	Shares are available to certain eligible investors as described in the prospectus. These shares have higher annual fees and expenses than Class A shares.
Advisor Class:	Shares are available to certain eligible investors as described in the prospectus.

1. Cumulative total return represents the change in value of an investment over the periods indicated.

2. Average annual total return represents the average annual change in value of an investment over the periods indicated.

3. Distribution rate is based on an annualization of the respective class’s September dividend and the maximum offering price (NAV for Classes B, C, R and Advisor) per share on 9/30/10.

4. The 30-day standardized yield for the 30 days ended 9/30/10 reflects an estimated yield to maturity (assuming all portfolio securities are held to maturity). It should be regarded as an estimate of the Fund’s rate of investment income, and it may not equal the Fund’s actual income distribution rate (which reflects the Fund’s past dividends paid to shareholders) or the income reported in the Fund’s financial statements.

5. Figures are as stated in the Fund’s prospectus current as of the date of this report. In periods of market volatility, assets may decline significantly, causing total annual Fund operating expenses to become higher than the figures shown.

6. Source: ^© 2010 Morningstar. The BC U.S. Government: Intermediate Index is the intermediate component of the BC 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. The Consumer Price Index (CPI), calculated by the U.S. Bureau of Labor Statistics, is a commonly used measure of the inflation rate.

7. Source: Lipper Inc. The Lipper GNMA Funds Classification Average is calculated by averaging the total return 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 GNMA securities. For the 12-month period ended 9/30/10, there were 66 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.

46 |     Annual Report

Your Fund’s Expenses

Franklin U.S. Government Securities Fund

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

• Transaction costs, including sales charges (loads) on Fund purchases; and

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

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

Actual Fund Expenses

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

You can estimate the expenses you paid during the period by following these steps. Of course, your account value and expenses will differ from those in this illustration:

1.	Divide your account value by $1,000.
	If an account had an $8,600 value, then $8,600 ÷ $1,000 = 8.6.
2.	Multiply the result by the number under the heading “Expenses Paid During Period.”
	If Expenses Paid During Period were $7.50, then 8.6 x $7.50 = $64.50.

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

Hypothetical Example for Comparison with Other Funds

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

Annual Report     | 47

Your Fund’s Expenses (continued)

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

	Beginning Account		Ending Account		Expenses Paid During
	Value 4/1/10		Value 9/30/10		Period* 4/1/10–9/30/10
Class A
Actual	$	1,000	$	1,038.00	$	3.78
Hypothetical (5% return before expenses)	$	1,000	$	1,021.36	$	3.75
Class B
Actual	$	1,000	$	1,035.40	$	6.33
Hypothetical (5% return before expenses)	$	1,000	$	1,018.85	$	6.28
Class C
Actual	$	1,000	$	1,034.10	$	6.32
Hypothetical (5% return before expenses)	$	1,000	$	1,018.85	$	6.28
Class R
Actual	$	1,000	$	1,036.10	$	5.56
Hypothetical (5% return before expenses)	$	1,000	$	1,019.60	$	5.52
Advisor Class
Actual	$	1,000	$	1,038.60	$	3.02
Hypothetical (5% return before expenses)	$	1,000	$	1,022.11	$	2.99

* Expenses are calculated using the most recent six-month expense ratio, annualized for each class (A: 0.74%; B: 1.24%; C: 1.24%; R: 1.09%; and Advisor: 0.59%), multiplied by the average account value over the period, multiplied by 183/365 to reflect the one-half year period.

48 |     Annual Report

Franklin Utilities Fund

Your Fund’s Goal and Main Investments: Franklin Utilities Fund seeks both capital appreciation and current income by investing at least 80% of its net assets in public utility company securities.

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. Please visitfranklintempleton.com or call (800) 342-5236 for most recent month-end performance.

We are pleased to bring you Franklin Utilities Fund’s annual report for the fiscal year ended September 30, 2010.

Performance Overview

Franklin Utilities Fund – Class A delivered a +12.69% cumulative total return for the 12 months under review. The Fund outperformed its broad benchmark, the Standard & Poor’s 500 (S&P 500) Index, which posted a +10.16% total return for the same period.¹ The Fund also outperformed the +11.90% total return of its narrow benchmark, the S&P 500 Utilities Index.² You can find the Fund’s long-term performance data in the Performance Summary beginning on page 52.

Investment Strategy

We search for the best return opportunities available in the global utilities arena with a specific focus on the U.S. electricity and gas sector. Generally, we look for companies producing a high percentage of earnings from regulated utility franchise operations.

Manager’s Discussion

Of the S&P 500 Index’s 10 sector groups, the utilities sector’s performance during the fiscal year was slightly above average. The Fund’s performance surpassed that of the S&P 500 Utilities Index and the broader S&P 500 Index, primarily due to stock selection.

1. Source: © 2010 Morningstar. All Rights Reserved. The information contained herein: (1) is proprietary to Morningstar and/or its content providers; (2) may not be copied or distributed; and (3) is not warranted to be accurate, complete or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information. The S&P 500 Index is a market capitalization-weighted index of 500 stocks designed to measure total U.S. equity market performance.

2. Source: © 2010 Morningstar. The S&P 500 Utilities Index is market capitalization weighted and consists of all utility stocks in the S&P 500 Index.

The indexes are unmanaged and include reinvested dividends. 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 109.

Annual Report     | 49

Top 10 Equity Holdings
Franklin Utilities Fund
9/30/10

Company	% of Total
Sector/Industry	Net Assets
Sempra Energy		4.9	%
Multi-Utilities
The Southern Co.		4.7	%
Electric Utilities
Entergy Corp.		3.9	%
Electric Utilities
Public Service Enterprise Group Inc.		3.8	%
Multi-Utilities
PG&E Corp.		3.8	%
Multi-Utilities
American Electric Power Co. Inc.		3.6	%
Electric Utilities
Edison International		3.2	%
Electric Utilities
PPL Corp.		3.2	%
Electric Utilities
Exelon Corp.		3.0	%
Electric Utilities
NextEra Energy Inc.		3.0	%
Electric Utilities

Most portfolio holdings posted strong gains during this annual period. Among the most significant contributors to performance was The Southern Co., one of America’s largest electricity distributors offering a combined generating capacity of nearly 42,000 megawatts and serving more than 4.4 million electricity customers in the southeastern U.S. Southern’s share price increase during the reporting period was supported by the company’s commitment to distributing earnings to investors, as it increased its dividend by 4% on a per-share, annualized basis. Southern was also one of just two U.S. utilities actively developing a new nuclear electricity-generating plant, which we believe could offer many years of capital deployment opportunities. The Fund’s investment in American Electric Power Co. (AEP), a large power generator and distributor serving more than five million customers in 11 states, was another top contributor to returns. Like Southern, AEP was helped by increased investor appetite for electric utilities offering above-average dividend yields that also did not have significant commodity exposure. The Fund’s holdings in Dominion Resources, a Virginia-based electricity and natural gas distributor to 12 states, also provided a significant boost to the Fund’s overall returns. During the year under review, Dominion reduced its commodity sensitivity by selling its natural gas and oil exploration and production business to focus on its move toward a more regulated business model. Dominion also boosted its annual dividend rate by 4.6%.

Although there were few detractors from the Fund’s performance this fiscal year, some holdings fell in value. These included electric utility FirstEnergy, which serves a region including Ohio, Pennsylvania and New Jersey; and Exelon, which distributes electricity to 5.4 million customers in northern Illinois (including Chicago) and southeastern Pennsylvania (including Philadelphia) through subsidiaries Commonwealth Edison (ComEd) and PECO Energy. Declining electricity and natural gas prices hindered these companies’ profitability, as they sell significant volumes of power at market-based pricing. Finally, shares of RWE, a German energy conglomerate that provides electricity and gas to residential and business customers primarily in central and western Europe, also fell in value and hindered the Fund’s overall advance. RWE’s performance was negatively impacted by declining German powe r prices over the past year, as well as by a specific German government initiative to tax future profits made by nuclear energy producers. RWE is one of Germany’s two major producers of nuclear power.

50 |     Annual Report

Thank you for your continued participation in Franklin Utilities Fund. We look forward to serving your future investment needs.

John C. Kohli, CFA

J. Blair Schmicker, CFA

Portfolio Management Team
Franklin Utilities Fund

The foregoing information reflects our analysis, opinions and portfolio holdings as of September 30, 2010, the end of the reporting period. The way we implement our main investment strategies and the resulting portfolio holdings may change depending on factors such as market and economic conditions. These opinions may not be relied upon as investment advice or an offer for a particular security. The information is not a complete analysis of every aspect of any market, country, industry, security or the Fund. Statements of fact are from sources considered reliable, but the investment manager makes no representation or warranty as to their completeness or accuracy. Although historical performance is no guarantee of future results, these insights may help you understand our investment management philosophy.

Annual Report     | 51

Performance Summary as of 9/30/10

Franklin Utilities Fund

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. 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.

Price and Distribution Information

Class A (Symbol: FKUTX)			Change		9/30/10		9/30/09
Net Asset Value (NAV)				+$0.70	$	11.44	$	10.74
Distributions (10/1/09–9/30/10)
Dividend Income	$	0.4500
Long-Term Capital Gain	$	0.1618
Total	$	0.6118

Class B (Symbol: FRUBX)			Change		9/30/10		9/30/09
Net Asset Value (NAV)				+$0.70	$	11.44	$	10.74
Distributions (10/1/09–9/30/10)
Dividend Income	$	0.3935
Long-Term Capital Gain	$	0.1618
Total	$	0.5553

Class C (Symbol: FRUSX)			Change		9/30/10		9/30/09
Net Asset Value (NAV)				+$0.69	$	11.40	$	10.71
Distributions (10/1/09–9/30/10)
Dividend Income	$	0.3972
Long-Term Capital Gain	$	0.1618
Total	$	0.5590

Class R (Symbol: FRURX)			Change		9/30/10		9/30/09
Net Asset Value (NAV)				+$0.70	$	11.41	$	10.71
Distributions (10/1/09–9/30/10)
Dividend Income	$	0.4126
Long-Term Capital Gain	$	0.1618
Total	$	0.5744

Advisor Class (Symbol: FRUAX)			Change		9/30/10		9/30/09
Net Asset Value (NAV)				+$0.71	$	11.50	$	10.79
Distributions (10/1/09–9/30/10)
Dividend Income	$	0.4664
Long-Term Capital Gain	$	0.1618
Total	$	0.6282

52 |     Annual Report

Performance Summary (continued)

Performance

Cumulative total return excludes sales charges. Average annual total return and value of $10,000 investment include maximum sales charges. Class A: 4.25% maximum initial sales charge; Class B: contingent deferred sales charge (CDSC) declining from 4% to 1% over six years, and eliminated thereafter; Class C: 1% CDSC in first year only;< I>Class R/Advisor Class: no sales charges.

Class A			1-Year			5-Year			10-Year
Cumulative Total Return1				+12.69	%		+21.18	%		+83.70	%
Average Annual Total Return2				+7.87	%		+3.02	%		+5.81	%
Value of $10,000 Investment3			$	10,787		$	11,602		$	17,595
Distribution Rate4	3.51	%
30-Day Standardized Yield5	3.16	%
Total Annual Operating Expenses6	0.80	%
Class B			1-Year			5-Year			10-Year
Cumulative Total Return1				+12.10	%		+18.27	%		+76.47	%
Average Annual Total Return2				+8.10	%		+3.09	%		+5.84	%
Value of $10,000 Investment3			$	10,810		$	11,645		$	17,647
Distribution Rate4	3.17	%
30-Day Standardized Yield5	2.81	%
Total Annual Operating Expenses6	1.30	%
Class C			1-Year			5-Year			10-Year
Cumulative Total Return1				+12.08	%		+18.23	%		+74.76	%
Average Annual Total Return2				+11.08	%		+3.41	%		+5.74	%
Value of $10,000 Investment3			$	11,108		$	11,823		$	17,476
Distribution Rate4	3.21	%
30-Day Standardized Yield5	2.81	%
Total Annual Operating Expenses6	1.30	%
Class R			1-Year			5-Year			Inception (1/1/02)
Cumulative Total Return1				+12.33	%		+19.09	%		+78.67	%
Average Annual Total Return2				+12.33	%		+3.56	%		+5.90	%
Value of $10,000 Investment3			$	11,233		$	11,909		$	17,867
Distribution Rate4	3.34	%
30-Day Standardized Yield5	2.97	%
Total Annual Operating Expenses6	1.15	%
Advisor Class			1-Year			5-Year			10-Year
Cumulative Total Return1				+12.89	%		+22.08	%		+86.45	%
Average Annual Total Return2				+12.89	%		+4.07	%		+6.43	%
Value of $10,000 Investment3			$	11,289		$	12,208		$	18,645
Distribution Rate4	3.79	%
30-Day Standardized Yield5	3.45	%
Total Annual Operating Expenses6	0.65	%

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.

Annual Report     | 53

Performance Summary (continued)

Total Return Index Comparison for a Hypothetical $10,000 Investment

Total return represents the change in value of an investment over the periods shown. It includes any current, 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.

Average Annual Total Return

Class A	9/30/10
1-Year		+7.87	%
5-Year		+3.02	%
10-Year		+5.81	%

Average Annual Total Return

Class B	9/30/10
1-Year		+8.10	%
5-Year		+3.09	%
10-Year		+5.84	%

54 |     Annual Report

Performance Summary (continued)

Average Annual Total Return

Class C	9/30/10
1-Year		+11.08	%
5-Year		+3.41	%
10-Year		+5.74	%

Average Annual Total Return

Class R	9/30/10
1-Year		+12.33	%
5-Year		+3.56	%
Since Inception (1/1/02)		+5.90	%

Annual Report     | 55

Performance Summary (continued)

Average Annual Total Return

Advisor Class	9/30/10
1-Year		+12.89	%
5-Year		+4.07	%
10-Year		+6.43	%

Endnotes

In addition to being sensitive to other factors, 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’s prospectus also includes a description of the main investment risks.

Class B:	These shares have higher annual fees and expenses than Class A shares.
Class C:	Prior to 1/1/04, these shares were offered with an initial sales charge; thus actual total returns would have differed. These shares have higher annual fees and expenses than Class A shares.
Class R:	Shares are available to certain eligible investors as described in the prospectus. These shares have higher annual fees and expenses than Class A shares.
Advisor Class:	Shares are available to certain eligible investors as described in the prospectus.

1. Cumulative total return represents the change in value of an investment over the periods indicated.

2. Average annual total return represents the average annual change in value of an investment over the periods indicated.

3. These figures represent the value of a hypothetical $10,000 investment in the Fund over the periods indicated.

4. Distribution rate is based on an annualization of the respective class’s current quarterly dividend and the maximum offering price (NAV for Classes B, C, R and Advisor) per share on 9/30/10.

5. The 30-day standardized yield for the 30 days ended 9/30/10 reflects an estimated yield to maturity (assuming all portfolio securities are held to maturity). It should be regarded as an estimate of the Fund’s rate of investment income, and it may not equal the Fund’s actual income distribution rate (which reflects the Fund’s past dividends paid to shareholders) or the income reported in the Fund’s financial statements.

6. Figures are as stated in the Fund’s prospectus current as of the date of this report. In periods of market volatility, assets may decline significantly, causing total annual Fund operating expenses to become higher than the figures shown.

7. Source: © 2010 Morningstar. The S&P 500 Index 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 Index.

56 |     Annual Report

Your Fund’s Expenses

Franklin Utilities Fund

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

• Transaction costs, including sales charges (loads) on Fund purchases; and

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

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

Actual Fund Expenses

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

You can estimate the expenses you paid during the period by following these steps. Of course, your account value and expenses will differ from those in this illustration:

1.	Divide your account value by $1,000.
	If an account had an $8,600 value, then $8,600 ÷ $1,000 = 8.6.
2.	Multiply the result by the number under the heading “Expenses Paid During Period.”
	If Expenses Paid During Period were $7.50, then 8.6 x $7.50 = $64.50.

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

Hypothetical Example for Comparison with Other Funds

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

Annual Report     | 57

Your Fund’s Expenses (continued)

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

	Beginning Account		Ending Account		Expenses Paid During
	Value 4/1/10		Value 9/30/10		Period* 4/1/10–9/30/10
Class A
Actual	$	1,000	$	1,070.30	$	4.00
Hypothetical (5% return before expenses)	$	1,000	$	1,021.21	$	3.90
Class B
Actual	$	1,000	$	1,067.40	$	6.58
Hypothetical (5% return before expenses)	$	1,000	$	1,018.70	$	6.43
Class C
Actual	$	1,000	$	1,067.80	$	6.58
Hypothetical (5% return before expenses)	$	1,000	$	1,018.70	$	6.43
Class R
Actual	$	1,000	$	1,068.50	$	5.81
Hypothetical (5% return before expenses)	$	1,000	$	1,019.45	$	5.67
Advisor Class
Actual	$	1,000	$	1,071.70	$	3.22
Hypothetical (5% return before expenses)	$	1,000	$	1,021.96	$	3.14

* Expenses are calculated using the most recent six-month expense ratio, annualized for each class (A: 0.77%; B: 1.27%; C: 1.27%; R: 1.12%; and Advisor: 0.62%), multiplied by the average account value over the period, multiplied by 183/365 to reflect the one-half year period.

58 |     Annual Report

Franklin Custodian Funds

Financial Highlights

Franklin DynaTech Fund

	Year Ended September 30,
Class A	2010			2009			2008			2007			2006
Per share operating performance (for a share outstanding throughout the year)
Net asset value, beginning of year	$	23.20		$	24.87		$	32.33		$	25.80		$	24.98
Income from investment operationsa:
Net investment income (loss)b		(0.11	)		(0.06	)		(0.08	)		(0.08	)		(0.05	)
Net realized and unrealized gains (losses)		4.07			(0.03	)		(6.67	)		6.61			0.87
Total from investment operations		3.96			(0.09	)		(6.75	)		6.53			0.82
Less distributions from net realized gains		—			(1.58	)		(0.71	)		—			—
Redemption feesc		—			—			—	d		—	d		—	d
Net asset value, end of year	$	27.16		$	23.20		$	24.87		$	32.33		$	25.80
Total returne		17.07	%		2.71	%		(21.36	)%		25.31	%		3.28	%
Ratios to average net assets
Expenses		1.03	%		1.16	%f		0.97	%f		0.99	%f		0.97	%f
Net investment income (loss)		(0.44	)%		(0.34	)%		(0.26	)%		(0.30	)%		(0.20	)%
Supplemental data
Net assets, end of year (000’s)	$	566,764		$	503,472		$	388,843		$	553,347		$	590,633
Portfolio turnover rate		31.39	%		46.05	%		41.01	%		18.03	%		18.61	%

a	The 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 shares in relation to income earned and/or fluctuating market value of the investments of the Fund.
b	Based on average daily shares outstanding.
c	Effective September 1, 2008, the redemption fee was eliminated.
d	Amount rounds to less than $0.01 per share.
e	Total return does not reflect sales commissions or contingent deferred sales charges, if applicable.
f	Benefit of expense reduction rounds to less than 0.01%.

Annual Report     |     The accompanying notes are an integral part of these financial statements.     | 59

Franklin Custodian Funds

Financial Highlights (continued)

Franklin DynaTech Fund

	Year Ended September 30,
Class B	2010			2009			2008			2007			2006
Per share operating performance (for a share outstanding throughout the year)
Net asset value, beginning of year	$	21.60		$	23.48		$	30.78		$	24.75		$	24.15
Income from investment operationsa:
Net investment income (loss)b		(0.28	)		(0.19	)		(0.29	)		(0.28	)		(0.23	)
Net realized and unrealized gains (losses)		3.78			(0.11	)		(6.30	)		6.31			0.83
Total from investment operations		3.50			(0.30	)		(6.59	)		6.03			0.60
Less distributions from net realized gains		—			(1.58	)		(0.71	)		—			—
Redemption feesc		—			—			—	d		—	d		—	d
Net asset value, end of year	$	25.10		$	21.60		$	23.48		$	30.78		$	24.75
Total returne		16.20	%		1.96	%		(21.96	)%		24.36	%		2.48	%
Ratios to average net assets
Expenses		1.76	%		1.91	%f		1.73	%f		1.75	%f		1.72	%f
Net investment income (loss)		(1.17	)%		(1.09	)%		(1.02	)%		(1.06	)%		(0.95	)%
Supplemental data
Net assets, end of year (000’s)	$	10,125		$	13,682		$	10,704		$	16,625		$	18,718
Portfolio turnover rate		31.39	%		46.05	%		41.01	%		18.03	%		18.61	%

a	The 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 shares in relation to income earned and/or fluctuating market value of the investments of the Fund.
b	Based on average daily shares outstanding.
c	Effective September 1, 2008, the redemption fee was eliminated.
d	Amount rounds to less than $0.01 per share.
e	Total return does not reflect sales commissions or contingent deferred sales charges, if applicable.
f	Benefit of expense reduction rounds to less than 0.01%.

60 |     The accompanying notes are an integral part of these financial statements.     |     Annual Report

Franklin Custodian Funds

Financial Highlights (continued)

Franklin DynaTech Fund

	Year Ended September 30,
Class C	2010			2009			2008			2007			2006
Per share operating performance (for a share outstanding throughout the year)
Net asset value, beginning of year	$	21.34		$	23.23		$	30.46		$	24.50		$	23.90
Income from investment operationsa:
Net investment income (loss)b		(0.28	)		(0.19	)		(0.28	)		(0.28	)		(0.23	)
Net realized and unrealized gains (losses)		3.75			(0.12	)		(6.24	)		6.24			0.83
Total from investment operations		3.47			(0.31	)		(6.52	)		5.96			0.60
Less distributions from net realized gains		—			(1.58	)		(0.71	)		—			—
Redemption feesc		—			—			—	d		—	d		—	d
Net asset value, end of year	$	24.81		$	21.34		$	23.23		$	30.46		$	24.50
Total returne		16.26	%		1.89	%		(21.93	)%		24.33	%		2.51	%
Ratios to average net assets
Expenses		1.78	%		1.91	%f		1.73	%f		1.74	%f		1.71	%f
Net investment income (loss)		(1.19	)%		(1.09	)%		(1.02	)%		(1.05	)%		(0.94	)%
Supplemental data
Net assets, end of year (000’s)	$	93,927		$	83,435		$	53,289		$	70,413		$	69,069
Portfolio turnover rate		31.39	%		46.05	%		41.01	%		18.03	%		18.61	%

a	The 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 shares in relation to income earned and/or fluctuating market value of the investments of the Fund.
b	Based on average daily shares outstanding.
c	Effective September 1, 2008, the redemption fee was eliminated.
d	Amount rounds to less than $0.01 per share.
e	Total return does not reflect sales commissions or contingent deferred sales charges, if applicable.
f	Benefit of expense reduction rounds to less than 0.01%.

Annual Report     |     The accompanying notes are an integral part of these financial statements.     | 61

Franklin Custodian Funds

Financial Highlights (continued)

Franklin DynaTech Fund

	Year Ended September 30,
Class R	2010			2009a
Per share operating performance (for a share outstanding throughout the year)
Net asset value, beginning of year	$	23.13		$	15.66
Income from investment operationsb:
Net investment income (loss)c		(0.17	)		(0.09	)
Net realized and unrealized gains (losses)		4.06			7.56
Total from investment operations		3.89			7.47
Net asset value, end of year	$	27.02		$	23.13
Total returnd		16.82	%		47.70	%
Ratios to average net assetse
Expenses		1.28	%		1.41	%f
Net investment income (loss)		(0.69	)%		(0.59	)%
Supplemental data
Net assets, end of year (000’s)	$	7,034		$	6,345
Portfolio turnover rate		31.39	%		46.05	%

a	For the period December 1, 2008 (effective date) to September 30, 2009.
b	The 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 shares in relation to income earned and/or fluctuating market value of the investments of the Fund.
c	Based on average daily shares outstanding.
d	Total return does not reflect sales commissions or contingent deferred sales charges, if applicable, and is not annualized for periods less than one year.
e	Ratios are annualized for periods less than one year.
f	Benefit of expense reduction rounds to less than 0.01%.

62 |     The accompanying notes are an integral part of these financial statements.     |     Annual Report

Franklin Custodian Funds

Financial Highlights (continued)

Franklin DynaTech Fund

	Year Ended September 30,
Advisor Class	2010			2009			2008a
Per share operating performance (for a share outstanding throughout the year)
Net asset value, beginning of year	$	23.28		$	24.90		$	31.40
Income from investment operationsb:
Net investment income (loss)c		(0.05	)		(0.02	)		(0.01	)
Net realized and unrealized gains (losses)		4.10			(0.02	)		(6.49	)
Total from investment operations		4.05			(0.04	)		(6.50	)
Less distributions from net realized gains		—			(1.58	)		—
Redemption feesd		—			—			—	e
Net asset value, end of year	$	27.33		$	23.28		$	24.90
Total returnf		17.40	%		2.92	%		(20.70	)%
Ratios to average net assetsg
Expenses		0.78	%		0.91	%h		0.73	%h
Net investment income (loss)		(0.19	)%		(0.09	)%		(0.02	)%
Supplemental data
Net assets, end of year (000’s)	$	11,541		$	8,208		$	1,938
Portfolio turnover rate		31.39	%		46.05	%		41.01	%

a	For the period May 15, 2008 (effective date) to September 30, 2008.
b	The 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 shares in relation to income earned and/or fluctuating market value of the investments of the Fund.
c	Based on average daily shares outstanding.
d	Effective September 1, 2008, the redemption fee was eliminated.
e	Amount rounds to less than $0.01 per share.
f	Total return is not annualized for periods less than one year.
g	Ratios are annualized for periods less than one year.
h	Benefit of expense reduction rounds to less than 0.01%.

Annual Report     |     The accompanying notes are an integral part of these financial statements.     | 63

Franklin Custodian Funds

Statement of Investments, September 30, 2010

	Franklin DynaTech Fund	Country	Shares		Value
	Common Stocks 99.7%
	Aerospace & Defense 3.1%
	The Boeing Co.	United States		110,000	$	7,319,400
	Precision Castparts Corp.	United States		110,000		14,008,500
						21,327,900
	Air Freight & Logistics 1.9%
	C.H. Robinson Worldwide Inc.	United States		100,000		6,992,000
	FedEx Corp.	United States		70,000		5,985,000
						12,977,000
	Biotechnology 2.1%
a	Celgene Corp.	United States		250,000		14,402,500
	Capital Markets 0.8%
	The Goldman Sachs Group Inc.	United States		40,000		5,783,200
	Chemicals 2.0%
	Sigma-Aldrich Corp.	United States		225,000		13,585,500
	Communications Equipment 4.7%
a	Cisco Systems Inc.	United States		500,000		10,950,000
a	F5 Networks Inc.	United States		100,000		10,381,000
a	Juniper Networks Inc.	United States		150,000		4,552,500
	QUALCOMM Inc.	United States		75,000		3,384,000
	ZTE Corp., H	China		750,000		2,986,815
						32,254,315
	Computers & Peripherals 9.6%
a	Apple Inc.	United States		185,000		52,493,750
	Hewlett-Packard Co.	United States		225,000		9,465,750
a	NetApp Inc.	United States		85,000		4,232,150
						66,191,650
	Consumer Finance 0.1%
a	Green Dot Corp.	United States		19,200		930,816
	Diversified Consumer Services 0.3%
a	Coinstar Inc.	United States		40,000		1,719,600
	Diversified Financial Services 0.8%
	CME Group Inc.	United States		21,000		5,469,450
	Electronic Equipment, Instruments & Components 1.6%
a	Dolby Laboratories Inc., A	United States		190,000		10,793,900
	Energy Equipment & Services 5.7%
a	FMC Technologies Inc.	United States		300,000		20,487,000
	National Oilwell Varco Inc.	United States		150,000		6,670,500
	Schlumberger Ltd.	United States		200,000		12,322,000
						39,479,500
	Health Care Equipment & Supplies 5.2%
a	Edwards Lifesciences Corp.	United States		200,000		13,410,000
a	HeartWare International Inc.	Australia		50,000		3,438,000
a	Intuitive Surgical Inc.	United States		30,000		8,512,200
	Stryker Corp.	United States		150,000		7,507,500

64 |     Annual Report

Franklin Custodian Funds

Statement of Investments, September 30, 2010 (continued)

	Franklin DynaTech Fund	Country	Shares		Value
	Common Stocks (continued)
	Health Care Equipment & Supplies (continued)
a	Thoratec Corp.	United States		80,000	$	2,958,400
						35,826,100
	Health Care Providers & Services 3.0%
a	Express Scripts Inc.	United States		300,000		14,610,000
	McKesson Corp.	United States		100,000		6,178,000
						20,788,000
	Health Care Technology 1.8%
a	Cerner Corp.	United States		150,000		12,598,500
	Hotels, Restaurants & Leisure 1.0%
a	Ctrip.com International Ltd., ADR	China		75,000		3,581,250
	Wynn Resorts Ltd.	United States		40,000		3,470,800
						7,052,050
	Industrial Conglomerates 0.8%
	General Electric Co.	United States		150,000		2,437,500
	Koninklijke Philips Electronics NV, N.Y. shs.	Netherlands		100,000		3,132,000
						5,569,500
	Internet & Catalog Retail 5.9%
a	Amazon.com Inc.	United States		100,000		15,706,000
a	Netflix Inc.	United States		50,000		8,108,000
a	Priceline.com Inc.	United States		47,500		16,546,150
						40,360,150
	Internet Software & Services 10.9%
a	Akamai Technologies Inc.	United States		70,000		3,512,600
a	Baidu Inc., ADR	China		200,000		20,524,000
a	Google Inc., A	United States		50,000		26,289,500
a	MercadoLibre Inc.	Argentina		125,000		9,022,500
	Tencent Holdings Ltd.	China		500,000		10,922,659
a	WebMD Health Corp.	United States		100,000		4,987,000
						75,258,259
	IT Services 3.9%
	MasterCard Inc., A	United States		45,000		10,080,000
	Visa Inc., A	United States		225,000		16,708,500
						26,788,500
	Life Sciences Tools & Services 2.4%
a	Thermo Fisher Scientific Inc.	United States		125,000		5,985,000
a	Waters Corp.	United States		150,000		10,617,000
						16,602,000
	Machinery 1.6%
	Flowserve Corp.	United States		100,000		10,942,000
	Oil, Gas & Consumable Fuels 1.3%
	Noble Energy Inc.	United States		50,000		3,754,500
	Petroleo Brasileiro SA, ADR	Brazil		150,000		5,440,500
						9,195,000

Annual Report     | 65

Franklin Custodian Funds

Statement of Investments, September 30, 2010 (continued)

	Franklin DynaTech Fund	Country	Shares		Value
	Common Stocks (continued)
	Pharmaceuticals 5.6%
	Allergan Inc.	United States		150,000	$	9,979,500
	Johnson & Johnson	United States		75,000		4,647,000
	Roche Holding AG	Switzerland		40,000		5,463,613
	Teva Pharmaceutical Industries Ltd., ADR	Israel		350,000		18,462,500
						38,552,613
	Semiconductors & Semiconductor Equipment 10.6%
	ARM Holdings PLC, ADR	United Kingdom		900,000		16,884,000
a	Cree Inc.	United States		70,000		3,800,300
	First Solar Inc.	United States		5,000		736,750
a	Hittite Microwave Corp.	United States		100,000		4,765,000
	Intel Corp.	United States		1,125,000		21,633,750
a	Lam Research Corp.	United States		150,000		6,277,500
a	Netlogic Microsystems Inc.	United States		250,000		6,895,000
	Power Integrations Inc.	United States		150,000		4,768,500
a	Silicon Laboratories Inc.	United States		200,000		7,330,000
						73,090,800
	Software 10.9%
a	Adobe Systems Inc.	United States		175,000		4,576,250
a	ANSYS Inc.	United States		200,000		8,450,000
a	Check Point Software Technologies Ltd.	Israel		200,000		7,386,000
b	ChinaCache International Holdings Ltd., ADR	China		7,300		87,600
a	Citrix Systems Inc.	United States		65,000		4,435,600
	FactSet Research Systems Inc.	United States		75,000		6,084,750
a	Informatica Corp.	United States		150,000		5,761,500
	Microsoft Corp.	United States		200,000		4,898,000
	Oracle Corp.	United States		250,000		6,712,500
a	QLIK Technologies Inc.	United States		52,700		1,162,035
a	Salesforce.com Inc.	United States		150,000		16,770,000
a	VMware Inc., A	United States		100,000		8,494,000
						74,818,235
	Wireless Telecommunication Services 2.1%
	America Movil SAB de CV, L, ADR	Mexico		85,000		4,533,050
a	American Tower Corp., A	United States		200,000		10,252,000
						14,785,050
	Total Common Stocks (Cost $364,688,370)					687,142,088
	Short Term Investments (Cost $5,804,707) 0.8%
	Money Market Funds 0.8%
a,c	Institutional Fiduciary Trust Money Market Portfolio, 0.00%	United States		5,804,707		5,804,707
	Total Investments (Cost $370,493,077) 100.5%					692,946,795
	Other Assets, less Liabilities (0.5)%					(3,555,949	)
	Net Assets 100.0%				$	689,390,846

See Abbreviations on page 142.
a	Non-income producing.
b	A portion or all of the security purchased on a delayed delivery basis. See Note 1(d).
c	See Note 7 regarding investments in the Institutional Fiduciary Trust Money Market Portfolio. The rate shown is the annualized seven-day yield at period end.

66 |     The accompanying notes are an integral part of these financial statements.     |     Annual Report

Franklin Custodian Funds

Financial Highlights

Franklin Growth Fund

	Year Ended September 30,
Class A	2010			2009			2008			2007			2006
Per share operating performance (for a share outstanding throughout the year)
Net asset value, beginning of year	$	36.48		$	37.17		$	46.36		$	39.10		$	34.83
Income from investment operationsa:
Net investment incomeb		0.20			0.29			0.24			0.16			0.12
Net realized and unrealized gains (losses)		4.71			(0.67	)		(9.30	)		7.21			4.21
Total from investment operations		4.91			(0.38	)		(9.06	)		7.37			4.33
Less distributions from net investment income		(0.28	)		(0.31	)		(0.13	)		(0.11	)		(0.06	)
Redemption feesc		—			—			—	d		—	d		—	d
Net asset value, end of year	$	41.11		$	36.48		$	37.17		$	46.36		$	39.10
Total returne		13.52	%		(0.71	)%		(19.59	)%		18.87	%		12.46	%
Ratios to average net assets
Expenses		0.94	%		1.00	%f		0.89	%f		0.93	%f		0.91	%f
Net investment income		0.50	%		0.95	%		0.56	%		0.37	%		0.34	%
Supplemental data
Net assets, end of year (000’s)	$	2,587,802		$	2,173,714		$	1,708,612		$	2,123,419		$	1,695,802
Portfolio turnover rate		4.36	%		3.92	%		5.64	%		0.37	%		2.21	%

a	The 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 shares in relation to income earned and/or fluctuating market value of the investments of the Fund.
b	Based on average daily shares outstanding.
c	Effective September 1, 2008, the redemption fee was eliminated.
d	Amount rounds to less than $0.01 per share.
e	Total return does not reflect sales commissions or contingent deferred sales charges, if applicable.
f	Benefit of expense reduction rounds to less than 0.01%.

Annual Report     |     The accompanying notes are an integral part of these financial statements.     | 67

Franklin Custodian Funds

Financial Highlights (continued)

Franklin Growth Fund

	Year Ended September 30,
Class B	2010			2009			2008			2007			2006
Per share operating performance (for a share outstanding throughout the year)
Net asset value, beginning of year	$	34.93		$	35.44		$	44.42		$	37.65		$	33.73
Income from investment operationsa:
Net investment income (loss)b		(0.06	)		0.07			(0.08	)		(0.16	)		(0.15	)
Net realized and unrealized gains (losses)		4.50			(0.58	)		(8.90	)		6.93			4.07
Total from investment operations		4.44			(0.51	)		(8.98	)		6.77			3.92
Less distributions from net investment income		(0.03	)		—			—			—			—
Redemption feesc		—			—			—	d		—	d		—	d
Net asset value, end of year	$	39.34		$	34.93		$	35.44		$	44.42		$	37.65
Total returne		12.70	%		(1.44	)%		(20.22	)%		17.98	%		11.62	%
Ratios to average net assets
Expenses		1.68	%		1.75	%f		1.64	%f		1.69	%f		1.67	%f
Net investment income (loss)		(0.24	)%		0.20	%		(0.19	)%		(0.39	)%		(0.42	)%
Supplemental data
Net assets, end of year (000’s)	$	51,594		$	87,790		$	89,779		$	138,640		$	122,871
Portfolio turnover rate		4.36	%		3.92	%		5.64	%		0.37	%		2.21	%

a	The 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 shares in relation to income earned and/or fluctuating market value of the investments of the Fund.
b	Based on average daily shares outstanding.
c	Effective September 1, 2008, the redemption fee was eliminated.
d	Amount rounds to less than $0.01 per share.
e	Total return does not reflect sales commissions or contingent deferred sales charges, if applicable.
f	Benefit of expense reduction rounds to less than 0.01%.

68 |     The accompanying notes are an integral part of these financial statements.     |     Annual Report

Franklin Custodian Funds

Financial Highlights(continued)

Franklin Growth Fund

	Year Ended September 30,
Class C	2010			2009			2008			2007			2006
Per share operating performance
(for a share outstanding throughout the year)
Net asset value, beginning of year	$	34.61		$	35.14		$	44.03		$	37.32		$	33.43
Income from investment operationsa:
Net investment income (loss)b		(0.09	)		0.06			(0.08	)		(0.16	)		(0.15	)
Net realized and unrealized gains (losses)		4.47			(0.57	)		(8.81	)		6.87			4.04
Total from investment operations		4.38			(0.51	)		(8.89	)		6.71			3.89
Less distributions from net investment income		(0.07	)		(0.02	)		—			—			—
Redemption feesc		—			—			—	d		—	d		—	d
Net asset value, end of year	$	38.92		$	34.61		$	35.14		$	44.03		$	37.32
Total returne		12.69	%		(1.45	)%		(20.19	)%		17.98	%		11.60	%
Ratios to average net assets
Expenses		1.69	%		1.75	%f		1.64	%f		1.69	%f		1.66	%f
Net investment income (loss)		(0.25	)%		0.20	%		(0.19	)%		(0.39	)%		(0.41	)%
Supplemental data
Net assets, end of year (000’s)	$	349,188		$	315,305		$	255,425		$	340,671		$	273,512
Portfolio turnover rate		4.36	%		3.92	%		5.64	%		0.37	%		2.21	%

a	The 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 shares in relation to income earned and/or fluctuating market value of the investments of the Fund.
b	Based on average daily shares outstanding.
c	Effective September 1, 2008, the redemption fee was eliminated.
d	Amount rounds to less than $0.01 per share.
e	Total return does not reflect sales commissions or contingent deferred sales charges, if applicable.
f	Benefit of expense reduction rounds to less than 0.01%.

Annual Report     |     The accompanying notes are an integral part of these financial statements.     | 69

Franklin Custodian Funds

Financial Highlights (continued)

Franklin Growth Fund

	Year Ended September 30,
Class R	2010			2009			2008			2007			2006
Per share operating performance (for a share outstanding throughout the year)
Net asset value, beginning of year	$	36.37		$	36.87		$	45.99		$	38.80		$	34.59
Income from investment operationsa:
Net investment incomeb		0.08			0.20			0.14			0.04			0.02
Net realized and unrealized gains (losses)		4.72			(0.59	)		(9.23	)		7.16			4.19
Total from investment operations		4.80			(0.39	)		(9.09	)		7.20			4.21
Less distributions from net investment income		(0.23	)		(0.11	)		(0.03	)		(0.01	)		—	c
Redemption feesd		—			—			—	c		—	c		—	c
Net asset value, end of year	$	40.94		$	36.37		$	36.87		$	45.99		$	38.80
Total returne		13.26	%		(0.98	)%		(19.78	)%		18.55	%		12.18	%
Ratios to average net assets
Expenses		1.19	%		1.25	%f		1.14	%f		1.19	%f		1.17	%f
Net investment income		0.25	%		0.70	%		0.31	%		0.11	%		0.08	%
Supplemental data
Net assets, end of year (000’s)	$	117,484		$	65,113		$	30,175		$	53,134		$	37,804
Portfolio turnover rate		4.36	%		3.92	%		5.64	%		0.37	%		2.21	%

a	The 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 shares in relation to income earned and/or fluctuating market value of the investments of the Fund.
b	Based on average daily shares outstanding.
c	Amount rounds to less than $0.01 per share.
d	Effective September 1, 2008, the redemption fee was eliminated.
e	Total return does not reflect sales commissions or contingent deferred sales charges, if applicable.
f	Benefit of expense reduction rounds to less than 0.01%.

70 |     The accompanying notes are an integral part of these financial statements.     |     Annual Report

Franklin Custodian Funds

Financial Highlights (continued)

Franklin Growth Fund

	Year Ended September 30,
Advisor Class	2010			2009			2008			2007			2006
Per share operating performance (for a share outstanding throughout the year)
Net asset value, beginning of year	$	36.53		$	37.25		$	46.45		$	39.17		$	34.89
Income from investment operationsa:
Net investment incomeb		0.29			0.36			0.34			0.27			0.22
Net realized and unrealized gains (losses)		4.72			(0.68	)		(9.31	)		7.21			4.21
Total from investment operations		5.01			(0.32	)		(8.97	)		7.48			4.43
Less distributions from net investment income		(0.36	)		(0.40	)		(0.23	)		(0.20	)		(0.15	)
Redemption feesc		—			—			—	d		—	d		—	d
Net asset value, end of year	$	41.18		$	36.53		$	37.25		$	46.45		$	39.17
Total return		13.82	%		(0.45	)%		(19.39	)%		19.16	%		12.73	%
Ratios to average net assets
Expenses		0.69	%		0.75	%e		0.64	%e		0.69	%e		0.67	%e
Net investment income		0.75	%		1.20	%		0.81	%		0.61	%		0.58	%
Supplemental data
Net assets, end of year (000’s)	$	544,936		$	430,926		$	256,988		$	363,221		$	274,603
Portfolio turnover rate		4.36	%		3.92	%		5.64	%		0.37	%		2.21	%

a	The 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 shares in relation to income earned and/or fluctuating market value of the investments of the Fund.
b	Based on average daily shares outstanding.
c	Effective September 1, 2008, the redemption fee was eliminated.
d	Amount rounds to less than $0.01 per share.
e	Benefit of expense reduction rounds to less than 0.01%.

Annual Report     |     The accompanying notes are an integral part of these financial statements.     | 71

Franklin Custodian Funds

Statement of Investments, September 30, 2010

	Franklin Growth Fund	Shares		Value
	Common Stocks 93.3%
	Automobiles & Components 2.2%
a	Ford Motor Co.		1,100,000	$	13,464,000
	Harley-Davidson Inc.		838,096		23,835,450
	Johnson Controls Inc.		1,400,000		42,700,000
	Toyota Motor Corp., ADR (Japan)		30,000		2,147,400
					82,146,850
	Banks 0.3%
	Wells Fargo & Co.		505,600		12,705,728
	Capital Goods 21.4%
	3M Co.		855,000		74,137,050
a	ABB Ltd., ADR (Switzerland)		850,000		17,952,000
	The Boeing Co.		1,045,000		69,534,300
	Caterpillar Inc.		200,000		15,736,000
	Danaher Corp.		550,000		22,335,500
	Deere & Co.		100,000		6,978,000
	Emerson Electric Co.		1,000,000		52,660,000
	General Dynamics Corp.		1,000,000		62,810,000
	General Electric Co.		720,000		11,700,000
	Illinois Tool Works Inc.		1,000,000		47,020,000
	Ingersoll-Rand PLC.		1,002,000		35,781,420
	Lockheed Martin Corp.		500,000		35,640,000
	Northrop Grumman Corp.		1,000,000		60,630,000
	Pall Corp.		500,000		20,820,000
	Precision Castparts Corp.		240,000		30,564,000
	Raytheon Co.		600,000		27,426,000
	Rockwell Collins Inc.		350,000		20,387,500
	Textron Inc.		1,050,000		21,588,000
a	Thomas & Betts Corp.		500,000		20,510,000
	United Technologies Corp.		850,000		60,545,500
	W.W. Grainger Inc.		550,000		65,510,500
					780,265,770
	Commercial & Professional Services 1.6%
	Avery Dennison Corp.		462,000		17,149,440
	Dun & Bradstreet Corp.		122,000		9,045,080
	Equifax Inc.		400,000		12,480,000
	Robert Half International Inc.		150,000		3,900,000
a	Stericycle Inc.		100,000		6,948,000
a	Verisk Analytics Inc., A		300,000		8,403,000
					57,925,520
	Consumer Durables & Apparel 1.3%
	NIKE Inc., B		75,000		6,010,500
	VF Corp.		500,000		40,510,000
					46,520,500

72 |     Annual Report

Franklin Custodian Funds

Statement of Investments, September 30, 2010 (continued)

	Franklin Growth Fund	Shares		Value
	Common Stocks (continued)
	Consumer Services 1.7%
a	Apollo Group Inc., A		150,000	$	7,702,500
	Carnival Corp.		1,065,000		40,693,650
a	Interval Leisure Group Inc.		60,020		808,469
	Starwood Hotels & Resorts Worldwide Inc.		250,000		13,137,500
					62,342,119
	Diversified Financials 1.2%
	American Express Co.		242,300		10,183,869
	BlackRock Inc.		125,000		21,281,250
	JPMorgan Chase & Co.		334,300		12,726,801
					44,191,920
	Energy 4.3%
	BP PLC, ADR (United Kingdom)		350,200		14,417,734
	ConocoPhillips		35,000		2,010,050
	Devon Energy Corp.		290,000		18,774,600
	Exxon Mobil Corp.		70,000		4,325,300
a	FMC Technologies Inc.		300,000		20,487,000
	Halliburton Co.		600,000		19,842,000
	National Oilwell Varco Inc.		175,000		7,782,250
	Occidental Petroleum Corp.		200,000		15,660,000
	Peabody Energy Corp.		350,000		17,153,500
	Royal Dutch Shell PLC, A, ADR (Netherlands)		280,000		16,884,000
	Schlumberger Ltd.		309,100		19,043,651
a	Transocean Ltd.		15,222		978,622
					157,358,707
	Food & Staples Retailing 0.5%
	CVS Caremark Corp.		600,000		18,882,000
	Food, Beverage & Tobacco 1.3%
	Bunge Ltd.		211,500		12,512,340
a	Hansen Natural Corp.		300,000		13,986,000
	PepsiCo Inc.		300,000		19,932,000
					46,430,340
	Health Care Equipment & Services 4.6%
	Aetna Inc.		400,000		12,644,000
a	Allscripts Healthcare Solutions Inc.		450,000		8,311,500
	Baxter International Inc.		400,000		19,084,000
	Cardinal Health Inc.		300,000		9,912,000
a	CareFusion Corp.		150,000		3,726,000
	Covidien PLC		350,000		14,066,500
a	Edwards Lifesciences Corp.		100,000		6,705,000
a	Intuitive Surgical Inc.		34,000		9,647,160
a	Medco Health Solutions Inc.		96,480		5,022,749
	Medtronic Inc.		60,000		2,014,800
	Quest Diagnostics Inc.		500,000		25,235,000
	Teleflex Inc.		500,000		28,390,000

Annual Report     | 73

Franklin Custodian Funds

Statement of Investments, September 30, 2010 (continued)

	Franklin Growth Fund	Shares		Value
	Common Stocks (continued)
	Health Care Equipment & Services (continued)
a	Varian Medical Systems Inc.		300,000	$	18,150,000
a	Zimmer Holdings Inc.		64,000		3,349,120
					166,257,829
	Household & Personal Products 0.5%
	The Procter & Gamble Co.		335,000		20,089,950
	Insurance 1.1%
	Aflac Inc.		333,300		17,234,943
a	Berkshire Hathaway Inc., A		184		22,908,000
					40,142,943
	Materials 3.6%
	Air Products and Chemicals Inc.		500,000		41,410,000
	Celanese Corp., A		500,000		16,050,000
	Ecolab Inc.		353,700		17,946,738
	Martin Marietta Materials Inc.		90,000		6,927,300
	Praxair Inc.		120,000		10,831,200
	Randgold Resources Ltd., ADR (United Kingdom)		150,000		15,219,000
	Sigma-Aldrich Corp.		400,000		24,152,000
					132,536,238
	Media 1.6%
a	Live Nation Entertainment Inc.		88,491		874,291
	The Walt Disney Co.		1,687,290		55,866,172
					56,740,463
	Pharmaceuticals, Biotechnology & Life Sciences 12.7%
	Abbott Laboratories		400,000		20,896,000
	Allergan Inc.		950,000		63,203,500
a	Amgen Inc.		932,000		51,362,520
a	Biogen Idec Inc.		400,000		22,448,000
a	Celgene Corp.		324,400		18,688,684
a	Covance Inc.		200,000		9,358,000
a	Dionex Corp.		250,000		21,610,000
	Eli Lilly & Co.		400,000		14,612,000
a	Gilead Sciences Inc.		250,000		8,902,500
	Johnson & Johnson		1,181,010		73,175,380
	Merck & Co. Inc.		788,350		29,019,163
a	Mettler-Toledo International Inc.		50,000		6,222,000
	Pfizer Inc.		2,761,000		47,406,370
	Pharmaceutical Product Development Inc.		300,000		7,437,000
	Roche Holding AG, ADR (Switzerland)		530,000		18,088,900
	Teva Pharmaceutical Industries Ltd., ADR (Israel)		275,000		14,506,250
a	Waters Corp.		500,000		35,390,000
					462,326,267
	Retailing 0.3%
a	Amazon.com Inc.		10,000		1,570,600
	Expedia Inc.		300,100		8,465,821

74 |     Annual Report

Franklin Custodian Funds

Statement of Investments, September 30, 2010 (continued)

	Franklin Growth Fund	Shares		Value
	Common Stocks (continued)
	Retailing (continued)
a	HSN Inc.		60,020	$	1,794,598
					11,831,019
	Semiconductors & Semiconductor Equipment 0.7%
a	First Solar Inc.		50,000		7,367,500
	Intel Corp.		500,000		9,615,000
a	SunPower Corp., A		2,000		28,800
a	SunPower Corp., B		48,000		665,280
	Texas Instruments Inc.		250,000		6,785,000
					24,461,580
	Software & Services 9.1%
a	Adobe Systems Inc.		527,900		13,804,585
a	Autodesk Inc.		800,000		25,576,000
	Automatic Data Processing Inc.		700,000		29,421,000
a	Citrix Systems Inc.		200,000		13,648,000
	Computer Sciences Corp.		1,000,000		46,000,000
a	Google Inc., A		76,300		40,117,777
a	lAC/lnterActiveCorp		150,050		3,941,814
	International Business Machines Corp.		580,000		77,801,200
	MasterCard Inc., A		80,000		17,920,000
	Microsoft Corp.		325,000		7,959,250
	Oracle Corp.		500,000		13,425,000
	Visa Inc., A		250,000		18,565,000
a	Yahoo! Inc.		1,600,000		22,672,000
					330,851,626
	Technology Hardware & Equipment 12.6%
a	Agilent Technologies Inc.		1,150,000		38,375,500
a	Apple Inc.		811,000		230,121,250
a	Cisco Systems Inc.		2,695,000		59,020,500
a	EMC Corp.		1,000,000		20,310,000
	Hewlett-Packard Co.		1,156,250		48,643,438
a	Logitech International SA (Switzerland)		150,000		2,610,000
	Molex Inc.		71,483		1,496,139
	Molex Inc., A		133,100		2,326,588
	QUALCOMM Inc.		660,000		29,779,200
a	Research In Motion Ltd. (Canada)		600,000		29,214,000
					461,896,615
	Telecommunication Services 1.4%
	America Movil SAB de CV, L, ADR (Mexico)		259,300		13,828,469
a	American Tower Corp., A		715,000		36,650,900
					50,479,369
	Transportation 8.0%
a	Air France-KLM, ADR (France)		600,000		9,204,000
a	Alaska Air Group Inc.		600,000		30,618,000
	Allegiant Travel Co.		100,000		4,232,000
	Arkansas Best Corp.		500,000		12,115,000

Annual Report     | 75

Franklin Custodian Funds

Statement of Investments, September 30, 2010 (continued)

	Franklin Growth Fund	Shares		Value
	Common Stocks (continued)
	Transportation (continued)
a	British Airways PLC, ADR (United Kingdom)		1,200,000	$	22,704,000
	C.H. Robinson Worldwide Inc.		267,300		18,689,616
	Canadian National Railway Co. (Canada)		500,000		32,010,000
	Canadian Pacific Railway Ltd. (Canada)		500,000		30,465,000
a	Continental Airlines Inc., B		1,000,000		24,840,000
	Expeditors International of Washington Inc.		404,200		18,686,166
	Forward Air Corp.		495,333		12,878,658
	Heartland Express Inc.		500,000		7,435,000
	Ryanair Holdings PLC, ADR (Ireland)		239,200		7,369,752
	Southwest Airlines Co.		65,200		852,164
	Union Pacific Corp.		600,000		49,080,000
	Werner Enterprises Inc.		462,000		9,466,380
					290,645,736
	Utilities 1.3%
	American Water Works Co. Inc.		700,000		16,289,000
	International Power PLC (United Kingdom)		3,058,904		18,652,015
	NextEra Energy Inc.		250,000		13,597,500
					48,538,515
	Total Common Stocks (Cost $1,745,179,804)				3,405,567,604
	Short Term Investments 5.8%
	Money Market Funds (Cost $181,648,270) 5.0%
a,b	Institutional Fiduciary Trust Money Market Portfolio, 0.00%		181,648,270		181,648,270
		Principal Amount
	Repurchase Agreements (Cost $31,822,988) 0.8%
c	Joint Repurchase Agreement, 0.205%, 10/01/10 (Maturity Value $31,823,169)	$	31,822,988		31,822,988
	Banc of America Securities LLC (Maturity Value $3,874,789)
	Barclays Capital Inc. (Maturity Value $1,808,192)
	BNP Paribas Securities Corp. (Maturity Value $6,716,280)
	Credit Suisse Securities (USA) LLC (Maturity Value $6,458,512)
	Deutsche Bank Securities Inc. (Maturity Value $2,632,731)
	HSBC Securities (USA) Inc. (Maturity Value $3,874,789)
	Morgan Stanley & Co. Inc. (Maturity Value $3,874,789)
	UBS Securities LLC (Maturity Value $2,583,087)
	Collateralized by U.S. Government Agency Securities, 0.146% - 6.25%, 2/01/11 - 4/18/17;
	dU.S. Government Agency Discount Notes, 1/14/11 - 2/28/14 and U.S. Treasury Notes, 0.875% - 10.625%, 2/28/11 - 8/15/15
	Total Investments (Cost $1,958,651,062) 99.1%				3,619,038,862
	Other Assets, less Liabilities 0.9%				31,965,725
	Net Assets 100.0%			$	3,651,004,587

See Abbreviations on page 142.
a	Non-income producing.
b	See Note 7 regarding investments in the Institutional Fiduciary Trust Money Market Portfolio. The rate shown is the annualized seven-day yield at period end.
c	See Note 1(c) regarding joint repurchase agreement.
d	The security is traded on a discount basis with no stated coupon rate.

76 |     The accompanying notes are an integral part of these financial statements.     |     Annual Report

Franklin Custodian Funds

Financial Highlights

Franklin Income Fund

	Year Ended September 30,
Class A	2010			2009			2008			2007			2006
Per share operating performance (for a share outstanding throughout the year)
Net asset value, beginning of year	$	1.99		$	1.98		$	2.74		$	2.57		$	2.50
Income from investment operationsa:
Net investment incomeb		0.13			0.13			0.16			0.14			0.14
Net realized and unrealized gains (losses)		0.14			0.04			(0.71	)		0.21			0.09
Total from investment operations		0.27			0.17			(0.55	)		0.35			0.23
Less distributions from:
Net investment income		(0.15	)		(0.16	)		(0.15	)		(0.14	)		(0.15	)
Net realized gains		—			—	c		(0.06	)		(0.04	)		(0.01	)
Total distributions		(0.15	)		(0.16	)		(0.21	)		(0.18	)		(0.16	)
Redemption feesd		—			—			—	c		—	c		—	c
Net asset value, end of year	$	2.11		$	1.99		$	1.98		$	2.74		$	2.57
Total returne		13.90	%		10.56	%		(21.36	)%		14.14	%		9.73	%
Ratios to average net assets
Expenses		0.65	%f		0.68	%f		0.62	%f		0.63	%f		0.64	%g
Net investment income		6.40	%		7.93	%		6.44	%		5.31	%		5.61	%
Supplemental data
Net assets, end of year (000’s)	$	32,281,991		$	27,773,006		$	26,892,973		$	35,476,603		$	26,641,398
Portfolio turnover rate		46.85	%		51.36	%		39.92	%		25.45	%		28.35	%

a	The 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 shares in relation to income earned and/or fluctuating market value of the investments of the Fund.
b	Based on average daily shares outstanding.
c	Amount rounds to less than $0.01 per share.
d	Effective September 1, 2008, the redemption fee was eliminated.
e	Total return does not reflect sales commissions or contingent deferred sales charges, if applicable.
f	Benefit of expense reduction rounds to less than 0.01%.
g	Benefit of waiver and payment by affiliate and expense reduction rounds to less than 0.01%.

Annual Report     |     The accompanying notes are an integral part of these financial statements.     | 77

Franklin Custodian Funds

Financial Highlights (continued)

Franklin Income Fund

	Year Ended September 30,
Class B	2010			2009			2008			2007			2006
Per share operating performance (for a share outstanding throughout the year)
Net asset value, beginning of year	$	1.98		$	1.97		$	2.73		$	2.56		$	2.49
Income from investment operationsa:
Net investment incomeb		0.12			0.12			0.14			0.12			0.12
Net realized and unrealized gains (losses)		0.13			0.04			(0.71	)		0.21			0.08
Total from investment operations		0.25			0.16			(0.57	)		0.33			0.20
Less distributions from:
Net investment income		(0.13	)		(0.15	)		(0.13	)		(0.12	)		(0.12	)
Net realized gains		—			—	c		(0.06	)		(0.04	)		(0.01	)
Total distributions		(0.13	)		(0.15	)		(0.19	)		(0.16	)		(0.13	)
Redemption feesd		—			—			—	c		—	c		—	c
Net asset value, end of year	$	2.10		$	1.98		$	1.97		$	2.73		$	2.56
Total returne		12.99	%		9.70	%		(22.13	)%		13.23	%		8.83	%
Ratios to average net assets
Expenses		1.49	%f		1.53	%f		1.47	%f		1.48	%f		1.49	%g
Net investment income		5.56	%		7.08	%		5.59	%		4.46	%		4.76	%
Supplemental data
Net assets, end of year (000’s)	$	1,629,726		$	2,051,280		$	2,428,765		$	3,745,636		$	3,743,374
Portfolio turnover rate		46.85	%		51.36	%		39.92	%		25.45	%		28.35	%

a	The 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 shares in relation to income earned and/or fluctuating market value of the investments of the Fund.
b	Based on average daily shares outstanding.
c	Amount rounds to less than $0.01 per share.
d	Effective September 1, 2008, the redemption fee was eliminated.
e	Total return does not reflect sales commissions or contingent deferred sales charges, if applicable.
f	Benefit of expense reduction rounds to less than 0.01%.
g	Benefit of waiver and payment by affiliate and expense reduction rounds to less than 0.01%.

78 |     The accompanying notes are an integral part of these financial statements.     |     Annual Report

Franklin Custodian Funds

Financial Highlights (continued)

Franklin Income Fund

	Year Ended September 30,
Class B1	2010			2009			2008			2007			2006
Per share operating performance (for a share outstanding throughout the year)
Net asset value, beginning of year	$	1.99		$	1.98		$	2.74		$	2.57		$	2.50
Income from investment operationsa:
Net investment incomeb		0.13			0.13			0.15			0.13			0.13
Net realized and unrealized gains (losses)		0.13			0.03			(0.71	)		0.21			0.08
Total from investment operations		0.26			0.16			(0.56	)		0.34			0.21
Less distributions from:
Net investment income		(0.13	)		(0.15	)		(0.14	)		(0.13	)		(0.13	)
Net realized gains		—			—	c		(0.06	)		(0.04	)		(0.01	)
Total distributions		(0.13	)		(0.15	)		(0.20	)		(0.30	)		(0.14	)
Redemption feesd		—			—			—	c		—	c		—	c
Net asset value, end of year	$	2.12		$	1.99		$	1.98		$	2.74		$	2.57
Total returne		13.73	%		10.03	%		(21.77	)%		13.57	%		9.17	%
Ratios to average net assets
Expenses		1.14	%f		1.17	%f		1.12	%f		1.13	%f		1.14	%g
Net investment income		5.91	%		7.44	%		5.94	%		4.81	%		5.11	%
Supplemental data
Net assets, end of year (000’s)	$	23,551		$	68,825		$	224,713		$	397,224		$	459,302
Portfolio turnover rate		46.85	%		51.36	%		39.92	%		25.45	%		28.35	%

a	The 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 shares in relation to income earned and/or fluctuating market value of the investments of the Fund.
b	Based on average daily shares outstanding.
c	Amount rounds to less than $0.01 per share.
d	Effective September 1, 2008, the redemption fee was eliminated.
e	Total return does not reflect sales commissions or contingent deferred sales charges, if applicable.
f	Benefit of expense reduction rounds to less than 0.01%.
g	Benefit of waiver and payment by affiliate and expense reduction rounds to less than 0.01%.

Annual Report     |     The accompanying notes are an integral part of these financial statements.     | 79

Franklin Custodian Funds

Financial Highlights (continued)

Franklin Income Fund

	Year Ended September 30,
Class C	2010			2009			2008			2007			2006
Per share operating performance (for a share outstanding throughout the year)
Net asset value, beginning of year	$	2.00		$	1.99		$	2.76		$	2.59		$	2.51
Income from investment operationsa:
Net investment incomeb		0.12			0.13			0.15			0.13			0.13
Net realized and unrealized gains (losses)		0.15			0.03			(0.72	)		0.21			0.09
Total from investment operations		0.27			0.16			(0.57	)		0.34			0.22
Less distributions from:
Net investment income		(0.14	)		(0.15	)		(0.14	)		(0.13	)		(0.13	)
Net realized gains		—			—	c		(0.06	)		(0.04	)		(0.01	)
Total distributions		(0.14	)		(0.15	)		(0.20	)		(0.17	)		(0.14	)
Redemption feesd		—			—			—	c		—	c		—	c
Net asset value, end of year	$	2.13		$	2.00		$	1.99		$	2.76		$	2.59
Total returne		13.76	%		9.93	%		(21.98	)%		13.47	%		9.56	%
Ratios to average net assets
Expenses		1.15	%f		1.18	%f		1.12	%f		1.13	%f		1.14	%g
Net investment income		5.90	%		7.43	%		5.94	%		4.81	%		5.11	%
Supplemental data
Net assets, end of year (000’s)	$	15,605,055		$	13,054,203		$	12,443,143		$	16,203,796		$	12,138,969
Portfolio turnover rate		46.85	%		51.36	%		39.92	%		25.45	%		28.35	%

a	The 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 shares in relation to income earned and/or fluctuating market value of the investments of the Fund.
b	Based on average daily shares outstanding.
c	Amount rounds to less than $0.01 per share.
d	Effective September 1, 2008, the redemption fee was eliminated.
e	Total return does not reflect sales commissions or contingent deferred sales charges, if applicable.
f	Benefit of expense reduction rounds to less than 0.01%.
g	Benefit of waiver and payment by affiliate and expense reduction rounds to less than 0.01%.

80 |     The accompanying notes are an integral part of these financial statements.     |     Annual Report

Franklin Custodian Funds

Financial Highlights (continued)

Franklin Income Fund

	Year Ended September 30,
Class R	2010			2009			2008			2007			2006
Per share operating performance (for a share outstanding throughout the year)
Net asset value, beginning of year	$	1.96		$	1.95		$	2.71		$	2.55		$	2.48
Income from investment operationsa:
Net investment incomeb		0.12			0.13			0.15			0.13			0.13
Net realized and unrealized gains (losses)		0.15			0.03			(0.71	)		0.20			0.09
Total from investment operations		0.27			0.16			(0.56	)		0.33			0.22
Less distributions from:
Net investment income		(0.14	)		(0.15	)		(0.14	)		(0.13)	)		(0.14	)
Net realized gains		—			—	c		(0.06	)		(0.04	)		(0.01	)
Total distributions		(0.14	)		(0.15	)		(0.20	)		(0.17	)		(0.15	)
Redemption feesd		—			—			—	c		—	c		—	c
Net asset value, end of year	$	2.09		$	1.96		$	1.95		$	2.71		$	2.55
Total returne		14.23	%		10.31	%		(21.91	)%		13.47	%		9.43	%
Ratios to average net assets
Expenses		1.00	%f		1.03	%f		0.97	%f		0.98	%f		0.99	%g
Net investment income		6.05	%		7.58	%		6.09	%		4.96	%		5.26	%
Supplemental data
Net assets, end of year (000’s)	$	370,564		$	315,298		$	267,956		$	286,670		$	183,609
Portfolio turnover rate		46.85	%		51.36	%		39.92	%		25.45	%		28.35	%

a	The 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 shares in relation to income earned and/or fluctuating market value of the investments of the Fund.
b	Based on average daily shares outstanding.
c	Amount rounds to less than $0.01 per share.
d	Effective September 1, 2008, the redemption fee was eliminated.
e	Total return does not reflect sales commissions or contingent deferred sales charges, if applicable.
f	Benefit of expense reduction rounds to less than 0.01%.
g	Benefit of waiver and payment by affiliate and expense reduction rounds to less than 0.01%.

Annual Report     |     The accompanying notes are an integral part of these financial statements.     | 81

Franklin Custodian Funds

Financial Highlights (continued)

Franklin Income Fund

	Year Ended September 30,
Advisor Class	2010			2009			2008			2007			2006
Per share operating performance (for a share outstanding throughout the year)
Net asset value, beginning of year	$	1.98		$	1.97		$	2.73		$	2.56		$	2.49
Income from investment operationsa:
Net investment incomeb		0.13			0.14			0.16			0.15			0.14
Net realized and unrealized gains (losses)		0.14			0.03			(0.70	)		0.21			0.09
Total from investment operations		0.27			0.17			(0.54	)		0.36			0.23
Less distributions from:
Net investment income		(0.15	)		(0.16	)		(0.16	)		(0.15	)		(0.15	)
Net realized gains		—			—	c		(0.06	)		(0.04	)		(0.01	)
Total distributions		(0.15	)		(0.16	)		(0.22	)		(0.19	)		(0.16	)
Redemption feesd		—			—			—	c		—	c		—	c
Net asset value, end of year	$	2.10		$	1.98		$	1.97		$	2.73		$	2.56
Total return		14.15	%		10.79	%		(21.33	)%		14.36	%		9.94	%
Ratios to average net assets
Expenses		0.50	%e		0.53	%e		0.47	%e		0.48	%e		0.49	%f
Net investment income		6.55	%		8.08	%		6.59	%		5.46	%		5.76	%
Supplemental data
Net assets, end of year (000’s)	$	4,593,709		$	4,183,925		$	4,259,806		$	6,195,966		$	3,786,643
Portfolio turnover rate		46.85	%		51.36	%		39.92	%		25.45	%		28.35	%

a	The 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 shares in relation to income earned and/or fluctuating market value of the investments of the Fund.
b	Based on average daily shares outstanding.
c	Amount rounds to less than $0.01 per share.
d	Effective September 1, 2008, the redemption fee was eliminated.
e	Benefit of expense reduction rounds to less than 0.01%.
f	Benefit of waiver and payment by affiliate and expense reduction rounds to less than 0.01%.

82 |     The accompanying notes are an integral part of these financial statements.     |     Annual Report

Franklin Custodian Funds

Statement of Investments, September 30, 2010

	Franklin Income Fund	Country	Shares/Warrants		Value
	Common Stocks and Other Equity Interests 30.4%
	Consumer Discretionary 1.2%
a	Charter Communications Inc.	United States		11,871,333	$	385,818,322
a	Charter Communications Inc., A	United States		4,084,845		132,757,463
a	Charter Communications Inc., wts., 11/30/14	United States		2,112,650		11,619,575
a,b	Dex One Corp.	United States		10,242,757		125,781,056
a	SuperMedia Inc., Litigation Trust	United States		30,326,101		75,815
						656,052,231
	Consumer Staples 0.5%
	Diageo PLC	United Kingdom		9,000,000		155,159,126
	PepsiCo Inc.	United States		1,500,000		99,660,000
						254,819,126
	Energy 5.1%
	BP PLC, ADR	United Kingdom		6,000,000		247,020,000
a,b	Callon Petroleum Co.	United States		4,181,258		20,697,227
b	Canadian Oil Sands Trust	United States		26,000,000		643,773,401
	ConocoPhillips	United States		8,000,000		459,440,000
	Exxon Mobil Corp.	United States		16,000,000		988,640,000
	Schlumberger Ltd.	United States		1,019,000		62,780,590
	Spectra Energy Corp.	United States		10,000,000		225,500,000
a	Weatherford International Ltd.	United States		6,315,000		107,986,500
						2,755,837,718
	Financials 3.7%
	Bank of America Corp.	United States		35,000,000		458,850,000
	Barclays PLC	United Kingdom		15,000,000		70,613,667
a	CIT Group Inc.	United States		3,000,000		122,460,000
a	Citigroup Inc.	United States		22,000,000		85,800,000
b	Colony Financial Inc.	United States		1,250,000		23,100,000
	HSBC Holdings PLC	United Kingdom		35,000,000		354,832,398
	JPMorgan Chase & Co.	United States		10,250,000		390,217,500
c	Wells Fargo & Co.	United States		19,000,000		477,470,000
						1,983,343,565
	Health Care 4.4%
	Johnson & Johnson	United States		10,000,000		619,600,000
	Merck & Co. Inc.	United States		25,000,000		920,250,000
	Pfizer Inc.	United States		26,750,000		459,297,500
	Roche Holding AG	Switzerland		3,000,000		409,770,992
						2,408,918,492
	Industrials 0.2%
	General Electric Co.	United States		7,500,000		121,875,000
a	Nortek Inc.	United States		40,000		1,600,000
						123,475,000
	Information Technology 0.2%
	Intel Corp.	United States		5,000,000		96,150,000

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Franklin Custodian Funds

Statement of Investments, September 30, 2010 (continued)

	Franklin Income Fund	Country	Shares/Warrants		Value
	Common Stocks and Other Equity Interests (continued)
	Materials 0.5%
	AngloGold Ashanti Ltd., ADR	South Africa		2,677,365	$	123,801,358
	Barrick Gold Corp.	Canada		2,000,000		92,580,000
	Weyerhaeuser Co.	United States		4,886,816		77,016,220
						293,397,578
	Telecommunication Services 3.2%
	AT&T Inc.	United States		18,250,000		521,950,000
	CenturyLink Inc.	United States		5,000,000		197,300,000
	Frontier Communications Corp.	United States		10,160,357		83,010,117
	Telstra Corp. Ltd.	Australia		75,000,000		190,005,682
	Verizon Communications Inc.	United States		9,000,000		293,310,000
	Vodafone Group PLC	United Kingdom		180,000,000		444,402,885
						1,729,978,684
	Utilities 11.4%
	AGL Resources Inc.	United States		2,650,000		101,654,000
	Ameren Corp.	United States		3,000,000		85,200,000
	American Electric Power Co. Inc.	United States		10,000,000		362,300,000
	CenterPoint Energy Inc.	United States		5,500,000		86,460,000
	Consolidated Edison Inc.	United States		5,300,000		255,566,000
	Dominion Resources Inc.	United States		10,500,000		458,430,000
	DTE Energy Co.	United States		2,750,000		126,307,500
	Duke Energy Corp.	United States		34,000,000		602,140,000
	FirstEnergy Corp.	United States		2,800,000		107,912,000
	NextEra Energy Inc.	United States		7,375,000		401,126,250
	NiSource Inc.	United States		2,500,000		43,500,000
	PG&E Corp.	United States		11,500,000		522,330,000
	Pinnacle West Capital Corp.	United States		5,000,000		206,350,000
	Portland General Electric Co.	United States		2,400,000		48,672,000
	PPL Corp.	United States		6,665,600		181,504,288
	Progress Energy Inc.	United States		9,400,000		417,548,000
	Public Service Enterprise Group Inc.	United States		15,000,000		496,200,000
	Sempra Energy	United States		6,500,000		349,700,000
	The Southern Co.	United States		21,000,000		782,040,000
	TECO Energy Inc.	United States		10,000,000		173,200,000
	Xcel Energy Inc.	United States		18,500,000		424,945,000
						6,233,085,038
	Total Common Stocks and Other Equity Interests (Cost $15,275,214,935)					16,535,057,432
d	Equity-Linked Securities 4.5%
	Consumer Discretionary 0.1%
e	JPMorgan Chase & Co. into Comcast Corp., 8.00%, 144A	United States		5,000,000		91,108,000

84 |     Annual Report

Franklin Custodian Funds

Statement of Investments, September 30, 2010 (continued)

	Franklin Income Fund	Country	Shares/Warrants		Value
d	Equity-Linked Securities (continued)
	Energy 1.2%
e	Barclays Bank PLC into Weatherford International Ltd., 12.00%, 144A	United States		7,350,000	$	130,878,510
	Credit Suisse into ConocoPhillips, 8.00%	United States		3,600,000		206,832,960
	Credit Suisse into Schlumberger Ltd., 8.00%	United States		1,500,000		91,560,000
e	Deutsche Bank AG into Chesapeake Energy Corp., 12.00%, 144A	United States		6,200,000		145,283,980
e	Morgan Stanley into Baker Hughes Inc., 8.00%, 144A	United States		2,500,000		105,187,500
						679,742,950
	Financials 0.7%
e	Barclays Capital PLC into Wells Fargo & Co., 8.00%, 144A	United States		5,406,000		138,206,012
e	Deutsche Bank AG into Citigroup Inc., 10.00%, 144A	United States		24,500,000		105,745,430
e	JPMorgan Chase & Co. into Bank of America, 9.00%, 144A	United States		5,000,000		70,650,000
e	JPMorgan Chase & Co. into Citigroup Inc., 10.00%, 144A	United States		21,276,000		86,048,441
						400,649,883
	Industrials 0.2%
e	JPMorgan Chase & Co. into First Solar Inc., 10.00%, 144A	United States		687,800		93,077,911
	Information Technology 1.0%
e	Barclays Bank PLC into Intel Corp., 8.00%., 144A	United States		9,653,000		189,911,191
e	The Goldman Sachs Group Inc. into Xerox Corp., 12.00%, 144A	United States		13,400,000		124,442,450
e	Morgan Stanley into Qualcomm Inc., 7.50%, 144A	United States		2,500,000		109,356,750
e	Morgan Stanley into Xilinx Inc., 8.00%, 144A	United States		4,000,000		104,354,800
						528,065,191
	Materials 1.1%
e	Barclays Capital PLC into Newmont Mining Corp., 8.50%, 144A	United States		3,044,000		177,169,628
	Credit Suisse into Barrick Gold Corp., 9.00%	United States		4,910,000		215,042,288
e	JPMorgan Chase & Co. into Nucor Corp., 9.00%, 144A	United States		2,100,000		85,007,370
e	Morgan Stanley into Freeport-Mcmoran Copper & Gold Inc., 9.00%, 144A	United States		1,250,000		104,526,000
						581,745,286
	Utilities 0.2%
	Credit Suisse into Calpine Corp., 8.00%	United States		8,000,000		96,326,400
	Total Equity-Linked Securities (Cost $2,447,724,306)					2,470,715,621
	Convertible Preferred Stocks 3.4%
	Consumer Discretionary 0.2%
a	General Motors Corp., 6.25%, cvt. pfd., C	United States		11,000,000		85,470,000
	Energy 0.3%
e	Chesapeake Energy Corp., 5.75%, cvt. pfd., 144A	United States		160,000		164,739,200

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Franklin Custodian Funds

Statement of Investments, September 30, 2010 (continued)

Franklin Income Fund	Country	Shares/Warrants		Value
Convertible Preferred Stocks (continued)
Financials 2.4%
Bank of America Corp., 7.25%, cvt. pfd., L	United States		679,738	$	667,842,585
aFannie Mae, 5.375%, cvt. pfd.	United States		4,700		8,648,000
aFannie Mae, 8.75%, cvt. pfd.	United States		3,239,000		1,580,405
aFelcor Lodging Trust Inc., 7.80%, cvt. pfd., A	United States		3,050,000		65,422,500
eForest City Enterprises Inc., 7.00%, cvt. pfd., 144A	United States		1,000,000		53,799,500
aLehman Brothers Holdings Inc., 7.25%, cvt. pfd., P	United States		1,000,650		800,520
aLehman Brothers Holdings Inc., 8.75%, cvt. pfd., Q	United States		550,000		55
Wells Fargo & Co., 7.50%, cvt. pfd., A	United States		512,900		515,977,400
					1,314,070,965
Health Care 0.4%
Tenet Healthcare Corp., 7.00%, cvt. pfd.	United States		250,000		213,750,000
Materials 0.1%
aAnglogold Ashanti Holdings Finance PLC, 6.00%, cvt. pfd.	South Africa		1,000,000		53,000,000
Utilities 0.0%†
Nextera Energy Inc., 8.375%, cvt. pfd.	United States		500,000		26,550,000
Total Convertible Preferred Stocks (Cost $3,945,926,583)					1,857,580,165
Preferred Stocks 0.5%
Financials 0.5%
aFannie Mae, 6.75%, pfd.	United States		3,000,000		1,050,000
aFannie Mae, 8.25%, pfd.	United States		11,784,000		5,126,040
aFannie Mae, 7.625%, pfd., R	United States		2,399,400		890,177
aFreddie Mac, 8.375%, pfd., Z	United States		16,608,000		7,141,440
eGMAC Inc., 7.00%, pfd., 144A	United States		267,636		245,556,030
Total Preferred Stocks (Cost $928,695,780)					259,763,687
		Principal Amount*
Convertible Bonds 0.6%
Financials 0.6%
CapitalSource Inc., cvt., senior sub. note,
4.00%, 7/15/34	United States		118,925,000		118,330,375
7.25%, 7/15/37	United States		12,676,000		12,612,620
fiStar Financial Inc., cvt., senior note, FRN, 1.033%, 10/01/12	United States		240,000,000		186,600,000
					317,542,995
Information Technology 0.0%†
Advanced Micro Devices Inc., cvt., senior note, 6.00%, 5/01/15	United States		17,172,000		16,978,815
Total Convertible Bonds (Cost $380,091,382)					334,521,810

86 |     Annual Report

Franklin Custodian Funds

Statement of Investments, September 30, 2010 (continued)

	Franklin Income Fund	Country	Principal Amount*			Value
	Corporate Bonds 51.8%
	Consumer Discretionary 8.1%
	Cablevision Systems Corp., senior note,
	8.625%, 9/15/17	United States		100,000,000		$	110,500,000
	7.75%, 4/15/18	United States		200,000,000			212,500,000
	8.00%, 4/15/20	United States		150,000,000			162,187,500
	CCH II LLC/CCH II Capital Corp., senior note, 13.50%, 11/30/16	United States		227,347,163			271,111,492
e	CCO Holdings LLC, senior note, 144A, 7.875%, 4/30/18	United States		84,900,000			88,508,250
e	Cequel Communications Holdings I LLC, senior note, 144A, 8.625%, 11/15/17	United States		60,000,000			63,600,000
e	CKE Restaurants Inc., senior secured note, 144A, 11.375%, 7/15/18	United States		66,000,000			67,980,000
	Clear Channel Worldwide Holdings Inc., senior note,
	A, 9.25%, 12/15/17	United States		24,900,000			26,518,500
	B, 9.25%, 12/15/17	United States		116,050,000			124,463,625
	CSC Holdings Inc., senior note, 8.50%, 4/15/14	United States		67,300,000			74,450,625
b,g	Dex One Corp., senior sub. note, PIK, 12.00%, 1/29/17	United States		81,136,340			64,199,129
	EchoStar DBS Corp., senior note,
	7.75%, 5/31/15	United States		40,000,000			42,850,000
	7.125%, 2/01/16	United States		152,000,000			160,550,000
	Ford Motor Credit Co. LLC,
	8.00%, 6/01/14	United States		400,000,000			437,896,400
	senior note, 8.70%, 10/01/14	United States		40,000,000			45,100,000
	senior note, 7.00%, 4/15/15	United States		450,000,000			481,514,400
	senior note, 12.00%, 5/15/15	United States		55,000,000			69,300,000
	senior note, 8.125%, 1/15/20	United States		47,700,000			54,902,128
h	General Motors Corp., senior deb., 8.375%, 7/15/33	United States		510,000,000			174,675,000
	The Goodyear Tire & Rubber Co., senior note, 8.25%, 8/15/20	United States		112,700,000			119,180,250
	Harrah’s Operating Co. Inc.,
	esenior note, 144A, 12.75%, 4/15/18	United States		25,000,000			23,437,500
	senior secured note, 11.25%, 6/01/17	United States		150,000,000			165,000,000
	Host Hotels & Resorts LP, senior note,
	O, 6.375%, 3/15/15	United States		100,000,000			102,875,000
	Q, 6.75%, 6/01/16	United States		83,000,000			86,423,750
	T, 9.00%, 5/15/17	United States		116,750,000			130,905,937
	KB Home, senior note,
	5.75%, 2/01/14	United States		75,000,000			72,843,750
	6.25%, 6/15/15	United States		90,000,000			86,400,000
	9.10%, 9/15/17	United States		49,000,000			50,592,500
	7.25%, 6/15/18	United States		70,500,000			66,446,250
	MGM Resorts International, senior note,
	6.75%, 4/01/13	United States		70,000,000			65,362,500
	11.375%, 3/01/18	United States		25,000,000			23,937,500
	Michaels Stores Inc., senior note, 10.00%, 11/01/14	United States		48,235,000			51,068,806
e,g	Univision Communications Inc., senior note, 144A, PIK, 10.50%, 3/15/15	United States		308,967,064			296,085,300
e	UPC Germany GmbH, senior secured note, 144A,
	8.125%, 12/01/17	Germany		52,700,000			55,302,062
	8.125%, 12/01/17	Germany	43,900,000		EUR		63,079,624
	9.625%, 12/01/19	Germany	23,100,000		EUR		34,178,872

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Franklin Custodian Funds

Statement of Investments, September 30, 2010 (continued)

	Franklin Income Fund	Country	Principal Amount*			Value
	Corporate Bonds (continued)
	Consumer Discretionary (continued)
	Virgin Media Secured Finance, senior secured note, 7.00%, 1/15/18	United Kingdom	70,000,000		GBP	$	116,622,755
e	Visant Corp., senior note, 144A, 10.00%, 10/01/17	United States		46,800,000			49,023,000
							4,391,572,405
	Consumer Staples 0.5%
e	JBS USA LLC, senior note, 144A, 11.625%, 5/01/14	United States		134,500,000			156,692,500
	SUPERVALU Inc., senior note, 8.00%, 5/01/16	United States		108,500,000			109,856,250
							266,548,750
	Energy 9.8%
	Alon Refining Krotz Springs Inc., senior secured note, 13.50%, 10/15/14	United States		30,000,000			29,400,000
	Anadarko Petroleum Corp., senior note, 5.95%, 9/15/16	United States		90,000,000			98,446,860
	Antero Resources Finance, senior note, 9.375%, 12/01/17	United States		106,200,000			113,368,500
e	ATP Oil & Gas Corp., senior secured note, 144A, 11.875%, 5/01/15	United States		125,000,000			108,437,500
b	Callon Petroleum Co., senior secured note, 13.00%, 9/15/16	United States		75,000,000			75,656,250
	Chesapeake Energy Corp., senior note,
	9.50%, 2/15/15	United States		100,000,000			116,250,000
	6.50%, 8/15/17	United States		183,000,000			190,777,500
	6.875%, 8/15/18	United States		104,000,000			109,460,000
	7.25%, 12/15/18	United States		188,065,000			203,580,362
	6.875%, 11/15/20	United States		143,000,000			152,295,000
e	Consol Energy Inc., senior note, 144A,
	8.00%, 4/01/17	United States		42,450,000			46,164,375
	8.25%, 4/01/20	United States		80,850,000			88,732,875
	Crosstex Energy LP/Crosstex Energy Finance Corp., senior note, 8.875%, 2/15/18	United States		32,800,000			34,522,000
	Denbury Resources Inc., senior sub. note, 8.25%, 2/15/20	United States		72,446,000			79,418,928
	El Paso Corp.,
	esenior bond, 144A, 6.50%, 9/15/20	United States		161,600,000			165,236,000
	senior note, 7.25%, 6/01/18	United States		60,000,000			64,961,460
	senior note, MTN, 7.75%, 1/15/32	United States		250,000,000			260,785,000
	Energy Transfer Equity LP, senior note, 7.50%, 10/15/20	United States		153,700,000			162,537,750
	EXCO Resources Inc., senior note, 7.50%, 9/15/18	United States		52,400,000			52,007,000
e	Expro Finance Luxembourg, senior secured note, 144A, 8.50%, 12/15/16	United Kingdom		56,800,000			54,386,000
	Forest Oil Corp., senior note,
	8.50%, 2/15/14	United States		45,000,000			49,387,500
	7.25%, 6/15/19	United States		47,875,000			49,191,563
	Holly Corp., senior note, 9.875%, 6/15/17	United States		35,000,000			37,231,250
e	Linn Energy Corp., senior note, 144A,
	8.625%, 4/15/20	United States		100,000,000			106,500,000
	7.75%, 2/01/21	United States		75,000,000			76,031,250
	Newfield Exploration Co.,
	senior sub. bond, 6.875%, 2/01/20	United States		100,000,000			106,750,000
	senior sub. note, 6.625%, 4/15/16	United States		42,000,000			43,890,000

88 |     Annual Report

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Statement of Investments, September 30, 2010 (continued)

Franklin Income Fund	Country	Principal Amount*		Value
Corporate Bonds (continued)
Energy (continued)
eNFR Energy LLC/NFR Finance Corp., senior note, 144A, 9.75%, 2/15/17	United States		60,000,000	$	60,000,000
OPTI Canada Inc., senior note, 7.875%, 12/15/14	Canada		70,000,000		53,025,000
Petrohawk Energy Corp., senior note,
10.50%, 8/01/14	United States		129,050,000		145,665,187
7.875%, 6/01/15	United States		141,000,000		148,402,500
ePetroplus Finance Ltd., senior note, 144A,
6.75%, 5/01/14	Switzerland		145,000,000		133,400,000
7.00%, 5/01/17	Switzerland		125,000,000		109,375,000
9.375%, 9/15/19	Bermuda		94,930,000		86,860,950
Pioneer Natural Resources Co., senior bond, 6.875%, 5/01/18	United States		100,000,000		107,518,600
Plains Exploration & Production Co., senior note,
7.75%, 6/15/15	United States		95,500,000		100,633,125
10.00%, 3/01/16	United States		80,000,000		91,600,000
8.625%, 10/15/19	United States		50,000,000		54,875,000
Quicksilver Resources Inc., senior note, 9.125%, 8/15/19	United States		90,000,000		99,112,500
Sabine Pass LNG LP, senior secured note,
7.25%, 11/30/13	United States		100,000,000		97,000,000
7.50%, 11/30/16	United States		240,000,000		220,200,000
SandRidge Energy Inc., senior note,
e144A, 9.875%, 5/15/16	United States		106,300,000		110,286,250
e144A, 8.00%, 6/01/18	United States		232,500,000		227,850,000
e144A, 8.75%, 1/15/20	United States		100,000,000		99,500,000
fFRN, 4.158%, 4/01/14	United States		80,000,000		74,160,800
gPIK, 8.625%, 4/01/15	United States		120,131,000		120,731,655
SEACOR Holdings Inc., senior note, 7.375%, 10/01/19	United States		23,800,000		25,996,669
SESI LLC, senior note, 6.875%, 6/01/14	United States		117,000,000		118,462,500
Tesoro Corp.,
i7.50%, 7/17/12	United States		100,000,000		94,587,070
senior note, 6.50%, 6/01/17	United States		16,050,000		15,889,500
senior note, 9.75%, 6/01/19	United States		36,400,000		40,222,000
eW&T Offshore Inc., senior note, 144A, 8.25%, 6/15/14	United States		192,500,000		184,800,000
eWestern Refining Inc.,
fsenior note, 144A, FRN, 10.75%, 6/15/14	United States		25,000,000		23,875,000
senior secured note, 144A, 11.25%, 6/15/17	United States		25,000,000		23,625,000
					5,343,059,229
Financials 9.2%
jBank of America Corp., pfd., sub. bond, M, 8.125%, Perpetual	United States		100,000,000		103,279,000
CIT Group Inc., senior secured sub. bond, 7.00%,
5/01/14	United States		115,100,000		115,100,000
5/01/15	United States		475,000,000		472,625,000
5/01/16	United States		825,000,000		816,750,000
5/01/17	United States		655,000,000		644,356,250
FelCor Lodging LP, senior secured note, 10.00%, 10/01/14	United States		142,450,000		155,626,625
Forest City Enterprises Inc., senior note, 7.625%, 6/01/15	United States		42,250,000		39,503,750
eGMAC Inc., senior note, 144A, 8.00%, 3/15/20	United States		205,000,000		224,475,000
Hexion U.S. Finance Corp., senior secured note, 8.875%, 2/01/18	United States		35,000,000		34,475,000

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Statement of Investments, September 30, 2010 (continued)

	Franklin Income Fund	Country	Principal Amount*		Value
	Corporate Bonds (continued)
	Financials (continued)
	International Lease Finance Corp.,
	senior note, 8.875%, 9/01/17	United States		73,300,000	$	79,530,500
	esenior note, 144A, 8.625%, 9/15/15	United States		58,300,000		62,526,750
	esenior note, 144A, 8.75%, 3/15/17	United States		171,500,000		184,362,500
	esenior secured note, 144A, 6.75%, 9/01/16	United States		79,200,000		85,140,000
	esenior secured note, 144A, 7.125%, 9/01/18	United States		122,300,000		132,389,750
	iStar Financial Inc.,
	senior note, 8.625%, 6/01/13	United States		190,000,000		156,987,500
	senior secured note, 10.00%, 6/15/14	United States		110,000,000		110,000,000
j	JPMorgan Chase & Co., junior sub. note, 1, 7.90%, Perpetual	United States		865,000,000		930,109,415
e,f	Liberty Mutual Group, junior sub. note, 144A, FRN, 10.75%, 6/15/88	United States		100,000,000		119,000,000
j	Wells Fargo Capital XIII, 7.70%, Perpetual	United States		44,500,000		46,391,250
j	Wells Fargo Capital XV, pfd., 9.75%, Perpetual	United States		449,600,000		496,808,000
						5,009,436,290
	Health Care 5.4%
	Community Health Systems Inc., senior sub. note, 8.875%, 7/15/15	United States		375,000,000		399,375,000
	HCA Inc.,
	6.75%, 7/15/13	United States		79,320,000		81,303,000
	senior note, 6.375%, 1/15/15	United States		169,455,000		169,878,638
	senior note, 6.50%, 2/15/16	United States		195,000,000		195,975,000
	senior secured bond, 7.25%, 9/15/20	United States		51,700,000		55,577,500
	senior secured note, 9.25%, 11/15/16	United States		300,000,000		325,500,000
	senior secured note, 8.50%, 4/15/19	United States		190,000,000		212,800,000
	senior secured note, 7.875%, 2/15/20	United States		165,000,000		181,293,750
e,g	Quintiles Transnational Corp., senior note, 144A, PIK, 9.50%, 12/30/14	United States		100,000,000		103,000,000
	Tenet Healthcare Corp.,
	senior note, 9.875%, 7/01/14	United States		30,000,000		32,400,000
	esenior note, 144A, 8.00%, 8/01/20	United States		178,600,000		178,600,000
	fsenior note, FRN, 9.25%, 2/01/15	United States		115,000,000		124,056,250
	senior secured note, 9.00%, 5/01/15	United States		300,000,000		327,750,000
	senior secured note, 10.00%, 5/01/18	United States		300,000,000		344,250,000
f,g	US Oncology Holdings Inc., senior note, PIK, FRN, 6.737%, 3/15/12	United States		67,272,000		63,877,320
	US Oncology Inc., senior note, 10.75%, 8/15/14	United States		15,000,000		15,675,000
	Vanguard Health Holding Co. II LLC, senior note, 8.00%, 2/01/18	United States		151,000,000		154,020,000
						2,965,331,458
	Industrials 4.9%
e	American Airlines Inc., senior secured note, 144A, 10.50%, 10/15/12	United States		57,500,000		62,531,250
e	Bombardier Inc., senior note, 144A, 7.75%, 3/15/20	Canada		50,000,000		54,375,000
e	Case New Holland Inc., senior note, 144A, 7.875%, 12/01/17	United States		255,000,000		280,500,000

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Statement of Investments, September 30, 2010 (continued)

	Franklin Income Fund	Country	Principal Amount*		Value
	Corporate Bonds (continued)
	Industrials (continued)
e	Ceva Group PLC, senior secured note, 144A,
	11.625%, 10/01/16	United Kingdom		11,800,000	$	12,595,227
	11.50%, 4/01/18	United Kingdom		212,525,000		222,334,954
e,k	CHC Helicopter SA, senior secured note, 144A, 9.25%, 10/15/20	Canada		196,700,000		199,650,500
e	Delta Air Lines Inc., senior secured note, 144A, 9.50%, 9/15/14	United States		61,178,000		66,684,020
g	Diversey Holdings Inc., senior note, PIK, 10.50%, 5/15/20	United States		49,200,000		54,642,750
	Diversey Inc., senior note, 8.25%, 11/15/19	United States		30,000,000		32,250,000
	Greenbrier Cos. Inc., senior note, 8.375%, 5/15/15	United States		31,706,000		30,913,350
	Hertz Corp.,
	senior note, 8.875%, 1/01/14	United States		450,000,000		464,062,500
esenior note, 144A, 7.50%, 10/15/18		United States		73,900,000		74,269,500
	senior sub. note, 10.50%, 1/01/16	United States		140,000,000		149,450,000
	Icahn Enterprises LP, senior note,
	7.75%, 1/15/16	United States		85,000,000		85,850,000
	8.00%, 1/15/18	United States		30,000,000		30,300,000
e	Interactive Data Corp., senior note, 144A, 10.25%, 8/01/18	United States		39,100,000		42,032,500
	Manitowoc Co. Inc., senior note, 9.50%, 2/15/18	United States		63,800,000		66,990,000
	Navistar International Corp., senior note, 8.25%, 11/01/21	United States		28,300,000		30,351,750
	Nortek Inc., senior secured note, 11.00%, 12/01/13	United States		40,177,777		42,889,777
e	Pinafore LLC/Inc., senior secured note, 144A, 9.00%, 10/01/18	United States		35,700,000		37,663,500
	RBS Global & Rexnord Corp.,
	senior note, 8.50%, 5/01/18	United States		144,350,000		147,417,438
	senior sub. note, 11.75%, 8/01/16	United States		97,000,000		104,275,000
	RSC Equipment Rental Inc./RSC Holdings III LLC,
lsenior note, 10.25%, 11/15/19		United States		58,000,000		61,915,000
esenior secured note, 144A, 10.00%, 7/15/17		United States		30,000,000		33,525,000
e	Severstal Columbus LLC, senior secured note, 144A, 10.25%, 2/15/18	United States		15,000,000		15,825,000
	Terex Corp., senior sub. note, 8.00%, 11/15/17	United States		185,000,000		186,156,250
	Transdigm Inc., senior sub. note, 7.75%, 7/15/14	United States		25,000,000		25,406,250
	United Rentals North America Inc., senior sub. note, 7.75%, 11/15/13	United States		77,910,000		79,078,650
						2,693,935,166
	Information Technology 5.3%
	Advanced Micro Devices Inc., senior note,
	8.125%, 12/15/17	United States		61,700,000		65,402,000
e144A, 7.75%, 8/01/20		United States		27,700,000		28,738,750
	Ceridian Corp., senior note, 11.25%, 11/15/15	United States		75,000,000		69,562,500
	First Data Corp.,
	senior note, 9.875%, 9/24/15	United States		799,822,000		655,904,930
	senior sub. note, 11.25%, 3/31/16	United States		409,000,000		296,525,000

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Franklin Custodian Funds

Statement of Investments, September 30, 2010 (continued)

	Franklin Income Fund	Country	Principal Amount*			Value
	Corporate Bonds (continued)
	Information Technology (continued)
	Freescale Semiconductor Inc.,
	senior note, 8.875%, 12/15/14	United States		490,000,000		$	492,450,000
	senior note, 10.125%, 12/15/16	United States		205,000,000			187,575,000
esenior note, 144A, 10.75%, 8/01/20		United States		200,000,000			201,500,000
esenior secured note, 144A, 10.125%, 3/15/18		United States		90,000,000			96,075,000
esenior secured note, 144A, 9.25%, 4/15/18		United States		200,000,000			208,000,000
	Lucent Technologies Inc., 6.45%, 3/15/29	United States		95,900,000			70,246,750
e	NXP BV/NXP Funding LLC, senior secured note, 144A, 9.75%, 8/01/18	Netherlands		61,800,000			66,126,000
	Sanmina-SCI Corp., senior sub. note,
	6.75%, 3/01/13	United States		116,500,000			118,247,500
	8.125%, 3/01/16	United States		100,000,000			103,000,000
	SunGard Data Systems Inc.,
	senior note, 9.125%, 8/15/13	United States		35,000,000			35,918,750
	senior note, 10.625%, 5/15/15	United States		55,000,000			61,600,000
	senior sub. note, 10.25%, 8/15/15	United States		85,000,000			89,887,500
	ViaSat Inc., senior note, 8.875%, 9/15/16	United States		49,250,000			53,251,562
							2,900,011,242
	Materials 2.3%
e	Cemex Finance LLC, senior secured note, 144A, 9.50%, 12/14/16	United States		50,000,000			50,560,000
	Huntsman International LLC,
	senior note, 5.50%, 6/30/16	United States		126,500,000			121,756,250
	senior sub. note, 7.875%, 11/15/14	United States		58,400,000			60,882,000
	senior sub. note, 7.375%, 1/01/15	United States		27,100,000			27,642,000
esenior sub. note, 144A, 8.625%, 3/15/21		United States		8,100,000			8,424,000
e	Ineos Finance PLC, senior secured note, 144A, 9.00%, 5/15/15	United Kingdom		30,600,000			32,130,000
e	Ineos Group Holdings PLC, senior sub. note, 144A, 7.875%, 2/15/16	United Kingdom	190,000,000		EUR		216,982,847
e	Kerling PLC, senior secured note, 144A, 10.625%, 1/28/17	United Kingdom	53,700,000		EUR		77,526,940
e	LBI Escrow Corp., senior secured note, 144A, 8.00%, 11/01/17	United States		80,000,000			87,600,000
	Nalco Co., senior note, 8.25%, 5/15/17	United States		21,650,000			24,031,500
	Nalco Finance Holdings LLC, senior note, 9.00%, 2/01/14	United States		380,000,000			390,450,000
	NewPage Corp., senior secured note,
	10.00%, 5/01/12	United States		52,800,000			26,400,000
	11.375%, 12/31/14	United States		50,000,000			45,500,000
e	Reynolds Group Issuer Inc./LLCA, senior note, 144A, 8.50%, 5/15/18	United States		39,200,000			38,514,000
	United States Steel Corp., senior note, 7.375%, 4/01/20	United States		40,000,000			41,900,000
							1,250,299,537
	Telecommunication Services 1.5%
e	Clearwire Communications LLC/Finance, senior secured note, 144A, 12.00%, 12/01/15	United States		50,000,000			54,000,000
e	Clearwire Corp., senior secured note, 144A, 12.00%, 12/01/15	United States		145,000,000			156,962,500
	Cricket Communications Inc.,
	senior note, 9.375%, 11/01/14	United States		65,000,000			67,600,000
	senior secured note, 7.75%, 5/15/16	United States		30,000,000			31,987,500

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Statement of Investments, September 30, 2010 (continued)

	Franklin Income Fund	Country	Principal Amount*		Value
	Corporate Bonds (continued)
	Telecommunication Services (continued)
e	Digicel Group Ltd., senior note, 144A, 8.875%, 1/15/15	Jamaica		61,900,000	$	63,447,500
	Frontier Communications Corp., senior note,
	7.875%, 4/15/15	United States		47,900,000		51,971,500
	8.25%, 4/15/17	United States		57,975,000		63,700,031
	8.50%, 4/15/20	United States		64,150,000		71,126,313
	8.75%, 4/15/22	United States		63,900,000		70,609,500
	Sprint Nextel Corp., senior note, 8.375%, 8/15/17	United States		80,200,000		87,418,000
	Virgin Media Finance PLC, senior note, 1, 9.50%, 8/15/16	United Kingdom		74,800,000		84,898,000
						803,720,844
	Utilities 4.8%
	The AES Corp., senior note, 8.00%, 10/15/17	United States		80,000,000		86,800,000
e	Calpine Construction Finance, senior secured note, 144A, 8.00%, 6/01/16	United States		100,000,000		107,500,000
e	Calpine Corp., senior secured note, 144A,
	7.25%, 10/15/17	United States		21,000,000		21,472,500
	7.875%, 7/31/20	United States		61,000,000		62,982,500
	Dynegy Holdings Inc., senior note,
	7.50%, 6/01/15	United States		198,500,000		157,311,250
	8.375%, 5/01/16	United States		295,000,000		231,575,000
	7.75%, 6/01/19	United States		105,000,000		72,450,000
e144A, 7.50%, 6/01/15		United States		150,000,000		118,125,000
	Dynegy Roseton Danskammer Pass Through Trust, secured bond, B, 7.67%, 11/08/16	United States		64,500,000		59,823,750
	Energy Future Holdings Corp., senior note,
	10.875%, 11/01/17	United States		6,658,000		4,028,090
gPIK, 12.00%, 11/01/17		United States		77,000,000		35,394,590
	R, 6.55%, 11/15/34	United States		141,515,000		54,483,275
e	Intergen NV, senior secured note, 144A, 9.00%, 6/30/17	Netherlands		80,000,000		85,000,000
e	Niska Gas Storage U.S./Canada, senior note, 144A, 8.875%, 3/15/18	United States		75,000,000		80,625,000
	Public Service Co. of New Mexico, senior note, 7.95%, 5/15/18	United States		50,200,000		55,532,495
	Reliant Energy Inc., senior note,
	7.625%, 6/15/14	United States		150,000,000		149,250,000
	7.875%, 6/15/17	United States		180,000,000		168,750,000
	Texas Competitive Electric Holdings Co. LLC, senior note,
	A, 10.25%, 11/01/15	United States		890,700,000		587,862,000
	B, 10.25%, 11/01/15	United States		310,000,000		204,600,000
gPIK, 11.25%, 11/01/16		United States		450,000,000		251,537,850
						2,595,103,300
	Total Corporate Bonds (Cost $27,005,893,865)					28,219,018,221
f,m	Senior Floating Rate Interests 5.8%
	Consumer Discretionary 1.7%
	Clear Channel Communications Inc., Term Loan B, 3.906%, 1/29/16	United States		537,786,283		425,590,619
b	Dex Media West LLC, Term Loan B, 7.00%, 10/24/14	United States		6,393,713		5,574,078
	Harrah’s Operating Co. Inc., Incremental Term Loan, 9.50%, 10/01/16	United States		99,250,000		101,928,857

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Statement of Investments, September 30, 2010 (continued)

	Franklin Income Fund	Country	Principal Amount*		Value
f,m	Senior Floating Rate Interests (continued)
	Consumer Discretionary (continued)
	Jarden Corp., Term Loan B-3, 2.283%, 1/24/12	United States		18,518,835	$	18,455,093
b	R.H. Donnelley Inc., Term Loan B, 9.00%, 10/24/14	United States		37,206,015		31,744,693
	SuperMedia Inc., Exit Term Loan, 11.00%, 12/31/15	United States		24,963,302		19,507,048
	Univision Communications Inc., Initial Term Loan, 2.065% - 2.506%, 9/29/14	United States		19,747,651		17,349,891
	Visant Corp. (Jostens), Tranche B Term Loan, 7.00%, 12/22/16	United States		300,000,000		302,040,000
						922,190,279
	Financials 0.1%
k	iStar Financial Inc., 2nd Lien Term Loan, 3.25%, 6/28/11	United States		45,000,000		42,041,250
	Industrials 0.7%
	Allison Transmission Inc., Term Loan B, 3.01% - 3.05%, 8/07/14	United States		97,713,223		91,942,085
	Altegrity Inc.,
	Term Loan B, 3.292%, 2/21/15	United States		96,768,652		89,027,160
	Tranche D Term Loan, 7.75%, 2/21/15	United States		60,000,000		60,112,500
	Ceva Group PLC,
	Dollar Pre-Refunded L/C Commitment, 3.289%, 8/01/12	United States		13,684,211		12,230,263
	EGL Term Loans, 3.256%, 8/01/12	United States		112,535,526		101,141,305
	Interactive Data Corp., Term Loan B, 6.75%, 1/29/17	United States		54,862,500		55,645,223
						410,098,536
	Information Technology 1.3%
k	First Data Corp.,
	Term Loan B-1, 3.006%, 9/24/14	United States		69,805,136		61,620,484
	Term Loan B-2, 3.006%, 9/24/14	United States		301,928,548		266,414,202
	Term Loan B-3, 3.006%, 9/24/14	United States		357,170,841		315,157,906
	Freescale Semiconductor Inc., Extended Term Loan, 4.509%, 12/01/16	United States		61,845,379		56,691,618
						699,884,210
	Materials 0.1%
	Novelis Corp., U.S. Term Loan, 2.26%, 7/07/14	United States		62,627,806		60,748,972
	Utilities 1.9%
k	Texas Competitive Electric Holdings Co. LLC,
	Term Loan, 3.25%, 10/10/14	United States		269,911,625		208,750,460
	Term Loan B-1, 3.758% - 3.789%, 10/10/14	United States		316,293,749		246,204,003
	Term Loan B-2, 3.758% - 4.066%, 10/10/14	United States		317,915,998		247,422,576
	Term Loan B-3, 3.758% - 3.789%, 10/10/14	United States		412,374,678		319,991,204
						1,022,368,243
	Total Senior Floating Rate Interests (Cost $3,376,194,713)					3,157,331,490
	Municipal Bonds (Cost $180,206,433) 0.3%
	California State GO, 7.95%, 3/01/36	United States		180,000,000		193,158,000
	Total Investments before Short Term Investments (Cost $53,539,947,997)					53,027,146,426

94 |     Annual Report

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Statement of Investments, September 30, 2010 (continued)

	Franklin Income Fund	Country	Principal Amount*		Value
	Short Term Investments 2.3%
	U.S. Government and Agency Securities 0.8%
n	FHLB 10/01/10 - 10/05/10	United States		398,383,000	$	398,382,000
n	FNMA, 10/04/10	United States		35,000,000		34,999,755
	Total U.S. Government and Agency Securities (Cost $433,381,470)					433,381,755
	Total Investments before Money Market Funds and Repurchase Agreements (Cost $53,973,329,467)					53,460,528,181
			Shares
	Money Market Funds (Cost $330,912,398) 0.6%
a,o	Institutional Fiduciary Trust Money Market Portfolio, 0.00%	United States		330,912,398		330,912,398
	Investments from Cash Collateral Received for Loaned Securities 0.0%†
	Money Market Funds 0.0%†
a	Bank of New York Institutional Cash Reserve Fund, Series B	United States		451,668		361,334
p	BNY Mellon Overnight Government Fund, 0.23%	United States		4,874,000		4,874,000
	Total Investments from Cash Collateral Received for Loaned Securities (Cost $5,325,668)					5,235,334
			Principal Amount*
	Repurchase Agreements (Cost $490,186,154) 0.9%
q	Joint Repurchase Agreement, 0.205%, 10/01/10 (Maturity Value $490,188,945)	United States		490,186,154		490,186,154
	Banc of America Securities LLC (Maturity Value $59,685,406)
	Barclays Capital Inc. (Maturity Value $27,852,536)
	BNP Paribas Securities Corp. (Maturity Value $103,454,377)
	Credit Suisse Securities (USA) LLC (Maturity Value $99,483,846)
	Deutsche Bank Securities Inc. (Maturity Value $40,553,331)
	HSBC Securities (USA) Inc. (Maturity Value $59,685,406)
	Morgan Stanley & Co. Inc. (Maturity Value $59,685,406)
	UBS Securities LLC (Maturity Value $39,788,637)
	Collateralized by U.S. Government Agency Securities, 0.146% - 6.25%, 2/01/11 - 4/18/17; n U.S. Government Agency Discount Notes, 1/14/11 - 2/28/14 and U.S. Treasury Notes, 0.875% - 10.625%, 2/28/11 - 8/15/15
	Total Investments (Cost $54,799,753,687) 99.6%					54,286,862,067
	Other Assets, less Liabilities 0.4%					217,733,378
	Net Assets 100.0%				$	54,504,595,445
			Contracts
	Options Written (Premium Received $40,999) 0.0%
	Call Options 0.0%
	Financials 0.0%
	Wells Fargo & Co., Oct. $35 Calls, 10/16/10	United States		1,000	$	—

Annual Report     | 95

Franklin Custodian Funds

Statement of Investments, September 30, 2010 (continued)

Franklin Income Fund

See Abbreviations on page 142.

*	The principal amount is stated in U.S. dollars unless otherwise indicated.
†	Rounds to less than 0.1% of net assets.
a	Non-income producing.
b	See Note 10 regarding holdings of 5% voting securities.
c	A portion or all of the security is held in connection with written option contracts open at year end.
d	See Note 1(f) regarding equity-linked securities.
e	Security 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, 2010, the aggregate value of these securities was $8,981,768,999, representing 16.48% of net assets.
f	The coupon rate shown represents the rate at period end.
g	Income may be received in additional securities and/or cash.
h	See Note 8 regarding defaulted securities.
i	Security has been deemed illiquid because it may not be able to be sold within seven days. At September 30, 2010, the value of this security was $94,587,070, representing 0.17% of net assets.
j	Perpetual security with no stated maturity date.
k	A portion or all of the security purchased on a when-issued or delayed delivery basis. See Note 1(d).
l	A portion or all of the security is on loan at September 30, 2010. See Note 1(g).
m	See Note 1(h) regarding senior floating rate interests.
n	The security is traded on a discount basis with no stated coupon rate.
o	See Note 7 regarding investments in the Institutional Fiduciary Trust Money Market Portfolio. The rate shown is the annualized seven-day yield at period end.
p	The rate shown is the annualized seven-day yield at period end.
q	See Note 1(c) regarding joint repurchase agreement.

96 |     The accompanying notes are an integral part of these financial statements.     |     Annual Report

Franklin Custodian Funds

Financial Highlights

Franklin U.S. Government Securities Fund

	Year Ended September 30,
Class A	2010			2009			2008			2007			2006
Per share operating performance (for a share outstanding throughout the year)
Net asset value, beginning of year	$	6.69		$	6.45		$	6.39		$	6.43		$	6.53
Income from investment operationsa:
Net investment incomeb		0.25			0.27			0.30			0.31			0.30
Net realized and unrealized gains (losses)		0.14			0.27			0.08			(0.02	)		(0.09	)
Total from investment operations		0.39			0.54			0.38			0.29			0.21
Less distributions from net investment income		(0.27	)		(0.30	)		(0.32	)		(0.33	)		(0.31	)
Redemption feesc		—			—			—	d		—	d		—	d
Net asset value, end of year	$	6.81		$	6.69		$	6.45		$	6.39		$	6.43
Total returne		5.94	%		8.50	%		6.00	%		4.63	%		3.40	%
Ratios to average net assets
Expenses		0.73	%		0.73	%f		0.72	%f		0.72	%f		0.72	%f
Net investment income		3.70	%		4.11	%		4.64	%		4.78	%		4.64	%
Supplemental data
Net assets, end of year (000’s)	$	6,771,471		$	6,275,792		$	5,353,961		$	5,073,449		$	5,291,117
Portfolio turnover rate		47.41	%		34.74	%		21.66	%		12.34	%		20.54	%

a	The 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 shares in relation to income earned and/or fluctuating market value of the investments of the Fund.
b	Based on average daily shares outstanding.
c	Effective September 1, 2008, the redemption fee was eliminated.
d	Amount rounds to less than $0.01 per share.
e	Total return does not reflect sales commissions or contingent deferred sales charges, if applicable.
f	Benefit of expense reduction rounds to less than 0.01%.

Annual Report     |     The accompanying notes are an integral part of these financial statements.     | 97

Franklin Custodian Funds

Financial Highlights (continued)

Franklin U.S. Government Securities Fund

	Year Ended September 30,
Class B	2010			2009			2008			2007			2006
Per share operating performance (for a share outstanding throughout the year)
Net asset value, beginning of year	$	6.68		$	6.44		$	6.38		$	6.42		$	6.52
Income from investment operationsa:
Net investment incomeb		0.22			0.24			0.27			0.27			0.26
Net realized and unrealized gains (losses)		0.13			0.26			0.07			(0.01	)		(0.08	)
Total from investment operations		0.35			0.50			0.34			0.26			0.18
Less distributions from net investment income		(0.23	)		(0.26	)		(0.28	)		(0.30	)		(0.28	)
Redemption feesc		—			—			—	d		—	d		—	d
Net asset value, end of year	$	6.80		$	6.68		$	6.44		$	6.38		$	6.42
Total returne		5.39	%		7.79	%		5.61	%		4.10	%		2.87	%
Ratios to average net assets
Expenses		1.23	%		1.24	%f		1.24	%f		1.25	%f		1.24	%f
Net investment income		3.20	%		3.60	%		4.12	%		4.25	%		4.12	%
Supplemental data
Net assets, end of year (000’s)	$	126,803		$	230,575		$	284,649		$	316,720		$	388,807
Portfolio turnover rate		47.41	%		34.74	%		21.66	%		12.34	%		20.54	%

a	The 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 shares in relation to income earned and/or fluctuating market value of the investments of the Fund.
b	Based on average daily shares outstanding.
c	Effective September 1, 2008, the redemption fee was eliminated.
d	Amount rounds to less than $0.01 per share.
e	Total return does not reflect sales commissions or contingent deferred sales charges, if applicable.
f	Benefit of expense reduction rounds to less than 0.01%.

98 |     The accompanying notes are an integral part of these financial statements.     |     Annual Report

Franklin Custodian Funds

Financial Highlights (continued)

Franklin U.S. Government Securities Fund

	Year Ended September 30,
Class C	2010			2009			2008			2007			2006
Per share operating performance (for a share outstanding throughout the year)
Net asset value, beginning of year	$	6.66		$	6.42		$	6.36		$	6.40		$	6.50
Income from investment operationsa:
Net investment incomeb		0.21			0.23			0.27			0.27			0.26
Net realized and unrealized gains (losses)		0.14			0.27			0.07			(0.01	)		(0.08	)
Total from investment operations		0.35			0.50			0.34			0.26			0.18
Less distributions from net investment income		(0.24	)		(0.26	)		(0.28	)		(0.30	)		(0.28	)
Redemption feesc		—			—			—	d		—	d		—	d
Net asset value, end of year	$	6.77		$	6.66		$	6.42		$	6.36		$	6.40
Total returne		5.28	%		8.01	%		5.48	%		4.12	%		2.88	%
Ratios to average net assets
Expenses		1.24	%		1.24	%f		1.24	%f		1.25	%f		1.23	%f
Net investment income		3.19	%		3.60	%		4.12	%		4.25	%		4.13	%
Supplemental data
Net assets, end of year (000’s)	$	2,484,847		$	1,464,614		$	610,148		$	418,951		$	424,462
Portfolio turnover rate		47.41	%		34.74	%		21.66	%		12.34	%		20.54	%

a	The 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 shares in relation to income earned and/or fluctuating market value of the investments of the Fund.
b	Based on average daily shares outstanding.
c	Effective September 1, 2008, the redemption fee was eliminated.
d	Amount rounds to less than $0.01 per share.
e	Total return does not reflect sales commissions or contingent deferred sales charges, if applicable.
f	Benefit of expense reduction rounds to less than 0.01%.

Annual Report     |     The accompanying notes are an integral part of these financial statements.     | 99

Franklin Custodian Funds

Financial Highlights (continued)

Franklin U.S. Government Securities Fund

	Year Ended September 30,
Class R	2010			2009			2008			2007			2006
Per share operating performance (for a share outstanding throughout the year)
Net asset value, beginning of year	$	6.69		$	6.45		$	6.39		$	6.43		$	6.53
Income from investment operationsa:
Net investment incomeb		0.23			0.25			0.28			0.28			0.27
Net realized and unrealized gains (losses)		0.13			0.26			0.07			(0.01	)		(0.08	)
Total from investment operations		0.36			0.51			0.35			0.27			0.19
Less distributions from net investment income		(0.24	)		(0.27	)		(0.29	)		(0.31	)		(0.29	)
Redemption feesc		—			—			—	d		—	d		—	d
Net asset value, end of year	$	6.81		$	6.69		$	6.45		$	6.39		$	6.43
Total returne		5.55	%		8.12	%		5.61	%		4.25	%		3.01	%
Ratios to average net assets
Expenses		1.09	%		1.09	%f		1.09	%f		1.10	%f		1.09	%f
Net investment income		3.34	%		3.75	%		4.27	%		4.40	%		4.27	%
Supplemental data
Net assets, end of year (000’s)	$	140,147		$	138,548		$	104,648		$	74,537		$	71,104
Portfolio turnover rate		47.41	%		34.74	%		21.66	%		12.34	%		20.54	%

a	The 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 shares in relation to income earned and/or fluctuating market value of the investments of the Fund.
b	Based on average daily shares outstanding.
c	Effective September 1, 2008, the redemption fee was eliminated.
d	Amount rounds to less than $0.01 per share.
e	Total return does not reflect sales commissions or contingent deferred sales charges, if applicable.
f	Benefit of expense reduction rounds to less than 0.01%.

100 |     The accompanying notes are an integral part of these financial statements.     |     Annual Report

Franklin Custodian Funds

Financial Highlights (continued)

Franklin U.S. Government Securities Fund

	Year Ended September 30,
Advisor Class	2010			2009			2008			2007			2006
Per share operating performance (for a share outstanding throughout the year)
Net asset value, beginning of year	$	6.71		$	6.47		$	6.41		$	6.45		$	6.55
Income from investment operationsa:
Net investment incomeb		0.26			0.28			0.31			0.31			0.31
Net realized and unrealized gains (losses)		0.14			0.27			0.08			(0.01	)		(0.09	)
Total from investment operations		0.40			0.55			0.39			0.30			0.22
Less distributions from net investment income		(0.28	)		(0.31	)		(0.33	)		(0.34	)		(0.32	)
Redemption feesc		—			—			—	d		—	d		—	d
Net asset value, end of year	$	6.83		$	6.71		$	6.47		$	6.41		$	6.45
Total return		6.06	%		8.63	%		6.11	%		4.75	%		3.53	%
Ratios to average net assets
Expenses		0.59	%		0.59	%e		0.59	%e		0.60	%e		0.59	%e
Net investment income		3.84	%		4.25	%		4.77	%		4.90	%		4.77	%
Supplemental data
Net assets, end of year (000’s)	$	1,193,213		$	863,951		$	612,026		$	470,751		$	387,239
Portfolio turnover rate		47.41	%		34.74	%		21.66	%		12.34	%		20.54	%

a	The 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 shares in relation to income earned and/or fluctuating market value of the investments of the Fund.
b	Based on average daily shares outstanding.
c	Effective September 1, 2008, the redemption fee was eliminated.
d	Amount rounds to less than $0.01 per share.
e	Benefit of expense reduction rounds to less than 0.01%.

Annual Report     |     The accompanying notes are an integral part of these financial statements.     | 101

Franklin Custodian Funds

Statement of Investments, September 30, 2010

	Franklin U.S. Government Securities Fund	Principal Amount		Value
	Mortgage-Backed Securities 99.1%
	Government National Mortgage Association (GNMA) Fixed Rate 99.1%
	GNMA GP 30 Year, 8.25%, 3/15/17 - 10/15/17	$	85,192	$	94,627
	GNMA GP 30 Year, 9.25%, 5/15/16 - 12/15/16		187,882		204,126
	GNMA GP 30 Year, 11.25%, 7/15/13 - 12/15/15		110,902		119,696
	GNMA GP 30 Year, 11.50%, 2/15/13 - 5/15/13		15,329		15,482
	GNMA GP 30 Year, 11.75%, 7/15/13 - 8/15/13		11,778		11,898
	GNMA GP 30 Year, 12.75%, 5/15/14		3,296		3,332
	GNMA I SF 15 Year, 6.50%, 5/15/18		638,720		662,937
a	GNMA I SF 30 Year, 4.50%, 1/15/39 - 8/15/40		2,177,065,460		2,295,764,910
	GNMA I SF 30 Year, 4.50%, 8/15/40		180,006,866		189,788,920
	GNMA I SF 30 Year, 5.00%, 8/15/39		165,801,680		176,838,747
	GNMA I SF 30 Year, 5.00%, 2/15/33 - 6/15/40		2,217,634,303		2,371,302,036
	GNMA I SF 30 Year, 5.50%, 2/15/39		119,288,336		128,433,561
	GNMA I SF 30 Year, 5.50%, 5/15/28 - 2/15/40		1,250,254,794		1,350,099,666
	GNMA I SF 30 Year, 6.00%, 10/15/23 - 2/15/39		886,043,857		967,803,210
	GNMA I SF 30 Year, 6.00%, 12/15/39		100,076,565		108,779,075
	GNMA I SF 30 Year, 6.50%, 5/15/23 - 8/15/37		215,528,777		240,857,326
	GNMA I SF 30 Year, 6.75%, 3/15/26		37,865		43,002
	GNMA I SF 30 Year, 7.00%, 4/15/16 - 9/15/32		132,718,245		151,199,123
	GNMA I SF 30 Year, 7.25%, 11/15/25 - 1/15/26		461,487		523,431
	GNMA I SF 30 Year, 7.50%, 7/15/16 - 8/15/33		42,476,915		48,540,025
	GNMA I SF 30 Year, 7.70%, 1/15/21 - 1/15/22		301,598		346,725
	GNMA I SF 30 Year, 8.00%, 11/15/15 - 9/15/30		25,406,221		28,860,347
	GNMA I SF 30 Year, 8.50%, 5/15/16 - 6/15/25		5,540,714		6,351,198
	GNMA I SF 30 Year, 9.00%, 11/15/15 - 7/15/23		6,833,744		7,692,282
	GNMA I SF 30 Year, 9.50%, 5/15/16 - 8/15/22		4,229,182		4,826,121
	GNMA I SF 30 Year, 10.00%, 2/15/16 - 3/15/25		5,492,131		6,183,566
	GNMA I SF 30 Year, 10.50%, 2/15/12 - 10/15/21		4,121,781		4,556,591
	GNMA I SF 30 Year, 11.00%, 10/15/10 - 5/15/21		2,420,905		2,623,292
	GNMA I SF 30 Year, 11.50%, 3/15/13 - 2/15/16		647,766		673,493
	GNMA I SF 30 Year, 12.00%, 5/15/11 - 1/15/18		3,252,293		3,374,908
	GNMA I SF 30 Year, 12.50%, 11/15/10 - 1/15/16		1,834,554		1,907,468
	GNMA I SF 30 Year, 13.00%, 1/15/11 - 9/15/15		2,013,823		2,075,411
	GNMA II GP 30 Year, 8.75%, 3/20/17 - 7/20/17		34,485		37,611
	GNMA II GP 30 Year, 11.50%, 8/20/13		8,495		8,578
	GNMA II SF 30 Year, 4.50%, 12/20/39		133,370,088		140,786,205
	GNMA II SF 30 Year, 4.50%, 5/20/33 - 9/20/40		356,304,401		376,399,243
	GNMA II SF 30 Year, 5.00%, 9/20/33		133,664,973		143,686,372
	GNMA II SF 30 Year, 5.00%, 7/20/33 - 5/20/40		328,258,514		351,706,598
	GNMA II SF 30 Year, 5.00%, 6/20/40		105,682,870		112,932,095
	GNMA II SF 30 Year, 5.50%, 6/20/34 - 4/20/40		627,407,100		676,508,499
	GNMA II SF 30 Year, 6.00%, 10/20/23 - 7/20/39		469,438,705		511,338,071
	GNMA II SF 30 Year, 6.50%, 6/20/24 - 1/20/39		147,591,157		163,017,138
	GNMA II SF 30 Year, 7.00%, 2/20/28 - 7/20/33		24,047,951		27,352,520
	GNMA II SF 30 Year, 7.50%, 10/20/22 - 4/20/32		4,524,388		5,149,022
	GNMA II SF 30 Year, 8.00%, 8/20/16 - 6/20/30		2,245,570		2,597,601
	GNMA II SF 30 Year, 8.50%, 4/20/16 - 6/20/25		1,132,243		1,295,994
	GNMA II SF 30 Year, 9.00%, 8/20/16 - 11/20/21		333,609		378,991
	GNMA II SF 30 Year, 9.50%, 3/20/18 - 4/20/25		227,008		262,639

102 |     Annual Report

Franklin Custodian Funds

Statement of Investments, September 30, 2010 (continued)

	Franklin U.S. Government Securities Fund	Principal Amount		Value
	Mortgage-Backed Securities (continued)
	Government National Mortgage Association (GNMA) Fixed Rate (continued)
	GNMA II SF 30 Year, 10.00%, 8/20/15 - 3/20/21	$	430,651	$	497,910
	GNMA II SF 30 Year, 10.50%, 8/20/14 - 3/20/21		1,110,607		1,238,637
	GNMA II SF 30 Year, 11.00%, 8/20/13 - 1/20/21		177,308		197,779
	GNMA II SF 30 Year, 11.50%, 9/20/13 - 2/20/18		92,602		98,334
	GNMA II SF 30 Year, 12.00%, 9/20/13 - 2/20/16		149,238		160,473
	GNMA II SF 30 Year, 12.50%, 10/20/13 - 11/20/15		100,926		110,167
	GNMA II SF 30 Year, 13.00%, 10/20/13 - 9/20/15		73,289		79,674
	Total Mortgage-Backed Securities (Cost $10,164,106,856)				10,616,396,683
		Shares
	Short Term Investments (Cost $112,396,476) 1.0%
	Money Market Funds 1.0%
b,c	Institutional Fiduciary Trust Money Market Portfolio, 0.00%		112,396,476		112,396,476
	Total Investments (Cost $10,276,503,332) 100.1%				10,728,793,159
	Other Assets, less Liabilities (0.1)%				(12,312,681	)
	Net Assets 100.0%			$	10,716,480,478

See Abbreviations on page 142.

a	A portion or all of the security purchased on a TBA basis. See Note 1(d).
b	Non-income producing.
c	See Note 7 regarding investments in the Institutional Fiduciary Trust Money Market Portfolio. The rate shown is the annualized seven-day yield at period end.

Annual Report     |     The accompanying notes are an integral part of these financial statements.     | 103

Franklin Custodian Funds

Financial Highlights

Franklin Utilities Fund

	Year Ended September 30,
Class A	2010			2009			2008			2007			2006
Per share operating performance (for a share outstanding throughout the year)
Net asset value, beginning of year	$	10.74		$	11.92		$	14.58		$	12.89		$	12.59
Income from investment operationsa:
Net investment incomeb		0.43			0.43			0.41			0.40			0.43
Net realized and unrealized gains (losses)		0.88			(1.11	)		(1.93	)		2.16			0.37
Total from investment operations		1.31			(0.68	)		(1.52	)		2.56			0.80
Less distributions from:
Net investment income		(0.45	)		(0.42	)		(0.40	)		(0.40	)		(0.41	)
Net realized gains		(0.16	)		(0.08	)		(0.74	)		(0.47	)		(0.09	)
Total distributions		(0.61	)		(0.50	)		(1.14	)		(0.87	)		(0.50	)
Redemption feesc		—			—			—	d		—	d		—	d
Net asset value, end of year	$	11.44		$	10.74		$	11.92		$	14.58		$	12.89
Total returne		12.69	%		(5.20	)%		(11.63	)%		20.32	%		6.69	%
Ratios to average net assets
Expenses		0.78	%		0.80	%f		0.74	%f		0.75	%f		0.76	%f
Net investment income		3.91	%		4.29	%		2.92	%		2.83	%		3.54	%
Supplemental data
Net assets, end of year (000’s)	$	1,823,972		$	1,543,060		$	1,769,397		$	2,157,614		$	1,926,732
Portfolio turnover rate		5.27	%		15.49	%		8.32	%		10.84	%		7.97	%

a	The 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 shares in relation to income earned and/or fluctuating market value of the investments of the Fund.
b	Based on average daily shares outstanding.
c	Effective September 1, 2008, the redemption fee was eliminated.
d	Amount rounds to less than $0.01 per share.
e	Total return does not reflect sales commissions or contingent deferred sales charges, if applicable.
f	Benefit of expense reduction rounds to less than 0.01%.

104 |     The accompanying notes are an integral part of these financial statements.     |     Annual Report

Franklin Custodian Funds

Financial Highlights (continued)

Franklin Utilities Fund

	Year Ended September 30,
Class B	2010			2009			2008			2007			2006
Per share operating performance (for a share outstanding throughout the year)
Net asset value, beginning of year	$	10.74		$	11.91		$	14.56		$	12.88		$	12.57
Income from investment operationsa:
Net investment incomeb		0.37			0.38			0.33			0.33			0.37
Net realized and unrealized gains (losses)		0.88			(1.10	)		(1.91	)		2.15			0.38
Total from investment operations		1.25			(0.72	)		(1.58	)		2.48			0.75
Less distributions from:
Net investment income		(0.39	)		(0.37	)		(0.33	)		(0.33	)		(0.35	)
Net realized gains		(0.16	)		(0.08	)		(0.74	)		(0.47	)		(0.09	)
Total distributions		(0.55	)		(0.45	)		(1.07	)		(0.80	)		(0.44	)
Redemption feesc		—			—			—	d		—	d		—	d
Net asset value, end of year	$	11.44		$	10.74		$	11.91		$	14.56		$	12.88
Total returne		12.10	%		(5.65	)%		(12.04	)%		19.66	%		6.25	%
Ratios to average net assets
Expenses		1.28	%		1.30	%f		1.24	%f		1.26	%f		1.26	%f
Net investment income		3.41	%		3.79	%		2.42	%		2.32	%		3.04	%
Supplemental data
Net assets, end of year (000’s)	$	50,439		$	64,176		$	92,695		$	127,587		$	133,824
Portfolio turnover rate		5.27	%		15.49	%		8.32	%		10.84	%		7.97	%

a	The 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 shares in relation to income earned and/or fluctuating market value of the investments of the Fund.
b	Based on average daily shares outstanding.
c	Effective September 1, 2008, the redemption fee was eliminated.
d	Amount rounds to less than $0.01 per share.
e	Total return does not reflect sales commissions or contingent deferred sales charges, if applicable.
f	Benefit of expense reduction rounds to less than 0.01%.

Annual Report      |     The accompanying notes are an integral part of these financial statements.     | 105

Franklin Custodian Funds

Financial Highlights (continued)

Franklin Utilities Fund

	Year Ended September 30,
Class C	2010			2009			2008			2007			2006
Per share operating performance (for a share outstanding throughout the year)
Net asset value, beginning of year	$	10.71		$	11.88		$	14.53		$	12.85		$	12.55
Income from investment operationsa:
Net investment incomeb		0.37			0.38			0.33			0.33			0.37
Net realized and unrealized gains (losses)		0.88			(1.10	)		(1.91	)		2.15			0.37
Total from investment operations		1.25			(0.72	)		(1.58	)		2.48			0.74
Less distributions from:
Net investment income		(0.40	)		(0.37	)		(0.33	)		(0.33	)		(0.35	)
Net realized gains		(0.16	)		(0.08	)		(0.74	)		(0.47	)		(0.09	)
Total distributions		(0.56	)		(0.45	)		(1.07	)		(0.80	)		(0.44	)
Redemption feesc		—			—			—	d		—	d		—	d
Net asset value, end of year	$	11.40		$	10.71		$	11.88		$	14.53		$	12.85
Total returne		12.08	%		(5.64	)%		(12.06	)%		19.72	%		6.19	%
Ratios to average net assets
Expenses		1.28	%		1.30	%f		1.24	%f		1.26	%f		1.25	%f
Net investment income		3.41	%		3.79	%		2.42	%		2.32	%		3.05	%
Supplemental data
Net assets, end of year (000’s)	$	405,024		$	300,544		$	339,247		$	424,977		$	391,509
Portfolio turnover rate		5.27	%		15.49	%		8.32	%		10.84	%		7.97	%

a	The 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 shares in relation to income earned and/or fluctuating market value of the investments of the Fund.
b	Based on average daily shares outstanding.
c	Effective September 1, 2008, the redemption fee was eliminated.
d	Amount rounds to less than $0.01 per share.
e	Total return does not reflect sales commissions or contingent deferred sales charges, if applicable.
f	Benefit of expense reduction rounds to less than 0.01%.

106 |     The accompanying notes are an integral part of these financial statements.     |     Annual Report

Franklin Custodian Funds

Financial Highlights (continued)

Franklin Utilities Fund

	Year Ended September 30,
Class R	2010			2009			2008			2007			2006
Per share operating performance (for a share outstanding throughout the year)
Net asset value, beginning of year	$	10.71		$	11.89		$	14.54		$	12.86		$	12.57
Income from investment operationsa:
Net investment incomeb		0.39			0.40			0.36			0.35			0.39
Net realized and unrealized gains (losses)		0.88			(1.11	)		(1.92	)		2.16			0.36
Total from investment operations		1.27			(0.71	)		(1.56	)		2.51			0.75
Less distributions from:
Net investment income		(0.41	)		(0.39	)		(0.35	)		(0.36	)		(0.37	)
Net realized gains		(0.16	)		(0.08	)		(0.74	)		(0.47	)		(0.09	)
Total distributions		(0.57	)		(0.47	)		(1.09	)		(0.83	)		(0.46	)
Redemption feesc		—			—			—	d		—	d		—	d
Net asset value, end of year	$	11.41		$	10.71		$	11.89		$	14.54		$	12.86
Total returne		12.33	%		(5.57	)%		(11.92	)%		19.92	%		6.29	%
Ratios to average net assets
Expenses		1.13	%		1.15	%f		1.09	%f		1.11	%f		1.11	%f
Net investment income		3.56	%		3.94	%		2.57	%		2.47	%		3.19	%
Supplemental data
Net assets, end of year (000’s)	$	42,285		$	37,795		$	36,596		$	41,845		$	27,736
Portfolio turnover rate		5.27	%		15.49	%		8.32	%		10.84	%		7.97	%

a	The 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 shares in relation to income earned and/or fluctuating market value of the investments of the Fund.
b	Based on average daily shares outstanding.
c	Effective September 1, 2008, the redemption fee was eliminated.
d	Amount rounds to less than $0.01 per share.
e	Total return does not reflect sales commissions or contingent deferred sales charges, if applicable.
f	Benefit of expense reduction rounds to less than 0.01%.

Annual Report     |     The accompanying notes are an integral part of these financial statements.     | 107

Franklin Custodian Funds

Financial Highlights (continued)

Franklin Utilities Fund

	Year Ended September 30,
Advisor Class	2010			2009			2008			2007			2006
Per share operating performance (for a share outstanding throughout the year)
Net asset value, beginning of year	$	10.79		$	11.98		$	14.64		$	12.95		$	12.64
Income from investment operationsa:
Net investment incomeb		0.45			0.45			0.42			0.42			0.45
Net realized and unrealized gains (losses)		0.89			(1.12	)		(1.92	)		2.17			0.38
Total from investment operations		1.34			(0.67	)		(1.50	)		2.59			0.83
Less distributions from:
Net investment income		(0.47	)		(0.44	)		(0.42	)		(0.43	)		(0.43	)
Net realized gains		(0.16	)		(0.08	)		(0.74	)		(0.47	)		(0.09	)
Total distributions		(0.63	)		(0.52	)		(1.16	)		(0.90	)		(0.52	)
Redemption feesc		—			—			—	d		—	d		—	d
Net asset value, end of year	$	11.50		$	10.79		$	11.98		$	14.64		$	12.95
Total return		12.89	%		(5.12	)%		(11.45	)%		20.43	%		6.88	%
Ratios to average net assets
Expenses		0.63	%		0.65	%e		0.59	%e		0.61	%e		0.61	%e
Net investment income		4.06	%		4.44	%		3.07	%		2.97	%		3.69	%
Supplemental data
Net assets, end of year (000’s)	$	222,788		$	124,454		$	58,817		$	86,823		$	103,041
Portfolio turnover rate		5.27	%		15.49	%		8.32	%		10.84	%		7.97	%

a	The 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 shares in relation to income earned and/or fluctuating market value of the investments of the Fund.
b	Based on average daily shares outstanding.
c	Effective September 1, 2008, the redemption fee was eliminated.
d	Amount rounds to less than $0.01 per share.
e	Benefit of expense reduction rounds to less than 0.01%.

108 |     The accompanying notes are an integral part of these financial statements.     |     Annual Report

Franklin Custodian Funds

Statement of Investments, September 30, 2010

Franklin Utilities Fund	Country	Shares		Value
Common Stocks 95.4%
Diversified Telecommunication Services 2.4%
AT&T Inc.	United States		1,200,000	$	34,320,000
Frontier Communications Corp.	United States		192,031		1,568,893
Verizon Communications Inc.	United States		800,000		26,072,000
					61,960,893
Electric Utilities 48.4%
Allegheny Energy Inc.	United States		1,100,000		26,972,000
American Electric Power Co. Inc.	United States		2,500,000		90,575,000
Cleco Corp.	United States		1,000,000		29,620,000
Duke Energy Corp.	United States		3,800,000		67,298,000
Edison International	United States		2,400,000		82,536,000
Entergy Corp.	United States		1,300,000		99,489,000
Exelon Corp.	United States		1,800,000		76,644,000
FirstEnergy Corp.	United States		1,700,000		65,518,000
Great Plains Energy Inc.	United States		1,400,000		26,460,000
Hawaiian Electric Industries Inc.	United States		600,000		13,524,000
NextEra Energy Inc.	United States		1,400,000		76,146,000
Northeast Utilities	United States		900,000		26,613,000
NV Energy Inc.	United States		5,600,000		73,640,000
Pinnacle West Capital Corp.	United States		1,200,000		49,524,000
PNM Resources Inc.	United States		3,300,000		37,587,000
Portland General Electric Co.	United States		1,100,000		22,308,000
PPL Corp.	United States		3,030,800		82,528,684
Progress Energy Inc.	United States		1,700,000		75,514,000
Scottish and Southern Energy PLC	United Kingdom		1,500,000		26,402,039
The Southern Co.	United States		3,200,000		119,168,000
UIL Holdings Corp.	United States		1,360,000		38,297,600
Westar Energy Inc.	United States		1,080,600		26,182,938
					1,232,547,261
Gas Utilities 0.6%
Questar Corp.	United States		800,000		14,024,000
Independent Power Producers & Energy Traders 2.3%
Constellation Energy Group	United States		1,800,000		58,032,000
Multi-Utilities 37.2%
Alliant Energy Corp.	United States		1,500,000		54,525,000
Ameren Corp.	United States		200,000		5,680,000
CenterPoint Energy Inc.	United States		3,800,000		59,736,000
CMS Energy Corp.	United States		1,400,000		25,228,000
Consolidated Edison Inc.	United States		1,100,000		53,042,000
Dominion Resources Inc.	United States		1,500,000		65,490,000
DTE Energy Co.	United States		500,000		22,965,000
GDF Suez	France		700,000		25,065,695
National Grid PLC	United Kingdom		6,982,857		59,313,975
NiSource Inc.	United States		1,800,000		31,320,000
PG&E Corp.	United States		2,100,000		95,382,000
Public Service Enterprise Group Inc.	United States		2,900,000		95,932,000
RWE AG	Germany		300,000		20,314,912
SCANA Corp.	United States		775,000		31,248,000
Sempra Energy	United States		2,300,000		123,740,000
TECO Energy Inc.	United States		1,000,000		17,320,000
United Utilities Group PLC	United Kingdom		2,960,189		26,679,706

Annual Report     | 109

Franklin Custodian Funds

Statement of Investments, September 30, 2010 (continued)

	Franklin Utilities Fund	Country	Shares		Value
	Common Stocks (continued)
	Multi-Utilities (continued)
	Vectren Corp.	United States		800,000	$	20,696,000
	Wisconsin Energy Corp.	United States		900,000		52,020,000
	Xcel Energy Inc.	United States		2,600,000		59,722,000
						945,420,288
	Oil, Gas & Consumable Fuels 2.9%
	Spectra Energy Corp.	United States		2,197,600		49,555,880
	The Williams Cos. Inc.	United States		1,300,000		24,843,000
						74,398,880
	Water Utilities 1.6%
	American Water Works Co. Inc.	United States		1,800,000		41,886,000
	Total Common Stocks (Cost $1,843,624,370)					2,428,269,322
			Principal Amount
	Corporate Bonds 3.2%
	Electric Utilities 1.6%
	MidAmerican Energy Holdings Co., senior note, 8.48%, 9/15/28	United States		25,000,000		33,203,375
	Northeast Generation Co., senior secured note, B-1, 8.812%, 10/15/26	United States		7,048,829		7,788,392
						40,991,767
	Independent Power Producers & Energy Traders 1.1%
	Energy Future Holdings Corp.,
	asecured senior note, 144A, 10.00%, 1/15/20	United States		24,225,000		24,167,877
	senior note, R, 6.55%, 11/15/34	United States		5,700,000		2,194,500
						26,362,377
	Multi-Utilities 0.5%
	Aquila Inc., senior note,
	7.95%, 2/01/11	United States		6,000,000		6,127,596
	8.27%, 11/15/21	United States		6,100,000		7,159,564
						13,287,160
	Total Corporate Bonds (Cost $77,776,007)					80,641,304
	Total Investments before Short Term Investments (Cost $1,921,400,377)					2,508,910,626
			Shares
	Short Term Investments (Cost $40,993,986) 1.6%
	Money Market Funds 1.6%
b,c	Institutional Fiduciary Trust Money Market Portfolio, 0.00%	United States		40,993,986		40,993,986
	Total Investments (Cost $1,962,394,363) 100.2%					2,549,904,612
	Other Assets, less Liabilities (0.2)%					(5,396,574	)
	Net Assets 100.0%				$	2,544,508,038

a	Security 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, 2010, the value of this security was $24,167,877, representing 0.95% of net assets.
b	Non-income producing.
c	See Note 7 regarding investments in the Institutional Fiduciary Trust Money Market Portfolio. The rate shown is the annualized seven-day yield at period end.

110 |     The accompanying notes are an integral part of these financial statements.     |     Annual Report

Franklin Custodian Funds

Financial Statements

Statements of Assets and Liabilities
September 30, 2010

	Franklin			Franklin			Franklin
	DynaTech Fund			Growth Fund			Income Fund
Assets:
Investments in securities:
Cost — Unaffiliated issuers	$	364,688,370		$	1,745,179,804		$	52,686,735,686
Cost — Non-controlled affiliated issuers (Note 10)		—			—			1,291,919,449
Cost — Sweep Money Fund (Note 7)		5,804,707			181,648,270			330,912,398
Cost — Repurchase agreements		—			31,822,988			490,186,154
Total cost of investments	$	370,493,077		$	1,958,651,062		$	54,799,753,687
Value — Unaffiliated issuers	$	687,142,088		$	3,405,567,604		$	52,475,237,681
Value — Non-controlled affiliated issuers (Note 10)		—			—			990,525,834
Value — Sweep Money Fund (Note 7)		5,804,707			181,648,270			330,912,398
Value — Repurchase agreements		—			31,822,988			490,186,154
Total value of investmentsa		692,946,795			3,619,038,862			54,286,862,067
Cash		525			111,181			13,632,118
Receivables:
Investment securities sold		—			5,798,839			102,153,529
Capital shares sold		677,864			31,504,660			152,145,641
Dividends and interest		365,176			3,951,039			671,137,811
Other assets		764			3,151			45,993
Total assets		693,991,124			3,660,407,732			55,225,977,159
Liabilities:
Payables:
Investment securities purchased		2,612,040			—			565,688,334
Capital shares redeemed		1,034,015			5,099,052			94,127,646
Affiliates		752,015			3,454,861			46,587,269
Allocator Funds (Note 11)		—			35,929			209,972
Unaffiliated transfer agent fees		120,420			533,723			5,983,222
Payable upon return of securities loaned		—			—			5,325,668
Accrued expenses and other liabilities		81,788			279,580			3,459,603
Total liabilities		4,600,278			9,403,145			721,381,714
Net assets, at value	$	689,390,846		$	3,651,004,587		$	54,504,595,445
Net assets consist of:
Paid-in capital	$	405,785,859		$	2,072,811,029		$	61,811,616,016
Undistributed net investment income (loss)		—			5,612,427			—
Distributions in excess of net investment income		—			—			(112,725,558	)
Net unrealized appreciation (depreciation)		322,467,882			1,660,386,659			(512,339,451	)
Accumulated net realized gain (loss)		(38,862,895	)		(87,805,528	)		(6,681,955,562	)
Net assets, at value	$	689,390,846		$	3,651,004,587		$	54,504,595,445

^a The Franklin Income Fund includes $5,031,128 of securities loaned.

Annual Report     |     The accompanying notes are an integral part of these financial statements.     | 111

Franklin Custodian Funds

Financial Statements (continued)

Statements of Assets and Liabilities (continued)
September 30, 2010

	Franklin		Franklin		Franklin
	DynaTech Fund		Growth Fund		Income Fund
Class A:
Net assets, at value	$	566,764,085	$	2,587,802,201	$	32,281,990,803
Shares outstanding		20,866,934		62,946,781		15,277,623,716
Net asset value per sharea	$	27.16	$	41.11	$	2.11
Maximum offering price per share (net asset value per share ÷ 94.25%, 94.25% and 95.75%, respectively)	$	28.82	$	43.62	$	2.20
Class B:
Net assets, at value	$	10,125,386	$	51,594,149	$	1,629,726,332
Shares outstanding		403,353		1,311,541		774,930,924
Net asset value and maximum offering price per sharea	$	25.10	$	39.34	$	2.10
Class B1:
Net assets, at value		—		—	$	23,550,921
Shares outstanding		—		—		11,123,528
Net asset value and maximum offering price per sharea		—		—	$	2.12
Class C:
Net assets, at value	$	93,926,515	$	349,188,086	$	15,605,054,970
Shares outstanding		3,786,546		8,971,595		7,324,846,474
Net asset value and maximum offering price per sharea	$	24.81	$	38.92	$	2.13
Class R:
Net assets, at value	$	7,034,342	$	117,484,015	$	370,563,846
Shares outstanding		260,365		2,869,430		177,545,954
Net asset value and maximum offering price per share	$	27.02	$	40.94	$	2.09
Advisor Class:
Net assets, at value	$	11,540,518	$	544,936,136	$	4,593,708,573
Shares outstanding		422,320		13,232,344		2,186,565,973
Net asset value and maximum offering price per share	$	27.33	$	41.18	$	2.10

^a Redemption price is equal to net asset value less contingent deferred sales charges, if applicable.

112 |     The accompanying notes are an integral part of these financial statements.     |     Annual Report

Franklin Custodian Funds

Financial Statements (continued)

Statements of Assets and Liabilities (continued)
September 30, 2010

	Franklin
	U.S. Government			Franklin
	Securities Fund			Utilities Fund
Assets:
Investments in securities:
Cost — Unaffiliated issuers	$	10,164,106,856		$	1,921,400,377
Cost — Sweep Money Fund (Note 7)		112,396,476			40,993,986
Total cost of investments	$	10,276,503,332		$	1,962,394,363
Value — Unaffiliated issuers	$	10,616,396,683		$	2,508,910,626
Value — Sweep Money Fund (Note 7)		112,396,476			40,993,986
Total value of investments		10,728,793,159			2,549,904,612
Receivables:
Capital shares sold		33,652,015			7,901,358
Dividends and interest		41,515,320			7,621,223
Other assets		8,499			2,188
Total assets		10,803,968,993			2,565,429,381
Liabilities:
Payables:
Investment securities purchased		44,611,014			13,901,790
Capital shares redeemed		32,305,091			4,471,838
Affiliates		9,016,096			2,035,342
Allocator Funds (Note 11)		41,646			10,058
Unaffiliated transfer agent fees		1,038,149			332,420
Accrued expenses and other liabilities		476,519			169,895
Total liabilities		87,488,515			20,921,343
Net assets, at value	$	10,716,480,478		$	2,544,508,038
Net assets consist of:
Paid-in capital	$	10,610,268,259		$	1,969,219,636
Undistributed net investment income		22,769,757			2,786,464
Net unrealized appreciation (depreciation)		452,289,827			587,523,981
Accumulated net realized gain (loss)		(368,847,365	)		(15,022,043	)
Net assets, at value	$	10,716,480,478		$	2,544,508,038

Annual Report     |     The accompanying notes are an integral part of these financial statements.     | 113

Franklin Custodian Funds

Financial Statements (continued)

Statements of Assets and Liabilities (continued)
September 30, 2010

	Franklin
	U.S. Government		Franklin
	Securities Fund		Utilities Fund
Class A:
Net assets, at value	$	6,771,471,155	$	1,823,971,732
Shares outstanding		993,976,948		159,442,916
Net asset value per sharea	$	6.81	$	11.44
Maximum offering price per share (net asset value per share ÷ 95.75%)	$	7.11	$	11.95
Class B:
Net assets, at value	$	126,802,595	$	50,439,368
Shares outstanding		18,640,926		4,408,979
Net asset value and maximum offering price per sharea	$	6.80	$	11.44
Class C:
Net assets, at value	$	2,484,846,921	$	405,023,717
Shares outstanding		366,918,168		35,527,064
Net asset value and maximum offering price per sharea	$	6.77	$	11.40
Class R:
Net assets, at value	$	140,146,848	$	42,285,227
Shares outstanding		20,589,522		3,706,422
Net asset value and maximum offering price per share	$	6.81	$	11.41
Advisor Class:
Net assets, at value	$	1,193,212,959	$	222,787,994
Shares outstanding		174,675,568		19,371,836
Net asset value and maximum offering price per share	$	6.83	$	11.50

^a Redemption price is equal to net asset value less contingent deferred sales charges, if applicable.

114 |     The accompanying notes are an integral part of these financial statements.     |     Annual Report

Franklin Custodian Funds

Financial Statements (continued)

Statements of Operations
for the year ended September 30, 2010

	Franklin			Franklin			Franklin
	DynaTech Fund			Growth Fund			Income Fund
Investment income:
Dividends:
Unaffiliated issuers	$	3,860,661		$	48,415,305		$	692,932,013
Non-controlled affiliated issuers (Note 10)		—			—			50,556,952
Interest:
Unaffiliated issuers		—			14,435			2,841,761,749
Non-controlled affiliated issuers (Note 10)		—			—			52,188,551
Income from securities loaned		—			—			1,303,497
Total investment income		3,860,661			48,429,740			3,638,742,762
Expenses:
Management fees (Note 3a)		3,175,313			15,026,525			196,626,526
Distribution fees: (Note 3c)
Class A		1,347,891			5,959,116			45,111,822
Class B		118,944			706,722			18,481,539
Class B1		—			—			221,952
Class C		897,352			3,338,340			93,323,299
Class R		32,840			428,982			1,732,148
Transfer agent fees (Note 3e)		1,610,275			6,705,190			45,401,588
Special servicing agreement fees (Note 11)		—			500,762			2,486,688
Custodian fees (Note 4)		18,824			51,703			1,000,634
Reports to shareholders		149,697			587,731			5,366,622
Registration and filing fees		88,845			159,690			1,212,503
Professional fees		63,942			103,311			535,264
Trustees’ fees and expenses		3,754			18,750			296,318
Other		14,872			65,928			1,403,136
Total expenses		7,522,549			33,652,750			413,200,039
Expense reductions (Note 4)		—			—			(346	)
Net expenses		—			—			413,199,693
Net investment income (loss)		(3,661,888	)		14,776,990			3,225,543,069
Realized and unrealized gains (losses):
Net realized gain (loss) from:
Investments:
Unaffiliated issuers		41,167,617			42,757,008			(917,339,548	)
Non-controlled affiliated issuers (Note 10)		—			—			(309,968,803	)
Written options		—			—			1,249,390
Foreign currency transactions		110,404			14,111			418,347
Net realized gain (loss)		41,278,021			42,771,119			(1,225,640,614	)
Net change in unrealized appreciation (depreciation) on:
Investments		64,024,955			355,329,494			4,660,344,611
Translation of other assets and liabilities denominated in foreign currencies		7,881			(1,512	)		704,061
Net change in unrealized appreciation (depreciation)		64,032,836			355,327,982			4,661,048,672
Net realized and unrealized gain (loss)		105,310,857			398,099,101			3,435,408,058
Net increase (decrease) in net assets resulting from operations	$	101,648,969		$	412,876,091		$	6,660,951,127

Annual Report     |     The accompanying notes are an integral part of these financial statements.     | 115

Franklin Custodian Funds

Financial Statements (continued)

Statements of Operations (continued)
for the year ended September 30, 2010

	Franklin
	U.S. Government		Franklin
	Securities Fund		Utilities Fund
Investment income:
Dividends	$	—	$	99,828,114
Interest		435,826,400		6,485,252
Total investment income		435,826,400		106,313,366
Expenses:
Management fees (Note 3a)		44,164,597		10,410,967
Distribution fees: (Note 3c)
Class A		8,987,735		2,487,659
Class B		1,149,041		373,463
Class C		12,916,634		2,270,093
Class R		685,783		195,135
Transfer agent fees (Note 3e)		10,856,833		3,150,924
Special servicing agreement fees (Note 11)		405,258		95,375
Custodian fees (Note 4)		145,273		52,631
Reports to shareholders		758,239		304,558
Registration and filing fees		503,906		127,175
Professional fees		149,709		60,561
Trustees’ fees and expenses		55,732		12,663
Other		751,270		28,155
Total expenses		81,530,010		19,569,359
Net investment income		354,296,390		86,744,007
Realized and unrealized gains (losses):
Net realized gain (loss) from:
Investments		43,597,077		(13,905,910	)
Foreign currency transactions		—		52,511
Net realized gain (loss)		43,597,077		(13,853,399	)
Net change in unrealized appreciation (depreciation) on:
Investments		151,179,514		195,596,660
Translation of other assets and liabilities denominated in foreign currencies		—		(11,344	)
Net change in unrealized appreciation (depreciation)		151,179,514		195,585,316
Net realized and unrealized gain (loss)		194,776,591		181,731,917
Net increase (decrease) in net assets resulting from operations	$	549,072,981	$	268,475,924

116 |     The accompanying notes are an integral part of these financial statements.     |     Annual Report

Franklin Custodian Funds

Financial Statements (continued)

Statements of Changes in Net Assets

	Franklin DynaTech Fund						Franklin Growth Fund
	Year Ended September 30,						Year Ended September 30,
	2010			2009			2010			2009
Increase (decrease) in net assets:
Operations:
Net investment income (loss)	$	(3,661,888	)	$	(2,203,451	)	$	14,776,990		$	19,035,425
Net realized gain (loss) from investments and foreign currency transactions		41,278,021			(59,040,251	)		42,771,119			18,944,348
Net change in unrealized appreciation (depreciation) on investments and translation of other assets and liabilities denominated in foreign currencies		64,032,836			117,993,942			355,327,982			50,707,596
Net increase (decrease) in net assets resulting from operations		101,648,969			56,750,240			412,876,091			88,687,369
Distributions to shareholders from:
Net investment income:
Class A		—			—			(16,704,632	)		(13,937,611	)
Class B		—			—			(59,099	)		—
Class C		—			—			(605,181	)		(158,739	)
Class R		—			—			(424,812	)		(93,243	)
Advisor Class		—			—			(4,186,666	)		(2,842,374	)
Net realized gains:
Class A		—			(23,817,251	)		—			—
Class B		—			(674,313	)		—			—
Class C		—			(3,500,844	)		—			—
Advisor Class		—			(211,314	)		—			—
Total distributions to shareholders		—			(28,203,722	)		(21,980,390	)		(17,031,967	)
Capital share transactions: (Note 2)
Class A		(20,813,805	)		95,693,757			137,271,042			423,439,580
Class B		(5,373,387	)		2,223,304			(45,199,219	)		64,703
Class C		(2,733,120	)		24,245,692			(4,673,037	)		55,014,386
Class R		(332,337	)		4,561,511			42,381,653			30,600,261
Advisor Class		1,852,034			5,097,576			57,480,773			151,094,118
Total capital share transactions		(27,400,615	)		131,821,840			187,261,212			660,213,048
Net increase (decrease) in net assets		74,248,354			160,368,358			578,156,913			731,868,450
Net assets:
Beginning of year		615,142,492			454,774,134			3,072,847,674			2,340,979,224
End of year	$	689,390,846		$	615,142,492		$	3,651,004,587		$	3,072,847,674
Undistributed net investment income included in net assets:
End of year	$	—		$	—		$	5,612,427		$	12,735,382

Annual Report     |     The accompanying notes are an integral part of these financial statements.     | 117

Franklin Custodian Funds

Financial Statements (continued)

Statements of Changes in Net Assets (continued)

							Franklin
	Franklin Income Fund						U.S. Government Securities Fund
	Year Ended September 30,						Year Ended September 30,
	2010			2009			2010			2009
Increase (decrease) in net assets:
Operations:
Net investment income	$	3,225,543,069		$	3,021,185,783		$	354,296,390		$	326,946,470
Net realized gain (loss) from investments, written options and foreign currency transactions		(1,225,640,614	)		(4,679,001,452	)		43,597,077			8,947,805
Net change in unrealized appreciation (depreciation) on investments and translation of other assets and liabilities denominated in foreign currencies		4,661,048,672			5,364,093,012			151,179,514			306,262,342
Net increase (decrease) in net assets resulting from operations		6,660,951,127			3,706,277,343			549,072,981			642,156,617
Distributions to shareholders from:
Net investment income:
Class A		(2,130,895,815	)		(2,122,519,292	)		(258,072,430	)		(266,824,581	)
Class B		(118,302,615	)		(162,039,544	)		(6,345,333	)		(10,979,232	)
Class B1		(2,367,258	)		(12,892,120	)		—			—
Class C		(935,146,104	)		(924,754,117	)		(67,975,758	)		(39,006,086	)
Class R		(23,521,043	)		(22,649,572	)		(4,950,161	)		(5,108,595	)
Advisor Class		(317,015,455	)		(322,719,140	)		(41,720,232	)		(32,473,805	)
Net realized gains:
Class A		—			(15,591,600	)		—			—
Class B		—			(1,384,690	)		—			—
Class B1		—			(124,160	)		—			—
Class C		—			(7,179,957	)		—			—
Class R		—			(166,198	)		—			—
Advisor Class		—			(2,449,031	)		—			—
Total distributions to shareholders		(3,527,248,290	)		(3,594,469,421	)		(379,063,914	)		(354,392,299	)
Capital share transactions: (Note 2)
Class A		2,663,148,549			729,974,966			382,989,796			707,313,300
Class B		(536,384,118	)		(324,408,642	)		(106,822,122	)		(64,174,344	)
Class B1		(47,563,018	)		(136,813,461	)		—			—
Class C		1,661,877,069			543,188,709			986,641,643			820,560,727
Class R		34,240,036			40,235,428			(628,625	)		29,529,703
Advisor Class		149,037,262			(24,803,405	)		310,809,591			227,056,372
Total capital share transactions		3,924,355,780			827,373,595			1,572,990,283			1,720,285,758
Net increase (decrease) in net assets		7,058,058,617			939,181,517			1,742,999,350			2,008,050,076
Net assets:
Beginning of year		47,446,536,828			46,507,355,311			8,973,481,128			6,965,431,052
End of year	$	54,504,595,445		$	47,446,536,828		$	10,716,480,478		$	8,973,481,128
Undistributed net investment income (distributions in excess of net investment income) included in net assets:
End of year	$	(112,725,558	)	$	(293,103,420	)	$	22,769,757		$	2,451,318

118 |     The accompanying notes are an integral part of these financial statements.     |     Annual Report

Franklin Custodian Funds

Financial Statements (continued)

Statements of Changes in Net Assets (continued)

	Franklin Utilities Fund
	Year Ended September 30,
	2010			2009
Increase (decrease) in net assets:
Operations:
Net investment income	$	86,744,007		$	79,810,590
Net realized gain (loss) from investments and foreign currency transactions		(13,853,399	)		28,009,600
Net change in unrealized appreciation (depreciation) on investments and translation of other assets and liabilities denominated in foreign currencies		195,585,316			(249,432,367	)
Net increase (decrease) in net assets resulting from operations		268,475,924			(141,612,177	)
Distributions to shareholders from:
Net investment income:
Class A		(68,149,865	)		(60,897,517	)
Class B		(2,057,071	)		(2,457,137	)
Class C		(12,635,206	)		(10,325,076	)
Class R		(1,462,964	)		(1,233,300	)
Advisor Class		(6,837,755	)		(2,775,441	)
Net realized gains:
Class A		(23,199,153	)		(11,143,330	)
Class B		(922,593	)		(556,682	)
Class C		(4,562,415	)		(2,138,465	)
Class R		(555,438	)		(236,227	)
Advisor Class		(1,930,079	)		(407,396	)
Total distributions to shareholders		(122,312,539	)		(92,170,571	)
Capital share transactions: (Note 2)
Class A		173,810,246			(47,298,609	)
Class B		(17,162,713	)		(18,007,546	)
Class C		81,972,824			(4,044,700	)
Class R		1,998,821			4,676,850
Advisor Class		87,695,496			71,734,045
Total capital share transactions		328,314,674			7,060,040
Net increase (decrease) in net assets		474,478,059			(226,722,708	)
Net assets:
Beginning of year		2,070,029,979			2,296,752,687
End of year	$	2,544,508,038		$	2,070,029,979
Undistributed net investment income included in net assets:
End of year	$	2,786,464		$	9,424,658

Annual Report     |     The accompanying notes are an integral part of these financial statements.     | 119

Franklin Custodian Funds

Notes to Financial Statements

1. Organization and Significant Accounting Policies

Franklin Custodian Funds (Trust) is registered under the Investment Company Act of 1940, as amended, (1940 Act) as an open-end investment company, consisting of five funds (Funds). The classes of shares offered within each of the Funds are indicated below. Each class of shares differs by its initial sales load, contingent deferred sales charges, distribution fees, voting rights on matters affecting a single class and its exchange privilege.

Class A, Class B, Class C, Class R	Class A, Class B, Class B1,
& Advisor Class	Class C, Class R & Advisor Class
Franklin DynaTech Fund	Franklin Income Fund
Franklin Growth Fund
Franklin U.S. Government Securities Fund
Franklin Utilities Fund

The following summarizes the Funds’ significant accounting policies.

a. Financial Instrument Valuation

The Funds value their investments in securities and other assets and liabilities carried at fair value daily. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants on the measurement date. Under procedures approved by the Funds’ Board of Trustees, the Funds may utilize independent pricing services, quotations from securities and financial instrument dealers, and other market sources to determine fair value.

Equity securities and derivative financial instruments listed on an exchange or on the NASDAQ National Market System are valued at the last quoted sale price or the official closing price of the day, respectively. Foreign equity securities are valued as of the close of trading on the foreign stock exchange on which the security is primarily traded, or the NYSE, whichever is earlier. The value is then converted into its U.S. dollar equivalent at the foreign exchange rate in effect at the close of the NYSE on the day that the value of the security is determined. Over-the-counter securities are valued within the range of the most recent quoted bid and ask prices. Securities that trade in multiple markets or on multiple exchanges are valued according to the broadest and most representative market. Certain equity securities are valued based upon fundamental characteristics or relationships to similar securities. Investments in open-end mutual funds and non-registered money market funds are valued at the closing net asset value.

Debt securities generally trade in the over-the-counter market rather than on a securities exchange. The Funds’ pricing services use multiple valuation techniques to determine fair value. In instances where sufficient market activity exists, the pricing services may utilize a market-based approach through which quotes from market makers are used to determine fair value. In instances where sufficient market activity may not exist or is limited, the pricing services also utilize proprietary valuation models which may consider market characteristics such as benchmark yield curves, option-adjusted spreads, credit spreads, estimated default rates, coupon rates, anticipated timing of

120 |     Annual Report

Franklin Custodian Funds

Notes to Financial Statements (continued)

1. Organization and Significant Accounting Policies (continued)

a. Financial Instrument Valuation (continued)

principal repayments, underlying collateral, and other unique security features in order to estimate the relevant cash flows, which are then discounted to calculate the fair value. Securities denominated in a foreign currency are converted into their U.S. dollar equivalent at the foreign exchange rate in effect at the close of the NYSE on the date that the values of the foreign debt securities are determined. Repurchase agreements are valued at cost, which approximates market value.

The Funds have procedures to determine the fair value of securities and other financial instruments for which market prices are not readily available or which may not be reliably priced. Under these procedures, the Funds primarily employ a market-based approach which may use related or comparable assets or liabilities, recent transactions, market multiples, book values, and other relevant information for the investment to determine the fair value of the investment. The Funds may also use an income-based valuation approach in which the anticipated future cash flows of the investment are discounted to calculate fair value. Discounts may also be applied due to the nature or duration of any restrictions on the disposition of the investments. Due to the inherent uncertainty of valuations of such investments, the fair values may differ significantly from the values that would have been used had an active market ex isted.

Trading in securities on foreign exchanges and over-the-counter markets may be completed before the daily close of business on the NYSE. Occasionally, events occur between the time at which trading in a foreign security is completed and the close of the NYSE that might call into question the reliability of the value of a portfolio security held by the fund. As a result, differences may arise between the value of the Funds’ portfolio securities as determined at the foreign market close and the latest indications of value at the close of the NYSE. In order to minimize the potential for these differences, the investment manager monitors price movements following the close of trading in foreign stock markets through a series of country specific market proxies (such as baskets of American Depository Receipts, futures contracts and exchange traded funds). These price movements are measured against established trigger thresholds for each specific market proxy to assist in determining if an event has occurred that may call into question the reliability of the values of the foreign securities held by the Funds. If such an event occurs, the securities may be valued using fair value procedures, which may include the use of independent pricing services.

b. Foreign Currency Translation

Portfolio securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollars based on the exchange rate of such currencies against U.S. dollars on the date of valuation. The Funds may enter into foreign currency exchange contracts to facilitate transactions denominated in a foreign currency. Purchases and sales of securities, income and expense items denominated in foreign currencies are translated into U.S. dollars at the exchange rate in

Annual Report      | 121

Franklin Custodian Funds

Notes to Financial Statements (continued)

1. Organization and Significant Accounting Policies (continued)

b. Foreign Currency Translation (continued)

effect on the transaction date. Portfolio securities and assets and liabilities denominated in foreign currencies contain risks that those currencies will decline in value relative to the U.S. dollar. Occasionally, events may impact the availability or reliability of foreign exchange rates used to convert the U.S. dollar equivalent value. If such an event occurs, the foreign exchange rate will be valued at fair value using procedures established and approved by the Trust’s Board of Trustees.

The Funds do not separately report the effect of changes in foreign exchange rates from changes in market prices on securities held. Such changes are included in the net realized and net unrealized gain or loss from investments on the Statement of Operations.

The effect of changes in foreign exchange rates from changes in market prices on securities held are included in net realized and unrealized gain or loss from investments on the Statement of Operations. Realized foreign exchange gains or losses arise from sales of foreign currencies, currency gains or losses realized between the trade and settlement dates on securities transactions and the difference between the recorded amounts of dividends, interest, and foreign withholding taxes and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign exchange gains and losses arise from changes in foreign exchange rates on foreign denominated assets and liabilities other than investments in securities held at the end of the reporting period.

c. Joint Repurchase Agreement

The Funds may enter into a joint repurchase agreement whereby their uninvested cash balance is deposited into a joint cash account with other funds managed by the investment manager or an affiliate of the investment manager and is used to invest in one or more repurchase agreements. The value and face amount of the joint repurchase agreement are allocated to the funds based on their pro-rata interest. A repurchase agreement is accounted for as a loan by the fund to the seller, collateralized by securities which are delivered to the fund’s custodian. The market value, including accrued interest, of the initial collateralization is required to be at least 102% of the dollar amount invested by the funds, with the value of the underlying securities marked to market daily to maintain coverage of at least 100%. The joint repurchase agreement held by the funds at year end had been entered into on September&nbs p;30, 2010.

d. Securities Purchased on a When-Issued, Delayed Delivery, and TBA Basis

The Funds may purchase securities on a when-issued, delayed delivery, and to-be-announced (TBA) basis, with payment and delivery scheduled for a future date. These transactions are subject to market fluctuations and are subject to the risk that the value at delivery may be more or less than the trade date purchase price. Although the Funds will generally purchase these securities with the intention of holding the securities, they may sell the securities before the settlement date. Sufficient assets have been segregated for these securities.

122 |      Annual Report

Franklin Custodian Funds

Notes to Financial Statements (continued)

1. Organization and Significant Accounting Policies (continued)

e. Derivative Financial Instruments

The Franklin Income Fund invests in derivative financial instruments (derivatives) in order to manage risk or gain exposure to various other investments or markets. Derivatives are financial contracts based on an underlying or notional amount, require no initial investment or an initial net investment that is smaller than would normally be required to have a similar response to changes in market factors, and require or permit net settlement. Derivatives may contain various risks including the potential inability of the counterparty to fulfill their obligations under the terms of the contract, the potential for an illiquid secondary market, and the potential for market movements which expose the fund to gains or losses in excess of the amounts shown on the Statement of Assets and Liabilities. Realized gain and loss and unrealized appreciation and depreciation on these contracts for the period are include d in the Statements of Operations.

The Franklin Income Fund purchases or writes option contracts primarily to manage and/or gain exposure to equity price risk. An option is a contract entitling the holder to purchase or sell a specific amount of shares or units of a particular security, currency or index, or notional amount of a swap (swaption), at a specified price. Options purchased are recorded as an asset while options written are recorded as a liability. Upon exercise of an option, the acquisition cost or sales proceeds of the security is adjusted by any premium paid or received. Upon expiration of an option, any premium paid or received is recorded as a realized loss or gain. Upon closing an option other than through expiration or exercise, the difference between the premium and the cost to close the position is recorded as a realized gain or loss.

See Note 9 regarding other derivative information.

f. Equity-Linked Securities

The Franklin Income Fund may invest in equity-linked securities. Equity-linked securities are hybrid financial instruments that generally combine both debt and equity characteristics into a single note form. Income received from equity linked securities is recorded as realized gains in the Statement of Operations and may be based on the performance of an underlying equity security, an equity index, or an option position. The risks of investing in equity-linked securities include unfavorable price movements in the underlying security and the credit risk of the issuing financial institution. There may be no guarantee of a return of principal with equity linked securities and the appreciation potential may be limited. Equity-linked securities may be more volatile and less liquid than other investments held by the Fund.

g. Securities Lending

The Franklin Income Fund participates in an agency based security lending program. The fund receives cash collateral against the loaned securities in an amount equal to at least 102% of the market value of the loaned securities. Collateral is maintained over the life of the loan in an

Annual Report      | 123

Franklin Custodian Funds

Notes to Financial Statements (continued)

1. Organization and Significant Accounting Policies (continued)

g. Securities Lending (continued)

amount not less than 100% of the market value of loaned securities, as determined at the close of fund business each day; any additional collateral required due to changes in security values is delivered to the fund on the next business day. The collateral is invested in a non-registered money fund and in a money market fund managed by the fund’s custodian on the fund’s behalf. The fund receives income from the investment of cash collateral, in addition to lending fees and rebates paid by the borrower. The fund bears the market risk with respect to the collateral investment, securities loaned, and the risk that the agent may default on its obligations to the fund. The securities lending agent has agreed to indemnify the fund in the event of default by a third party borrower.

h. Senior Floating Rate Interests

Senior secured corporate loans pay interest at rates which are periodically reset by reference to a base lending rate plus a spread. These base lending rates are generally the prime rate offered by a designated U.S. bank or the London InterBank Offered Rate (LIBOR). Senior secured corporate loans often require prepayment of principal from excess cash flows or at the discretion of the borrower. As a result, actual maturity may be substantially less than the stated maturity.

Senior secured corporate loans in which the fund invests are generally readily marketable, but may be subject to some restrictions on resale.

i. Income Taxes

It is each Fund’s policy to qualify as a regulated investment company under the Internal Revenue Code and to distribute to shareholders substantially all of its taxable income and net realized gains. As a result, no provision for U.S. federal income taxes is required. The Funds file U.S. income tax returns as well as tax returns in certain other jurisdictions. The Funds recognize in their financial statements the effects including penalties and interest, if any, of a tax position taken on tax return (or expected to be taken) when it’s more likely than not (a greater than 50% probability), based on the technical merits, that the tax position will be sustained upon examination by the tax authorities. As of September 30, 2010, and for all open tax years, the Funds have determined that no provision for income tax is required in the Funds’ financial statements. Open tax years are those that re main subject to examination and are based on each tax jurisdiction statute of limitation. The Funds are not aware of any tax position for which it is reasonably possible that the total amounts of unrecognized tax effects will significantly change in the next twelve months.

j. Security Transactions, Investment Income, Expenses and Distributions

Security transactions are accounted for on trade date. Realized gains and losses on security transactions are determined on a specific identification basis. Interest income and estimated expenses are accrued daily. Amortization of premium and accretion of discount on debt securities

124 |      Annual Report

Franklin Custodian Funds

Notes to Financial Statements (continued)

1. Organization and Significant Accounting Policies (continued)

j. Security Transactions, Investment Income, Expenses and Distributions (continued)

are included in interest income. Facility fees are recognized as income over the expected term of the loan. Dividend income is recorded on the ex-dividend date. Distributions to shareholders are recorded on the ex-dividend date and are determined according to income tax regulations (tax basis). Distributable earnings determined on a tax basis may differ from earnings recorded in accordance with accounting principles generally accepted in the United States of America. These differences may be permanent or temporary. Permanent differences are reclassified among capital accounts to reflect their tax character. These reclassifications have no impact on net assets or the results of operations. Temporary differences are not reclassified, as they may reverse in subsequent periods.

Common expenses incurred by the Trust are allocated among the Funds based on the ratio of net assets of each fund to the combined net assets of the Trust. Fund specific expenses are charged directly to the fund that incurred the expense.

Realized and unrealized gains and losses and net investment income, not including class specific expenses, are allocated daily to each class of shares based upon the relative proportion of net assets of each class. Differences in per share distributions, by class, are generally due to differences in class specific expenses.

k. Accounting Estimates

The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the amounts of income and expenses during the reporting period. Actual results could differ from those estimates.

l. Guarantees and Indemnifications

Under the Trust’s organizational documents, its officers and trustees are indemnified by the Trust against certain liabilities arising out of the performance of their duties to the Trust. Additionally, in the normal course of business, the Trust, on behalf of the Funds, enters into contracts with service providers that contain general indemnification clauses. The Trust’s maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Trust that have not yet occurred. Currently, the Trust expects the risk of loss to be remote.

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Notes to Financial Statements (continued)

2. Shares of Beneficial Interest

At September 30, 2010, there were an unlimited number of shares authorized (without par value). Transactions in the Funds’ shares were as follows:

	Franklin DynaTech Fund						Franklin Growth Fund
	Shares			Amount			Shares			Amount
Class A Shares:
Year ended September 30, 2010
Shares sold		3,861,404		$	97,617,815			15,008,884		$	592,373,612
Shares issued in reinvestment of distributions		—			—			402,846			15,404,808
Shares redeemed		(4,698,990	)		(118,431,620	)		(12,049,005	)		(470,507,378	)
Net increase (decrease)		(837,586	)	$	(20,813,805	)		3,362,725		$	137,271,042
Year ended September 30, 2009
Shares sold		2,782,002		$	53,411,677			12,015,889		$	359,509,553
Shares issued on reorganization (Note 12)		7,598,915			126,195,671			14,593,037			451,362,637
Shares issued in reinvestment of distributions		1,359,432			21,288,705			486,462			12,711,248
Shares redeemed		(5,668,339	)		(105,202,296	)		(13,479,108	)		(400,143,858	)
Net increase (decrease)		6,072,010		$	95,693,757			13,616,280		$	423,439,580
Class B Shares:
Year ended September 30, 2010
Shares sold		39,193		$	908,906			59,910		$	2,278,747
Shares issued in reinvestment of distributions		—			—			1,489			54,809
Shares redeemed		(269,319	)		(6,282,293	)		(1,262,819	)		(47,532,775	)
Net increase (decrease)		(230,126	)	$	(5,373,387	)		(1,201,420	)	$	(45,199,219	)
Year ended September 30, 2009
Shares sold		68,034		$	1,166,470			269,458		$	7,369,648
Shares issued on reorganization (Note 12)		471,140			7,329,289			897,036			26,650,945
Shares issued in reinvestment of distributions		39,296			576,475			—			—
Shares redeemed		(400,924	)		(6,848,930	)		(1,186,449	)		(33,955,890	)
Net increase (decrease)		177,546		$	2,223,304			(19,955	)	$	64,703
Class C Shares:
Year ended September 30, 2010
Shares sold		767,752		$	17,728,055			1,757,368		$	65,780,420
Shares issued in reinvestment of distributions		—			—			15,351			559,243
Shares redeemed		(890,252	)		(20,461,175	)		(1,912,255	)		(71,012,700	)
Net increase (decrease)		(122,500	)	$	(2,733,120	)		(139,536	)	$	(4,673,037	)
Year ended September 30, 2009
Shares sold		610,534		$	10,952,317			1,769,875		$	50,036,992
Shares issued on reorganization (Note 12)		1,986,027			30,539,237			2,280,868			67,125,954
Shares issued in reinvestment of distributions		219,790			3,186,956			5,806			144,797
Shares redeemed		(1,201,455	)		(20,432,818	)		(2,213,519	)		(62,293,357	)
Net increase (decrease)		1,614,896		$	24,245,692			1,843,030		$	55,014,386

126 |     Annual Report

Franklin Custodian Funds

Notes to Financial Statements (continued)

2. Shares of Beneficial Interest(continued)

	Franklin DynaTech Fund						Franklin Growth Fund
	Shares			Amount			Shares			Amount
Class R Shares:
Year ended September 30, 2010
Shares sold		84,648		$	2,108,343			1,596,152		$	62,395,159
Shares issued in reinvestment of distributions		—			—			10,831			413,311
Shares redeemed		(98,580	)		(2,440,680	)		(527,829	)		(20,426,817	)
Net increase (decrease)		(13,932	)	$	(332,337	)		1,079,154		$	42,381,653
Year ended September 30, 2009a
Shares sold		105,135		$	1,878,341			2,050,622		$	61,397,829
Shares issued on reorganization (Note 12)		269,510			4,473,861			308,381			9,519,723
Shares issued in reinvestment of distributions		—			—			3,545			92,515
Shares redeemed		(100,348	)		(1,790,691	)		(1,390,720	)		(40,409,806	)
Net increase (decrease)		274,297		$	4,561,511			971,828		$	30,600,261
Advisor Class Shares:
Year ended September 30, 2010
Shares sold		112,665		$	2,925,854			6,348,692		$	247,260,820
Shares issued in reinvestment of distributions		—			—			102,177			3,905,212
Shares redeemed		(42,936	)		(1,073,820	)		(5,016,397	)		(193,685,259	)
Net increase (decrease)		69,729		$	1,852,034			1,434,472		$	57,480,773
Year ended September 30, 2009
Shares sold		193,916		$	3,835,277			1,828,858		$	54,651,357
Shares issued on reorganization (Note 12)		99,151			1,649,870			4,691,275			145,148,039
Shares issued in reinvestment of distributions		13,467			211,295			102,244			2,668,575
Shares redeemed		(31,772	)		(598,866	)		(1,722,646	)		(51,373,853	)
Net increase (decrease)		274,762		$	5,097,576			4,899,731		$	151,094,118

^a For the period December 1, 2008 (effective date) to September 30, 2009, for the Franklin DynaTech Fund.

							Franklin U.S. Government
	Franklin Income Fund						Securities Fund
	Shares			Amount			Shares			Amount
Class A Shares:
Year ended September 30, 2010
Shares sold		3,122,047,774		$	6,401,965,279			255,107,116		$	1,722,046,431
Shares issued in reinvestment of distributions		795,698,609			1,618,086,910			28,399,723			191,100,894
Shares redeemed		(2,616,323,977	)		(5,356,903,640	)		(227,148,749	)		(1,530,157,529	)
Net increase (decrease)		1,301,422,406		$	2,663,148,549			56,358,090		$	382,989,796
Year ended September 30, 2009
Shares sold		3,194,615,875		$	5,446,582,263			327,684,616		$	2,154,557,471
Shares issued in reinvestment of distributions		929,761,078			1,563,293,948			28,818,237			189,352,370
Shares redeemed		(3,760,506,184	)		(6,279,901,245	)		(248,416,455	)		(1,636,596,541	)
Net increase (decrease)		363,870,769		$	729,974,966			108,086,398		$	707,313,300

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Franklin Custodian Funds

Notes to Financial Statements (continued)

2. Shares of Beneficial Interest(continued)

							Franklin U.S. Government
	Franklin Income Fund						Securities Fund
	Shares			Amount			Shares			Amount
Class B Shares:
Year ended September 30, 2010
Shares sold		13,878,110		$	28,322,228			1,842,598		$	12,415,351
Shares issued in reinvestment of distributions		40,513,875			81,924,023			742,529			4,985,042
Shares redeemed		(316,412,820	)		(646,630,369	)		(18,446,529	)		(124,222,515	)
Net increase (decrease)		(262,020,835	)	$	(536,384,118	)		(15,861,402	)	$	(106,822,122	)
Year ended September 30, 2009
Shares sold		34,580,449		$	58,074,216			8,056,168		$	52,523,598
Shares issued in reinvestment of distributions		63,807,057			106,531,528			1,218,659			7,988,052
Shares redeemed		(295,644,541	)		(489,014,386	)		(18,942,006	)		(124,685,994	)
Net increase (decrease)		(197,257,035	)	$	(324,408,642	)		(9,667,179	)	$	(64,174,344	)
Class B1 Shares:
Year ended September 30, 2010
Shares sold		223,452		$	458,088
Shares issued in reinvestment of distributions		659,909			1,334,988
Shares redeemed		(24,397,067	)		(49,356,094	)
Net increase (decrease)		(23,513,706	)		(47,563,018	)
Year ended September 30, 2009
Shares sold		616,259		$	1,006,991
Shares issued in reinvestment of distributions		4,478,768			7,437,357
Shares redeemed		(84,121,447	)		(145,257,809	)
Net increase (decrease)		(79,026,420	)		(136,813,461	)
Class C Shares:
Year ended September 30, 2010
Shares sold		1,596,716,655		$	3,301,950,026			212,527,927		$	1,426,604,550
Shares issued in reinvestment of distributions		320,155,286			656,144,553			7,931,210			53,125,111
Shares redeemed		(1,112,022,517	)		(2,296,217,510	)		(73,580,512	)		(493,088,018	)
Net increase (decrease)		804,849,424		$	1,661,877,069			146,878,625		$	986,641,643
Year ended September 30, 2009
Shares sold		1,490,228,499		$	2,568,269,575			177,348,206		$	1,163,765,108
Shares issued in reinvestment of distributions		372,417,014			631,594,234			4,298,963			28,151,041
Shares redeemed		(1,592,519,479	)		(2,656,675,100	)		(56,632,697	)		(371,355,422	)
Net increase (decrease)		270,126,034		$	543,188,709			125,014,472		$	820,560,727

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Franklin Custodian Funds

Notes to Financial Statements (continued)

2. Shares of Beneficial Interest (continued)

							Franklin U.S. Government
	Franklin Income Fund						Securities Fund
	Shares			Amount			Shares			Amount
Class R Shares:
Year ended September 30, 2010
Shares sold		55,322,582		$	111,791,528			10,173,157		$	68,640,631
Shares issued in reinvestment of distributions		10,944,621			21,995,589			713,551			4,797,215
Shares redeemed		(49,258,198	)		(99,547,081	)		(11,015,574	)		(74,066,471	)
Net increase (decrease)		17,009,005		$	34,240,036			(128,866	)	$	(628,625	)
Year ended September 30, 2009
Shares sold		68,996,085		$	115,848,208			13,507,302		$	88,919,423
Shares issued in reinvestment of distributions		12,725,193			21,140,911			758,236			4,977,846
Shares redeemed		(58,266,413	)		(96,753,691	)		(9,774,179	)		(64,367,566	)
Net increase (decrease)		23,454,865		$	40,235,428			4,491,359		$	29,529,703
Advisor Class Shares:
Year ended September 30, 2010
Shares sold		476,839,253		$	974,685,741			68,407,061		$	462,448,131
Shares issued in reinvestment of distributions		139,718,744			282,316,193			5,162,635			34,844,804
Shares redeemed		(546,851,471	)		(1,107,964,672	)		(27,638,036	)		(186,483,344	)
Net increase (decrease)		69,706,526		$	149,037,262			45,931,660		$	310,809,591
Year ended September 30, 2009
Shares sold		537,139,078		$	923,014,317			56,386,916		$	373,566,694
Shares issued in reinvestment of distributions		185,103,308			309,081,671			4,110,288			27,061,258
Shares redeemed		(772,328,637	)		(1,256,899,393	)		(26,340,863	)		(173,571,580	)
Net increase (decrease)		(50,086,251	)	$	(24,803,405	)		34,156,341		$	227,056,372

	Franklin Utilities Fund
	Shares			Amount
Class A Shares:
Year ended September 30, 2010
Shares sold		35,022,184		$	384,837,941
Shares issued in reinvestment of distributions		7,008,916			75,475,936
Shares redeemed		(26,258,647	)		(286,503,631	)
Net increase (decrease)		15,772,453		$	173,810,246
Year ended September 30, 2009
Shares sold		21,564,244		$	217,252,356
Shares issued in reinvestment of distributions		5,861,644			57,450,592
Shares redeemed		(32,180,738	)		(322,001,557	)
Net increase (decrease)		(4,754,850	)	$	(47,298,609	)

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Franklin Custodian Funds

Notes to Financial Statements (continued)

2. Shares of Beneficial Interest (continued)

	Franklin Utilities Fund
	Shares			Amount
Class B Shares:
Year ended September 30, 2010
Shares sold		353,630		$	3,843,661
Shares issued in reinvestment of distributions		177,266			1,910,217
Shares redeemed		(2,098,673	)		(22,916,591	)
Net increase (decrease)		(1,567,777	)	$	(17,162,713	)
Year ended September 30, 2009
Shares sold		320,985		$	3,200,510
Shares issued in reinvestment of distributions		184,409			1,806,989
Shares redeemed		(2,310,669	)		(23,015,045	)
Net increase (decrease)		(1,805,275	)	$	(18,007,546	)
Class C Shares:
Year ended September 30, 2010
Shares sold		12,669,924		$	138,793,399
Shares issued in reinvestment of distributions		998,302			10,724,815
Shares redeemed		(6,213,093	)		(67,545,390	)
Net increase (decrease)		7,455,133		$	81,972,824
Year ended September 30, 2009
Shares sold		6,347,474		$	64,084,256
Shares issued in reinvestment of distributions		738,883			7,227,247
Shares redeemed		(7,568,351	)		(75,356,203	)
Net increase (decrease)		(481,994	)	$	(4,044,700	)
Class R Shares:
Year ended September 30, 2010
Shares sold		1,198,667		$	13,083,869
Shares issued in reinvestment of distributions		185,276			1,990,558
Shares redeemed		(1,205,407	)		(13,075,606	)
Net increase (decrease)		178,536		$	1,998,821
Year ended September 30, 2009
Shares sold		1,545,267		$	15,712,097
Shares issued in reinvestment of distributions		147,603			1,446,259
Shares redeemed		(1,242,997	)		(12,481,506	)
Net increase (decrease)		449,873		$	4,676,850
Advisor Class Shares:
Year ended September 30, 2010
Shares sold		10,770,245		$	119,820,517
Shares issued in reinvestment of distributions		689,152			7,473,842
Shares redeemed		(3,617,556	)		(39,598,863	)
Net increase (decrease)		7,841,841		$	87,695,496
Year ended September 30, 2009
Shares sold		8,908,323		$	94,646,702
Shares issued in reinvestment of distributions		267,630			2,655,239
Shares redeemed		(2,556,521	)		(25,567,896	)
Net increase (decrease)		6,619,432		$	71,734,045

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Franklin Custodian Funds

Notes to Financial Statements (continued)

3. Transactions with Affiliates

Franklin Resources, Inc. is the holding company for various subsidiaries that together are referred to as Franklin Templeton Investments. 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 Investment Advisory Services, LLC (Investment Advisory)	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

a. Management Fees

Franklin Income Fund and the 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

The Franklin DynaTech Fund, the Franklin Growth Fund and the 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

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Franklin Custodian Funds

Notes to Financial Statements (continued)

3. Transactions with Affiliates (continued)

a. Management Fees (continued)

Under a subadvisory agreement, Investment Advisory, an affiliate of Advisers, provides subadvisory services to the Franklin Growth Fund. The subadvisory fee is paid by Advisers based on the average monthly net assets, and is not 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 average daily net assets, and is not an additional expense of the Funds.

c. Distribution Fees

The Trust’s Board of Trustees has adopted distribution plans for each share class, with the exception of Advisor Class shares, pursuant to Rule 12b-1 under the 1940 Act. Under the Funds’ Class A 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. Under the Class A reimbursement distribution plans, costs exceeding the maximum for the current plan year cannot be reimbursed in subsequent periods.

In addition, under the Funds’ Class B, B1, 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 maximum annual plan rates, based on the average daily net assets, for each class, are as follows:

										Franklin
	Franklin			Franklin			Franklin			U.S. Government			Franklin
	DynaTech			Growth			Income			Securities			Utilities
	Fund			Fund			Fund			Fund			Fund
Reimbursement Plans:
Class A		0.25	%		0.25	%		0.15	%		0.15	%		0.15	%
Compensation Plans:
Class B		1.00	%		1.00	%		1.00	%		0.65	%		0.65	%
Class B1		—			—			0.65	%		—			—
Class C		1.00	%		1.00	%		0.65	%		0.65	%		0.65	%
Class R		0.50	%		0.50	%		0.50	%		0.50	%		0.50	%

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Notes to Financial Statements (continued)

3. Transactions with Affiliates (continued)

d. Sales Charges/Underwriting Agreements

Distributors has advised the Funds of the following commission transactions related to the sales and redemptions of the Funds’ shares for the year:

	Franklin		Franklin		Franklin
	DynaTech		Growth		Income
	Fund		Fund		Fund
Sales charges retained net of commissions paid to unaffiliated broker/dealers	$	161,584	$	1,481,545	$	15,294,255
Contingent deferred sales charges retained	$	11,084	$	49,128	$	2,135,310

	Franklin U.S.
	Government		Franklin
	Securities		Utilities
	Fund		Fund
Sales charges retained net of commissions paid to unaffiliated broker/dealers	$	3,332,731	$	609,879
Contingent deferred sales charges retained	$	869,536	$	56,370

e. Transfer Agent Fees

For the year ended September 30, 2010, the Funds paid transfer agent fees as noted in the Statements of Operations of which the following amounts were retained by Investor Services:

	Franklin		Franklin		Franklin		Franklin		Franklin
	DynaTech		Growth		Income		U.S. Government		Utilities
	Fund		Fund		Fund		Securities Fund		Fund
Transfer agent fees	$	1,132,451	$	4,221,956	$	22,367,629	$	6,376,862	$	1,862,442

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, 2010, the custodian fees were reduced as noted in the Statements of Operations.

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Franklin Custodian Funds

Notes to Financial Statements (continued)

5. Income Taxes

For tax purposes, capital losses may be carried over to offset future capital gains, if any. At September 30, 2010, the capital loss carryforwards were as follows:

	Franklin								Franklin
	DynaTech			Franklin			Franklin		U.S. Government
	Fund			Growth Fund			Income Fund		Securities Fund
Capital loss carryforwards expiring in:
2011	$	—		$	—		$	—	$	33,556,845
2012		—			—			—		129,102,166
2013		—			—			—		74,283,298
2014		—			—			—		47,763,112
2015		—			—			—		28,034,940
2016		8,729,949			84,084,287			—		20,514,778
2017		29,338,979			—			589,874,490		18,668,917
2018		—			—			4,428,035,897		16,923,309
	$	38,068,928	a	$	84,084,287	b	$	5,017,910,387	$	368,847,365

a	Includes $34,098,719 from the merged Franklin Global Communications Fund, Franklin Global Health Care Fund and Franklin Technology Fund, which may be carried over to offset future capital gains, subject to certain limitations.
b	Includes $84,084,287 from the merged Franklin Capital Growth Fund, which may be carried over to offset future capital gains, subject to certain limitations.

During the year ended September 30, 2010, the Franklin DynaTech Fund and the Franklin Growth Fund utilized $16,325,833 and $36,137,689, respectively, of capital loss carryforwards.

On September 30, 2010, the Franklin DynaTech Fund and the Franklin U.S. Government Securities Fund had expired capital loss carryforwards of $1,173,700 and $11,768,551, respectively, which were reclassified to paid-in capital.

For tax purposes, realized capital losses occurring subsequent to October 31, may be deferred and treated as occurring on the first day of the following fiscal year. At September 30, 2010, the Franklin Income Fund and the Franklin Utilities Fund deferred realized capital losses of $1,454,309,585 and $12,850,632, respectively.

The tax character of distributions paid during the years ended September 30, 2010 and 2009, was as follows:

	Franklin DynaTech Fund				Franklin Growth Fund
	2010		2009		2010		2009
Distributions paid from:
Ordinary income	$	—	$	—	$	21,980,390	$	17,031,967
Long term capital gain		—		28,203,722		—		—
	$	—	$	28,203,722	$	21,980,390	$	17,031,967

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Notes to Financial Statements (continued)

5. Income Taxes (continued)

					Franklin
	Franklin				U.S. Government
	Income Fund				Securities Fund
	2010		2009		2010		2009
Distributions paid from — ordinary income	$	3,527,248,290	$	3,594,469,421	$	379,063,914	$	354,392,299

	Franklin Utilities Fund
	2010		2009
Distributions paid from:
Ordinary income	$	91,153,934	$	77,688,471
Long term capital gain		31,158,605		14,482,100
	$	122,312,539	$	92,170,571

At September 30, 2010, 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	$	371,287,044		$	1,967,622,302		$	55,125,126,443
Unrealized appreciation	$	325,646,832		$	1,717,401,392		$	5,420,716,961
Unrealized depreciation		(3,987,081	)		(65,984,832	)		(6,258,981,337	)
Net unrealized appreciation (depreciation)	$	321,659,751		$	1,651,416,560		$	(838,264,376	)
Distributable earnings — undistributed ordinary income		—		$	10,862,427		$	22,882,152

	Franklin
	U.S. Government
	Securities			Franklin
	Fund			Utilities Fund
Cost of investments	$	10,276,503,332		$	1,963,315,349
Unrealized appreciation	$	456,388,073		$	636,002,624
Unrealized depreciation		(4,098,246	)		(49,413,361	)
Net unrealized appreciation (depreciation)	$	452,289,827		$	586,589,263
Distributable earnings — undistributed ordinary income	$	22,769,777		$	1,536,045

Net investment income (loss) differs for financial statement and tax purposes primarily due to differing treatments of defaulted securities, foreign currency transactions, paydown losses, payments-in-kind, bond discounts and premiums, corporate actions and regulatory settlements.

Net realized gains (losses) differ for financial statement and tax purposes primarily due to differing treatments of defaulted securities, wash sales, foreign currency transactions, paydown losses, payments-in-kind, bond discounts and premiums, and corporate actions.

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Notes to Financial Statements (continued)

6. Investment Transactions

Purchases and sales (excluding short term securities) for the year ended September 30, 2010, were as follows:

	Franklin		Franklin		Franklin
	DynaTech Fund		Growth Fund		Income Fund
Purchases	$	202,165,615	$	139,912,261	$	26,917,363,212
Sales	$	235,343,797	$	159,186,308	$	23,306,640,917

	Franklin
	U.S. Government		Franklin
	Securities		Utilities
	Fund		Fund
Purchases	$	6,691,090,530	$	420,493,152
Sales	$	4,542,572,645	$	116,885,240

Transactions in options written during the year ended September 30, 2010, were as follows:

	Number of			Premiums
	Contracts			Received
Franklin Income Fund
Options outstanding at September 30, 2009		—		$	—
Options written		38,796			1,290,389
Options expired		(37,796	)		(1,249,390	)
Options exercised		—			—
Options closed		—			—
Options outstanding at September 30, 2010		1,000		$	40,999

7. Investments in Institutional Fiduciary Trust Money Market Portfolio

The Funds may invest in the Institutional Fiduciary Trust Money Market Portfolio (Sweep Money Fund), an open-end investment company managed by Advisers. Pursuant to a SEC exemptive order specific to the Funds’ investment in the Sweep Money Fund, management fees paid by the Funds are reduced on assets invested in the Sweep Money Fund, in an amount not to exceed the management and administrative fees paid by the Sweep Money Fund.

8. Credit Risk and Defaulted Securities

At September 30, 2010, the Franklin Income Fund had 54.5% of its portfolio invested in high yield, senior secured floating rate notes, or other securities rated below investment grade. 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.

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Notes to Financial Statements (continued)

8. Credit Risk and Defaulted Securities (continued)

The Franklin Income Fund held a defaulted security for which the income has been deemed uncollectible. At September 30, 2010, the value of this security was $174,675,000, representing 0.32% 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 security has been identified on the accompanying Statement of Investments.

9. Other Derivative Information

For the period ended September 30, 2010, the effect of derivative contracts on the Franklin Income Fund’s Statement of Operations was as follows:

				Change in		Average
				Unrealized		Amount
Derivative Contracts		Realized Gain		Appreciation		Outstanding
Not Accounted for as	Statement of Operations	(Loss) for		(Depreciation)		During the
Hedging Instruments	Locations	the Year		for the Year		the Yeara
Equity contracts	Net realized gain (loss) from written options	$	1,249,390	$	40,999	$	3,869

^a Represents the average number of option contracts or notional amount for other derivative contracts outstanding during the year.

See Note 1(e) regarding derivative financial instruments.

10. 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. Investments in “affiliated companies” for the Franklin Income Fund for the year ended September 30, 2010, were as shown below.

	Number of						Number of
	Shares/						Shares/							Realized
	Principal Held						Principal		Value					Capital
	at Beginning		Gross		Gross		Held at End		at End			Investment		Gain
Name of Issuer	of Year		Additions		Reductions		of Year		of Year			Income		(Loss)
Franklin Income Fund
Non-Controlled Affiliates
Ameren Corp.		12,100,000		—		9,100,000		3,000,000	$	—	a	$	12,169,850	$	(179,462,333	)
Ameren Corp., senior note, 8.875%, 5/15/14		58,200,000		—		58,200,000		—		—	a		638,704		7,173,310
Callon Petroleum Co.		—		4,181,258		—		4,181,258		20,697,227			—		—
Callon Petroleum Co., senior secured note, 13.00%, 9/15/16		—		83,625,000		8,625,000		75,000,000		75,656,250			11,449,750		(1,611,596	)
Canadian Oil Sands Trust		25,847,400		152,600		—		26,000,000		643,773,401			37,524,602		—
Colony Financial Inc.		1,250,000		—		—		1,250,000		23,100,000			862,500		—

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Notes to Financial Statements (continued)

10. Holdings of 5% Voting Securities of Portfolio Companies (continued)

		Number of						Number of
		Shares/						Shares/							Realized
		Principal Held						Principal		Value					Capital
		at Beginning		Gross		Gross		Held at End		at End			Investment		Gain
Name of Issuer		of Year		Additions		Reductions		of Year		of Year			Income		(Loss)
	Franklin Income Fund (continued)
	Non-Controlled Affiliates (continued)
b	Dex Media West LLC, Term Loan B, 7.00%, 10/24/14		—		7,771,319		1,377,606		6,393,713		5,574,078			294,818		411,745
	Dex One Corp.		—		10,242,757		—		10,242,757		125,781,056			—		—
	Dex One Corp., senior sub. note, PIK, 12.00%, 1/29/17		—		81,136,340		—		81,136,340		64,199,129			6,572,044		—
	iStar Financial Inc.		5,213,500		—		5,213,500		—		—	a		—		(131,827,123	)
	iStar Financial Inc., 8.625%, 6/01/13		169,100,000		20,900,000		—		190,000,000		—	a		15,429,037		—
	iStar Financial Inc., cvt., senior note, FRN, 1.033%, 10/01/12		250,000,000		—		10,000,000		240,000,000		—	a		2,134,754		(2,225,000	)
	iStar Financial Inc., senior secured note, 144A, 8.00%, 3/15/11		—		20,392,000		20,392,000		—		—	a		236,454		461,230
	iStar Financial Inc.,senior secured note, 10.00%, 6/15/14		54,850,000		92,923,000		37,773,000		110,000,000		—	a		13,783,475		(3,433,103	)
b	R.H. Donnelley Inc., Term Loan B, 9.00%, 10/24/14		—		42,659,116		5,453,101		37,206,015		31,744,693			1,649,515		544,067
	Total Affiliated Securities (1.82% of Net Assets)									$	990,525,834		$	102,745,503	$	(309,968,803	)

a	As of September 30, 2010, no longer an affiliate.
b	Company is a wholly owned subsidiary of Dex One Corp.

11. Special Servicing Agreement

The Funds, which are eligible underlying investments of one or more of the Franklin Templeton Fund Allocator Series Funds (Allocator Funds), entered into a Special Servicing Agreement (SSA) with the Allocator Funds and certain service providers of the Funds and the Allocator Funds. Under the SSA, the Funds may pay a portion of the Allocator Funds’ expenses (other than any asset allocation, administrative and distribution fees), to the extent such payments are less than the amount of the benefits realized or expected to be realized by the Funds (e.g., due to reduced costs associated with servicing accounts) from the investment in the funds by the Allocator Funds. The Allocator Funds are either managed by Advisers or administered by FT Services. For the year ended September 30, 2010, the funds were held by one or more of the Allocator Funds and the amount of expenses borne by the funds is noted in the Statements of Operations. At September 30, 2010, one or more of the Allocator Funds owned a percentage of the funds’ outstanding shares as follows:

		Franklin
Franklin	Franklin	U.S. Government	Franklin
Growth Fund	Income Fund	Securities Fund	Utilities Fund
7.85%	4.53%	3.90%	0.95%

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Notes to Financial Statements (continued)

12. Reorganization

On December 3, 2008, the Franklin DynaTech Fund acquired the net assets of the Franklin Global Communications Fund, the Franklin Global Health Care Fund, and the Franklin Technology Fund pursuant to a plan of reorganization approved by the Franklin Global Communications Fund’s, the Franklin Global Health Care Fund’s, and the Franklin Technology Fund’s shareholders. The reorganization was accomplished by a tax free exchange, and the net assets acquired and shares issued were as follows:

			Shares Issued		Unrealized
			by Franklin		Appreciation
Fund Name	Net Assets		DynaTech Fund		(Depreciation)
Franklin Global Communications Fund	$	47,740,803		2,914,752	$	(18,325,185	)
Franklin Global Health Care Fund		89,644,203		5,503,466		(8,804,887	)
Franklin Technology Fund		32,802,922		2,006,525		(10,136,675	)
Total	$	170,187,928		10,424,743	$	(37,266,747	)

The combined net assets of the Franklin DynaTech Fund immediately after the reorganization were $475,468,843.

On May 6, 2009, the Franklin Growth Fund acquired the net assets of the Franklin Capital Growth Fund pursuant to a plan of reorganization approved by the Franklin Capital Growth Fund’s shareholders. The reorganization was accomplished by a tax-free exchange of 22,770,597 shares of the Franklin Growth Fund for the net assets of the Franklin Capital Growth Fund which aggregate $699,807,298, including $(9,584,107) of unrealized appreciation (depreciation). The combined net assets of the Franklin Growth Fund immediately after the reorganization were $2,586,155,713.

13. Credit Facility

The Funds, together with other U.S. registered and foreign investment funds (collectively “Borrowers”), managed by Franklin Templeton Investments, are borrowers in a joint syndicated senior unsecured credit facility totaling $750 million (Global Credit Facility) which matures on January 21, 2011. 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 its relative share of the aggregate net assets of all of the Borrowers, including an annual commitment fee of 0.10% based upon the unused portion of the Global Credit Facility, which is reflected in other expenses on the Statements of Operations. During the year ended September 30, 2010, the Funds did not use the Global Credit Facility.

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Notes to Financial Statements (continued)

14. Regulatory and Litigation Matters

During the year ended September 30, 2010, the Franklin Growth Fund received $30,072 resulting from a settlement between the SEC and Advisers relating to market-timing activities, as previously reported in the fund’s financial statements during the years ended September 30, 2003 through September 30, 2008. This payment is included in capital shares transactions on the Statements of Changes in Net Assets.

15. 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’ investments and are summarized in the following fair value hierarchy:

• Level 1 — quoted prices in active markets for identical securities

• Level 2 — other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speed, credit risk, etc.)

• Level 3 — significant unobservable inputs (including the Funds’ own assumptions in determining the fair value of investments)

The inputs or methodology used for valuing securities are not an indication of the risk associated with investing in those securities.

For movements between the levels within the fair value hierarchy, the Funds have adopted a policy of recognizing the transfers as of the date of the underlying event which caused the movement.

The following is a summary of the inputs used as of September 30, 2010, in valuing the Funds’ assets and liabilities carried at fair value:

	Level 1		Level 2		Level 3		Total
Franklin DynaTech Fund
Assets:
Investments in Securities:
Equity Investmentsa	$	687,142,088	$	—	$	—	$	687,142,088
Short Term Investments		5,804,707		—		—		5,804,707
Total Investments in Securities	$	692,946,795	$	—	$	—	$	692,946,795
Franklin Growth Fund
Assets:
Investments in Securities:
Equity Investmentsa	$	3,405,567,604	$	—	$	—	$	3,405,567,604
Short Term Investments		181,648,270		31,822,988		—		213,471,258
Total Investments in Securities	$	3,587,215,874	$	31,822,988	$	—	$	3,619,038,862

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Notes to Financial Statements (continued)

15. Fair Value Measurements (continued)

	Level 1		Level 2		Level 3		Total
Franklin Income Fund
Assets:
Investments in Securities:
Equity Investments:b
Consumer Discretionary	$	644,356,841	$	97,165,390	$	—	$	741,522,231
Energy		2,112,064,317		164,739,200		—		2,276,803,517
Financials		3,247,594,227		309,583,990		—		3,557,178,217
Health Care		2,408,918,492		213,750,000		—		2,622,668,492
Industrials		121,875,000		1,600,000		—		123,475,000
Other Equity Investmentsa		8,686,980,426		—		—		8,686,980,426
Equity-Linked Securities		—		2,470,715,621		—		2,470,715,621
Convertible Bonds		—		334,521,810		—		334,521,810
Corporate Bonds		—		28,124,431,151		94,587,070		28,219,018,221
Senior Floating Rate Interests		—		3,157,331,490		—		3,157,331,490
Municipal Bonds		—		193,158,000		—		193,158,000
Mutual Funds		643,773,401		—		—		643,773,401
Short Term Investments		335,786,398		923,929,243		—		1,259,715,641
Total Investments in Securities	$	18,201,349,102	$	35,990,925,895	$	94,587,070	$	54,286,862,067
Franklin U.S. GovernmentSecurities Fund
Assets:
Investments in Securities:
Mortgage-Backed Securities	$	—	$	10,616,396,683	$	—	$	10,616,396,683
Short Term Investments		112,396,476		—		—		112,396,476
Total Investments in Securities	$	112,396,476	$	10,616,396,683	$	—	$	10,728,793,159
Franklin Utilities Fund
Assets:
Investments in Securities:
Equity Investmentsa	$	2,428,269,322	$	—	$	—	$	2,428,269,322
Corporate Bonds		—		80,641,304		—		80,641,304
Short Term Investments		40,993,986		—		—		40,993,986
Total Investments in Securities	$	2,469,263,308	$	80,641,304	$	—	$	2,549,904,612

a	For detailed industry descriptions, see the accompanying Statements of Investments.
b	Includes common, preferred and convertible preferred stock as well as other equity investments.

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Franklin Custodian Funds

Notes to Financial Statements (continued)

15. Fair Value Measurements (continued)

At September 30, 2010, the reconciliation of assets in which significant unobservable inputs (Level 3) were used in determining the Funds’ fair value, were as follows:

Net Change

Net Change

in Unrealized

in

Appreciation

Balance at

Net

Unrealized

Net

Transfer

Balance

(Depreciation)

Beginning

Realized

Appreciation

Purchases

In (Out) of

at End

on Assets Held

of Year

Gain (Loss)

(Depreciation)

(Sales)

Level 3

of Year

at Year End

Franklin Income Fund

Assets

Corporate Bonds

$

—

$

—

$

2,337,070

$

92,250,000

$

—

$

94,587,070

$

2,337,070

16. 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.

ABBREVIATIONS
Currency
EUR	—     Euro
GBP	—     British Pound
Selected Portfolio
ADR	—     American Depository Receipt
FHLB	—  Federal Home Loan Bank
FNMA	—     Federal National Mortgage Association
FRN	—     Floating Rate Note
GO	—     General Obligation
GP	—     Graduated Payment
L/C	—     Letter of Credit
MTN	—     Medium Term Note
PIK	—     Payment-In-Kind
SF	—     Single Family

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Report of Independent Registered Public Accounting Firm

To the Board of Trustees and Shareholders of Franklin Custodian Funds

In our opinion, the accompanying statements of assets and liabilities, including the statements of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of the Franklin DynaTech Fund, Franklin Growth Fund, Franklin Income Fund, Franklin U.S. Government Securities Fund and Franklin Utilities Fund, separate portfolios of Franklin Custodian Funds, (hereafter referred to as the “Funds”) at September 30, 2010, 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 then ended and the financial highlights for each of the periods presented, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafte r referred to as “financial statements”) are the responsibility of the Funds’ management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at September 30, 2010 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.

PricewaterhouseCoopers LLP

San Francisco, California
November 16, 2010

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Franklin Custodian Funds

Tax Designation (unaudited)

Under Section 852(b)(3)(C) of the Internal Revenue Code (Code), the Funds designate the maximum amount allowable but no less than the following amounts as long term capital gain dividends for the fiscal year ended September 30, 2010:

Franklin

Utilities Fund

$31,158,605

Under Section 854(b)(2) of the Code, the Funds designate the following percentage amounts of the ordinary income dividends as income qualifying for the dividends received deduction for the fiscal year ended September 30, 2010:

Franklin	Franklin	Franklin
Growth Fund	Income Fund	Utilities Fund
100%	17.56%	100%

Under Section 854(b)(2) of the Code, the Funds designate 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 Code for the fiscal year ended September 30, 2010:

Franklin	Franklin	Franklin	Franklin
DynaTech Fund	Growth Fund	Income Fund	Utilities Fund
$3,891,060	$48,125,611	$666,952,003	$100,252,215

Distributions, including qualified dividend income, paid during calendar year 2010 will be reported to shareholders on Form 1099-DIV in January 2011. 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 Code, the Funds designate 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 Code for the fiscal year ended September 30, 2010:

		Franklin
Franklin	Franklin	U.S. Government	Franklin
Growth Fund	Income Fund	Securities Fund	Utilities Fund
$5,426	$2,428,161,743	$398,328,315	$5,389,717

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Board Members and Officers

The name, year of birth and address of the officers and board members, as well as their affiliations, positions held with the Fund, principal occupations during the past five years and number of portfolios overseen in the Franklin Templeton Investments fund complex are shown below. Generally, each board member serves until that person’s successor is elected and qualified.

Independent Board Members

			Number of Portfolios in
Name, Year of Birth		Length of	Fund Complex Overseen
and Address	Position	Time Served	by Board Member*	Other Directorships Held
Harris J. Ashton (1932)	Trustee	Since 1976	129	Bar-S Foods (meat packing company) (1981-2010).
One Franklin Parkway
San Mateo, CA 94403-1906
Principal Occupation During Past 5 Years:
Director of various companies; and formerly, Director, RBC Holdings, Inc. (bank holding company) (until 2002); and President, Chief Executive Officer and Chairman of the Board, General Host Corporation (nursery and craft centers) (until 1998).
Sam Ginn (1937) One Franklin Parkway San Mateo, CA 94403-1906	Trustee	Since 2007	106	ICO Global Communications (Holdings) Limited (satellite company).
Principal Occupation During Past 5 Years:
Private investor; and formerly, Chairman of the Board, Vodafone AirTouch, PLC (wireless company); Chairman of the Board and Chief Executive Officer, AirTouch Communications (cellular communications) (1993-1998) and Pacific Telesis Group (telephone holding company) (1988-1994).
Edith E. Holiday (1952) One Franklin Parkway San Mateo, CA 94403-1906	Trustee	Since 1998	129	Hess Corporation (exploration and refining of oil and gas), H.J. Heinz Company (processed foods and allied products), RTI International Metals, Inc. (manufacture and distribution of titanium), Canadian National Railway (railroad) and White Mountains Insurance Group, Ltd. (holding company).
Principal Occupation During Past 5 Years:
Director or Trustee of various companies and trusts; and formerly, Assistant to the President of the United States and Secretary of the Cabinet (1990-1993); General Counsel to the United States Treasury Department (1989-1990); and Counselor to the Secretary and Assistant Secretary for Public Affairs and Public Liaison-United States Treasury Department (1988-1989).
J. Michael Luttig (1954) One Franklin Parkway San Mateo, CA 94403-1906	Trustee	Since December 2009	129	Boeing Capital Corporation (aircraft financing).
Principal Occupation During Past 5 Years:
Executive Vice President, General Counsel and member of Executive Council, The Boeing Company; and formerly, Federal Appeals Court Judge, U.S. Court of Appeals for the Fourth Circuit (1991-2006).

Annual Report     | 145

			Number of Portfolios in
Name, Year of Birth		Length of	Fund Complex Overseen
and Address	Position	Time Served	by Board Member*	Other Directorships Held
Frank A. Olson (1932) One Franklin Parkway	Trustee	Since 2005	129	Hess Corporation (exploration and refining of oil and gas).
San Mateo, CA 94403-1906
Principal Occupation During Past 5 Years:
Chairman Emeritus, The Hertz Corporation (car rental) (since 2000) (Chairman of the Board (1980-2000) and Chief Executive Officer (1977-1999)); and formerly, Chairman of the Board, President and Chief Executive Officer, UAL Corporation (airlines).
Larry D. Thompson (1945) One Franklin Parkway San Mateo, CA 94403-1906	Trustee	Since 2007	137	Cbeyond, Inc. (business communications provider) and The Southern Company (energy company).
Principal Occupation During Past 5 Years:
Senior Vice President — Government Affairs, General Counsel and Secretary, PepsiCo, Inc. (consumer products); and formerly, Director, Delta Airlines (aviation) (2003-2005) and Providian Financial Corp. (credit card provider) (1997-2001); 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).
John B. Wilson (1959) One Franklin Parkway San Mateo, CA 94403-1906	Lead Independent Trustee	Trustee since 2007 and Lead Independent Trustee since 2008	106	None
Principal Occupation During Past 5 Years:
President and Founder, Hyannis Port Capital, Inc. (real estate and private equity investing); serves on private and non-profit boards; and formerly, Chief Operating Officer and Executive Vice President, Gap, Inc. (retail) (1996-2000); Chief Financial Officer and Executive Vice President — Finance and Strategy, Staples, Inc. (office supplies) (1992-1996); Senior Vice President — Corporate Planning, Northwest Airlines, Inc. (airlines) (1990-1992); and Vice President and Partner, Bain & Company (consulting firm) (1986-1990).
Interested Board Members and Officers
			Number of Portfolios in
Name, Year of Birth		Length of	Fund Complex Overseen
and Address	Position	Time Served	by Board Member*	Other Directorships Held
**Charles B. Johnson (1933) One Franklin Parkway San Mateo, CA 94403-1906	Trustee and Chairman of the Board	Trustee since 1969 and Chairman of the Board since 2007	129	None
Principal Occupation During Past 5 Years:
Chairman of the Board, Member — Office of the Chairman and Director, Franklin Resources, 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 41 of the investment companies in Franklin Templeton Investments.

146 |     Annual Report

			Number of Portfolios in
Name, Year of Birth		Length of	Fund Complex Overseen
and Address	Position	Time Served	by Board Member*	Other Directorships Held
**Rupert H. Johnson, Jr. (1940) One Franklin Parkway San Mateo, CA 94403-1906	Trustee and Vice President	Trustee since 1983 and Vice President since 1982	51	None
Principal Occupation During Past 5 Years:
Vice Chairman, Member — Office of the Chairman and Director, Franklin Resources, Inc.; Director, Franklin Advisers, Inc.; Senior Vice President, Franklin Advisory Services, LLC; and officer and/or director or trustee, as the case may be, of some of the other subsidiaries of Franklin Resources, Inc. and of 25 of the investment companies in Franklin Templeton Investments.
James M. Davis (1952) One Franklin Parkway San Mateo, CA 94403-1906	Chief Compliance Officer and Vice President — AML Compliance	Chief Compliance Officer since 2004 and Vice President — AML Compliance since 2006	Not Applicable	Not Applicable
Principal Occupation During Past 5 Years:
Director, Global Compliance, Franklin Resources, Inc.; officer of some of the other subsidiaries of Franklin Resources, Inc. and of 45 of the investment companies in Franklin Templeton Investments; and formerly, Director of Compliance, Franklin Resources, Inc. (1994-2001).
Laura F. Fergerson (1962) One Franklin Parkway San Mateo, CA 94403-1906	Chief Executive Officer — Finance and Administration	Since 2009	Not Applicable	Not Applicable
Principal Occupation During Past 5 Years:
Vice President, Franklin Templeton Services, LLC; officer of 45 of the investment companies in Franklin Templeton Investments; and formerly, Director and member of Audit and Valuation Committees, Runkel Funds, Inc. (2003-2004); Assistant Treasurer of most of the investment companies in Franklin Templeton Investments (1997-2003); and Vice President, Franklin Templeton Services, LLC (1997-2003).
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 Past 5 Years:
Director, Fund Accounting, Franklin Templeton Investments; and officer of 27 of the investment companies in Franklin Templeton Investments.
Aliya S. Gordon (1973) One Franklin Parkway San Mateo, CA 94403-1906	Vice President	Since 2009	Not Applicable	Not Applicable
Principal Occupation During Past 5 Years:
Associate General Counsel, Franklin Templeton Investments; officer of 45 of the investment companies in Franklin Templeton Investments; and formerly, Litigation Associate, Steefel, Levitt & Weiss, LLP (2000-2004).

Annual Report     | 147

			Number of Portfolios in
Name, Year of Birth		Length of	Fund Complex Overseen
and Address	Position	Time Served	by Board Member*	Other Directorships Held
David P. Goss (1947) One Franklin Parkway San Mateo, CA 94403-1906	Vice President	Since 2000	Not Applicable	Not Applicable
Principal Occupation During Past 5 Years:
Senior Associate General Counsel, Franklin Templeton Investments; and officer and/or director, as the case may be, of some of the other subsidiaries of Franklin Resources, Inc. and of 45 of the investment companies in Franklin Templeton Investments.
Steven J. Gray (1955) One Franklin Parkway San Mateo, CA 94403-1906	Vice President	Since 2009	Not Applicable	Not Applicable
Principal Occupation During Past 5 Years:
Senior Associate General Counsel, Franklin Templeton Investments; Vice President, Franklin Templeton Distributors, Inc.; and officer of 45 of the investment companies in Franklin Templeton Investments.
Edward B. Jamieson (1948) One Franklin Parkway San Mateo, CA 94403-1906	President and Chief Executive Officer — Investment Management	Since April 2010	Not Applicable	Not Applicable
Principal Occupation During Past 5 Years:
President, Chief Investment Officer and Director, Franklin Advisers, Inc.; Executive Vice President, Franklin Templeton Institutional, LLC; and officer and/or trustee, as the case may be, of some of the other subsidiaries of Franklin Resources, Inc. and of 10 of the investment companies in Franklin Templeton Investments.
Robert C. Rosselot (1960) 500 East Broward Blvd. Suite 2100 Fort Lauderdale, FL 33394-3091	Vice President	Since 2009	Not Applicable	Not Applicable
Principal Occupation During Past 5 Years:
Senior Associate General Counsel, Franklin Templeton Investments; Assistant Secretary, Franklin Resources, Inc.; Vice President and Secretary, Templeton Investment Counsel, LLC; Vice President, Secretary and Trust Officer, Fiduciary Trust International of the South; and officer of 45 of the investment companies in Franklin Templeton Investments.
Karen L. Skidmore (1952) One Franklin Parkway San Mateo, CA 94403-1906	Vice President and Secretary	Since 2006	Not Applicable	Not Applicable
Principal Occupation During Past 5 Years:
Senior Associate General Counsel, Franklin Templeton Investments; and officer of 45 of the investment companies in Franklin Templeton Investments.

148 |     Annual Report

			Number of Portfolios in
Name, Year of Birth		Length of	Fund Complex Overseen
and Address	Position	Time Served	by Board Member*	Other Directorships Held
Craig S. Tyle (1960) One Franklin Parkway San Mateo, CA 94403-1906	Vice President	Since 2005	Not Applicable	Not Applicable
Principal Occupation During Past 5 Years:
General Counsel and Executive Vice President, Franklin Resources, Inc.; officer of some of the other subsidiaries of Franklin Resources, Inc. and of 45 of the investment companies in Franklin Templeton Investments; and formerly, Partner, Shearman & Sterling, LLP (2004-2005); and General Counsel, Investment Company Institute (ICI) (1997-2004).

*	We base the number of portfolios on each separate series of the U.S. registered investment companies within the Franklin Templeton Investments fund complex. These portfolios have a common investment manager or affiliated investment managers.
**	Charles B. Johnson and Rupert H. Johnson, Jr. are considered to be interested persons of the Fund under the federal securities laws due to their positions as officers and directors and major shareholders of Franklin Resources, Inc., which is the parent company of the Fund’s investment manager and distributor.
Note 1:	Charles B. Johnson and Rupert H. Johnson, Jr. are brothers.
Note 2:	Officer information is current as of the date of this report. It is possible that after this date, information about officers may change.
Note 3:	Prior to September 30, 2010, Robert F. Carlson and Frank W.T. LaHaye each ceased to be a trustee of the Trust.

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 John B. Wilson as its audit committee financial expert. The Board believes that Mr. Wilson qualifies as such an expert in view of his extensive business background and experience, including service as chief financial officer of Staples, Inc. from 1992 to 1996. Mr. Wilson has been a Member and Chairman of the Fund’s Audit Committee since 2007. As a result of such background and experience, the Board believes that Mr. Wilson 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. Mr. Wilson 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/(800) 342-5236 to request the SAI.

Annual Report     | 149

Franklin Custodian Funds

Shareholder Information

Proxy Voting Policies and Procedures

The Trust’s investment manager has established Proxy Voting Policies and Procedures (Policies) that the Trust uses to determine how to vote proxies relating to portfolio securities. Shareholders may view the Trust’s complete Policies online at franklintempleton.com. Alternatively, shareholders may request copies of the Policies free of charge by calling the Proxy Group collect at (954) 527-7678 or by sending a written request to: Franklin Templeton Companies, LLC, 500 East Broward Boulevard, Suite 1500, Fort Lauderdale, FL 33394, Attention: Proxy Group. Copies of the Trust’s proxy voting records are also made available online at franklintempleton.com and posted on the U.S. Securities and Exchange Commission’s website at sec.gov and reflect the most recent 12-month period ended June 30.

Quarterly Statement of Investments

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

Householding of Reports and Prospectuses

You will receive each Fund’s financial reports every six months as well as an annual updated summary prospectus (prospectus available upon request). To reduce Fund expenses, we try to identify related shareholders in a household and send only one copy of the financial reports and summary prospectus. This process, called “householding,” will continue indefinitely unless you instruct us otherwise. If you prefer not to have these documents householded, please call us at (800) 632-2301. At any time you may view current prospectuses/summary prospectuses and financial reports on our website. If you choose, you may receive these documents through electronic delivery.

150 |     Annual Report

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Franklin Templeton Funds

Literature Request. To receive a summary prospectus and/or prospectus, please call us at (800) DIAL BEN/(800) 342-5236 or visit franklintempleton.com. Investors should carefully consider a fund’s investment goals, risks, charges and expenses before investing. The prospectus contains this and other information. Please carefully read a prospectus before investing. To ensure the highest quality of service, we may monitor, record and access telephone calls to or from our service departments. These calls can be identified by the presence of a regular beeping tone.

VALUE

Franklin All Cap Value Fund
Franklin Balance Sheet Investment Fund
Franklin Large Cap Value Fund
Franklin MicroCap Value Fund¹
Franklin MidCap Value Fund
Franklin Small Cap Value Fund
Mutual Beacon Fund
Mutual Quest Fund
Mutual Recovery Fund²
Mutual Shares Fund

BLEND

Franklin Focused Core Equity Fund
Franklin Large Cap Equity Fund
Franklin Rising Dividends Fund

GROWTH

Franklin DynaTech Fund
Franklin Flex Cap Growth Fund
Franklin Growth Fund
Franklin Growth Opportunities Fund
Franklin Small Cap Growth Fund
Franklin Small-Mid Cap Growth Fund

SECTOR

Franklin Biotechnology Discovery Fund
Franklin Global Real Estate Fund
Franklin Gold & Precious Metals Fund
Franklin Natural Resources Fund
Franklin Real Estate Securities Fund
Franklin Utilities Fund
Mutual Financial Services Fund

GLOBAL

Mutual Global Discovery Fund
Templeton Global Opportunities Trust
Templeton Global Smaller Companies Fund
Templeton Growth Fund
Templeton World Fund

INTERNATIONAL

Franklin India Growth Fund
Franklin International Growth Fund
Franklin International Small Cap Growth Fund
Mutual European Fund
Mutual International Fund
Templeton BRIC Fund
Templeton China World Fund
Templeton Developing Markets Trust
Templeton Emerging Markets Small Cap Fund
Templeton Foreign Fund
Templeton Foreign Smaller Companies Fund
Templeton Frontier Markets Fund

HYBRID

Franklin Balanced Fund
Franklin Convertible Securities Fund
Franklin Equity Income Fund
Franklin Income Fund
Templeton Income Fund

ASSET ALLOCATION

Franklin Templeton Corefolio^®Allocation Fund
Franklin Templeton Founding Funds Allocation Fund
Franklin Templeton Conservative Allocation Fund³
Franklin Templeton Growth Allocation Fund³
Franklin Templeton Moderate Allocation Fund³
Franklin Templeton 2015 Retirement Target Fund
Franklin Templeton 2025 Retirement Target Fund
Franklin Templeton 2035 Retirement Target Fund
Franklin Templeton 2045 Retirement Target Fund

FIXED INCOME

Franklin Adjustable U.S. Government Securities Fund⁴
Franklin Floating Rate Daily Access Fund
Franklin High Income Fund
Franklin Limited Maturity U.S. Government Securities Fund⁴

Franklin Low Duration Total Return Fund
Franklin Real Return Fund
Franklin Strategic Income Fund
Franklin Strategic Mortgage Portfolio
Franklin Templeton Hard Currency Fund
Franklin Total Return Fund
Franklin U.S. Government Securities Fund⁴
Templeton Global Bond Fund
Templeton Global Total Return Fund
Templeton International Bond Fund

TAX-FREE INCOME⁵

National

Double Tax-Free Income Fund
Federal Tax-Free Income Fund High
Yield Tax-Free Income Fund
Insured Tax-Free Income
Fund⁶

Limited-/Intermediate-Term

California Intermediate-Term Tax-Free Income Fund
Federal Intermediate-Term Tax-Free Income Fund
Federal Limited-Term Tax-Free Income Fund
New York Intermediate-Term Tax-Free Income Fund

State-Specific

Alabama	Michigan8
Arizona	Minnesota8
California7	Missouri
Colorado	New Jersey
Connecticut	New York7
Florida	North Carolina
Georgia	Ohio8
Kentucky	Oregon
Louisiana	Pennsylvania
Maryland	Tennessee
Massachusetts8	Virginia

INSURANCE FUNDS

Franklin Templeton Variable Insurance Products Trust⁹

1.	The fund is closed to new investors. Existing shareholders and select retirement plans can continue adding to their accounts.
2.	The fund is a continuously offered, closed-end fund. Shares may be purchased daily; there is no daily redemption. However, each quarter, pending board approval, the fund will authorize the repurchase of 5%–25% of the outstanding number of shares. Investors may tender all or a portion of their shares during the tender period.
3.	Effective 5/1/10, the Franklin Templeton Target Funds changed their name to the Franklin Templeton Allocation Funds. The funds’ investment goals and principal investment strategies remained unchanged.
4.	An investment in the fund is neither insured nor guaranteed by the U.S. government or by any other entity or institution.
5.	For investors subject to the alternative minimum tax, a small portion of fund dividends may be taxable. Distributions of capital gains are generally taxable.
6.	The fund invests primarily in insured municipal securities.
7.	These funds are available in three or more variations, including long-term portfolios, intermediate-term portfolios, portfolios of insured securities, a high-yield portfolio (CA only) and a money market portfolio (CA only).
8.	The Board of Trustees approved the elimination of the non-fundamental policy requiring the fund to invest at least 80% of net assets in insured municipal securities and the removal of the word “Insured” from the fund name. The changes became effective 2/15/09.
9.	The funds of the Franklin Templeton Variable Insurance Products Trust are generally available only through insurance company variable contracts.

07/10 Not part of the annual report

One Franklin Parkway
San Mateo, CA 94403-1906

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Annual Report and Shareholder LetterFranklin Custodian Funds

Investment Manager
Franklin Advisers, Inc.

Distributor
Franklin Templeton Distributors, Inc.
(800) DIAL BEN^®
franklintempleton.com

Shareholder Services
(800) 632-2301

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

© 2010 Franklin Templeton Investments. All rights reserved.

FCF A 11/10

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 12(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 John B. Wilson and he 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 $372,044 for the fiscal year ended September 30, 2010 and $403,223 for the fiscal year ended September 30, 2009.

(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 $8,307 for the fiscal year ended September 30, 2010 and $2,650 for the fiscal year ended September 30, 2009. 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 $35,000 for the fiscal year ended September 30, 2010 and $2,000 for the fiscal year ended September 30, 2009. The services for whic h these fees were paid included technical tax consultation for capital gain tax reporting to foreign governments and derivative investments.

(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 $26,774 for the fiscal year ended September 30, 2010 and $0 for the fiscal year ended September 30, 2009.  The services for which these fees were paid include 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 $118,026 for the fiscal year ended September 30, 2010 and $0 for the fiscal year ended September 30, 2009.  The services for which these fees were paid include review of materials provided to the fund Board in connection with the investment management contract renewal process.

(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 $188,107 for the fiscal year ended September 30, 2010 and $4,650 for the fiscal year ended September 30, 2009.

(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 andAffiliated 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 ensure that information required to be disclosed in the Registrant’s filings under the Securities Exchange Act of 1934 and the Investment Company Act of 1940 is recorded, processed, summarized and reported within the periods specified in the rules and forms of the Securities and Exchange Commission.  Such information is accumulated and communicated to the Registrant’s management, including its principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.  The Registrant’s management, including the principal executive officer and the principal financial officer, recognizes that any set of controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives.

Within 90 days prior to the filing date of this Shareholder Report on Form N-CSR, the Registrant had carried out an evaluation, under the supervision and with the participation of the Registrant’s management, including the Registrant’s principal executive officer and the Registrant’s principal financial officer, of the effectiveness of the design and operation of the Registrant’s disclosure controls and procedures.  Based on such evaluation, the Registrant’s principal executive officer and principal financial officer concluded that the Registrant’s disclosure controls and procedures are effective.

(b)  Changes in Internal Controls.  There have been no significant changes in the Registrant’s internal controls or in other factors that could significantly affect the internal controls subsequent to the date of their evaluation in connection with the preparation of this Shareholder Report on Form N-CSR.

Item 12. Exhibits.

(a) (1) Code of Ethics

(a) (2) Certifications pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 of Laura F. Fergerson,, 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 Laura F. Fergerson,, 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/LAURA F. FERGERSON

      Laura F. Fergerson

      Chief Executive Officer - Finance and Administration

Date  November 24, 2010

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/LAURA F. FERGERSON

      Laura F. Fergerson

      Chief Executive Officer - Finance and Administration

Date  November 24, 2010

By /s/GASTON GARDEY

      Gaston Gardey

      Chief Financial Officer and

Chief Accounting Officer

Date  November 24, 2010

EX-99.CODE ETH

                                                               Exhibit 12(a)(1)



CODE OF ETHICS FOR PRINCIPAL EXECUTIVES & SENIOR FINANCIAL OFFICERS
- ------------------------------------------------------------------------------

PROCEDURES   Revised December 22, 2008

- -------------------------------------------------------------------------------

                            FRANKLIN TEMPLETON FUNDS
                   CODE OF ETHICS FOR PRINCIPAL EXECUTIVE AND
                            SENIOR FINANCIAL OFFICERS

I.  Covered Officers and Purpose of the Code

     This  code of  ethics  (the  "Code")  applies  to the  Principal  Executive
Officers,  Principal  Financial  Officer and Principal  Accounting  Officer (the
"Covered  Officers,"  each of whom is set forth in Exhibit A) of each investment
company advised by a Franklin  Resources  subsidiary and that is registered with
the United States Securities & Exchange  Commission ("SEC")  (collectively,  "FT
Funds") for the purpose of promoting:

     o Honest and ethical conduct, including the ethical resolution of actual or
       apparent conflicts of  interest between personal and  professional
       relationships;

     o Full, fair, accurate, timely and understandable disclosure in reports and
       documents that a registrant files with, or submits to, the SEC and in
       other public communications made by or on behalf of the FT Funds;

     o Compliance with applicable laws and governmental rules and regulations;

     o The prompt internal reporting of violations of the Code to an appropriate
       person or persons identified in the Code; and

     o Accountability for adherence to the Code.

     Each  Covered  Officer  will be  expected  to adhere to a high  standard of
business ethics and must be sensitive to situations that may give rise to actual
as well as apparent conflicts of interest.

II.  Other Policies and Procedures

     This  Code  shall be the sole  code of  ethics  adopted  by the  Funds  for
purposes  of  Section  406 of the  Sarbanes-Oxley  Act and the  rules  and forms
applicable to registered investment companies thereunder.

     Franklin  Resources,  Inc.  has  separately  adopted the CODE OF ETHICS AND
BUSINESS  CONDUCT  ("Business  Conduct"),  which is  applicable to all officers,
directors and employees of Franklin Resources, Inc., including Covered Officers.
It  summarizes  the values,  principles  and business  practices  that guide the
employee's business conduct and also provides a set of basic principles to guide
officers,  directors and employees  regarding the minimum  ethical  requirements
expected of them. It supplements  the values,  principles  and business  conduct
identified in the Code and other existing employee policies.

     Additionally, the Franklin Templeton Funds have separately adopted the CODE
OF ETHICS AND POLICY STATEMENT ON INSIDER TRADING governing personal  securities
trading and other related  matters.  The Code for Insider  Trading  provides for
separate  requirements  that  apply to the  Covered  Officers  and  others,  and
therefore is not part of this Code.

     Insofar as other  policies or procedures of Franklin  Resources,  Inc., the
Funds, the Funds' adviser,  principal  underwriter,  or other service  providers
govern or purport to govern the behavior or activities  of the Covered  Officers
who are  subject to this Code,  they are  superceded  by this Code to the extent
that they overlap or conflict with the  provisions  of this Code.  Please review
these other  documents or consult with the Legal  Department  if have  questions
regarding the applicability of these policies to you.

III. Covered Officers Should Handle Ethically Actual and Apparent Conflicts of
Interest

     OVERVIEW.  A "conflict of interest" occurs when a Covered Officer's private
interest  interferes  with the  interests  of, or his or her  service to, the FT
Funds. For example, a conflict of interest would arise if a Covered Officer,  or
a member of his  family,  receives  improper  personal  benefits  as a result of
apposition with the FT Funds.

     Certain  conflicts  of  interest  arise  out of the  relationships  between
Covered  Officers  and the FT Funds and  already  are  subject  to  conflict  of
interest  provisions in the Investment Company Act of 1940 ("Investment  Company
Act") and the Investment  Advisers Act of 1940 ("Investment  Advisers Act"). For
example,  Covered Officers may not individually  engage in certain  transactions
(such as the purchase or sale of securities or other property) with the FT Funds
because of their status as "affiliated  persons" of the FT Funds.  The FT Funds'
and the investment  advisers' compliance programs and procedures are designed to
prevent, or identify and correct, violations of these provisions. This Code does
not, and is not intended to,  repeat or replace these  programs and  procedures,
and such conflicts fall outside of the parameters of this Code.

     Although  typically not  presenting an  opportunity  for improper  personal
benefit,  conflicts arise from, or as a result of, the contractual  relationship
between the FT Funds,  the  investment  advisers and the fund  administrator  of
which the Covered  Officers are also  officers or employees.  As a result,  this
Code  recognizes  that the Covered  Officers will, in the normal course of their
duties (whether formally for the FT Funds, for the adviser,  the  administrator,
or for all  three),  be  involved  in  establishing  policies  and  implementing
decisions that will have different effects on the adviser, administrator and the
FT Funds.  The  participation  of the  Covered  Officers in such  activities  is
inherent in the contractual  relationship between the FT Funds, the adviser, and
the administrator and is consistent with the performance by the Covered Officers
of their duties as officers of the FT Funds.  Thus,  if performed in  conformity
with the  provisions of the Investment  Company Act and the Investment  Advisers
Act, such activities will be deemed to have been handled ethically. In addition,
it is  recognized  by the FT Funds'  Boards  of  Directors  ("Boards")  that the
Covered  Officers  may  also be  officers  or  employees  of one or  more  other
investment companies covered by this or other codes.

     Other conflicts of interest are covered by the Code, even if such conflicts
of interest are not subject to provisions in the Investment  Company Act and the
Investment  Advisers Act. The following  list provides  examples of conflicts of
interest  under the Code,  but Covered  Officers  should keep in mind that these
examples  are not  exhaustive.  The  overarching  principle is that the personal
interest  of a Covered  Officer  should  not be  placed  improperly  before  the
interest of the FT Funds.

Each Covered Officer must:

     o Not use his or her personal influence  or  personal  relationships
       improperly to influence investment decisions orfinancial reporting by
       the FT Funds whereby the Covered Officer would benefit personally to the
       detriment of the FT Funds;

     o Not cause the FT Funds to take action, or fail to take  action, for the
       individual personal benefit of the Covered Officer rather than the
       benefit the FT Funds;

     o Not retaliate against any other Covered Officer or any employee of the FT
       Funds or their affiliated persons for reports of potential  violations
       that are made in good faith;

     o Report  at  least   annually  the  following  affiliations  or other
       relationships:/ 1
          o all directorships for public companies and all companies that are
            required to file reports with the SEC;
          o any direct or indirect  business relationship  with any independent
            directors of the FT Funds;
          o any direct or indirect  business relationship with any independent
            public  accounting  firm (which are not related to the routine
            issues related to the firm's service as the Covered Persons
            accountant); and
          o any direct or indirect interest in any transaction with any FT Fund
            that will benefit the officer (not including benefits derived from
            the advisory, sub-advisory, distribution or service agreements with
            affiliates of Franklin Resources).

     These reports will be reviewed by the Legal  Department for compliance with
the Code.

     There are some  conflict  of  interest  situations  that  should  always be
approved  in writing by Franklin  Resources  General  Counsel or Deputy  General
Counsel, if material. Examples of these include/2:

     o Service as a director on the board of any public or private Company;

     o The  receipt  of any gifts in excess  of $100 from any  person,  from any
       corporation or association

     o The receipt of any entertainment from any Company with which the FT Funds
       has current or prospective  business dealings unless such entertainment
       is business related, reasonable in cost, appropriate as to time and
       place, and not so frequent as to raise any question of  impropriety.
       Notwithstanding the foregoing, the Covered Officers must obtain prior
       approval from the Franklin Resources General Counsel for any
       entertainment  with a value in excess of $1000.

     o Any ownership  interest in, or any consulting or employment relationship
       with, any of the FT Fund's service providers, other than an investment
       adviser, principal underwriter, administrator or any affiliated person
       thereof;

     o A direct or  indirect  financial  interest  in  commissions,  transaction
       charges or spreads paid by the FT Funds for   effecting   portfolio
       transactions or for selling or redeeming shares  other than an interest
       arising from the Covered Officer's employment, such as compensation  or
       equity ownership.

     Franklin Resources General Counsel or Deputy General Counsel will provide a
report to the FT Funds  Audit  Committee  of any  approvals  granted at the next
regularly scheduled meeting.

IV. Disclosure and Compliance

     o Each Covered  Officer  should  familiarize  himself  with the  disclosure
       requirements generally applicable to the FT Funds;

     o Each Covered Officer should not knowingly misrepresent, or cause others
       to  misrepresent, facts about the FT Funds to others, whether within or
       outside the FT Funds, including to the FT Funds' directors and auditors,
       and to governmental regulators and self-regulatory organizations;

     o Each Covered Officer should, to the extent appropriate within his or her
       area of responsibility, consult with other officers and employees of the
       FT Funds, the FT Fund's adviser and the administrator with the goal of
       promoting full, fair, accurate, timely and understandable disclosure in
       the reports and documents the FT Funds file with, or submit to, the SEC
       and in other public communications made by the FT Funds; and

     o It is the  responsibility  of each Covered Officer to promote compliance
       with the standards and restrictions imposed by applicable laws, rules and
       regulations.

V. Reporting and Accountability

Each Covered Officer must:

     o Upon becoming a covered officer affirm in writing to the Board that he or
       she has received, read, and understands the Code (see Exhibit B);

     o Annually  thereafter  affirm to the Board that he has  complied  with the
       requirements of the Code; and

     o Notify  Franklin  Resources'  General  Counsel or Deputy General Counsel
       promptly if he or she knows of any violation of this Code. Failure to do
       so is itself is a violation of this Code.

     Franklin Resources' General Counsel and Deputy General Counsel  are
responsible for applying this Code to specific situations in which questions are
presented under  it and have  the  authority  to  interpret  this  Code in any
particular  situation./3 However, the Independent Directors of the respective FT
Funds will consider any  approvals or waivers/4  sought by any Chief  Executive
Officers of the Funds.

     The FT Funds will follow these  procedures in  investigating  and enforcing
this Code:

     o Franklin  Resources General Counsel or Deputy General Counsel will take
       all appropriate action to investigate any potential  violations reported
       to the Legal Department;

     o If,  after such  investigation,  the  General Counsel or Deputy General
       Counsel believes that no violation has occurred, The General Counsel is
       not required to take any further action;

     o Any matter that the General Counsel or Deputy General Counsel believes is
       a  violation  will  be  reported  to  the  Independent   Directors  of
       the appropriate FT Fund;

     o If the Independent Directors concur that a violation has occurred, it
       will inform and make a recommendation to the Board of the appropriate
       FT Fund or Funds, which will consider appropriate action, which may
       include review of, and appropriate modifications to, applicable policies
       and procedures; notification to appropriate personnel of the investment
       adviser or its board; or a recommendation to dismiss the Covered Officer;

     o The Independent Directors will be responsible for granting  waivers, as
       appropriate; and

     o Any changes to or waivers of this Code will, to the extent required, are
       disclosed as provided by SEC rules./5

VI. Other Policies and Procedures

     This Code shall be the sole code of ethics adopted by the FT Funds for
purposes of Section 406 of the Sarbanes-Oxley Act and the rules and forms
applicable to registered investment companies thereunder. Insofar as other
policies or procedures of the FT Funds, the FT Funds' advisers, principal
underwriter, or other service providers govern or purport to govern the behavior
or activities of the Covered Officers who are subject to this Code, they are
superseded by this Code to the extent that they overlap or conflict with the
provisions of this Code. The FT Code of Ethics and Policy Statement On Insider
Trading, adopted by the FT Funds, FT investment advisers and FT Fund's principal
underwriter pursuant to Rule 17j-1 under the Investment Company Act, the Code of
Ethics and Business Conduct and more detailed policies and procedures set forth
in FT's Employee Handbook are separate requirements applying to the Covered
Officers and others, and are not part of this Code.

VII. Amendments

     Any  amendments to this Code,  other than  amendments to Exhibit A, must be
approved  or  ratified  by a majority  vote of the FT Funds'  Board  including a
majority of independent directors.

VIII. Confidentiality

     All reports and records  prepared or maintained  pursuant to this Code will
be considered  confidential  and shall be maintained and protected  accordingly.
Except as  otherwise  required by law or this Code,  such  matters  shall not be
disclosed to anyone other than the FT Funds' Board and their counsel.

IX. Internal Use

     The Code is intended  solely for the  internal use by the FT Funds and does
not  constitute an admission,  by or on behalf of any FT Funds,  as to any fact,
circumstance, or legal conclusion.

X. Disclosure on Form N-CSR

     Item 2 of Form N-CSR requires a registered management investment company to
disclose annually whether, as of the end of the period covered by the report, it
has  adopted  a code  of  ethics  that  applies  to the  registrant's  principal
executive officer,  principal financial officer, principal accounting officer or
controller, or persons performing similar functions, regardless of whether these
officers are employed by the registrant or a third party.  If the registrant has
not adopted such a code of ethics, it must explain why it has not done so.

     The  registrant  must also:  (1) file with the SEC a copy of the code as an
exhibit  to its  annual  report;  (2) post the text of the code on its  Internet
website and  disclose,  in its most recent  report on Form N-CSR,  its  Internet
address and the fact that it has posted the code on its Internet website; or (3)
undertake  in its most  recent  report on Form  N-CSR to  provide  to any person
without charge, upon request, a copy of the code and explain the manner in which
such  request may be made.  Disclosure  is also  required of  amendments  to, or
waivers  (including  implicit  waivers)  from,  a  provision  of the code in the
registrant's  annual report on Form N-CSR or on its website.  If the  registrant
intends to satisfy the requirement to disclose amendments and waivers by posting
such  information  on its website,  it will be required to disclose its Internet
address and this intention.

     The Legal Department shall be responsible for ensuring that:

     o a copy of the Code is filed  with the SEC as an exhibit to each Fund's
       annual report; and

     o any  amendments to, or waivers (including implicit waivers) from, a
       provision  of the Code is disclosed in the  registrant's annual report
       on Form N-CSR.

     In the event that the  foregoing  disclosure is omitted or is determined to
be incorrect, the Legal Department shall promptly file such information with the
SEC as an amendment to Form N-CSR.

     In such an event, the Fund Chief  Compliance  Officer shall review the Code
and propose such changes to the Code as are necessary or  appropriate to prevent
reoccurrences.



EXHIBIT A

                 Persons Covered by the Franklin Templeton Funds
                                 Code of Ethics
                                  December 2008

FRANKLIN GROUP OF FUNDS

Edward B. Jamieson        President and Chief Executive Officer - Investment
                          Management
Charles B. Johnson        President and Chief Executive Officer - Investment
                          Management
Rupert H. Johnson, Jr.    President and Chief Executive Officer - Investment
                          Management
William J. Lippman        President and Chief Executive Officer - Investment
                          Management
Christopher Molumphy      President and Chief Executive Officer - Investment
                          Management
Jennifer J. Bolt          Chief Executive Officer - Finance and Administration
Laura Fergerson           Chief Financial Officer and Chief Accounting Officer


FRANKLIN MUTUAL SERIES FUNDS

Peter Langerman           Chief Executive Officer-Investment Management
Jennifer J. Bolt          Chief Executive Officer - Finance and Administration
Laura Fergerson           Chief Financial Officer and Chief Accounting Officer


TEMPLETON GROUP OF FUNDS

Mark Mobius               President and Chief Executive Officer - Investment
                          Management
Christopher J. Molumphy   President and Chief Executive Officer - Investment
                          Management
Gary P. Motyl             President and Chief Executive Officer - Investment
                          Management
Donald F. Reed            President and Chief Executive Officer - Investment
                          Management
Jennifer J. Bolt          Chief Executive Officer - Finance and Administration
Laura Fergerson           Chief Financial Officer and Chief Accounting Officer





                                    EXHIBIT B

                               ACKNOWLEDGMENT FORM
                                    DECEMBER

                    FRANKLIN TEMPLETON FUNDS CODE OF ETHICS
             FOR PRINCIPAL EXECUTIVE AND SENIOR FINANCIAL OFFICERS

INSTRUCTIONS:
1. Complete all sections of this form.
2. Print the completed form, sign, and date.
3. Submit completed form to FT's General Counsel c/o Code of Ethics
   Administration within 10 days of becoming a Covered Officer and by January
   30th of each subsequent year.

INTER-OFFICE MAIL: Code of Ethics Administration, Global Compliance  SM-920/2
TELEPHONE:         (650) 312-5698 Fax: (650) 312-5646
E-MAIL:            Preclear-Code of Ethics (internal address);
                   lpreclear@frk.com (external address)

- ------------------------------------------------------------------------------
COVERED OFFICER'S NAME:
- ------------------------------------------------------------------------------
TITLE:
- ------------------------------------------------------------------------------
DEPARTMENT:
- ------------------------------------------------------------------------------
LOCATION:
- ------------------------------------------------------------------------------
CERTIFICATION FOR YEAR ENDING:
- ------------------------------------------------------------------------------

TO: Franklin Resources General Counsel, Legal Department

I hereby acknowledge receipt of a copy of Franklin Templeton Fund's code of
ethics for Principal Executive Officers and Senior Financial Officers (the
"Code") that I have read and understand. I will comply fully with all provisions
of the Code to the extent they apply to me during the period of my employment.
I further understand and acknowledge that any violation of the Code may subject
me to disciplinary action, including termination of employment.




       ----------------------------       ----------------------
                Signature                     Date signed






- -----------------------------

1. Reporting of these affiliations or other relationships shall be made by
completing the annual Directors and Officers Questionnaire and returning the
questionnaire to Franklin Resources Inc, General Counsel or Deputy General
Counsel.

2. Any activity or relationship that would present a conflict for a Covered
Officer may also present a conflict for the Covered Officer if a member of the
Covered Officer's immediate family engages in such an activity or has such a
relationship. The Cover Person should also obtain written approval by FT's
General Counsel in such situations.

3. Franklin Resources General Counsel and Deputy General Counsel are authorized
to consult, as appropriate, with members of the Audit Committee, counsel to the
FT Funds and counsel to the Independent Directors, and are encouraged to do so.

4. Item 2 of Form N-CSR defines "waiver" as "the approval by the registrant of a
material departure from a provision of the code of ethics" and "implicit
waiver," which must also be disclosed, as "the registrant's failure to take
action within a reasonable period of time regarding a material departure from a
provision of the code of ethics that has been made known to an executive
officer" of the registrant. See Part X.

5. See Part X.

EX-99.CERT

   fcf302certs.htm - Generated by SEC Publisher for SEC Filing

EX-99.906 CERT

Exhibit 12(b)

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO SECTION 906

OF THE SARBANES-OXLEY ACT OF 2002

I, Laura F. Fergerson, Chief Executive Officer of the Franklin Custodian Funds (the “Registrant”), certify, pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:

1.The periodic report on Form N-CSR of the Registrant for the period ended 9/30/2010 (the “Form N-CSR”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2.The information contained in the Form N-CSR fairly presents, in all material respects, the financial condition and results of operations of the Registrant.

Dated:  11/24/2010

                                                S\LAURA F. FERGERSON

                                                Laura F. Fergerson

Chief Executive Officer - Finance and Administration

Exhibit 12(b)

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO SECTION 906

OF THE SARBANES-OXLEY ACT OF 2002

I, Gaston Gardey, Chief Financial Officer of the Franklin Custodian Funds (the “Registrant”), certify, pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:

1.The periodic report on Form N-CSR of the Registrant for the period ended 9/30/2010 (the “Form N-CSR”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2.The information contained in the Form N-CSR fairly presents, in all material respects, the financial condition and results of operations of the Registrant.

Dated:  11/24/2010

                                                S\GASTON GARDEY

                                                Gaston Gardey

Chief Financial Officer and Chief Accounting Officer