UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-00537
Franklin Custodian Funds
(Exact name of registrant as specified in charter)
One Franklin Parkway, San Mateo, CA 94403-1906
(Address of principal executive offices) (Zip code)
Craig S. Tyle, One Franklin Parkway, San Mateo, CA 94403-1906
(Name and address of agent for service)
Registrant’s telephone number, including area code: 650 312-2000
Date of fiscal year end: 9/30
Date of reporting period: 9/30/18
| Item 1. | Reports to Stockholders. |
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Annual Report and Shareholder Letter
September 30, 2018
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Sign up for electronic delivery at franklintempleton.com/edelivery
Franklin Templeton Investments
Why choose Franklin Templeton Investments?
Successful investing begins with ambition. And achievement only comes when you reach for it. That’s why we continually strive to deliver better outcomes for investors. No matter what your goals are, our deep, global investment expertise allows us to offer solutions that can help.
During our more than 70 years of experience, we’ve managed through all kinds of markets—up, down and those in between. We’re always preparing for what may come next. It’s because of this, combined with our strength as one of the world’s largest asset managers that we’ve earned the trust of millions of investors around the world.
Dear Fellow Shareholder:
1. Source: Morningstar.
2. Source: Copyright © 2018, S&P Dow Jones Indices LLC. All rights reserved. The index levels for the S&P 500 shown above are based on total returns, which include reinvestment of any income or distributions.
3. Source: Bloomberg Barclays Indices. The index levels for the Bloomberg Barclays U.S. Aggregate Bond Index shown above are based on total returns, which include reinvestment of any income or distributions.
The indexes are unmanaged and include reinvestment of any income or distributions.
See www.franklintempletondatasources.com for additional data provider information.
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Not FDIC Insured | May Lose Value | No Bank Guarantee
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1. Source: Morningstar.
The indexes are unmanaged and include reinvestment of any income or distributions. They do not reflect any fees, expenses or sales charges. One cannot invest directly in an index, and an index is not representative of the Fund’s portfolio.
Frank Russell Company is the source and owner of the trademarks, service marks and copyrights related to the Russell Indexes. Russell® is a trademark of Frank Russell Company.
2. The information technology sector comprises communications equipment; electronic equipment, instruments and components; IT services; semiconductors and semiconductor equipment; software; and technology hardware, storage and peripherals in the SOI. The consumer discretionary sector comprises diversified consumer services; internet and direct marketing retail; and textiles, apparel and luxury goods in the SOI. The health care sector comprises biotechnology, health care equipment and supplies, health care providers and services, health care technology, life sciences tools and services, and pharmaceuticals in the SOI.
The 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 45.
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FRANKLIN DYNATECH FUND
3. No energy sector companies held at period-end.
4. Not held at period-end.
See www.franklintempletondatasources.com for additional data provider information.
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FRANKLIN DYNATECH FUND
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FRANKLIN DYNATECH FUND
Performance Summary as of September 30, 2018
The performance table and graphs do not reflect any taxes that a shareholder would pay on Fund dividends, capital gain distributions, if any, or any realized gains on the sale of Fund shares. Total return reflects reinvestment of the Fund’s dividends and capital gain distributions, if any, and any unrealized gains or losses. Your dividend income will vary depending on dividends or interest paid by securities in the Fund’s portfolio, adjusted for operating expenses of each class. Capital gain distributions are net profits realized from the sale of portfolio securities.
Performance as of 9/30/181
Cumulative total return excludes sales charges. Average annual total return includes maximum sales charges. Sales charges will vary depending on the size of the investment and the class of share purchased. The maximum is 5.50% and the minimum is 0%. Class A: 5.50% maximum initial sales charge; Advisor Class: no sales charges. For other share classes, visit franklintempleton.com.
| Share Class | Cumulative Total Return2 |
|
Average Annual Total Return3 | |||
| A4 |
||||||
| 1-Year |
+30.88% | +23.68% | ||||
| 5-Year |
+124.31% | +16.21% | ||||
| 10-Year |
+327.46% | +14.98% | ||||
| Advisor |
||||||
| 1-Year |
+31.21% | +31.21% | ||||
| 5-Year |
+127.13% | +17.83% | ||||
| 10-Year |
+338.12% | +15.92% | ||||
Performance data represent past performance, which does not guarantee future results. Investment return and principal value will fluctuate, and you may have a gain or loss when you sell your shares. Current performance may differ from figures shown. For most recent month-end performance, go to franklintempleton.com or call (800) 342-5236.
See page 9 for Performance Summary footnotes.
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FRANKLIN DYNATECH FUND
PERFORMANCE SUMMARY
Total Return Index Comparison for a Hypothetical $10,000 Investment1
Total return represents the change in value of an investment over the periods shown. It includes any applicable maximum sales charge, Fund expenses, account fees and reinvested distributions. The unmanaged indexes include reinvestment of any income or distributions. They differ from the Fund in composition and do not pay management fees or expenses. One cannot invest directly in an index.
Class A (10/1/08–9/30/18)
Advisor Class (10/1/08–9/30/18)
See page 9 for Performance Summary footnotes.
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FRANKLIN DYNATECH FUND
PERFORMANCE SUMMARY
Distributions (10/1/17–9/30/18)
| Share Class | Long-Term Capital Gain |
|||
| A | $1.1554 | |||
| C | $1.1554 | |||
| R | $1.1554 | |||
| R6 | $1.1554 | |||
| Advisor | $1.1554 | |||
Total Annual Operating Expenses6
| Share Class | With Waiver | Without Waiver | ||||
| A | 0.89% | 0.90% | ||||
| Advisor | 0.64% | 0.65% | ||||
Each class of shares is available to certain eligible investors and has different annual fees and expenses, as described in the prospectus.
All investments involve risks, including possible loss of principal. Stocks historically have outperformed other asset classes over the long term, but tend to fluctuate more dramatically over the short term. Investments in fast-growing industries, like the technology and health care sectors (which have historically been volatile) could result in increased price fluctuation, especially over the short term, due to the rapid pace of product change and development and changes in government regulation of companies emphasizing scientific or technological advancement or regulatory approval for new drugs and medical instruments. The Fund may also invest in small- and mid-capitalization companies, which can be particularly sensitive to changing economic conditions, and their prospects for growth are less certain than those of larger, more established companies. The Fund is actively managed but there is no guarantee that the manager’s investment decisions will produce the desired results. The Fund’s prospectus also includes a description of the main investment risks.
1. The Fund has a fee waiver associated with any investment it makes in a Franklin Templeton money fund and/or other Franklin Templeton fund, contractually guaranteed through 1/31/19. Fund investment results reflect the fee waiver; without this waiver, the results would have been lower.
2. Cumulative total return represents the change in value of an investment over the periods indicated.
3. Average annual total return represents the average annual change in value of an investment over the periods indicated. Return for less than one year, if any, has not been annualized.
4. Prior to 9/10/18, these shares were offered at a higher initial sales charge of 5.75%, thus actual returns would have differed. Total returns with sales charges have been restated to reflect the current maximum initial sales charge of 5.50%.
5. Source: Morningstar. The Russell 1000 Growth Index is market capitalization-weighted and measures performance of those Russell 1000 Index companies with higher price-to-book ratios and higher forecasted growth values. The S&P 500 is a market capitalization-weighted index of 500 stocks designed to measure total U.S. equity market performance.
6. Figures are as stated in the Fund’s current prospectus and may differ from the expense ratios disclosed in the Your Fund’s Expenses and Financial Highlights sections in this report. In periods of market volatility, assets may decline significantly, causing total annual Fund operating expenses to become higher than the figures shown.
See www.franklintempletondatasources.com for additional data provider information.
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FRANKLIN DYNATECH FUND
Your Fund’s Expenses
As a Fund shareholder, you can incur two types of costs: (1) transaction costs, including sales charges (loads) on Fund purchases and redemptions; and (2) ongoing Fund costs, including management fees, distribution and service (12b-1) fees, and other Fund expenses. All mutual funds have ongoing costs, sometimes referred to as operating expenses. The table below shows ongoing costs of investing in the Fund and can help you understand these costs and compare them with those of other mutual funds. The table assumes a $1,000 investment held for the six months indicated.
Actual Fund Expenses
The table below provides information about actual account values and actual expenses in the columns under the heading “Actual.” In these columns the Fund’s actual return, which includes the effect of Fund expenses, is used to calculate the “Ending Account Value” for each class of shares. You can estimate the expenses you paid during the period by following these steps (of course, your account value and expenses will differ from those in this illustration): Divide your account value by $1,000 (if your account had an $8,600 value, then $8,600 ÷ $1,000 = 8.6). Then multiply the result by the number in the row for your class of shares under the headings “Actual” and “Expenses Paid During Period” (if Actual Expenses Paid During Period were $7.50, then 8.6 x $7.50 = $64.50). In this illustration, the actual expenses paid this period are $64.50.
Hypothetical Example for Comparison with Other Funds
Under the heading “Hypothetical” in the table, information is provided about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. This information may not be used to estimate the actual ending account balance or expenses you paid for the period, but it can help you compare ongoing costs of investing in the Fund with those of other funds. To do so, compare this 5% hypothetical example for the class of shares you hold with the 5% hypothetical examples that appear in the shareholder reports of other funds.
Please note that expenses shown in the table are meant to highlight ongoing costs and do not reflect any transactional costs. Therefore, information under the heading “Hypothetical” is useful in comparing ongoing costs only, and will not help you compare total costs of owning different funds. In addition, if transactional costs were included, your total costs would have been higher.
| Actual (actual return after expenses) |
Hypothetical (5% annual return before expenses) |
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|||||||||||
| Share Class |
Beginning Account Value 4/1/18 |
Ending Account Value 9/30/18 |
Expenses Paid During Period 4/1/18–9/30/181,2 |
Ending Account Value 9/30/18 |
Expenses Paid During Period 4/1/18–9/30/181,2 |
Net Annualized Expense Ratio2 | ||||||
|
|
|
|
| |||||||||
| A |
$1,000 | $1,160.90 | $4.60 | $1,020.81 | $4.31 | 0.85% | ||||||
| C |
$1,000 | $1,156.50 | $8.65 | $1,017.05 | $8.09 | 1.60% | ||||||
| R |
$1,000 | $1,159.50 | $5.95 | $1,019.55 | $5.57 | 1.10% | ||||||
| R6 |
$1,000 | $1,162.70 | $2.71 | $1,022.56 | $2.54 | 0.50% | ||||||
| Advisor |
$1,000 | $1,162.30 | $3.25 | $1,022.06 | $3.04 | 0.60% | ||||||
1. Expenses are equal to the annualized expense ratio for the six-month period as indicated above—in the far right column—multiplied by the simple average account value over the period indicated, and then multiplied by 183/365 to reflect the one-half year period.
2. Reflects expenses after fee waivers and expense reimbursements. Does not include acquired fund fees and expenses.
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1. Source: Morningstar.
The index is unmanaged and includes reinvestment of any income or distributions. It does not reflect any fees, expenses or sales charges. One cannot invest directly in an index, and an index is not representative of the Fund’s portfolio.
The dollar value, number of shares or principal amount, and names of all portfolio holdings are listed in the Fund’s Statement of Investments (SOI).
The SOI begins on page 55.
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FRANKLIN GROWTH FUND
2. The IT sector comprises semiconductors and semiconductor equipment, software and services, and technology hardware and equipment in the SOI. The health care sector comprises health care equipment and services and pharmaceuticals, biotechnology and life sciences in the SOI. The industrials sector comprises capital goods, commercial and professional services, and transportation in the SOI.
3. Not a Fund holding.
See www.franklintempletondatasources.com for additional data provider information.
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FRANKLIN GROWTH FUND
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FRANKLIN GROWTH FUND
Performance Summary as of September 30, 2018
The performance table and graphs do not reflect any taxes that a shareholder would pay on Fund dividends, capital gain distributions, if any, or any realized gains on the sale of Fund shares. Total return reflects reinvestment of the Fund’s dividends and capital gain distributions, if any, and any unrealized gains or losses. Your dividend income will vary depending on dividends or interest paid by securities in the Fund’s portfolio, adjusted for operating expenses of each class. Capital gain distributions are net profits realized from the sale of portfolio securities.
Performance as of 9/30/181
Cumulative total return excludes sales charges. Average annual total return includes maximum sales charges. Sales charges will vary depending on the size of the investment and the class of share purchased. The maximum is 5.50% and the minimum is 0%. Class A: 5.50% maximum initial sales charge; Advisor Class: no sales charges. For other share classes, visit franklintempleton.com.
| Share Class | Cumulative Total Return2 |
Average Annual Total Return3 | ||
| A4 |
||||
| 1-Year |
+20.72% | +14.08% | ||
| 5-Year |
+101.75% | +13.78% | ||
| 10-Year |
+233.46% | +12.16% | ||
| Advisor |
||||
| 1-Year |
+21.02% | +21.02% | ||
| 5-Year |
+104.29% | +15.36% | ||
| 10-Year |
+241.95% | +13.08% | ||
Performance data represent past performance, which does not guarantee future results. Investment return and principal value will fluctuate, and you may have a gain or loss when you sell your shares. Current performance may differ from figures shown. For most recent month-end performance, go to franklintempleton.com or call (800) 342-5236.
See page 16 for Performance Summary footnotes.
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FRANKLIN GROWTH FUND
PERFORMANCE SUMMARY
Total Return Index Comparison for a Hypothetical $10,000 Investment1
Total return represents the change in value of an investment over the periods shown. It includes any applicable maximum sales charge, Fund expenses, account fees and reinvested distributions. The unmanaged index includes reinvestment of any income or distributions. It differs from the Fund in composition and does not pay management fees or expenses. One cannot invest directly in an index.
Class A (10/1/08–9/30/18)
Advisor Class (10/1/08–9/30/18)
See page 16 for Performance Summary footnotes.
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FRANKLIN GROWTH FUND
PERFORMANCE SUMMARY
Distributions (10/1/17–9/30/18)
| Share Class | Net Investment Income |
Long-Term Capital Gain |
Total | |||||
|
A |
$ | 0.3618 | $2.2538 | $2.6156 | ||||
| C | $ | — | $2.2538 | $2.2538 | ||||
| R | $ | 0.1304 | $2.2538 | $2.3842 | ||||
| R6 | $ | 0.7359 | $2.2538 | $2.9897 | ||||
| Advisor | $ | 0.5853 | $2.2538 | $2.8391 | ||||
|
Total Annual Operating Expenses6
|
|
|||||||
| Share Class | With Waiver | Without Waiver | ||||||
|
A |
0.87% | 0.88% | ||||||
| Advisor | 0.62% | 0.63% | ||||||
Each class of shares is available to certain eligible investors and has different annual fees and expenses, as described in the prospectus.
All investments involve risks, including possible loss of principal. Historically, the Fund has focused on larger companies. The Fund may also invest in small, relatively new and/or unseasoned companies, which involves additional risks, as the price of these securities can be volatile, particularly over the short term. The Fund may focus on particular sectors of the market from time to time, which can carry greater risks of adverse developments in such sectors. In addition, the Fund may invest up to 40% of its net assets in stocks of foreign companies, which involve special risks, including currency fluctuations and economic as well as political uncertainty. The Fund is actively managed but there is no guarantee that the manager’s investment decisions will produce the desired results. The Fund’s prospectus also includes a description of the main investment risks.
1. The Fund has a fee waiver associated with any investment it makes in a Franklin Templeton money fund and/or other Franklin Templeton fund, contractually guaranteed through 1/31/19. Fund investment results reflect the fee waiver; without this waiver, the results would have been lower.
2. Cumulative total return represents the change in value of an investment over the periods indicated.
3. Average annual total return represents the average annual change in value of an investment over the periods indicated. Return for less than one year, if any, has not been annualized.
4. Prior to 9/10/18, these shares were offered at a higher initial sales charge of 5.75%, thus actual returns would have differed. Total returns with sales charges have been restated to reflect the current maximum initial sales charge of 5.50%.
5. Source: Morningstar. The S&P 500 is a market capitalization-weighted index of 500 stocks designed to measure total U.S. equity market performance.
6. Figures are as stated in the Fund’s current prospectus and may differ from the expense ratios disclosed in the Your Fund’s Expenses and Financial Highlights sections in this report. In periods of market volatility, assets may decline significantly, causing total annual Fund operating expenses to become higher than the figures shown.
See www.franklintempletondatasources.com for additional data provider information.
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FRANKLIN GROWTH FUND
Your Fund’s Expenses
As a Fund shareholder, you can incur two types of costs: (1) transaction costs, including sales charges (loads) on Fund purchases and redemptions; and (2) ongoing Fund costs, including management fees, distribution and service (12b-1) fees, and other Fund expenses. All mutual funds have ongoing costs, sometimes referred to as operating expenses. The table below shows ongoing costs of investing in the Fund and can help you understand these costs and compare them with those of other mutual funds. The table assumes a $1,000 investment held for the six months indicated.
Actual Fund Expenses
The table below provides information about actual account values and actual expenses in the columns under the heading “Actual.” In these columns the Fund’s actual return, which includes the effect of Fund expenses, is used to calculate the “Ending Account Value” for each class of shares. You can estimate the expenses you paid during the period by following these steps (of course, your account value and expenses will differ from those in this illustration): Divide your account value by $1,000 (if your account had an $8,600 value, then $8,600 ÷ $1,000 = 8.6). Then multiply the result by the number in the row for your class of shares under the headings “Actual” and “Expenses Paid During Period” (if Actual Expenses Paid During Period were $7.50, then 8.6 x $7.50 = $64.50). In this illustration, the actual expenses paid this period are $64.50.
Hypothetical Example for Comparison with Other Funds
Under the heading “Hypothetical” in the table, information is provided about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. This information may not be used to estimate the actual ending account balance or expenses you paid for the period, but it can help you compare ongoing costs of investing in the Fund with those of other funds. To do so, compare this 5% hypothetical example for the class of shares you hold with the 5% hypothetical examples that appear in the shareholder reports of other funds.
Please note that expenses shown in the table are meant to highlight ongoing costs and do not reflect any transactional costs. Therefore, information under the heading “Hypothetical” is useful in comparing ongoing costs only, and will not help you compare total costs of owning different funds. In addition, if transactional costs were included, your total costs would have been higher.
| Actual (actual return after expenses) |
Hypothetical (5% annual return before expenses) |
|||||||||||||||||||||||
|
|
|
|||||||||||||||||||||||
| Share Class |
Beginning Account Value 4/1/18 |
Ending Account Value 9/30/18 |
Expenses Paid During Period 4/1/18–9/30/181,2 |
Ending Account Value 9/30/18 |
Expenses Paid During Period 4/1/18–9/30/181,2 |
Net Annualized Expense Ratio2 | ||||||||||||||||||
|
|
|
|
| |||||||||||||||||||||
| A |
$1,000 | $1,117.40 | $4.25 | $1,021.06 | $4.05 | 0.80% | ||||||||||||||||||
| C |
$1,000 | $1,113.20 | $8.21 | $1,017.30 | $7.84 | 1.55% | ||||||||||||||||||
| R |
$1,000 | $1,116.00 | $5.57 | $1,019.80 | $5.32 | 1.05% | ||||||||||||||||||
| R6 |
$1,000 | $1,119.30 | $2.44 | $1,022.76 | $2.33 | 0.46% | ||||||||||||||||||
| Advisor |
$1,000 | $1,118.80 | $2.92 | $1,022.31 | $2.79 | 0.55% | ||||||||||||||||||
1. Expenses are equal to the annualized expense ratio for the six-month period as indicated above—in the far right column—multiplied by the simple average account value over the period indicated, and then multiplied by 183/365 to reflect the one-half year period.
2. Reflects expenses after fee waivers and expense reimbursements. Does not include acquired fund fees and expenses.
| franklintempleton.com | Annual Report | 17 | ||
1. Source: Morningstar.
2. Source: Lipper, a Thomson Reuters Company. For the 12-month period ended 9/30/18, this category consisted of 561 funds. Lipper calculations do not include sales charges or expense subsidization by a fund’s manager. The Fund’s performance relative to the average may have differed if these and other factors had been considered.
The indexes are unmanaged and include reinvestment of any income or distributions. They do not reflect any fees, expenses or sales charges. One cannot invest directly in an index, and an index is not representative of the Fund’s portfolio.
The dollar value, number of shares or principal amount, and names of all portfolio holdings are listed in the Fund’s Statement of Investments (SOI).
The SOI begins on page 65.
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FRANKLIN INCOME FUND
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FRANKLIN INCOME FUND
3. Not held at period-end.
see www.franklintempletondatasources.com for additional data provider information.
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FRANKLIN INCOME FUND
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FRANKLIN INCOME FUND
Performance Summary as of September 30, 2018
The performance tables and graphs do not reflect any taxes that a shareholder would pay on Fund dividends, capital gain distributions, if any, or any realized gains on the sale of Fund shares. Total return reflects reinvestment of the Fund’s dividends and capital gain distributions, if any, and any unrealized gains or losses. Your dividend income will vary depending on dividends or interest paid by securities in the Fund’s portfolio, adjusted for operating expenses of each class. Capital gain distributions are net profits realized from the sale of portfolio securities.
Performance as of 9/30/181
Cumulative total return excludes sales charges. Average annual total return includes maximum sales charges. Sales charges will vary depending on the size of the investment and the class of share purchased. The maximum is 4.25% and the minimum is 0%. Class A: 4.25% maximum initial sales charge; Advisor Class: no sales charges. For other share classes, visit franklintempleton.com.
| Share Class | Cumulative Total Return2 |
Average Annual Total Return3 | ||
| A4 |
||||
| 1-Year |
+2.17% | -2.17% | ||
| 5-Year |
+29.01% | +4.32% | ||
| 10-Year |
+116.46% | +7.56% | ||
| Advisor |
||||
| 1-Year |
+2.34% | +2.34% | ||
| 5-Year |
+30.21% | +5.42% | ||
| 10-Year |
+119.95% | +8.20% | ||
| Distribution |
|
30-Day Standardized Yield6
| ||||||
| Share Class | Rate5 | (with waiver) | (without waiver) | |||||
|
A7 |
—% | —% | —% | |||||
| Advisor |
5.32% | 4.02% | 4.02% | |||||
Performance data represent past performance, which does not guarantee future results. Investment return and principal value will fluctuate, and you may have a gain or loss when you sell your shares. Current performance may differ from figures shown. For most recent month-end performance, go to franklintempleton.com or call (800) 342-5236.
See page 25 for Performance Summary footnotes.
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FRANKLIN INCOME FUND
PERFORMANCE SUMMARY
Total Return Index Comparison for a Hypothetical $10,000 Investment1
Total return represents the change in value of an investment over the periods shown. It includes any applicable maximum sales charge, Fund expenses, account fees and reinvested distributions. The unmanaged indexes include reinvestment of any income or distributions. They differ from the Fund in composition and do not pay management fees or expenses. One cannot invest directly in an index.
Class A (10/1/08–9/30/18)
Advisor Class (10/1/08–9/30/18)
See page 25 for Performance Summary footnotes.
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FRANKLIN INCOME FUND
PERFORMANCE SUMMARY
Net Asset Value
| Share Class (Symbol) | 9/30/18 | 9/10/18 | 9/30/17 | Change | ||||
| A (FKIQX) | $2.32 | $2.31 | N/A | +$0.01 | ||||
| A1 (FKINX) | $2.32 | N/A | $2.39 | -$0.07 | ||||
| C (FCISX) | $2.35 | N/A | $2.42 | -$0.07 | ||||
| R (FISRX) | $2.28 | N/A | $2.35 | -$0.07 | ||||
| R6 (FNCFX) | $2.30 | N/A | $2.37 | -$0.07 | ||||
| Advisor (FRIAX) | $2.30 | N/A | $2.37 | -$0.07 | ||||
| Distributions (10/1/17–9/30/18) | ||||||||
| Share Class | Net Investment Income |
|||||||
| A (9/10/18–9/30/18) | $ — | |||||||
| A1 | $0.1200 | |||||||
| C | $0.1074 | |||||||
| R | $0.1116 | |||||||
| R6 | $0.1244 | |||||||
| Advisor | $0.1232 | |||||||
| Total Annual Operating Expenses10 | ||||||||
| Share Class | With Waiver | Without Waiver | ||||||
| A | 0.72% | 0.73% | ||||||
| Advisor | 0.47% | 0.48% | ||||||
See page 25 for Performance Summary footnotes.
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FRANKLIN INCOME FUND
PERFORMANCE SUMMARY
Each class of shares is available to certain investors and has different annual fees and expenses, as described in the prospectus.
All investments involve risks, including possible loss of principal. The Fund’s share price and yield will be affected by interest rate movements. Bond prices generally move in the opposite direction of interest rates. Thus, as prices of bonds in the Fund adjust to a rise in interest rates, the Fund’s share price may decline. Changes in the financial strength of a bond issuer or in a bond’s credit rating may affect its value. The Fund’s portfolio includes a substantial portion of higher yielding, lower rated corporate bonds because of the relatively higher yields they offer. Floating-rate loans are lower rated, higher yielding instruments, which are subject to increased risk of default and can potentially result in loss of principal. These securities carry a greater degree of credit risk relative to investment-grade securities. Stock prices fluctuate, sometimes rapidly and dramatically, due to factors affecting individual companies, particular industries or sectors, or general market conditions. The Fund is actively managed but there is no guarantee that the manager’s investment decisions will produce the desired results. The Fund’s prospectus also includes a description of the main investment risks.
1. The Fund has a fee waiver associated with any investment it makes in a Franklin Templeton money fund and/or other Franklin Templeton fund, contractually guaranteed through 1/31/19. Fund investment results reflect the fee waiver; without this waiver, the results would have been lower.
2. Cumulative total return represents the change in value of an investment over the periods indicated.
3. Average annual total return represents the average annual change in value of an investment over the periods indicated. Return for less than one year, if any, has not been annualized.
4. Effective 9/10/18, Class A shares closed to new investors, were renamed Class A1 shares, and a new Class A share with a different expense structure became available. Class A performance shown has been calculated as follows: (a) for periods prior to 9/10/18, a restated figure is used based on the Fund’s Class A1 performance that includes any Rule 12b-1 rate differential that exists between Class A1 and Class A; and (b) for periods after 9/10/18, actual Class A performance is used, reflecting all charges and fees applicable to that class.
5. Distribution rate is based on an annualization of the respective class’s September dividend and the maximum offering price (NAV for Advisor Class) per share on 9/30/18.
6. The Fund’s 30-day standardized yield is calculated over a trailing 30-day period using the yield to maturity on bonds and/or the dividends accrued on stocks. It may not equal the Fund’s actual income distribution rate, which reflects the Fund’s past dividends paid to shareholders.
7. Share Class A launched on 9/10/18 and yield cannot be produced until this share class has been in existence for 30 days. This value will not be calculated until 10/31/18.
8. Source: Morningstar. The S&P 500 is a market capitalization-weighted index of 500 stocks designed to measure total U.S. equity market performance. The Bloomberg Barclays U.S. Aggregate Bond Index is a market capitalization-weighted index representing the U.S. investment-grade, fixed-rate, taxable bond market with index components for government and corporate, mortgage pass-through and asset-backed securities. All issues included are SEC registered, taxable, dollar denominated and nonconvertible, must have at least one year to final maturity and must be rated investment grade (Baa3/BBB-/BBB- or higher) using the middle rating of Moody’s, S&P and Fitch, respectively.
9. Source: Lipper, a Thomas Reuters Company. The Lipper Mixed-Asset Target Allocation Moderate Funds Classification Average is calculated by averaging the total returns of all funds within the Lipper Mixed-Asset Target Allocation Moderate Funds classification in the Lipper Open-End underlying funds universe. Lipper Mixed-Asset Target Allocation Moderate Funds are defined as funds that, by portfolio practice, maintain a mix of between 40%–60% equity securities, with the remainder invested in bonds, cash and cash equivalents. For the one-year period ended 9/30/18, there were 561 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.
10. Figures are as stated in the Fund’s current prospectus and may differ from the expense ratios disclosed in the Your Fund’s Expenses and Financial Highlights sections in this report. In periods of market volatility, assets may decline significantly, causing total annual Fund operating expenses to become higher than the figures shown.
See www.franklintempletondatasources.com for additional data provider information.
| franklintempleton.com | Annual Report | 25 | ||
FRANKLIN INCOME FUND
Your Fund’s Expenses
As a Fund shareholder, you can incur two types of costs: (1) transaction costs, including sales charges (loads) on Fund purchases and redemptions; and (2) ongoing Fund costs, including management fees, distribution and service (12b-1) fees, and other Fund expenses. All mutual funds have ongoing costs, sometimes referred to as operating expenses. The table below shows ongoing costs of investing in the Fund and can help you understand these costs and compare them with those of other mutual funds. The table assumes a $1,000 investment held for the six months indicated.
Actual Fund Expenses
The table below provides information about actual account values and actual expenses in the columns under the heading “Actual.” In these columns the Fund’s actual return, which includes the effect of Fund expenses, is used to calculate the “Ending Account Value” for each class of shares. You can estimate the expenses you paid during the period by following these steps (of course, your account value and expenses will differ from those in this illustration): Divide your account value by $1,000 (if your account had an $8,600 value, then $8,600 ÷ $1,000 = 8.6). Then multiply the result by the number in the row for your class of shares under the headings “Actual” and “Expenses Paid During Period” (if Actual Expenses Paid During Period were $7.50, then 8.6 x $7.50 = $64.50). In this illustration, the actual expenses paid this period are $64.50.
Hypothetical Example for Comparison with Other Funds
Under the heading “Hypothetical” in the table, information is provided about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. This information may not be used to estimate the actual ending account balance or expenses you paid for the period, but it can help you compare ongoing costs of investing in the Fund with those of other funds. To do so, compare this 5% hypothetical example for the class of shares you hold with the 5% hypothetical examples that appear in the shareholder reports of other funds.
Please note that expenses shown in the table are meant to highlight ongoing costs and do not reflect any transactional costs. Therefore, information under the heading “Hypothetical” is useful in comparing ongoing costs only, and will not help you compare total costs of owning different funds. In addition, if transactional costs were included, your total costs would have been higher.
| Actual (actual return after expenses) |
Hypothetical (5% annual return before expenses) |
|||||||||||
|
|
|
|||||||||||
| Share Class |
Beginning Account Value 4/1/181 |
Ending Account Value 9/30/18 |
Expenses Paid During Period 4/1/18–9/30/182,3,4 |
Ending Account Value 9/30/18 |
Expenses Paid During Period 4/1/18–9/30/183,4 |
Net Annualized Expense Ratio4 | ||||||
|
|
|
|
| |||||||||
| A |
$1,000 | $1,004.30 | $0.39 | $1,021.51 | $3.60 | 0.71% | ||||||
| A1 |
$1,000 | $1,039.80 | $3.17 | $1,021.96 | $3.14 | 0.62% | ||||||
| C |
$1,000 | $1,041.10 | $5.73 | $1,019.45 | $5.67 | 1.12% | ||||||
| R |
$1,000 | $1,043.30 | $4.97 | $1,020.21 | $4.91 | 0.97% | ||||||
| R6 |
$1,000 | $1,041.10 | $1.89 | $1,023.21 | $1.88 | 0.37% | ||||||
| Advisor |
$1,000 | $1,040.80 | $2.40 | $1,022.71 | $2.38 | 0.47% | ||||||
1. For A1, C, R, R6 and Advisor, 4/1/18 for Actual and Hypothetical. For Class A, 9/10/18 for Actual and 4/1/18 for Hypothetical.
2. For Classes A1, C, R, R6 and Advisor, 4/1/18–9/30/18. For Class A, 9/10/18–9/30/18.
3. Expenses are equal to the annualized expense ratio for the six-month period as indicated above—in the far right column—multiplied by the simple average account value over the period indicated, and then multiplied by 183/365 to reflect the one-half year period. The multiplier is 20/365 for Actual Class A expenses to reflect the number of days since inception.
4. Reflects expenses after fee waivers and expense reimbursements. Does not include acquired fund fees and expenses.
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Annual Report | franklintempleton.com | ||
Franklin U.S. Government Securities Fund
1. Securities owned by the Fund, but not shares of the Fund, are guaranteed by the U.S. government, its agencies or instrumentalities as to timely payment of principal and interest. The Fund’s yield and share price are not guaranteed and will vary with market conditions.
2. Source: Morningstar.
3. Source: Lipper, a Thomson Reuters Company. For the 12-month period ended 9/30/18, there were 53 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.
The indexes are unmanaged and include reinvestment of any income or distributions. They do not reflect any fees, expenses or sales charges. One cannot invest directly in an index, and an index is not representative of the Fund’s portfolio.
See www.franklintempletondatasources.com for additional data provider information.
The dollar value, number of shares or principal amount, and names of all portfolio holdings are listed in the Fund’s Statement of Investments (SOI).
The SOI begins on page 87.
| franklintempleton.com | Annual Report | 27 | ||
FRANKLIN U.S. GOVERNMENT SECURITIES FUND
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FRANKLIN U.S. GOVERNMENT SECURITIES FUND
Performance Summary as of September 30, 2018
The performance tables and graphs do not reflect any taxes that a shareholder would pay on Fund dividends, capital gain distributions, if any, or any realized gains on the sale of Fund shares. Total return reflects reinvestment of the Fund’s dividends and capital gain distributions, if any, and any unrealized gains or losses. Your dividend income will vary depending on dividends or interest paid by securities in the Fund’s portfolio, adjusted for operating expenses of each class. Capital gain distributions are net profits realized from the sale of portfolio securities.
Performance as of 9/30/181
Cumulative total return excludes sales charges. Average annual total return includes maximum sales charges. Sales charges will vary depending on the size of the investment and the class of share purchased. The maximum is 4.25% and the minimum is 0%. Class A: 4.25% maximum initial sales charge; Advisor Class: no sales charges. For other share classes, visit franklintempleton.com.
| Share Class | Cumulative Total Return2 |
Average Annual Total Return3 | ||
| A4 |
||||
| 1-Year |
-1.42% | -5.61% | ||
| 5-Year |
+5.36% | +0.18% | ||
| 10-Year |
+30.02% | +2.22% | ||
| Advisor |
||||
| 1-Year |
-1.45% | -1.45% | ||
| 5-Year |
+5.96% | +1.17% | ||
| 10-Year |
+31.70% | +2.79% | ||
| Distribution | 30-Day Standardized Yield6 | |||||||
| Share Class | Rate5 | (with waiver) | (without waiver) | |||||
| A7 |
3.22% | —% | —% | |||||
| Advisor |
3.35% | 2.73% | 2.72% | |||||
Performance data represent past performance, which does not guarantee future results. Investment return and principal value will fluctuate, and you may have a gain or loss when you sell your shares. Current performance may differ from figures shown. For most recent month-end performance, go to franklintempleton.com or call (800) 342-5236.
See page 31 for Performance Summary footnotes.
| franklintempleton.com | Annual Report | 29 | ||
FRANKLIN U.S. GOVERNMENT SECURITIES FUND
PERFORMANCE SUMMARY
Total Return Index Comparison for a Hypothetical $10,000 Investment1
Total return represents the change in value of an investment over the periods shown. It includes any applicable maximum sales charge, Fund expenses, account fees and reinvested distributions. The unmanaged indexes include reinvestment of any income or distributions. They differ from the Fund in composition and do not pay management fees or expenses. One cannot invest directly in an index.
Class A (10/1/08–9/30/18)
Advisor Class (10/1/08–9/30/18)
See page 31 for Performance Summary footnotes.
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FRANKLIN U.S. GOVERNMENT SECURITIES FUND
PERFORMANCE SUMMARY
Distributions (10/1/17–9/30/18)
| Share Class | Net Investment Income | |
|
A (9/10/18–9/30/18) |
$0.0164 | |
| A1 | $0.1828 | |
| C | $0.1527 | |
| R | $0.1617 | |
| R6 | $0.1988 | |
| Advisor | $0.1915 |
Total Annual Operating Expenses11
| Share Class | ||
|
A |
0.87% | |
| Advisor | 0.62% |
Each class of shares is available to certain eligible investors and has different annual fees and expenses, as described in the prospectus.
All investments involve risks, including possible loss of principal. The Fund’s share price and yield will be affected by interest rate movements and mortgage prepayments. Bond prices generally move in the opposite direction of interest rates. Thus, as prices of bonds in the Fund adjust to a rise in interest rates, the Fund’s share price may decline. Changes in the financial strength of a bond issuer or in a bond’s credit rating may affect its value. The Fund is actively managed but there is no guarantee that the manager’s investment decisions will produce the desired results. The Fund’s prospectus also includes a description of the main investment risks.
1. The Fund has a fee waiver associated with any investment it makes in a Franklin Templeton money fund and/or other Franklin Templeton fund, contractually guaranteed through 1/31/19. Fund investment results reflect the fee waiver; without this waiver, the results would have been lower.
2. Cumulative total return represents the change in value of an investment over the periods indicated.
3. Average annual total return represents the average annual change in value of an investment over the periods indicated. Return for less than one year, if any, has not been annualized.
4. Effective 9/10/18, Class A shares closed to new investors, were renamed Class A1 shares, and a new Class A share with a different expense structure became available. Class A performance shown has been calculated as follows: (a) for periods prior to 9/10/18, a restated figure is used based on the Fund’s Class A1 performance that includes any Rule 12b-1 rate differential that exists between Class A1 and Class A; and (b) for periods after 9/10/18, actual Class A performance is used, reflecting all charges and fees applicable to that class.
5. Distribution rate is based on an annualization of the respective class’s September dividend and the maximum offering price (NAV for Advisor Class) per share on 9/30/18.
6. The Fund’s 30-day standardized yield is calculated over a trailing 30-day period using the yield to maturity on bonds and/or the dividends accrued on stocks. It may not equal the Fund’s actual income distribution rate, which reflects the Fund’s past dividends paid to shareholders.
7. Share Class A launched on 9/10/18 and yield cannot be produced until this share class has been in existence for 30 days. This value will not be calculated until 10/31/18.
8. Source: Morningstar. Bloomberg Barclays U.S. Government Intermediate Index, the intermediate component of the Bloomberg Barclays U.S. Government Index, which includes public obligations of the U.S. Treasury with at least one year to final maturity and publicly issued debt of U.S. government agencies, quasi-federal corporations, and corporate or foreign debt guaranteed by the U.S. government.
9. Source: Lipper, a Thomson Reuters Company. The Lipper GNMA Funds Classification Average is calculated by averaging the total sum for all funds within the Lipper GNMA Funds classification in the Lipper Open-End underlying funds universe for the period indicated. Lipper GNMA Funds are defined as funds that invest primarily in Government National Mortgage Association securities. For the one-year period ended 9/30/18, there were 53 funds in this category. Lipper calculations do not include sales charges or expense subsidization by a fund’s manager. The Fund’s performance relative to the average may have differed if these or other factors had been considered.
10. Source: Bureau of Labor Statistics, bls.gov/cpi. The Consumer Price Index (CPI) is a commonly used measure of the inflation rate.
11. Figures are as stated in the Fund’s current prospectus and may differ from the expense ratios disclosed in the Your Fund’s Expenses and Financial Highlights sections in this report. In periods of market volatility, assets may decline significantly, causing total annual Fund operating expenses to become higher than the figures shown.
See www.franklintempletondatasources.com for additional data provider information.
| franklintempleton.com | Annual Report | 31 | ||
FRANKLIN U.S. GOVERNMENT SECURITIES FUND
Your Fund’s Expenses
As a Fund shareholder, you can incur two types of costs: (1) transaction costs, including sales charges (loads) on Fund purchases and redemptions; and (2) ongoing Fund costs, including management fees, distribution and service (12b-1) fees, and other Fund expenses. All mutual funds have ongoing costs, sometimes referred to as operating expenses. The table below shows ongoing costs of investing in the Fund and can help you understand these costs and compare them with those of other mutual funds. The table assumes a $1,000 investment held for the six months indicated.
Actual Fund Expenses
The table below provides information about actual account values and actual expenses in the columns under the heading “Actual.” In these columns the Fund’s actual return, which includes the effect of Fund expenses, is used to calculate the “Ending Account Value” for each class of shares. You can estimate the expenses you paid during the period by following these steps (of course, your account value and expenses will differ from those in this illustration): Divide your account value by $1,000 (if your account had an $8,600 value, then $8,600 ÷ $1,000 = 8.6). Then multiply the result by the number in the row for your class of shares under the headings “Actual” and “Expenses Paid During Period” (if Actual Expenses Paid During Period were $7.50, then 8.6 x $7.50 = $64.50). In this illustration, the actual expenses paid this period are $64.50.
Hypothetical Example for Comparison with Other Funds
Under the heading “Hypothetical” in the table, information is provided about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. This information may not be used to estimate the actual ending account balance or expenses you paid for the period, but it can help you compare ongoing costs of investing in the Fund with those of other funds. To do so, compare this 5% hypothetical example for the class of shares you hold with the 5% hypothetical examples that appear in the shareholder reports of other funds.
Please note that expenses shown in the table are meant to highlight ongoing costs and do not reflect any transactional costs. Therefore, information under the heading “Hypothetical” is useful in comparing ongoing costs only, and will not help you compare total costs of owning different funds. In addition, if transactional costs were included, your total costs would have been higher.
| Actual (actual return after expenses) |
Hypothetical (5% annual return before expenses) |
|||||||||||
|
|
|
|||||||||||
| Share Class |
Beginning Account Value 4/1/181 |
Ending Account Value 9/30/18 |
Expenses Paid During Period 4/1/18–9/30/182,3,4 |
Ending Account Value 9/30/18 |
Expenses Paid During Period 4/1/18–9/30/183,4 |
Net Annualized Expense Ratio4 | ||||||
|
|
|
|
| |||||||||
| A |
$1,000 | $ 997.70 | $0.47 | $1,020.76 | $4.36 | 0.86% | ||||||
| A1 |
$1,000 | $ 998.80 | $3.71 | $1,021.36 | $3.75 | 0.74% | ||||||
| C |
$1,000 | $ 996.30 | $6.21 | $1,018.85 | $6.28 | 1.24% | ||||||
| R |
$1,000 | $ 997.00 | $5.46 | $1,019.60 | $5.52 | 1.09% | ||||||
| R6 |
$1,000 | $ 1,000.10 | $2.41 | $1,022.66 | $2.43 | 0.48% | ||||||
| Advisor |
$1,000 | $ 999.50 | $2.96 | $1,022.11 | $2.99 | 0.59% | ||||||
1. For Classes A1, C, R, R6 and Advisor, 4/1/18 for Actual and Hypothetical. For Class A, 9/10/18 for Actual and 4/1/18 for Hypothetical.
2. For Classes A1, C, R, R6 and Advisor, 4/1/18–9/30/18. For Class A, 9/10/18-9/30/18.
3. Expenses are equal to the annualized expense ratio for the six-month period as indicated above—in the far right column—multiplied by the simple average account value over the period indicated, and then multiplied by 183/365 to reflect the one-half year period. The multiplier is 20/365 for Actual Class A expenses to reflect the number of days since inception.
4. Reflects expenses after fee waivers and expense reimbursements. Does not include acquired fund fees and expenses.
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Annual Report | franklintempleton.com | ||
1. Source: Morningstar.
The indexes are unmanaged and include reinvested dividends. They do not reflect any fees, expenses or sales charges. One cannot invest directly in an index, and an index is not representative of the Fund’s portfolio.
2. The utilities sector comprises electric utilities, gas utilities, multi-utilities and water utilities in the SOI.
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 96.
| franklintempleton.com | Annual Report | 33 | ||
FRANKLIN UTILITIES FUND
3. The energy sector comprises oil, gas and consumable fuels in the SOI.
See www.franklintempletondatasources.com for additional data provider information.
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Annual Report | franklintempleton.com | ||
FRANKLIN UTILITIES FUND
Performance Summary as of September 30, 2018
The performance tables and graphs do not reflect any taxes that a shareholder would pay on Fund dividends, capital gain distributions, if any, or any realized gains on the sale of Fund shares. Total return reflects reinvestment of the Fund’s dividends and capital gain distributions, if any, and any unrealized gains or losses. Your dividend income will vary depending on dividends or interest paid by securities in the Fund’s portfolio, adjusted for operating expenses of each class. Capital gain distributions are net profits realized from the sale of portfolio securities.
Performance as of 9/30/181
Cumulative total return excludes sales charges. Average annual total return includes maximum sales charges. Sales charges will vary depending on the size of the investment and the class of share purchased. The maximum is 4.25% and the minimum is 0%. Class A: 4.25% maximum initial sales charge; Advisor Class: no sales charges. For other share classes, visit franklintempleton.com.
| Share Class | Cumulative Total Return2 |
Average Annual Total Return3 | ||
| A4 |
||||
| 1-Year |
+1.68% | -2.64% | ||
| 5-Year |
+58.94% | +8.76% | ||
| 10-Year |
+141.08% | +8.73% | ||
| Advisor |
||||
| 1-Year |
+1.82% | +1.82% | ||
| 5-Year |
+60.23% | +9.89% | ||
| 10-Year |
+144.91% | +9.37% | ||
| Distribution | 30-Day Standardized Yield6 | |||||||
| Share Class | Rate5 | (with waiver) | (without waiver) | |||||
|
A7 |
—% | —% | —% | |||||
| Advisor |
2.70% | 3.00% | 3.00% | |||||
Performance data represent past performance, which does not guarantee future results. Investment return and principal value will fluctuate, and you may have a gain or loss when you sell your shares. Current performance may differ from figures shown. For most recent month-end performance, go to franklintempleton.com or call (800) 342-5236.
See page 38 for Performance Summary footnotes.
| franklintempleton.com | Annual Report | 35 | ||
FRANKLIN UTILITIES FUND
PERFORMANCE SUMMARY
Total Return Index Comparison for a Hypothetical $10,000 Investment1
Total return represents the change in value of an investment over the periods shown. It includes any applicable maximum sales charge, Fund expenses, account fees and reinvested distributions. The unmanaged indexes include reinvestment of any income or distributions. They differ from the Fund in composition and do not pay management fees or expenses. One cannot invest directly in an index.
Class A (10/1/08–9/30/18)
Advisor Class (10/1/08–9/30/18)
See page 38 for Performance Summary footnotes.
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Annual Report | franklintempleton.com | ||
FRANKLIN UTILITIES FUND
PERFORMANCE SUMMARY
Net Asset Value
| Share Class (Symbol) | 9/30/18 | 9/10/18 | 9/30/17 | Change | ||||
| A (FKUQX) | $18.66 | $19.16 | N/A | -$ 0.50 | ||||
| A1 (FKUTX) | $18.66 | N/A | $19.18 | -$ 0.52 | ||||
| C (FRUSX) | $18.57 | N/A | $19.09 | -$ 0.52 | ||||
| R (FRURX) | $18.59 | N/A | $19.11 | -$ 0.52 | ||||
| R6 (FUFRX) | $18.81 | N/A | $19.32 | -$ 0.51 | ||||
| Advisor (FRUAX) | $18.81 | N/A | $19.32 | -$ 0.51 | ||||
| Distributions (10/1/17–9/30/18) | ||||||||
| Share Class | Net Investment Income |
Long-Term Capital Gain |
Total | |||||
| A (9/10/18–9/30/18) | $ — | $ — | $ — | |||||
| A1 | $0.5355 | $0.3087 | $0.8442 | |||||
| C | $0.4422 | $0.3087 | $0.7509 | |||||
| R | $0.4701 | $0.3087 | $0.7788 | |||||
| R6 | $0.5813 | $0.3087 | $0.8900 | |||||
| Advisor | $0.5634 | $0.3087 | $0.8721 | |||||
| Total Annual Operating Expenses9 | ||||||||
| Share Class | ||||||||
| A | 0.83% | |||||||
| Advisor | 0.58% | |||||||
See page 38 for Performance Summary footnotes.
| franklintempleton.com | Annual Report | 37 | ||
FRANKLIN UTILITIES FUND
PERFORMANCE SUMMARY
Each class of shares is available to certain eligible investors and has different annual fees and expenses, as described in the prospectus.
All investments involve risks, including possible loss of principal. Investing in a fund concentrating in the utilities sector involves special risks, including increased susceptibility to adverse economic and regulatory developments affecting the sector. Stocks historically have outperformed other asset classes over the long term, but tend to fluctuate more dramatically over the short term. Securities issued by utility companies have been historically sensitive to interest rate changes. When interest rates fall, utility securities prices, and thus a utilities fund’s share price, tend to rise; when interest rates rise, their prices generally fall. The Fund is actively managed but there is no guarantee that the manager’s investment decisions will produce the desired results. The Fund’s prospectus also includes a description of the main investment risks.
1. The Fund has a fee waiver associated with any investment it makes in a Franklin Templeton money fund and/or other Franklin Templeton fund, contractually guaranteed through 1/31/19. Fund investment results reflect the fee waiver; without this waiver, the results would have been lower.
2. Cumulative total return represents the change in value of an investment over the periods indicated.
3. Average annual total return represents the average annual change in value of an investment over the periods indicated. Return for less than one year, if any, has not been annualized.
4. Effective 9/10/18, Class A shares closed to new investors, were renamed Class A1 shares, and a new Class A share with a different expense structure became available. Class A performance shown has been calculated as follows: (a) for periods prior to 9/10/18, a restated figure is used based on the Fund’s Class A1 performance that includes any Rule 12b-1 rate differential that exists between Class A1 and Class A; and (b) for periods after 9/10/18, actual Class A performance is used, reflecting all charges and fees applicable to that class.
5. Distribution rate is based on an annualization of the respective class’s current quarterly dividend and the maximum offering price (NAV for Advisor Class) per share on 9/30/18.
6. The Fund’s 30-day standardized yield is calculated over a trailing 30-day period using the yield to maturity on bonds and/or the dividends accrued on stocks. It may not equal the Fund’s actual income distribution rate, which reflects the Fund’s past dividends paid to shareholders.
7. Share Class A launched on 9/10/18 and yield cannot be produced until this share class has been in existence for 30 days. This value will not be calculated until 10/31/18.
8. Source: Morningstar. The S&P 500 is a market capitalization-weighted index of 500 stocks designed to measure total U.S. equity market performance. The S&P 500 Utilities Index is market capitalization weighted and consists of all utility stocks in the S&P 500.
9. Figures are as stated in the Fund’s current prospectus and may differ from the expense ratios disclosed in the Your Fund’s Expenses and Financial Highlights sections in this report. In periods of market volatility, assets may decline significantly, causing total annual Fund operating expenses to become higher than the figures shown.
See www.franklintempletondatasources.com for additional data provider information.
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Annual Report | franklintempleton.com | ||
FRANKLIN UTILITIES FUND
Your Fund’s Expenses
As a Fund shareholder, you can incur two types of costs: (1) transaction costs, including sales charges (loads) on Fund purchases and redemptions; and (2) ongoing Fund costs, including management fees, distribution and service (12b-1) fees, and other Fund expenses. All mutual funds have ongoing costs, sometimes referred to as operating expenses. The table below shows ongoing costs of investing in the Fund and can help you understand these costs and compare them with those of other mutual funds. The table assumes a $1,000 investment held for the six months indicated.
Actual Fund Expenses
The table below provides information about actual account values and actual expenses in the columns under the heading “Actual.” In these columns the Fund’s actual return, which includes the effect of Fund expenses, is used to calculate the “Ending Account Value” for each class of shares. You can estimate the expenses you paid during the period by following these steps (of course, your account value and expenses will differ from those in this illustration): Divide your account value by $1,000 (if your account had an $8,600 value, then $8,600 ÷ $1,000 = 8.6). Then multiply the result by the number in the row for your class of shares under the headings “Actual” and “Expenses Paid During Period” (if Actual Expenses Paid During Period were $7.50, then 8.6 x $7.50 = $64.50). In this illustration, the actual expenses paid this period are $64.50.
Hypothetical Example for Comparison with Other Funds
Under the heading “Hypothetical” in the table, information is provided about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. This information may not be used to estimate the actual ending account balance or expenses you paid for the period, but it can help you compare ongoing costs of investing in the Fund with those of other funds. To do so, compare this 5% hypothetical example for the class of shares you hold with the 5% hypothetical examples that appear in the shareholder reports of other funds.
Please note that expenses shown in the table are meant to highlight ongoing costs and do not reflect any transactional costs. Therefore, information under the heading “Hypothetical” is useful in comparing ongoing costs only, and will not help you compare total costs of owning different funds. In addition, if transactional costs were included, your total costs would have been higher.
| Actual (actual return after expenses) |
Hypothetical (5% annual return before expenses) |
|||||||||||
|
|
|
|||||||||||
| Share Class |
Beginning Account Value 4/1/181 |
Ending Account Value 9/30/18 |
Expenses Paid During 4/1/18–9/30/182,3,4 |
Ending Account Value 9/30/18 |
Expenses Paid During Period 4/1/18–9/30/183,4 |
Net Annualized Expense Ratio4 | ||||||
|
|
|
|
| |||||||||
| A |
$1,000 | $ 973.90 | $0.45 | $1,020.86 | $4.26 | 0.84% | ||||||
| A1 |
$1,000 | $1,059.10 | $3.87 | $1,021.31 | $3.80 | 0.75% | ||||||
| C |
$1,000 | $1,057.40 | $6.45 | $1,018.80 | $6.33 | 1.25% | ||||||
| R |
$1,000 | $1,057.50 | $5.67 | $1,019.55 | $5.57 | 1.10% | ||||||
| R6 |
$1,000 | $1,061.10 | $2.53 | $1,022.61 | $2.48 | 0.49% | ||||||
| Advisor |
$1,000 | $1,060.60 | $3.10 | $1,022.06 | $3.04 | 0.60% | ||||||
1. For Classes A1, C, R, R6 and Advisor, 4/1/18 for Actual and Hypothetical. For Class A, 9/10/18 for Actual and 4/1/18 for Hypothetical.
2. For Classes A1, C, R, R6 and Advisor, 4/1/18–9/30/18. For Class A, 9/10/18–9/30/18.
3. Expenses are equal to the annualized expense ratio for the six-month period as indicated above—in the far right column—multiplied by the simple average account value over the period indicated, and then multiplied by 183/365 to reflect the one-half year period. The multiplier is 20/365 for Actual Class A expenses to reflect the number of days since inception.
4. Reflects expenses after fee waivers and expense reimbursements. Does not include acquired fund fees and expenses.
| franklintempleton.com | Annual Report | 39 | ||
FRANKLIN CUSTODIAN FUNDS
Franklin DynaTech Fund
| Year Ended September 30, | ||||||||||||||||||||
| 2018 | 2017 | 2016 | 2015 | 2014 | ||||||||||||||||
|
|
||||||||||||||||||||
| Class A |
||||||||||||||||||||
| Per share operating performance |
||||||||||||||||||||
| (for a share outstanding throughout the year) |
||||||||||||||||||||
| Net asset value, beginning of year |
$63.10 | $52.05 | $46.04 | $46.08 | $42.13 | |||||||||||||||
|
|
|
|||||||||||||||||||
| Income from investment operationsa: |
||||||||||||||||||||
| Net investment income (loss)b |
(0.23 | ) | (0.18 | ) | (0.14 | ) | (0.21 | ) | (0.18 | ) | ||||||||||
| Net realized and unrealized gains (losses) |
19.45 | 12.92 | 7.35 | 1.78 | 5.94 | |||||||||||||||
|
|
|
|||||||||||||||||||
| Total from investment operations |
19.22 | 12.74 | 7.21 | 1.57 | 5.76 | |||||||||||||||
|
|
|
|||||||||||||||||||
| Less distributions from net realized gains |
(1.16 | ) | (1.69 | ) | (1.20 | ) | (1.61 | ) | (1.81 | ) | ||||||||||
|
|
|
|||||||||||||||||||
| Net asset value, end of year |
$81.16 | $63.10 | $52.05 | $46.04 | $46.08 | |||||||||||||||
|
|
|
|||||||||||||||||||
| Total returnc |
30.88% | 25.67% | 15.73% | 3.40% | 13.98% | |||||||||||||||
| Ratios to average net assets |
||||||||||||||||||||
| Expenses before waiver and payments by affiliates |
0.86% | 0.92% | 0.91% | 0.89% | 0.89% | |||||||||||||||
| Expenses net of waiver and payments by affiliates |
0.86% | d,e | 0.91% | d | 0.90% | 0.89% | e | 0.89% | d,e | |||||||||||
| Net investment income (loss) |
(0.32)% | (0.33)% | (0.30)% | (0.44)% | (0.41)% | |||||||||||||||
| Supplemental data |
||||||||||||||||||||
| Net assets, end of year (000’s) |
$3,741,562 | $2,498,393 | $2,123,082 | $1,857,570 | $1,504,338 | |||||||||||||||
| Portfolio turnover rate |
17.22% | 19.85% | 22.42% | 31.02% | 26.43% | |||||||||||||||
aThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and repurchases of the Fund’s shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
bBased on average daily shares outstanding.
cTotal return does not reflect sales commissions or contingent deferred sales charges, if applicable.
dBenefit of expense reduction rounds to less than 0.01%.
eBenefit of waiver and payments by affiliates rounds to less than 0.01%.
| 40 |
Annual Report | The accompanying notes are an integral part of these financial statements. | franklintempleton.com | ||
FRANKLIN CUSTODIAN FUNDS
FINANCIAL HIGHLIGHTS
Franklin DynaTech Fund (continued)
| Year Ended September 30, | ||||||||||||||||||||
| 2018 | 2017 | 2016 | 2015 | 2014 | ||||||||||||||||
|
|
||||||||||||||||||||
| Class C |
||||||||||||||||||||
| Per share operating performance |
||||||||||||||||||||
| (for a share outstanding throughout the year) |
||||||||||||||||||||
| Net asset value, beginning of year |
$53.49 | $44.71 | $40.00 | $40.53 | $37.53 | |||||||||||||||
|
|
|
|||||||||||||||||||
| Income from investment operationsa: |
||||||||||||||||||||
| Net investment income (loss)b |
(0.65 | ) | (0.50 | ) | (0.43 | ) | (0.50 | ) | (0.46 | ) | ||||||||||
| Net realized and unrealized gains (losses) |
16.39 | 10.97 | 6.34 | 1.58 | 5.27 | |||||||||||||||
|
|
|
|||||||||||||||||||
| Total from investment operations |
15.74 | 10.47 | 5.91 | 1.08 | 4.81 | |||||||||||||||
|
|
|
|||||||||||||||||||
| Less distributions from net realized gains |
(1.16 | ) | (1.69 | ) | (1.20 | ) | (1.61 | ) | (1.81 | ) | ||||||||||
|
|
|
|||||||||||||||||||
| Net asset value, end of year. |
$68.07 | $53.49 | $44.71 | $40.00 | $40.53 | |||||||||||||||
|
|
|
|||||||||||||||||||
| Total returnc |
29.93% | 24.72% | 14.86% | 2.63% | 13.13% | |||||||||||||||
| Ratios to average net assets |
||||||||||||||||||||
| Expenses before waiver and payments by affiliates |
1.61% | 1.67% | 1.66% | 1.64% | 1.64% | |||||||||||||||
| Expenses net of waiver and payments by affiliates |
1.61% | d,e | 1.66% | d | 1.65% | 1.64% | e | 1.64% | d,e | |||||||||||
| Net investment income (loss) |
(1.07)% | (1.08)% | (1.05)% | (1.19)% | (1.16)% | |||||||||||||||
| Supplemental data |
||||||||||||||||||||
| Net assets, end of year (000’s) |
$611,221 | $374,502 | $318,896 | $270,961 | $212,961 | |||||||||||||||
| Portfolio turnover rate |
17.22% | 19.85% | 22.42% | 31.02% | 26.43% | |||||||||||||||
aThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and repurchases of the Fund’s shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
bBased on average daily shares outstanding.
cTotal return does not reflect sales commissions or contingent deferred sales charges, if applicable.
dBenefit of expense reduction rounds to less than 0.01%.
eBenefit of waiver and payments by affiliates rounds to less than 0.01%.
| franklintempleton.com | The accompanying notes are an integral part of these financial statements. | Annual Report | 41 | ||
FRANKLIN CUSTODIAN FUNDS
FINANCIAL HIGHLIGHTS
Franklin DynaTech Fund (continued)
| Year Ended September 30, | ||||||||||||||||||||
| 2018 | 2017 | 2016 | 2015 | 2014 | ||||||||||||||||
|
|
||||||||||||||||||||
| Class R |
||||||||||||||||||||
| Per share operating performance |
||||||||||||||||||||
| (for a share outstanding throughout the year) |
||||||||||||||||||||
| Net asset value, beginning of year |
$61.51 | $50.90 | $45.16 | $45.35 | $41.58 | |||||||||||||||
|
|
|
|||||||||||||||||||
| Income from investment operationsa: |
||||||||||||||||||||
| Net investment income (loss)b |
(0.40 | ) | (0.31 | ) | (0.26 | ) | (0.32 | ) | (0.29 | ) | ||||||||||
| Net realized and unrealized gains (losses) |
18.93 | 12.61 | 7.20 | 1.74 | 5.87 | |||||||||||||||
|
|
|
|||||||||||||||||||
| Total from investment operations |
18.53 | 12.30 | 6.94 | 1.42 | 5.58 | |||||||||||||||
|
|
|
|||||||||||||||||||
| Less distributions from net realized gains |
(1.16 | ) | (1.69 | ) | (1.20 | ) | (1.61 | ) | (1.81 | ) | ||||||||||
|
|
|
|||||||||||||||||||
| Net asset value, end of year. |
$78.88 | $61.51 | $50.90 | $45.16 | $45.35 | |||||||||||||||
|
|
|
|||||||||||||||||||
| Total return |
30.57% | 25.36% | 15.43% | 3.11% | 13.72% | |||||||||||||||
| Ratios to average net assets |
||||||||||||||||||||
| Expenses before waiver and payments by affiliates |
1.11% | 1.17% | 1.16% | 1.14% | 1.14% | |||||||||||||||
| Expenses net of waiver and payments by affiliates |
1.11% | c,d | 1.16% | c | 1.15% | 1.14% | d | 1.14% | c,d | |||||||||||
| Net investment income (loss) |
(0.57)% | (0.58)% | (0.55)% | (0.69)% | (0.66)% | |||||||||||||||
| Supplemental data |
||||||||||||||||||||
| Net assets, end of year (000’s) |
$95,925 | $47,860 | $38,862 | $43,001 | $45,230 | |||||||||||||||
| Portfolio turnover rate |
17.22% | 19.85% | 22.42% | 31.02% | 26.43% | |||||||||||||||
aThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and repurchases of the Fund’s shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
bBased on average daily shares outstanding.
cBenefit of expense reduction rounds to less than 0.01%.
dBenefit of waiver and payments by affiliates rounds to less than 0.01%.
| 42 |
Annual Report | The accompanying notes are an integral part of these financial statements. | franklintempleton.com | ||
FRANKLIN CUSTODIAN FUNDS
FINANCIAL HIGHLIGHTS
Franklin DynaTech Fund (continued)
| Year Ended September 30, | ||||||||||||||||||||
| 2018 | 2017 | 2016 | 2015 | 2014 | ||||||||||||||||
|
|
||||||||||||||||||||
| Class R6 |
||||||||||||||||||||
| Per share operating performance |
||||||||||||||||||||
| (for a share outstanding throughout the year) |
||||||||||||||||||||
| Net asset value, beginning of year |
$65.28 | $53.56 | $47.15 | $46.97 | $42.74 | |||||||||||||||
|
|
|
|||||||||||||||||||
| Income from investment operationsa: |
||||||||||||||||||||
| Net investment income (loss)b |
0.04 | 0.06 | 0.06 | (0.01 | ) | (0.01 | ) | |||||||||||||
| Net realized and unrealized gains (losses) |
20.15 | 13.35 | 7.55 | 1.80 | 6.05 | |||||||||||||||
|
|
|
|||||||||||||||||||
| Total from investment operations |
20.19 | 13.41 | 7.61 | 1.79 | 6.04 | |||||||||||||||
|
|
|
|||||||||||||||||||
| Less distributions from net realized gains |
(1.16 | ) | (1.69 | ) | (1.20 | ) | (1.61 | ) | (1.81 | ) | ||||||||||
|
|
|
|||||||||||||||||||
| Net asset value, end of year |
$84.31 | $65.28 | $53.56 | $47.15 | $46.97 | |||||||||||||||
|
|
|
|||||||||||||||||||
| Total return |
31.38% | 26.17% | 16.21% | 3.81% | 14.45% | |||||||||||||||
| Ratios to average net assets |
||||||||||||||||||||
| Expenses before waiver and payments by affiliates |
0.50% | 0.49% | 0.49% | 0.48% | 0.49% | |||||||||||||||
| Expenses net of waiver and payments by affiliates |
0.50% | c,d | 0.48% | c | 0.48% | 0.48% | d | 0.49% | c,d | |||||||||||
| Net investment income (loss) |
0.04% | 0.10% | 0.12% | (0.03)% | (0.01)% | |||||||||||||||
| Supplemental data |
||||||||||||||||||||
| Net assets, end of year (000’s) |
$1,688,595 | $457,846 | $359,505 | $362,627 | $342,466 | |||||||||||||||
| Portfolio turnover rate |
17.22% | 19.85% | 22.42% | 31.02% | 26.43% | |||||||||||||||
aThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and repurchases of the Fund’s shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
bBased on average daily shares outstanding.
cBenefit of expense reduction rounds to less than 0.01%.
dBenefit of waiver and payments by affiliates rounds to less than 0.01%.
| franklintempleton.com | The accompanying notes are an integral part of these financial statements. | Annual Report | 43 | ||
FRANKLIN CUSTODIAN FUNDS
FINANCIAL HIGHLIGHTS
Franklin DynaTech Fund (continued)
| Year Ended September 30, | ||||||||||||||||||||
| 2018 | 2017 | 2016 | 2015 | 2014 | ||||||||||||||||
|
|
||||||||||||||||||||
| Advisor Class |
||||||||||||||||||||
| Per share operating performance |
||||||||||||||||||||
| (for a share outstanding throughout the year) |
||||||||||||||||||||
| Net asset value, beginning of year |
$64.78 | $53.25 | $46.96 | $46.87 | $42.71 | |||||||||||||||
|
|
|
|||||||||||||||||||
| Income from investment operationsa: |
||||||||||||||||||||
| Net investment income (loss)b |
(0.06 | ) | (0.04 | ) | (0.03 | ) | (0.09 | ) | (0.07 | ) | ||||||||||
| Net realized and unrealized gains (losses) |
20.00 | 13.26 | 7.52 | 1.79 | 6.04 | |||||||||||||||
|
|
|
|||||||||||||||||||
| Total from investment operations |
19.94 | 13.22 | 7.49 | 1.70 | 5.97 | |||||||||||||||
|
|
|
|||||||||||||||||||
| Less distributions from net realized gains |
(1.16 | ) | (1.69 | ) | (1.20 | ) | (1.61 | ) | (1.81 | ) | ||||||||||
|
|
|
|||||||||||||||||||
| Net asset value, end of year |
$83.56 | $64.78 | $53.25 | $46.96 | $46.87 | |||||||||||||||
|
|
|
|||||||||||||||||||
| Total return |
31.21% | 25.98% | 16.02% | 3.62% | 14.29% | |||||||||||||||
| Ratios to average net assets |
||||||||||||||||||||
| Expenses before waiver and payments by affiliates |
0.61% | 0.67% | 0.66% | 0.64% | 0.64% | |||||||||||||||
| Expenses net of waiver and payments by affiliates |
0.61% | c,d | 0.66% | c | 0.65% | 0.64% | d | 0.64% | c,d | |||||||||||
| Net investment income (loss) |
(0.07)% | (0.08)% | (0.05)% | (0.19)% | (0.16)% | |||||||||||||||
| Supplemental data |
||||||||||||||||||||
| Net assets, end of year (000’s) |
$680,066 | $712,762 | $203,443 | $176,090 | $159,180 | |||||||||||||||
| Portfolio turnover rate |
17.22% | 19.85% | 22.42% | 31.02% | 26.43% | |||||||||||||||
aThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and repurchases of the Fund’s shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
bBased on average daily shares outstanding.
cBenefit of expense reduction rounds to less than 0.01%.
dBenefit of waiver and payments by affiliates rounds to less than 0.01%.
| 44 |
Annual Report | The accompanying notes are an integral part of these financial statements. | franklintempleton.com | ||
FRANKLIN CUSTODIAN FUNDS
Statement of Investments, September 30, 2018
Franklin DynaTech Fund
| Country | Shares | Value | ||||||||
|
Common Stocks 97.8% |
||||||||||
| Aerospace & Defense 3.8% |
||||||||||
| The Boeing Co. |
United States | 250,000 | $ | 92,975,000 | ||||||
| Heico Corp. |
United States | 650,000 | 60,196,500 | |||||||
| Raytheon Co. |
United States | 500,000 | 103,330,000 | |||||||
|
|
|
|||||||||
| 256,501,500 | ||||||||||
|
|
|
|||||||||
| Air Freight & Logistics 0.7% |
||||||||||
| FedEx Corp. |
United States | 200,000 | 48,158,000 | |||||||
|
|
|
|||||||||
| Biotechnology 2.0% |
||||||||||
| Amgen Inc. |
United States | 80,000 | 16,583,200 | |||||||
| aAudentes Therapeutics Inc. |
United States | 20,000 | 791,800 | |||||||
| aBluebird Bio Inc. |
United States | 100,000 | 14,600,000 | |||||||
| aGenomic Health Inc. |
United States | 100,000 | 7,022,000 | |||||||
| aHomology Medicines Inc. |
United States | 30,000 | 685,800 | |||||||
| aNeurocrine Biosciences Inc. |
United States | 300,000 | 36,885,000 | |||||||
| aPTC Therapeutics Inc. |
United States | 150,000 | 7,050,000 | |||||||
| aRegeneron Pharmaceuticals Inc. |
United States | 50,000 | 20,202,000 | |||||||
| aSarepta Therapeutics Inc. |
United States | 175,000 | 28,264,250 | |||||||
| auniQure NV |
Netherlands | 100,000 | 3,639,000 | |||||||
|
|
|
|||||||||
| 135,723,050 | ||||||||||
|
|
|
|||||||||
| Capital Markets 3.9% |
||||||||||
| The Charles Schwab Corp. |
United States | 1,400,000 | 68,810,000 | |||||||
| Intercontinental Exchange Inc. |
United States | 750,000 | 56,167,500 | |||||||
| Moody’s Corp. |
United States | 350,000 | 58,520,000 | |||||||
| MSCI Inc. |
United States | 450,000 | 79,834,500 | |||||||
| Nasdaq Inc. |
United States | 25,000 | 2,145,000 | |||||||
|
|
|
|||||||||
| 265,477,000 | ||||||||||
|
|
|
|||||||||
| Communications Equipment 0.4% |
||||||||||
| aArista Networks Inc. |
United States | 50,000 | 13,293,000 | |||||||
| aPalo Alto Networks Inc. |
United States | 60,000 | 13,515,600 | |||||||
|
|
|
|||||||||
| 26,808,600 | ||||||||||
|
|
|
|||||||||
| Diversified Consumer Services 0.4% |
||||||||||
| aBright Horizons Family Solutions Inc. |
United States | 250,000 | 29,460,000 | |||||||
|
|
|
|||||||||
| Electrical Equipment 0.2% |
||||||||||
| Nidec Corp. |
Japan | 100,000 | 14,382,507 | |||||||
|
|
|
|||||||||
| Electronic Equipment, Instruments & Components 1.9% |
||||||||||
| Amphenol Corp., A |
United States | 700,000 | 65,814,000 | |||||||
| Cognex Corp. |
United States | 400,000 | 22,328,000 | |||||||
| Keyence Corp. |
Japan | 75,000 | 43,543,491 | |||||||
|
|
|
|||||||||
| 131,685,491 | ||||||||||
|
|
|
|||||||||
| Entertainment 3.7% |
||||||||||
| Activision Blizzard Inc. |
United States | 750,000 | 62,392,500 | |||||||
| aElectronic Arts Inc. |
United States | 500,000 | 60,245,000 | |||||||
| aNetflix Inc. |
United States | 250,000 | 93,532,500 | |||||||
| aSea Ltd., ADR |
Thailand | 50,000 | 691,500 | |||||||
| aSpotify Technology SA |
United States | 120,000 | 21,699,600 | |||||||
| aTake-Two Interactive Software Inc. |
United States | 100,000 | 13,799,000 | |||||||
|
|
|
|||||||||
| 252,360,100 | ||||||||||
|
|
|
|||||||||
| franklintempleton.com | Annual Report | 45 | ||
FRANKLIN CUSTODIAN FUNDS
STATEMENT OF INVESTMENTS
Franklin DynaTech Fund (continued)
| Country | Shares | Value | ||||||||
|
Common Stocks (continued) |
||||||||||
| Equity Real Estate Investment Trusts (REITs) 2.4% |
||||||||||
| American Tower Corp. |
United States | 400,000 | $ | 58,120,000 | ||||||
| Equinix Inc. |
United States | 100,000 | 43,289,000 | |||||||
| aSBA Communications Corp., A |
United States | 400,000 | 64,252,000 | |||||||
|
|
|
|||||||||
| 165,661,000 | ||||||||||
|
|
|
|||||||||
| Health Care Equipment & Supplies 9.4% |
||||||||||
| Abbott Laboratories |
United States | 1,000,000 | 73,360,000 | |||||||
| aABIOMED Inc. |
United States | 140,000 | 62,965,000 | |||||||
| aAlign Technology Inc. |
United States | 70,000 | 27,385,400 | |||||||
| Becton, Dickinson and Co. |
United States | 250,000 | 65,250,000 | |||||||
| Danaher Corp. |
United States | 500,000 | 54,330,000 | |||||||
| aEdwards Lifesciences Corp. |
United States | 300,000 | 52,230,000 | |||||||
| aIDEXX Laboratories Inc. |
United States | 450,000 | 112,347,000 | |||||||
| aIntuitive Surgical Inc. |
United States | 150,000 | 86,100,000 | |||||||
| aiRhythm Technologies Inc. |
United States | 315,000 | 29,817,900 | |||||||
| aNeuronetics Inc. |
United States | 160,800 | 5,155,248 | |||||||
| ResMed Inc. |
United States | 75,000 | 8,650,500 | |||||||
| aSiemens Healthineers AG |
Germany | 250,000 | 10,992,746 | |||||||
| Stryker Corp. |
United States | 300,000 | 53,304,000 | |||||||
|
|
|
|||||||||
| 641,887,794 | ||||||||||
|
|
|
|||||||||
| Health Care Providers & Services 1.4% |
||||||||||
| UnitedHealth Group Inc. |
United States | 350,000 | 93,114,000 | |||||||
|
|
|
|||||||||
| Health Care Technology 1.3% |
||||||||||
| aInspire Medical Systems Inc. |
United States | 350,000 | 14,728,000 | |||||||
| aVeeva Systems Inc. |
United States | 700,000 | 76,209,000 | |||||||
|
|
|
|||||||||
| 90,937,000 | ||||||||||
|
|
|
|||||||||
| Industrial Conglomerates 0.3% |
||||||||||
| Roper Technologies Inc. |
United States | 75,000 | 22,215,750 | |||||||
|
|
|
|||||||||
| Interactive Media & Services 9.3% |
||||||||||
| aAlphabet Inc., A |
United States | 200,000 | 241,416,000 | |||||||
| aAlphabet Inc., C |
United States | 62,170 | 74,198,030 | |||||||
| aCarGurus Inc. |
United States | 375,000 | 20,883,750 | |||||||
| aEventbrite Inc., A |
United States | 113,500 | 4,309,595 | |||||||
| aFacebook Inc., A. |
United States | 1,000,000 | 164,460,000 | |||||||
| aMatch Group Inc. |
United States | 350,000 | 20,268,500 | |||||||
| a,bMeituan Dianping, Reg S, B |
China | 680,400 | 5,970,899 | |||||||
| Tencent Holdings Ltd. |
China | 2,500,000 | 103,211,961 | |||||||
|
|
|
|||||||||
| 634,718,735 | ||||||||||
|
|
|
|||||||||
| Internet & Direct Marketing Retail 11.3% |
||||||||||
| aAlibaba Group Holding Ltd., ADR |
China | 500,000 | 82,380,000 | |||||||
| aAmazon.com Inc. |
United States | 250,000 | 500,750,000 | |||||||
| aBooking Holdings Inc. |
United States | 20,000 | 39,680,000 | |||||||
| aDelivery Hero SE |
Germany | 350,000 | 16,830,293 | |||||||
| aEtsy Inc. |
United States | 500,000 | 25,690,000 | |||||||
| aGrubHub Inc. |
United States | 300,000 | 41,586,000 | |||||||
| aJust Eat PLC |
United Kingdom | 100,000 | 873,639 | |||||||
| MercadoLibre Inc. |
Argentina | 100,000 | 34,047,000 | |||||||
| aMercari Inc. |
Japan | 200,000 | 6,608,298 | |||||||
| Zozo Inc. |
Japan | 750,000 | 22,702,275 | |||||||
|
|
|
|||||||||
| 771,147,505 | ||||||||||
|
|
|
|||||||||
| 46 |
Annual Report | franklintempleton.com | ||
FRANKLIN CUSTODIAN FUNDS
STATEMENT OF INVESTMENTS
Franklin DynaTech Fund (continued)
| Country | Shares | Value | ||||||||
|
Common Stocks (continued) |
||||||||||
| IT Services 11.1% |
||||||||||
| aAdyen NV |
Netherlands | 65,000 | $ | 53,049,612 | ||||||
| aFiserv Inc. |
United States | 500,000 | 41,190,000 | |||||||
| aGoDaddy Inc., A |
United States | 500,000 | 41,695,000 | |||||||
| aI3 Verticals Inc., A |
United States | 277,300 | 6,372,354 | |||||||
| aInterXion Holding NV |
Netherlands | 500,000 | 33,650,000 | |||||||
| Mastercard Inc., A |
United States | 1,000,000 | 222,610,000 | |||||||
| aMongoDB Inc. |
United States | 325,000 | 26,503,750 | |||||||
| aPagSeguro Digital Ltd. |
Brazil | 350,000 | 9,684,500 | |||||||
| aPayPal Holdings Inc. |
United States | 600,000 | 52,704,000 | |||||||
| aShopify Inc., A |
Canada | 350,000 | 57,487,138 | |||||||
| aSquare Inc., A |
United States | 650,000 | 64,356,500 | |||||||
| Visa Inc., A |
United States | 1,000,000 | 150,090,000 | |||||||
|
|
|
|||||||||
| 759,392,854 | ||||||||||
|
|
|
|||||||||
| Life Sciences Tools & Services 2.2% |
||||||||||
| aIllumina Inc. |
United States | 225,000 | 82,588,500 | |||||||
| Thermo Fisher Scientific Inc. |
United States | 200,000 | 48,816,000 | |||||||
| aWaters Corp. |
United States | 100,000 | 19,468,000 | |||||||
|
|
|
|||||||||
| 150,872,500 | ||||||||||
|
|
|
|||||||||
| Machinery 1.2% |
||||||||||
| Fortive Corp. |
United States | 1,000,000 | 84,200,000 | |||||||
|
|
|
|||||||||
| Media 0.3% |
||||||||||
| aLiberty Broadband Corp., A |
United States | 200,000 | 16,866,000 | |||||||
|
|
|
|||||||||
| Pharmaceuticals 0.3% |
||||||||||
| aElanco Animal Health Inc. |
United States | 247,800 | 8,645,742 | |||||||
| Merck KGaA |
Germany | 100,000 | 10,332,455 | |||||||
|
|
|
|||||||||
| 18,978,197 | ||||||||||
|
|
|
|||||||||
| Professional Services 1.2% |
||||||||||
| aCoStar Group Inc. |
United States | 150,000 | 63,126,000 | |||||||
| TransUnion |
United States | 200,000 | 14,716,000 | |||||||
|
|
|
|||||||||
| 77,842,000 | ||||||||||
|
|
|
|||||||||
| Real Estate Management & Development 0.0%† |
||||||||||
| aRedfin Corp. |
United States | 50,000 | 935,000 | |||||||
|
|
|
|||||||||
| Semiconductors & Semiconductor Equipment 6.1% |
||||||||||
| Analog Devices Inc. |
United States | 500,000 | 46,230,000 | |||||||
| ASML Holding NV, N.Y. shs |
Netherlands | 200,000 | 37,604,000 | |||||||
| Intel Corp. |
United States | 1,000,000 | 47,290,000 | |||||||
| KLA-Tencor Corp. |
United States | 150,000 | 15,256,500 | |||||||
| Lam Research Corp. |
United States | 350,000 | 53,095,000 | |||||||
| Monolithic Power Systems |
United States | 350,000 | 43,935,500 | |||||||
| NVIDIA Corp. |
United States | 425,000 | 119,433,500 | |||||||
| Xilinx Inc. |
United States | 625,000 | 50,106,250 | |||||||
|
|
|
|||||||||
| 412,950,750 | ||||||||||
|
|
|
|||||||||
| Software 21.4% |
||||||||||
| a2U Inc. |
United States | 500,000 | 37,595,000 | |||||||
| aAdobe Systems Inc. |
United States | 500,000 | 134,975,000 | |||||||
| aAltair Engineering Inc. |
United States | 500,000 | 21,725,000 | |||||||
| aAlteryx Inc. |
United States | 225,000 | 12,872,250 | |||||||
| aANSYS Inc. |
United States | 200,000 | 37,336,000 | |||||||
| aAspen Technology Inc. |
United States | 500,000 | 56,955,000 | |||||||
| franklintempleton.com | Annual Report | 47 | ||
FRANKLIN CUSTODIAN FUNDS
STATEMENT OF INVESTMENTS
Franklin DynaTech Fund (continued)
| Country | Shares | Value | ||||||||
|
Common Stocks (continued) |
||||||||||
| Software (continued) |
||||||||||
| aAtlassian Corp. PLC |
United States | 500,000 | $ | 48,070,000 | ||||||
| aAutodesk Inc. |
United States | 400,000 | 62,444,000 | |||||||
| aAvalara Inc. |
United States | 110,000 | 3,842,300 | |||||||
| aBlackline Inc. |
United States | 350,000 | 19,764,500 | |||||||
| aCadence Design Systems Inc. |
United States | 500,000 | 22,660,000 | |||||||
| Constellation Software Inc. |
Canada | 5,000 | 3,674,403 | |||||||
| aDocuSign Inc. |
United States | 500,000 | 26,285,000 | |||||||
| aDropbox Inc., A |
United States | 150,000 | 4,024,500 | |||||||
| aGuidewire Software Inc. |
United States | 500,000 | 50,505,000 | |||||||
| aHubspot Inc. |
United States | 250,000 | 37,737,500 | |||||||
| Intuit Inc. |
United States | 300,000 | 68,220,000 | |||||||
| Microsoft Corp. |
United States | 2,000,000 | 228,740,000 | |||||||
| aPluralsight Inc., A |
United States | 500,000 | 16,000,000 | |||||||
| aPTC Inc. |
United States | 25,000 | 2,654,750 | |||||||
| aQ2 Holdings Inc. |
United States | 500,000 | 30,275,000 | |||||||
| aRealPage Inc. |
United States | 25,000 | 1,647,500 | |||||||
| aSalesforce.com Inc. |
United States | 1,000,000 | 159,030,000 | |||||||
| aSendGrid Inc. |
United States | 100,000 | 3,679,000 | |||||||
| aServiceNow Inc. |
United States | 600,000 | 117,378,000 | |||||||
| aSmartsheet Inc. A |
United States | 200,000 | 6,252,000 | |||||||
| aSplunk Inc. |
United States | 500,000 | 60,455,000 | |||||||
| aSVMK Inc. |
United States | 125,100 | 2,005,353 | |||||||
| aTyler Technologies Inc. |
United States | 100,000 | 24,506,000 | |||||||
| aUltimate Software Group Inc. |
United States | 100,000 | 32,219,000 | |||||||
| aWorkday Inc., A |
United States | 500,000 | 72,990,000 | |||||||
| aZendesk Inc. |
United States | 500,000 | 35,500,000 | |||||||
| aZscaler Inc. |
United States | 200,000 | 8,156,000 | |||||||
| aZuora Inc. |
United States | 200,000 | 4,622,000 | |||||||
|
|
|
|||||||||
| 1,454,795,056 | ||||||||||
|
|
|
|||||||||
| Technology Hardware, Storage & Peripherals 1.3% |
||||||||||
| Apple Inc. |
United States | 400,000 | 90,296,000 | |||||||
|
|
|
|||||||||
| Textiles, Apparel & Luxury Goods 0.3% |
||||||||||
| NIKE Inc., B |
United States | 200,000 | 16,944,000 | |||||||
|
|
|
|||||||||
|
Total Common Stocks (Cost $3,421,116,937) |
6,664,310,389 | |||||||||
|
|
|
|||||||||
| Short Term Investments (Cost $125,141,525) 1.8% |
||||||||||
| Money Market Funds 1.8% |
||||||||||
| c,dInstitutional Fiduciary Trust Money Market Portfolio, 1.69% |
United States | 125,141,525 | 125,141,525 | |||||||
|
|
|
|||||||||
|
Total Investments (Cost $3,546,258,462) 99.6% |
6,789,451,914 | |||||||||
| Other Assets, less Liabilities 0.4% |
27,917,474 | |||||||||
|
|
|
|||||||||
|
Net Assets 100.0% |
$ | 6,817,369,388 | ||||||||
|
|
|
|||||||||
| 48 |
Annual Report | franklintempleton.com | ||
FRANKLIN CUSTODIAN FUNDS
STATEMENT OF INVESTMENTS
Franklin DynaTech Fund (continued)
See Abbreviations on page 130.
†Rounds to less than 0.1% of net assets.
aNon-income producing.
bSecurity was purchased pursuant to Regulation S under the Securities Act of 1933, which exempts from registration securities offered and sold outside of the United States. Such a security cannot be sold in the United States without either an effective registration statement filed pursuant to the Securities Act of 1933, or pursuant to an exemption from registration. This security has been deemed liquid under guidelines approved by the Fund’s Board of Trustees. At September 30, 2018, the value of this security was $5,970,899, representing less than 0.1% of net assets.
cSee Note 3(f) regarding investments in affiliated management investment companies.
dThe rate shown is the annualized seven-day effective yield at period end.
| franklintempleton.com | The accompanying notes are an integral part of these financial statements. | Annual Report | 49 | ||
FRANKLIN CUSTODIAN FUNDS
Financial Highlights
Franklin Growth Fund
| Year Ended September 30, | ||||||||||||||||||||
| 2018 | 2017 | 2016 | 2015 | 2014 | ||||||||||||||||
|
|
||||||||||||||||||||
| Class A |
||||||||||||||||||||
| Per share operating performance |
||||||||||||||||||||
| (for a share outstanding throughout the year) |
||||||||||||||||||||
| Net asset value, beginning of year |
$ 91.61 | $78.54 | $72.40 | $70.51 | $59.49 | |||||||||||||||
|
|
|
|||||||||||||||||||
| Income from investment operationsa: |
||||||||||||||||||||
| Net investment incomeb |
0.41 | 0.40 | 0.47 | c | 0.29 | 0.26 | ||||||||||||||
| Net realized and unrealized gains (losses) |
18.18 | 15.56 | 8.51 | 1.79 | 11.06 | |||||||||||||||
|
|
|
|||||||||||||||||||
| Total from investment operations |
18.59 | 15.96 | 8.98 | 2.08 | 11.32 | |||||||||||||||
|
|
|
|||||||||||||||||||
| Less distributions from: |
||||||||||||||||||||
| Net investment income |
(0.36 | ) | (0.39 | ) | (0.47 | ) | (0.19 | ) | (0.30 | ) | ||||||||||
| Net realized gains |
(2.25 | ) | (2.50 | ) | (2.37 | ) | — | — | ||||||||||||
|
|
|
|||||||||||||||||||
| Total distributions |
(2.61 | ) | (2.89 | ) | (2.84 | ) | (0.19 | ) | (0.30 | ) | ||||||||||
|
|
|
|||||||||||||||||||
| Net asset value, end of year |
$107.59 | $91.61 | $78.54 | $72.40 | $70.51 | |||||||||||||||
|
|
|
|||||||||||||||||||
| Total returnd |
20.72% | 21.12% | 12.57% | 2.94% | 19.08% | |||||||||||||||
| Ratios to average net assets |
||||||||||||||||||||
| Expenses before waiver and payments by affiliates |
0.83% | 0.88% | 0.88% | 0.88% | 0.90% | |||||||||||||||
| Expenses net of waiver and payments by affiliatese |
0.83% | f | 0.87% | 0.86% | 0.88% | f | 0.90% | f | ||||||||||||
| Net investment income |
0.41% | 0.47% | 0.63% | c | 0.38% | 0.40% | ||||||||||||||
| Supplemental data |
||||||||||||||||||||
| Net assets, end of year (000’s) |
$9,044,834 | $8,051,641 | $7,628,523 | $7,185,665 | $6,611,073 | |||||||||||||||
| Portfolio turnover rate |
6.05% | g | 5.60% | 7.53% | 5.05% | 1.50% | ||||||||||||||
aThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and repurchases of the Fund’s shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
bBased on average daily shares outstanding.
cNet investment income per share includes approximately $0.10 per share related to income received in the form of special dividends in connection with certain Fund holdings. Excluding this amount, the ratio of net investment income to average net assets would have been 0.50%.
dTotal return does not reflect sales commissions or contingent deferred sales charges, if applicable.
eBenefit of expense reduction rounds to less than 0.01%.
fBenefit of waiver and payments by affiliates rounds to less than 0.01%.
gExcludes the value of portfolio securities delivered as a result of a redemption in-kind. See Note 11.
| 50 |
Annual Report | The accompanying notes are an integral part of these financial statements. | franklintempleton.com | ||
FRANKLIN CUSTODIAN FUNDS
FINANCIAL HIGHLIGHTS
Franklin Growth Fund (continued)
| Year Ended September 30, | ||||||||||||||||||||
| 2018 | 2017 | 2016 | 2015 | 2014 | ||||||||||||||||
|
|
||||||||||||||||||||
| Class C |
||||||||||||||||||||
| Per share operating performance |
||||||||||||||||||||
| (for a share outstanding throughout the year) |
||||||||||||||||||||
| Net asset value, beginning of year |
$84.25 | $72.60 | $67.17 | $65.75 | $55.64 | |||||||||||||||
|
|
|
|||||||||||||||||||
| Income from investment operationsa: |
||||||||||||||||||||
| Net investment income (loss)b |
(0.30 | ) | (0.21 | ) | (0.08 | )c | (0.26 | ) | (0.22 | ) | ||||||||||
| Net realized and unrealized gains (losses) |
16.68 | 14.36 | 7.88 | 1.68 | 10.33 | |||||||||||||||
|
|
|
|||||||||||||||||||
| Total from investment operations |
16.38 | 14.15 | 7.80 | 1.42 | 10.11 | |||||||||||||||
|
|
|
|||||||||||||||||||
| Less distributions from net realized gains |
(2.25 | ) | (2.50 | ) | (2.37 | ) | — | — | ||||||||||||
|
|
|
|||||||||||||||||||
| Net asset value, end of year |
$98.38 | $84.25 | $72.60 | $67.17 | $65.75 | |||||||||||||||
|
|
|
|||||||||||||||||||
| Total returnd |
19.82% | 20.21% | 11.74% | 2.16% | 18.17% | |||||||||||||||
| Ratios to average net assets |
||||||||||||||||||||
| Expenses before waiver and payments by affiliates |
1.58% | 1.63% | 1.63% | 1.63% | 1.65% | |||||||||||||||
| Expenses net of waiver and payments by affiliatese |
1.58% | f | 1.62% | 1.61% | 1.63% | f | 1.65% | f | ||||||||||||
| Net investment income (loss) |
(0.34)% | (0.28)% | (0.12)%c | (0.37)% | (0.35)% | |||||||||||||||
| Supplemental data |
||||||||||||||||||||
| Net assets, end of year (000’s) |
$1,060,258 | $930,751 | $846,965 | $777,570 | $662,548 | |||||||||||||||
| Portfolio turnover rate |
6.05% | g | 5.60% | 7.53% | 5.05% | 1.50% | ||||||||||||||
aThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and repurchases of the Fund’s shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
bBased on average daily shares outstanding.
cNet investment income per share includes approximately $0.10 per share related to income received in the form of special dividends in connection with certain Fund holdings. Excluding this amount, the ratio of net investment income to average net assets would have been (0.25)%.
dTotal return does not reflect sales commissions or contingent deferred sales charges, if applicable.
eBenefit of expense reduction rounds to less than 0.01%.
fBenefit of waiver and payments by affiliates rounds to less than 0.01%.
gExcludes the value of portfolio securities delivered as a result of a redemption in-kind. See Note 11.
| franklintempleton.com | The accompanying notes are an integral part of these financial statements. | Annual Report | 51 | ||
FRANKLIN CUSTODIAN FUNDS
FINANCIAL HIGHLIGHTS
Franklin Growth Fund (continued)
| Year Ended September 30, | ||||||||||||||||||||
| 2018 | 2017 | 2016 | 2015 | 2014 | ||||||||||||||||
|
|
||||||||||||||||||||
| Class R |
||||||||||||||||||||
| Per share operating performance |
||||||||||||||||||||
| (for a share outstanding throughout the year) |
||||||||||||||||||||
| Net asset value, beginning of year |
$ 91.13 | $78.14 | $71.93 | $70.05 | $59.07 | |||||||||||||||
|
|
|
|||||||||||||||||||
| Income from investment operationsa: |
||||||||||||||||||||
| Net investment incomeb |
0.16 | 0.19 | 0.29 | c | 0.10 | 0.10 | ||||||||||||||
| Net realized and unrealized gains (losses) |
18.09 | 15.51 | 8.45 | 1.78 | 10.98 | |||||||||||||||
|
|
|
|||||||||||||||||||
| Total from investment operations |
18.25 | 15.70 | 8.74 | 1.88 | 11.08 | |||||||||||||||
|
|
|
|||||||||||||||||||
| Less distributions from: |
||||||||||||||||||||
| Net investment income |
(0.13 | ) | (0.21 | ) | (0.16 | ) | — | (0.10 | ) | |||||||||||
| Net realized gains |
(2.25 | ) | (2.50 | ) | (2.37 | ) | — | — | ||||||||||||
|
|
|
|||||||||||||||||||
| Total distributions |
(2.38 | ) | (2.71 | ) | (2.53 | ) | — | (0.10 | ) | |||||||||||
|
|
|
|||||||||||||||||||
| Net asset value, end of year |
$107.00 | $91.13 | $78.14 | $71.93 | $70.05 | |||||||||||||||
|
|
|
|||||||||||||||||||
| Total return |
20.42% | 20.81% | 12.29% | 2.68% | 18.77% | |||||||||||||||
| Ratios to average net assets |
||||||||||||||||||||
| Expenses before waiver and payments by affiliates |
1.08% | 1.13% | 1.13% | 1.13% | 1.15% | |||||||||||||||
| Expenses net of waiver and payments by affiliatesd |
1.08% | e | 1.12% | 1.11% | 1.13% | e | 1.15% | e | ||||||||||||
| Net investment income |
0.16% | 0.22% | 0.38% | c | 0.13% | 0.15% | ||||||||||||||
| Supplemental data |
||||||||||||||||||||
| Net assets, end of year (000’s) |
$524,960 | $510,317 | $477,221 | $501,813 | $565,634 | |||||||||||||||
| Portfolio turnover rate |
6.05% | f | 5.60% | 7.53% | 5.05% | 1.50% | ||||||||||||||
aThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and repurchases of the Fund’s shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
bBased on average daily shares outstanding.
cNet investment income per share includes approximately $0.10 per share related to income received in the form of special dividends in connection with certain Fund holdings. Excluding this amount, the ratio of net investment income to average net assets would have been 0.25%.
dBenefit of expense reduction rounds to less than 0.01%.
eBenefit of waiver and payments by affiliates rounds to less than 0.01%.
fExcludes the value of portfolio securities delivered as a result of a redemption in-kind. See Note 11.
| 52 |
Annual Report | The accompanying notes are an integral part of these financial statements. | franklintempleton.com | ||
FRANKLIN CUSTODIAN FUNDS
FINANCIAL HIGHLIGHTS
Franklin Growth Fund (continued)
| Year Ended September 30, | ||||||||||||||||||||
| 2018 | 2017 | 2016 | 2015 | 2014 | ||||||||||||||||
|
|
||||||||||||||||||||
| Class R6 |
||||||||||||||||||||
| Per share operating performance |
||||||||||||||||||||
| (for a share outstanding throughout the year) |
||||||||||||||||||||
| Net asset value, beginning of year |
$ 91.90 | $78.79 | $72.69 | $70.76 | $59.71 | |||||||||||||||
|
|
|
|||||||||||||||||||
| Income from investment operationsa: |
||||||||||||||||||||
| Net investment incomeb |
0.77 | 0.74 | 0.78 | c | 0.61 | 0.55 | ||||||||||||||
| Net realized and unrealized gains (losses) |
18.22 | 15.59 | 8.56 | 1.79 | 11.08 | |||||||||||||||
|
|
|
|||||||||||||||||||
| Total from investment operations |
18.99 | 16.33 | 9.34 | 2.40 | 11.63 | |||||||||||||||
|
|
|
|||||||||||||||||||
| Less distributions from: |
||||||||||||||||||||
| Net investment income |
(0.74 | ) | (0.72 | ) | (0.87 | ) | (0.47 | ) | (0.58 | ) | ||||||||||
| Net realized gains |
(2.25 | ) | (2.50 | ) | (2.37 | ) | — | — | ||||||||||||
|
|
|
|||||||||||||||||||
| Total distributions |
(2.99 | ) | (3.22 | ) | (3.24 | ) | (0.47 | ) | (0.58 | ) | ||||||||||
|
|
|
|||||||||||||||||||
| Net asset value, end of year |
$107.90 | $91.90 | $78.79 | $72.69 | $70.76 | |||||||||||||||
|
|
|
|||||||||||||||||||
| Total return |
21.17% | 21.61% | 13.05% | 3.37% | 19.59% | |||||||||||||||
| Ratios to average net assets |
||||||||||||||||||||
| Expenses before waiver and payments by affiliates |
0.47% | 0.46% | 0.46% | 0.46% | 0.47% | |||||||||||||||
| Expenses net of waiver and payments by affiliatesd |
0.46% | 0.45% | 0.44% | 0.46% | e | 0.47% | e | |||||||||||||
| Net investment income |
0.78% | 0.89% | 1.05% | c | 0.80% | 0.83% | ||||||||||||||
| Supplemental data |
||||||||||||||||||||
| Net assets, end of year (000’s) |
$2,634,455 | $1,700,993 | $1,247,825 | $1,163,362 | $1,107,887 | |||||||||||||||
| Portfolio turnover rate |
6.05% | f | 5.60% | 7.53% | 5.05% | 1.50% | ||||||||||||||
aThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and repurchases of the Fund’s shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
bBased on average daily shares outstanding.
cNet investment income per share includes approximately $0.10 per share related to income received in the form of special dividends in connection with certain Fund holdings. Excluding this amount, the ratio of net investment income to average net assets would have been 0.92%.
dBenefit of expense reduction rounds to less than 0.01%.
eBenefit of waiver and payments by affiliates rounds to less than 0.01%.
fExcludes the value of portfolio securities delivered as a result of a redemption in-kind. See Note 11.
| franklintempleton.com | The accompanying notes are an integral part of these financial statements. | Annual Report | 53 | ||
FRANKLIN CUSTODIAN FUNDS
FINANCIAL HIGHLIGHTS
Franklin Growth Fund (continued)
| Year Ended September 30, | ||||||||||||||||||||
| 2018 | 2017 | 2016 | 2015 | 2014 | ||||||||||||||||
|
|
||||||||||||||||||||
| Advisor Class |
||||||||||||||||||||
| Per share operating performance |
||||||||||||||||||||
| (for a share outstanding throughout the year) |
||||||||||||||||||||
| Net asset value, beginning of year |
$ 91.90 | $78.80 | $72.67 | $70.75 | $59.66 | |||||||||||||||
|
|
|
|||||||||||||||||||
| Income from investment operationsa: |
||||||||||||||||||||
| Net investment incomeb |
0.66 | 0.60 | 0.65 | c | 0.48 | 0.43 | ||||||||||||||
| Net realized and unrealized gains (losses) |
18.23 | 15.61 | 8.56 | 1.79 | 11.08 | |||||||||||||||
|
|
|
|||||||||||||||||||
| Total from investment operations |
18.89 | 16.21 | 9.21 | 2.27 | 11.51 | |||||||||||||||
|
|
|
|||||||||||||||||||
| Less distributions from: |
||||||||||||||||||||
| Net investment income |
(0.59 | ) | (0.61 | ) | (0.71 | ) | (0.35 | ) | (0.42 | ) | ||||||||||
| Net realized gains |
(2.25 | ) | (2.50 | ) | (2.37 | ) | — | — | ||||||||||||
|
|
|
|||||||||||||||||||
| Total distributions |
(2.84 | ) | (3.11 | ) | (3.08 | ) | (0.35 | ) | (0.42 | ) | ||||||||||
|
|
|
|||||||||||||||||||
| Net asset value, end of year |
$107.95 | $91.90 | $78.80 | $72.67 | $70.75 | |||||||||||||||
|
|
|
|||||||||||||||||||
| Total return |
21.02% | 21.43% | 12.85% | 3.20% | 19.37% | |||||||||||||||
| Ratios to average net assets |
||||||||||||||||||||
| Expenses before waiver and payments by affiliates |
0.58% | 0.63% | 0.63% | 0.63% | 0.65% | |||||||||||||||
| Expenses net of waiver and payments by affiliatesd |
0.58% | e | 0.62% | 0.61% | 0.63% | e | 0.65% | e | ||||||||||||
| Net investment income |
0.66% | 0.72% | 0.88% | c | 0.63% | 0.65% | ||||||||||||||
| Supplemental data |
||||||||||||||||||||
| Net assets, end of year (000’s) |
$3,139,208 | $2,801,153 | $1,998,483 | $1,514,492 | $1,414,980 | |||||||||||||||
| Portfolio turnover rate |
6.05% | f | 5.60% | 7.53% | 5.05% | 1.50% | ||||||||||||||
aThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and repurchases of the Fund’s shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
bBased on average daily shares outstanding.
cNet investment income per share includes approximately $0.10 per share related to income received in the form of special dividends in connection with certain Fund holdings. Excluding this amount, the ratio of net investment income to average net assets would have been 0.75%.
dBenefit of expense reduction rounds to less than 0.01%.
eBenefit of waiver and payments by affiliates rounds to less than 0.01%.
fExcludes the value of portfolio securities delivered as a result of a redemption in-kind. See Note 11.
| 54 |
Annual Report | The accompanying notes are an integral part of these financial statements. | franklintempleton.com | ||
FRANKLIN CUSTODIAN FUNDS
Statement of Investments, September 30, 2018
Franklin Growth Fund
| Country | Shares | Value | ||||||||
|
Common Stocks 97.9% |
||||||||||
| Automobiles & Components 0.4% |
||||||||||
| BorgWarner Inc. |
United States | 1,643,554 | $ | 70,311,240 | ||||||
|
|
|
|||||||||
| Banks 0.2% |
||||||||||
| Wells Fargo & Co. |
United States | 747,070 | 39,265,999 | |||||||
|
|
|
|||||||||
| Capital Goods 17.2% |
||||||||||
| 3M Co. |
United States | 851,660 | 179,453,279 | |||||||
| Allegion PLC |
United States | 697,265 | 63,151,291 | |||||||
| AMETEK Inc. |
United States | 697,265 | 55,167,607 | |||||||
| The Boeing Co. |
United States | 1,095,703 | 407,491,946 | |||||||
| BWX Technologies Inc. |
United States | 1,195,312 | 74,754,812 | |||||||
| Caterpillar Inc. |
United States | 547,852 | 83,541,951 | |||||||
| Deere & Co. |
United States | 498,047 | 74,871,405 | |||||||
| Emerson Electric Co. |
United States | 1,095,703 | 83,908,936 | |||||||
| Fortive Corp. |
United States | 522,949 | 44,032,306 | |||||||
| General Dynamics Corp. |
United States | 996,093 | 203,920,159 | |||||||
| General Electric Co. |
United States | 2,490,233 | 28,114,731 | |||||||
| Huntington Ingalls Industries Inc. |
United States | 298,828 | 76,523,874 | |||||||
| Illinois Tool Works Inc. |
United States | 996,093 | 140,568,644 | |||||||
| Ingersoll-Rand PLC |
United States | 1,095,703 | 112,090,417 | |||||||
| Lockheed Martin Corp. |
United States | 498,047 | 172,304,340 | |||||||
| Northrop Grumman Corp. |
United States | 1,095,703 | 347,743,261 | |||||||
| Raytheon Co. |
United States | 597,656 | 123,511,589 | |||||||
| Rockwell Collins Inc. |
United States | 348,633 | 48,972,478 | |||||||
| aSensata Technologies Holding PLC |
United States | 3,187,498 | 157,940,526 | |||||||
| Stanley Black & Decker Inc. |
United States | 647,461 | 94,814,189 | |||||||
| Textron Inc. |
United States | 1,593,749 | 113,905,241 | |||||||
| United Technologies Corp. |
United States | 926,367 | 129,515,370 | |||||||
|
|
|
|||||||||
| 2,816,298,352 | ||||||||||
|
|
|
|||||||||
| Commercial & Professional Services 2.7% |
||||||||||
| Equifax Inc. |
United States | 547,852 | 71,533,036 | |||||||
| aIHS Markit Ltd. |
United States | 3,542,704 | 191,164,308 | |||||||
| aVerisk Analytics Inc. |
United States | 1,494,140 | 180,118,577 | |||||||
|
|
|
|||||||||
| 442,815,921 | ||||||||||
|
|
|
|||||||||
| Consumer Durables & Apparel 1.0% |
||||||||||
| NIKE Inc., B |
United States | 1,872,655 | 158,651,332 | |||||||
|
|
|
|||||||||
| Consumer Services 0.9% |
||||||||||
| Carnival Corp. |
United States | 1,195,312 | 76,225,046 | |||||||
| Graham Holdings Co., B |
United States | 79,688 | 46,163,258 | |||||||
| Marriott International Inc., A |
United States | 199,219 | 26,302,885 | |||||||
|
|
|
|||||||||
| 148,691,189 | ||||||||||
|
|
|
|||||||||
| Diversified Financials 3.5% |
||||||||||
| American Express Co. |
United States | 597,656 | 63,644,387 | |||||||
| aBerkshire Hathaway Inc., A |
United States | 184 | 58,880,009 | |||||||
| BlackRock Inc. |
United States | 224,121 | 105,634,951 | |||||||
| The Charles Schwab Corp. |
United States | 2,988,279 | 146,873,913 | |||||||
| Intercontinental Exchange Inc. |
United States | 1,394,530 | 104,436,352 | |||||||
| T. Rowe Price Group Inc. |
United States | 896,484 | 97,878,123 | |||||||
|
|
|
|||||||||
| 577,347,735 | ||||||||||
|
|
|
|||||||||
| franklintempleton.com | Annual Report | 55 | ||
FRANKLIN CUSTODIAN FUNDS
STATEMENT OF INVESTMENTS
Franklin Growth Fund (continued)
| Country | Shares | Value | ||||||||
|
Common Stocks (continued) |
||||||||||
| Energy 1.0% |
||||||||||
| Cabot Oil & Gas Corp., A |
United States | 3,386,716 | $ | 76,268,844 | ||||||
| aConcho Resources Inc. |
United States | 597,656 | 91,291,954 | |||||||
|
|
|
|||||||||
| 167,560,798 | ||||||||||
|
|
|
|||||||||
| Food, Beverage & Tobacco 3.2% |
||||||||||
| Anheuser-Busch InBev SA/NV, ADR |
Belgium | 348,633 | 30,529,792 | |||||||
| Brown-Forman Corp., B |
United States | 1,618,651 | 81,822,808 | |||||||
| Constellation Brands Inc., A |
United States | 547,852 | 118,127,848 | |||||||
| Mondelez International Inc., A |
United States | 1,494,140 | 64,188,255 | |||||||
| aMonster Beverage Corp. |
United States | 2,689,451 | 156,741,204 | |||||||
| PepsiCo Inc. |
United States | 647,461 | 72,386,140 | |||||||
|
|
|
|||||||||
| 523,796,047 | ||||||||||
|
|
|
|||||||||
| Health Care Equipment & Services 8.5% |
||||||||||
| Abbott Laboratories |
United States | 1,344,726 | 98,649,099 | |||||||
| aABIOMED Inc. |
United States | 199,219 | 89,598,745 | |||||||
| Aetna Inc. |
United States | 647,461 | 131,337,464 | |||||||
| Baxter International Inc. |
United States | 398,438 | 30,715,585 | |||||||
| Becton, Dickinson and Co. |
United States | 77,397 | 20,200,617 | |||||||
| CVS Health Corp. |
United States | 653,437 | 51,438,561 | |||||||
| Danaher Corp. |
United States | 1,045,898 | 113,647,277 | |||||||
| aEdwards Lifesciences Corp. |
United States | 398,438 | 69,368,056 | |||||||
| aHaemonetics Corp. |
United States | 996,093 | 114,132,336 | |||||||
| aIntuitive Surgical Inc. |
United States | 448,242 | 257,290,908 | |||||||
| aLaboratory Corp. of America Holdings |
United States | 498,047 | 86,500,803 | |||||||
| Quest Diagnostics Inc. |
United States | 896,484 | 96,739,588 | |||||||
| Stryker Corp. |
United States | 398,438 | 70,794,464 | |||||||
| Teleflex Inc. |
United States | 498,047 | 132,525,326 | |||||||
| aVarian Medical Systems Inc. |
United States | 298,828 | 33,447,818 | |||||||
|
|
|
|||||||||
| 1,396,386,647 | ||||||||||
|
|
|
|||||||||
| Insurance 0.3% |
||||||||||
| Aflac Inc. |
United States | 1,195,312 | 56,263,336 | |||||||
|
|
|
|||||||||
| Materials 4.4% |
||||||||||
| Air Products and Chemicals Inc. |
United States | 498,047 | 83,198,751 | |||||||
| Albemarle Corp. |
United States | 547,852 | 54,664,673 | |||||||
| aAxalta Coating Systems Ltd. |
United States | 3,386,716 | 98,756,639 | |||||||
| Celanese Corp. |
United States | 1,245,117 | 141,943,338 | |||||||
| Ecolab Inc. |
United States | 916,406 | 143,674,133 | |||||||
| International Flavors & Fragrances Inc. |
United States | 198,721 | 27,646,065 | |||||||
| Martin Marietta Materials Inc. |
United States | 398,438 | 72,495,794 | |||||||
| Praxair Inc. |
United States | 572,754 | 92,058,750 | |||||||
|
|
|
|||||||||
| 714,438,143 | ||||||||||
|
|
|
|||||||||
| Media & Entertainment 5.7% |
||||||||||
| aAlphabet Inc., A |
United States | 164,356 | 198,390,841 | |||||||
| aAlphabet Inc., C |
United States | 157,813 | 188,345,081 | |||||||
| Cable One Inc. |
United States | 79,688 | 70,413,114 | |||||||
| Comcast Corp., A |
United States | 109,571 | 3,879,909 | |||||||
| aElectronic Arts Inc. |
United States | 597,656 | 72,011,571 | |||||||
| aFacebook Inc., A |
United States | 871,582 | 143,340,376 | |||||||
| aIAC/InterActiveCorp. |
United States | 298,828 | 64,762,004 | |||||||
| The Walt Disney Co. |
United States | 1,717,553 | 200,850,648 | |||||||
|
|
|
|||||||||
| 941,993,544 | ||||||||||
|
|
|
|||||||||
| 56 |
Annual Report | franklintempleton.com | ||
FRANKLIN CUSTODIAN FUNDS
STATEMENT OF INVESTMENTS
Franklin Growth Fund (continued)
| Country | Shares | Value | ||||||||
|
Common Stocks (continued) |
||||||||||
| Pharmaceuticals, Biotechnology & Life Sciences 12.7% |
||||||||||
| AbbVie Inc. |
United States | 458,203 | $ | 43,336,840 | ||||||
| Agilent Technologies Inc. |
United States | 1,294,921 | 91,343,727 | |||||||
| Amgen Inc. |
United States | 996,093 | 206,480,118 | |||||||
| AstraZeneca PLC, ADR |
United Kingdom | 1,992,186 | 78,830,800 | |||||||
| aBiogen Inc. |
United States | 498,047 | 175,964,986 | |||||||
| aCatalent Inc. |
United States | 3,386,716 | 154,264,914 | |||||||
| aCelgene Corp. |
United States | 1,294,921 | 115,882,480 | |||||||
| aElanco Animal Health Inc. |
United States | 610,307 | 21,293,611 | |||||||
| Eli Lilly & Co. |
United States | 1,444,335 | 154,991,589 | |||||||
| Gilead Sciences Inc. |
United States | 647,461 | 49,990,464 | |||||||
| aIllumina Inc. |
United States | 522,949 | 191,953,660 | |||||||
| Johnson & Johnson |
United States | 1,195,412 | 165,170,076 | |||||||
| Merck & Co. Inc. |
United States | 996,093 | 70,662,837 | |||||||
| aMettler-Toledo International Inc. |
United States | 423,340 | 257,805,593 | |||||||
| aNeurocrine Biosciences Inc. |
United States | 498,047 | 61,234,879 | |||||||
| Pfizer Inc. |
United States | 2,750,213 | 121,201,887 | |||||||
| aWaters Corp. |
United States | 622,559 | 121,199,786 | |||||||
|
|
|
|||||||||
| 2,081,608,247 | ||||||||||
|
|
|
|||||||||
| Real Estate 1.6% |
||||||||||
| American Tower Corp. |
United States | 896,484 | 130,259,125 | |||||||
| Equinix Inc. |
United States | 298,828 | 129,359,653 | |||||||
|
|
|
|||||||||
| 259,618,778 | ||||||||||
|
|
|
|||||||||
| Retailing 5.0% |
||||||||||
| aAlibaba Group Holding Ltd., ADR |
China | 478,524 | 78,841,614 | |||||||
| aAmazon.com Inc. |
United States | 348,633 | 698,311,899 | |||||||
| Expedia Group Inc. |
United States | 348,633 | 45,489,634 | |||||||
|
|
|
|||||||||
| 822,643,147 | ||||||||||
|
|
|
|||||||||
| Semiconductors & Semiconductor Equipment 2.4% |
||||||||||
| ASML Holding NV, N.Y. shs |
Netherlands | 647,461 | 121,735,617 | |||||||
| Intel Corp. |
United States | 1,095,703 | 51,815,795 | |||||||
| Lam Research Corp. |
United States | 29,883 | 4,533,251 | |||||||
| Monolithic Power Systems |
United States | 448,242 | 56,267,818 | |||||||
| Texas Instruments Inc. |
United States | 1,394,530 | 149,619,124 | |||||||
| Versum Materials Inc. |
United States | 249,024 | 8,967,354 | |||||||
|
|
|
|||||||||
| 392,938,959 | ||||||||||
|
|
|
|||||||||
| Software & Services 11.7% |
||||||||||
| aAdyen NV |
Netherlands | 59,965 | 48,940,308 | |||||||
| aAutodesk Inc. |
United States | 796,875 | 124,400,156 | |||||||
| Automatic Data Processing Inc. |
United States | 697,265 | 105,049,945 | |||||||
| CDK Global LLC |
United States | 232,422 | 14,540,320 | |||||||
| DXC Technology Co. |
United States | 1,394,530 | 130,416,446 | |||||||
| Intuit Inc. |
United States | 996,093 | 226,511,548 | |||||||
| Mastercard Inc., A |
United States | 1,394,530 | 310,436,323 | |||||||
| Microsoft Corp. |
United States | 3,386,716 | 387,338,709 | |||||||
| Perspecta Inc. |
United States | 697,265 | 17,933,656 | |||||||
| aSalesforce.com Inc. |
United States | 547,852 | 87,124,904 | |||||||
| aServiceNow Inc. |
United States | 996,093 | 194,865,674 | |||||||
| aTwilio Inc., A |
United States | 209,180 | 18,048,050 | |||||||
| aTyler Technologies Inc. |
United States | 174,317 | 42,718,124 | |||||||
| franklintempleton.com | Annual Report | 57 | ||
FRANKLIN CUSTODIAN FUNDS
STATEMENT OF INVESTMENTS
Franklin Growth Fund (continued)
| Country | Shares | Value | ||||||||
|
Common Stocks (continued) |
||||||||||
| Software & Services (continued) |
||||||||||
| Visa Inc., A |
United States | 1,394,530 | $ | 209,305,008 | ||||||
|
|
|
|||||||||
| 1,917,629,171 | ||||||||||
|
|
|
|||||||||
| Technology Hardware & Equipment 8.9% |
||||||||||
| Apple Inc. |
United States | 4,070,036 | 918,769,927 | |||||||
| Cisco Systems Inc. |
United States | 2,933,494 | 142,714,483 | |||||||
| Cognex Corp. |
United States | 846,679 | 47,261,622 | |||||||
| aKeysight Technologies Inc. |
United States | 647,461 | 42,913,715 | |||||||
| TE Connectivity Ltd. |
United States | 1,643,554 | 144,517,703 | |||||||
| aTrimble Inc. |
United States | 2,689,451 | 116,883,540 | |||||||
| aViaSat Inc. |
United States | 697,265 | 44,590,097 | |||||||
|
|
|
|||||||||
| 1,457,651,087 | ||||||||||
|
|
|
|||||||||
| Transportation 5.7% |
||||||||||
| Alaska Air Group Inc. |
United States | 3,187,498 | 219,491,112 | |||||||
| Allegiant Travel Co. |
United States | 199,219 | 25,260,969 | |||||||
| Canadian National Railway Co. |
Canada | 996,093 | 89,449,152 | |||||||
| Canadian Pacific Railway Ltd. |
Canada | 498,047 | 105,556,081 | |||||||
| J.B. Hunt Transport Services Inc. |
United States | 498,047 | 59,237,710 | |||||||
| Kansas City Southern |
United States | 747,070 | 84,628,090 | |||||||
| aRyanair Holdings PLC, ADR |
Ireland | 232,309 | 22,310,956 | |||||||
| Union Pacific Corp. |
United States | 2,022,069 | 329,253,495 | |||||||
|
|
|
|||||||||
| 935,187,565 | ||||||||||
|
|
|
|||||||||
| Utilities 0.9% |
||||||||||
| American Water Works Co. Inc. |
United States | 697,265 | 61,338,402 | |||||||
| NextEra Energy Inc. |
United States | 498,047 | 83,472,677 | |||||||
|
|
|
|||||||||
| 144,811,079 | ||||||||||
|
|
|
|||||||||
| Total Common Stocks (Cost $5,320,743,047) |
16,065,908,316 | |||||||||
|
|
|
|||||||||
| Management Investment Companies (Cost $10,108,515) 0.7% |
||||||||||
| Diversified Financials 0.7% |
||||||||||
| aAltaba Inc. |
United States | 1,693,358 | 115,351,547 | |||||||
|
|
|
|||||||||
| Total Investments before Short Term Investments |
16,181,259,863 | |||||||||
|
|
|
|||||||||
| Short Term Investments (Cost $224,477,141) 1.4% |
||||||||||
| Money Market Funds 1.4% |
||||||||||
| b,cInstitutional Fiduciary Trust Money Market Portfolio, 1.69% |
United States | 224,477,141 | 224,477,141 | |||||||
|
|
|
|||||||||
| Total Investments (Cost $5,555,328,703) 100.0% |
16,405,737,004 | |||||||||
| Other Assets, less Liabilities (0.0)%† |
(2,021,685 | ) | ||||||||
|
|
|
|||||||||
| Net Assets 100.0% |
$ | 16,403,715,319 | ||||||||
|
|
|
|||||||||
See Abbreviations on page 130.
†Rounds to less than 0.1% of net assets.
aNon-income producing.
bSee Note 3(f) regarding investments in affiliated management investment companies.
cThe rate shown is the annualized seven-day effective yield at period end.
| 58 |
Annual Report | The accompanying notes are an integral part of these financial statements. | franklintempleton.com | ||
FRANKLIN CUSTODIAN FUNDS
Financial Highlights
Franklin Income Fund
| Year Ended September 30, 2018a |
||||
|
Class A |
||||
| Per share operating performance |
||||
| (for a share outstanding throughout the year) |
||||
| Net asset value, beginning of year |
$ 2.31 | |||
| Income from investment operationsb: |
||||
| Net investment income (loss)c |
(0.04 | ) | ||
| Net realized and unrealized gains (losses) |
0.05 | |||
| Total from investment operations |
0.01 | |||
| Net asset value, end of year. |
$ 2.32 | |||
| Total returnd |
0.43% | |||
| Ratios to average net assetse |
||||
| Expensesf |
0.71% | |||
| Net investment income |
3.89% | |||
| Supplemental data |
||||
| Net assets, end of year (000’s) |
$107,057 | |||
| Portfolio turnover rate |
49.95% | |||
aFor the period September 10, 2018 (effective date) to September 30, 2018.
bThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and repurchases of the Fund’s shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
cBased on average daily shares outstanding.
dTotal return does not reflect sales commissions or contingent deferred sales charges, if applicable, and is not annualized for periods less than one year.
eRatios are annualized for periods less than one year.
fBenefit of waiver and payments by affiliates and expense reduction rounds to less than 0.01%.
| franklintempleton.com | The accompanying notes are an integral part of these financial statements. | Annual Report | 59 | ||
FRANKLIN CUSTODIAN FUNDS
FINANCIAL HIGHLIGHTS
Franklin Income Fund (continued)
| Year Ended September 30, | ||||||||||||||||||||
| 2018 | 2017 | 2016 | 2015 | 2014 | ||||||||||||||||
| Class A1 |
||||||||||||||||||||
| Per share operating performance |
||||||||||||||||||||
| (for a share outstanding throughout the year) |
||||||||||||||||||||
| Net asset value, beginning of year
|
$ 2.39 | $ 2.25 | $ 2.10 | $ 2.48 | $ 2.33 | |||||||||||||||
|
Income from investment operationsa: |
||||||||||||||||||||
| Net investment incomeb |
0.09 | 0.10 | 0.10 | 0.10 | 0.11 | |||||||||||||||
| Net realized and unrealized gains (losses) |
(0.04 | ) | 0.16 | 0.17 | (0.36 | ) | 0.16 | |||||||||||||
|
Total from investment operations |
0.05 | 0.26 | 0.27 | (0.26 | ) | 0.27 | ||||||||||||||
|
Less distributions from net investment income |
(0.12 | ) | (0.12 | ) | (0.12 | ) | (0.12 | ) | (0.12 | ) | ||||||||||
|
Net asset value, end of year |
$ 2.32 | $ 2.39 | $ 2.25 | $ 2.10 | $ 2.48 | |||||||||||||||
| Total returnc |
2.18% | 11.86% | 13.31% | (10.93)% | 11.86% | |||||||||||||||
| Ratios to average net assets |
||||||||||||||||||||
| Expenses before waiver and payments by affiliates |
0.61% | 0.62% | 0.61% | 0.61% | 0.61% | |||||||||||||||
| Expenses net of waiver and payments by affiliatesd |
0.61% | e | 0.61% | 0.61% | e | 0.61% | e | 0.61% | e | |||||||||||
| Net investment income |
3.99% | 4.22% | 4.57% | 4.43% | 4.28% | |||||||||||||||
| Supplemental data |
||||||||||||||||||||
| Net assets, end of year (000’s) |
$42,929,573 | $46,505,632 | $45,515,127 | $44,886,127 | $53,823,921 | |||||||||||||||
| Portfolio turnover rate |
49.95% | 34.12% | 61.26% | 44.81% | 36.03% | |||||||||||||||
aThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and repurchases of the Fund’s shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
bBased on average daily shares outstanding.
cTotal return does not reflect sales commissions or contingent deferred sales charges, if applicable.
dBenefit of expense reduction rounds to less than 0.01%.
eBenefit of waiver and payments by affiliates rounds to less than 0.01%.
| 60 |
Annual Report | The accompanying notes are an integral part of these financial statements. | franklintempleton.com | ||
FRANKLIN CUSTODIAN FUNDS
FINANCIAL HIGHLIGHTS
Franklin Income Fund (continued)
| Year Ended September 30, | ||||||||||||||||||||
| 2018 | 2017 | 2016 | 2015 | 2014 | ||||||||||||||||
| Class C |
||||||||||||||||||||
| Per share operating performance |
||||||||||||||||||||
| (for a share outstanding throughout the year) |
||||||||||||||||||||
| Net asset value, beginning of year |
$ 2.42 | $ 2.27 | $ 2.13 | $ 2.50 | $ 2.35 | |||||||||||||||
| Income from investment operationsa: |
||||||||||||||||||||
| Net investment incomeb |
0.08 | 0.09 | 0.09 | 0.09 | 0.09 | |||||||||||||||
| Net realized and unrealized gains (losses) |
(0.04 | ) | 0.17 | 0.16 | (0.35 | ) | 0.17 | |||||||||||||
| Total from investment operations |
0.04 | 0.26 | 0.25 | (0.26 | ) | 0.26 | ||||||||||||||
|
Less distributions from net investment income |
(0.11 | ) | (0.11 | ) | (0.11 | ) | (0.11 | ) | (0.11 | ) | ||||||||||
|
Net asset value, end of year |
$ 2.35 | $ 2.42 | $ 2.27 | $ 2.13 | $ 2.50 | |||||||||||||||
| Total returnc |
1.61% | 11.63% | 12.07% | (10.89)% | 11.19% | |||||||||||||||
| Ratios to average net assets |
||||||||||||||||||||
| Expenses before waiver and payments by affiliates |
1.11% | 1.12% | 1.11% | 1.11% | 1.11% | |||||||||||||||
| Expenses net of waiver and payments by affiliatesd |
1.11% | e | 1.11% | 1.11% | e | 1.11% | e | 1.11% | e | |||||||||||
| Net investment income |
3.49% | 3.72% | 4.07% | 3.93% | 3.78% | |||||||||||||||
| Supplemental data |
||||||||||||||||||||
| Net assets, end of year (000’s) |
$19,895,441 | $23,036,875 | $23,841,466 | $24,091,638 | $28,802,209 | |||||||||||||||
| Portfolio turnover rate |
49.95% | 34.12% | 61.26% | 44.81% | 36.03% | |||||||||||||||
aThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and repurchases of the Fund’s shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
bBased on average daily shares outstanding.
cTotal return does not reflect sales commissions or contingent deferred sales charges, if applicable.
dBenefit of expense reduction rounds to less than 0.01%.
eBenefit of waiver and payments by affiliates rounds to less than 0.01%.
| franklintempleton.com | The accompanying notes are an integral part of these financial statements. | Annual Report | 61 | ||
FRANKLIN CUSTODIAN FUNDS
FINANCIAL HIGHLIGHTS
Franklin Income Fund (continued)
| Year Ended September 30, | ||||||||||||||||||||
| 2018 | 2017 | 2016 | 2015 | 2014 | ||||||||||||||||
| Class R |
||||||||||||||||||||
| Per share operating performance |
||||||||||||||||||||
| (for a share outstanding throughout the year) |
||||||||||||||||||||
| Net asset value, beginning of year |
$ 2.35 | $ 2.21 | $ 2.07 | $ 2.44 | $ 2.29 | |||||||||||||||
| Income from investment operationsa: |
||||||||||||||||||||
| Net investment incomeb |
0.08 | 0.09 | 0.09 | 0.10 | 0.10 | |||||||||||||||
| Net realized and unrealized gains (losses) |
(0.04 | ) | 0.16 | 0.16 | (0.36 | ) | 0.16 | |||||||||||||
| Total from investment operations |
0.04 | 0.25 | 0.25 | (0.26 | ) | 0.26 | ||||||||||||||
|
Less distributions from net investment income |
(0.11 | ) | (0.11 | ) | (0.11 | ) | (0.11 | ) | (0.11 | ) | ||||||||||
|
Net asset value, end of year |
$ 2.28 | $ 2.35 | $ 2.21 | $ 2.07 | $ 2.44 | |||||||||||||||
| Total return |
1.86% | 11.67% | 12.62% | (10.99)% | 11.66% | |||||||||||||||
| Ratios to average net assets |
||||||||||||||||||||
| Expenses before waiver and payments by affiliates |
0.96% | 0.97% | 0.96% | 0.96% | 0.96% | |||||||||||||||
| Expenses net of waiver and payments by affiliatesc |
0.96% | d | 0.96% | 0.96% | d | 0.96% | d | 0.96% | d | |||||||||||
| Net investment income |
3.64% | 3.87% | 4.22% | 4.08% | 3.93% | |||||||||||||||
| Supplemental data |
||||||||||||||||||||
| Net assets, end of year (000’s) |
$296,098 | $361,603 | $396,107 | $416,653 | $514,892 | |||||||||||||||
| Portfolio turnover rate |
49.95% | 34.12% | 61.26% | 44.81% | 36.03% | |||||||||||||||
aThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and repurchases of the Fund’s shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
bBased on average daily shares outstanding.
cBenefit of expense reduction rounds to less than 0.01%.
dBenefit of waiver and payments by affiliates rounds to less than 0.01%.
| 62 |
Annual Report | The accompanying notes are an integral part of these financial statements. | franklintempleton.com | ||
FRANKLIN CUSTODIAN FUNDS
FINANCIAL HIGHLIGHTS
Franklin Income Fund (continued)
| Year Ended September 30, | ||||||||||||||||||||
| 2018 | 2017 | 2016 | 2015 | 2014 | ||||||||||||||||
| Class R6 |
||||||||||||||||||||
| Per share operating performance |
||||||||||||||||||||
| (for a share outstanding throughout the year) |
||||||||||||||||||||
| Net asset value, beginning of year |
$ 2.37 | $ 2.23 | $ 2.09 | $ 2.46 | $ 2.31 | |||||||||||||||
| Income from investment operationsa: |
||||||||||||||||||||
| Net investment incomeb |
0.10 | 0.11 | 0.10 | 0.11 | 0.11 | |||||||||||||||
| Net realized and unrealized gains (losses) |
(0.05 | ) | 0.15 | 0.16 | (0.35 | ) | 0.17 | |||||||||||||
|
Total from investment operations |
0.05 | 0.26 | 0.26 | (0.24 | ) | 0.28 | ||||||||||||||
|
Less distributions from net investment income |
(0.12 | ) | (0.12 | ) | (0.12 | ) | (0.13 | ) | (0.13 | ) | ||||||||||
|
Net asset value, end of year |
$ 2.30 | $ 2.37 | $ 2.23 | $ 2.09 | $ 2.46 | |||||||||||||||
| Total return |
2.40% | 12.15% | 13.15% | (10.39)% | 12.19% | |||||||||||||||
| Ratios to average net assets |
||||||||||||||||||||
| Expenses before waiver and payments by affiliates |
0.39% | 0.39% | 0.38% | 0.38% | 0.38% | |||||||||||||||
| Expenses net of waiver and payments by affiliatesc |
0.39% | d | 0.38% | 0.38% | d | 0.38% | d | 0.38% | d | |||||||||||
| Net investment income |
4.21% | 4.45% | 4.80% | 4.66% | 4.50% | |||||||||||||||
| Supplemental data |
||||||||||||||||||||
| Net assets, end of year (000’s) |
$2,062,334 | $1,815,977 | $1,737,577 | $1,744,718 | $2,108,076 | |||||||||||||||
| Portfolio turnover rate |
49.95% | 34.12% | 61.26% | 44.81% | 36.03% | |||||||||||||||
aThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and repurchases of the Fund’s shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
bBased on average daily shares outstanding.
cBenefit of expense reduction rounds to less than 0.01%.
dBenefit of waiver and payments by affiliates rounds to less than 0.01%.
| franklintempleton.com | The accompanying notes are an integral part of these financial statements. | Annual Report | 63 | ||
FRANKLIN CUSTODIAN FUNDS
FINANCIAL HIGHLIGHTS
Franklin Income Fund (continued)
| Year Ended September 30, | ||||||||||||||||||||
| 2018 | 2017 | 2016 | 2015 | 2014 | ||||||||||||||||
| Advisor Class |
||||||||||||||||||||
| Per share operating performance |
||||||||||||||||||||
| (for a share outstanding throughout the year) |
||||||||||||||||||||
| Net asset value, beginning of year |
$ 2.37 | $ 2.23 | $ 2.09 | $ 2.46 | $ 2.31 | |||||||||||||||
| Income from investment operationsa: |
||||||||||||||||||||
| Net investment incomeb |
0.10 | 0.10 | 0.10 | 0.11 | 0.11 | |||||||||||||||
| Net realized and unrealized gains (losses) |
(0.05 | ) | 0.16 | 0.16 | (0.36 | ) | 0.17 | |||||||||||||
|
Total from investment operations |
0.05 | 0.26 | 0.26 | (0.25 | ) | 0.28 | ||||||||||||||
|
Less distributions from net investment income |
(0.12 | ) | (0.12 | ) | (0.12 | ) | (0.12 | ) | (0.13 | ) | ||||||||||
|
Net asset value, end of year |
$ 2.30 | $ 2.37 | $ 2.23 | $ 2.09 | $ 2.46 | |||||||||||||||
| Total return |
2.34% | 12.09% | 13.06% | (10.46)% | 12.12% | |||||||||||||||
| Ratios to average net assets |
||||||||||||||||||||
| Expenses before waiver and payments by affiliates |
0.46% | 0.47% | 0.46% | 0.46% | 0.46% | |||||||||||||||
| Expenses net of waiver and payments by affiliatesc |
0.46% | d | 0.46% | 0.46% | d | 0.46% | d | 0.46% | d | |||||||||||
| Net investment income |
4.14% | 4.37% | 4.72% | 4.58% | 4.43% | |||||||||||||||
| Supplemental data |
||||||||||||||||||||
| Net assets, end of year (000’s) |
$11,328,761 | $11,671,173 | $8,143,479 | $7,754,475 | $9,096,269 | |||||||||||||||
| Portfolio turnover rate |
49.95% | 34.12% | 61.26% | 44.81% | 36.03% | |||||||||||||||
aThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and repurchases of the Fund’s shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
bBased on average daily shares outstanding.
cBenefit of expense reduction rounds to less than 0.01%.
dBenefit of waiver and payments by affiliates rounds to less than 0.01%.
| 64 |
Annual Report | The accompanying notes are an integral part of these financial statements. | franklintempleton.com | ||
FRANKLIN CUSTODIAN FUNDS
Statement of Investments, September 30, 2018
Franklin Income Fund
| Country | Shares | Value | ||||||||
|
Common Stocks 35.2% |
||||||||||
| Communication Services 1.6% |
||||||||||
| BCE Inc. |
Canada | 6,000,000 | $ | 242,915,168 | ||||||
| Verizon Communications Inc. |
United States | 18,000,000 | 961,020,000 | |||||||
|
|
|
|||||||||
| 1,203,935,168 | ||||||||||
|
|
|
|||||||||
| Consumer Discretionary 1.7% |
||||||||||
| Daimler AG |
Germany | 5,000,000 | 315,488,177 | |||||||
| aFord Motor Co. |
United States | 53,300,341 | 493,028,154 | |||||||
| General Motors Co. |
United States | 11,793,000 | 397,070,310 | |||||||
| bTarget Corp. |
United States | 1,000,000 | 88,210,000 | |||||||
|
|
|
|||||||||
| 1,293,796,641 | ||||||||||
|
|
|
|||||||||
| Consumer Staples 3.6% |
||||||||||
| cAnheuser-Busch InBev SA/NV, ADR |
Belgium | 5,999,930 | 525,413,870 | |||||||
| bThe Coca-Cola Co. |
United States | 7,000,000 | 323,330,000 | |||||||
| Nestle SA |
Switzerland | 5,000,000 | 416,768,541 | |||||||
| PepsiCo Inc. |
United States | 5,500,000 | 614,900,000 | |||||||
| bPhilip Morris International Inc. |
United States | 4,519,400 | 368,511,876 | |||||||
| The Procter & Gamble Co. |
United States | 6,500,000 | 540,995,000 | |||||||
|
|
|
|||||||||
| 2,789,919,287 | ||||||||||
|
|
|
|||||||||
| Energy 4.7% |
||||||||||
| Baker Hughes a GE Co., A |
United States | 9,500,000 | 321,385,000 | |||||||
| bBP PLC, ADR |
United Kingdom | 4,000,000 | 184,400,000 | |||||||
| Chevron Corp. |
United States | 3,000,000 | 366,840,000 | |||||||
| Exxon Mobil Corp. |
United States | 6,500,000 | 552,630,000 | |||||||
| Halliburton Co. |
United States | 12,948,409 | 524,799,017 | |||||||
| bOccidental Petroleum Corp. |
United States | 2,500,000 | 205,425,000 | |||||||
| Royal Dutch Shell PLC, A, ADR |
United Kingdom | 13,500,000 | 919,890,000 | |||||||
| Schlumberger Ltd. |
United States | 237,000 | 14,438,040 | |||||||
| d,eTalos Energy Inc. |
United States | 5,517,437 | 181,082,282 | |||||||
| TransCanada Corp. |
Canada | 4,500,000 | 182,070,000 | |||||||
| The Williams Cos. Inc. |
United States | 6,500,000 | 176,735,000 | |||||||
|
|
|
|||||||||
| 3,629,694,339 | ||||||||||
|
|
|
|||||||||
| Financials 5.8% |
||||||||||
| AXA SA |
France | 18,000,000 | 483,767,887 | |||||||
| bBank of America Corp. |
United States | 15,000,000 | 441,900,000 | |||||||
| Barclays PLC |
United Kingdom | 59,230,758 | 132,631,775 | |||||||
| HSBC Holdings PLC |
United Kingdom | 30,000,000 | 261,935,336 | |||||||
| bJPMorgan Chase & Co. |
United States | 7,500,000 | 846,300,000 | |||||||
| bMetLife Inc. |
United States | 8,880,000 | 414,873,600 | |||||||
| U.S. Bancorp |
United States | 6,000,000 | 316,860,000 | |||||||
| Wells Fargo & Co. |
United States | 29,690,000 | 1,560,506,400 | |||||||
|
|
|
|||||||||
| 4,458,774,998 | ||||||||||
|
|
|
|||||||||
| Health Care 4.3% |
||||||||||
| AstraZeneca PLC |
United Kingdom | 10,000,000 | 777,306,863 | |||||||
| bEli Lilly & Co. |
United States | 2,000,000 | 214,620,000 | |||||||
| Johnson & Johnson |
United States | 3,000,000 | 414,510,000 | |||||||
| bMerck & Co. Inc. |
United States | 14,000,000 | 993,160,000 | |||||||
| Pfizer Inc. |
United States | 20,000,000 | 881,400,000 | |||||||
|
|
|
|||||||||
| 3,280,996,863 | ||||||||||
|
|
|
|||||||||
| franklintempleton.com | Annual Report | 65 | ||
FRANKLIN CUSTODIAN FUNDS
STATEMENT OF INVESTMENTS
Franklin Income Fund (continued)
| Country | Shares | Value | ||||||||
|
Common Stocks (continued) |
||||||||||
| Industrials 1.6% |
||||||||||
| b3M Co. |
United States | 1,000,000 | $ | 210,710,000 | ||||||
| d,fCEVA Logistics AG |
Switzerland | 1,963,608 | 36,663,024 | |||||||
| Cummins Inc. |
United States | 1,760,706 | 257,186,325 | |||||||
| General Electric Co. |
United States | 66,000,000 | 745,140,000 | |||||||
|
|
|
|||||||||
| 1,249,699,349 | ||||||||||
|
|
|
|||||||||
| Information Technology 2.2% |
||||||||||
| Analog Devices Inc. |
United States | 3,000,000 | 277,380,000 | |||||||
| Applied Materials Inc. |
United States | 1,000,000 | 38,650,000 | |||||||
| Intel Corp. |
United States | 3,000,000 | 141,870,000 | |||||||
| Lam Research Corp. |
United States | 1,500,000 | 227,550,000 | |||||||
| Microchip Technology Inc. |
United States | 400,000 | 31,564,000 | |||||||
| Microsoft Corp. |
United States | 2,908,000 | 332,587,960 | |||||||
| Oracle Corp. |
United States | 3,920,015 | 202,115,974 | |||||||
| Texas Instruments Inc. |
United States | 4,000,000 | 429,160,000 | |||||||
|
|
|
|||||||||
| 1,680,877,934 | ||||||||||
|
|
|
|||||||||
| Materials 2.7% |
||||||||||
| BASF SE |
Germany | 10,000,000 | 888,707,264 | |||||||
| BHP Billiton PLC |
United Kingdom | 5,000,000 | 108,924,638 | |||||||
| DowDuPont Inc. |
United States | 7,757,000 | 498,852,670 | |||||||
| Rio Tinto PLC, ADR. |
Australia | 11,251,535 | 574,053,316 | |||||||
|
|
|
|||||||||
| 2,070,537,888 | ||||||||||
|
|
|
|||||||||
| Real Estate 0.6% |
||||||||||
| Host Hotels & Resorts Inc. |
United States | 20,000,000 | 422,000,000 | |||||||
|
|
|
|||||||||
| Utilities 6.4% |
||||||||||
| bDominion Energy Inc. |
United States | 18,000,000 | 1,265,040,000 | |||||||
| Duke Energy Corp. |
United States | 9,000,000 | 720,180,000 | |||||||
| Entergy Corp. |
United States | 1,428,600 | 115,902,318 | |||||||
| bSempra Energy. |
United States | 10,330,000 | 1,175,037,500 | |||||||
| The Southern Co. |
United States | 30,000,000 | 1,308,000,000 | |||||||
| Xcel Energy Inc. |
United States | 6,500,000 | 306,865,000 | |||||||
|
|
|
|||||||||
| 4,891,024,818 | ||||||||||
|
|
|
|||||||||
| Total Common Stocks (Cost $23,998,851,144) |
26,971,257,285 | |||||||||
|
|
|
|||||||||
| gEquity-Linked Securities 12.8% |
||||||||||
| Communication Services 0.9% |
||||||||||
| hBarclays Bank PLC into Alphabet Inc., 7.00%, A, 144A |
United States | 182,000 | 211,912,165 | |||||||
| hCredit Suisse AG London into Comcast Corp., 7.00%, A, 144A |
United States | 6,204,000 | 225,201,869 | |||||||
| hGoldman Sachs International into Comcast Corp., 7.00%, A, 144A |
United States | 5,970,000 | 212,915,447 | |||||||
| hRoyal Bank of Canada into Alphabet Inc., 6.00%, A, 144A |
Belgium | 24,100 | 29,218,258 | |||||||
|
|
|
|||||||||
| 679,247,739 | ||||||||||
|
|
|
|||||||||
| Consumer Discretionary 2.1% |
||||||||||
| hCitigroup Global Markets Holdings Inc. into Ford Motor Co., 9.00%, 144A |
United States | 17,100,000 | 162,957,989 | |||||||
| hCitigroup Global Markets Holdings Inc. into General Motors Co., 9.00%, 144A |
United States | 8,350,000 | 288,837,664 | |||||||
| hCredit Suisse AG London into General Motors Co., 8.00%, 144A |
United States | 5,680,000 | 199,376,912 | |||||||
| hCredit Suisse AG London into Newell Brands Inc., 7.00%, 144A |
United States | 3,940,000 | 82,837,921 | |||||||
| hJP Morgan Chase Financial Co. LLC into Ford Motor Co., 10.00%, 144A |
United States | 28,170,000 | 269,104,038 | |||||||
| hMorgan Stanley BV into Target Corp., 8.00%, 144A |
United States | 3,379,000 | 283,786,660 | |||||||
| hWells Fargo Bank National Assn. into Ford Motor Co., 8.50%, 144A |
United States | 12,500,000 | 120,573,925 | |||||||
| 66 |
Annual Report | franklintempleton.com | ||
FRANKLIN CUSTODIAN FUNDS
STATEMENT OF INVESTMENTS
Franklin Income Fund (continued)
| Country | Shares | Value | ||||||||
|
gEquity-Linked Securities (continued) |
||||||||||
| Consumer Discretionary (continued) |
||||||||||
| hWells Fargo Bank National Assn. into Target Corp., 8.00%, 144A |
United States | 2,536,000 | $ | 218,228,138 | ||||||
|
|
|
|||||||||
| 1,625,703,247 | ||||||||||
|
|
|
|||||||||
| Energy 1.1% |
||||||||||
| hBNP Paribas Arbitrage Issuance BV into Anadarko Petroleum Corp., 8.50%, 144A |
United States | 4,464,000 | 247,265,451 | |||||||
| hJP Morgan Chase Financial Co. LLC into Schlumberger Ltd., 144A |
United States | 4,170,000 | 250,955,262 | |||||||
| hRoyal Bank of Canada into Anadarko Petroleum Corp., 8.50%, 144A |
United States | 4,450,000 | 252,854,229 | |||||||
| hUBS AG London into Halliburton Co., 7.00%, 144A |
United States | 1,400,000 | 58,883,818 | |||||||
|
|
|
|||||||||
| 809,958,760 | ||||||||||
|
|
|
|||||||||
| Financials 1.1% |
||||||||||
| hBarclays Bank PLC into Wells Fargo & Co., 6.50%, 144A |
United States | 4,355,000 | 232,728,870 | |||||||
| hBarclays Bank PLC into MetLife Inc., 7.00%, 144A |
United States | 5,339,000 | 248,557,871 | |||||||
| hDeutsche Bank AG London into Wells Fargo & Co., 7.00%, 144A |
United States | 3,785,000 | 204,960,475 | |||||||
| hRoyal Bank of Canada into U.S. Bancorp, 6.00%, 144A |
United States | 3,680,000 | 196,768,353 | |||||||
|
|
|
|||||||||
| 883,015,569 | ||||||||||
|
|
|
|||||||||
| Health Care 1.0% |
||||||||||
| hBarclays Bank PLC into Mylan NV, 7.50%, 144A |
United States | 2,421,000 | 89,266,819 | |||||||
| hCitigroup Global Markets Holdings Inc. into Medtronic PLC, 6.00%, 144A |
United States | 1,882,000 | 165,439,675 | |||||||
| hMerrill Lynch International & Co. CV into Merck & Co. Inc., 6.50%, 144A |
United States | 4,125,000 | 274,243,988 | |||||||
| hUBS AG London into Medtronic PLC, 6.00%, 144A |
United States | 2,442,000 | 219,664,198 | |||||||
|
|
|
|||||||||
| 748,614,680 | ||||||||||
|
|
|
|||||||||
| Industrials 1.3% |
||||||||||
| hMerrill Lynch International & Co. CV into Deere & Co., 7.00%, 144A |
United States | 1,848,000 | 268,845,874 | |||||||
| hMorgan Stanley BV into Cummins Inc., 7.50%, 144A |
United States | 1,265,000 | 191,947,429 | |||||||
| hUBS AG London into Union Pacific Corp., 7.50%, 144A |
United States | 2,130,000 | 328,443,048 | |||||||
| hWells Fargo Bank National Assn. into General Electric Co., 8.00%, 144A |
United States | 17,300,000 | 202,062,944 | |||||||
|
|
|
|||||||||
| 991,299,295 | ||||||||||
|
|
|
|||||||||
| Information Technology 4.1% |
||||||||||
| hCitigroup Global Markets Holdings Inc. into Texas Instruments Inc., 7.00%, 144A |
United States | 1,600,000 | 175,403,744 | |||||||
| hDeutsche Bank AG London into Applied Materials Inc., 8.00%, 144A |
United States | 3,252,000 | 132,509,042 | |||||||
| hDeutsche Bank AG London into Intel Corp., 7.00%, 144A |
United States | 10,750,000 | 510,084,576 | |||||||
| hGoldman Sachs International into Apple Inc., 6.50%, 144A |
United States | 2,883,000 | 561,866,988 | |||||||
| hGoldman Sachs International into Texas Instruments Inc., 7.00%, 144A |
United States | 2,312,000 | 248,084,319 | |||||||
| hMorgan Stanley BV into Microsoft Corp., 7.00%, 144A |
United States | 3,521,000 | 376,879,421 | |||||||
| hSociete Generale SA into Intel Corp., 8.00%, 144A |
United States | 4,322,000 | 207,764,509 | |||||||
| hUBS AG London into Broadcom Ltd., 8.00%, 144A |
United States | 757,000 | 190,959,381 | |||||||
| hUBS AG London into Microsoft Corp., 6.50%, 144A |
United States | 550,000 | 61,551,426 | |||||||
| hUBS AG London into Oracle Corp., 5.50%, 144A |
United States | 3,799,000 | 197,186,821 | |||||||
| hWells Fargo Bank National Assn. into Intel Corp., 8.00%, 144A |
United States | 2,880,000 | 141,336,608 | |||||||
| hWells Fargo Bank National Assn. into Microsoft Corp., 7.00%, 144A |
United States | 3,118,000 | 326,172,346 | |||||||
|
|
|
|||||||||
| 3,129,799,181 | ||||||||||
|
|
|
|||||||||
| Materials 1.2% |
||||||||||
| hBarclays Bank PLC into International Paper Co., 8.00%, 144A |
United States | 3,125,000 | 158,166,231 | |||||||
| hBarclays Bank PLC into Rio Tinto PLC, 10.00%, 144A |
United Kingdom | 4,752,000 | 249,758,586 | |||||||
| hMerrill Lynch International & Co. CV into DowDuPont Inc., 7.00%, 144A |
United States | 3,560,000 | 234,578,760 | |||||||
| hUBS AG London into DowDuPont Inc., 6.00%, 144A |
United States | 4,360,000 | 286,920,870 | |||||||
|
|
|
|||||||||
| 929,424,447 | ||||||||||
|
|
|
|||||||||
| Total Equity-Linked Securities (Cost $9,975,623,924) |
9,797,062,918 | |||||||||
|
|
|
|||||||||
| franklintempleton.com | Annual Report | 67 | ||
FRANKLIN CUSTODIAN FUNDS
STATEMENT OF INVESTMENTS
Franklin Income Fund (continued)
| Country | Shares | Value | ||||||||||||
| Convertible Preferred Stocks 1.2% |
||||||||||||||
| Energy 0.1% |
||||||||||||||
| Chesapeake Energy Corp., 5.75%, cvt. pfd. |
United States | 95,150 | $ | 60,676,870 | ||||||||||
|
|
|
|||||||||||||
| Financials 0.9% |
||||||||||||||
| Bank of America Corp., 7.25%, cvt. pfd., L |
United States | 445,218 | 576,223,395 | |||||||||||
| dFNMA, 5.375%, cvt. pfd. |
United States | 4,250 | 76,500,000 | |||||||||||
|
|
|
|||||||||||||
| 652,723,395 | ||||||||||||||
|
|
|
|||||||||||||
| Industrials 0.1% |
||||||||||||||
| Fortive Corp., 5.00%, cvt. pfd., A |
United States | 47,000 | 50,704,070 | |||||||||||
|
|
|
|||||||||||||
| Utilities 0.1% |
||||||||||||||
| Sempra Energy, 6.00%, cvt. pfd., A |
United States | 400,000 | 40,336,000 | |||||||||||
| Sempra Energy, 6.75%, cvt. pfd., B |
United States | 739,000 | 74,487,505 | |||||||||||
|
|
|
|||||||||||||
| 114,823,505 | ||||||||||||||
|
|
|
|||||||||||||
| Total Convertible Preferred Stocks (Cost $922,626,057) |
878,927,840 | |||||||||||||
|
|
|
|||||||||||||
| Preferred Stocks 0.1% |
||||||||||||||
| Financials 0.1% |
||||||||||||||
| dFHLMC, 8.375%, pfd., Z |
United States | 7,632,009 | 40,678,608 | |||||||||||
| dFNMA, 8.25%, pfd., S |
United States | 5,500,000 | 30,305,000 | |||||||||||
|
|
|
|||||||||||||
| Total Preferred Stocks (Cost $316,153,851) |
70,983,608 | |||||||||||||
|
|
|
|||||||||||||
| Units | ||||||||||||||
| iIndex-Linked Notes (Cost $100,105,450) 0.1% |
||||||||||||||
| Financials 0.1% |
||||||||||||||
| h,jMorgan Stanley Finance LLC, senior note, 144A, 5.08%, 10/03/19 |
United States | 755,000 | 107,904,600 | |||||||||||
|
|
|
|||||||||||||
| Principal Amount* |
||||||||||||||
| Convertible Bonds 0.7% |
||||||||||||||
| Energy 0.5% |
||||||||||||||
| Chesapeake Energy Corp., cvt., senior note, 5.50%, 9/15/26 |
United States | 135,000,000 | 133,756,650 | |||||||||||
| Weatherford International Ltd., cvt., senior note, 5.875%, 7/01/21 |
United States | 238,500,000 | 225,197,424 | |||||||||||
|
|
|
|||||||||||||
| 358,954,074 | ||||||||||||||
|
|
|
|||||||||||||
| Health Care 0.2% |
||||||||||||||
| hBayer Capital Corp BV, cvt., junior sub. note, 144A, 5.625%, 11/22/19 |
Germany | 150,000,000 | EUR | 160,735,276 | ||||||||||
|
|
|
|||||||||||||
| Total Convertible Bonds (Cost $528,459,708) |
519,689,350 | |||||||||||||
|
|
|
|||||||||||||
| Corporate Bonds 37.2% |
||||||||||||||
| Communication Services 5.4% |
||||||||||||||
| hAltice Financing SA, secured bond, 144A, 7.50%, 5/15/26 |
Luxembourg | 50,000,000 | 48,375,000 | |||||||||||
| hAltice Luxembourg SA, senior secured note, 144A, 7.75%, 5/15/22 |
Luxembourg | 50,000,000 | 48,850,000 | |||||||||||
| AMC Entertainment Holdings Inc., |
||||||||||||||
| senior sub. bond, 5.75%, 6/15/25 |
United States | 37,325,000 | 35,859,994 | |||||||||||
| senior sub. note, 5.875%, 11/15/26 |
United States | 41,300,000 | 39,648,000 | |||||||||||
| AT&T Inc., |
||||||||||||||
| senior bond, 4.125%, 2/17/26 |
United States | 100,000,000 | 98,917,957 | |||||||||||
| senior note, 3.00%, 6/30/22 |
United States | 100,000,000 | 97,591,543 | |||||||||||
| 68 |
Annual Report | franklintempleton.com | ||
FRANKLIN CUSTODIAN FUNDS
STATEMENT OF INVESTMENTS
Franklin Income Fund (continued)
| Country | Principal Amount* |
Value | ||||||
| Corporate Bonds (continued) |
||||||||
| Communication Services (continued) |
||||||||
| CCO Holdings LLC/CCO Holdings Capital Corp., |
||||||||
| senior bond, 5.125%, 2/15/23 |
United States | 105,000,000 | $ | 105,656,250 | ||||
| senior bond, 5.75%, 9/01/23 |
United States | 67,000,000 | 68,255,580 | |||||
| senior bond, 5.75%, 1/15/24 |
United States | 105,000,000 | 106,968,750 | |||||
| hsenior bond, 144A, 5.50%, 5/01/26 |
United States | 60,000,000 | 59,475,000 | |||||
| hsenior bond, 144A, 5.125%, 5/01/27 |
United States | 70,000,000 | 66,542,700 | |||||
| hsenior bond, 144A, 5.00%, 2/01/28 |
United States | 45,500,000 | 42,879,200 | |||||
| hsenior note, 144A, 5.875%, 4/01/24 |
United States | 5,000,000 | 5,118,750 | |||||
| Consolidated Communications Inc., senior note, 6.50%, 10/01/22 |
United States | 34,300,000 | 32,585,000 | |||||
| DISH DBS Corp., |
||||||||
| senior bond, 5.875%, 7/15/22 |
United States | 391,500,000 | 383,425,312 | |||||
| senior bond, 5.00%, 3/15/23 |
United States | 300,000,000 | 273,354,000 | |||||
| senior note, 5.875%, 11/15/24 |
United States | 128,200,000 | 115,700,500 | |||||
| Netflix Inc., |
||||||||
| senior bond, 4.375%, 11/15/26 |
United States | 52,000,000 | 49,112,960 | |||||
| hsenior bond, 144A, 4.875%, 4/15/28 |
United States | 55,000,000 | 51,768,750 | |||||
| hsenior bond, 144A, 5.875%, 11/15/28 |
United States | 60,000,000 | 60,259,200 | |||||
| hSFR Group SA, secured bond, 144A, 7.375%, 5/01/26 |
France | 50,000,000 | 50,187,500 | |||||
| hSirius XM Radio Inc., |
||||||||
| senior bond, 144A, 6.00%, 7/15/24 |
United States | 50,000,000 | 52,010,000 | |||||
| senior note, 144A, 4.625%, 5/15/23 |
United States | 88,400,000 | 87,745,840 | |||||
| Sprint Capital Corp., senior note, 6.90%, 5/01/19 |
United States | 200,000,000 | 203,750,000 | |||||
| Sprint Communications Inc., |
||||||||
| senior bond, 11.50%, 11/15/21 |
United States | 200,000,000 | 235,500,000 | |||||
| senior note, 7.00%, 8/15/20 |
United States | 102,500,000 | 107,581,950 | |||||
| senior note, 6.00%, 11/15/22 |
United States | 362,700,000 | 370,860,750 | |||||
| Sprint Corp., |
||||||||
| senior bond, 7.875%, 9/15/23 |
United States | 187,350,000 | 202,311,771 | |||||
| senior bond, 7.125%, 6/15/24 |
United States | 190,650,000 | 198,514,313 | |||||
| senior note, 7.625%, 3/01/26 |
United States | 100,000,000 | 106,075,000 | |||||
| hSprint Spectrum Co. LLC, senior secured bond, first lien, 144A, 5.152%, 9/20/29 |
United States | 220,000,000 | 221,628,000 | |||||
| hUnivision Communications Inc., |
||||||||
| senior secured note, first lien, 144A, 5.125%, 5/15/23 |
United States | 160,000,000 | 153,600,000 | |||||
| senior secured note, first lien, 144A, 5.125%, 2/15/25 |
United States | 120,020,000 | 112,518,750 | |||||
| Verizon Communications Inc., |
||||||||
| senior bond, 3.50%, 11/01/24 |
United States | 50,000,000 | 49,389,312 | |||||
| senior bond, 2.625%, 8/15/26. |
United States | 7,000,000 | 6,354,597 | |||||
| hVirgin Media Secured Finance PLC, senior secured bond, first lien, 144A, 5.50%, 1/15/25 |
United Kingdom | 80,000,000 | 80,200,000 | |||||
| Zayo Group LLC/Zayo Capital Inc., senior note, 6.00%, 4/01/23 |
United States | 77,000,000 | 79,695,000 | |||||
|
|
|
|||||||
| 4,108,267,229 | ||||||||
|
|
|
|||||||
| Consumer Discretionary 2.0% |
||||||||
| h24 Hour Holdings III LLC, senior note, 144A, 8.00%, 6/01/22 |
United States | 110,000,000 | 110,853,600 | |||||
| Alibaba Group Holding Ltd., senior note, 3.40%, 12/06/27 |
China | 55,000,000 | 51,322,975 | |||||
| Fiat Chrysler Automobiles NV, senior note, 5.25%, 4/15/23 |
United Kingdom | 55,400,000 | 56,529,052 | |||||
| Ford Motor Co., |
||||||||
| senior bond, 4.75%, 1/15/43 |
United States | 50,000,000 | 41,803,268 | |||||
| senior note, 4.346%, 12/08/26 |
United States | 100,000,000 | 94,316,369 | |||||
| franklintempleton.com | Annual Report | 69 | ||
FRANKLIN CUSTODIAN FUNDS
STATEMENT OF INVESTMENTS
Franklin Income Fund (continued)
| Country | Principal Amount* |
Value | ||||||
| Corporate Bonds (continued) |
||||||||
| Consumer Discretionary (continued) |
||||||||
| Ford Motor Credit Co. LLC, |
||||||||
| senior note, 3.336%, 3/18/21 |
United States | 25,000,000 | $ | 24,659,334 | ||||
| senior note, 4.134%, 8/04/25 |
United States | 75,000,000 | 70,934,066 | |||||
| ksenior note, FRN, 3.221%, (3-month USD LIBOR + 0.88%), 10/12/21 |
United States | 50,000,000 | 49,558,428 | |||||
| General Motors Co., senior bond, 5.15%, 4/01/38 |
United States | 165,000,000 | 153,759,684 | |||||
| General Motors Financial Co. Inc., |
||||||||
| senior note, 3.15%, 6/30/22 |
United States | 14,400,000 | 14,020,523 | |||||
| senior note, 4.15%, 6/19/23 |
United States | 75,000,000 | 74,847,022 | |||||
| hGolden Nugget Inc., senior note, 144A, 6.75%, 10/15/24 |
United States | 50,000,000 | 50,844,000 | |||||
| hHanesbrands Inc., |
||||||||
| senior bond, 144A, 4.875%, 5/15/26 |
United States | 41,000,000 | 39,411,250 | |||||
| senior note, 144A, 4.625%, 5/15/24 |
United States | 30,000,000 | 29,306,250 | |||||
| KB Home, |
||||||||
| senior bond, 7.50%, 9/15/22 |
United States | 25,800,000 | 27,960,750 | |||||
| senior note, 7.00%, 12/15/21 |
United States | 20,200,000 | 21,361,500 | |||||
| hShea Homes LP/Shea Homes Funding Corp., |
||||||||
| senior bond, 144A, 6.125%, 4/01/25 |
United States | 85,000,000 | 83,406,250 | |||||
| senior note, 144A, 5.875%, 4/01/23 |
United States | 70,000,000 | 69,387,500 | |||||
| hTesla Inc., senior note, 144A, 5.30%, 8/15/25 |
United States | 100,000,000 | 84,625,000 | |||||
| h Wynn Las Vegas LLC/Wynn Las Vegas Capital Corp., |
||||||||
| senior bond, 144A, 4.25%, 5/30/23 |
United States | 84,000,000 | 80,640,000 | |||||
| senior bond, 144A, 5.50%, 3/01/25 |
United States | 135,000,000 | 130,781,250 | |||||
| senior bond, 144A, 5.25%, 5/15/27 |
United States | 99,827,000 | 92,839,110 | |||||
| hWynn Macau Ltd., senior bond, 144A, 5.50%, 10/01/27 |
Macau | 60,100,000 | 56,494,000 | |||||
|
|
|
|||||||
| 1,509,661,181 | ||||||||
|
|
|
|||||||
| Consumer Staples 0.7% |
||||||||
| Anheuser-Busch InBev Worldwide Inc., senior bond, 4.00%, 4/13/28 |
Belgium | 25,000,000 | 24,676,684 | |||||
| hBAT Capital Corp., |
||||||||
| senior note, 144A, 3.222%, 8/15/24 |
United Kingdom | 75,000,000 | 71,560,059 | |||||
| senior note, 144A, 3.557%, 8/15/27 |
United Kingdom | 140,000,000 | 130,485,600 | |||||
| Kraft Heinz Foods Co., |
||||||||
| senior bond, 3.50%, 6/06/22 |
United States | 14,200,000 | 14,121,255 | |||||
| senior bond, 3.95%, 7/15/25 |
United States | 60,000,000 | 59,190,059 | |||||
| senior bond, 4.625%, 1/30/29 |
United States | 50,000,000 | 49,988,148 | |||||
| hPost Holdings Inc., |
||||||||
| senior bond, 144A, 5.00%, 8/15/26 |
United States | 62,500,000 | 59,331,250 | |||||
| senior bond, 144A, 5.625%, 1/15/28 |
United States | 65,000,000 | 62,725,000 | |||||
| Walmart Inc., |
||||||||
| senior note, 3.40%, 6/26/23 |
United States | 50,000,000 | 50,199,414 | |||||
| senior note, 3.55%, 6/26/25 |
United States | 40,000,000 | 40,216,352 | |||||
|
|
|
|||||||
| 562,493,821 | ||||||||
|
|
|
|||||||
| Energy 7.7% |
||||||||
| hAscent Resources Utica Holdings LLC/ARU Finance Corp., senior note, 144A, 10.00%, 4/01/22 |
United States | 150,000,000 | 169,875,000 | |||||
| Bill Barrett Corp., |
||||||||
| senior bond, 7.00%, 10/15/22 |
United States | 200,890,000 | 200,890,000 | |||||
| senior note, 8.75%, 6/15/25 |
United States | 142,000,000 | 149,810,000 | |||||
| Callon Petroleum Co., senior note, 6.375%, 7/01/26 |
United States | 40,000,000 | 40,900,000 | |||||
| 70 |
Annual Report | franklintempleton.com | ||
FRANKLIN CUSTODIAN FUNDS
STATEMENT OF INVESTMENTS
Franklin Income Fund (continued)
| Country | Principal Amount* |
Value | ||||||
| Corporate Bonds (continued) |
||||||||
| Energy (continued) |
||||||||
| Calumet Specialty Products Partners LP/Calumet Finance Corp., |
||||||||
| senior note, 6.50%, 4/15/21 |
United States | 309,348,000 | $ | 309,348,000 | ||||
| senior note, 7.625%, 1/15/22 |
United States | 97,552,000 | 98,283,640 | |||||
| senior note, 7.75%, 4/15/23 |
United States | 62,000,000 | 62,310,000 | |||||
| Canadian Natural Resources Ltd., senior bond, 3.85%, 6/01/27 |
Canada | 25,000,000 | 24,379,490 | |||||
| Chesapeake Energy Corp., |
||||||||
| hsecured note, second lien, 144A, 8.00%, 12/15/22 |
United States | 506,386,000 | 531,705,300 | |||||
| senior bond, 6.875%, 11/15/20 |
United States | 95,000,000 | 99,987,500 | |||||
| senior bond, 6.125%, 2/15/21 |
United States | 226,000,000 | 232,384,500 | |||||
| senior bond, 8.00%, 6/15/27 |
United States | 250,000,000 | 255,500,000 | |||||
| senior note, 6.625%, 8/15/20 |
United States | 157,800,000 | 165,690,000 | |||||
| senior note, 5.375%, 6/15/21 |
United States | 97,000,000 | 97,000,000 | |||||
| senior note, 4.875%, 4/15/22 |
United States | 107,710,000 | 105,151,887 | |||||
| senior note, 5.75%, 3/15/23 |
United States | 96,700,000 | 94,645,125 | |||||
| csenior note, 8.00%, 1/15/25 |
United States | 410,000,000 | 424,145,000 | |||||
| senior note, 7.50%, 10/01/26 |
United States | 50,000,000 | 50,062,500 | |||||
| ksenior note, FRN, 5.589%, (3-month USD LIBOR + 3.25%), 4/15/19 |
United States | 72,800,000 | 73,073,000 | |||||
| Chevron Corp., senior note, 2.895%, 3/03/24 |
United States | 17,300,000 | 16,847,713 | |||||
| Energy Transfer Equity LP, senior secured bond, first lien, 5.50%, 6/01/27 |
United States | 95,300,000 | 99,140,590 | |||||
| Ensco PLC, |
||||||||
| senior bond, 5.75%, 10/01/44 |
United States | 50,000,000 | 37,562,500 | |||||
| senior note, 7.75%, 2/01/26 |
United States | 35,000,000 | 34,868,750 | |||||
| Ferrellgas LP/Ferrellgas Finance Corp., |
||||||||
| senior note, 6.50%, 5/01/21 |
United States | 79,295,000 | 71,365,500 | |||||
| senior note, 6.75%, 1/15/22 |
United States | 112,500,000 | 98,718,750 | |||||
| senior note, 6.75%, 6/15/23 |
United States | 88,500,000 | 74,340,000 | |||||
| Gulfport Energy Corp., |
||||||||
| senior note, 6.375%, 5/15/25 |
United States | 50,000,000 | 49,375,000 | |||||
| senior note, 6.375%, 1/15/26 |
United States | 50,000,000 | 48,750,000 | |||||
| Halcon Resources Corp., senior note, 6.75%, 2/15/25 |
United States | 80,000,000 | 77,200,000 | |||||
| Kinder Morgan Inc., |
||||||||
| senior bond, 7.75%, 1/15/32 |
United States | 118,000,000 | 149,239,438 | |||||
| hsenior secured bond, first lien, 144A, 5.625%, 11/15/23 |
United States | 91,200,000 | 97,411,816 | |||||
| hMatador Resources Co., senior note, 144A, 5.875%, 9/15/26 |
United States | 50,000,000 | 50,750,000 | |||||
| Sanchez Energy Corp., senior note, 7.75%, 6/15/21 |
United States | 81,692,000 | 57,592,860 | |||||
| hSunoco LP/Sunoco Finance Corp., senior note, 144A, 5.50%, 2/15/26 |
United States | 74,775,000 | 72,419,587 | |||||
| hTalos Production LLC/Talos Production Finance Inc., senior note, second lien, 144A, 11.00%, 4/03/22 |
United States | 72,845,556 | 78,308,973 | |||||
| W&T Offshore Inc., |
||||||||
| h,lsecured note, second lien, 144A, PIK, 9.00%, 5/15/20 |
United States | 82,377,299 | 83,201,072 | |||||
| senior note, 8.50%, 6/15/19 |
United States | 96,921,000 | 97,405,605 | |||||
| h,lsenior secured note, third lien, 144A, PIK, 10.00%, 6/15/21 |
United States | 74,635,970 | 75,059,008 | |||||
| hWeatherford International LLC, senior note, 144A, 9.875%, 3/01/25 |
United States | 88,000,000 | 85,360,000 | |||||
| Weatherford International Ltd., |
||||||||
| senior note, 5.125%, 9/15/20 |
United States | 81,000,000 | 80,898,750 | |||||
| senior note, 7.75%, 6/15/21 |
United States | 384,500,000 | 383,058,125 | |||||
| senior note, 4.50%, 4/15/22 |
United States | 317,600,000 | 279,488,000 | |||||
| senior note, 8.25%, 6/15/23 |
United States | 283,100,000 | 268,945,000 | |||||
| senior note, 9.875%, 2/15/24 |
United States | 230,000,000 | 225,975,000 | |||||
| The Williams Cos. Inc., senior note, 4.55%, 6/24/24 |
United States | 46,858,000 | 47,650,515 | |||||
|
|
|
|||||||
| 5,926,073,494 | ||||||||
|
|
|
|||||||
| franklintempleton.com | Annual Report | 71 | ||
FRANKLIN CUSTODIAN FUNDS
STATEMENT OF INVESTMENTS
Franklin Income Fund (continued)
| Country | Principal Amount* |
Value | ||||||
| Corporate Bonds (continued) |
||||||||
| Financials 5.0% |
||||||||
| hAshtead Capital Inc., secured bond, second lien, 144A, 4.375%, 8/15/27 |
United Kingdom | 20,000,000 | $ | 19,026,400 | ||||
| Bank of America Corp., |
||||||||
| mjunior sub. bond, AA, 6.10% to 3/17/25, FRN thereafter, Perpetual |
United States | 80,000,000 | 84,000,000 | |||||
| mjunior sub. bond, U, 5.20% to 6/01/23, FRN thereafter, Perpetual |
United States | 68,000,000 | 67,405,000 | |||||
| mjunior sub. bond, X, 6.25% to 9/05/24, FRN thereafter, Perpetual |
United States | 85,000,000 | 90,100,000 | |||||
| senior bond, 3.419% to 12/20/27, FRN thereafter, 12/20/28 |
United States | 135,000,000 | 126,774,902 | |||||
| senior note, 3.004% to 12/20/22, FRN thereafter, 12/20/23 |
United States | 100,000,000 | 97,077,538 | |||||
| Barclays PLC, senior note, 4.375%, 1/12/26 |
United Kingdom | 67,300,000 | 65,296,816 | |||||
| Capital One Financial Corp., |
||||||||
| senior sub. note, 4.20%, 10/29/25 |
United States | 100,000,000 | 97,814,856 | |||||
| sub. note, 3.75%, 7/28/26 |
United States | 75,000,000 | 70,065,289 | |||||
| Citigroup Inc., |
||||||||
| mjunior sub. bond, 5.35% to 5/15/23, FRN thereafter, Perpetual |
United States | 179,195,000 | 176,283,081 | |||||
| mjunior sub. bond, 5.90% to 2/15/23, FRN thereafter, Perpetual |
United States | 33,000,000 | 33,825,000 | |||||
| mjunior sub. bond, 5.95% to 1/30/23, FRN thereafter, Perpetual |
United States | 230,000,000 | 235,398,100 | |||||
| mjunior sub. bond, M, 6.30% to 5/15/24, FRN thereafter, Perpetual |
United States | 247,500,000 | 253,068,750 | |||||
| mjunior sub. bond, O, 5.875% to 3/27/20, FRN thereafter, Perpetual |
United States | 160,000,000 | 164,400,000 | |||||
| mjunior sub. bond, Q, 5.95% to 8/15/20, FRN thereafter, Perpetual |
United States | 120,000,000 | 123,771,000 | |||||
| sub. bond, 4.125%, 7/25/28 |
United States | 165,000,000 | 159,501,743 | |||||
| sub. note, 3.50%, 5/15/23 |
United States | 45,000,000 | 44,300,305 | |||||
| mFifth Third Bancorp, junior sub. bond, 5.10% to 6/30/23, FRN thereafter, Perpetual |
United States | 54,000,000 | 53,055,000 | |||||
| The Goldman Sachs Group Inc., |
||||||||
| senior note, 3.50%, 11/16/26 |
United States | 55,000,000 | 52,222,018 | |||||
| senior note, 2.876% to 10/31/21, FRN thereafter, 10/31/22 |
United States | 125,000,000 | 122,010,541 | |||||
| senior note, 3.272% to 9/29/24, FRN thereafter, 9/29/25 |
United States | 100,000,000 | 95,591,156 | |||||
| HSBC Holdings PLC, |
||||||||
| senior bond, 4.292% to 9/12/25, FRN thereafter, 9/12/26 |
United Kingdom | 125,000,000 | 123,380,000 | |||||
| senior note, 3.40%, 3/08/21 |
United Kingdom | 15,500,000 | 15,464,583 | |||||
| mJPMorgan Chase & Co., |
||||||||
| junior sub. bond, 6.125% to 4/30/24, FRN thereafter, Perpetual |
United States | 60,000,000 | 62,557,800 | |||||
| junior sub. bond, 6.75% to 2/01/24, FRN thereafter, Perpetual |
United States | 100,000,000 | 109,250,000 | |||||
| kjunior sub. bond, FRN, 5.809%, (3-month USD LIBOR + 3.47%), Perpetual |
United States | 585,000,000 | 588,217,500 | |||||
| junior sub. bond, Q, 5.15% to 5/01/23, FRN thereafter, Perpetual |
United States | 100,000,000 | 100,125,000 | |||||
| junior sub. bond, R, 6.00% to 8/01/23, FRN thereafter, Perpetual |
United States | 105,000,000 | 109,331,250 | |||||
| junior sub. bond, V, 5.00% to 7/30/19, FRN thereafter, Perpetual |
United States | 200,000,000 | 201,750,000 | |||||
| junior sub. bond, X, 6.10% to 10/01/24, FRN thereafter, Perpetual |
United States | 80,000,000 | 82,900,000 | |||||
| mMorgan Stanley, junior sub. bond, 5.55% to 7/15/20, FRN thereafter, Perpetual |
United States | 58,000,000 | 59,609,500 | |||||
| Prudential Financial Inc., junior sub. bond, 5.70% to 9/15/28, FRN thereafter, 9/15/48 |
United States | 75,000,000 | 74,743,500 | |||||
| mWells Fargo & Co., junior sub. bond, S, 5.90% to 6/15/24, FRN thereafter, Perpetual |
United States | 98,700,000 | 100,303,875 | |||||
|
|
|
|||||||
| 3,858,620,503 | ||||||||
|
|
|
|||||||
| Health Care 12.0% |
||||||||
| AbbVie Inc., |
||||||||
| senior bond, 3.20%, 5/14/26 |
United States | 10,000,000 | 9,323,635 | |||||
| senior note, 2.90%, 11/06/22 |
United States | 25,000,000 | 24,305,683 | |||||
| Allergan Funding SCS, senior bond, 3.80%, 3/15/25 |
United States | 100,000,000 | 98,024,236 | |||||
| 72 |
Annual Report | franklintempleton.com | ||
FRANKLIN CUSTODIAN FUNDS
STATEMENT OF INVESTMENTS
Franklin Income Fund (continued)
| Country | Principal Amount* |
Value | ||||||
| Corporate Bonds (continued) |
||||||||
| Health Care (continued) |
||||||||
| AstraZeneca PLC, |
||||||||
| senior note, 2.375%, 11/16/20 |
United Kingdom | 10,000,000 | $ | 9,851,250 | ||||
| senior note, 2.375%, 6/12/22 |
United Kingdom | 31,500,000 | 30,315,758 | |||||
| hAvantor Inc., senior note, 144A, 9.00%, 10/01/25 |
United States | 30,000,000 | 31,012,500 | |||||
| hBausch Health Cos. Inc., |
||||||||
| senior bond, 144A, 6.125%, 4/15/25 |
United States | 122,400,000 | 116,714,520 | |||||
| senior note, 144A, 7.50%, 7/15/21 |
United States | 205,000,000 | 209,356,250 | |||||
| senior note, 144A, 5.50%, 3/01/23 |
United States | 50,526,000 | 48,795,485 | |||||
| senior note, 144A, 5.875%, 5/15/23 |
United States | 315,000,000 | 306,967,500 | |||||
| senior note, 144A, 9.00%, 12/15/25 |
United States | 85,000,000 | 91,803,400 | |||||
| senior note, 144A, 9.25%, 4/01/26 |
United States | 200,000,000 | 216,250,000 | |||||
| senior note, 144A, 8.50%, 1/31/27 |
United States | 50,000,000 | 52,625,000 | |||||
| senior note, first lien, 144A, 7.00%, 3/15/24 |
United States | 77,300,000 | 81,860,700 | |||||
| senior secured note, first lien, 144A, 6.50%, 3/15/22 |
United States | 50,500,000 | 52,646,250 | |||||
| senior secured note, first lien, 144A, 5.50%, 11/01/25 |
United States | 30,000,000 | 30,060,000 | |||||
| hBayer US Finance II LLC, senior note, 144A, 4.25%, 12/15/25 |
Germany | 75,000,000 | 74,614,125 | |||||
| CHS/Community Health Systems Inc., |
||||||||
| senior note, 6.875%, 2/01/22 |
United States | 1,260,024,000 | 714,094,410 | |||||
| hsenior note, 144A, 11.00%, 6/30/23 |
United States | 1,475,000,000 | 1,334,255,500 | |||||
| hsenior note, 144A, 8.125%, 6/30/24 |
United States | 731,006,000 | 614,045,040 | |||||
| hsenior secured note, 144A, 8.625%, 1/15/24 |
United States | 50,000,000 | 51,937,500 | |||||
| senior secured note, first lien, 6.25%, 3/31/23 |
United States | 355,000,000 | 338,581,250 | |||||
| CVS Health Corp., |
||||||||
| senior bond, 4.30%, 3/25/28 |
United States | 125,000,000 | 124,005,071 | |||||
| senior bond, 5.05%, 3/25/48 |
United States | 50,200,000 | 51,483,165 | |||||
| senior note, 4.10%, 3/25/25 |
United States | 75,000,000 | 74,872,486 | |||||
| DaVita Inc., |
||||||||
| senior bond, 5.125%, 7/15/24 |
United States | 132,000,000 | 128,040,000 | |||||
| senior bond, 5.00%, 5/01/25 |
United States | 129,500,000 | 124,927,355 | |||||
| hEndo DAC/Endo Finance LLC/Endo Finco Inc., |
||||||||
| senior bond, 144A, 6.00%, 2/01/25 |
United States | 108,700,000 | 94,242,900 | |||||
| senior note, 144A, 6.00%, 7/15/23 |
United States | 185,525,000 | 165,581,062 | |||||
| hEndo Finance LLC, senior note, 144A, 5.75%, 1/15/22 |
United States | 126,000,000 | 118,282,500 | |||||
| hEndo Finance LLC/Endo Finco Inc., senior note, 144A, 5.375%, 1/15/23 |
United States | 35,000,000 | 30,975,000 | |||||
| hHalfmoon Parent Inc., |
||||||||
| senior secured note, 144A, 3.75%, 7/15/23 |
United States | 60,000,000 | 59,836,628 | |||||
| senior secured note, 144A, 4.125%, 11/15/25 |
United States | 60,000,000 | 59,899,594 | |||||
| HCA Inc., |
||||||||
| senior bond, 5.875%, 5/01/23 |
United States | 120,000,000 | 126,750,000 | |||||
| senior note, 7.50%, 2/15/22 |
United States | 100,000,000 | 109,750,000 | |||||
| senior secured note, first lien, 5.00%, 3/15/24 |
United States | 134,800,000 | 138,507,000 | |||||
| Horizon Pharma Inc., senior note, 6.625%, 5/01/23 |
United States | 95,012,000 | 97,387,300 | |||||
| cMallinckrodt International Finance SA, senior bond, 4.75%, 4/15/23 |
United States | 66,000,000 | 56,618,544 | |||||
| hMallinckrodt International Finance SA/Mallinckrodt CB LLC, |
||||||||
| senior note, 144A, 4.875%, 4/15/20 |
United States | 277,252,000 | 275,865,740 | |||||
| senior note, 144A, 5.75%, 8/01/22 |
United States | 340,000,000 | 315,350,000 | |||||
| senior note, 144A, 5.625%, 10/15/23 |
United States | 285,350,000 | 253,961,500 | |||||
| senior note, 144A, 5.50%, 4/15/25 |
United States | 137,500,000 | 116,806,250 | |||||
| Mylan NV, senior note, 3.95%, 6/15/26 |
United States | 100,000,000 | 94,812,000 | |||||
| franklintempleton.com | Annual Report | 73 | ||
FRANKLIN CUSTODIAN FUNDS
STATEMENT OF INVESTMENTS
Franklin Income Fund (continued)
| Country | Principal Amount* |
Value | ||||||
| Corporate Bonds (continued) |
||||||||
| Health Care (continued) |
||||||||
| Tenet Healthcare Corp., |
||||||||
| secured note, second lien, 5.125%, 5/01/25 |
United States | 128,300,000 | $ | 126,696,250 | ||||
| senior note, 8.125%, 4/01/22 |
United States | 872,900,000 | 923,135,395 | |||||
| senior note, 6.75%, 6/15/23 |
United States | 550,000,000 | 550,000,000 | |||||
| senior note, 7.00%, 8/01/25 |
United States | 140,000,000 | 138,837,300 | |||||
| senior note, 6.875%, 11/15/31 |
United States | 37,400,000 | 33,667,480 | |||||
| senior secured note, first lien, 4.375%, 10/01/21 |
United States | 130,000,000 | 130,087,100 | |||||
| senior secured note, first lien, 4.625%, 7/15/24 |
United States | 25,200,000 | 24,557,400 | |||||
| hsenior secured note, second lien, 144A, 7.50%, 1/01/22 |
United States | 66,700,000 | 69,868,250 | |||||
|
|
|
|||||||
| 9,152,243,262 | ||||||||
|
|
|
|||||||
| Industrials 0.5% |
||||||||
| hCloud Crane LLC, secured note, second lien, 144A, 10.125%, 8/01/24 |
United States | 20,000,000 | 21,950,000 | |||||
| United Rentals North America Inc., |
||||||||
| senior bond, 5.75%, 11/15/24 |
United States | 47,400,000 | 48,857,550 | |||||
| senior bond, 4.875%, 1/15/28 |
United States | 48,000,000 | 45,120,000 | |||||
| United Technologies Corp., |
||||||||
| senior bond, 4.50%, 6/01/42 |
United States | 50,000,000 | 49,602,856 | |||||
| senior note, 3.10%, 6/01/22 |
United States | 15,900,000 | 15,667,006 | |||||
| senior note, 3.95%, 8/16/25 |
United States | 25,000,000 | 24,878,399 | |||||
| senior note, 3.125%, 5/04/27 |
United States | 40,000,000 | 37,416,060 | |||||
| hWest Corp., senior note, 144A, 8.50%, 10/15/25 |
United States | 40,000,000 | 36,900,000 | |||||
| hXPO Logistics Inc., senior note, 144A, 6.50%, 6/15/22 |
United States | 128,598,000 | 133,259,677 | |||||
|
|
|
|||||||
| 413,651,548 | ||||||||
|
|
|
|||||||
| Information Technology 0.5% |
||||||||
| hCommScope Inc., senior bond, 144A, 5.50%, 6/15/24 |
United States | 100,000,000 | 101,125,000 | |||||
| hCommScope Technologies LLC, senior bond, 144A, 6.00%, 6/15/25 |
United States | 74,200,000 | 76,945,400 | |||||
| hDell International LLC/EMC Corp., senior secured note, first lien, 144A, 5.45%, 6/15/23 |
United States | 69,750,000 | 73,337,167 | |||||
| hMicrochip Technology Inc., senior secured note, first lien, 144A, 4.333%, 6/01/23 |
United States | 25,000,000 | 24,865,294 | |||||
| NCR Corp., |
||||||||
| senior note, 5.00%, 7/15/22 |
United States | 40,000,000 | 39,850,000 | |||||
| senior note, 6.375%, 12/15/23 |
United States | 35,000,000 | 35,743,750 | |||||
|
|
|
|||||||
| 351,866,611 | ||||||||
|
|
|
|||||||
| Materials 1.2% |
||||||||
| Ball Corp., senior bond, 4.00%, 11/15/23 |
United States | 90,000,000 | 88,312,500 | |||||
| hBWAY Holding Co., |
||||||||
| secured note, 144A, 5.50%, 4/15/24 |
United States | 75,000,000 | 73,919,250 | |||||
| senior note, 144A, 7.25%, 4/15/25 |
United States | 170,000,000 | 166,158,000 | |||||
| hCemex Finance LLC, senior secured note, first lien, 144A, 6.00%, 4/01/24 |
Mexico | 88,400,000 | 91,355,654 | |||||
| hCemex SAB de CV, |
||||||||
| senior secured bond, 144A, 7.75%, 4/16/26 |
Mexico | 55,100,000 | 60,410,262 | |||||
| senior secured bond, first lien, 144A, 5.70%, 1/11/25 |
Mexico | 70,000,000 | 71,166,550 | |||||
| Crown Americas LLC/Crown Americas Capital Corp. IV, senior bond, 4.50%, 1/15/23 |
United States | 85,000,000 | 85,552,500 | |||||
| hFMG Resources (August 2006) Pty. Ltd., |
||||||||
| senior note, 144A, 4.75%, 5/15/22 |
Australia | 20,000,000 | 19,773,400 | |||||
| senior note, 144A, 5.125%, 3/15/23 |
Australia | 4,000,000 | 3,925,000 | |||||
| senior note, 144A, 5.125%, 5/15/24 |
Australia | 44,400,000 | 43,164,126 | |||||
| 74 |
Annual Report | franklintempleton.com | ||
FRANKLIN CUSTODIAN FUNDS
STATEMENT OF INVESTMENTS
Franklin Income Fund (continued)
| Country | Principal Amount* |
Value | ||||||||
| Corporate Bonds (continued) |
||||||||||
| Materials (continued) |
||||||||||
| International Paper Co., |
||||||||||
| senior bond, 3.00%, 2/15/27 |
United States | 50,000,000 | $ | 45,967,645 | ||||||
| senior bond, 4.40%, 8/15/47 |
United States | 50,000,000 | 46,199,842 | |||||||
| LYB International Finance II BV, senior note, 3.50%, 3/02/27 |
United States | 50,000,000 | 46,849,295 | |||||||
| hSyngenta Finance NV, |
||||||||||
| senior note, 144A, 4.441%, 4/24/23 |
Switzerland | 35,000,000 | 34,794,200 | |||||||
| senior note, 144A, 5.182%, 4/24/28 |
Switzerland | 50,000,000 | 47,940,250 | |||||||
|
|
|
|||||||||
| 925,488,474 | ||||||||||
|
|
|
|||||||||
| Real Estate 0.6% |
||||||||||
| American Tower Corp., senior bond, 3.375%, 10/15/26 |
United States | 50,000,000 | 46,621,515 | |||||||
| Equinix Inc., senior bond, 5.375%, 5/15/27 |
United States | 140,000,000 | 140,582,400 | |||||||
| Iron Mountain Inc., |
||||||||||
| hsenior note, 144A, 4.875%, 9/15/27 |
United States | 135,610,000 | 124,930,712 | |||||||
| senior sub. bond, 5.75%, 8/15/24 |
United States | 129,254,000 | 128,219,968 | |||||||
|
|
|
|||||||||
| 440,354,595 | ||||||||||
|
|
|
|||||||||
| Utilities 1.6% |
||||||||||
| The AES Corp., senior bond, 4.875%, 5/15/23 |
United States | 60,000,000 | 60,825,000 | |||||||
| Calpine Corp., |
||||||||||
| senior bond, 5.75%, 1/15/25 |
United States | 170,000,000 | 151,087,500 | |||||||
| senior note, 5.375%, 1/15/23 |
United States | 300,000,000 | 283,125,000 | |||||||
| senior note, 5.50%, 2/01/24 |
United States | 186,500,000 | 167,150,625 | |||||||
| Ferrellgas Partners LP/Ferrellgas Partners Finance Corp., senior note, 8.625%, 6/15/20 |
United States | 49,900,000 | 47,654,500 | |||||||
| h InterGen NV, secured bond, 144A, 7.00%, 6/30/23 |
Netherlands | 26,900,000 | 26,765,500 | |||||||
| Sempra Energy, senior bond, 3.40%, 2/01/28 |
United States | 50,000,000 | 46,865,999 | |||||||
| Vistra Energy Corp., |
||||||||||
| senior note, 7.375%, 11/01/22 |
United States | 286,500,000 | 298,369,695 | |||||||
| senior note, 5.875%, 6/01/23 |
United States | 130,000,000 | 133,997,500 | |||||||
|
|
|
|||||||||
| 1,215,841,319 | ||||||||||
|
|
|
|||||||||
| Total Corporate Bonds (Cost $28,334,394,799) |
28,464,562,037 | |||||||||
|
|
|
|||||||||
| k,nSenior Floating Rate Interests 3.8% |
||||||||||
| Communication Services 1.5% |
||||||||||
| Digicel International Finance Ltd., Initial Term B Loans, 5.57%, (3-month USD LIBOR + 3.25%), 5/25/24 |
United States | 69,324,937 | 66,234,223 | |||||||
| Digicert Holdings Inc., |
||||||||||
| First Lien Term Loan, 6.242%, (1-month USD LIBOR + 4.00%), 10/01/24 |
United States | 44,887,500 | 45,128,770 | |||||||
| Second Lien Initial Loan, 10.242%, (1-month USD LIBOR + 8.00%), 9/18/25 |
United States | 20,396,762 | 20,371,266 | |||||||
| Global Eagle Entertainment Inc., Initial Term Loans, 10.02%, (6-month USD LIBOR + 7.50%), 1/06/23 |
United States | 103,901,875 | 107,278,686 | |||||||
| o iHeartCommunications Inc., |
||||||||||
| Tranche D Term Loan, 8.443%, (3-month USD LIBOR + 6.75%), 1/30/19 |
United States | 731,589,932 | 551,494,438 | |||||||
| Tranche E Term Loan, 9.193%, (3-month USD LIBOR + 7.50%), 7/30/19 |
United States | 241,744,256 | 181,761,463 | |||||||
| franklintempleton.com | Annual Report | 75 | ||
FRANKLIN CUSTODIAN FUNDS
STATEMENT OF INVESTMENTS
Franklin Income Fund (continued)
| Country | Principal Amount* |
Value | ||||||
| k,nSenior Floating Rate Interests (continued) |
||||||||
| Communication Services (continued) |
||||||||
| MH Sub I LLC & Micro Holding Corp., |
||||||||
| Amendment No. 2 Initial Term Loan, 5.915%, (1-month USD LIBOR + 3.75%), 9/15/24 |
United States | 39,600,000 | $ | 39,918,582 | ||||
| Second Lien Initial Term Loan, 9.665%, (1-month USD LIBOR + 7.50%), 9/15/25 |
United States | 30,000,000 | 30,393,750 | |||||
| Securus Technologies Holdings Inc., |
||||||||
| Initial Term Loan B, 6.742%, (1-month USD LIBOR + 4.50%), 11/01/24 |
United States | 44,662,500 | 44,876,523 | |||||
| Second Lien Initial Loan, 10.492%, (1-month USD LIBOR + 8.25%), 11/01/25 |
United States | 30,000,000 | 30,150,000 | |||||
| Univision Communications Inc., Term Loan, 4.992%, (1-month USD LIBOR + 2.75%), 3/15/24 |
United States | 29,756,023 | 29,007,481 | |||||
|
|
|
|||||||
| 1,146,615,182 | ||||||||
|
|
|
|||||||
| Consumer Discretionary 1.0% |
||||||||
| 24 Hour Fitness Worldwide Inc., Term Loan, 5.742%, (1-month USD LIBOR + 3.50%), 5/30/25 |
United States | 99,750,000 | 100,581,217 | |||||
| Academy Ltd., Initial Term Loan, 6.104%, (1-month USD LIBOR + 4.00%), 7/02/22 |
United States | 110,854,786 | 86,512,960 | |||||
| Belk Inc., Closing Date Term Loan, 6.883%, (1-month USD LIBOR + 4.75%), 12/12/22 |
United States | 233,257,868 | 204,757,256 | |||||
| LTI Holdings Inc., Initial Term Loans, 5.742%, (1-month USD LIBOR + 3.50%), 9/06/25 |
United States | 30,000,000 | 30,168,750 | |||||
| PetSmart Inc., Tranche B-2 Loans, 5.12%, (1-month USD LIBOR + 3.00%), 3/11/22 |
United States | 231,594,530 | 202,723,955 | |||||
| Stars Group Holdings BV, Stars Group (US), USD Term Loan, 5.886%, (3-month USD LIBOR + 3.50%), 7/10/25 |
United States | 64,837,500 | 65,522,508 | |||||
| a,pTenneco Inc., Tranche B Term Loan, TBD, 10/01/25 |
United States | 50,000,000 | 50,023,150 | |||||
|
|
|
|||||||
| 740,289,796 | ||||||||
|
|
|
|||||||
| Consumer Staples 0.1% |
||||||||
| Almonde Inc., |
||||||||
| Tahoe Canada Bidco Inc. and Misys Europe SA, Dollar Term Loan, 5.886%, (3-month USD LIBOR + 3.50%), 6/13/24 |
United States | 56,462,782 | 56,564,245 | |||||
| Tahoe Canada Bidco Inc. and Misys Europe SA, Second Lien, Dollar Term Loan, 9.636%, (3-month USD LIBOR + 7.25%), 6/13/25 |
United States | 15,000,000 | 14,868,750 | |||||
|
|
|
|||||||
| 71,432,995 | ||||||||
|
|
|
|||||||
| Energy 0.4% |
||||||||
| pNorthRiver Midstream Finance LP, Senior Secured Term Loan, TBD, 9/28/25 |
United States | 40,000,000 | 39,900,000 | |||||
| W&T Offshore Inc., |
||||||||
| Second Lien Term Loan, 9.00%, 5/15/20 |
United States | 161,850,000 | 164,682,375 | |||||
| Senior Secured 1.5 Lien Term Loan, 11.00%, 11/15/19 |
United States | 75,000,000 | 79,125,000 | |||||
|
|
|
|||||||
| 283,707,375 | ||||||||
|
|
|
|||||||
| Financials 0.1% |
||||||||
| Russell Investments US Institutional Holdco Inc., Initial Term Loan, 5.492%, (1-month USD LIBOR + 3.25%), 6/01/23 |
United States | 85,499,222 | 86,087,029 | |||||
|
|
|
|||||||
| 76 |
Annual Report | franklintempleton.com | ||
FRANKLIN CUSTODIAN FUNDS
STATEMENT OF INVESTMENTS
Franklin Income Fund (continued)
| Country | Principal Amount* |
Value | ||||||
| k,nSenior Floating Rate Interests (continued) |
||||||||
| Health Care 0.3% |
||||||||
| Amneal Pharmaceuticals LLC, Initial Term Loans, 5.75%, (1-month USD LIBOR + 3.50%), 5/04/25 |
United States | 59,836,133 | $ | 60,471,892 | ||||
| Endo Luxembourg Finance Co. I S.A.R.L. and Endo LLC, Initial Term Loans, 6.50%, (1-month USD LIBOR + 4.25%), 4/29/24 |
United States | 79,000,000 | 79,691,250 | |||||
| Horizon Pharma Inc., Third Amendment Refinancing Term Loan, 5.50%, (1-month USD LIBOR + 3.25%), 3/29/24 |
United States | 31,652,262 | 31,949,003 | |||||
| Lannett Co. Inc., Initial Tranche B Term Loans, 7.617%, (1-month USD LIBOR + 5.375%), 11/25/22 |
United States | 34,825,837 | 30,646,736 | |||||
| Mallinckrodt International Finance SA and Mallinckrodt CB LLC, 2018 Incremental Term Loans, 5.517%, (6-month USD LIBOR + 3.00%), 2/24/25 |
Luxembourg | 49,750,000 | 49,854,923 | |||||
|
|
|
|||||||
| 252,613,804 | ||||||||
|
|
|
|||||||
| Industrials 0.3% |
||||||||
|
Commercial Barge Line Co., Initial Term Loan, 10.992%, (1-month USD LIBOR + 8.75%), 11/12/20 |
United States | 54,033,646 | 42,011,160 | |||||
| Vertiv Group Corp., Term B Loans, 6.313%, (3-month USD LIBOR + 4.00%), 11/30/23 |
United States | 104,327,586 | 104,947,083 | |||||
| West Corp., Term B Loans, 6.242%, (1-month USD LIBOR + 4.00%), 10/10/24 |
United States | 61,268,853 | 61,162,490 | |||||
|
|
|
|||||||
| 208,120,733 | ||||||||
|
|
|
|||||||
| Information Technology 0.0%† |
||||||||
| Microchip Technology Inc., Initial Term Loan, 4.25%, (1-month USD LIBOR + 2.00%), 5/29/25 |
United States | 47,827,500 | 47,916,985 | |||||
|
|
|
|||||||
| Utilities 0.1% |
||||||||
|
Talen Energy Supply LLC, |
||||||||
| Initial Term Loan, 6.242%, (1-month USD LIBOR + 4.00%), 4/13/24 |
United States | 43,913,327 | 44,204,252 | |||||
| Term B-1 Loans, 6.242%, (1-month USD LIBOR + 4.00%), 7/15/23 |
United States | 63,889,562 | 64,400,679 | |||||
|
|
|
|||||||
| 108,604,931 | ||||||||
|
|
|
|||||||
| Total Senior Floating Rate Interests |
2,945,388,830 | |||||||
|
|
|
|||||||
| U.S. Government and Agency Securities 6.7% |
||||||||
| U.S. Treasury Note, |
||||||||
| 1.00%, 6/30/19 |
United States | 500,000,000 | 494,472,655 | |||||
| 1.875%, 12/31/19 |
United States | 500,000,000 | 494,941,405 | |||||
| 2.25%, 3/31/20 |
United States | 750,000,000 | 744,477,540 | |||||
| 2.50%, 5/31/20 |
United States | 500,000,000 | 497,675,780 | |||||
| 2.50%, 6/30/20 |
United States | 500,000,000 | 497,509,765 | |||||
| 2.375%, 3/15/21 |
United States | 500,000,000 | 494,414,060 | |||||
| 2.625%, 6/15/21 |
United States | 500,000,000 | 496,816,405 | |||||
| 2.75%, 8/15/21 |
United States | 200,000,000 | 199,285,156 | |||||
| 2.75%, 4/30/23 |
United States | 500,000,000 | 495,986,330 | |||||
| 2.75%, 5/31/23 |
United States | 500,000,000 | 495,996,095 | |||||
| 2.875%, 5/31/25 |
United States | 250,000,000 | 248,012,695 | |||||
|
|
|
|||||||
| Total U.S. Government and Agency Securities |
5,159,587,886 | |||||||
|
|
|
|||||||
| franklintempleton.com | Annual Report | 77 | ||
FRANKLIN CUSTODIAN FUNDS
STATEMENT OF INVESTMENTS
Franklin Income Fund (continued)
| Country | Shares | Value | ||||||
| Escrows and Litigation Trusts 0.0% |
||||||||
| d,fMotors Liquidation Co., Escrow Account |
United States | 400,000,000 | $ | — | ||||
| d,fMotors Liquidation Co., Escrow Account, cvt. pfd., C |
United States | 11,000,000 | — | |||||
|
|
|
|||||||
| Total Escrows and Litigation Trusts |
— | |||||||
|
|
|
|||||||
| Number of Contracts |
Notional Amount* |
|||||||
| Options Purchased (Cost $121,510,189) 0.1% |
||||||||
| Puts - Exchange-Traded |
||||||||
| S&P 500 Index, December Strike Price $2,700, Expires 12/18/20 |
5,000 | 500,000 | 81,950,000 | |||||
|
|
|
|||||||
| Total Investments before Short Term Investments |
74,997,314,354 | |||||||
|
|
|
|||||||
| Country |
Principal |
|||||||
| Short Term Investments 1.8% |
||||||||
| U.S. Government and Agency Securities (Cost $994,257,994) 1.3% |
||||||||
| qU.S. Treasury Bill, 10/04/18 - 3/21/19 |
United States | 1,000,000,000 | 994,256,995 | |||||
|
|
|
|||||||
| Total Investments before Money Market Funds and Repurchase Agreement |
75,991,571,349 | |||||||
|
|
|
|||||||
| Shares |
||||||||
| Money Market Funds (Cost $351,285,912) 0.5% |
||||||||
| r,sInstitutional Fiduciary Trust Money Market Portfolio, 1.69% |
United States | 351,285,912 | 351,285,912 | |||||
|
|
|
|||||||
| tInvestments from Cash Collateral Received for Loaned Securities 0.0%† |
||||||||
| Money Market Funds (Cost $12,623,000) 0.0%† |
||||||||
| r,sInstitutional Fiduciary Trust Money Market Portfolio, 1.69% |
United States | 12,623,000 | 12,623,000 | |||||
|
|
|
|||||||
| Principal |
||||||||
| 78 |
Annual Report | franklintempleton.com | ||
FRANKLIN CUSTODIAN FUNDS
STATEMENT OF INVESTMENTS
Franklin Income Fund (continued)
| Country | Principal Amount* |
Value | ||||||||||
| Investments from Cash Collateral Received for Loaned Securities (continued) |
||||||||||||
| Repurchase Agreement (Cost $3,155,971) 0.0%† |
||||||||||||
| uJoint Repurchase Agreement, 2.24%, 10/01/18 (Maturity Value $3,156,560) |
||||||||||||
| BNP Paribas Securities Corp. |
||||||||||||
| Collateralized by qU.S. Treasury Bill, 10/11/18 - 1/17/19; U.S. Treasury Bond, 8.00%, 11/15/21; U.S. Treasury Note, 0.875% - 2.25%, 11/30/18 - 2/28/23; and U.S. Treasury Strip, 2/15/19 - 8/15/21 (valued at $3,218,970) |
United States | 3,155,971 | $ | 3,155,971 | ||||||||
|
|
|
|||||||||||
| Total Investments from Cash Collateral Received for Loaned Securities (Cost $15,778,971) |
15,778,971 | |||||||||||
|
|
|
|||||||||||
| Total Investments (Cost $73,980,619,776) 99.7% |
76,358,636,232 | |||||||||||
| Options Written (0.0)%† |
(24,673,000 | ) | ||||||||||
| Other Assets, less Liabilities 0.3% |
285,301,255 | |||||||||||
|
|
|
|||||||||||
| Net Assets 100.0% |
$ | 76,619,264,487 | ||||||||||
|
|
|
|||||||||||
| Number of Contracts |
Notional Amount* |
|||||||||||
| vOptions Written (0.0)%† |
||||||||||||
| Calls - Exchange-Traded |
||||||||||||
| 3M Co., October Strike Price $230, Expires 10/19/18 |
10,000 | 1,000,000 | (40,000 | ) | ||||||||
| Bank of America Corp., December Strike Price $33, Expires 12/21/18 |
50,000 | 5,000,000 | (1,000,000 | ) | ||||||||
| BP PLC, October Strike Price $44, Expires 10/19/18 |
20,000 | 2,000,000 | (5,000,000 | ) | ||||||||
| The Coca-Cola Co., November Strike Price $48, Expires 11/16/18 |
20,000 | 2,000,000 | (460,000 | ) | ||||||||
| Dominion Energy Inc., October Strike Price $75, Expires 10/19/18 |
15,000 | 1,500,000 | (30,000 | ) | ||||||||
| Eli Lilly & Co., October Strike Price $105, Expires 10/19/18 |
10,000 | 1,000,000 | (3,430,000 | ) | ||||||||
| Eli Lilly & Co., October Strike Price $110, Expires 10/19/18 |
10,000 | 1,000,000 | (680,000 | ) | ||||||||
| JPMorgan Chase & Co., October Strike Price $125, Expires 10/19/18 |
10,000 | 1,000,000 | (50,000 | ) | ||||||||
| Merck & Co Inc., October Strike Price $72.50, Expires 10/19/18 |
15,000 | 1,500,000 | (615,000 | ) | ||||||||
| Merck & Co. Inc., November Strike Price $72.50, Expires 11/16/18 |
10,000 | 1,000,000 | (1,240,000 | ) | ||||||||
| MetLife Inc., October Strike Price $47.50, Expires 10/19/18 |
10,000 | 1,000,000 | (560,000 | ) | ||||||||
| Occidental Petroleum Corp., November Strike Price $85, Expires 11/16/18 |
10,000 | 1,000,000 | (1,450,000 | ) | ||||||||
| Occidental Petroleum Corp., November Strike Price $87.50, Expires 11/16/18 |
5,000 | 500,000 | (395,000 | ) | ||||||||
| Philip Morris International Inc., October Strike Price $87.50, Expires 10/19/18 |
10,000 | 1,000,000 | (200,000 | ) | ||||||||
| Sempra Energy, October Strike Price $120, Expires 10/19/18 |
10,000 | 1,000,000 | (100,000 | ) | ||||||||
| Target Corp., October Strike Price $85, Expires 10/19/18 |
10,000 | 1,000,000 | (3,770,000 | ) | ||||||||
|
|
|
|||||||||||
| (19,020,000 | ) | |||||||||||
|
|
|
|||||||||||
| Puts - Exchange-Traded |
||||||||||||
| Amazon.com Inc., October Strike Price $1,850, Expires 10/19/18 |
1,100 | 110,000 | (968,000 | ) | ||||||||
| Analog Devices Inc., October Strike Price $87.50, Expires 10/19/18 |
10,000 | 1,000,000 | (525,000 | ) | ||||||||
| Exxon Mobil Corp., October Strike Price $75, Expires 10/19/18 |
20,000 | 2,000,000 | (60,000 | ) | ||||||||
| Lam Research Corp., October Strike Price $150, Expires 10/19/18 |
10,000 | 1,000,000 | (4,100,000 | ) | ||||||||
|
|
|
|||||||||||
| (5,653,000 | ) | |||||||||||
|
|
|
|||||||||||
| Total Options Written (Premiums received $28,483,429) |
$ | (24,673,000 | ) | |||||||||
|
|
|
|||||||||||
| franklintempleton.com | Annual Report | 79 | ||
FRANKLIN CUSTODIAN FUNDS
STATEMENT OF INVESTMENTS
Franklin Income Fund (continued)
See Abbreviations on page 130.
†Rounds to less than 0.1% of net assets.
*The principal/notional amount is stated in U.S. dollars unless otherwise indicated.
aA portion or all of the security purchased on a delayed delivery basis. See Note 1(d).
bA portion or all of the security is held in connection with written option contracts open at year end.
cA portion or all of the security is on loan at September 30, 2018. See Note 1(h).
dNon-income producing.
eSee Note 9 regarding holdings of 5% voting securities.
fFair valued using significant unobservable inputs. See Note 12 regarding fair value measurements.
gSee Note 1(g) regarding equity-linked securities.
hSecurity 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, 2018, the aggregate value of these securities was $19,728,967,395, representing 25.7% of net assets.
iSee Note 1(f) regarding index-linked notes.
jSecurity pays a fixed 2.00% coupon rate and a variable coupon based on the distribution of the Morgan Stanley Custom Enhanced SPX B DT Index 20 Delta. The coupon rate shown represents the combined rate at period end. Cash payment at maturity or upon early redemption is based on the performance of the Morgan Stanley Custom Enhanced SPX B Index 20 Delta.
kThe coupon rate shown represents the rate at period end.
lIncome may be received in additional securities and/or cash.
mPerpetual security with no stated maturity date.
nSee Note 1(j) regarding senior floating rate interests.
oSee Note 7 regarding defaulted securities.
pA portion or all of the security represents an unsettled loan commitment. The coupon rate is to-be determined (TBD) at the time of settlement and will be based upon a reference index/floor plus a spread.
qThe security was issued on a discount basis with no stated coupon rate.
rSee Note 3(f) regarding investments in affiliated management investment companies.
sThe rate shown is the annualized seven-day effective yield at period end.
tSee Note 1(h) regarding securities on loan.
uSee Note 1(c) regarding joint repurchase agreement.
vSee Note 1(e) regarding written options.
| 80 |
Annual Report | The accompanying notes are an integral part of these financial statements. | franklintempleton.com | ||
FRANKLIN CUSTODIAN FUNDS
Financial Highlights
Franklin U.S. Government Securities Fund
| Year Ended September 30, 2018a |
||||
| Class A |
||||
| Per share operating performance |
||||
| (for a share outstanding throughout the year) |
||||
| Net asset value, beginning of year |
$ 5.89 | |||
|
|
|
|||
| Income from investment operationsb: |
||||
| Net investment incomec |
0.01 | |||
| Net realized and unrealized gains (losses) |
(0.02 | ) | ||
|
|
|
|||
| Total from investment operations |
(0.01 | ) | ||
|
|
|
|||
| Less distributions from net investment income |
(0.02 | ) | ||
|
|
|
|||
| Net asset value, end of year |
$ 5.86 | |||
|
|
|
|||
| Total returnd |
(0.23)% | |||
| Ratios to average net assetse |
||||
| Expensesf,g |
0.86% | |||
| Net investment income |
2.40% | |||
| Supplemental data |
||||
| Net assets, end of year (000’s) |
$4,472 | |||
| Portfolio turnover rate |
44.67% | |||
| Portfolio turnover rate excluding mortgage dollar rollsh |
44.67% | |||
aFor the period September 10, 2018 (effective date) to September 30, 2018.
bThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and repurchases of the Fund’s shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
cBased on average daily shares outstanding.
dTotal return does not reflect sales commissions or contingent deferred sales charges, if applicable, and is not annualized for periods less than one year.
eRatios are annualized for periods less than one year.
fBenefit of expense reduction rounds to less than 0.01%.
gBenefit of waiver and payments by affiliates rounds to less than 0.01%.
hSee Note 1(i) regarding mortgage dollar rolls.
| franklintempleton.com | The accompanying notes are an integral part of these financial statements. | Annual Report | 81 | ||
FRANKLIN CUSTODIAN FUNDS
FINANCIAL HIGHLIGHTS
Franklin U.S. Government Securities Fund (continued)
| Year Ended September 30, | ||||||||||||||||||||
| 2018 | 2017 | 2016 | 2015 | 2014 | ||||||||||||||||
|
Class A1 |
||||||||||||||||||||
| Per share operating performance |
||||||||||||||||||||
| (for a share outstanding throughout the year) |
||||||||||||||||||||
| Net asset value, beginning of year |
$ 6.13 | $ 6.35 | $ 6.40 | $ 6.48 | $ 6.53 | |||||||||||||||
| Income from investment operationsa: |
||||||||||||||||||||
| Net investment incomeb |
0.15 | 0.13 | 0.14 | 0.15 | 0.17 | |||||||||||||||
| Net realized and unrealized gains (losses) |
(0.25 | ) | (0.16 | ) | 0.01 | (0.02 | ) | 0.01 | ||||||||||||
| Total from investment operations |
(0.10 | ) | (0.03 | ) | 0.15 | 0.13 | 0.18 | |||||||||||||
| Less distributions from net investment income |
(0.18 | ) | (0.19 | ) | (0.20 | ) | (0.21 | ) | (0.23 | ) | ||||||||||
| Net asset value, end of year |
$ 5.85 | $ 6.13 | $ 6.35 | $ 6.40 | $ 6.48 | |||||||||||||||
| Total returnc |
(1.60)% | (0.45)% | 2.35% | 2.07% | 2.80% | |||||||||||||||
| Ratios to average net assets |
||||||||||||||||||||
| Expensesd,e |
0.76% | 0.79% | 0.76% | 0.76% | 0.75% | |||||||||||||||
| Net investment income |
2.50% | 2.17% | 2.21% | 2.28% | 2.62% | |||||||||||||||
| Supplemental data |
||||||||||||||||||||
| Net assets, end of year (000’s) |
$3,099,373 | $3,581,769 | $4,235,819 | $4,167,639 | $4,323,990 | |||||||||||||||
| Portfolio turnover rate |
44.67% | 86.72% | 92.18% | 69.10% | 69.73% | |||||||||||||||
| Portfolio turnover rate excluding mortgage dollar rollsf |
44.67% | 86.72% | 92.18% | 58.70% | 38.79% | |||||||||||||||
aThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and repurchases of the Fund’s shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
bBased on average daily shares outstanding.
cTotal return does not reflect sales commissions or contingent deferred sales charges, if applicable.
dBenefit of expense reduction rounds to less than 0.01%.
eBenefit of waiver and payments by affiliates rounds to less than 0.01%.
fSee Note 1(i) regarding mortgage dollar rolls.
| 82 |
Annual Report | The accompanying notes are an integral part of these financial statements. | franklintempleton.com | ||
FRANKLIN CUSTODIAN FUNDS
FINANCIAL HIGHLIGHTS
Franklin U.S. Government Securities Fund (continued)
| Year Ended September 30, | ||||||||||||||||||||
| 2018 | 2017 | 2016 | 2015 | 2014 | ||||||||||||||||
|
Class C |
||||||||||||||||||||
| Per share operating performance |
||||||||||||||||||||
| (for a share outstanding throughout the year) |
||||||||||||||||||||
| Net asset value, beginning of year |
$ 6.08 | $ 6.30 | $ 6.36 | $ 6.44 | $ 6.49 | |||||||||||||||
| Income from investment operationsa: |
||||||||||||||||||||
| Net investment incomeb |
0.12 | 0.10 | 0.11 | 0.11 | 0.14 | |||||||||||||||
| Net realized and unrealized gains (losses) |
(0.24 | ) | (0.16 | ) | — | c | (0.01 | ) | 0.01 | |||||||||||
| Total from investment operations |
(0.12 | ) | (0.06 | ) | 0.11 | 0.10 | 0.15 | |||||||||||||
| Less distributions from net investment income |
(0.15 | ) | (0.16 | ) | (0.17 | ) | (0.18 | ) | (0.20 | ) | ||||||||||
| Net asset value, end of year. |
$ 5.81 | $ 6.08 | $ 6.30 | $ 6.36 | $ 6.44 | |||||||||||||||
| Total returnd |
(1.94)% | (0.96)% | 1.70% | 1.57% | 2.30% | |||||||||||||||
| Ratios to average net assets |
||||||||||||||||||||
| Expensese,f |
1.26% | 1.29% | 1.26% | 1.26% | 1.25% | |||||||||||||||
| Net investment income |
2.00% | 1.67% | 1.71% | 1.78% | 2.12% | |||||||||||||||
| Supplemental data |
||||||||||||||||||||
| Net assets, end of year (000’s) |
$571,525 | $797,394 | $1,034,410 | $1,040,294 | $1,190,720 | |||||||||||||||
| Portfolio turnover rate |
44.67% | 86.72% | 92.18% | 69.10% | 69.73% | |||||||||||||||
| Portfolio turnover rate excluding mortgage dollar rollsg |
44.67% | 86.72% | 92.18% | 58.70% | 38.79% | |||||||||||||||
aThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and repurchases of the Fund’s shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
bBased on average daily shares outstanding.
cAmount rounds to less than $0.01 per share.
dTotal return does not reflect sales commissions or contingent deferred sales charges, if applicable.
eBenefit of expense reduction rounds to less than 0.01%.
fBenefit of waiver and payments by affiliates rounds to less than 0.01%.
gSee Note 1(i) regarding mortgage dollar rolls.
| franklintempleton.com | The accompanying notes are an integral part of these financial statements. | Annual Report | 83 | ||
FRANKLIN CUSTODIAN FUNDS
FINANCIAL HIGHLIGHTS
Franklin U.S. Government Securities Fund (continued)
| Year Ended September 30, | ||||||||||||||||||||
| 2018 | 2017 | 2016 | 2015 | 2014 | ||||||||||||||||
|
Class R |
||||||||||||||||||||
| Per share operating performance |
||||||||||||||||||||
| (for a share outstanding throughout the year) |
||||||||||||||||||||
| Net asset value, beginning of year |
$ 6.12 | $ 6.34 | $ 6.40 | $ 6.48 | $ 6.53 | |||||||||||||||
| Income from investment operationsa: |
||||||||||||||||||||
| Net investment incomeb |
0.13 | 0.11 | 0.12 | 0.13 | 0.15 | |||||||||||||||
| Net realized and unrealized gains (losses) |
(0.24 | ) | (0.16 | ) | — | c | (0.02 | ) | 0.01 | |||||||||||
| Total from investment operations |
(0.11 | ) | (0.05 | ) | 0.12 | 0.11 | 0.16 | |||||||||||||
| Less distributions from net investment income |
(0.16 | ) | (0.17 | ) | (0.18 | ) | (0.19 | ) | (0.21 | ) | ||||||||||
| Net asset value, end of year |
$ 5.85 | $ 6.12 | $ 6.34 | $ 6.40 | $ 6.48 | |||||||||||||||
| Total return |
(1.78)% | (0.81)% | 1.84% | 1.71% | 2.44% | |||||||||||||||
| Ratios to average net assets |
||||||||||||||||||||
| Expensesd,e |
1.11% | 1.13% | 1.11% | 1.11% | 1.10% | |||||||||||||||
| Net investment income |
2.15% | 1.83% | 1.86% | 1.93% | 2.27% | |||||||||||||||
| Supplemental data |
||||||||||||||||||||
| Net assets, end of year (000’s) |
$31,144 | $38,363 | $59,785 | $64,689 | $74,442 | |||||||||||||||
| Portfolio turnover rate |
44.67% | 86.72% | 92.18% | 69.10% | 69.73% | |||||||||||||||
| Portfolio turnover rate excluding mortgage dollar rollsf |
44.67% | 86.72% | 92.18% | 58.70% | 38.79% | |||||||||||||||
aThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and repurchases of the Fund’s shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
bBased on average daily shares outstanding.
cAmount rounds to less than $0.01 per share.
dBenefit of expense reduction rounds to less than 0.01%.
eBenefit of waiver and payments by affiliates rounds to less than 0.01%.
fSee Note 1(i) regarding mortgage dollar rolls.
| 84 |
Annual Report | The accompanying notes are an integral part of these financial statements. | franklintempleton.com | ||
FRANKLIN CUSTODIAN FUNDS
FINANCIAL HIGHLIGHTS
Franklin U.S. Government Securities Fund (continued)
| Year Ended September 30, | ||||||||||||||||||||
| 2018 | 2017 | 2016 | 2015 | 2014 | ||||||||||||||||
|
Class R6 |
||||||||||||||||||||
| Per share operating performance |
||||||||||||||||||||
| (for a share outstanding throughout the year) |
||||||||||||||||||||
| Net asset value, beginning of year |
$ 6.15 | $ 6.37 | $ 6.42 | $ 6.50 | $ 6.55 | |||||||||||||||
| Income from investment operationsa: |
||||||||||||||||||||
| Net investment incomeb |
0.17 | 0.15 | 0.16 | 0.17 | 0.19 | |||||||||||||||
| Net realized and unrealized gains (losses) |
(0.25 | ) | (0.16 | ) | 0.01 | (0.02 | ) | 0.01 | ||||||||||||
| Total from investment operations |
(0.08 | ) | (0.01 | ) | 0.17 | 0.15 | 0.20 | |||||||||||||
| Less distributions from net investment income |
(0.20 | ) | (0.21 | ) | (0.22 | ) | (0.23 | ) | (0.25 | ) | ||||||||||
| Net asset value, end of year |
$ 5.87 | $ 6.15 | $ 6.37 | $ 6.42 | $ 6.50 | |||||||||||||||
| Total return |
(1.33)% | (0.16)% | 2.63% | 2.35% | 3.08% | |||||||||||||||
| Ratios to average net assets |
||||||||||||||||||||
| Expenses before waiver and payments by affiliates |
0.49% | 0.48% | 0.48% | 0.47% | 0.47% | |||||||||||||||
| Expenses net of waiver and payments by affiliatesc |
0.48% | 0.48% | d | 0.48% | d | 0.47% | d | 0.47% | d | |||||||||||
| Net investment income |
2.78% | 2.48% | 2.49% | 2.57% | 2.90% | |||||||||||||||
| Supplemental data |
||||||||||||||||||||
| Net assets, end of year (000’s) |
$694,813 | $446,174 | $624,619 | $375,644 | $497,246 | |||||||||||||||
| Portfolio turnover rate |
44.67% | 86.72% | 92.18% | 69.10% | 69.73% | |||||||||||||||
| Portfolio turnover rate excluding mortgage dollar rollse |
44.67% | 86.72% | 92.18% | 58.70% | 38.79% | |||||||||||||||
aThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and repurchases of the Fund’s shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
bBased on average daily shares outstanding.
cBenefit of expense reduction rounds to less than 0.01%.
dBenefit of waiver and payments by affiliates rounds to less than 0.01%.
eSee Note 1(i) regarding mortgage dollar rolls.
| franklintempleton.com | The accompanying notes are an integral part of these financial statements. | Annual Report | 85 | ||
FRANKLIN CUSTODIAN FUNDS
FINANCIAL HIGHLIGHTS
Franklin U.S. Government Securities Fund (continued)
| Year Ended September 30, | ||||||||||||||||||||
| 2018 | 2017 | 2016 | 2015 | 2014 | ||||||||||||||||
|
Advisor Class |
||||||||||||||||||||
| Per share operating performance |
||||||||||||||||||||
| (for a share outstanding throughout the year) |
||||||||||||||||||||
| Net asset value, beginning of year |
$ 6.15 | $ 6.37 | $ 6.42 | $ 6.50 | $ 6.55 | |||||||||||||||
| Income from investment operationsa: |
||||||||||||||||||||
| Net investment incomeb |
0.16 | 0.15 | 0.15 | 0.16 | 0.18 | |||||||||||||||
| Net realized and unrealized gains (losses) |
(0.25 | ) | (0.17 | ) | 0.01 | (0.02 | ) | 0.01 | ||||||||||||
| Total from investment operations |
(0.09 | ) | (0.02 | ) | 0.16 | 0.14 | 0.19 | |||||||||||||
| Less distributions from net investment income |
(0.19 | ) | (0.20 | ) | (0.21 | ) | (0.22 | ) | (0.24 | ) | ||||||||||
| Net asset value, end of year |
$ 5.87 | $ 6.15 | $ 6.37 | $ 6.42 | $ 6.50 | |||||||||||||||
| Total return |
(1.45)% | (0.30)% | 2.49% | 2.21% | 2.94% | |||||||||||||||
| Ratios to average net assets |
||||||||||||||||||||
| Expensesc,d |
0.61% | 0.64% | 0.61% | 0.61% | 0.60% | |||||||||||||||
| Net investment income |
2.65% | 2.32% | 2.36% | 2.43% | 2.77% | |||||||||||||||
| Supplemental data |
||||||||||||||||||||
| Net assets, end of year (000’s) |
$720,281 | $854,640 | $718,975 | $622,339 | $652,737 | |||||||||||||||
| Portfolio turnover rate |
44.67% | 86.72% | 92.18% | 69.10% | 69.73% | |||||||||||||||
| Portfolio turnover rate excluding mortgage dollar rollse |
44.67% | 86.72% | 92.18% | 58.70% | 38.79% | |||||||||||||||
aThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and repurchases of the Fund’s shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
bBased on average daily shares outstanding.
cBenefit of expense reduction rounds to less than 0.01%.
dBenefit of waiver and payments by affiliates rounds to less than 0.01%.
eSee Note 1(i) regarding mortgage dollar rolls.
| 86 |
Annual Report | The accompanying notes are an integral part of these financial statements. | franklintempleton.com | ||
FRANKLIN CUSTODIAN FUNDS
Statement of Investments, September 30, 2018
Franklin U.S. Government Securities Fund
| Principal Amount |
Value | |||||||
|
Mortgage-Backed Securities 96.5% |
||||||||
| Government National Mortgage Association (GNMA) Fixed Rate 96.5% |
||||||||
| GNMA I SF 30 Year, 3.50%, 4/15/43 - 5/15/43 |
$ | 27,392,517 | $ | 27,362,813 | ||||
| GNMA I SF 30 Year, 4.00%, 10/15/40 - 1/15/45 |
44,635,641 | 45,687,121 | ||||||
| GNMA I SF 30 Year, 4.00%, 8/15/44 |
17,237,555 | 17,643,555 | ||||||
| GNMA I SF 30 Year, 4.00%, 1/15/45 - 8/15/46 |
47,578,145 | 48,694,748 | ||||||
| GNMA I SF 30 Year, 4.50%, 2/15/39 - 1/15/40 |
47,964,954 | 50,233,289 | ||||||
| GNMA I SF 30 Year, 4.50%, 3/15/39 |
16,251,877 | 16,963,702 | ||||||
| GNMA I SF 30 Year, 4.50%, 1/15/40 - 6/15/40 |
48,163,265 | 50,335,347 | ||||||
| GNMA I SF 30 Year, 4.50%, 6/15/40 |
13,254,132 | 13,919,495 | ||||||
| GNMA I SF 30 Year, 4.50%, 6/15/40 - 8/15/40 |
45,144,410 | 47,152,020 | ||||||
| GNMA I SF 30 Year, 4.50%, 7/15/40 |
13,255,121 | 13,832,705 | ||||||
| GNMA I SF 30 Year, 4.50%, 8/15/40 - 6/15/41 |
28,586,272 | 29,972,495 | ||||||
| GNMA I SF 30 Year, 5.00%, 2/15/33 - 11/15/33 |
48,235,775 | 51,141,338 | ||||||
| GNMA I SF 30 Year, 5.00%, 11/15/33 - 6/15/39 |
46,461,863 | 49,257,134 | ||||||
| GNMA I SF 30 Year, 5.00%, 6/15/39 - 11/15/39 |
47,737,292 | 50,689,043 | ||||||
| GNMA I SF 30 Year, 5.00%, 8/15/39 |
19,673,882 | 20,906,221 | ||||||
| GNMA I SF 30 Year, 5.00%, 10/15/39 |
13,856,243 | 14,729,892 | ||||||
| GNMA I SF 30 Year, 5.00%, 10/15/39 |
18,089,337 | 19,222,518 | ||||||
| GNMA I SF 30 Year, 5.00%, 11/15/39 |
23,903,508 | 25,401,488 | ||||||
| GNMA I SF 30 Year, 5.00%, 11/15/39 - 4/15/40 |
47,546,658 | 50,452,638 | ||||||
| GNMA I SF 30 Year, 5.00%, 2/15/40 |
12,898,635 | 13,709,124 | ||||||
| GNMA I SF 30 Year, 5.00%, 3/15/40 |
15,746,852 | 16,734,907 | ||||||
| GNMA I SF 30 Year, 5.00%, 4/15/40 - 6/15/40 |
45,892,400 | 48,675,782 | ||||||
| GNMA I SF 30 Year, 5.00%, 9/15/40 |
20,407,482 | 21,685,852 | ||||||
| GNMA I SF 30 Year, 5.50%, 5/15/28 - 6/15/33 |
47,234,989 | 51,193,465 | ||||||
| GNMA I SF 30 Year, 5.50%, 6/15/33 - 11/15/36 |
44,366,955 | 48,083,540 | ||||||
| GNMA I SF 30 Year, 5.50%, 12/15/36 - 7/15/39 |
43,489,700 | 47,088,049 | ||||||
| GNMA I SF 30 Year, 5.50%, 8/15/39 - 2/15/40 |
14,190,765 | 15,382,144 | ||||||
| GNMA I SF 30 Year, 6.00%, 10/15/23 - 2/15/34 |
46,983,761 | 51,098,573 | ||||||
| GNMA I SF 30 Year, 6.00%, 2/15/34 - 8/15/37 |
46,644,438 | 50,973,363 | ||||||
| GNMA I SF 30 Year, 6.00%, 9/15/37 - 12/15/39 |
37,463,875 | 40,641,798 | ||||||
| GNMA I SF 30 Year, 6.50%, 5/15/23 - 8/15/37 |
41,087,879 | 45,265,539 | ||||||
| GNMA I SF 30 Year, 7.00%, 3/15/22 - 9/15/32 |
28,454,373 | 30,644,894 | ||||||
| GNMA I SF 30 Year, 7.25%, 12/15/25 - 1/15/26 |
80,885 | 82,066 | ||||||
| GNMA I SF 30 Year, 7.50%, 6/15/21 - 8/15/33 |
7,918,345 | 8,418,257 | ||||||
| GNMA I SF 30 Year, 7.70%, 1/15/21 - 10/15/21 |
24,551 | 24,600 | ||||||
| GNMA I SF 30 Year, 8.00%, 2/15/20 - 9/15/30 |
2,823,689 | 2,888,971 | ||||||
| GNMA I SF 30 Year, 8.50%, 9/15/19 - 5/15/25 |
479,182 | 489,767 | ||||||
| GNMA I SF 30 Year, 9.00%, 12/15/18 - 7/15/23 |
389,324 | 396,050 | ||||||
| GNMA I SF 30 Year, 9.50%, 11/15/18 - 8/15/22 |
361,631 | 364,090 | ||||||
| GNMA I SF 30 Year, 10.00%, 12/15/18 - 3/15/25 |
132,936 | 133,797 | ||||||
| GNMA I SF 30 Year, 10.50%, 1/15/19 - 10/15/21 |
42,558 | 42,709 | ||||||
| GNMA I SF 30 Year, 11.00%, 7/15/19 - 5/15/21 |
2,986 | 2,995 | ||||||
| GNMA II SF 30 Year, 3.00%, 2/20/45 |
8,589,705 | 8,391,205 | ||||||
| GNMA II SF 30 Year, 3.00%, 7/20/47 |
243,106,116 | 235,769,385 | ||||||
| GNMA II SF 30 Year, 3.00%, 9/20/47 |
56,348,497 | 54,640,804 | ||||||
| GNMA II SF 30 Year, 3.00%, 10/20/47 |
24,313,674 | 23,575,789 | ||||||
| GNMA II SF 30 Year, 3.00%, 11/20/47 |
90,465,482 | 87,714,548 | ||||||
| GNMA II SF 30 Year, 3.50%, 10/20/40 - 5/20/43 |
33,084,235 | 33,048,989 | ||||||
| GNMA II SF 30 Year, 3.50%, 7/20/42 |
50,252,743 | 50,271,721 | ||||||
| GNMA II SF 30 Year, 3.50%, 8/20/42 |
17,432,853 | 17,439,437 | ||||||
| GNMA II SF 30 Year, 3.50%, 9/20/42 |
115,899,961 | 115,943,735 | ||||||
| franklintempleton.com | Annual Report | 87 | ||
FRANKLIN CUSTODIAN FUNDS
STATEMENT OF INVESTMENTS
Franklin U.S. Government Securities Fund (continued)
| Principal Amount |
Value | |||||||
|
Mortgage-Backed Securities (continued) |
||||||||
| Government National Mortgage Association (GNMA) Fixed Rate (continued) |
||||||||
| GNMA II SF 30 Year, 3.50%, 10/20/42 |
$ | 23,888,360 | $ | 23,897,382 | ||||
| GNMA II SF 30 Year, 3.50%, 11/20/42 |
19,996,383 | 20,003,936 | ||||||
| GNMA II SF 30 Year, 3.50%, 4/20/43 |
24,447,428 | 24,456,664 | ||||||
| GNMA II SF 30 Year, 3.50%, 5/20/43 |
33,078,718 | 33,091,214 | ||||||
| GNMA II SF 30 Year, 3.50%, 6/20/43 |
38,113,659 | 38,128,058 | ||||||
| GNMA II SF 30 Year, 3.50%, 8/20/43 |
27,166,917 | 27,177,182 | ||||||
| GNMA II SF 30 Year, 3.50%, 9/20/47 |
718,249,057 | 714,967,176 | ||||||
| GNMA II SF 30 Year, 3.50%, 11/20/47 |
706,843,484 | 703,612,149 | ||||||
| GNMA II SF 30 Year, 3.50%, 2/20/48 |
296,220,783 | 294,864,371 | ||||||
| GNMA II SF 30 Year, 4.00%, 5/20/40 - 2/20/44 |
21,567,225 | 22,085,424 | ||||||
| GNMA II SF 30 Year, 4.00%, 11/20/40 |
33,080,738 | 33,961,357 | ||||||
| GNMA II SF 30 Year, 4.00%, 12/20/40 |
19,536,762 | 20,057,492 | ||||||
| GNMA II SF 30 Year, 4.00%, 1/20/41 |
21,495,339 | 22,068,465 | ||||||
| GNMA II SF 30 Year, 4.00%, 7/20/41 |
26,369,189 | 27,069,531 | ||||||
| GNMA II SF 30 Year, 4.00%, 9/20/41 |
31,302,034 | 32,135,416 | ||||||
| GNMA II SF 30 Year, 4.00%, 10/20/41 |
38,454,925 | 39,477,534 | ||||||
| GNMA II SF 30 Year, 4.00%, 11/20/41 |
35,455,193 | 36,400,224 | ||||||
| GNMA II SF 30 Year, 4.00%, 2/20/44 |
22,077,452 | 22,539,150 | ||||||
| GNMA II SF 30 Year, 4.00%, 4/20/48 |
292,609,043 | 297,945,173 | ||||||
| GNMA II SF 30 Year, 4.00%, 6/20/48 |
84,237,651 | 85,773,870 | ||||||
| GNMA II SF 30 Year, 4.00%, 9/20/48 |
56,600,000 | 57,629,397 | ||||||
| GNMA II SF 30 Year, 4.50%, 5/20/33 - 7/20/40 |
40,835,283 | 42,812,834 | ||||||
| GNMA II SF 30 Year, 4.50%, 12/20/39 |
22,272,266 | 23,361,229 | ||||||
| GNMA II SF 30 Year, 4.50%, 5/20/41 |
29,003,333 | 30,418,040 | ||||||
| GNMA II SF 30 Year, 4.50%, 6/20/41 - 8/20/42 |
15,250,728 | 15,993,325 | ||||||
| GNMA II SF 30 Year, 4.50%, 6/20/41 |
35,112,221 | 36,822,083 | ||||||
| GNMA II SF 30 Year, 4.50%, 7/20/41 |
38,268,764 | 40,130,795 | ||||||
| GNMA II SF 30 Year, 4.50%, 9/20/41 |
51,268,838 | 53,762,832 | ||||||
| GNMA II SF 30 Year, 4.50%, 10/20/41 |
38,212,037 | 40,069,859 | ||||||
| GNMA II SF 30 Year, 4.50%, 2/20/44 |
20,778,890 | 21,782,437 | ||||||
| GNMA II SF 30 Year, 5.00%, 7/20/33 - 12/20/39 |
45,320,765 | 48,439,623 | ||||||
| GNMA II SF 30 Year, 5.00%, 9/20/33 |
21,572,836 | 23,279,783 | ||||||
| GNMA II SF 30 Year, 5.00%, 4/20/40 - 9/20/41 |
15,276,828 | 16,291,354 | ||||||
| GNMA II SF 30 Year, 5.00%, 6/20/40 |
14,960,319 | 16,147,837 | ||||||
| GNMA II SF 30 Year, 5.50%, 6/20/34 - 8/20/35 |
46,915,057 | 50,571,151 | ||||||
| GNMA II SF 30 Year, 5.50%, 12/20/34 |
13,921,847 | 15,005,025 | ||||||
| GNMA II SF 30 Year, 5.50%, 10/20/35 - 4/20/40 |
21,587,544 | 23,188,387 | ||||||
| GNMA II SF 30 Year, 6.00%, 10/20/23 - 10/20/37 |
46,314,052 | 50,707,911 | ||||||
| GNMA II SF 30 Year, 6.00%, 12/20/37 - 7/20/39 |
15,443,678 | 16,905,285 | ||||||
| GNMA II SF 30 Year, 6.50%, 6/20/24 - 1/20/39 |
20,920,724 | 23,380,468 | ||||||
| GNMA II SF 30 Year, 7.00%, 2/20/28 - 7/20/33 |
5,220,225 | 5,966,448 | ||||||
| GNMA II SF 30 Year, 7.50%, 10/20/22 - 4/20/32 |
1,074,999 | 1,178,807 | ||||||
| GNMA II SF 30 Year, 8.00%, 5/20/24 - 6/20/30 |
517,662 | 582,316 | ||||||
| GNMA II SF 30 Year, 8.50%, 5/20/19 - 6/20/25 |
93,331 | 96,115 | ||||||
| GNMA II SF 30 Year, 9.00%, 9/20/21 - 11/20/21 |
22,526 | 23,394 | ||||||
| GNMA II SF 30 Year, 9.50%, 1/20/20 - 4/20/25 |
29,696 | 29,989 | ||||||
| GNMA II SF 30 Year, 10.00%, 6/20/19 - 3/20/21 |
30,497 | 31,141 | ||||||
| GNMA II SF 30 Year, 10.50%, 11/20/18 - 1/20/21 |
18,263 | 18,329 | ||||||
| GNMA II SF 30 Year, 11.00%, 1/20/21 |
2,896 | 2,906 | ||||||
|
|
|
|||||||
|
Total Mortgage-Backed Securities (Cost $5,029,038,819) |
4,938,754,375 | |||||||
|
|
|
|||||||
| 88 |
Annual Report | franklintempleton.com | ||
FRANKLIN CUSTODIAN FUNDS
STATEMENT OF INVESTMENTS
Franklin U.S. Government Securities Fund (continued)
| Principal Amount |
Value | |||||||
|
U.S. Government and Agency Securities (Cost $89,975,770) 1.6% |
||||||||
| U.S. Treasury Bond, 4.75%, 2/15/37 |
$ | 67,500,000 | $ | 82,922,168 | ||||
|
|
|
|||||||
| Total Investments before Short Term Investments |
5,021,676,543 | |||||||
|
|
|
|||||||
| Shares | ||||||||
|
|
|
|||||||
| Short Term Investments (Cost $93,109,667) 1.8% |
||||||||
| Money Market Funds 1.8% |
||||||||
| a,bInstitutional Fiduciary Trust Money Market Portfolio, 1.69% |
93,109,667 | 93,109,667 | ||||||
|
|
|
|||||||
| Total Investments (Cost $5,212,124,256) 99.9% |
5,114,786,210 | |||||||
| Other Assets, less Liabilities 0.1% |
6,821,815 | |||||||
|
|
|
|||||||
| Net Assets 100.0% |
$ | 5,121,608,025 | ||||||
|
|
|
|||||||
See Abbreviations on page 130.
aSee Note 3(f) regarding investments in affiliated management investment companies.
bThe rate shown is the annualized seven-day effective yield at period end.
| franklintempleton.com | The accompanying notes are an integral part of these financial statements. | Annual Report | 89 | ||
FRANKLIN CUSTODIAN FUNDS
Financial Highlights
Franklin Utilities Fund
| Year Ended September 30, 2018a | ||
|
Class A |
||
| Per share operating performance |
||
| (for a share outstanding throughout the year) |
||
| Net asset value, beginning of year |
$19.16 | |
|
| ||
| Income from investment operationsb: |
||
| Net investment incomec |
0.02 | |
| Net realized and unrealized gains (losses) |
(0.52) | |
|
| ||
| Total from investment operations |
(0.50) | |
|
| ||
| Net asset value, end of year |
$18.66 | |
|
| ||
| Total returnd |
(2.61)% | |
| Ratios to average net assetse |
||
| Expensesf,g |
0.84% | |
| Net investment income |
2.62% | |
| Supplemental data |
||
| Net assets, end of year (000’s) |
$3,536 | |
| Portfolio turnover rate |
4.58% | |
aFor the period September 10, 2018 (effective date) to September 30, 2018.
bThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and repurchases of the Fund’s shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
cBased on average daily shares outstanding.
dTotal return does not reflect sales commissions or contingent deferred sales charges, if applicable, and is not annualized for periods less than one year.
eRatios are annualized for periods less than one year.
fBenefit of expense reduction rounds to less than 0.01%.
gBenefit of waiver and payments by affiliates rounds to less than 0.01%.
| 90 |
Annual Report | The accompanying notes are an integral part of these financial statements. | franklintempleton.com | ||
FRANKLIN CUSTODIAN FUNDS
FINANCIAL HIGHLIGHTS
Franklin Utilities Fund (continued)
| Year Ended September 30, | ||||||||||||||||||||
| 2018 | 2017 | 2016 | 2015 | 2014 | ||||||||||||||||
| Class A1 |
||||||||||||||||||||
| Per share operating performance |
||||||||||||||||||||
| (for a share outstanding throughout the year) |
||||||||||||||||||||
| Net asset value, beginning of year |
$19.18 | $17.85 | $16.08 | $16.58 | $14.62 | |||||||||||||||
| Income from investment operationsa: |
||||||||||||||||||||
| Net investment incomeb |
0.50 | 0.53 | 0.48 | 0.49 | 0.49 | |||||||||||||||
| Net realized and unrealized gains (losses) |
(0.17 | ) | 1.30 | 2.31 | (0.09 | ) | 2.00 | |||||||||||||
| Total from investment operations |
0.33 | 1.83 | 2.79 | 0.40 | 2.49 | |||||||||||||||
| Less distributions from: |
||||||||||||||||||||
| Net investment income |
(0.54 | ) | (0.49 | ) | (0.50 | ) | (0.48 | ) | (0.49 | ) | ||||||||||
| Net realized gains |
(0.31 | ) | (0.01 | ) | (0.52 | ) | (0.42 | ) | (0.04 | ) | ||||||||||
| Total distributions |
(0.85 | ) | (0.50 | ) | (1.02 | ) | (0.90 | ) | (0.53 | ) | ||||||||||
| Net asset value, end of year |
$18.66 | $19.18 | $17.85 | $16.08 | $16.58 | |||||||||||||||
| Total returnc |
1.68% | 10.38% | 18.23% | 2.19% | 17.24% | |||||||||||||||
| Ratios to average net assets |
||||||||||||||||||||
| Expensesd |
0.74% | e | 0.75% | e | 0.73% | e | 0.73% | 0.75% | e | |||||||||||
| Net investment income |
2.72% | 2.86% | 2.81% | 2.88% | 3.05% | |||||||||||||||
| Supplemental data |
||||||||||||||||||||
| Net assets, end of year (000’s) |
$3,654,795 | $4,182,780 | $4,180,124 | $3,524,835 | $3,717,397 | |||||||||||||||
| Portfolio turnover rate |
4.58% | 0.89% | 7.17% | 9.55% | 8.10% | |||||||||||||||
aThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and repurchases of the Fund’s shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
bBased on average daily shares outstanding.
cTotal return does not reflect sales commissions or contingent deferred sales charges, if applicable.
dBenefit of waiver and payments by affiliates rounds to less than 0.01%.
eBenefit of expense reduction rounds to less than 0.01%.
| franklintempleton.com | The accompanying notes are an integral part of these financial statements. | Annual Report | 91 | ||
FRANKLIN CUSTODIAN FUNDS
FINANCIAL HIGHLIGHTS
Franklin Utilities Fund (continued)
| Year Ended September 30, | ||||||||||||||||||||
| 2018 | 2017 | 2016 | 2015 | 2014 | ||||||||||||||||
| Class C |
||||||||||||||||||||
| Per share operating performance |
||||||||||||||||||||
| (for a share outstanding throughout the year) |
||||||||||||||||||||
| Net asset value, beginning of year |
$19.09 | $17.76 | $16.01 | $16.50 | $14.56 | |||||||||||||||
| Income from investment operationsa: |
||||||||||||||||||||
| Net investment incomeb |
0.41 | 0.43 | 0.39 | 0.40 | 0.41 | |||||||||||||||
| Net realized and unrealized gains (losses) |
(0.18 | ) | 1.30 | 2.30 | (0.08 | ) | 1.98 | |||||||||||||
| Total from investment operations |
0.23 | 1.73 | 2.69 | 0.32 | 2.39 | |||||||||||||||
| Less distributions from: |
||||||||||||||||||||
| Net investment income |
(0.44 | ) | (0.39 | ) | (0.42 | ) | (0.39 | ) | (0.41 | ) | ||||||||||
| Net realized gains |
(0.31 | ) | (0.01 | ) | (0.52 | ) | (0.42 | ) | (0.04 | ) | ||||||||||
| Total distributions |
(0.75 | ) | (0.40 | ) | (0.94 | ) | (0.81 | ) | (0.45 | ) | ||||||||||
| Net asset value, end of year |
$18.57 | $19.09 | $17.76 | $16.01 | $16.50 | |||||||||||||||
| Total returnc |
1.18% | 9.88% | 17.59% | 1.74% | 16.61% | |||||||||||||||
| Ratios to average net assets |
||||||||||||||||||||
| Expensesd |
1.24% | e | 1.25% | e | 1.23% | e | 1.23% | 1.25% | e | |||||||||||
| Net investment income |
2.22% | 2.36% | 2.31% | 2.38% | 2.55% | |||||||||||||||
| Supplemental data |
||||||||||||||||||||
| Net assets, end of year (000’s) |
$834,070 | $981,515 | $1,064,065 | $931,800 | $986,318 | |||||||||||||||
| Portfolio turnover rate |
4.58% | 0.89% | 7.17% | 9.55% | 8.10% | |||||||||||||||
aThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and repurchases of the Fund’s shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
bBased on average daily shares outstanding.
cTotal return does not reflect sales commissions or contingent deferred sales charges, if applicable.
dBenefit of waiver and payments by affiliates rounds to less than 0.01%.
eBenefit of expense reduction rounds to less than 0.01%.
| 92 |
Annual Report | The accompanying notes are an integral part of these financial statements. | franklintempleton.com | ||
FRANKLIN CUSTODIAN FUNDS
FINANCIAL HIGHLIGHTS
Franklin Utilities Fund (continued)
| Year Ended September 30, | ||||||||||||||||||||
| 2018 | 2017 | 2016 | 2015 | 2014 | ||||||||||||||||
| Class R |
||||||||||||||||||||
| Per share operating performance |
||||||||||||||||||||
| (for a share outstanding throughout the year) |
||||||||||||||||||||
| Net asset value, beginning of year |
$19.11 | $17.78 | $16.02 | $16.52 | $14.58 | |||||||||||||||
| Income from investment operationsa: |
||||||||||||||||||||
| Net investment incomeb |
0.44 | 0.46 | 0.42 | 0.42 | 0.43 | |||||||||||||||
| Net realized and unrealized gains (losses) |
(0.18 | ) | 1.30 | 2.30 | (0.09 | ) | 1.99 | |||||||||||||
| Total from investment operations |
0.26 | 1.76 | 2.72 | 0.33 | 2.42 | |||||||||||||||
| Less distributions from: |
||||||||||||||||||||
| Net investment income |
(0.47 | ) | (0.42 | ) | (0.44 | ) | (0.41 | ) | (0.44 | ) | ||||||||||
| Net realized gains |
(0.31 | ) | (0.01 | ) | (0.52 | ) | (0.42 | ) | (0.04 | ) | ||||||||||
| Total distributions |
(0.78 | ) | (0.43 | ) | (0.96 | ) | (0.83 | ) | (0.48 | ) | ||||||||||
| Net asset value, end of year |
$18.59 | $19.11 | $17.78 | $16.02 | $16.52 | |||||||||||||||
| Total return |
1.33% | 10.04% | 17.81% | 1.83% | 16.75% | |||||||||||||||
| Ratios to average net assets |
||||||||||||||||||||
| Expensesc |
1.09% | d | 1.10% | d | 1.08% | d | 1.08% | 1.10% | d | |||||||||||
| Net investment income |
2.37% | 2.51% | 2.46% | 2.53% | 2.70% | |||||||||||||||
| Supplemental data |
||||||||||||||||||||
| Net assets, end of year (000’s) |
$72,927 | $94,465 | $103,247 | $83,271 | $95,498 | |||||||||||||||
| Portfolio turnover rate |
4.58% | 0.89% | 7.17% | 9.55% | 8.10% | |||||||||||||||
aThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and repurchases of the Fund’s shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
bBased on average daily shares outstanding.
cBenefit of waiver and payments by affiliates rounds to less than 0.01%.
dBenefit of expense reduction rounds to less than 0.01%.
| franklintempleton.com | The accompanying notes are an integral part of these financial statements. | Annual Report | 93 | ||
FRANKLIN CUSTODIAN FUNDS
FINANCIAL HIGHLIGHTS
Franklin Utilities Fund (continued)
| Year Ended September 30, | ||||||||||||||||||||
| 2018 | 2017 | 2016 | 2015 | 2014 | ||||||||||||||||
| Class R6 |
||||||||||||||||||||
| Per share operating performance |
||||||||||||||||||||
| (for a share outstanding throughout the year) |
||||||||||||||||||||
| Net asset value, beginning of year |
$19.32 | $17.97 | $16.18 | $16.68 | $14.71 | |||||||||||||||
| Income from investment operationsa: |
||||||||||||||||||||
| Net investment incomeb |
0.55 | 0.58 | 0.53 | 0.53 | 0.53 | |||||||||||||||
| Net realized and unrealized gains (losses) |
(0.17 | ) | 1.31 | 2.32 | (0.09 | ) | 2.01 | |||||||||||||
| Total from investment operations |
0.38 | 1.89 | 2.85 | 0.44 | 2.54 | |||||||||||||||
| Less distributions from: |
||||||||||||||||||||
| Net investment income |
(0.58 | ) | (0.53 | ) | (0.54 | ) | (0.52 | ) | (0.53 | ) | ||||||||||
| Net realized gains |
(0.31 | ) | (0.01 | ) | (0.52 | ) | (0.42 | ) | (0.04 | ) | ||||||||||
| Total distributions |
(0.89 | ) | (0.54 | ) | (1.06 | ) | (0.94 | ) | (0.57 | ) | ||||||||||
| Net asset value, end of year |
$18.81 | $19.32 | $17.97 | $16.18 | $16.68 | |||||||||||||||
| Total return |
1.97% | 10.70% | 18.55% | 2.45% | 17.51% | |||||||||||||||
| Ratios to average net assets |
||||||||||||||||||||
| Expenses before waiver and payments by affiliates |
0.52% | 0.48% | 0.47% | 0.47% | 0.48% | |||||||||||||||
| Expenses net of waiver and payments by affiliates |
0.48% | c | 0.48% | c,d | 0.47% | c,d | 0.47% | d | 0.48% | c,d | ||||||||||
| Net investment income |
2.98% | 3.13% | 3.07% | 3.14% | 3.32% | |||||||||||||||
| Supplemental data |
||||||||||||||||||||
| Net assets, end of year (000’s) |
$230,393 | $241,455 | $219,587 | $201,225 | $236,437 | |||||||||||||||
| Portfolio turnover rate |
4.58% | 0.89% | 7.17% | 9.55% | 8.10% | |||||||||||||||
aThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and repurchases of the Fund’s shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
bBased on average daily shares outstanding.
cBenefit of expense reduction rounds to less than 0.01%.
dBenefit of waiver and payments by affiliates rounds to less than 0.01%.
| 94 |
Annual Report | The accompanying notes are an integral part of these financial statements. | franklintempleton.com | ||
FRANKLIN CUSTODIAN FUNDS
FINANCIAL HIGHLIGHTS
Franklin Utilities Fund (continued)
| Year Ended September 30, | ||||||||||||||||||||
| 2018 | 2017 | 2016 | 2015 | 2014 | ||||||||||||||||
| Advisor Class |
||||||||||||||||||||
| Per share operating performance |
||||||||||||||||||||
| (for a share outstanding throughout the year) |
||||||||||||||||||||
| Net asset value, beginning of year |
$19.32 | $17.97 | $16.19 | $16.68 | $14.71 | |||||||||||||||
| Income from investment operationsa: |
||||||||||||||||||||
| Net investment incomeb |
0.54 | 0.57 | 0.51 | 0.52 | 0.52 | |||||||||||||||
| Net realized and unrealized gains (losses) |
(0.18 | ) | 1.30 | 2.32 | (0.09 | ) | 2.00 | |||||||||||||
| Total from investment operations |
0.36 | 1.87 | 2.83 | 0.43 | 2.52 | |||||||||||||||
| Less distributions from: |
||||||||||||||||||||
| Net investment income |
(0.56 | ) | (0.51 | ) | (0.53 | ) | (0.50 | ) | (0.51 | ) | ||||||||||
| Net realized gains |
(0.31 | ) | (0.01 | ) | (0.52 | ) | (0.42 | ) | (0.04 | ) | ||||||||||
| Total distributions |
(0.87 | ) | (0.52 | ) | (1.05 | ) | (0.92 | ) | (0.55 | ) | ||||||||||
| Net asset value, end of year |
$18.81 | $19.32 | $17.97 | $16.19 | $16.68 | |||||||||||||||
| Total return |
1.82% | 10.64% | 18.34% | 2.40% | 17.37% | |||||||||||||||
| Ratios to average net assets |
||||||||||||||||||||
| Expensesc |
0.59% | d | 0.60% | d | 0.58% | d | 0.58% | 0.60% | d | |||||||||||
| Net investment income |
2.87% | 3.01% | 2.96% | 3.03% | 3.20% | |||||||||||||||
| Supplemental data |
||||||||||||||||||||
| Net assets, end of year (000’s) |
$927,845 | $963,228 | $755,484 | $549,371 | $562,202 | |||||||||||||||
| Portfolio turnover rate |
4.58% | 0.89% | 7.17% | 9.55% | 8.10% | |||||||||||||||
aThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and repurchases of the Fund’s shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
bBased on average daily shares outstanding.
cBenefit of waiver and payments by affiliates rounds to less than 0.01%.
dBenefit of expense reduction rounds to less than 0.01%.
| franklintempleton.com | The accompanying notes are an integral part of these financial statements. | Annual Report | 95 | ||
FRANKLIN CUSTODIAN FUNDS
Statement of Investments, September 30, 2018
Franklin Utilities Fund
| Country | Shares | Value | ||||||||
| Common Stocks 99.6% |
||||||||||
| Electric Utilities 58.1% |
||||||||||
| Alliant Energy Corp. |
United States | 3,800,000 | $ | 161,766,000 | ||||||
| American Electric Power Co. Inc. |
United States | 3,900,000 | 276,432,000 | |||||||
| Duke Energy Corp. |
United States | 3,200,000 | 256,064,000 | |||||||
| Edison International |
United States | 3,300,000 | 223,344,000 | |||||||
| Emera Inc. |
Canada | 2,000,000 | 62,140,730 | |||||||
| Entergy Corp. |
United States | 2,100,000 | 170,373,000 | |||||||
| Evergy Inc. |
United States | 4,600,000 | 252,632,000 | |||||||
| Eversource Energy |
United States | 2,300,000 | 141,312,000 | |||||||
| Exelon Corp. |
United States | 6,700,000 | 292,522,000 | |||||||
| FirstEnergy Corp. |
United States | 4,700,000 | 174,699,000 | |||||||
| NextEra Energy Inc. |
United States | 2,850,000 | 477,660,000 | |||||||
| OGE Energy Corp. |
United States | 1,700,000 | 61,744,000 | |||||||
| aPG&E Corp. |
United States | 2,000,000 | 92,020,000 | |||||||
| Pinnacle West Capital Corp. |
United States | 1,500,000 | 118,770,000 | |||||||
| PNM Resources Inc. |
United States | 2,199,970 | 86,788,816 | |||||||
| PPL Corp. |
United States | 2,700,000 | 79,002,000 | |||||||
| The Southern Co. |
United States | 4,200,000 | 183,120,000 | |||||||
| Xcel Energy Inc. |
United States | 4,600,000 | 217,166,000 | |||||||
|
|
|
|||||||||
| 3,327,555,546 | ||||||||||
|
|
|
|||||||||
| Gas Utilities 1.2% |
||||||||||
| Atmos Energy Corp. |
United States | 200,000 | 18,782,000 | |||||||
| Spire Inc. |
United States | 700,000 | 51,485,000 | |||||||
|
|
|
|||||||||
| 70,267,000 | ||||||||||
|
|
|
|||||||||
| Multi-Utilities 32.5% |
||||||||||
| Ameren Corp. |
United States | 1,100,000 | 69,542,000 | |||||||
| Black Hills Corp. |
United States | 700,000 | 40,663,000 | |||||||
| CenterPoint Energy Inc. |
United States | 5,000,000 | 138,250,000 | |||||||
| CMS Energy Corp. |
United States | 5,100,000 | 249,900,000 | |||||||
| Consolidated Edison Inc. |
United States | 1,250,000 | 95,237,500 | |||||||
| Dominion Energy Inc. |
United States | 4,200,000 | 295,176,000 | |||||||
| DTE Energy Co. |
United States | 1,600,000 | 174,608,000 | |||||||
| National Grid PLC |
United Kingdom | 5,999,933 | 61,897,077 | |||||||
| NiSource Inc. |
United States | 3,400,000 | 84,728,000 | |||||||
| NorthWestern Corp. |
United States | 596,800 | 35,008,288 | |||||||
| Public Service Enterprise Group Inc. |
United States | 2,800,000 | 147,812,000 | |||||||
| SCANA Corp. |
United States | 300,000 | 11,667,000 | |||||||
| Sempra Energy |
United States | 2,400,000 | 273,000,000 | |||||||
| Vectren Corp. |
United States | 500,000 | 35,745,000 | |||||||
| WEC Energy Group Inc. |
United States | 2,150,792 | 143,586,874 | |||||||
|
|
|
|||||||||
| 1,856,820,739 | ||||||||||
|
|
|
|||||||||
| Oil, Gas & Consumable Fuels 4.4% |
||||||||||
| Enbridge Inc. |
Canada | 800,000 | 25,832,000 | |||||||
| Kinder Morgan Inc. |
United States | 4,800,000 | 85,104,000 | |||||||
| ONEOK Inc. |
United States | 568,200 | 38,518,278 | |||||||
| TransCanada Corp. |
Canada | 1,000,000 | 40,431,705 | |||||||
| The Williams Cos. Inc. |
United States | 2,200,000 | 59,818,000 | |||||||
|
|
|
|||||||||
| 249,703,983 | ||||||||||
|
|
|
|||||||||
| 96 |
Annual Report | franklintempleton.com | ||
FRANKLIN CUSTODIAN FUNDS
STATEMENT OF INVESTMENTS
Franklin Utilities Fund (continued)
| Country | Shares | Value | ||||||||
| Common Stocks (continued) |
||||||||||
| Water Utilities 3.4% |
||||||||||
| American Water Works Co. Inc. |
United States | 1,500,000 | $ | 131,955,000 | ||||||
| United Utilities Group PLC |
United Kingdom | 6,700,000 | 61,485,846 | |||||||
|
|
|
|||||||||
| 193,440,846 | ||||||||||
|
|
|
|||||||||
| Total Common Stocks (Cost $3,130,618,940) |
5,697,788,114 | |||||||||
|
|
|
|||||||||
| Principal Amount |
||||||||||
| Corporate Bonds (Cost $6,087,828) 0.1% |
||||||||||
| Multi-Utilities 0.1% |
||||||||||
| Aquila Inc., senior note, 8.27%, 11/15/21 |
United States | $ | 6,100,000 | 6,818,488 | ||||||
|
|
|
|||||||||
| Total Investments before Short Term Investments |
5,704,606,602 | |||||||||
|
|
|
|||||||||
| Shares | ||||||||||
| Short Term Investments (Cost $17,808,342) 0.3% |
||||||||||
| Money Market Funds 0.3% |
||||||||||
| b,cInstitutional Fiduciary Trust Money Market Portfolio, 1.69% |
United States | 17,808,342 | 17,808,342 | |||||||
|
|
|
|||||||||
| Total Investments (Cost $3,154,515,110) 100.0% |
5,722,414,944 | |||||||||
| Other Assets, less Liabilities 0.0%† |
1,151,601 | |||||||||
|
|
|
|||||||||
| Net Assets 100.0% |
$ | 5,723,566,545 | ||||||||
|
|
|
|||||||||
See Abbreviations on page 130.
†Rounds to less than 0.1% of net assets.
aNon-income producing.
bSee Note 3(f) regarding investments in affiliated management investment companies.
cThe rate shown is the annualized seven-day effective yield at period end.
| franklintempleton.com | The accompanying notes are an integral part of these financial statements. | Annual Report | 97 | ||
FRANKLIN CUSTODIAN FUNDS
Statements of Assets and Liabilities
September 30, 2018
| Franklin DynaTech Fund |
Franklin Growth Fund |
Franklin Income Fund |
||||||||||
| Assets: |
||||||||||||
| +Investments in securities: |
||||||||||||
| Cost - Unaffiliated issuers |
$3,421,116,937 | $ 5,330,851,562 | $73,414,984,106 | |||||||||
| Cost - Non-controlled affiliates (Note 3f and 9) |
125,141,525 | 224,477,141 | 562,479,699 | |||||||||
| Cost - Unaffiliated repurchase agreements |
— | — | 3,155,971 | |||||||||
|
|
|
|||||||||||
| Value - Unaffiliated issuers |
$6,664,310,389 | $16,181,259,863 | $75,810,489,067 | |||||||||
| Value - Non-controlled affiliates (Note 3f and 9) |
125,141,525 | 224,477,141 | 544,991,194 | |||||||||
| Value - Unaffiliated repurchase agreements |
— | — | 3,155,971 | |||||||||
| Cash |
— | 298,762 | 7,079,695 | |||||||||
| Receivables: |
||||||||||||
| Investment securities sold |
18,383,491 | — | 163,817,810 | |||||||||
| Capital shares sold |
31,793,292 | 33,715,266 | 48,041,336 | |||||||||
| Dividends and interest |
1,397,883 | 8,902,516 | 675,300,542 | |||||||||
| Other assets |
1,894 | 5,858 | 31,367 | |||||||||
|
|
|
|||||||||||
| Total assets |
6,841,028,474 | 16,448,659,406 | 77,252,906,982 | |||||||||
|
|
|
|||||||||||
| Liabilities: |
||||||||||||
| Payables: |
||||||||||||
| Investment securities purchased |
7,372,010 | — | 440,489,736 | |||||||||
| Capital shares redeemed |
9,979,269 | 29,557,054 | 82,502,934 | |||||||||
| Management fees |
2,539,677 | 5,903,346 | 23,567,847 | |||||||||
| Distribution fees |
2,543,406 | 5,884,279 | 33,055,070 | |||||||||
| Transfer agent fees |
837,869 | 2,906,625 | 10,105,514 | |||||||||
| Options written, at value (premiums received $—, $— and $28,483,429, respectively) |
— | — | 24,673,000 | |||||||||
| Payable upon return of securities loaned |
— | — | 15,778,971 | |||||||||
| Accrued expenses and other liabilities |
386,855 | 692,783 | 3,469,423 | |||||||||
|
|
|
|||||||||||
| Total liabilities |
23,659,086 | 44,944,087 | 633,642,495 | |||||||||
|
|
|
|||||||||||
| Net assets, at value |
$6,817,369,388 | $16,403,715,319 | $76,619,264,487 | |||||||||
|
|
|
|||||||||||
| Net assets consist of: |
||||||||||||
| Paid-in capital |
$3,419,048,146 | $ 5,345,609,332 | $76,426,657,156 | |||||||||
| Total distributable earnings (loss) |
3,398,321,242 | 11,058,105,987 | 192,607,331 | |||||||||
|
|
|
|||||||||||
| Net assets, at value |
$6,817,369,388 | $16,403,715,319 | $76,619,264,487 | |||||||||
|
|
|
|||||||||||
| +Includes securities loaned |
$ — | $ — | $ 15,276,890 | |||||||||
| 98 |
Annual Report | The accompanying notes are an integral part of these financial statements. | franklintempleton.com | ||
FRANKLIN CUSTODIAN FUNDS
FINANCIAL STATEMENTS
Statements of Assets and Liabilities (continued)
September 30, 2018
| Franklin DynaTech Fund |
Franklin Growth Fund |
Franklin Income Fund |
||||||||
| Class A: | ||||||||||
| Net assets, at value |
$3,741,561,876 | $9,044,834,174 | $ 107,057,233 | |||||||
|
|
||||||||||
| Shares outstanding |
46,102,241 | 84,070,372 | 46,110,126 | |||||||
|
|
||||||||||
| Net asset value per sharea |
$81.16 | $107.59 | $2.32 | |||||||
|
|
||||||||||
| Maximum offering price per share (net asset value per share ÷ 94.50%, 94.50% and 95.75%, respectively) |
$85.88 | $113.85 | $2.42 | |||||||
|
|
||||||||||
| Class A1: |
||||||||||
| Net assets, at value |
$42,929,573,280 | |||||||||
|
|
|
|||||||||
| Shares outstanding |
18,489,593,506 | |||||||||
|
|
|
|||||||||
| Net asset value and maximum offering price per sharea |
$2.32 | |||||||||
|
|
|
|||||||||
| Maximum offering price per share (net asset value per share ÷ 95.75%) |
$2.42 | |||||||||
|
|
|
|||||||||
| Class C: |
||||||||||
| Net assets, at value |
$ 611,220,971 | $1,060,257,868 | $19,895,441,018 | |||||||
|
|
||||||||||
| Shares outstanding |
8,979,652 | 10,777,365 | 8,453,597,826 | |||||||
|
|
||||||||||
| Net asset value and maximum offering price per sharea |
$68.07 | $98.38 | $2.35 | |||||||
|
|
||||||||||
| Class R: |
||||||||||
| Net assets, at value |
$ 95,924,932 | $ 524,960,276 | $ 296,097,953 | |||||||
|
|
||||||||||
| Shares outstanding |
1,216,121 | 4,906,019 | 129,959,623 | |||||||
|
|
||||||||||
| Net asset value and maximum offering price per share |
$78.88 | $107.00 | $2.28 | |||||||
|
|
||||||||||
| Class R6: |
||||||||||
| Net assets, at value |
$1,688,595,135 | $2,634,454,734 | $ 2,062,333,739 | |||||||
|
|
||||||||||
| Shares outstanding |
20,027,224 | 24,415,837 | 895,173,936 | |||||||
|
|
||||||||||
| Net asset value and maximum offering price per share |
$84.31 | $107.90 | $2.30 | |||||||
|
|
||||||||||
| Advisor Class: |
||||||||||
| Net assets, at value |
$ 680,066,474 | $3,139,208,267 | $11,328,761,264 | |||||||
|
|
||||||||||
| Shares outstanding |
8,138,719 | 29,079,905 | 4,920,721,863 | |||||||
|
|
||||||||||
| Net asset value and maximum offering price per share |
$83.56 | $107.95 | $2.30 | |||||||
|
|
||||||||||
aRedemption price is equal to net asset value less contingent deferred sales charges, if applicable.
| franklintempleton.com | The accompanying notes are an integral part of these financial statements. | Annual Report | 99 | ||
FRANKLIN CUSTODIAN FUNDS
FINANCIAL STATEMENTS
Statements of Assets and Liabilities (continued)
September 30, 2018
| Franklin U.S. Government Securities Fund |
Franklin Utilities Fund |
|||||||
| Assets: |
||||||||
| Investments in securities: |
||||||||
| Cost - Unaffiliated issuers |
$5,119,014,589 | $3,136,706,768 | ||||||
| Cost - Non-controlled affiliates (Note 3f and 9) |
93,109,667 | 17,808,342 | ||||||
|
|
|
|||||||
| Value - Unaffiliated issuers |
$5,021,676,543 | $5,704,606,602 | ||||||
| Value - Non-controlled affiliates (Note 3f and 9) |
93,109,667 | 17,808,342 | ||||||
| Receivables: |
||||||||
| Capital shares sold |
2,115,061 | 3,344,770 | ||||||
| Dividends and interest |
16,218,287 | 9,485,290 | ||||||
| Other assets |
2,078 | 2,274 | ||||||
|
|
|
|||||||
| Total assets |
5,133,121,636 | 5,735,247,278 | ||||||
|
|
|
|||||||
| Liabilities: |
||||||||
| Payables: |
||||||||
| Capital shares redeemed |
4,887,625 | 6,353,511 | ||||||
| Management fees |
1,908,586 | 2,164,274 | ||||||
| Distribution fees |
1,447,085 | 1,929,251 | ||||||
| Transfer agent fees |
940,462 | 897,247 | ||||||
| Distributions to shareholders |
1,728,665 | — | ||||||
| Accrued expenses and other liabilities |
601,188 | 336,450 | ||||||
|
|
|
|||||||
| Total liabilities |
11,513,611 | 11,680,733 | ||||||
|
|
|
|||||||
| Net assets, at value |
$5,121,608,025 | $5,723,566,545 | ||||||
|
|
|
|||||||
| Net assets consist of: |
||||||||
| Paid-in capital |
$5,774,571,841 | $2,985,993,771 | ||||||
| Total distributable earnings (loss) |
(652,963,816 | ) | 2,737,572,774 | |||||
|
|
|
|||||||
| Net assets, at value |
$5,121,608,025 | $5,723,566,545 | ||||||
|
|
|
|||||||
| 100 |
Annual Report | The accompanying notes are an integral part of these financial statements. | franklintempleton.com | ||
FRANKLIN CUSTODIAN FUNDS
FINANCIAL STATEMENTS
Statements of Assets and Liabilities (continued)
September 30, 2018
| Franklin U.S. Government Securities Fund |
Franklin Utilities Fund |
|||||||
| Class A: |
||||||||
| Net assets, at value |
$ | 4,471,761 | $ | 3,536,416 | ||||
|
|
|
|||||||
| Shares outstanding |
763,712 | 189,504 | ||||||
|
|
|
|||||||
| Net asset value per sharea |
$5.86 | $18.66 | ||||||
|
|
|
|||||||
| Maximum offering price per share (net asset value per share ÷ 95.75%) |
$6.12 | $19.49 | ||||||
|
|
|
|||||||
| Class A1: |
||||||||
| Net assets, at value |
$3,099,373,279 | $3,654,795,449 | ||||||
|
|
|
|||||||
| Shares outstanding |
529,734,092 | 195,813,880 | ||||||
|
|
|
|||||||
| Net asset value and maximum offering price per sharea |
$5.85 | $18.66 | ||||||
|
|
|
|||||||
| Maximum offering price per share (net asset value per share ÷ 95.75%) |
$6.11 | $19.49 | ||||||
|
|
|
|||||||
| Class C: |
||||||||
| Net assets, at value |
$ | 571,525,228 | $ | 834,069,544 | ||||
|
|
|
|||||||
| Shares outstanding |
98,391,789 | 44,920,626 | ||||||
|
|
|
|||||||
| Net asset value and maximum offering price per sharea |
$5.81 | $18.57 | ||||||
|
|
|
|||||||
| Class R: |
||||||||
| Net assets, at value |
$ | 31,143,613 | $ | 72,926,787 | ||||
|
|
|
|||||||
| Shares outstanding |
5,325,841 | 3,922,276 | ||||||
|
|
|
|||||||
| Net asset value and maximum offering price per share |
$5.85 | $18.59 | ||||||
|
|
|
|||||||
| Class R6: |
||||||||
| Net assets, at value |
$ | 694,812,652 | $ | 230,392,966 | ||||
|
|
|
|||||||
| Shares outstanding |
118,357,953 | 12,250,590 | ||||||
|
|
|
|||||||
| Net asset value and maximum offering price per share |
$5.87 | $18.81 | ||||||
|
|
|
|||||||
| Advisor Class: |
||||||||
| Net assets, at value |
$ | 720,281,492 | $ | 927,845,383 | ||||
|
|
|
|||||||
| Shares outstanding |
122,678,764 | 49,332,482 | ||||||
|
|
|
|||||||
| Net asset value and maximum offering price per share |
$5.87 | $18.81 | ||||||
|
|
|
|||||||
aRedemption price is equal to net asset value less contingent deferred sales charges, if applicable.
| franklintempleton.com | The accompanying notes are an integral part of these financial statements. | Annual Report | 101 | ||
FRANKLIN CUSTODIAN FUNDS
FINANCIAL STATEMENTS
Statements of Operations
for the year ended September 30, 2018
| Franklin DynaTech Fund |
Franklin Growth Fund |
Franklin Income Fund |
||||||||||
|
Investment income: |
||||||||||||
| Dividends: (net of foreign taxes)* |
||||||||||||
| Unaffiliated issuers |
$ | 26,915,256 | $ | 184,282,044 | $ | 1,191,885,750 | ||||||
| Non-controlled affiliates (Note 3f and 9) |
1,641,929 | 3,722,826 | 14,519,270 | |||||||||
| Interest: |
||||||||||||
| Unaffiliated issuers |
— | — | 2,407,788,207 | |||||||||
| Controlled affiliates (Note 9) |
— | — | 3,353,931 | |||||||||
| Non-controlled affiliates (Note 9) |
— | — | 54,098,020 | |||||||||
| Income from securities loaned (net of fees and rebates) |
— | — | 1,784,265 | |||||||||
|
|
|
|||||||||||
|
Total investment income |
|
28,557,185 |
|
|
188,004,870 |
|
|
3,673,429,443 |
| |||
|
|
|
|||||||||||
| Expenses: |
||||||||||||
| Management fees (Note 3a) |
24,562,529 | 67,188,693 | 295,407,924 | |||||||||
| Distribution fees: (Note 3c) |
||||||||||||
| Class A |
7,607,712 | 21,320,776 | 7,774 | |||||||||
| Class A1 |
— | — | 66,878,563 | |||||||||
| Class C |
4,825,287 | 10,022,333 | 139,081,351 | |||||||||
| Class R |
332,065 | 2,596,195 | 1,606,084 | |||||||||
| Transfer agent fees: (Note 3e) |
||||||||||||
| Class A |
3,942,975 | 10,762,503 | 2,555 | |||||||||
| Class A1 |
— | — | 39,476,500 | |||||||||
| Class C |
625,212 | 1,264,977 | 18,944,896 | |||||||||
| Class R |
86,202 | 656,832 | 286,257 | |||||||||
| Class R6 |
294,901 | 565,131 | 332,845 | |||||||||
| Advisor Class |
629,903 | 3,542,778 | 9,980,022 | |||||||||
| Custodian fees (Note 4) |
102,240 | 192,780 | 1,134,368 | |||||||||
| Reports to shareholders |
589,165 | 919,198 | 4,137,630 | |||||||||
| Registration and filing fees |
362,023 | 215,466 | 741,861 | |||||||||
| Professional fees |
88,153 | 188,019 | 1,862,824 | |||||||||
| Trustees’ fees and expenses |
21,513 | 66,212 | 363,971 | |||||||||
| Other |
70,274 | 224,385 | 687,973 | |||||||||
|
|
|
|||||||||||
|
Total expenses |
|
44,140,154 |
|
|
119,726,278 |
|
|
580,933,398 |
| |||
| Expense reductions (Note 4) |
(155 | ) | (743 | ) | (418,073 | ) | ||||||
| Expenses waived/paid by affiliates (Note 3f and 3g) |
(541,797 | ) | (1,190,435 | ) | (5,123,635 | ) | ||||||
|
|
|
|||||||||||
|
Net expenses |
|
43,598,202 |
|
|
118,535,100 |
|
|
575,391,690 |
| |||
|
|
|
|||||||||||
|
Net investment income (loss) |
|
(15,041,017 |
) |
|
69,469,770 |
|
|
3,098,037,753 |
| |||
|
|
|
|||||||||||
| Realized and unrealized gains (losses): |
||||||||||||
| Net realized gain (loss) from: |
||||||||||||
| Investments:+ |
||||||||||||
| Unaffiliated issuers |
176,745,336 | 308,138,392 | 2,407,938,687 | |||||||||
| Controlled affiliates (Note 3f and 9) |
— | — | 4,149,459 | |||||||||
| Non-controlled affiliates (Note 3f and 9) |
— | — | (389,718,988 | ) | ||||||||
| Written options |
— | — | 121,101,389 | |||||||||
| Foreign currency transactions |
41,609 | (204,064 | ) | (3,955,235 | ) | |||||||
|
|
|
|||||||||||
|
Net realized gain (loss) |
|
176,786,945 |
|
|
307,934,328 |
|
|
2,139,515,312 |
| |||
|
|
|
|||||||||||
| Net change in unrealized appreciation (depreciation) on: |
||||||||||||
| Investments: |
||||||||||||
| Unaffiliated issuers |
1,253,022,528 | 2,488,154,018 | (4,256,651,399 | ) | ||||||||
| Controlled affiliates (Note 3f and 9) |
— | — | 50,030,607 | |||||||||
| Non-controlled affiliates (Note 3f and 9) |
— | — | 556,805,106 | |||||||||
| Translation of other assets and liabilities denominated in foreign currencies |
(5,535 | ) | — | (1,303,586 | ) | |||||||
| Written options |
— | — | 6,930,114 | |||||||||
|
|
|
|||||||||||
|
Net change in unrealized appreciation (depreciation) |
|
1,253,016,993 |
|
|
2,488,154,018 |
|
|
(3,644,189,158 |
) | |||
|
|
|
|||||||||||
| 102 |
Annual Report | The accompanying notes are an integral part of these financial statements. | franklintempleton.com | ||
FRANKLIN CUSTODIAN FUNDS
FINANCIAL STATEMENTS
Statements of Operations (continued)
for the year ended September 30, 2018
| Franklin DynaTech Fund |
Franklin Growth Fund |
Franklin Income Fund |
||||||||||
| Net realized and unrealized gain (loss) |
$ | 1,429,803,938 | $ | 2,796,088,346 | $ | (1,504,673,846 | ) | |||||
|
|
|
|||||||||||
| Net increase (decrease) in net assets resulting from operations |
$ | 1,414,762,921 | $ | 2,865,558,116 | $ | 1,593,363,907 | ||||||
|
|
|
|||||||||||
| *Foreign taxes withheld on dividends |
$ | 116,462 | $ | 1,251,966 | $ | 55,476,204 | ||||||
| +Includes gains from a redemption in-kind (Note 11) |
$ | — | $ | 42,189,159 | $ | — | ||||||
| franklintempleton.com | The accompanying notes are an integral part of these financial statements. | Annual Report | 103 | ||
FRANKLIN CUSTODIAN FUNDS
FINANCIAL STATEMENTS
Statements of Operations (continued)
for the year ended September 30, 2018
| Franklin U.S. Government |
Franklin Utilities Fund |
|||||||
|
Investment income: |
||||||||
| Dividends: (net of foreign taxes)* |
||||||||
| Unaffiliated issuers |
$ | — | $ | 205,451,330 | ||||
| Non-controlled affiliates (Note 3f and 9) |
1,279,356 | 278,893 | ||||||
| Interest: |
||||||||
| Unaffiliated issuers: |
||||||||
| Paydown gain (loss) |
(29,839,912 | ) | — | |||||
| Paid in cash |
205,400,869 | 1,328,823 | ||||||
| Income from securities loaned (net of fees and rebates) |
— | 2,492 | ||||||
|
|
|
|||||||
|
Total investment income |
176,840,313 | 207,061,538 | ||||||
|
|
|
|||||||
| Expenses: |
||||||||
| Management fees (Note 3a) |
24,532,386 | 27,230,235 | ||||||
| Distribution fees: (Note 3c) |
||||||||
| Class A |
277 | 260 | ||||||
| Class A1 |
4,980,924 | 5,772,753 | ||||||
| Class C |
4,376,640 | 5,826,246 | ||||||
| Class R |
168,573 | 403,339 | ||||||
| Transfer agent fees: (Note 3e) |
||||||||
| Class A |
142 | 112 | ||||||
| Class A1 |
4,651,394 | 4,467,136 | ||||||
| Class C |
929,587 | 1,040,390 | ||||||
| Class R |
47,000 | 93,918 | ||||||
| Class R6 |
151,927 | 127,199 | ||||||
| Advisor Class |
1,012,477 | 1,073,316 | ||||||
| Custodian fees (Note 4) |
45,842 | 72,945 | ||||||
| Reports to shareholders |
400,518 | 423,124 | ||||||
| Registration and filing fees |
162,551 | 153,389 | ||||||
| Professional fees |
95,120 | 102,060 | ||||||
| Trustees’ fees and expenses |
25,001 | 28,007 | ||||||
| Other |
578,710 | 108,443 | ||||||
|
|
|
|||||||
| Total expenses |
42,159,069 | 46,922,872 | ||||||
| Expense reductions (Note 4) |
(1,315 | ) | (6,897 | ) | ||||
| Expenses waived/paid by affiliates (Note 3f and 3g) |
(424,436 | ) | (184,341 | ) | ||||
|
|
|
|||||||
|
Net expenses |
41,733,318 | 46,731,634 | ||||||
|
|
|
|||||||
|
Net investment income |
135,106,995 | 160,329,904 | ||||||
|
|
|
|||||||
| Realized and unrealized gains (losses): |
||||||||
| Net realized gain (loss) from: |
||||||||
| Investments: |
||||||||
| Unaffiliated issuers |
(17,091,870 | ) | 202,345,920 | |||||
| Foreign currency transactions |
— | (204,082 | ) | |||||
|
|
|
|||||||
|
Net realized gain (loss) |
(17,091,870 | ) | 202,141,838 | |||||
|
|
|
|||||||
| Net change in unrealized appreciation (depreciation) on: |
||||||||
| Investments: |
||||||||
| Unaffiliated issuers |
(204,522,890 | ) | (290,381,785 | ) | ||||
| Translation of other assets and liabilities denominated in foreign currencies |
— | 3,394 | ||||||
|
|
|
|||||||
|
Net change in unrealized appreciation (depreciation) |
(204,522,890 | ) | (290,378,391 | ) | ||||
|
|
|
|||||||
|
Net realized and unrealized gain (loss) |
(221,614,760 | ) | (88,236,553 | ) | ||||
|
|
|
|||||||
|
Net increase (decrease) in net assets resulting from operations |
$ | (86,507,765 | ) | $ | 72,093,351 | |||
|
|
|
|||||||
| *Foreign taxes withheld on dividends |
$ | — | $ | 1,429,263 | ||||
| 104 |
Annual Report | The accompanying notes are an integral part of these financial statements. | franklintempleton.com | ||
FRANKLIN CUSTODIAN FUNDS
FINANCIAL STATEMENTS
Statements of Changes in Net Assets
| Franklin DynaTech Fund | Franklin Growth Fund | |||||||||||||||
|
|
|
|||||||||||||||
| Year Ended September 30, | Year Ended September 30, | |||||||||||||||
|
|
|
|||||||||||||||
| 2018 | 2017 | 2018 | 2017 | |||||||||||||
|
Increase (decrease) in net assets: |
||||||||||||||||
| Operations: |
||||||||||||||||
| Net investment income (loss) |
$ | (15,041,017 | ) | $ | (10,773,451 | ) | $ | 69,469,770 | $ | 65,365,826 | ||||||
| Net realized gain (loss) |
176,786,945 | 110,351,134 | 307,934,328 | 281,282,680 | ||||||||||||
| Net change in unrealized appreciation (depreciation) |
1,253,016,993 | 687,873,992 | 2,488,154,018 | 2,130,737,126 | ||||||||||||
|
|
|
|||||||||||||||
| Net increase (decrease) in net assets resulting from operations |
1,414,762,921 | 787,451,675 | 2,865,558,116 | 2,477,385,632 | ||||||||||||
|
|
|
|||||||||||||||
| Distributions to shareholders: (Note 1l) |
||||||||||||||||
| Class A |
(46,020,971 | ) | (67,256,053 | ) | (226,847,781 | ) | (271,375,277 | ) | ||||||||
| Class C |
(8,263,863 | ) | (11,758,906 | ) | (24,694,013 | ) | (28,670,653 | ) | ||||||||
| Class R |
(916,852 | ) | (1,284,067 | ) | (13,125,428 | ) | (16,218,229 | ) | ||||||||
| Class R6 |
(16,654,639 | ) | (11,046,724 | ) | (66,654,737 | ) | (50,057,658 | ) | ||||||||
| Advisor Class |
(5,793,931 | ) | (7,824,210 | ) | (76,869,802 | ) | (80,246,268 | ) | ||||||||
|
|
|
|||||||||||||||
| Total distributions to shareholders |
(77,650,256 | ) | (99,169,960 | ) | (408,191,761 | ) | (446,568,085 | ) | ||||||||
|
|
|
|||||||||||||||
| Capital share transactions: (Note 2) |
||||||||||||||||
| Class A |
479,666,303 | (58,619,051 | ) | (384,147,638 | ) | (775,062,897 | ) | |||||||||
| Class C |
121,107,638 | (5,464,905 | ) | (26,004,014 | ) | (50,580,939 | ) | |||||||||
| Class R |
32,046,631 | 1,319,443 | (68,853,353 | ) | (43,562,140 | ) | ||||||||||
| Class R6 |
912,918,385 | 11,234,886 | 556,753,865 | 215,211,021 | ||||||||||||
| Advisor Class |
(156,845,531 | ) | 410,822,596 | (126,254,992 | ) | 419,014,663 | ||||||||||
|
|
|
|||||||||||||||
| Total capital share transactions |
1,388,893,426 | 359,292,969 | (48,506,132 | ) | (234,980,292 | ) | ||||||||||
|
|
|
|||||||||||||||
| Net increase (decrease) in net assets |
2,726,006,091 | 1,047,574,684 | 2,408,860,223 | 1,795,837,255 | ||||||||||||
| Net assets: |
||||||||||||||||
| Beginning of year |
4,091,363,297 | 3,043,788,613 | 13,994,855,096 | 12,199,017,841 | ||||||||||||
|
|
|
|||||||||||||||
| End of year (Note 1l) |
$ | 6,817,369,388 | $ | 4,091,363,297 | $ | 16,403,715,319 | $ | 13,994,855,096 | ||||||||
|
|
|
|||||||||||||||
| franklintempleton.com | The accompanying notes are an integral part of these financial statements. | Annual Report | 105 | ||
FRANKLIN CUSTODIAN FUNDS
FINANCIAL STATEMENTS
Statements of Changes in Net Assets (continued)
| Franklin Income Fund | Franklin U.S. Government Securities Fund | |||||||||||||||
| Year Ended September 30, | Year Ended September 30, | |||||||||||||||
| 2018 | 2017 | 2018 | 2017 | |||||||||||||
|
Increase (decrease) in net assets: |
||||||||||||||||
| Operations: |
||||||||||||||||
| Net investment income |
$ | 3,098,037,753 | $ | 3,350,660,766 | $ | 135,106,995 | $ | 130,407,046 | ||||||||
| Net realized gain (loss) |
2,139,515,312 | 1,860,395,900 | (17,091,870 | ) | (63,379,288 | ) | ||||||||||
| Net change in unrealized appreciation (depreciation) |
(3,644,189,158 | ) | 3,978,607,766 | (204,522,890 | ) | (107,534,558 | ) | |||||||||
|
|
|
|||||||||||||||
| Net increase (decrease) in net assets resulting from operations |
1,593,363,907 | 9,189,664,432 | (86,507,765 | ) | (40,506,800 | ) | ||||||||||
|
|
|
|||||||||||||||
| Distributions to shareholders: (Note 1l) |
||||||||||||||||
| Class A |
— | — | (12,054 | ) | — | |||||||||||
| Class A1 |
(2,288,960,635 | ) | (2,378,392,172 | ) | (102,662,505 | ) | (117,543,709 | ) | ||||||||
| Class M |
(106 | ) | — | (67 | ) | — | ||||||||||
| Class C |
(972,575,550 | ) | (1,087,030,360 | ) | (17,064,880 | ) | (23,194,188 | ) | ||||||||
| Class R |
(15,730,910 | ) | (18,864,554 | ) | (917,007 | ) | (1,294,613 | ) | ||||||||
| Class R6 |
(112,761,533 | ) | (95,303,179 | ) | (20,832,132 | ) | (16,694,015 | ) | ||||||||
| Advisor Class |
(597,750,735 | ) | (524,726,253 | ) | (23,153,769 | ) | (25,402,172 | ) | ||||||||
|
|
|
|||||||||||||||
|
Total distributions to shareholders |
|
(3,987,779,469 |
) |
|
(4,104,316,518 |
) |
|
(164,642,414 |
) |
|
(184,128,697 |
) | ||||
|
|
|
|||||||||||||||
| Capital share transactions: (Note 2) |
||||||||||||||||
| Class A |
107,124,173 | — | 4,483,084 | — | ||||||||||||
| Class A1 |
(2,231,639,649 | ) | (1,869,610,539 | ) | (326,093,441 | ) | (511,968,136 | ) | ||||||||
| Class M |
229 | — | 108 | — | ||||||||||||
| Class C |
(2,505,402,882 | ) | (2,293,654,717 | ) | (194,350,252 | ) | (202,855,335 | ) | ||||||||
| Class R |
(55,588,036 | ) | (58,209,535 | ) | (5,634,672 | ) | (19,433,072 | ) | ||||||||
| Class R6 |
309,451,485 | (32,346,017 | ) | 276,619,775 | (159,062,673 | ) | ||||||||||
| Advisor Class |
(1,525,738 | ) | 2,925,976,903 | (100,605,572 | ) | 162,685,038 | ||||||||||
|
|
|
|||||||||||||||
|
Total capital share transactions |
|
(4,377,580,418 |
) |
|
(1,327,843,905 |
) |
|
(345,580,970 |
) |
|
(730,634,178 |
) | ||||
|
|
|
|||||||||||||||
| Net increase (decrease) in net assets |
(6,771,995,980 | ) | 3,757,504,009 | (596,731,149 | ) | (955,269,675 | ) | |||||||||
| Net assets: |
||||||||||||||||
| Beginning of year |
83,391,260,467 | 79,633,756,458 | 5,718,339,174 | 6,673,608,849 | ||||||||||||
|
|
|
|||||||||||||||
|
End of year (Note 1l) |
$ |
76,619,264,487 |
|
|
$83,391,260,467 |
|
|
$5,121,608,025 |
|
|
$5,718,339,174 |
| ||||
|
|
|
|||||||||||||||
| 106 |
Annual Report | The accompanying notes are an integral part of these financial statements. | franklintempleton.com | ||
FRANKLIN CUSTODIAN FUNDS
FINANCIAL STATEMENTS
Statements of Changes in Net Assets (continued)
| Franklin Utilities Fund | ||||||||
| Year Ended September 30, | ||||||||
| 2018 | 2017 | |||||||
|
Increase (decrease) in net assets: |
||||||||
| Operations: |
||||||||
| Net investment income |
$ | 160,329,904 | $ | 177,423,281 | ||||
| Net realized gain (loss) |
202,141,838 | 88,486,105 | ||||||
| Net change in unrealized appreciation (depreciation) |
(290,378,391 | ) | 349,739,100 | |||||
|
|
|
|||||||
|
Net increase (decrease) in net assets resulting from operations |
|
72,093,351 |
|
|
615,648,486 |
| ||
|
|
|
|||||||
| Distributions to shareholders: (Note 1l) |
||||||||
| Class A1 |
(177,065,549 | ) | (110,776,128 | ) | ||||
| Class M |
(70 | ) | — | |||||
| Class C |
(37,179,447 | ) | (22,295,630 | ) | ||||
| Class R |
(3,557,682 | ) | (2,300,362 | ) | ||||
| Class R6 |
(10,987,844 | ) | (6,819,072 | ) | ||||
| Advisor Class |
(43,572,165 | ) | (23,791,428 | ) | ||||
|
|
|
|||||||
|
Total distributions to shareholders |
|
(272,362,757 |
) |
|
(165,982,620 |
) | ||
|
|
|
|||||||
| Capital share transactions: (Note 2) |
||||||||
| Class A |
3,570,602 | — | ||||||
| Class A1 |
(400,697,038 | ) | (289,671,581 | ) | ||||
| Class M |
262 | — | ||||||
| Class C |
(115,788,847 | ) | (156,252,743 | ) | ||||
| Class R |
(18,460,504 | ) | (15,638,722 | ) | ||||
| Class R6 |
(4,300,346 | ) | 4,295,848 | |||||
| Advisor Class |
(3,930,299 | ) | 148,535,428 | |||||
|
|
|
|||||||
|
Total capital share transactions |
|
(539,606,170 |
) |
|
(308,731,770 |
) | ||
|
|
|
|||||||
| Net increase (decrease) in net assets |
(739,875,576 | ) | 140,934,096 | |||||
| Net assets: |
||||||||
| Beginning of year |
6,463,442,121 | 6,322,508,025 | ||||||
|
|
|
|||||||
|
End of year (Note 1l) |
$ |
5,723,566,545 |
|
$ |
6,463,442,121 |
| ||
|
|
|
|||||||
| franklintempleton.com | The accompanying notes are an integral part of these financial statements. | Annual Report | 107 | ||
FRANKLIN CUSTODIAN FUNDS
| 108 |
Annual Report | franklintempleton.com | ||
FRANKLIN CUSTODIAN FUNDS
NOTES TO FINANCIAL STATEMENTS
| franklintempleton.com | Annual Report | 109 | ||
FRANKLIN CUSTODIAN FUNDS
NOTES TO FINANCIAL STATEMENTS
| 110 |
Annual Report | franklintempleton.com | ||
FRANKLIN CUSTODIAN FUNDS
NOTES TO FINANCIAL STATEMENTS
| franklintempleton.com | Annual Report | 111 | ||
FRANKLIN CUSTODIAN FUNDS
NOTES TO FINANCIAL STATEMENTS
| 112 |
Annual Report | franklintempleton.com | ||
FRANKLIN CUSTODIAN FUNDS
NOTES TO FINANCIAL STATEMENTS
*Effective with the current reporting period, it is no longer required to present certain line items on the Statements of Changes in Net Assets. Such disclosure changes are included in the Statements of Changes in Net Assets, therefore prior period amounts are presented below.
For the year ended September 30, 2017, distributions to shareholders were as follows:
| Franklin DynaTech Fund |
Franklin Growth Fund |
Franklin Income Fund |
||||||||||
|
Distributions from net investment income: |
||||||||||||
| Class A |
$ | — | $ | (36,895,906 | ) | $ | — | |||||
| Class A1 |
— | — | (2,378,392,172 | ) | ||||||||
| Class C |
— | — | (1,087,030,360 | ) | ||||||||
| Class R |
— | (1,230,882 | ) | (18,864,554 | ) | |||||||
| Class R6 |
— | (11,177,576 | ) | (95,303,179 | ) | |||||||
| Advisor Class |
— | (15,699,120 | ) | (524,726,253 | ) | |||||||
| Distributions from net realized gains: |
||||||||||||
| Class A |
(67,256,053 | ) | (234,479,371 | ) | — | |||||||
| Class C |
(11,758,906 | ) | (28,670,653 | ) | — | |||||||
| Class R |
(1,284,067 | ) | (14,987,347 | ) | — | |||||||
| Class R6 |
(11,046,724 | ) | (38,880,082 | ) | — | |||||||
| Advisor Class |
(7,824,210 | ) | (64,547,148 | ) | — | |||||||
| Franklin U.S. Government |
Franklin Utilities Fund |
|||||||||||
|
Distributions from net investment income: |
||||||||||||
| Class A1 |
$ | (117,543,709 | ) | $ | (108,430,003 | ) | ||||||
| Class C |
(23,194,188 | ) | (21,699,670 | ) | ||||||||
| Class R |
(1,294,613 | ) | (2,242,163 | ) | ||||||||
| Class R6 |
(16,694,015 | ) | (6,694,467 | ) | ||||||||
| Advisor Class |
(25,402,172 | ) | (23,372,926 | ) | ||||||||
| Distributions from net realized gains: |
||||||||||||
| Class A1 |
— | (2,346,125 | ) | |||||||||
| Class C |
— | (595,960 | ) | |||||||||
| Class R |
— | (58,199 | ) | |||||||||
| Class R6 |
— | (124,605 | ) | |||||||||
| Advisor Class |
— | (418,502 | ) | |||||||||
For the year ended September 30, 2017, undistributed net investment income/accumulated net investment loss/distribution in excess of net investment income included in net assets were as follows:
| Fund | Undistributed net investment income |
Distribution in excess of net investment income |
Accumulated net investment loss |
|||||||||||||||||||
|
Franklin DynaTech Fund |
$ | — | $ | — | $ | (8,477,093 | ) | |||||||||||||||
| Franklin Growth Fund |
$ | 37,243,783 | $ | — | $ | — | ||||||||||||||||
| Franklin Income Fund |
$ | — | $ | (74,871,430 | ) | $ | — | |||||||||||||||
| Franklin U.S. Government Securities Fund |
|
$ | — | $ | (1,086,491 | ) | $ | — | ||||||||||||||
| Franklin Utilities Fund |
$ | 19,836,444 | $ | — | $ | — | ||||||||||||||||
| franklintempleton.com | Annual Report | 113 | ||
FRANKLIN CUSTODIAN FUNDS
NOTES TO FINANCIAL STATEMENTS
2. Shares of Beneficial Interest
At September 30, 2018, 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, 2018 |
||||||||||||||||
| Shares sold |
14,831,366 | $ | 1,079,518,288 | 11,280,920 | $ | 1,109,298,387 | ||||||||||
| Shares issued in reinvestment of distributions |
649,398 | 42,412,146 | 2,241,557 | 209,293,239 | ||||||||||||
| Shares redeemed |
(8,972,810 | ) | (642,264,131 | ) | (17,341,818 | ) | (1,702,739,264 | ) | ||||||||
|
Net increase (decrease) |
6,507,954 | $ | 479,666,303 | (3,819,341 | ) | $ | (384,147,638 | ) | ||||||||
|
Year ended September 30, 2017 |
||||||||||||||||
| Shares sold |
9,362,267 | $ | 523,007,968 | 14,162,348 | $ | 1,174,286,495 | ||||||||||
| Shares issued in reinvestment of distributions |
1,325,934 | 62,305,651 | 3,311,489 | 249,918,049 | ||||||||||||
| Shares redeemed |
(11,882,951 | ) | (643,932,670 | ) | (26,713,031 | ) | (2,199,267,441 | ) | ||||||||
|
Net increase (decrease) |
(1,194,750 | ) | $ | (58,619,051 | ) | (9,239,194 | ) | $ | (775,062,897 | ) | ||||||
|
Class C Shares: |
||||||||||||||||
| Year ended September 30, 2018 |
||||||||||||||||
| Shares sold |
3,541,513 | $ | 216,395,204 | 2,015,126 | $ | 182,547,090 | ||||||||||
| Shares issued in reinvestment of distributions |
145,521 | 8,019,671 | 273,473 | 23,494,117 | ||||||||||||
| Shares redeemed |
(1,708,778 | ) | (103,307,237 | ) | (2,558,228 | ) | (232,045,221 | ) | ||||||||
|
Net increase (decrease) |
1,978,256 | $ | 121,107,638 | (269,629 | ) | $ | (26,004,014 | ) | ||||||||
|
Year ended September 30, 2017 |
||||||||||||||||
| Shares sold |
1,608,949 | $ | 76,923,384 | 2,061,309 | $ | 157,211,473 | ||||||||||
| Shares issued in reinvestment of distributions |
278,097 | 11,146,149 | 378,292 | 26,423,730 | ||||||||||||
| Shares redeemed |
(2,017,425 | ) | (93,534,438 | ) | (3,058,986 | ) | (234,216,142 | ) | ||||||||
| Net increase (decrease) |
(130,379 | ) | $ | (5,464,905 | ) | (619,385 | ) | $ | (50,580,939 | ) | ||||||
|
Class R Shares: |
||||||||||||||||
| Year ended September 30, 2018 |
||||||||||||||||
| Shares sold |
728,247 | $ | 52,135,875 | 646,523 | $ | 63,137,515 | ||||||||||
| Shares issued in reinvestment of distributions |
14,081 | 895,541 | 137,299 | 12,777,077 | ||||||||||||
| Shares redeemed |
(304,303 | ) | (20,984,785 | ) | (1,477,753 | ) | (144,767,945 | ) | ||||||||
|
Net increase (decrease) |
438,025 | $ | 32,046,631 | (693,931 | ) | $ | (68,853,353 | ) | ||||||||
|
Year ended September 30, 2017 |
||||||||||||||||
| Shares sold |
267,584 | $ | 14,852,690 | 912,197 | $ | 76,231,533 | ||||||||||
| Shares issued in reinvestment of distributions |
27,272 | 1,251,781 | 210,204 | 15,813,630 | ||||||||||||
| Shares redeemed |
(280,176 | ) | (14,785,028 | ) | (1,629,437 | ) | (135,607,303 | ) | ||||||||
|
Net increase (decrease) |
14,680 | $ | 1,319,443 | (507,036 | ) | $ | (43,562,140 | ) | ||||||||
| 114 |
Annual Report | franklintempleton.com | ||
FRANKLIN CUSTODIAN FUNDS
NOTES TO FINANCIAL STATEMENTS
| Franklin DynaTech Fund |
Franklin Growth Fund | |||||||||||||
| Shares | Amount | Shares | Amount | |||||||||||
|
Class R6 Shares: |
||||||||||||||
| Year ended September 30, 2018 |
||||||||||||||
| Shares sold |
17,913,232 | $1,294,331,619 | 11,217,056 | $ 1,090,829,917 | ||||||||||
| Shares issued in reinvestment of distributions |
246,188 | 16,654,639 | 664,503 | 62,044,590 | ||||||||||
| Shares redeemed in-kind (Note 11) |
— | — | (596,870 | ) | (64,204,995) | |||||||||
| Shares redeemed |
(5,146,068 | ) | (398,067,873 | ) | (5,377,348 | ) | (531,915,647) | |||||||
|
|
| |||||||||||||
| Net increase (decrease) |
13,013,352 | $ 912,918,385 | 5,907,341 | $ 556,753,865 | ||||||||||
|
|
| |||||||||||||
| Year ended September 30, 2017 |
||||||||||||||
| Shares sold |
1,671,232 | $ 92,675,376 | 6,556,890 | $ 547,502,376 | ||||||||||
| Shares issued in reinvestment of distributions |
228,050 | 11,046,724 | 613,371 | 46,278,808 | ||||||||||
| Shares redeemed |
(1,597,410 | ) | (92,487,214 | ) | (4,499,648 | ) | (378,570,163) | |||||||
|
|
| |||||||||||||
| Net increase (decrease) |
301,872 | $ 11,234,886 | 2,670,613 | $ 215,211,021 | ||||||||||
|
|
| |||||||||||||
| Advisor Class Shares: |
||||||||||||||
| Year ended September 30, 2018 |
||||||||||||||
| Shares sold |
5,333,633 | $ 398,259,942 | 7,218,349 | $ 715,181,948 | ||||||||||
| Shares issued in reinvestment of distributions |
79,332 | 5,323,142 | 772,474 | 72,226,322 | ||||||||||
| Shares redeemed |
(8,277,537 | ) | (560,428,615 | ) | (9,391,141 | ) | (913,663,262) | |||||||
|
|
| |||||||||||||
| Net increase (decrease) |
(2,864,572 | ) | $ (156,845,531 | ) | (1,400,318 | ) | $ (126,254,992) | |||||||
|
|
| |||||||||||||
| Year ended September 30, 2017 |
||||||||||||||
| Shares sold |
9,006,379 | $ 514,535,401 | 11,853,956 | $ 980,377,887 | ||||||||||
| Shares issued in reinvestment of distributions |
155,933 | 7,506,593 | 998,990 | 75,473,718 | ||||||||||
| Shares redeemed |
(1,979,331 | ) | (111,219,398 | ) | (7,733,627 | ) | (636,836,942) | |||||||
|
|
| |||||||||||||
| Net increase (decrease) |
7,182,981 | $ 410,822,596 | 5,119,319 | $ 419,014,663 | ||||||||||
|
|
| |||||||||||||
| Franklin Income Fund |
Franklin U.S. Government Securities Fund | |||||||||||
| Shares | Amount | Shares | Amount | |||||||||
| Class A Shares: |
||||||||||||
| Year ended September 30, 2018a |
||||||||||||
| Shares sold |
47,757,868 | $ | 110,955,834 | 854,097 | $ 5,012,817 | |||||||
| Shares issued in reinvestment of distributions |
— | — | 1,534 | 8,990 | ||||||||
| Shares redeemed |
(1,647,742) | (3,831,661 | ) | (91,919 | ) | (538,723) | ||||||
|
| ||||||||||||
| Net increase (decrease) |
46,110,126 | $ | 107,124,173 | 763,712 | $ 4,483,084 | |||||||
|
| ||||||||||||
| Class A1 Shares: |
||||||||||||
| Year ended September 30, 2018 |
||||||||||||
| Shares sold |
1,654,073,714 | $ | 3,876,349,005 | 91,619,493 | $ 551,601,916 | |||||||
| Shares issued in reinvestment of distributions |
897,284,705 | 2,093,922,360 | 14,259,224 | 84,951,032 | ||||||||
| Shares redeemed |
(3,507,769,889) | (8,201,911,014 | ) | (160,829,797 | ) | (962,646,389) | ||||||
|
| ||||||||||||
| Net increase (decrease) |
(956,411,470) | $ | (2,231,639,649 | ) | (54,951,080 | ) | $ (326,093,441) | |||||
|
| ||||||||||||
| Year ended September 30, 2017 |
||||||||||||
| Shares sold |
2,326,579,530 | $ | 5,409,263,110 | 88,315,020 | $ 547,846,708 | |||||||
| Shares issued in reinvestment of distributions |
942,817,065 | 2,180,859,371 | 16,155,083 | 99,906,202 | ||||||||
| Shares redeemed |
(4,077,035,296) | (9,459,733,020 | ) | (187,133,417 | ) | (1,159,721,046) | ||||||
|
| ||||||||||||
| Net increase (decrease) |
(807,638,701) | $ | (1,869,610,539 | ) | (82,663,314 | ) | $ (511,968,136) | |||||
|
| ||||||||||||
| franklintempleton.com | Annual Report | 115 | ||
FRANKLIN CUSTODIAN FUNDS
NOTES TO FINANCIAL STATEMENTS
2. Shares of Beneficial Interest (continued)
| Franklin Income Fund |
Franklin U.S. Government Securities Fund |
|||||||||||||||
| Shares | Amount | Shares | Amount | |||||||||||||
| Class M Shares:b |
||||||||||||||||
| Year ended September 30, 2018c |
||||||||||||||||
| Shares sold |
2,058 | $ | 5,000 | 829 | $ | 5,000 | ||||||||||
| Shares redeemed |
(2,058 | ) | (4,771 | ) | (829 | ) | (4,892 | ) | ||||||||
|
|
|
|||||||||||||||
| Net increase (decrease) |
— | $ | 229 | — | $ | 108 | ||||||||||
|
|
|
|||||||||||||||
| Class C Shares: |
||||||||||||||||
| Year ended September 30, 2018 |
||||||||||||||||
| Shares sold |
582,283,439 | $ | 1,382,849,638 | 7,433,473 | $ | 44,268,648 | ||||||||||
| Shares issued in reinvestment of distributions |
377,996,060 | 893,922,732 | 2,628,467 | 15,553,873 | ||||||||||||
| Shares redeemed |
(2,018,663,790 | ) | (4,782,175,252 | ) | (42,755,854 | ) | (254,172,773 | ) | ||||||||
|
|
|
|||||||||||||||
| Net increase (decrease) |
(1,058,384,291 | ) | $ | (2,505,402,882 | ) | (32,693,914 | ) | $ | (194,350,252 | ) | ||||||
|
|
|
|||||||||||||||
| Year ended September 30, 2017 |
||||||||||||||||
| Shares sold |
911,767,616 | $ | 2,142,426,105 | 14,550,091 | $ | 89,797,342 | ||||||||||
| Shares issued in reinvestment of distributions |
413,154,940 | 967,759,461 | 3,401,372 | 20,890,746 | ||||||||||||
| Shares redeemed |
(2,297,260,192 | ) | (5,403,840,283 | ) | (50,952,421 | ) | (313,543,423 | ) | ||||||||
|
|
|
|||||||||||||||
| Net increase (decrease) |
(972,337,636 | ) | $ | (2,293,654,717 | ) | (33,000,958 | ) | $ | (202,855,335 | ) | ||||||
|
|
|
|||||||||||||||
| Class R Shares: |
||||||||||||||||
| Year ended September 30, 2018 |
||||||||||||||||
| Shares sold |
22,303,807 | $ | 51,304,961 | 1,311,996 | $ | 7,841,271 | ||||||||||
| Shares issued in reinvestment of distributions |
6,461,113 | 14,805,328 | 144,887 | 862,596 | ||||||||||||
| Shares redeemed |
(52,753,780 | ) | (121,698,325 | ) | (2,397,338 | ) | (14,338,539 | ) | ||||||||
|
|
|
|||||||||||||||
| Net increase (decrease) |
(23,988,860 | ) | $ | (55,588,036 | ) | (940,455 | ) | $ | (5,634,672 | ) | ||||||
|
|
|
|||||||||||||||
| Year ended September 30, 2017 |
||||||||||||||||
| Shares sold |
29,390,834 | $ | 67,078,836 | 2,216,203 | $ | 13,791,777 | ||||||||||
| Shares issued in reinvestment of distributions |
7,822,410 | 17,773,811 | 199,172 | 1,231,596 | ||||||||||||
| Shares redeemed |
(62,623,063 | ) | (143,062,182 | ) | (5,574,593 | ) | (34,456,445 | ) | ||||||||
|
|
|
|||||||||||||||
| Net increase (decrease) |
(25,409,819 | ) | $ | (58,209,535 | ) | (3,159,218 | ) | $ | (19,433,072 | ) | ||||||
|
|
|
|||||||||||||||
| Class R6 Shares: |
||||||||||||||||
| Year ended September 30, 2018 |
||||||||||||||||
| Shares sold |
241,446,374 | $ | 566,628,288 | 61,412,244 | $ | 370,212,496 | ||||||||||
| Shares issued in reinvestment of distributions |
46,333,019 | 107,151,115 | 3,488,682 | 20,828,159 | ||||||||||||
| Shares redeemed |
(157,691,667 | ) | (364,327,918 | ) | (19,140,378 | ) | (114,420,880 | ) | ||||||||
|
|
|
|||||||||||||||
| Net increase (decrease) |
130,087,726 | $ | 309,451,485 | 45,760,548 | $ | 276,619,775 | ||||||||||
|
|
|
|||||||||||||||
| Year ended September 30, 2017 |
||||||||||||||||
| Shares sold |
45,238,070 | $ | 104,748,463 | 7,989,421 | $ | 49,592,166 | ||||||||||
| Shares issued in reinvestment of distributions |
39,448,905 | 90,547,964 | 2,685,559 | 16,667,699 | ||||||||||||
| Shares redeemed |
(98,936,238 | ) | (227,642,444 | ) | (36,176,783 | ) | (225,322,538 | ) | ||||||||
|
|
|
|||||||||||||||
| Net increase (decrease) |
(14,249,263 | ) | $ | (32,346,017 | ) | (25,501,803 | ) | $ | (159,062,673 | ) | ||||||
|
|
|
|||||||||||||||
| 116 |
Annual Report | franklintempleton.com | ||
FRANKLIN CUSTODIAN FUNDS
NOTES TO FINANCIAL STATEMENTS
| Franklin Income Fund |
Franklin U.S. Government Securities Fund |
|||||||||||||||
|
|
|
| ||||||||||||||
| Shares | Amount | Shares | Amount | |||||||||||||
| Advisor Class Shares: |
||||||||||||||||
| Year ended September 30, 2018 |
||||||||||||||||
| Shares sold |
1,216,256,316 | $ | 2,822,041,342 | 40,864,155 | $ | 245,204,402 | ||||||||||
| Shares issued in reinvestment of distributions |
227,374,647 | 525,980,680 | 3,544,600 | 21,175,930 | ||||||||||||
| Shares redeemed |
(1,442,679,003 | ) | (3,349,547,760 | ) | (60,767,806 | ) | (366,985,904 | ) | ||||||||
|
|
|
| ||||||||||||||
| Net increase (decrease) |
951,960 | $ | (1,525,738 | ) | (16,359,051 | ) | $ | (100,605,572 | ) | |||||||
|
|
|
| ||||||||||||||
| Year ended September 30, 2017 |
||||||||||||||||
| Shares sold |
2,163,722,071 | $ | 4,992,265,330 | 63,438,736 | $ | 394,713,677 | ||||||||||
| Shares issued in reinvestment of distributions |
201,275,423 | 462,952,027 | 3,720,638 | 23,067,829 | ||||||||||||
| Shares redeemed |
(1,099,054,643 | ) | (2,529,240,454 | ) | (41,027,662 | ) | (255,096,468 | ) | ||||||||
|
|
|
| ||||||||||||||
| Net increase (decrease) |
1,265,942,851 | $ | 2,925,976,903 | 26,131,712 | $ | 162,685,038 | ||||||||||
|
|
|
| ||||||||||||||
aFor the period September 10, 2018 (effective date) to September 30, 2018.
bClass M was closed to investors on June 8, 2018.
cFor the period January 25, 2018 (effective date) to June 8, 2018.
| Franklin Utilities Fund | ||||||||
|
|
|
| ||||||
| Shares | Amount | |||||||
| Class A Shares: |
||||||||
| Year ended September 30, 2018a |
||||||||
| Shares sold |
192,333 | $ | 3,622,735 | |||||
| Shares redeemed |
(2,829 | ) | (52,133 | ) | ||||
|
|
|
| ||||||
| Net increase (decrease) |
189,504 | $ | 3,570,602 | |||||
|
|
|
| ||||||
| Class A1 Shares: |
||||||||
| Year ended September 30, 2018 |
||||||||
| Shares sold |
24,701,743 | $ | 456,163,799 | |||||
| Shares issued in reinvestment of distributions |
8,528,408 | 161,849,791 | ||||||
| Shares redeemed |
(55,450,300 | ) | (1,018,710,628 | ) | ||||
|
|
|
| ||||||
| Net increase (decrease) |
(22,220,149 | ) | $ | (400,697,038 | ) | |||
|
|
|
| ||||||
| Year ended September 30, 2017 |
||||||||
| Shares sold |
33,746,244 | $ | 620,365,753 | |||||
| Shares issued in reinvestment of distributions |
5,477,068 | 100,790,068 | ||||||
| Shares redeemed |
(55,404,028 | ) | (1,010,827,402 | ) | ||||
|
|
|
| ||||||
| Net increase (decrease) |
(16,180,716 | ) | $ | (289,671,581 | ) | |||
|
|
|
| ||||||
| Class M Shares:b |
||||||||
| Year ended September 30, 2018c |
||||||||
| Shares sold |
276 | $ | 5,000 | |||||
| Shares redeemed |
(276 | ) | (4,738 | ) | ||||
|
|
|
| ||||||
| Net increase (decrease) |
— | $ | 262 | |||||
|
|
|
| ||||||
| franklintempleton.com | Annual Report | 117 | ||
FRANKLIN CUSTODIAN FUNDS
NOTES TO FINANCIAL STATEMENTS
2. Shares of Beneficial Interest (continued)
| Franklin Utilities Fund |
||||||||
| Shares | Amount | |||||||
|
|
||||||||
| Class C Shares: |
||||||||
| Year ended September 30, 2018 |
||||||||
| Shares sold |
3,577,672 | $ | 66,427,917 | |||||
| Shares issued in reinvestment of distributions |
1,833,349 | 34,761,364 | ||||||
| Shares redeemed |
(11,911,335 | ) | (216,978,128) | |||||
|
|
|
|||||||
|
Net increase (decrease) |
(6,500,314 | ) |
$ |
(115,788,847) |
| |||
|
|
|
|||||||
|
Year ended September 30, 2017 |
||||||||
| Shares sold |
5,503,753 | $ | 100,721,777 | |||||
| Shares issued in reinvestment of distributions |
1,083,738 | 19,834,562 | ||||||
| Shares redeemed |
(15,075,669 | ) | (276,809,082) | |||||
|
|
|
|||||||
|
Net increase (decrease) |
(8,488,178 | ) |
$ |
(156,252,743) |
| |||
|
|
|
|||||||
|
Class R Shares: |
||||||||
| Year ended September 30, 2018 |
||||||||
| Shares sold |
977,147 | $ | 17,937,233 | |||||
| Shares issued in reinvestment of distributions |
181,427 | 3,446,022 | ||||||
| Shares redeemed |
(2,178,750 | ) | (39,843,759) | |||||
|
|
|
|||||||
|
Net increase (decrease) |
(1,020,176 | ) |
$ |
(18,460,504) |
| |||
|
|
|
|||||||
|
Year ended September 30, 2017 |
||||||||
| Shares sold |
1,609,833 | $ | 29,215,041 | |||||
| Shares issued in reinvestment of distributions |
121,708 | 2,225,505 | ||||||
| Shares redeemed |
(2,594,910 | ) | (47,079,268) | |||||
|
|
|
|||||||
|
Net increase (decrease) |
(863,369 | ) |
$ |
(15,638,722) |
| |||
|
|
|
|||||||
|
Class R6 Shares: |
||||||||
| Year ended September 30, 2018 |
||||||||
| Shares sold |
2,535,167 | $ | 47,060,404 | |||||
| Shares issued in reinvestment of distributions |
576,101 | 10,987,844 | ||||||
|
Shares redeemed |
(3,356,319 | ) | (62,348,594) | |||||
|
|
|
|||||||
| Net increase (decrease) |
(245,051 | ) |
$ |
(4,300,346) |
| |||
|
|
|
|||||||
|
Year ended September 30, 2017 |
||||||||
| Shares sold |
3,378,291 | $ | 61,987,731 | |||||
| Shares issued in reinvestment of distributions |
367,045 | 6,819,073 | ||||||
| Shares redeemed |
(3,469,190 | ) | (64,510,956) | |||||
|
|
|
|||||||
|
Net increase (decrease) |
276,146 |
$ |
4,295,848 |
| ||||
|
|
|
|||||||
| 118 |
Annual Report | franklintempleton.com | ||
FRANKLIN CUSTODIAN FUNDS
NOTES TO FINANCIAL STATEMENTS
| Franklin Utilities Fund | ||||||
| Shares | Amount | |||||
| Advisor Class Shares: |
||||||
| Year ended September 30, 2018 |
||||||
| Shares sold |
14,395,975 | $ 268,529,702 | ||||
| Shares issued in reinvestment of distributions |
2,102,341 | 40,138,480 | ||||
| Shares redeemed |
(17,010,198 | ) | (312,598,481) | |||
| Net increase (decrease) |
(511,882 | ) | $ (3,930,299) | |||
| Year ended September 30, 2017 |
||||||
| Shares sold |
21,268,414 | $ 394,510,240 | ||||
| Shares issued in reinvestment of distributions |
1,182,297 | 22,042,770 | ||||
| Shares redeemed |
(14,639,265 | ) | (268,017,582) | |||
| Net increase (decrease) |
7,811,446 | $ 148,535,428 | ||||
aFor the period September 10, 2018 (effective date) to September 30, 2018.
bClass M was closed to investors on June 8, 2018.
cFor the period January 25, 2018 (effective date) to June 8, 2018.
3. Transactions with Affiliates
Franklin Resources, Inc. is the holding company for various subsidiaries that together are referred to as Franklin Templeton 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 Templeton Services, LLC (FT Services) |
Administrative manager | |||
|
Franklin Templeton Distributors, Inc. (Distributors) |
Principal underwriter | |||
|
Franklin Templeton Investor Services, LLC (Investor Services) |
Transfer agent | |||
| franklintempleton.com | Annual Report | 119 | ||
FRANKLIN CUSTODIAN FUNDS
NOTES TO FINANCIAL STATEMENTS
3. Transactions with Affiliates (continued)
a. Management Fees
Franklin Income Fund and Franklin Utilities Fund pay an investment management fee to Advisers based on the month-end net assets of each of the Funds as follows:
| Annualized Fee Rate | Net Assets | |
| 0.625% |
Up to and including $100 million | |
| 0.500% |
Over $100 million, up to and including $250 million | |
| 0.450% |
Over $250 million, up to and including $7.5 billion | |
| 0.440% |
Over $7.5 billion, up to and including $10 billion | |
| 0.430% |
Over $10 billion, up to and including $12.5 billion | |
| 0.420% |
Over $12.5 billion, up to and including $15 billion | |
| 0.400% |
Over $15 billion, up to and including $17.5 billion | |
| 0.380% |
Over $17.5 billion, up to and including $20 billion | |
| 0.360% |
Over $20 billion, up to and including $35 billion | |
| 0.355% |
Over $35 billion, up to and including $50 billion | |
| 0.350% |
Over $50 billion, up to and including $65 billion | |
| 0.345% |
Over $65 billion, up to and including $80 billion | |
| 0.340% |
In excess of $80 billion |
Franklin DynaTech Fund, Franklin Growth Fund and Franklin U.S. Government Securities Fund pay an investment management fee to Advisers based on the month-end net assets of each of the Funds as follows:
| Annualized Fee Rate | Net Assets | |
|
| ||
| 0.625% |
Up to and including $100 million | |
|
| ||
| 0.500% |
Over $100 million, up to and including $250 million | |
|
| ||
| 0.450% |
Over $250 million, up to and including $7.5 billion | |
|
| ||
| 0.440% |
Over $7.5 billion, up to and including $10 billion | |
|
| ||
| 0.430% |
Over $10 billion, up to and including $12.5 billion | |
|
| ||
| 0.420% |
Over $12.5 billion, up to and including $15 billion | |
|
| ||
| 0.400% |
Over $15 billion, up to and including $17.5 billion | |
|
| ||
| 0.380% |
Over $17.5 billion, up to and including $20 billion | |
|
| ||
| 0.360% |
Over $20 billion, up to and including $35 billion | |
|
| ||
| 0.355% |
Over $35 billion, up to and including $50 billion | |
|
| ||
| 0.350% |
In excess of $50 billion | |
|
| ||
For the year ended September 30, 2018, each Fund’s gross effective investment management fee rate based on average daily net assets was as follows:
| Franklin DynaTech Fund |
Franklin Growth Fund |
Franklin Income Fund |
Franklin Securities Fund |
Franklin Utilities Fund |
||||||||||||||
|
|
0.462% |
|
|
0.442% |
|
|
0.371% |
|
|
0.453% |
|
|
0.455% |
| ||||
| 120 |
Annual Report | franklintempleton.com | ||
FRANKLIN CUSTODIAN FUNDS
NOTES TO FINANCIAL STATEMENTS
b. Administrative Fees
Under an agreement with Advisers, FT Services provides administrative services to the Funds. The fee is paid by Advisers based on each of the Funds’ average daily net assets, and is not an additional expense of the Funds.
c. Distribution Fees
The Board has adopted distribution plans for each share class, with the exception of Class R6 and Advisor Class shares, pursuant to Rule 12b-1 under the 1940 Act. Under the Funds’ Class A and A1 reimbursement distribution plans, the Funds reimburse Distributors for costs incurred in connection with the servicing, sale and distribution of each Fund’s shares up to the maximum annual plan rate for each class. Under the Class A and A1 reimbursement distribution plans, costs exceeding the maximum for the current plan year cannot be reimbursed in subsequent periods. In addition, under the Funds’ Class C and R compensation distribution plans, the Funds pay Distributors for costs incurred in connection with the servicing, sale and distribution of each Fund’s shares up to the maximum annual plan rate for each class. The plan year, for purposes of monitoring compliance with the maximum annual plan rates, is February 1 through January 31 for each Fund.
The maximum annual plan rates, based on the average daily net assets, for each class, are as follows:
| Franklin DynaTech Fund |
Franklin Growth Fund |
Franklin Income Fund |
Franklin U.S. Government Securities Fund |
Franklin Utilities Fund | ||||||||||||||
| Reimbursement Plans: |
||||||||||||||||||
| Class A |
0.25% | 0.25% | 0.25% | 0.25% | 0.25% | |||||||||||||
| Class A1 |
—% | —% | 0.15% | 0.15% | 0.15% | |||||||||||||
| Compensation Plans: |
||||||||||||||||||
| Class C |
1.00% | 1.00% | 0.65% | 0.65% | 0.65% | |||||||||||||
| Class R |
0.50% | 0.50% | 0.50% | 0.50% | 0.50% | |||||||||||||
| d. Sales Charges/Underwriting Agreements | ||||||||||||||||||
| Front-end sales charges and contingent deferred sales charges (CDSC) do not represent expenses of the Funds. These charges are deducted from the proceeds of sales of fund shares prior to investment or from redemption proceeds prior to remittance, as applicable. Distributors has advised the Funds of the following commission transactions related to the sales and redemptions of the Funds’ shares for the year: | ||||||||||||||||||
| Franklin DynaTech Fund |
Franklin Growth Fund |
Franklin Income Fund |
Franklin U.S. Government Securities Fund |
Franklin Utilities Fund | ||||||||||||||
| Sales charges retained net of commissions paid to unaffiliated brokers/dealers |
$ | 1,967,161 | $ | 2,000,188 | $ | 9,031,023 | $ | 324,323 | $406,279 | |||||||||
| CDSC retained |
$ | 70,764 | $ | 82,594 | $ | 983,947 | $ | 43,517 | $ 65,162 | |||||||||
Effective September 10, 2018, the Board approved changes to certain front-end sales charges and dealer commissions on Class A and A1 shares. Further details are disclosed in the Funds’ Prospectus.
e. Transfer Agent Fees
Each class of shares pays transfer agent fees to Investor Services for its performance of shareholder servicing obligations. Effective November 1, 2017, the fees are based on an annualized asset based fee of 0.02% plus a transaction based fee. Prior to November 1, 2017, the fees were account based fees that varied based on fund or account type. In addition, each class reimburses Investor
| franklintempleton.com | Annual Report | 121 | ||
FRANKLIN CUSTODIAN FUNDS
NOTES TO FINANCIAL STATEMENTS
3. Transactions with Affiliates (continued)
e. Transfer Agent Fees (continued)
Services for out of pocket expenses incurred and, except for Class R6, reimburses shareholder servicing fees paid to third parties. These fees are allocated daily based upon their relative proportion of such classes’ aggregate net assets. Class R6 pays Investor Services transfer agent fees specific to that class.
For the year ended September 30, 2018, the Funds paid transfer agent fees as noted in the Statements of Operations of which the following amounts were retained by Investor Services:
| Franklin DynaTech Fund |
Franklin Growth Fund |
Franklin Income Fund |
Franklin U.S. Government Securities Fund |
Franklin Utilities Fund |
||||||||||||||||
| Transfer agent fees |
$2,498,796 | $6,502,207 | $27,704,796 | $3,393,589 | $2,931,859 | |||||||||||||||
f. Investments in Affiliated Management Investment Companies
Certain or all Funds invest in one or more affiliated management investment companies for purposes other than exercising a controlling influence over the management or policies. Management fees paid by the Funds are waived on assets invested in the affiliated management investment companies, as noted in the Statements of Operations, in an amount not to exceed the management and administrative fees paid directly or indirectly by each affiliate. During the year ended September 30, 2018, investments in affiliated management investment companies were as follows:
| Number of Shares Held at Beginning of Year |
Gross Additions |
Gross Reductions |
Number of Shares of Year |
Value at End of Year |
Dividend Income |
Realized Gain (Loss) |
Net Change in Unrealized Appreciation (Depreciation) | |||||||||||||||||||||
|
Franklin DynaTech Fund |
|
|||||||||||||||||||||||||||
| Non-Controlled Affiliates |
|
|||||||||||||||||||||||||||
| Institutional Fiduciary Trust Money Market Portfolio, 1.69% |
90,584,258 | 1,497,776,816 | (1,463,219,549 | ) | 125,141,525 | $ | 125,141,525 | $ | 1,641,929 | $ — | $ — | |||||||||||||||||
| Franklin Growth Fund |
|
|||||||||||||||||||||||||||
| Non-Controlled Affiliates |
|
|||||||||||||||||||||||||||
| Institutional Fiduciary Trust Money Market Portfolio, 1.69% |
331,780,723 | 917,604,905 | (1,024,908,487 | ) | 224,477,141 | $ | 224,477,141 | $ | 3,722,826 | $ — | $ — | |||||||||||||||||
| Franklin Income Fund |
|
|||||||||||||||||||||||||||
| Non-Controlled Affiliates |
|
|||||||||||||||||||||||||||
| Institutional Fiduciary Trust Money Market Portfolio, 1.69% |
4,208,455,331 | 20,073,441,797 | (23,917,988,216 | ) | 363,908,912 | $ | 363,908,912 | $ | 14,519,270 | $ — | $ — | |||||||||||||||||
| Franklin U.S. Government Securities Fund |
|
|||||||||||||||||||||||||||
| Non-Controlled Affiliates |
|
|||||||||||||||||||||||||||
| Institutional Fiduciary Trust Money Market Portfolio, 1.69% |
90,681,295 | 1,136,760,512 | (1,134,332,140 | ) | 93,109,667 | $ | 93,109,667 | $ | 1,279,356 | $ — | $ — | |||||||||||||||||
| Franklin Utilities Fund |
|
|||||||||||||||||||||||||||
| Non-Controlled Affiliates |
|
|||||||||||||||||||||||||||
| Institutional Fiduciary Trust Money Market Portfolio, 1.69% |
21,127,106 | 704,284,803 | (707,603,567 | ) | 17,808,342 | $ | 17,808,342 | $ | 278,893 | $ — | $ — | |||||||||||||||||
| 122 |
Annual Report | franklintempleton.com | ||
FRANKLIN CUSTODIAN FUNDS
NOTES TO FINANCIAL STATEMENTS
g. Waiver and Expense Reimbursements
For Franklin Income Fund, Investor Services has contractually agreed in advance to waive or limit its fees so that the Class R6 transfer agent fees do not exceed 0.01% based on the average net assets of the class until January 31, 2019. For Franklin DynaTech Fund, Franklin Growth Fund, Franklin U.S. Government Securities Fund and Franklin Utilities Fund, Investor Services has voluntarily agreed in advance to waive or limit its fees so that the Class R6 transfer agent fees do not exceed 0.02%. Investor Services may discontinue this waiver in the future.
h. Other Affiliated Transactions
At September 30, 2018, one or more of the funds in Franklin Fund Allocator Series owned a percentage of the following Funds’ outstanding shares:
| Franklin DynaTech Fund |
Franklin Growth Fund |
Franklin Income Fund |
Franklin U.S. Government Securities Fund |
Franklin Utilities Fund | ||||
| 4.3% |
6.2% | 1.9% | 8.4% | 2.3% | ||||
i. Interfund Transactions
Franklin Income Fund engaged in purchases and sales of investments with funds or other accounts that have common investment managers (or affiliated investment managers), directors, trustees or officers. During the year ended September 30, 2018, these purchase and sale transactions aggregated $11,130,000 and $0, respectively.
4. Expense Offset Arrangement
The Funds have entered into an arrangement with their custodian whereby credits realized as a result of uninvested cash balances are used to reduce a portion of the Funds’ custodian expenses. During the year ended September 30, 2018, the custodian fees were reduced as noted in the Statements of Operations.
5. Income Taxes
For tax purposes, capital losses may be carried over to offset future capital gains. Capital loss carryforwards with no expiration, if any, must be fully utilized before those losses with expiration dates.
At September 30, 2018, the capital loss carryforwards were as follows:
| Franklin Income Fund |
Franklin U.S. Government |
|||||||
|
Capital loss carryforwards subject to expiration: |
||||||||
| 2019 |
$ | — | $ 4,445,156 | |||||
| Capital loss carryforwards not subject to expiration: |
||||||||
| Short Term |
1,410,836,852 | 227,313,517 | ||||||
| Long Term |
577,904,717 | 323,826,140 | ||||||
|
|
|
|||||||
|
Total capital loss carryforwards |
$ |
1,988,741,569 |
|
|
$555,584,813 |
| ||
|
|
|
|||||||
During the year ended September 30, 2018, Franklin Income Fund utilized $1,148,333,281 of capital loss carryforwards.
On September 30, 2018, Franklin Income Fund and Franklin U.S. Government Securities Fund had expired capital loss carryforwards of $2,298,838,256 and $16,923,310, respectively, which were reclassified to paid-in capital.
| franklintempleton.com | Annual Report | 123 | ||
FRANKLIN CUSTODIAN FUNDS
NOTES TO FINANCIAL STATEMENTS
5. Income Taxes (continued)
For tax purposes, the Funds may elect to defer any portion of a late-year ordinary loss to the first day of the following fiscal year. At September 30, 2018, Franklin DynaTech Fund deferred late-year ordinary losses of $11,794,621.
The tax character of distributions paid during the years ended September 30, 2018 and 2017, was as follows:
| Franklin DynaTech Fund |
Franklin Growth Fund |
|||||||||||||||
|
|
|
|||||||||||||||
| 2018 | 2017 | 2018 | 2017 | |||||||||||||
|
|
||||||||||||||||
| Distributions paid from: |
||||||||||||||||
| Ordinary income |
$ | — | $ | — | $ | 64,350,332 | $ | 65,003,484 | ||||||||
| Long term capital gain |
77,650,256 | 99,169,960 | 343,841,429 | 381,564,601 | ||||||||||||
|
|
|
|||||||||||||||
| $ | 77,650,256 | $ | 99,169,960 | $ | 408,191,761 | $ | 446,568,085 | |||||||||
|
|
|
|||||||||||||||
| Franklin Income Fund |
Franklin U.S. Government Securities Fund |
|||||||||||||||
|
|
|
|||||||||||||||
| 2018 | 2017 | 2018 | 2017 | |||||||||||||
|
|
||||||||||||||||
| Distributions paid from: |
||||||||||||||||
| Ordinary income |
$ | 3,987,779,469 | $ | 4,104,316,518 | $ | 164,642,414 | $ | 184,128,697 | ||||||||
|
|
|
|||||||||||||||
| Franklin Utilities Fund |
||||||||
|
|
|
|||||||
| 2018 | 2017 | |||||||
|
|
||||||||
| Distributions paid from: |
||||||||
| Ordinary income |
$ | 169,581,554 | $ | 165,982,620 | ||||
| Long term capital gain |
102,781,203 | — | ||||||
|
|
|
|||||||
| $ | 272,362,757 | $ | 165,982,620 | |||||
|
|
|
|||||||
At September 30, 2018, 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 DynaTech Fund |
Franklin Growth Fund |
Franklin Income Fund | ||||||||
| Cost of investments |
$ | 3,547,127,933 | $ | 5,560,734,542 | $74,137,873,509 | |||||
|
|
| |||||||||
| Unrealized appreciation |
$ | 3,248,049,056 | $ | 10,912,369,301 | $ 6,295,593,800 | |||||
| Unrealized depreciation |
(5,725,075 | ) | (67,366,839 | ) | (4,099,504,077) | |||||
|
|
| |||||||||
| Net unrealized appreciation (depreciation) |
$ | 3,242,323,981 | $ | 10,845,002,462 | $ 2,196,089,723 | |||||
|
|
| |||||||||
| Distributable earnings: |
||||||||||
| Undistributed ordinary income |
$ | — | $ | 53,693,621 | $ 22,797,075 | |||||
| Undistributed long term capital gains |
167,082,709 | 159,409,937 | — | |||||||
|
|
| |||||||||
| Total distributable earnings |
$ | 167,082,709 | $ | 213,103,558 | $ 22,797,075 | |||||
|
|
| |||||||||
| 124 |
Annual Report | franklintempleton.com | ||
FRANKLIN CUSTODIAN FUNDS
NOTES TO FINANCIAL STATEMENTS
| Franklin U.S. Government |
Franklin Utilities Fund | |||||
| Cost of investments |
$ | 5,213,336,770 | $3,153,216,354 | |||
|
|
| |||||
| Unrealized appreciation |
$ | 54,153,567 | $2,617,379,234 | |||
| Unrealized depreciation |
(152,704,127 | ) | (48,180,644) | |||
|
|
| |||||
| Net unrealized appreciation (depreciation) |
$ | (98,550,560 | ) | $2,569,198,590 | ||
|
|
| |||||
| Distributable earnings: |
||||||
| Undistributed ordinary income |
$ | 2,900,221 | $ 12,532,253 | |||
| Undistributed long term capital gains |
— | 155,838,727 | ||||
|
|
| |||||
| Total distributable earnings |
$ | 2,900,221 | $ 168,370,980 | |||
|
|
| |||||
Differences between income and/or capital gains as determined on a book basis and a tax basis are primarily due to differing treatments of paydown losses, bond discounts and premiums, corporate actions, equity-linked securities, wash sales and gains realized on in-kind shareholder redemptions.
Franklin DynaTech Fund, Franklin Growth Fund and Franklin Utilities Fund utilized a tax accounting practice to treat a portion of the proceeds from capital shares redeemed as a distribution from realized capital gains.
6. Investment Transactions
Purchases and sales of investments (excluding short term securities and in-kind transactions) for the year ended September 30, 2018, were as follows:
| Franklin DynaTech Fund |
Franklin Growth Fund |
Franklin Income Fund |
Franklin U.S. Government Securities Fund |
Franklin Utilities Fund | ||||||||||||||
| Purchases |
$2,128,367,915 | $ | 897,922,270 | $ | 38,354,125,751 | $2,372,371,850 | $274,493,157 | |||||||||||
| Sales |
$ 889,294,014 | $ | 1,117,705,970 | $ | 39,655,069,205 | $2,744,292,913 | $917,753,491 | |||||||||||
At September 30, 2018, in connection with securities lending transactions, Franklin Income Fund loaned corporate bonds and notes and received $15,778,971 of cash collateral. The gross amount of recognized liability for such transactions is included in payable upon return of securities loaned in the Statement of Assets and Liabilities. The agreements can be terminated at any time.
7. Credit Risk and Defaulted Securities
At September 30, 2018, Franklin Income Fund had 34.1% of its portfolio invested in high yield securities, senior secured floating rate notes, or other securities rated below investment grade and unrated securities, if any. These securities may be more sensitive to economic conditions causing greater price volatility and are potentially subject to a greater risk of loss due to default than higher rated securities.
Franklin Income Fund held defaulted securities and/or other securities for which the income has been deemed uncollectible. At September 30, 2018, the aggregate value of these securities was $733,255,901, representing 1.0% of the Fund’s net assets. The Fund discontinues accruing income on securities for which income has been deemed uncollectible and provides an estimate for losses on interest receivable. The securities have been identified in the accompanying Statement of Investments.
| franklintempleton.com | Annual Report | 125 | ||
FRANKLIN CUSTODIAN FUNDS
NOTES TO FINANCIAL STATEMENTS
8. Other Derivative Information
At September 30, 2018, the Fund’s investments in derivative contracts are reflected in the Statements of Assets and Liabilities as follows:
| Asset Derivatives |
Liability Derivatives | |||||||||||
| Derivative Contracts Not Accounted for as Hedging Instruments |
Statements of Location |
Fair Value | Statements of Location |
Fair Value | ||||||||
|
Franklin Income Fund |
||||||||||||
| Equity contracts |
Investments in securities, at value |
$ | 81,950,000 | a | Options written, at value | $24,673,000 | ||||||
|
|
|
| ||||||||||
aPurchased option contracts are included in investments in securities, at value in the Statements of Assets and Liabilities.
For the year ended September 30, 2018, the effect of derivative contracts in the Fund’s Statements of Operations was as follows:
| Derivative Contracts Not Accounted for as Hedging Instruments |
Statements of Operations Location |
Net Realized Gain (Loss) for the Year |
Statements of Operations Location |
Net Change in Unrealized Appreciation (Depreciation) for the Year | ||||||
| Net realized gain (loss) from: | Net change in unrealized appreciation (depreciation) on: | |||||||||
| Franklin Income Fund |
||||||||||
| Equity contracts |
Investments | $ | 4,614,303 | a | Investments | $(33,314,959)a | ||||
| Written options | 121,101,389 | Written options | 6,930,114 | |||||||
|
|
|
| ||||||||
| Totals |
$ | 125,715,692 | $(26,384,845) | |||||||
|
|
|
| ||||||||
aPurchased option contracts are included in net realized gain (loss) from investments and net change in unrealized appreciation (depreciation) on investments in the Statements of Operations.
For the year ended September 30, 2018, the average month end notional amount of options represented $40,827,538.
See Note 1(e) regarding derivative financial instruments.
9. Holdings of 5% Voting Securities of Portfolio Companies
The 1940 Act defines “affiliated companies” to include investments in portfolio companies in which a fund owns 5% or more of the outstanding voting securities. During the year ended September 30, 2018, investments in “affiliated companies” were as follows:
| Name of Issuer | Number of Shares / Principal at Beginning of Year |
Gross Additions |
Gross Reductions |
Number of Shares / Amount Held at End of Year |
Value at End of Year |
Investment Income |
Realized Gain (Loss) |
Net Change in Unrealized | ||||||||||||||||||||||
|
Franklin Income Fund |
|
|||||||||||||||||||||||||||||
| Controlled Affiliatesa |
|
|||||||||||||||||||||||||||||
| Dividends | ||||||||||||||||||||||||||||||
|
|
|
|||||||||||||||||||||||||||||
| Stone Energy Corp. |
6,151,402 | — | (6,151,402)b | — | $ — | $ — | $ — | $46,273,623 | ||||||||||||||||||||||
| Interest | ||||||||||||||||||||||||||||||
|
|
|
|||||||||||||||||||||||||||||
| Stone Energy Corp., senior note, 7.50%, 5/31/22 |
72,845,556 | — | (72,845,556)b | — | — | 3,353,931 | 4,149,459 | 3,756,984 | ||||||||||||||||||||||
| Total Controlled Affiliates |
|
$ — | $3,353,931 | $4,149,459 | $50,030,607 | |||||||||||||||||||||||||
| 126 |
Annual Report | franklintempleton.com | ||
FRANKLIN CUSTODIAN FUNDS
NOTES TO FINANCIAL STATEMENTS
| Name of Issuer | Number of Shares / Principal Amount Held at Beginning of Year |
Gross Additions |
Gross Reductions |
Number of Shares / Principal Amount Held at End of Year |
Value at End of Year |
Investment Income |
Realized Gain (Loss) |
Net Change in Unrealized Appreciation (Depreciation) | ||||||||||||||||||||||
| Franklin Income Fund (continued) |
|
|||||||||||||||||||||||||||||
| Non-Controlled Affiliates |
|
|||||||||||||||||||||||||||||
| Dividends | ||||||||||||||||||||||||||||||
|
|
|
|||||||||||||||||||||||||||||
| CEVA Holdings LLC |
81,371 | 114,990 | b | (196,361 | )b | — | $ | — | $ | — | $ | — | $ 111,348,143 | |||||||||||||||||
| CEVA Holdings LLC, cvt. pfd., A-1, 2/20/49 |
2,897 | — | (2,897 | )b | — | — | — | — | 2,086,020 | |||||||||||||||||||||
| CEVA Holdings LLC, cvt. pfd., A-2, 2/20/49 |
110,565 | — | (110,565 | )b | — | — | — | — | 114,542,822 | |||||||||||||||||||||
| Energy XXI Gulf Coast Inc. |
7,000,000 | — | (7,000,000 | ) | — | — | — | (276,683,474 | ) | 244,184,332 | ||||||||||||||||||||
| Goodrich Petroleum Corp. |
2,260,859 | — | (2,260,859 | ) | — | — | — | 4,645,755 | (1,960,199) | |||||||||||||||||||||
| Halcon Resources Corp. |
22,500,000 | — | (22,500,000 | ) | — | — | — | (129,393,550 | ) | 125,091,495 | ||||||||||||||||||||
| Talos Energy Inc. |
— | 6,151,402 | b | (633,965 | ) | 5,517,437 | 181,082,282 | — | (5,559,547 | ) | (17,488,505) | |||||||||||||||||||
| W&T Offshore Inc. |
10,000,000 | — | (10,000,000 | ) | — | — | — | 15,002,537 | (14,382,287) | |||||||||||||||||||||
|
|
| |||||||||||||||||||||||||||||
| $ | 181,082,282 | $ | — | $ | (391,988,279 | ) | $563,421,821 | |||||||||||||||||||||||
|
|
| |||||||||||||||||||||||||||||
| Interest | ||||||||||||||||||||||||||||||
|
|
|
|||||||||||||||||||||||||||||
| Halcon Resources Corp., senior note, 144A, 6.75%, 2/15/25 |
108,000,000 | — | (108,000,000 | )b | — | — | 90,147 | 2,269,291 | (6,616,715) | |||||||||||||||||||||
| W&T Offshore Inc., Second Lien Term Loan, 9.00%, 5/15/20 |
161,850,000 | — | — | 161,850,000 | — | c | 14,566,500 | — | —c | |||||||||||||||||||||
| W&T Offshore Inc., secured note, second lien, 144A, PIK, 9.00%, 5/15/20 |
75,645,453 | 6,731,846 | b | — | 82,377,299 | — | c | 10,390,355 | d | — | —c | |||||||||||||||||||
| W&T Offshore Inc., senior note, 8.50%, 6/15/19 |
15,568,000 | 81,353,000 | — | 96,921,000 | — | c | 12,905,395 | — | —c | |||||||||||||||||||||
| W&T Offshore Inc., Senior Secured 1.5 Lien Term Loan, 11.00%, 11/15/19 |
75,000,000 | — | — | 75,000,000 | — | c | 8,250,000 | — | —c | |||||||||||||||||||||
| W&T Offshore Inc., senior secured note, third lien, 144A, PIK, 10.00%, 6/15/21 |
67,697,026 | 6,938,944 | b | — | 74,635,970 | — | c | 7,895,623 | d | — | —c | |||||||||||||||||||
|
|
| |||||||||||||||||||||||||||||
| $ | — | $54,098,020 | $ | 2,269,291 | $ (6,616,715) | |||||||||||||||||||||||||
|
|
| |||||||||||||||||||||||||||||
| Total Non-Controlled Affiliates |
|
$ | 181,082,282 | $54,098,020 | $ | (389,718,988 | ) | $556,805,106 | ||||||||||||||||||||||
|
|
| |||||||||||||||||||||||||||||
| Total Affiliated Securities (Value is 0.2% of Net Assets) |
|
$ | 181,082,282 | $57,451,951 | $ | (385,569,529 | ) | $606,835,713 | ||||||||||||||||||||||
|
|
| |||||||||||||||||||||||||||||
aIssuer in which the Fund owns 25% or more of the outstanding voting securities.
bGross addition/reduction was the result of various corporate actions.
cAs of September 30, 2018, no longer an affiliate.
dIncludes non-cash dividend/interest received.
10. 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 $2 billion (Global Credit Facility) which matures on February 8, 2019. 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.
| franklintempleton.com | Annual Report | 127 | ||
FRANKLIN CUSTODIAN FUNDS
NOTES TO FINANCIAL STATEMENTS
10. Credit Facility (continued)
Under the terms of the Global Credit Facility, the Funds shall, in addition to interest charged on any borrowings made by the Funds and other costs incurred by the Funds, pay their share of fees and expenses incurred in connection with the implementation and maintenance of the Global Credit Facility, based upon their relative share of the aggregate net assets of all of the Borrowers, including an annual commitment fee of 0.15% based upon the unused portion of the Global Credit Facility. These fees are reflected in other expenses in the Statements of Operations. During the year ended September 30, 2018, the Funds did not use the Global Credit Facility.
11. Redemption In-Kind
During the year ended September 30, 2018, the Franklin Growth Fund realized $42,189,159 of net gains resulting from a redemption in-kind in which a shareholder redeemed fund shares for cash and securities held by the Fund. Because such gains are not taxable to the Fund and are not distributed to remaining shareholders, they have been reclassified from accumulated net realized gains to paid-in capital.
12. Fair Value Measurements
The Funds follow a fair value hierarchy that distinguishes between market data obtained from independent sources (observable inputs) and the Funds’ own market assumptions (unobservable inputs). These inputs are used in determining the value of the Funds’ financial instruments and are summarized in the following fair value hierarchy:
| • | Level 1 – quoted prices in active markets for identical financial instruments |
| • | Level 2 – other significant observable inputs (including quoted prices for similar financial instruments, interest rates, prepayment speed, credit risk, etc.) |
| • | Level 3 – significant unobservable inputs (including the Funds’ own assumptions in determining the fair value of financial instruments) |
The input levels are not necessarily an indication of the risk or liquidity associated with financial instruments at that level.
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.
A summary of inputs used as of September 30, 2018, in valuing the Funds’ assets and liabilities carried at fair value, is as follows:
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||
|
Franklin DynaTech Fund |
||||||||||||||||
| Assets: |
||||||||||||||||
| Investments in Securities:a |
||||||||||||||||
| Equity Investments |
$ | 6,664,310,389 | $ | — | $ | — | $ | 6,664,310,389 | ||||||||
| Short Term Investments |
125,141,525 | — | — | 125,141,525 | ||||||||||||
|
|
|
|||||||||||||||
|
Total Investments in Securities |
$ |
6,789,451,914 |
|
$ |
— |
|
$ |
— |
|
$ |
6,789,451,914 |
| ||||
|
|
|
|||||||||||||||
| Franklin Growth Fund |
||||||||||||||||
| Assets: |
||||||||||||||||
| Investments in Securities:a |
||||||||||||||||
| Equity Investmentsb |
$ | 16,181,259,863 | $ | — | $ | — | $ | 16,181,259,863 | ||||||||
| Short Term Investments |
224,477,141 | — | — | 224,477,141 | ||||||||||||
|
|
|
|||||||||||||||
|
Total Investments in Securities |
$ |
16,405,737,004 |
|
$ |
— |
|
$ |
— |
|
$ | 16,405,737,004 | |||||
|
|
|
|||||||||||||||
| 128 |
Annual Report | franklintempleton.com | ||
FRANKLIN CUSTODIAN FUNDS
NOTES TO FINANCIAL STATEMENTS
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||
|
Franklin Income Fund |
||||||||||||||||
| Assets: |
||||||||||||||||
| Investments in Securities:a |
||||||||||||||||
| Equity Investments:b |
||||||||||||||||
| Energy |
$ | 3,629,694,339 | $ | 60,676,870 | $ | — | $ | 3,690,371,209 | ||||||||
| Financials |
5,105,982,001 | 76,500,000 | — | 5,182,482,001 | ||||||||||||
| Industrials |
1,263,740,395 | — | 36,663,024 | 1,300,403,419 | ||||||||||||
| All Other Equity Investments |
17,747,912,104 | — | — | 17,747,912,104 | ||||||||||||
| Equity-Linked Securities |
— | 9,797,062,918 | — | 9,797,062,918 | ||||||||||||
| Index-Linked Notes |
— | 107,904,600 | — | 107,904,600 | ||||||||||||
| Convertible Bonds |
— | 519,689,350 | — | 519,689,350 | ||||||||||||
| Corporate Bonds |
— | 28,464,562,037 | — | 28,464,562,037 | ||||||||||||
| Senior Floating Rate Interests |
— | 2,945,388,830 | — | 2,945,388,830 | ||||||||||||
| U.S. Government and Agency Securities |
— | 5,159,587,886 | — | 5,159,587,886 | ||||||||||||
| Escrows and Litigation Trusts |
— | — | — | c | — | |||||||||||
| Options Purchased |
81,950,000 | — | — | 81,950,000 | ||||||||||||
| Short Term Investments |
1,358,165,907 | 3,155,971 | — | 1,361,321,878 | ||||||||||||
|
|
|
|||||||||||||||
|
Total Investments in Securities |
$ |
29,187,444,746 |
|
$ |
47,134,528,462 |
|
$ |
36,663,024 |
|
$ |
76,358,636,232 |
| ||||
|
|
|
|||||||||||||||
| Liabilities: |
||||||||||||||||
| Other Financial Instruments: |
||||||||||||||||
| Options Written |
$ | 24,673,000 | $ | — | $ | — | $ | 24,673,000 | ||||||||
|
|
|
|||||||||||||||
| Franklin U.S. Government Securities Fund |
||||||||||||||||
| Assets: |
||||||||||||||||
| Investments in Securities:a |
||||||||||||||||
| Mortgage-Backed Securities |
$ | — | $ | 4,938,754,375 | $ | — | $ | 4,938,754,375 | ||||||||
| U.S. Government and Agency Securities |
— | 82,922,168 | — | 82,922,168 | ||||||||||||
| Short Term Investments |
93,109,667 | — | — | 93,109,667 | ||||||||||||
|
|
|
|||||||||||||||
|
Total Investments in Securities |
$ |
93,109,667 |
|
$ |
5,021,676,543 |
|
$ |
— |
|
$ |
5,114,786,210 |
| ||||
|
|
|
|||||||||||||||
| Franklin Utilities Fund |
||||||||||||||||
| Assets: |
||||||||||||||||
| Investments in Securities:a |
||||||||||||||||
| Equity Investments |
$ | 5,697,788,114 | $ | — | $ | — | $ | 5,697,788,114 | ||||||||
| Corporate Bonds |
— | 6,818,488 | — | 6,818,488 | ||||||||||||
| Short Term Investments |
17,808,342 | — | — | 17,808,342 | ||||||||||||
|
|
|
|||||||||||||||
|
Total Investments in Securities |
$ |
5,715,596,456 |
|
$ |
6,818,488 |
|
$ |
— |
|
$ |
5,722,414,944 |
| ||||
|
|
|
|||||||||||||||
aFor detailed categories, see the accompanying Statement of Investments.
bIncludes common, preferred and convertible preferred stocks and management investment companies.
cIncludes securities determined to have no value at September 30, 2018.
A reconciliation of assets in which Level 3 inputs are used in determining fair value is presented when there are significant Level 3 financial instruments at the beginning and/or end of the year.
13. New Accounting Pronouncements
In March 2017, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2017-08, Receivables—Nonrefundable Fees and Other Costs (Subtopic 310-20): Premium Amortization on Purchased Callable Debt Securities. The amendments in the ASU shorten the amortization period for certain callable debt securities acquired at a premium, to be amortized to the earliest call date. The ASU does not require an accounting change for securities acquired at a discount, which
| franklintempleton.com | Annual Report | 129 | ||
FRANKLIN CUSTODIAN FUNDS
NOTES TO FINANCIAL STATEMENTS
13. New Accounting Pronouncements (continued)
continues to be amortized to maturity. The ASU is effective for fiscal years and interim periods within those fiscal years beginning after December 15, 2018. Management has reviewed the requirements and believes the adoption of this ASU will not have a material impact on the financial statements.
In August 2018, FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurements. The amendments in the ASU modify the disclosure requirements on fair value measurements in Topic 820. The ASU is effective for interim and annual reporting periods beginning after December 15, 2019. Management is currently evaluating the impact, if any, of applying this provision.
14. Subsequent Events
The Funds have evaluated subsequent events through the issuance of the financial statements and determined that no events have occurred that require disclosure, except for the following:
On February 27, 2018, the Board approved an automatic conversion feature for Class C that will convert shareholders’ Class C shares into Class A shares after they have been held for 10 years. The conversion feature will become effective October 5, 2018. Further details are disclosed in the Funds’ Prospectus.
Abbreviations
| Currency | Selected Portfolio | |||||||
|
EUR |
Euro |
ADR |
American Depositary Receipt |
|||||
| USD |
United States Dollar | FHLMC | Federal Home Loan Mortgage Corp. | |||||
| FNMA | Federal National Mortgage Association | |||||||
| FRN | Floating Rate Note | |||||||
| LIBOR | London InterBank Offered Rate | |||||||
| PIK | Payment-In-Kind | |||||||
| SF | Single Family | |||||||
| SPX B | S&P 500 Index Buy-Write | |||||||
| SPX B DT | S&P 500 Index Buy-Write Distribution | |||||||
| 130 |
Annual Report | franklintempleton.com | ||
FRANKLIN CUSTODIAN FUNDS
Report of Independent Registered Public Accounting Firm
To the Board of Trustees of Franklin Custodian Funds and Shareholders of Franklin Dynatech Fund, Franklin Growth Fund, Franklin Income Fund, Franklin U.S. Government Securities Fund and Franklin Utilities Fund
Opinions on the Financial Statements
We have audited the accompanying statements of assets and liabilities, including the statements of investments, of Franklin Dynatech Fund, Franklin Growth Fund, Franklin Income Fund, Franklin U.S. Government Securities Fund, and Franklin Utilities Fund (the “Funds”) as of September 30, 2018, the related statements of operations for the year ended September 30, 2018, the statements of changes in net assets for each of the two years in the period ended September 30, 2018, including the related notes, and the financial highlights for each of the periods indicated therein (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of each of the Funds as of September 30, 2018, the results of each of their operations for the year then ended, the changes in each of their net assets for each of the two years in the period ended September 30, 2018 and each of the financial highlights for each of the periods indicated therein in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinions
These financial statements are the responsibility of the Funds’ management. Our responsibility is to express an opinion on the Funds’ financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Funds in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits of these financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.
We conducted our audits of these financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our procedures included confirmation of securities owned as of September 30, 2018 by correspondence with the custodian, transfer agent and brokers; when replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinions.
PricewaterhouseCoopers LLP
San Francisco, California
November 29, 2018
We have served as the auditor of one or more investment companies in the Franklin Templeton Group of Funds since 1948.
| franklintempleton.com | Annual Report | 131 | ||
FRANKLIN CUSTODIAN FUNDS
Under Section 852(b)(3)(C) of the Internal Revenue Code, the Funds hereby report the maximum amount allowable but no less than the following amounts as long term capital gain dividends for the fiscal year ended September 30, 2018:
| Franklin DynaTech Fund |
Franklin Growth Fund |
Franklin Utilities Fund |
||||
|
$80,609,920 |
$352,856,934 |
$119,370,157 |
Under Section 854(b)(1)(A) of the Internal Revenue Code, the Funds hereby report the following percentage amounts of the ordinary income dividends as income qualifying for the dividends received deduction for the fiscal year ended September 30, 2018:
| Franklin Growth Fund |
Franklin Income Fund |
Franklin Utilities Fund |
||||
|
100.00% |
19.75% |
100.00% |
Under Section 854(b)(1)(B) of the Internal Revenue Code, the Funds hereby report the maximum amount allowable but no less than the following amounts as qualified dividends for purposes of the maximum rate under Section 1(h)(11) of the Internal Revenue Code for the fiscal year ended September 30, 2018:
| Franklin DynaTech Fund |
Franklin Growth Fund |
Franklin Income Fund |
Franklin Utilities Fund |
|||||
|
$22,952,651 |
$177,693,494 |
$1,196,031,910 |
$206,685,415 |
|||||
Distributions, including qualified dividend income, paid during calendar year 2018 will be reported to shareholders on Form 1099-DIV by mid-February 2019. Shareholders are advised to check with their tax advisors for information on the treatment of these amounts on their individual income tax returns.
Under Section 871(k)(1)(C) of the Internal Revenue Code, the Funds hereby report the maximum amount allowable but no less than the following amounts as interest related dividends for purposes of the tax imposed under Section 871(a)(1)(A) of the Internal Revenue Code for the fiscal year ended September 30, 2018:
| Franklin Income Fund |
Franklin U.S. Government |
|
||||
|
$1,753,286,377 |
$165,617,839 |
|||||
| 132 |
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FRANKLIN CUSTODIAN FUNDS
Special Meeting of Shareholders
MEETING OF SHAREHOLDERS: OCTOBER 30, 2017 AND RECONVENED ON DECEMBER 15, 2017 AND DECEMBER 29, 2017
(UNAUDITED)
A Special Meeting of Shareholders of Franklin Custodian Funds was held at the offices of Franklin Templeton Investments, One Franklin Parkway, San Mateo, California on October 30, 2017 and reconvened on December 15, 2017 and December 29, 2017. The purpose of the meeting was to elect Trustees of Franklin Custodian Funds and to vote on the following proposals: for each Fund, to approve the use of a “manager of managers” structure whereby the Fund’s investment manager would be able to hire and replace subadvisers without shareholder approval; for each Fund, to approve an amended fundamental investment restriction regarding investments in commodities; and for Franklin Income Fund, to consider a shareholder proposal. At the meeting, (i) the following persons were elected by the shareholders to serve as Trustees of Franklin Custodian Funds: Harris J. Ashton, Terrence J. Checki, Mary C. Choksi, Edith E. Holiday, Gregory E. Johnson, Rupert H. Johnson, Jr., J. Michael Luttig, Larry D. Thompson, and John B. Wilson; (ii) the proposals to use a “manager of managers” structure and to approve the amended fundamental investment restriction regarding investments in commodities were approved by shareholders of each Fund; and (iii) sufficient votes were not received to pass the shareholder proposal for Franklin Income Fund. No other business was transacted at the meeting.
In connection with the meeting, management is aware that some shareholders received from the proxy solicitor numerous calls and mailings that may have been distracting. Management is taking steps to ensure that, in the future, for any new shareholder meeting solicitations that occur, such activity is not repeated. Management apologizes for any inconvenience that may have been caused as a result of such calls and mailings.
The results of the voting at the meeting are as follows:
| Proposal 1. | To elect a Board of Trustees: |
| Name | For | Withheld | ||||||
| Harris J. Ashton |
20,620,255,266 | 682,475,910 | ||||||
| Terrence J. Checki |
20,622,617,162 | 680,114,004 | ||||||
| Mary C. Choksi |
20,641,972,272 | 660,758,903 | ||||||
| Edith E. Holiday |
20,643,191,970 | 659,539,208 | ||||||
| Gregory E. Johnson |
20,640,028,777 | 662,702,399 | ||||||
| Rupert H. Johnson, Jr. |
20,623,629,983 | 679,101,196 | ||||||
| J. Michael Luttig |
20,638,743,410 | 663,987,768 | ||||||
| Larry D. Thompson |
20,634,644,439 | 668,086,738 | ||||||
| John B. Wilson |
20,638,176,920 | 661,053,794 | ||||||
Total Trust Shares Outstanding*: 36,447,693,102
*As of the record date.
| franklintempleton.com | Annual Report | 133 | ||
FRANKLIN CUSTODIAN FUNDS
SPECIAL MEETING OF SHAREHOLDERS
| Proposal 2. | To approve the use of a “manager of managers” structure whereby the Fund’s investment manager would be able to hire and replace subadvisers without shareholder approval: |
Franklin DynaTech Fund
| Shares | ||||
| For |
26,120,033 | |||
| Against |
1,611,032 | |||
| Abstain |
1,036,224 | |||
| Broker Non-Votes |
7,606,644 | |||
| Total Fund Shares Voted |
36,373,925 | |||
| Total Fund Shares Outstanding* |
64,259,298 | |||
| Franklin Growth Fund | ||||
| Shares | ||||
| For |
62,525,115 | |||
| Against |
3,841,242 | |||
| Abstain |
2,289,625 | |||
| Broker Non-Votes |
17,966,153 | |||
| Total Fund Shares Voted |
86,622,134 | |||
| Total Fund Shares Outstanding* |
153,895,391 | |||
| Franklin Income Fund | ||||
| Shares | ||||
| For |
13,745,941,125 | |||
| Against |
1,083,743,995 | |||
| Abstain |
700,822,344 | |||
| Broker Non-Votes |
4,857,894,126 | |||
| Total Fund Shares Voted |
20,388,081,146 | |||
| Total Fund Shares Outstanding* |
34,952,846,556 | |||
| Franklin U.S. Government Securities Fund | ||||
| Shares | ||||
| For |
428,222,393 | |||
| Against |
29,263,682 | |||
| Abstain |
20,078,313 | |||
| Broker Non-Votes |
103,560,080 | |||
| Total Fund Shares Voted |
581,124,647 | |||
| Total Fund Shares Outstanding* |
940,312,857 | |||
| Franklin Utilities Fund | ||||
| Shares | ||||
| For |
143,130,068 | |||
| Against |
10,836,309 | |||
| Abstain |
7,518,358 | |||
| Broker Non-Votes |
48,794,594 | |||
| Total Fund Shares Voted |
210,279,325 | |||
| Total Fund Shares Outstanding* |
336,129,000 | |||
| 134 |
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FRANKLIN CUSTODIAN FUNDS
SPECIAL MEETING OF SHAREHOLDERS
| Proposal 3. | To approve an amended fundamental investment restriction regarding investments in commodities: |
Franklin DynaTech Fund
| Shares | ||||
| For |
26,263,004 | |||
| Against |
1,160,563 | |||
| Abstain |
1,343,715 | |||
| Broker Non-Votes |
7,606,644 | |||
| Total Fund Shares Voted |
36,373,925 | |||
| Total Fund Shares Outstanding* |
64,259,298 | |||
| Franklin Growth Fund | ||||
| Shares | ||||
| For |
62,908,596 | |||
| Against |
2,906,472 | |||
| Abstain |
2,840,914 | |||
| Broker Non-Votes |
17,966,153 | |||
| Total Fund Shares Voted |
86,622,134 | |||
| Total Fund Shares Outstanding* |
153,895,391 | |||
| Franklin Income Fund | ||||
| Shares | ||||
| For |
13,861,058,200 | |||
| Against |
776,938,721 | |||
| Abstain |
892,190,099 | |||
| Broker Non-Votes |
4,857,894,126 | |||
| Total Fund Shares Voted |
20,388,081,146 | |||
| Total Fund Shares Outstanding* |
34,952,846,556 | |||
| Franklin U.S. Government Securities Fund | ||||
| Shares | ||||
| For |
428,632,998 | |||
| Against |
23,699,554 | |||
| Abstain |
25,232,014 | |||
| Broker Non-Votes |
103,560,080 | |||
| Total Fund Shares Voted |
581,124,647 | |||
| Total Fund Shares Outstanding* |
940,312,857 | |||
| Franklin Utilities Fund | ||||
| Shares | ||||
| For |
143,792,779 | |||
| Against |
8,193,703 | |||
| Abstain |
9,498,250 | |||
| Broker Non-Votes |
48,794,594 | |||
| Total Fund Shares Voted |
210,279,325 | |||
| Total Fund Shares Outstanding* |
336,129,000 | |||
| franklintempleton.com | Annual Report | 135 | ||
FRANKLIN CUSTODIAN FUNDS
SPECIAL MEETING OF SHAREHOLDERS
| Proposal 4. | Shareholder proposal requesting that Franklin Income Fund’s Board institute procedures to prevent holding investments in companies that, in the judgment of the Board, substantially contribute to genocide or crimes against humanity: |
| Shares | ||||
| For |
3,258,164,390 | |||
| Against |
11,233,489,698 | |||
| Abstain |
1,038,532,927 | |||
| Broker Non-Votes |
4,857,894,126 | |||
| Total Fund Shares Voted |
20,388,081,146 | |||
| Total Fund Shares Outstanding* |
34,952,846,556 | |||
| 136 |
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FRANKLIN CUSTODIAN FUNDS
The name, year of birth and address of the officers and board members, as well as their affiliations, positions held with the Trust, principal occupations during at least the past five years and number of U.S. registered portfolios overseen in the Franklin Templeton Investments fund complex, are shown below. Generally, each board member serves until that person’s successor is elected and qualified.
Independent Board Members
|
Name, Year of Birth and Address
|
Position
|
Length
of
|
Number of Portfolios in
|
Other Directorships
Held
| ||||
|
Harris J. Ashton (1932) One Franklin Parkway San Mateo, CA 94403-1906 |
Trustee |
Since 1976 |
136 |
Bar-S Foods (meat packing company) (1981-2010). | ||||
| Principal Occupation During at Least the Past 5 Years: | ||||||||
| Director of various companies; and formerly, Director, RBC Holdings, Inc. (bank holding company) (until 2002); and President, Chief Executive Officer and Chairman of the Board, General Host Corporation (nursery and craft centers) (until 1998).
| ||||||||
| Terrence J. Checki (1945) One Franklin Parkway San Mateo, CA 94403-1906 |
Trustee | Since December 2017 | 112 | Hess Corporation (exploration of oil and gas) (2014-present). | ||||
| Principal Occupation During at Least the Past 5 Years: | ||||||||
| Member of the Council on Foreign Relations (1996-present); Member of the National Committee on U.S.-China Relations (1999-present); member of the Board of Trustees of the Economic Club of New York (2013-present); member of the Board of Trustees of the Foreign Policy Association (2005-present) and member of various other boards of trustees and advisory boards; and formerly, Executive Vice President of the Federal Reserve Bank of New York and Head of its Emerging Markets and Internal Affairs Group and Member of Management Committee (1995-2014); and Visiting Fellow at the Council on Foreign Relations (2014).
| ||||||||
| Mary C. Choksi (1950) One Franklin Parkway San Mateo, CA 94403-1906 |
Trustee | Since 2014 | 136 | Avis Budget Group Inc. (car rental) (2007-present), Omnicom Group Inc. (advertising and marketing communications services) (2011-present) and White Mountains Insurance Group, Ltd. (holding company) (2017-present). | ||||
| Principal Occupation During at Least the Past 5 Years: | ||||||||
| Director of various companies; and formerly, Founder and Senior Advisor, Strategic Investment Group (investment management group) (2015-2017); Founding Partner and Senior Managing Director, Strategic Investment Group (1987–2015); Founding Partner and Managing Director, Emerging Markets Management LLC (investment management firm) (1987-2011); and Loan Officer/Senior Loan Officer/Senior Pension Investment Officer, World Bank Group (international financial institution) (1977-1987).
| ||||||||
| Edith E. Holiday (1952) One Franklin Parkway San Mateo, CA 94403-1906 |
Trustee | Since 1998 | 136 | Hess Corporation (exploration of oil and gas) (1993-present), Canadian National Railway (railroad) (2001-present), White Mountains Insurance Group, Ltd. (holding company) (2004-present), Santander Consumer USA Holdings, Inc. (consumer finance) (2016-present), RTI International Metals, Inc. (manufacture and distribution of titanium) (1999-2015) and H.J. Heinz Company (processed foods and allied products) (1994-2013). | ||||
| Principal Occupation During at Least the Past 5 Years: | ||||||||
| Director or Trustee of various companies and trusts; and formerly, Assistant to the President of the United States and Secretary of the Cabinet (1990-1993); General Counsel to the United States Treasury Department (1989-1990); and Counselor to the Secretary and Assistant Secretary for Public Affairs and Public Liaison-United States Treasury Department (1988-1989).
| ||||||||
| J. Michael Luttig (1954) One Franklin Parkway San Mateo, CA 94403-1906 |
Trustee | Since 2009 | 136 | Boeing Capital Corporation (aircraft financing) (2006-2013). | ||||
| Principal Occupation During at Least the Past 5 Years: | ||||||||
| Executive Vice President, General Counsel and member of the Executive Council, The Boeing Company (aerospace company) (2006-present); and formerly, Federal Appeals Court Judge, U.S. Court of Appeals for the Fourth Circuit (1991-2006).
| ||||||||
| franklintempleton.com | Annual Report | 137 | ||
FRANKLIN CUSTODIAN FUNDS
Independent Board Members (continued)
|
Name, Year of Birth and Address
|
Position
|
Length
of
|
Number of Portfolios in
|
Other Directorships
Held
| ||||
| Larry D. Thompson (1945) One Franklin Parkway San Mateo, CA 94403-1906 |
Trustee | Since 2007 | 136 | The Southern Company (energy company) (2014-present; previously 2010-2012), Graham Holdings Company (education and media organization) (2011-present) and Cbeyond, Inc. (business communications provider) (2010-2012). | ||||
| Principal Occupation During at Least the Past 5 Years: | ||||||||
| Director of various companies; Counsel, Finch McCranie, LLP (law firm) (2015-present); Independent Compliance Monitor and Auditor, Volkswagen AG (manufacturer of automobiles and commercial vehicles) (2017-present); John A. Sibley Professor of Corporate and Business Law, University of Georgia School of Law (2015-present; previously 2011-2012); and formerly, Executive Vice President - Government Affairs, General Counsel and Corporate Secretary, PepsiCo, Inc. (consumer products) (2012-2014); Senior Vice President - Government Affairs, General Counsel and Secretary, PepsiCo, Inc. (2004-2011); Senior Fellow of The Brookings Institution (2003-2004); Visiting Professor, University of Georgia School of Law (2004); and Deputy Attorney General, U.S. Department of Justice (2001-2003).
| ||||||||
| John B. Wilson (1959) One Franklin Parkway San Mateo, CA 94403-1906 |
Lead Independent Trustee | Trustee since 2007 and Lead Independent Trustee since 2008 | 112 | None | ||||
| Principal Occupation During at Least the Past 5 Years: | ||||||||
| President and Founder, Hyannis Port Capital, Inc. (real estate and private equity investing) (2002-present); Senior Advisor, McKinsey & Co. (consulting) (2017-present); serves on private and non-profit boards; and formerly, President, Staples International and Head of Global Transformation (office supplies) (2012-2016); Chief Operating Officer and Executive Vice President, Gap, Inc. (retail) (1996-2000); Chief Financial Officer and Executive Vice President – Finance and Strategy, Staples, Inc. (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 | ||||||||
| Name, Year of Birth
|
Position
|
Length of
|
Number of Portfolios in
|
Other Directorships
Held
| ||||
| **Gregory E. Johnson (1961) One Franklin Parkway San Mateo, CA 94403-1906 |
Trustee | Since 2013 | 150 | None | ||||
| Principal Occupation During at Least the Past 5 Years: | ||||||||
| Chairman of the Board, Member - Office of the Chairman, Director and Chief Executive Officer, Franklin Resources, Inc.; officer and/or director or trustee, as the case may be, of some of the other subsidiaries of Franklin Resources, Inc. and of 42 of the investment companies in Franklin Templeton Investments; Vice Chairman, Investment Company Institute; and formerly, President, Franklin Resources, Inc. (1994-2015).
| ||||||||
| **Rupert H. Johnson, Jr. (1940) One Franklin Parkway San Mateo, CA 94403-1906 |
Chairman of the Board, Trustee and Vice President | Chairman of the Board since 2013, Trustee since 1983 and Vice President since 1982 | 136 | None | ||||
| Principal Occupation During at Least the Past 5 Years: | ||||||||
| Vice Chairman, Member - Office of the Chairman and Director, Franklin Resources, Inc.; Director, Franklin Advisers, Inc.; 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 40 of the investment companies in Franklin Templeton Investments.
| ||||||||
| Alison E. Baur (1964) One Franklin Parkway San Mateo, CA 94403-1906 |
Vice President | Since 2012 | Not Applicable | Not Applicable | ||||
| Principal Occupation During at Least the Past 5 Years: | ||||||||
| Deputy General Counsel, Franklin Templeton Investments; and officer of some of the other subsidiaries of Franklin Resources, Inc. and of 44 of the investment companies in Franklin Templeton Investments.
| ||||||||
| 138 |
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FRANKLIN CUSTODIAN FUNDS
Interested Board Members and Officers (continued)
|
Name, Year of Birth
|
Position
|
Length of
|
Number of Portfolios in
|
Other Directorships
Held
| ||||
| Gaston Gardey (1967) One Franklin Parkway San Mateo, CA 94403-1906 |
Chief Financial Officer, Chief Accounting Officer and Treasurer | Since 2009 | Not Applicable | Not Applicable | ||||
| Principal Occupation During at Least the Past 5 Years: | ||||||||
| Treasurer, U.S. Fund Administration & Reporting, Franklin Templeton Investments; and officer of 28 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 at Least the Past 5 Years: | ||||||||
| Senior Associate General Counsel, Franklin Templeton Investments; and officer of 44 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 at Least the Past 5 Years: | ||||||||
| Senior Associate General Counsel, Franklin Templeton Investments; Vice President, Franklin Templeton Distributors, Inc. and FASA, LLC; and officer of 44 of the investment companies in Franklin Templeton Investments.
| ||||||||
| Matthew T. Hinkle (1971) One Franklin Parkway San Mateo, CA 94403-1906 |
Chief Executive Officer – Finance and Administration | Since 2017 | Not Applicable | Not Applicable | ||||
| Principal Occupation During at Least the Past 5 Years: | ||||||||
| Senior Vice President, Franklin Templeton Services, LLC; officer of 44 of the investment companies in Franklin Templeton Investments; and formerly, Vice President, Global Tax (2012-April 2017) and Treasurer/Assistant Treasurer, Franklin Templeton Investments (2009-2017).
| ||||||||
| Edward B. Jamieson (1948) One Franklin Parkway San Mateo, CA 94403-1906 |
President and Chief Executive Officer – Investment Management | Since 2010 | Not Applicable | Not Applicable | ||||
| Principal Occupation During at Least the Past 5 Years: | ||||||||
| President 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 Lim (1948) One Franklin Parkway San Mateo, CA 94403-1906 |
Vice President –AML Compliance | Since 2016 | Not Applicable | Not Applicable | ||||
| Principal Occupation During at Least the Past 5 Years: | ||||||||
| Vice President, Franklin Templeton Companies, LLC; Chief Compliance Officer, Franklin Templeton Distributors, Inc. and Franklin Templeton Investor Services, LLC; and officer of 44 of the investment companies in Franklin Templeton Investments.
| ||||||||
| Kimberly H. Novotny (1972) 300 S.E. 2nd Street Fort Lauderdale, FL 33301-1923 |
Vice President | Since 2013 | Not Applicable | Not Applicable | ||||
| Principal Occupation During at Least the Past 5 Years: | ||||||||
| Associate General Counsel, Franklin Templeton Investments; Vice President and Corporate Secretary, Fiduciary Trust International of the South; Vice President, Templeton Investment Counsel, LLC; Assistant Secretary, Franklin Resources, Inc.; and officer of 44 of the investment companies in Franklin Templeton Investments.
| ||||||||
| franklintempleton.com | Annual Report | 139 | ||
FRANKLIN CUSTODIAN FUNDS
Interested Board Members and Officers (continued)
|
Name, Year of Birth
|
Position
|
Length of
|
Number of Portfolios in
|
Other Directorships
Held
| ||||
| Robert C. Rosselot (1960) 300 S.E. 2nd Street Fort Lauderdale, FL 33301-1923 |
Chief Compliance Officer | Since 2013 | Not Applicable | Not Applicable | ||||
| Principal Occupation During at Least the Past 5 Years: | ||||||||
| Director, Global Compliance, Franklin Templeton Investments; Vice President, Franklin Templeton Companies, LLC; officer of 44 of the investment companies in Franklin Templeton Investments; and formerly, Senior Associate General Counsel, Franklin Templeton Investments (2007-2013); and Secretary and Vice President, Templeton Group of Funds (2004-2013).
| ||||||||
| 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 at Least the Past 5 Years: | ||||||||
| Senior Associate General Counsel, Franklin Templeton Investments; and officer of 44 of the investment companies in Franklin Templeton Investments.
| ||||||||
| Navid J. Tofigh (1972) One Franklin Parkway San Mateo, CA 94403-1906 |
Vice President | Since 2015 | Not Applicable | Not Applicable | ||||
| Principal Occupation During at Least the Past 5 Years: | ||||||||
| Associate General Counsel, Franklin Templeton Investments; and officer of 44 of the investment companies in Franklin Templeton Investments.
| ||||||||
| Craig S. Tyle (1960) One Franklin Parkway San Mateo, CA 94403-1906 |
Vice President | Since 2005 | Not Applicable | Not Applicable | ||||
| Principal Occupation During at Least the Past 5 Years: | ||||||||
| General Counsel and Executive Vice President, Franklin Resources, Inc.; and officer of some of the other subsidiaries of Franklin Resources, Inc. and of 44 of the investment companies in Franklin Templeton Investments.
| ||||||||
| Lori A. Weber (1964) 300 S.E. 2nd Street Fort Lauderdale, FL 33301-1923
|
Vice President | Since 2011 | Not Applicable | Not Applicable | ||||
| Principal Occupation During at Least the Past 5 Years: | ||||||||
| Senior Associate General Counsel, Franklin Templeton Investments; Assistant Secretary, Franklin Resources, Inc.; Vice President and Secretary, Templeton Investment Counsel, LLC; and officer of 44 of the investment companies in Franklin Templeton Investments.
| ||||||||
*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.
**Gregory E. Johnson is considered to be an interested person of the Fund under the federal securities laws due to his position as an officer and director of Franklin Resources, Inc. (Resources), which is the parent company of the Fund’s investment manager and distributor. Rupert H. Johnson, Jr. is considered to be an interested person of the Fund under the federal securities laws due to his position as an officer and director and major shareholder of Resources.
Note 1: Rupert H. Johnson, Jr. is the uncle of Gregory E. Johnson.
Note 2: Officer information is current as of the date of this report. It is possible that after this date, information about officers may change.
The Sarbanes-Oxley Act of 2002 and Rules adopted by the Securities and Exchange Commission require the Fund to disclose whether the Fund’s Audit Committee includes at least one member who is an audit committee financial expert within the meaning of such Act and Rules. The Fund’s Board has determined that there is at least one such financial expert on the Audit Committee and has designated 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/342-5236 to request the SAI.
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| 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 $486,626 for the fiscal year ended September 30, 2018 and $554,374 for the fiscal year ended September 30, 2017.
(b) Audit-Related Fees
The aggregate fees paid to the principal accountant for assurance and related services rendered by the principal accountant to the registrant that are reasonably related to the performance of the audit of the registrant’s financial statements and are not reported under paragraph (a) of Item 4 were $9,306 for the fiscal year ended September 30, 2018 and $9,213 for the fiscal year ended September 30, 2017. 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 $5,000 for the fiscal year ended September 30, 2018 and $0 for the fiscal year ended September 30, 2017. The services for which these fees were paid included tax consulting services related to the operating agreement and term sheet for the launch of a new fund.
(d) All Other Fees
The aggregate fees paid to the principal accountant for products and services rendered by the principal accountant to the registrant not reported in paragraphs (a)-(c) of Item 4 were $39,976 for the fiscal year ended September 30, 2018 and $0 for the fiscal year ended September 30, 2017. The services for which these fees were paid included review of materials provided to the fund Board in connection with the investment management contract renewal process.
The aggregate fees paid to the principal accountant for products and services rendered by the principal accountant to the registrant’s investment adviser and any entity controlling, controlled by or under common control with the investment adviser that provides ongoing services to the registrant not reported in paragraphs (a)-(c) of Item 4 were $16,500 for the fiscal year ended September 30, 2018 and $14,000 for the fiscal year ended September 30, 2017. The services for which these fees were paid included the issuance of an Auditor’s Certificate for South Korean regulatory shareholders disclosures, assets under management certification, and benchmarking services in connection with the ICI TA Survey.
(e) (1) The registrant’s audit committee is directly responsible for approving the services to be provided by the auditors, including:
(i) pre-approval of all audit and audit related services;
(ii) pre-approval of all non-audit related services to be provided to the Fund by the auditors;
(iii) pre-approval of all non-audit related services to be provided to the registrant by the auditors to the registrant’s investment adviser or to any entity that controls, is controlled by or is under common control with the registrant’s investment adviser and that provides ongoing services to the registrant where the non-audit services relate directly to the operations or financial reporting of the registrant; and
(iv) establishment by the audit committee, if deemed necessary or appropriate, as an alternative to committee pre-approval of services to be provided by the auditors, as required by paragraphs (ii) and (iii) above, of policies and procedures to permit such services to be pre-approved by other means, such as through
establishment of guidelines or by action of a designated member or members of the committee; provided the policies and procedures are detailed as to the particular service and the committee is informed of each service and such policies and procedures do not include delegation of audit committee responsibilities, as contemplated under the Securities Exchange Act of 1934, to management; subject, in the case of (ii) through (iv), to any waivers, exceptions or exemptions that may be available under applicable law or rules.
(e) (2) None of the services provided to the registrant described in paragraphs (b)-(d) of Item 4 were 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 $70,782 for the fiscal year ended September 30, 2018 and $23,213 for the fiscal year ended September 30, 2017.
(h) The registrant’s audit committee of the board has considered whether the provision of non-audit services that were rendered to the registrant’s investment adviser (not including any sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser), and any entity controlling, controlled by, or under common control with the investment adviser that provides ongoing services to the registrant that were not pre-approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X is compatible with maintaining the principal accountant’s independence.
| Item 5. | Audit Committee of Listed Registrants. N/A |
| Item 6. | Schedule of Investments. N/A |
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies. N/A
Item 8. Portfolio Managers of Closed-End Management Investment Companies. N/A
Item 9. Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers. N/A
| Item 10. | Submission of Matters to a Vote of Security Holders. |
There have been no changes to the procedures by which shareholders may recommend nominees to the Registrant’s Board of Trustees that would require disclosure herein.
| Item 11. | Controls and Procedures. |
(a) Evaluation of Disclosure Controls and Procedures. The Registrant maintains disclosure controls and procedures that are designed to provide reasonable assurance that information required to be disclosed in the Registrant’s filings under the Securities Exchange Act of 1934, as amended, and the Investment Company Act of 1940 is recorded, processed, summarized and reported within the periods specified in the rules and forms of the Securities and Exchange Commission. Such information is accumulated and communicated to the Registrant’s management, including its principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure. The Registrant’s management, including the principal executive officer and the principal financial officer, recognizes that any set of controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives.
Within 90 days prior to the filing date of this Shareholder Report on Form N-CSR, the Registrant had carried out an evaluation, under the supervision and with the participation of the Registrant’s management, including the Registrant’s principal executive officer and the Registrant’s principal financial officer, of the effectiveness of the design and operation of the Registrant’s disclosure controls and procedures. Based on such evaluation, the Registrant’s principal executive officer and principal financial officer concluded that the Registrant’s disclosure controls and procedures are effective.
(b) Changes in Internal Controls. There have been no changes in the Registrant’s internal control over financial reporting that occurred during the period covered by this report that has materially affected, or is reasonably likely to materially affect the internal control over financial reporting.
Item 12. Disclosure of Securities Lending Activities for Closed-End Management Investment Company. N/A
| Item 13. | Exhibits. |
(a)(1) Code of Ethics
(a)(2) Certifications pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 of Matthew T. Hinkle, Chief Executive Officer - Finance and Administration, and Gaston Gardey, Chief Financial Officer and Chief Accounting Officer
(b) Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 of Matthew T. Hinkle, Chief Executive Officer - Finance and Administration, and Gaston Gardey, Chief Financial Officer and Chief Accounting Officer
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| FRANKLIN CUSTODIAN FUNDS | ||
| By | /s/ MATTHEW T. HINKLE | |
| Matthew T. Hinkle | ||
| Chief Executive Officer - Finance and Administration | ||
| Date | November 27, 2018 | |
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
| By | /s/ MATTHEW T. HINKLE | |
| Matthew T. Hinkle | ||
| Chief Executive Officer - Finance and Administration | ||
| Date | November 27, 2018 | |
| By | /s/ GASTON GARDEY | |
| Gaston Gardey | ||
| Chief Financial Officer and Chief Accounting Officer | ||
| Date | November 27, 2018 | |