UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM N-CSRS
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: 3/31/15
Item 1. Reports to Stockholders.
Franklin Templeton Investments
Gain From Our Perspective®
At Franklin Templeton Investments, we’re dedicated to one goal: delivering exceptional asset management for our clients. By bringing together multiple, world-class investment teams in a single firm, we’re able to offer specialized expertise across styles and asset classes, all supported by the strength and resources of one of the world’s largest asset managers. This has helped us to become a trusted partner to individual and institutional investors across the globe.
Focus on Investment Excellence
At the core of our firm, you’ll find multiple independent investment teams—each with a focused area of expertise—from traditional to alternative strategies and multi-asset solutions. And because our portfolio groups operate autonomously, their strategies can be combined to deliver true style and asset class diversification.
All of our investment teams share a common commitment to excellence grounded in rigorous, fundamental research and robust, disciplined risk management. Decade after decade, our consistent, research-driven processes have helped Franklin Templeton earn an impressive record of strong, long-term results.
Global Perspective Shaped by Local Expertise
In today’s complex and interconnected world, smart investing demands a global perspective. Franklin Templeton pioneered international investing over 60 years ago, and our expertise in emerging markets spans more than a quarter of a century. Today, our investment professionals are on the ground across the globe, spotting investment ideas and potential risks firsthand. These locally based teams bring in-depth understanding of local companies, economies and cultural nuances, and share their best thinking across our global research network.
Strength and Experience
Franklin Templeton is a global leader in asset management serving clients in over 150 countries.1 We run our business with the same prudence we apply to asset management, staying focused on delivering relevant investment solutions, strong long-term results and reliable, personal service. This approach, focused on putting clients first, has helped us to become one of the most trusted names in financial services.
1. As of 12/31/14. Clients are represented by the total number of shareholder accounts.
Not FDIC Insured | May Lose Value | No Bank Guarantee
Contents | |
Shareholder Letter | 1 |
Semiannual Report | |
Economic and Market Overview | 3 |
Franklin DynaTech Fund | 4 |
Franklin Growth Fund | 12 |
Franklin Income Fund | 20 |
Franklin U.S. Government | |
Securities Fund | 28 |
Franklin Utilities Fund | 35 |
Financial Highlights and | |
Statements of Investments | 42 |
Financial Statements | 103 |
Notes to Financial Statements | 112 |
Shareholder Information | 130 |
1 |
Semiannual Report
Economic and Market Overview
U.S. economic growth trends were generally encouraging during the six-month period ended March 31, 2015, although economic expansion slowed in 2015’s first quarter. In the first half of the period, greater spending by consumers, businesses, and state and local governments aided growth. However, low energy prices, harsh weather, labor disruptions and U.S. dollar strength led export levels to fall and businesses to reduce spending in the latter half. Housing market data showed home prices and mortgage rates fell during the six-month period, while home sales rose. Retail sales softened in the second half of the period despite job growth and generally lower gasoline prices. Inflation, as measured by the Consumer Price Index, remained subdued during the six months and fell sharply toward period-end amid lower energy and import prices. Manufacturing and non-manufacturing activities increased, and the unemployment rate declined to 5.5% in March 2015 from 5.9% in September 2014.1
The U.S. Federal Reserve Board (Fed) ended its bond buying program in October 2014, based on its view that underlying economic strength could support ongoing progress in labor market conditions. Although the Fed had repeatedly stated that it could be patient with regard to raising interest rates, toward period-end, the Fed removed the word “patient” from its monetary policy guidance. It added, however, that it might keep interest rates lower than what it viewed as normal.
Investor confidence grew as the U.S. economy continued to grow and the Fed maintained its cautious tone on raising interest rates. The markets endured sell-offs when many investors reacted to the crisis in Ukraine, Greece’s debt negotiations and signs of relatively weak economic growth in Europe and Japan, as well as less robust growth in China. U.S. stocks rose overall for the six months under review as the Standard & Poor’s 500 Index and the Dow Jones Industrial Average reached all-time highs.
The 10-year Treasury yield, which moves inversely to price, declined from 2.52% at the start of the period to 1.94% by period-end, as investors sought less risky assets in response to negative news stories. Near period-end, soft domestic data and the Fed’s willingness to keep interest rates low also supported bond prices.
The foregoing information reflects our analysis and opinions as of March 31, 2015. The information is not a complete analysis of every aspect of any market, country, industry, security or fund. Statements of fact are from sources considered reliable.
1. Source: Bureau of Labor Statistics.
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Franklin DynaTech Fund
We are pleased to bring you Franklin DynaTech Fund’s semiannual report for the period ended March 31, 2015.
Your Fund’s Goal and Main Investments
The Fund seeks capital appreciation by investing primarily in equity securities of companies that emphasize innovation and new technologies, and that benefit from new industry conditions in the dynamically changing global economy.
Performance Overview
The Fund’s Class A shares delivered a +9.23% cumulative total return for the six months under review. In comparison, the Russell 1000® Growth Index, which measures performance of the largest companies in the Russell 3000® Index with higher price-to-book ratios and higher forecasted growth values, generated a total return of +8.81%.1 Also for comparison, the broad U.S. stock market as measured by the Standard & Poor’s 500 Index, produced a +5.93% total return, and domestic and international-based stocks as measured by the NASDAQ Composite Index® posted a +9.70% total return.1 You can find the Fund’s long-term performance data in the Performance Summary beginning on page 7.
Performance data represent past performance, which does not guarantee future results. Investment return and principal value will fluctuate, and you may have a gain or loss when you sell your shares. Current performance may differ from figures shown. Please visit franklintempleton.com or call (800) 342-5236 for most recent month-end performance.
Investment Strategy
We use fundamental, bottom-up research to seek companies meeting our criteria of growth potential, quality and valuation. In seeking sustainable growth characteristics, we look for companies we believe can produce sustainable earnings and cash flow growth, evaluating the long-term market opportunity and competitive structure of an industry to target leaders and emerging leaders. We define quality companies as those with strong and improving competitive positions in attractive
markets. We also believe important attributes of quality are experienced and talented management teams as well as financial strength reflected in the capital structure, gross and operating margins, free cash flow generation and returns on capital employed. Our valuation analysis includes a range of potential outcomes based on an assessment of multiple scenarios. In assessing value, we consider whether security prices fully reflect the balance of the sustainable growth opportunities relative to business and financial risks.
1. Source: Morningstar.
The indexes are unmanaged and include reinvested dividends. One cannot invest directly in an index, and an index is not representative of the Fund’s portfolio.
Russell Investment Group is the source and owner of the trademarks, service marks and copyrights related to the Russell Indexes. Russell® is a trademark of
Russell Investment Group.
The dollar value, number of shares or principal amount, and names of all portfolio holdings are listed in the Fund’s Statement of Investments (SOI).
The SOI begins on page 47.
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FRANKLIN DYNATECH FUND
Manager’s Discussion
The Fund’s health care holdings contributed notably to absolute performance during the reporting period.2 In biotechnology, Biogen benefited from growing demand for its medicines treating multiple sclerosis, blood cancers and hemophilia, as well as encouraging early results regarding a new treatment for Alzheimer’s disease. Celgene’s share price rose as a result of increased sales for its treatments for multiple myeloma and other cancers. Also helping Celgene were recent approvals from the U.S. Food and Drug Administration and the European equivalent for its existing psoriasis medication OTEZLA to treat psoriatic arthritis. Shares of Incyte advanced based on expanded FDA approval of its bone marrow cancer drug Jakafi to treat uncontrolled polycythemia vera, as well as from positive phase three trial results for a new arthritis medication. Strong sales growth for XTNADI, used to treat advanced prostate cancer, propelled Medivation’s stock price. Outside biotechnology, pharmaceuticals firm Actavis was helped by growth of its top branded products as well as its North American generics business.
Top 10 Holdings
3/31/15
Company | % of Total | |
Sector/Industry | Net Assets | |
Google Inc., A & C | 3.1 | % |
Internet Software & Services | ||
Facebook Inc., A | 2.7 | % |
Internet Software & Services | ||
Biogen Inc. | 2.7 | % |
Biotechnology | ||
Celgene Corp. | 2.7 | % |
Biotechnology | ||
Actavis PLC | 2.6 | % |
Pharmaceuticals | ||
Visa Inc., A | 2.3 | % |
IT Services | ||
MasterCard Inc., A | 2.2 | % |
IT Services | ||
Palo Alto Networks Inc. | 2.0 | % |
Communications Equipment | ||
LinkedIn Corp., A | 1.9 | % |
Internet Software & Services | ||
Apple Inc. | 1.9 | % |
Technology Hardware, Storage & Peripherals |
The Fund’s information technology (IT) positions also substantially supported results.3 Palo Alto Networks delivered strong results and increased its market share due to high demand for its next-generation security platforms that were enhanced by new hardware and ongoing research. ServiceNow, a provider of cloud-based automation of enterprise IT operations, experienced growing revenue aided by an expanding customer base as well as existing customer renewals and upgrades. The share price of personal computing and mobile communication device manufacturer Apple reached a record high during the period partially resulting from all-time high revenue from iPhone, Mac and App Store sales in the first quarter. Global payments technology firms VISA and MasterCard benefited from ongoing growth in payment volume, including cross-border volume, and total processed transactions, aided by payment innovations and global expansion efforts. Tencent Holdings, a leading provider of comprehensive Internet services in China, enjoyed a share price rally stemming from positive results attained by expanding its mobile Internet presence in online media and gaming, and from launching online security, Android app store and mobile payment platforms.
Regarding detractors, the Fund’s energy sector holdings weighed on absolute performance.4 Lower fuel price trends and geopolitical unrest depressed the share price of FMC Technologies, a technology solutions provider for the energy industry and other industrial markets. However, the company experienced growing revenues from its subsea and surface technologies as well as a strong order backlog. Although the stock price of Schlumberger, an oilfield services company, was also suppressed by energy sector trends, growing revenue, particularly in North America, the Middle East and parts of South America and sub-Saharan Africa, contributed to increased earnings. Oil and gas companies Noble Energy5 and Pioneer Natural Resources also reported positive financial results amid falling energy prices and took steps to maintain financial and operational flexibility. Anadarko Petroleum’s fourth-quarter revenue missed estimates, and it reported a net loss for 2014, largely resulting from a large final payment for an environmental lawsuit that was settled before the reporting period.
In other sectors, shares of online user-generated review database provider Yelp suffered despite positive financial results, based largely on downgrading by stock analysts concerned
2. 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.
3. The IT sector comprises communications equipment; electronic equipment, instruments and components; Internet and catalog retail; Internet software and services;
IT services; semiconductors and semiconductor equipment; software; and technology hardware, storage and peripherals in the SOI.
4. The energy sector comprises energy equipment and services; and oil, gas and consumable fuels in the SOI.
5. Sold by period-end.
See www.franklintempletondatasources.com for additional data provider information.
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FRANKLIN DYNATECH FUND
about slowing user growth, U.S. market saturation and competition from rivals. The share price of Flowserve, a precision-engineered flow control equipment manufacturer, was affected by lower oil prices despite favorable financial results including improved gross and operating margins. Shares of Internet TV subscription service provider Netflix declined based on concerns about subscriber growth, although financial results met estimates. SanDisk, a flash storage card product manufacturer, reported disappointing fourth-quarter results due to supply constraints worsened by unplanned operations maintenance.5 Biotechnology firm Gilead Sciences’ shares declined after missing third-quarter earnings estimates and Express Scripts Holding, a prescription management firm, chose a lower cost alternative to Sovaldi, Gilead’s hepatitis C medicine.
As managers of Franklin DynaTech Fund, at period-end we remained encouraged by the relative abundance of companies that we believe have strong long-term growth prospects trading at what we perceive to be attractive valuations. We believe it is these innovative, thought-leading companies that may promote economic advancement over the longer term.
Thank you for your continued participation in Franklin DynaTech Fund. We look forward to serving your future investment needs.
The foregoing information reflects our analysis, opinions and portfolio holdings as of March 31, 2015, the end of the reporting period. The way we implement our main investment strategies and the resulting portfolio holdings may change depending on factors such as market and economic conditions. These opinions may not be relied upon as investment advice or an offer for a particular security. The information is not a complete analysis of every aspect of any market, country, industry, security or the Fund. Statements of fact are from sources considered reliable, but the investment manager makes no representation or warranty as to their completeness or accuracy. Although historical performance is no guarantee of future results, these insights may help you understand our investment management philosophy.
6 | Semiannual Report
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FRANKLIN DYNATECH FUND
Performance Summary as of March 31, 2015
Your dividend income will vary depending on dividends or interest paid by securities in the Fund’s portfolio, adjusted for operating expenses of each class. Capital gain distributions are net profits realized from the sale of portfolio securities. The performance table does 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.
Net Asset Value | |||||
Share Class (Symbol) | 3/31/15 | 9/30/14 | Change | ||
A (FKDNX) | $ | 48.64 | $ | 46.08 | +$2.56 |
C (FDYNX) | $ | 42.42 | $ | 40.53 | +$1.89 |
R (FDNRX) | $ | 47.77 | $ | 45.35 | +$2.42 |
R6 (FDTRX) | $ | 49.71 | $ | 46.97 | +$2.74 |
Advisor (FDYZX) | $ | 49.56 | $ | 46.87 | +$2.69 |
Distributions (10/1/14–3/31/15) | |||||
Long-Term | |||||
Share Class | Capital Gain | ||||
A | $ | 1.6142 | |||
C | $ | 1.6142 | |||
R | $ | 1.6142 | |||
R6 | $ | 1.6142 | |||
Advisor | $ | 1.6142 |
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Semiannual Report | 7
FRANKLIN DYNATECH FUND
PERFORMANCE SUMMARY
Performance as of 3/31/151
Cumulative total return excludes sales charges. Average annual total return and value of $10,000 investment include maximum sales charges. Class A: 5.75% maximum initial sales charge; Class C: 1% contingent deferred sales charge in first year only;
Class R/R6/Advisor Class: no sales charges.
Cumulative | Average Annual | Value of | Total Annual | |||||
Share Class | Total Return2 | Total Return3 | $ | 10,000 Investment4 | Operating Expenses5 | |||
A | 0.89 | % | ||||||
6-Month | +9.23 | % | +2.96 | % | $ | 10,296 | ||
1-Year | +14.40 | % | +7.83 | % | $ | 10,783 | ||
5-Year | +101.78 | % | +13.72 | % | $ | 19,018 | ||
10-Year | +165.50 | % | +9.60 | % | $ | 25,019 | ||
C | 1.64 | % | ||||||
6-Month | +8.84 | % | +7.84 | % | $ | 10,784 | ||
1-Year | +13.54 | % | +12.54 | % | $ | 11,254 | ||
5-Year | +94.33 | % | +14.21 | % | $ | 19,433 | ||
10-Year | +146.34 | % | +9.43 | % | $ | 24,634 | ||
R | 1.14 | % | ||||||
6-Month | +9.07 | % | +9.07 | % | $ | 10,907 | ||
1-Year | +14.10 | % | +14.10 | % | $ | 11,410 | ||
5-Year | +99.26 | % | +14.78 | % | $ | 19,926 | ||
Since Inception (12/1/08) | +236.56 | % | +21.14 | % | $ | 33,656 | ||
R6 | 0.49 | % | ||||||
6-Month | +9.45 | % | +9.45 | % | $ | 10,945 | ||
1-Year | +14.85 | % | +14.85 | % | $ | 11,485 | ||
Since Inception (5/1/13) | +46.43 | % | +22.04 | % | $ | 14,643 | ||
Advisor6 | 0.64 | % | ||||||
6-Month | +9.36 | % | +9.36 | % | $ | 10,936 | ||
1-Year | +14.69 | % | +14.69 | % | $ | 11,469 | ||
5-Year | +104.32 | % | +15.36 | % | $ | 20,432 | ||
10-Year | +170.10 | % | +10.45 | % | $ | 27,010 |
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.
8 | Semiannual Report
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FRANKLIN DYNATECH FUND |
PERFORMANCE SUMMARY |
All investments involve risks, including possible loss of principal. The Fund’s investments in fast-growing industries, including 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 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.
Class C: | These shares have higher annual fees and expenses than Class A shares. |
Class R: | Shares are available to certain eligible investors as described in the prospectus. These shares have higher annual fees and expenses than Class A shares. |
Class R6: | Shares are available to certain eligible investors as described in the prospectus. |
Advisor Class: | Shares are available to certain eligible investors as described in the prospectus. |
1. The Fund has a fee waiver associated with its investments in a Franklin Templeton money fund, contractually guaranteed through at least its current fiscal year-end.
Class R6 has a fee waiver contractually guaranteed through at least the Fund’s current fiscal year-end. Fund investment results reflect the fee waivers, to the extent
applicable; without these reductions, 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. Six-month return has not been annualized.
4. These figures represent the value of a hypothetical $10,000 investment in the Fund over the periods indicated.
5. Figures are as stated in the Fund’s current prospectus. In periods of market volatility, assets may decline significantly, causing total annual Fund operating expenses to
become higher than the figures shown.
6. Effective 5/15/08, the Fund began offering Advisor Class shares, which do not have sales charges or a Rule 12b-1 plan. Performance quotations for this class reflect the
following methods of calculation: (a) For periods prior to 5/15/08, a restated figure is used based upon the Fund’s Class A performance, excluding the effect of Class A’s
maximum initial sales charge, but reflecting the effect of the Class A Rule 12b-1 fees; and (b) for periods after 5/15/08, actual Advisor Class performance is used reflecting
all charges and fees applicable to that class. Since 5/15/08 (commencement of sales), the cumulative and average annual total returns of Advisor Class shares were
+91.18% and +9.88%.
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Semiannual Report | 9
FRANKLIN DYNATECH FUND
Your Fund’s Expenses
As a Fund shareholder, you can incur two types of costs:
- Transaction costs, including sales charges (loads) on Fund purchases; and
- Ongoing Fund costs, including management fees, distribu- tion and service (12b-1) fees, and other Fund expenses. All mutual funds have ongoing costs, sometimes referred to as operating expenses.
The following table shows ongoing costs of investing in the Fund and can help you understand these costs and compare them with those of other mutual funds. The table assumes a $1,000 investment held for the six months indicated.
Actual Fund Expenses
The first line (Actual) for each share class listed in the table provides actual account values and expenses. The “Ending Account Value” is derived from the Fund’s actual return, which includes the effect of Fund expenses.
You can estimate the expenses you paid during the period by following these steps. Of course, your account value and expenses will differ from those in this illustration:
1. | Divide your account value by $1,000. |
If an account had an $8,600 value, then $8,600 ÷ $1,000 = 8.6. | |
2. | Multiply the result by the number under the heading “Expenses Paid During Period.” |
If Expenses Paid During Period were $7.50, then 8.6 x $7.50 = $64.50. |
In this illustration, the estimated expenses paid this period are $64.50.
Hypothetical Example for Comparison with Other Funds
Information in the second line (Hypothetical) for each class in the table can help you compare ongoing costs of investing in the Fund with those of other mutual funds. This information may not be used to estimate the actual ending account balance or expenses you paid during the period. The hypothetical “Ending Account Value” is based on the actual expense ratio for each class and an assumed 5% annual rate of return before expenses, which does not represent the Fund’s actual return. The figure under the heading “Expenses Paid During Period” shows the hypothetical expenses your account would have incurred under this scenario. You can compare this figure with the 5% hypothetical examples that appear in shareholder reports of other funds.
Please note that expenses shown in the table are meant to highlight ongoing costs and do not reflect any transaction costs, such as sales charges. Therefore, the second line for each class is useful in comparing ongoing costs only, and will not help you compare total costs of owning different funds. In addition, if transaction costs were included, your total costs would have been higher. Please refer to the Fund prospectus for additional information on operating expenses.
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FRANKLIN DYNATECH FUND
YOUR FUND’S EXPENSES
Beginning Account | Ending Account | Expenses Paid During | ||||
Share Class | Value 10/1/14 | Value 3/31/15 | Period* 10/1/14–3/31/15 | |||
A | ||||||
Actual | $ | 1,000 | $ | 1,092.30 | $ | 4.64 |
Hypothetical (5% return before expenses) | $ | 1,000 | $ | 1,020.49 | $ | 4.48 |
C | ||||||
Actual | $ | 1,000 | $ | 1,088.40 | $ | 8.54 |
Hypothetical (5% return before expenses) | $ | 1,000 | $ | 1,016.75 | $ | 8.25 |
R | ||||||
Actual | $ | 1,000 | $ | 1,090.70 | $ | 5.94 |
Hypothetical (5% return before expenses) | $ | 1,000 | $ | 1,019.25 | $ | 5.74 |
R6 | ||||||
Actual | $ | 1,000 | $ | 1,094.50 | $ | 2.56 |
Hypothetical (5% return before expenses) | $ | 1,000 | $ | 1,022.49 | $ | 2.47 |
Advisor Class | ||||||
Actual | $ | 1,000 | $ | 1,093.60 | $ | 3.34 |
Hypothetical (5% return before expenses) | $ | 1,000 | $ | 1,021.74 | $ | 3.23 |
*Expenses are calculated using the most recent six-month expense ratio, net of expense waivers, annualized for each class (A: 0.89%;
C: 1.64%; R: 1.14%; R6: 0.49%; and Advisor: 0.64%), multiplied by the average account value over the period, multiplied by 182/365 to
reflect the one-half year period.
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Semiannual Report | 11
Franklin Growth Fund
We are pleased to bring you Franklin Growth Fund’s semiannual report for the period ended March 31, 2015.
Your Fund’s Goal and Main Investments
The Fund seeks capital appreciation by investing substantially in equity securities of companies that are leaders in their industries.
Performance Overview
The Fund’s Class A shares delivered a +9.70% cumulative total return for the six months under review. In comparison, the Standard & Poor’s 500 Index, which is a broad measure of U.S. stock performance, generated a +5.93% total return.1 You can find the Fund’s long-term performance data in the Performance Summary beginning on page 15.
Performance data represent past performance, which does not guarantee future results. Investment return and principal value will fluctuate, and you may have a gain or loss when you sell your shares. Current performance may differ from figures shown. Please visit franklintempleton.com or call (800) 342-5236 for most recent month-end performance.
Investment Strategy
We use fundamental, bottom-up research to seek companies meeting our criteria of growth potential, quality and valuation. In seeking sustainable growth characteristics, we look for companies we believe can produce sustainable earnings and cash flow growth, evaluating the long-term market opportunity and competitive structure of an industry to target leaders and emerging leaders. We define quality companies as those with strong and improving competitive positions in attractive markets. We also believe important attributes of quality are experienced and talented management teams as well as financial strength reflected in the capital structure, gross and operating margins, free cash flow generation and returns on capital employed. Our valuation analysis includes a range of potential outcomes based on an assessment of multiple scenarios. In assessing value, we consider whether security prices fully reflect the balance of the sustainable growth opportunities relative to business and financial risks.
1. Source: Morningstar.
The index is unmanaged and includes reinvested dividends. One cannot invest directly in an index, and an index is not representative of the Fund’s portfolio.
The dollar value, number of shares or principal amount, and names of all portfolio holdings are listed in the Fund’s Statement of Investments (SOI).
The SOI begins on page 56.
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FRANKLIN GROWTH FUND
Manager’s Discussion
Franklin Growth Fund owned shares of 157 companies at period-end. We continue to invest in a broad array of companies of all sizes and in varied industries.
During the period under review, most investment sectors contributed to absolute performance, particularly health care, industrials, information technology (IT) and consumer discretionary.2 In health care, beauty drug maker Allergan reported strong earnings resulting from growing pharmaceutical and medical device sales, and the company was acquired by Actavis toward period-end. Injection drug and infusion technology provider Hospira benefited from favorable pricing, strong inventory and competitor supply issues. Hospira pursued being acquired by its larger rival Pfizer, which hoped to capitalize on Hospira’s alternatives to costly biotechnology drugs, and the deal was expected to close in mid-2015. Biogen experienced growing demand for its medicines treating multiple sclerosis, blood cancers and hemophilia, and reported encouraging study results about a new treatment for Alzheimer’s. Shares of Mettler-Toledo, a provider of weighing and analytical instruments, rallied due to favorable markets in the Americas, solid results in Asia, growth in Europe and ongoing cost controls.
In industrials, air service provider Alaska Air Group reported record earnings helped by high customer satisfaction rankings, better seating and fuel efficiency, and new non-stop routes. Defense contractor Northrup Grumman benefited from rising aerospace systems sales, financial stability and prudent debt levels, healthy cash flow and lower pension costs. In IT, the share price of personal computing and mobile communication device maker Apple reached a record level partially resulting from all-time high revenue from iPhone, Mac and App Store sales in the first quarter. In consumer discretionary, energy drink producer Monster Beverage reported favorable results and pursued a long-term partnership with Coca-Cola that was expected to improve Monster’s product distribution.
Energy companies, including many with solid fundamentals, were generally hurt by declining energy prices and geopolitical unrest. Thus, the Fund’s small energy sector allocation hindered absolute performance. Shares of Halliburton, an oil and gas industry products and services provider, were depressed even though the company had record 2014 results helped by growing sales in North America, the Middle East, Asia and Latin America. The share price of National Oilwell Varco, an oil and gas drilling equipment provider, was also suppressed, but the firm’s rig aftermarket, wellbore technologies, and completion and production solutions segments supported improved 2014 results. Despite a lower stock price, growing revenue for oilfield services company Schlumberger, in North America, the Middle East and parts of South America and sub-Saharan Africa, contributed to higher earnings. FMC Technologies, an energy technology provider that suffered from a reduced valuation, experienced growing revenue from its subsea and surface technologies as well as a strong order backlog. Anadarko Petroleum’s fourth-quarter revenue missed estimates and the company reported a 2014 net loss, largely resulting from a large final payment for an environmental lawsuit that was settled before the reporting period.
Top 10 Holdings | ||
3/31/15 | ||
Company | % of Total | |
Sector/Industry | Net Assets | |
Apple Inc. | 4.3 | % |
Technology Hardware & Equipment | ||
Alaska Air Group Inc. | 1.8 | % |
Transportation | ||
Biogen Inc. | 1.8 | % |
Pharmaceuticals, Biotechnology & Life Sciences | ||
Northrop Grumman Corp. | 1.5 | % |
Capital Goods | ||
The Walt Disney Co. | 1.5 | % |
Media | ||
Google Inc., A & C | 1.5 | % |
Software & Services | ||
The Boeing Co. | 1.4 | % |
Capital Goods | ||
Amgen Inc. | 1.4 | % |
Pharmaceuticals, Biotechnology & Life Sciences | ||
VF Corp. | 1.3 | % |
Consumer Durables & Apparel | ||
3M Co. | 1.2 | % |
Capital Goods |
2. 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. The IT sector comprises semiconductors and semiconductor equipment, software and
services, and technology hardware and equipment in the SOI. The consumer discretionary sector comprises automobiles and components, consumer durables and apparel,
consumer services, media and retailing in the SOI.
See www.franklintempletondatasources.com for additional data provider information.
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FRANKLIN GROWTH FUND
In other sectors, although IT software and services provider International Business Machines reported rising 2014 earnings, the company’s revenue and net income declined as it sought to reposition its focus to higher value cloud, analytics, mobile, social and security applications. Copper and gold mining firm Freeport-McMoRan reported a 2014 net loss resulting from lower commodity prices and took steps to reduce or defer capital and operating costs to maintain its financial strength. Earnings in 2014 declined for Trimble Navigation, a positioning, wireless and software technology provider, stemming from fourth-quarter impacts from a stronger dollar, new acquisitions, lower oil prices and declining agriculture revenue.
Thank you for your continued participation in Franklin Growth Fund. We look forward to serving your future investment needs.
The foregoing information reflects our analysis, opinions and portfolio holdings as of March 31, 2015, the end of the reporting period. The way we implement our main investment strategies and the resulting portfolio holdings may change depending on factors such as market and economic conditions. These opinions may not be relied upon as investment advice or an offer for a particular security. The information is not a complete analysis of every aspect of any market, country, industry, security or the Fund. Statements of fact are from sources considered reliable, but the investment manager makes no representation or warranty as to their completeness or accuracy. Although historical performance is no guarantee of future results, these insights may help you understand our investment management philosophy.
CFA® is a trademark owned by CFA Institute.
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FRANKLIN GROWTH FUND
Performance Summary as of March 31, 2015
Your dividend income will vary depending on dividends or interest paid by securities in the Fund’s portfolio, adjusted for operating expenses of each class. Capital gain distributions are net profits realized from the sale of portfolio securities. The performance table does 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.
Net Asset Value | |||||
Share Class (Symbol) | 3/31/15 | 9/30/14 | Change | ||
A (FKGRX) | $ | 77.16 | $ | 70.51 | +$6.65 |
C (FRGSX) | $ | 71.86 | $ | 65.75 | +$6.11 |
R (FGSRX) | $ | 76.76 | $ | 70.05 | +$6.71 |
R6 (FIFRX) | $ | 77.31 | $ | 70.76 | +$6.55 |
Advisor (FCGAX) | $ | 77.35 | $ | 70.75 | +$6.60 |
Distributions (10/1/14–3/31/15) | |||||
Dividend | |||||
Share Class | Income | ||||
A | $ | 0.1859 | |||
R6 | $ | 0.4667 | |||
Advisor | $ | 0.3521 |
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FRANKLIN GROWTH FUND
PERFORMANCE SUMMARY
Performance as of 3/31/151
Cumulative total return excludes sales charges. Average annual total return and value of $10,000 investment include maximum sales charges. Class A: 5.75% maximum initial sales charge; Class C: 1% contingent deferred sales charge in first year only;
Class R/R6/Advisor Class: no sales charges.
Cumulative | Average Annual | Value of | Total Annual | |||||
Share Class | Total Return2 | Total Return3 | $ | 10,000 Investment4 | Operating Expenses5 | |||
A | 0.90 | % | ||||||
6-Month | +9.70 | % | +3.40 | % | $ | 10,340 | ||
1-Year | +16.01 | % | +9.33 | % | $ | 10,933 | ||
5-Year | +89.38 | % | +12.28 | % | $ | 17,847 | ||
10-Year | +143.69 | % | +8.67 | % | $ | 22,970 | ||
C | 1.65 | % | ||||||
6-Month | +9.29 | % | +8.29 | % | $ | 10,829 | ||
1-Year | +15.14 | % | +14.14 | % | $ | 11,414 | ||
5-Year | +82.36 | % | +12.77 | % | $ | 18,236 | ||
10-Year | +126.05 | % | +8.50 | % | $ | 22,605 | ||
R | 1.15 | % | ||||||
6-Month | +9.58 | % | +9.58 | % | $ | 10,958 | ||
1-Year | +15.71 | % | +15.71 | % | $ | 11,571 | ||
5-Year | +87.02 | % | +13.34 | % | $ | 18,702 | ||
10-Year | +137.69 | % | +9.04 | % | $ | 23,769 | ||
R6 | 0.47 | % | ||||||
6-Month | +9.94 | % | +9.94 | % | $ | 10,994 | ||
1-Year | +16.51 | % | +16.51 | % | $ | 11,651 | ||
Since Inception (5/1/13) | +43.83 | % | +20.90 | % | $ | 14,383 | ||
Advisor | 0.65 | % | ||||||
6-Month | +9.85 | % | +9.85 | % | $ | 10,985 | ||
1-Year | +16.29 | % | +16.29 | % | $ | 11,629 | ||
5-Year | +91.75 | % | +13.91 | % | $ | 19,175 | ||
10-Year | +149.81 | % | +9.59 | % | $ | 24,981 |
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.
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FRANKLIN GROWTH FUND |
PERFORMANCE SUMMARY |
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 prices 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.
Class C: | These shares have higher annual fees and expenses than Class A shares. |
Class R: | Shares are available to certain eligible investors as described in the prospectus. These shares have higher annual fees and expenses than Class A shares. |
Class R6: | Shares are available to certain eligible investors as described in the prospectus. |
Advisor Class: | Shares are available to certain eligible investors as described in the prospectus. |
1. The Fund has a fee waiver associated with its investments in a Franklin Templeton money fund, contractually guaranteed through at least its current fiscal year-end.
Class R6 has a fee waiver contractually guaranteed though at least the Fund’s current fiscal year-end. Fund investment results reflect the fee waivers, to the extent
applicable; without these reductions, 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. Six-month return has not been annualized.
4. These figures represent the value of a hypothetical $10,000 investment in the Fund over the periods indicated.
5. Figures are as stated in the Fund’s current prospectus. In periods of market volatility, assets may decline significantly, causing total annual Fund operating expenses to
become higher than the figures shown.
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FRANKLIN GROWTH FUND
Your Fund’s Expenses
As a Fund shareholder, you can incur two types of costs:
- Transaction costs, including sales charges (loads) on Fund purchases; and
- Ongoing Fund costs, including management fees, distribu- tion and service (12b-1) fees, and other Fund expenses. All mutual funds have ongoing costs, sometimes referred to as operating expenses.
The following table shows ongoing costs of investing in the Fund and can help you understand these costs and compare them with those of other mutual funds. The table assumes a $1,000 investment held for the six months indicated.
Actual Fund Expenses
The first line (Actual) for each share class listed in the table provides actual account values and expenses. The “Ending Account Value” is derived from the Fund’s actual return, which includes the effect of Fund expenses.
You can estimate the expenses you paid during the period by following these steps. Of course, your account value and expenses will differ from those in this illustration:
1. | Divide your account value by $1,000. |
If an account had an $8,600 value, then $8,600 ÷ $1,000 = 8.6. | |
2. | Multiply the result by the number under the heading “Expenses Paid During Period.” |
If Expenses Paid During Period were $7.50, then 8.6 x $7.50 = $64.50. |
In this illustration, the estimated expenses paid this period are $64.50.
Hypothetical Example for Comparison with Other Funds
Information in the second line (Hypothetical) for each class in the table can help you compare ongoing costs of investing in the Fund with those of other mutual funds. This information may not be used to estimate the actual ending account balance or expenses you paid during the period. The hypothetical “Ending Account Value” is based on the actual expense ratio for each class and an assumed 5% annual rate of return before expenses, which does not represent the Fund’s actual return. The figure under the heading “Expenses Paid During Period” shows the hypothetical expenses your account would have incurred under this scenario. You can compare this figure with the 5% hypothetical examples that appear in shareholder reports of other funds.
Please note that expenses shown in the table are meant to highlight ongoing costs and do not reflect any transaction costs, such as sales charges. Therefore, the second line for each class is useful in comparing ongoing costs only, and will not help you compare total costs of owning different funds. In addition, if transaction costs were included, your total costs would have been higher. Please refer to the Fund prospectus for additional information on operating expenses.
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FRANKLIN GROWTH FUND
YOUR FUND’S EXPENSES
Beginning Account | Ending Account | Expenses Paid During | ||||
Share Class | Value 10/1/14 | Value 3/31/15 | Period* 10/1/14–3/31/15 | |||
A | ||||||
Actual | $ | 1,000 | $ | 1,097.00 | $ | 4.65 |
Hypothetical (5% return before expenses) | $ | 1,000 | $ | 1,020.49 | $ | 4.48 |
C | ||||||
Actual | $ | 1,000 | $ | 1,092.90 | $ | 8.56 |
Hypothetical (5% return before expenses) | $ | 1,000 | $ | 1,016.75 | $ | 8.25 |
R | ||||||
Actual | $ | 1,000 | $ | 1,095.80 | $ | 5.96 |
Hypothetical (5% return before expenses) | $ | 1,000 | $ | 1,019.25 | $ | 5.74 |
R6 | ||||||
Actual | $ | 1,000 | $ | 1,099.40 | $ | 2.46 |
Hypothetical (5% return before expenses) | $ | 1,000 | $ | 1,022.59 | $ | 2.37 |
Advisor | ||||||
Actual | $ | 1,000 | $ | 1,098.50 | $ | 3.35 |
Hypothetical (5% return before expenses) | $ | 1,000 | $ | 1,021.74 | $ | 3.23 |
*Expenses are calculated using the most recent six-month expense ratio, net of expense waivers, annualized for each class (A: 0.89%;
C: 1.64%; R: 1.14%; R6: 0.47%; and Advisor: 0.64%), multiplied by the average account value over the period, multiplied by 182/365 to
reflect the one-half year period.
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Semiannual Report | 19
Franklin Income Fund
This semiannual report for Franklin Income Fund covers the period ended March 31, 2015.
Your Fund’s Goal and Main Investments
The Fund seeks to maximize income while maintaining prospects for capital appreciation by investing, under normal market conditions, in a diversified portfolio of debt and equity securities.
Performance Overview
The Fund’s Class A shares had a -1.21% cumulative total return for the six months under review. In comparison, the Fund’s equity benchmark, the Standard & Poor’s 500 Index, which is a broad measure of U.S. stock performance, posted a +5.93% total return.1 The Fund’s fixed income benchmark, the Barclays U.S. Aggregate Bond Index, which tracks the U.S. investment-grade, taxable bond market, returned +3.43%.1 The Fund’s peers, as measured by the Lipper Mixed-Asset Target Allocation Moderate Funds Classification Average, which consists of funds chosen by Lipper that, by practice, maintain a mix of 40% to 60% equity securities, with the remainder in bonds and cash, generated a +3.14% total return.2 You can find the Fund’s long-term performance data in the Performance Summary beginning on page 23.
Performance data represent past performance, which does not guarantee future results. Investment return and principal value will fluctuate, and you may have a gain or loss when you sell your shares. Current performance may differ from figures shown. Please visit franklintempleton.com or call (800) 342-5236 for most recent month-end performance.
Investment Strategy
By generally performing independent analysis of debt, convertible and equity securities, we search for undervalued or out-of-favor securities we believe offer opportunities for income today and significant growth tomorrow. We consider such factors as a company’s experience and managerial strength; its cash flow potential and profitability; its competitive positioning and advantages; its responsiveness to changes in interest rates and business conditions; debt maturity schedules and borrowing requirements; a company’s changing financial condition and market recognition of the change; and a security’s relative value based on such factors as anticipated cash flow, interest or dividend coverage, asset coverage and earnings.
Dividend Distributions* | |||||
10/1/14–3/31/15 | |||||
Dividend per Share (cents) | |||||
Advisor | |||||
Month | Class A | Class C | Class R | Class R6 | Class |
October | 1.00 | 0.89 | 0.93 | 1.05 | 1.03 |
November | 1.00 | 0.89 | 0.93 | 1.05 | 1.03 |
December | 1.00 | 0.89 | 0.93 | 1.04 | 1.03 |
January | 1.00 | 0.89 | 0.93 | 1.04 | 1.03 |
February | 1.00 | 0.89 | 0.93 | 1.04 | 1.03 |
March | 1.00 | 0.91 | 0.94 | 1.04 | 1.03 |
Total | 6.00 | 5.36 | 5.59 | 6.26 | 6.18 |
*All Fund distributions will vary depending upon current market conditions, and past
distributions are not indicative of future trends.
Manager’s Discussion
During the six months under review, we continued to strategically shift the Fund’s asset mix, and our equity holdings declined while our fixed income holdings increased. The Fund’s equity weighting fell from 60.6% to 55.2% of total net assets, and the Fund’s fixed income weighting rose from 38.2% to 41.4%. Our cash position increased during the period from 1.2% to 3.4% of total net assets.
The slowing global economy outside North America and growing production led to excess supply in oil, coal and iron ore and contributed to a decline in energy prices in 2014’s fourth quarter. This collapse drove a substantial amount of the under-performance in the Fund’s energy, materials and basic industry sectors and placed significant pressure on the Fund’s share price during the period. Major equity energy detractors included Royal Dutch Shell, Canadian Oil Sands, Total, BP and Chevron. Negatively impacting results within our fixed income energy holdings were corporate bonds of oil and gas exploration and production companies including Energy XXI Gulf Coast, Quicksilver Resources,3 SandRidge Energy,
1. Source: Morningstar.
2. Source: Lipper, a Thomson Reuters Company. For the six-month period ended 3/31/15, this category consisted of 577 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. One cannot invest directly in an index, and an index is not representative of the
Fund’s portfolio.
3. Sold by period-end.
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 66.
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FRANKLIN INCOME FUND
Portfolio Breakdown* | ||
3/31/15 | ||
% of Total | ||
Net Assets | ||
Equity** | 55.2 | % |
Utilities | 9.8 | % |
Energy | 9.5 | % |
Materials | 9.1 | % |
Health Care | 5.6 | % |
Consumer Discretionary | 5.2 | % |
Financials | 4.9 | % |
Industrials | 4.4 | % |
Information Technology | 3.6 | % |
Telecommunication Services | 2.4 | % |
Consumer Staples | 0.7 | % |
Fixed Income | 41.4 | % |
Energy | 10.4 | % |
Consumer Discretionary | 8.1 | % |
Financials | 4.5 | % |
Telecommunication Services | 4.1 | % |
Information Technology | 3.5 | % |
Materials | 3.0 | % |
Health Care | 2.9 | % |
Other | 4.9 | % |
Short-Term Investments & Other Net Assets | 3.4 | % |
*Figures reflect certain derivatives held in the portfolio (or their underlying reference
assets) and may not total 100% or may be negative due to rounding, use of any
derivatives, unsettled trades or other factors.
**Includes convertible bonds.
Samson Investments3 and W&T Offshore, as well as holdings in oilfield services and offshore drilling companies including Hercules Offshore and Ocean Rig UDW. Our equity and fixed income positions in Walter Energy and Peabody Energy were detractors as well.
Our positions in companies exposed to falling coal and iron ore prices also weighed on results. Major detractors included bonds of Arch Coal and stocks of Freeport-McMoRan, BHP Billiton and Rio Tinto.
On a positive note, the equity side of the Fund’s portfolio benefited from positions in utilities, consumer discretionary and health care. In fixed income, the Fund’s positions in communications, consumer non-cyclical and technology were strong contributors.4
Top Five Equity Holdings | ||
3/31/15 | ||
Company | % of Total | |
Sector/Industry | Net Assets | |
Royal Dutch Shell PLC | 1.6 | % |
Energy | ||
Target Corp. | 1.6 | % |
Consumer Discretionary | ||
General Electric Co. | 1.5 | % |
Industrials | ||
Pfizer Inc. | 1.5 | % |
Health Care | ||
BP PLC | 1.3 | % |
Energy |
The equity utilities sector was aided by investor speculation that slowing economic growth could keep interest rates low, as well as what seemed to be long-term favorable fundamentals that benefited the sector. Also, since these companies are U.S.-based, foreign currency exchange movements had minimal impact on performance, which helped the sector attract domestic investors. Contributors included PG&E, Xcel Energy and Public Service Enterprise Group. PG&E got through a difficult resolution to the San Bruno gas pipeline explosion, which enabled investors to focus on the multi-year growth opportunity ahead for the company.
Our equity consumer discretionary positions that helped performance were mainly equity automotive holdings and convertible securities of Ford Motor, Volkswagen International Finance and a new position in Fiat Chrysler Automobiles. Big-box retailer Target was able to overcome negative sentiment associated with the company’s disappointing expansion into Canada and the data breach it suffered in December 2013.
In other sectors, notable equity contributors included Pfizer and General Motors. Drug maker Pfizer benefited from a robust mergers and acquisitions environment in the pharmaceuticals industry, which allowed the company to deliver on pipeline opportunities. Auto manufacturer General Motors put a period
4. Communications holdings are in consumer discretionary and telecommunication services in the fixed income section of the SOI. Consumer non-cyclical holdings are in
consumer discretionary, consumer staples, financials, health care, industrials and information technology in the fixed income section of the SOI. Technology holdings are in
information technology and financials in the fixed income section of the SOI.
See www.franklintempletondatasources.com for additional data provider information.
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Semiannual Report | 21
FRANKLIN INCOME FUND
of failed recalls and fatalities behind it by focusing on improving its operational efficiency and taking steps build shareholder value.
Top Five Fixed Income Holdings | ||
and Senior Floating Rate Interests* | ||
3/31/15 | ||
Company | % of Total | |
Sector/Industry | Net Assets | |
First Data Corp. | 2.1 | % |
Information Technology | ||
iHeartCommunications Inc. | 2.0 | % |
Consumer Discretionary | ||
JPMorgan Chase & Co. | 1.7 | % |
Financials | ||
Sprint Communications Inc. | 1.2 | % |
Telecommunication Services | ||
Tenet Healthcare Corp. | 0.9 | % |
Health Care | ||
*Does not include convertible bonds. |
During the period, fixed income markets experienced volatility and credit spreads widened. In this environment, we found what we considered opportunities to add modest exposure at attractive prices, particularly in high yield bonds.
Notable individual fixed income contributors included payment technology developer First Data Corp., health care facilities operator HCA and financial services provider JPMorgan Chase & Co.
Despite the Fund’s share price volatility during the period, the Fund’s yield was substantially higher than the blended yield for the Fund’s two benchmark indexes and its Lipper peers. We believe this performance allowed us to deliver on the Fund’s primary objective of maintaining a high level of consistent monthly income.
Thank you for your continued participation in Franklin Income Fund. We look forward to serving your future investment needs.
The foregoing information reflects our analysis, opinions and portfolio holdings as of March 31, 2015, the end of the reporting period. The way we implement our main investment strategies and the resulting portfolio holdings may change depending on factors such as market and economic conditions. These opinions may not be relied upon as investment advice or an offer for a particular security. The information is not a complete analysis of every aspect of any market, country, industry, security or the Fund. Statements of fact are from sources considered reliable, but the investment manager makes no representation or warranty as to their completeness or accuracy. Although historical performance is no guarantee of future results, these insights may help you understand our investment management philosophy.
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FRANKLIN INCOME FUND
Performance Summary as of March 31, 2015
Your dividend income will vary depending on dividends or interest paid by securities in the Fund’s portfolio, adjusted for operating expenses of each class. Capital gain distributions are net profits realized from the sale of portfolio securities. The performance tables 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.
Net Asset Value | ||||||
Share Class (Symbol) | 3/31/15 | 9/30/14 | Change | |||
A (FKINX) | $ | 2.39 | $ | 2.48 | -$ | 0.09 |
C (FCISX) | $ | 2.41 | $ | 2.50 | -$ | 0.09 |
R (FISRX) | $ | 2.35 | $ | 2.44 | -$ | 0.09 |
R6 (FNCFX) | $ | 2.37 | $ | 2.46 | -$ | 0.09 |
Advisor (FRIAX) | $ | 2.37 | $ | 2.46 | -$ | 0.09 |
Distributions (10/1/14–3/31/15) | ||||||
Dividend | ||||||
Share Class | Income | |||||
A | $ | 0.0600 | ||||
C | $ | 0.0536 | ||||
R | $ | 0.0559 | ||||
R6 | $ | 0.0626 | ||||
Advisor | $ | 0.0618 |
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FRANKLIN INCOME FUND
PERFORMANCE SUMMARY
Performance as of 3/31/151
Cumulative total return excludes sales charges. Average annual total return and value of $10,000 investment include maximum sales charges. Class A: 4.25% maximum initial sales charge; Class C: 1% contingent deferred sales charge in first year only;
Class R/R6/Advisor Class: no sales charges.
Cumulative | Average Annual | Value of | Total Annual | |||||
Share Class | Total Return2 | Total Return3 | $ | 10,000 Investment4 | Operating Expenses5 | |||
A | 0.61 | % | ||||||
6-Month | -1.21 | % | -5.41 | % | $ | 9,459 | ||
1-Year | +0.75 | % | -3.51 | % | $ | 9,649 | ||
5-Year | +53.29 | % | +8.01 | % | $ | 14,699 | ||
10-Year | +92.19 | % | +6.28 | % | $ | 18,393 | ||
C | 1.11 | % | ||||||
6-Month | -1.46 | % | -2.43 | % | $ | 9,757 | ||
1-Year | -0.17 | % | -1.12 | % | $ | 9,888 | ||
5-Year | +48.90 | % | +8.29 | % | $ | 14,890 | ||
10-Year | +82.61 | % | +6.21 | % | $ | 18,261 | ||
R | 0.96 | % | ||||||
6-Month | -1.40 | % | -1.40 | % | $ | 9,860 | ||
1-Year | +0.41 | % | +0.41 | % | $ | 10,041 | ||
5-Year | +50.87 | % | +8.57 | % | $ | 15,087 | ||
10-Year | +85.46 | % | +6.37 | % | $ | 18,546 | ||
R6 | 0.38 | % | ||||||
6-Month | -1.11 | % | -1.11 | % | $ | 9,889 | ||
1-Year | +0.98 | % | +0.98 | % | $ | 10,098 | ||
Since Inception (5/1/13) | +12.12 | % | +6.15 | % | $ | 11,212 | ||
Advisor | 0.46 | % | ||||||
6-Month | -1.15 | % | -1.15 | % | $ | 9,885 | ||
1-Year | +0.90 | % | +0.90 | % | $ | 10,090 | ||
5-Year | +54.18 | % | +9.05 | % | $ | 15,418 | ||
10-Year | +94.98 | % | +6.91 | % | $ | 19,498 |
Distribution | 30-Day Standardized Yield7 | |||||
Share Class | Rate6 | (with waiver) | (without waiver) | |||
A | 4.80 | % | 3.95 | % | 3.95 | % |
C | 4.53 | % | 3.63 | % | 3.63 | % |
R | 4.80 | % | 3.77 | % | 3.77 | % |
R6 | 5.27 | % | 4.39 | % | 4.39 | % |
Advisor | 5.22 | % | 4.29 | % | 4.29 | % |
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.
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FRANKLIN INCOME FUND |
PERFORMANCE SUMMARY |
All investments involve risks, including possible loss of principal. Stock prices fluctuate, sometimes rapidly and dramatically, due to factors affecting individual companies, particular industries or sectors, or general market conditions. 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. 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.
Class C: | These shares have higher annual fees and expenses than Class A shares. |
Class R: | Shares are available to certain eligible investors as described in the prospectus. These shares have higher annual fees and expenses than Class A shares. |
Class R6: | Shares are available to certain eligible investors as described in the prospectus. |
Advisor Class: | Shares are available to certain eligible investors as described in the prospectus. |
1. The Fund has a fee waiver associated with its investments in a Franklin Templeton money fund, contractually guaranteed through at least its current fiscal year-end.
Class R6 has a fee waiver contractually guaranteed through at least the Fund’s current fiscal year-end. Fund investment results reflect the fee waivers, to the extent
applicable; without these reductions, 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. Six-month return has not been annualized.
4. These figures represent the value of a hypothetical $10,000 investment in the Fund over the periods indicated.
5. Figures are as stated in the Fund’s current prospectus. In periods of market volatility, assets may decline significantly, causing total annual Fund operating expenses to
become higher than the figures shown.
6. Distribution rate is based on an annualization of the respective class’s March dividend and the maximum offering price (NAV for Classes C, R, R6 and Advisor) per share
on 3/31/15.
7. The 30-day standardized yield for the 30 days ended 3/31/15 reflects an estimated yield to maturity (assuming all portfolio securities are held to maturity). It should be
regarded as an estimate of the Fund’s rate of investment income, and it may not equal the Fund’s actual income distribution rate (which reflects the Fund’s past dividends
paid to shareholders) or the income reported in the Fund’s financial statements.
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FRANKLIN INCOME FUND
Your Fund’s Expenses
As a Fund shareholder, you can incur two types of costs:
- Transaction costs, including sales charges (loads) on Fund purchases; and
- Ongoing Fund costs, including management fees, distribu- tion and service (12b-1) fees, and other Fund expenses. All mutual funds have ongoing costs, sometimes referred to as operating expenses.
The following table shows ongoing costs of investing in the Fund and can help you understand these costs and compare them with those of other mutual funds. The table assumes a $1,000 investment held for the six months indicated.
Actual Fund Expenses
The first line (Actual) for each share class listed in the table provides actual account values and expenses. The “Ending Account Value” is derived from the Fund’s actual return, which includes the effect of Fund expenses.
You can estimate the expenses you paid during the period by following these steps. Of course, your account value and expenses will differ from those in this illustration:
1. | Divide your account value by $1,000. |
If an account had an $8,600 value, then $8,600 ÷ $1,000 = 8.6. | |
2. | Multiply the result by the number under the heading “Expenses Paid During Period.” |
If Expenses Paid During Period were $7.50, then 8.6 x $7.50 = $64.50. |
In this illustration, the estimated expenses paid this period are $64.50.
Hypothetical Example for Comparison with Other Funds
Information in the second line (Hypothetical) for each class in the table can help you compare ongoing costs of investing in the Fund with those of other mutual funds. This information may not be used to estimate the actual ending account balance or expenses you paid during the period. The hypothetical “Ending Account Value” is based on the actual expense ratio for each class and an assumed 5% annual rate of return before expenses, which does not represent the Fund’s actual return. The figure under the heading “Expenses Paid During Period” shows the hypothetical expenses your account would have incurred under this scenario. You can compare this figure with the 5% hypothetical examples that appear in shareholder reports of other funds.
Please note that expenses shown in the table are meant to highlight ongoing costs and do not reflect any transaction costs, such as sales charges. Therefore, the second line for each class is useful in comparing ongoing costs only, and will not help you compare total costs of owning different funds. In addition, if transaction costs were included, your total costs would have been higher. Please refer to the Fund prospectus for additional information on operating expenses.
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FRANKLIN INCOME FUND
YOUR FUND’S EXPENSES
Beginning Account | Ending Account | Expenses Paid During | ||||
Share Class | Value 10/1/14 | Value 3/31/15 | Period* 10/1/14–3/31/15 | |||
A | ||||||
Actual | $ | 1,000 | $ | 987.90 | $ | 2.97 |
Hypothetical (5% return before expenses) | $ | 1,000 | $ | 1,021.94 | $ | 3.02 |
C | ||||||
Actual | $ | 1,000 | $ | 985.40 | $ | 5.44 |
Hypothetical (5% return before expenses) | $ | 1,000 | $ | 1,019.45 | $ | 5.54 |
R | ||||||
Actual | $ | 1,000 | $ | 986.00 | $ | 4.70 |
Hypothetical (5% return before expenses) | $ | 1,000 | $ | 1,020.19 | $ | 4.78 |
R6 | ||||||
Actual | $ | 1,000 | $ | 988.90 | $ | 1.88 |
Hypothetical (5% return before expenses) | $ | 1,000 | $ | 1,023.04 | $ | 1.92 |
Advisor | ||||||
Actual | $ | 1,000 | $ | 988.50 | $ | 2.23 |
Hypothetical (5% return before expenses) | $ | 1,000 | $ | 1,022.69 | $ | 2.27 |
*Expenses are calculated using the most recent six-month expense ratio, net of expense waivers, annualized for each class (A: 0.60%;
C: 1.10%; R: 0.95%; R6: 0.38%; and Advisor: 0.45%), multiplied by the average account value over the period, multiplied by 182/365 to
reflect the one-half year period.
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Semiannual Report | 27
Franklin U.S. Government Securities Fund
This semiannual report for Franklin U.S. Government Securities Fund covers the period ended March 31, 2015.
Your Fund’s Goal and Main Investments
The Fund seeks income by investing at least 80% of its net assets in U.S. government securities. The Fund presently invests substantially all of its assets in Government National Mortgage Association obligations (Ginnie Maes).
Since 1983, the Fund has invested substantially in Ginnie Mae securities, which carry a guarantee backed by the full faith and credit of the U.S. government as to the timely payment of interest and principal.1 Issued by the Government National Mortgage Association (GNMA), Ginnie Maes have been among the highest yielding U.S. government obligations available.
Performance data represent past performance, which does not guarantee future results. Investment return and principal value will fluctuate, and you may have a gain or loss when you sell your shares. Current performance may differ from figures shown. Please visit franklintempleton.com or call (800) 342-5236 for most recent month-end performance.
Portfolio Breakdown | ||
Based on Total Investments as of 3/31/15 | ||
GNMA | 97.7 | % |
Short-Term Investments & Other Net Assets | 2.3 | % |
Performance Overview
The Fund’s Class A shares generated a +2.15% cumulative total return for the six months under review. In comparison, the Fund’s peers, as measured by the Lipper GNMA Funds Classification Average, which consists of funds chosen by Lipper that invest primarily in GNMAs, posted a +1.91% total return.2 The Barclays U.S. Government Index: Intermediate Component, the intermediate component of the Barclays U.S. Government Index, returned +2.21% for the same period.3 The Fund’s return reflects the effect of management fees and expenses, while the Barclays U.S. Government Index: Intermediate Component does not have such costs. You can find the Fund’s long-term performance data in the Performance Summary beginning on page 30.
Investment Strategy
We currently invest the Fund’s assets predominantly in GNMA obligations. We analyze securities using proprietary models to help us identify attractive investment opportunities. The Fund’s short-term investments may include short-term government securities and cash or cash equivalents.
Dividend Distributions* | |||||
10/1/14–3/31/15 | |||||
Dividend per Share (cents) | |||||
Advisor | |||||
Month | Class A | Class C | Class R | Class R6 | Class |
October | 1.84 | 1.56 | 1.64 | 1.99 | 1.92 |
November | 1.79 | 1.52 | 1.60 | 1.94 | 1.87 |
December | 1.83 | 1.55 | 1.63 | 1.98 | 1.91 |
January | 1.82 | 1.54 | 1.62 | 1.98 | 1.90 |
February | 1.81 | 1.56 | 1.63 | 1.95 | 1.88 |
March | 1.77 | 1.49 | 1.58 | 1.93 | 1.85 |
Total | 10.86 | 9.22 | 9.70 | 11.77 | 11.33 |
*All Fund distributions will vary depending upon current market conditions, and past
distributions are not indicative of future trends.
Manager’s Discussion
The U.S. economy showed strength during the reporting period. Although economic expansion moderated in 2014’s fourth quarter, inflation and the unemployment rate declined during the period. In the real estate market, slightly lower prices, an improved labor market and low interest rates contributed to growth in home sales. Inventory levels, however, remained tight and could increase price levels. The U.S. Federal Reserve Board (Fed) ceased its bond buying program
1. Securities owned by the Fund, but not shares of the Fund, are guaranteed by the U.S. government, its agencies or instrumentalities as to timely payment of principal
and interest. The Fund’s yield and share price are not guaranteed and will vary with market conditions.
2. Source: Lipper, a Thomson Reuters Company. For the six-month period ended 3/31/15, this category consisted of 60 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 or other factors had been considered.
3. Source: Morningstar.
The indexes are unmanaged and include reinvestment of any income or distributions. One cannot invest directly in an index, and an index is not representative of the
Fund’s portfolio.
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 92.
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FRANKLIN U.S. GOVERNMENT SECURITIES FUND
in October 2014 and stated near period-end that it might maintain low interest rates.
Ginnie Mae (GNMA) mortgage-backed securities (MBS) performed well during the period and produced positive total returns but were outpaced by strong performance from Treasuries.
In our view, agency MBS remained fully valued. Questions persisted, however, about the demand source for agency MBS now that the Fed has ended its buying program. We felt demand from banks, mortgage real estate investment trusts, overseas investors and domestic money managers would need to rise to compensate for the Fed’s reduced presence in the MBS sector. We believe prepayment levels could increase if mortgage rates continue to approach their lowest levels since the spring of 2013.
Within the agency mortgage pass-through sector, GNMA MBS lagged their Fannie Mae MBS and Freddie Mac MBS counterparts. Within Ginnie Maes, higher coupon bonds under-performed lower coupon bonds in total returns and excess returns over Treasuries.
The Fund maintains a conservative, disciplined investment strategy and invests entirely in GNMA mortgage pass-throughs, which remain the only MBS that are backed by the full faith and credit of the U.S. government — the same guarantee applicable to U.S. Treasuries.1 Our collateral-intensive research approach can allow us to uncover dislocations across the GNMA markets and associated misvaluation of prepayment risk. We continue to focus on specified pools where we believe our experience and continual investment in new technologies help us uncover these discrepancies.
During the period, we were more weighted toward GNMA IIs (pools of mortgages from multiple issuers) than GNMA Is (pools of mortgages from single issuers). Over the period, we added to GNMA II 3.5% and 4.0% coupons while reducing exposure to 4.5% coupons. Our heaviest allocation was in 3.5%, 4.0% and 4.5% coupons. The Fund’s position relative to the benchmark in mid- to higher coupon 4.5% and 5.0% GNMA securities generally benefited performance, while our allocation to lower coupon 3.0% and 3.5% GNMAs generally detracted from performance.
Thank you for your continued participation in Franklin U.S. Government Securities Fund. We welcome your comments and questions and look forward to serving your investment needs in the years ahead.
The foregoing information reflects our analysis, opinions and portfolio holdings as of March 31, 2015, the end of the reporting period. The way we implement our main investment strategies and the resulting portfolio holdings may change depending on factors such as market and economic conditions. These opinions may not be relied upon as investment advice or an offer for a particular security. The information is not a complete analysis of every aspect of any market, country, industry, security or the Fund. Statements of fact are from sources considered reliable, but the investment manager makes no representation or warranty as to their completeness or accuracy. Although historical performance is no guarantee of future results, these insights may help you understand our investment management philosophy.
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Semiannual Report | 29
FRANKLIN U.S. GOVERNMENT SECURITIES FUND
Performance Summary as of March 31, 2015
Your dividend income will vary depending on dividends or interest paid by securities in the Fund’s portfolio, adjusted for operating expenses of each class. Capital gain distributions are net profits realized from the sale of portfolio securities. The performance tables 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.
Net Asset Value | |||||
Share Class (Symbol) | 3/31/15 | 9/30/14 | Change | ||
A (FKUSX) | $ | 6.51 | $ | 6.48 | +$0.03 |
C (FRUGX) | $ | 6.46 | $ | 6.44 | +$0.02 |
R (FUSRX) | $ | 6.50 | $ | 6.48 | +$0.02 |
R6 (FGORX) | $ | 6.52 | $ | 6.50 | +$0.02 |
Advisor (FUSAX) | $ | 6.53 | $ | 6.50 | +$0.03 |
Distributions (10/1/14–3/31/15) | |||||
Dividend | |||||
Share Class | Income | ||||
A | $ | 0.1086 | |||
C | $ | 0.0922 | |||
R | $ | 0.0970 | |||
R6 | $ | 0.1177 | |||
Advisor | $ | 0.1133 |
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FRANKLIN U.S. GOVERNMENT SECURITIES FUND
PERFORMANCE SUMMARY
Performance as of 3/31/151
Cumulative total return excludes sales charges. Average annual total return includes maximum sales charges. Class A: 4.25% maximum initial sales charge; Class C: 1% contingent deferred sales charge in first year only;
Class R/R6/Advisor Class: no sales charges.
Cumulative | Average Annual | Total Annual | ||||
Share Class | Total Return2 | Total Return3 | Operating Expenses4 | |||
A | 0.75 | % | ||||
6-Month | +2.15 | % | -2.22 | % | ||
1-Year | +3.92 | % | -0.53 | % | ||
5-Year | +17.08 | % | +2.30 | % | ||
10-Year | +51.13 | % | +3.77 | % | ||
C | 1.25 | % | ||||
6-Month | +1.75 | % | +0.75 | % | ||
1-Year | +3.26 | % | +2.26 | % | ||
5-Year | +13.88 | % | +2.63 | % | ||
10-Year | +43.45 | % | +3.67 | % | ||
R | 1.10 | % | ||||
6-Month | +1.81 | % | +1.81 | % | ||
1-Year | +3.40 | % | +3.40 | % | ||
5-Year | +14.82 | % | +2.80 | % | ||
10-Year | +45.75 | % | +3.84 | % | ||
R6 | 0.47 | % | ||||
6-Month | +2.13 | % | +2.13 | % | ||
1-Year | +4.04 | % | +4.04 | % | ||
Since Inception (5/1/13) | +3.67 | % | +1.90 | % | ||
Advisor | 0.60 | % | ||||
6-Month | +2.22 | % | +2.22 | % | ||
1-Year | +4.06 | % | +4.06 | % | ||
5-Year | +17.90 | % | +3.35 | % | ||
10-Year | +53.32 | % | +4.37 | % |
Distribution | 30-Day Standardized Yield6 | |||||
Share Class | Rate5 | (with waiver) | (without waiver) | |||
A | 3.12 | % | 2.24 | % | 2.24 | % |
C | 2.77 | % | 1.83 | % | 1.83 | % |
R | 2.92 | % | 1.98 | % | 1.98 | % |
R6 | 3.55 | % | 2.63 | % | 2.63 | % |
Advisor | 3.40 | % | 2.49 | % | 2.49 | % |
Performance data represent past performance, which does not guarantee future results. Investment return and principal value will fluctuate, and you may have a gain or loss when you sell your shares. Current performance may differ from figures shown. For most recent month-end performance, go to franklintempleton.com or call (800) 342-5236.
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Semiannual Report | 31
FRANKLIN U.S. GOVERNMENT SECURITIES FUND
PERFORMANCE SUMMARY
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.
Class C: | These shares have higher annual fees and expenses than Class A shares. |
Class R: | Shares are available to certain eligible investors as described in the prospectus. These shares have higher annual fees and expenses than Class A shares. |
Class R6: | Shares are available to certain eligible investors as described in the prospectus. |
Advisor Class: | Shares are available to certain eligible investors as described in the prospectus. |
1. The Fund has a fee waiver associated with its investments in a Franklin Templeton money fund, contractually guaranteed through at least its current fiscal year-end.
Class R6 has a fee waiver contractually guaranteed through at least the Fund’s current fiscal year-end. Fund investment results reflect the fee waivers, to the extent
applicable; without these reductions, 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. Six-month return has not been annualized.
4. Figures are as stated in the Fund’s current prospectus. In periods of market volatility, assets may decline significantly, causing total annual Fund operating expenses to
become higher than the figures shown.
5. Distribution rate is based on an annualization of the respective class’s March dividend and the maximum offering price (NAV for Classes C, R, R6 and Advisor) per share
on 3/31/15.
6. The 30-day standardized yield for the 30 days ended 3/31/15 reflects an estimated yield to maturity (assuming all portfolio securities are held to maturity). It should be
regarded as an estimate of the Fund’s rate of investment income, and it may not equal the Fund’s actual income distribution rate (which reflects the Fund’s past dividends
paid to shareholders) or the income reported in the Fund’s financial statements.
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FRANKLIN U.S. GOVERNMENT SECURITIES FUND
Your Fund’s Expenses
As a Fund shareholder, you can incur two types of costs:
- Transaction costs, including sales charges (loads) on Fund purchases; and
- Ongoing Fund costs, including management fees, distribu- tion and service (12b-1) fees, and other Fund expenses. All mutual funds have ongoing costs, sometimes referred to as operating expenses.
The following table shows ongoing costs of investing in the Fund and can help you understand these costs and compare them with those of other mutual funds. The table assumes a $1,000 investment held for the six months indicated.
Actual Fund Expenses
The first line (Actual) for each share class listed in the table provides actual account values and expenses. The “Ending Account Value” is derived from the Fund’s actual return, which includes the effect of Fund expenses.
You can estimate the expenses you paid during the period by following these steps. Of course, your account value and expenses will differ from those in this illustration:
1. | Divide your account value by $1,000. |
If an account had an $8,600 value, then $8,600 ÷ $1,000 = 8.6. | |
2. | Multiply the result by the number under the heading “Expenses Paid During Period.” |
If Expenses Paid During Period were $7.50, then 8.6 x $7.50 = $64.50. |
In this illustration, the estimated expenses paid this period are $64.50.
Hypothetical Example for Comparison with Other Funds
Information in the second line (Hypothetical) for each class in the table can help you compare ongoing costs of investing in the Fund with those of other mutual funds. This information may not be used to estimate the actual ending account balance or expenses you paid during the period. The hypothetical “Ending Account Value” is based on the actual expense ratio for each class and an assumed 5% annual rate of return before expenses, which does not represent the Fund’s actual return. The figure under the heading “Expenses Paid During Period” shows the hypothetical expenses your account would have incurred under this scenario. You can compare this figure with the 5% hypothetical examples that appear in shareholder reports of other funds.
Please note that expenses shown in the table are meant to highlight ongoing costs and do not reflect any transaction costs, such as sales charges. Therefore, the second line for each class is useful in comparing ongoing costs only, and will not help you compare total costs of owning different funds. In addition, if transaction costs were included, your total costs would have been higher. Please refer to the Fund prospectus for additional information on operating expenses.
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Semiannual Report | 33
FRANKLIN U.S. GOVERNMENT SECURITIES FUND | ||||||
YOUR FUND’S EXPENSES | ||||||
Beginning Account | Ending Account | Expenses Paid During | ||||
Share Class | Value 10/1/14 | Value 3/31/15 | Period* 10/1/14–3/31/15 | |||
A | ||||||
Actual | $ | 1,000 | $ | 1,021.50 | $ | 3.83 |
Hypothetical (5% return before expenses) | $ | 1,000 | $ | 1,021.14 | $ | 3.83 |
C | ||||||
Actual | $ | 1,000 | $ | 1,017.50 | $ | 6.34 |
Hypothetical (5% return before expenses) | $ | 1,000 | $ | 1,018.65 | $ | 6.34 |
R | ||||||
Actual | $ | 1,000 | $ | 1,018.10 | $ | 5.58 |
Hypothetical (5% return before expenses) | $ | 1,000 | $ | 1,019.40 | $ | 5.59 |
R6 | ||||||
Actual | $ | 1,000 | $ | 1,021.30 | $ | 2.37 |
Hypothetical (5% return before expenses) | $ | 1,000 | $ | 1,022.59 | $ | 2.37 |
Advisor | ||||||
Actual | $ | 1,000 | $ | 1,022.20 | $ | 3.08 |
Hypothetical (5% return before expenses) | $ | 1,000 | $ | 1,021.89 | $ | 3.07 |
*Expenses are calculated using the most recent six-month expense ratio, net of expense waivers, annualized for each class (A: 0.76%;
C: 1.26%; R: 1.11%; R6: 0.47%; and Advisor: 0.61%), multiplied by the average account value over the period, multiplied by 182/365 to
reflect the one-half year period.
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Franklin Utilities Fund
This semiannual report for Franklin Utilities Fund covers the period ended March 31, 2015.
Your Fund’s Goal and Main Investments
The Fund seeks both capital appreciation and current income by investing at least 80% of its net assets in public utility company securities.
Performance Overview
The Fund’s Class A shares delivered a +6.19% cumulative total return for the six months under review. In comparison, the Standard & Poor’s 500 (S&P 500®) Index, which is a broad measure of U.S. stock performance, generated a +5.93% total return, and the S&P 500 Utilities Index, which measures the performance of all utilities stocks in the S&P 500 Index, produced a +7.34% total return.1 You can find the Fund’s long-term performance data in the Performance Summary beginning on page 37.
Performance data represent past performance, which does not guarantee future results. Investment return and principal value will fluctuate, and you may have a gain or loss when you sell your shares. Current performance may differ from figures shown. Please visit franklintempleton.com or call (800) 342-5236 for most recent month-end performance.
Investment Strategy
We search for the best return opportunities available in the global utilities arena with a specific focus on the U.S. electricity and gas sector. Generally, we look for companies producing a high percentage of earnings from regulated utility franchise operations.
Manager’s Discussion
For the six months under review, the Fund’s utilities sector holdings outperformed the S&P 500 Index and the S&P 500 Utilities Index, while the Fund’s energy sector holdings under-performed both indexes.2
Electric utilities led the Fund’s notable contributors to absolute performance. In the fourth quarter of 2014, California-based electric power generator and distributor Edison International reported strong financial results, driven by its Southern
California Edison subsidiary’s rate base growth, higher income tax benefits and lower severance costs. The company also maintained high levels of investment to help meet California’s public policy objectives and assure grid reliability for its customers. Fourth-quarter 2014 earnings for Florida-based electricity generator and distributor NextEra Energy increased from the prior year’s, reflecting higher revenues across all of its subsidiaries. The company experienced gains following an announcement of a proposed merger with Hawaiian Electric Industries, which was approved by the Federal Energy Regulatory Commission by period-end. The company also benefited after NextEra outlined plans for long-term earnings growth.
Multi-utilities also helped absolute results. PG&E, a public utility operating in northern and central California, experienced double-digit earnings growth in 2014’s fourth quarter mostly due to higher electricity and natural gas rates. Although the company invested significantly in a massive safety program to
1. Source: Morningstar.
The indexes are unmanaged and include reinvested dividends. One cannot invest directly in an index, and an index is not representative of the Fund’s portfolio.
2. The utilities sector comprises electric utilities, gas utilities, multi-utilities and water utilities in the SOI. The energy sector comprises oil, gas and consumable fuels
in the SOI.
See www.franklintempletondatasources.com for additional data provider information.
The dollar value, number of shares or principal amount, and names of all portfolio holdings are listed in the Fund’s Statement of Investments (SOI).
The SOI begins on page 100.
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Semiannual Report | 35
FRANKLIN UTILITIES FUND
prevent another fatal pipeline explosion and has an upcoming large fine from California regulators, analysts viewed the company favorably based on its strong fundamentals and the necessity of electricity regardless of economic conditions. Minnesota-based electricity and natural gas generator and distributor Xcel Energy reported better-than-expected fourth-quarter 2014 earnings resulting from rate increases in several jurisdictions, weather-normalized sales growth and lower interest charges.
Top 10 Equity Holdings | ||
3/31/15 | ||
Company | % of Total | |
Sector/Industry | Net Assets | |
NextEra Energy Inc. | 5.0 | % |
Electric Utilities | ||
Dominion Resources Inc. | 4.9 | % |
Multi-Utilities | ||
Edison International | 4.6 | % |
Electric Utilities | ||
Duke Energy Corp. | 4.5 | % |
Electric Utilities | ||
Sempra Energy | 4.4 | % |
Multi-Utilities | ||
American Electric Power Co. Inc. | 3.8 | % |
Electric Utilities | ||
Exelon Corp. | 3.7 | % |
Electric Utilities | ||
PG&E Corp. | 3.5 | % |
Multi-Utilities | ||
The Southern Co. | 3.1 | % |
Electric Utilities | ||
PPL Corp. | 2.8 | % |
Electric Utilities |
The energy sector in general was hurt by lower oil prices during the period and weighed on the Fund’s absolute performance. Key energy detractors included TransCanada and The Williams Cos. In addition, some Fund holdings in other sectors lost value and hindered absolute Fund performance. Shares of British power producer Drax Group fell to their lowest levels in two years following announced U.K. government changes to a subsidy scheme for biomass plants, as well as an investigation by the European Commission into how subsidies are granted for U.K. biomass conversions. Drax has been gradually converting its coal-fired power plant to biomass and would be negatively impacted by the government’s reducing subsidy amounts for qualifying renewable energy projects. Company management also warned of headwinds in 2015 arising from declining commodity prices. The stock of MDU Resources Group, a diversified natural resources company with energy and transportation infrastructure businesses, fell after reporting lower-than-expected fourth-quarter 2014 earnings and revenue results. Additionally, a weak outlook for crude oil prices weighed on the stock price. Texas-based domestic energy delivery company CenterPoint Energy’s shares suffered from the potential negative effects of Houston’s slowing economic growth and declining commodity prices.
Thank you for your continued participation in Franklin Utilities Fund. We look forward to serving your future investment needs.
The foregoing information reflects our analysis, opinions and portfolio holdings as of March 31, 2015, the end of the reporting period. The way we implement our main investment strategies and the resulting portfolio holdings may change depending on factors such as market and economic conditions. These opinions may not be relied upon as investment advice or an offer for a particular security. The information is not a complete analysis of every aspect of any market, country, industry, security or the Fund. Statements of fact are from sources considered reliable, but the investment manager makes no representation or warranty as to their completeness or accuracy. Although historical performance is no guarantee of future results, these insights may help you understand our investment management philosophy.
36 | Semiannual Report
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FRANKLIN UTILITIES FUND
Performance Summary as of March 31, 2015
Your dividend income will vary depending on dividends or interest paid by securities in the Fund’s portfolio, adjusted for operating expenses of each class. Capital gain distributions are net profits realized from the sale of portfolio securities. The performance tables 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.
Net Asset Value | ||||||||
Share Class (Symbol) | 3/31/15 | 9/30/14 | Change | |||||
A (FKUTX) | $ | 16.95 | $ | 16.58 | +$ | 0.37 | ||
C (FRUSX) | $ | 16.88 | $ | 16.50 | +$ | 0.38 | ||
R (FRURX) | $ | 16.90 | $ | 16.52 | +$ | 0.38 | ||
R6 (FUFRX) | $ | 17.06 | $ | 16.68 | +$ | 0.38 | ||
Advisor (FRUAX) | $ | 17.06 | $ | 16.68 | +$ | 0.38 | ||
Distributions (10/1/14–3/31/15) | ||||||||
Dividend | Short-Term | Long-Term | ||||||
Share Class | Income | Capital Gain | Capital Gain | Total | ||||
A | $ | 0.2450 | $ | 0.0648 | $ | 0.3530 | $ | 0.6628 |
C | $ | 0.1936 | $ | 0.0648 | $ | 0.3530 | $ | 0.6114 |
R | $ | 0.2086 | $ | 0.0648 | $ | 0.3530 | $ | 0.6264 |
R6 | $ | 0.2716 | $ | 0.0648 | $ | 0.3530 | $ | 0.6894 |
Advisor | $ | 0.2605 | $ | 0.0648 | $ | 0.3530 | $ | 0.6783 |
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FRANKLIN UTILITIES FUND
PERFORMANCE SUMMARY
Performance as of 3/31/151
Cumulative total return excludes sales charges. Average annual total return and value of $10,000 investment include maximum sales charges. Class A: 4.25% maximum initial sales charge; Class C: 1% contingent deferred sales charge in first year only;
Class R/R6/Advisor Class: no sales charges.
Cumulative | Average Annual | Value of | Total Annual | |||||
Share Class | Total Return2 | Total Return3 | $ | 10,000 Investment4 | Operating Expenses5 | |||
A | 0.75 | % | ||||||
6-Month | +6.19 | % | +1.66 | % | $ | 10,166 | ||
1-Year | +10.80 | % | +6.06 | % | $ | 10,606 | ||
5-Year | +89.26 | % | +12.63 | % | $ | 18,127 | ||
10-Year | +144.72 | % | +8.89 | % | $ | 23,428 | ||
C | 1.25 | % | ||||||
6-Month | +5.97 | % | +4.97 | % | $ | 10,497 | ||
1-Year | +10.25 | % | +9.25 | % | $ | 10,925 | ||
5-Year | +84.62 | % | +13.05 | % | $ | 18,462 | ||
10-Year | +132.66 | % | +8.81 | % | $ | 23,266 | ||
R | 1.10 | % | ||||||
6-Month | +6.05 | % | +6.05 | % | $ | 10,605 | ||
1-Year | +10.41 | % | +10.41 | % | $ | 11,041 | ||
5-Year | +86.01 | % | +13.22 | % | $ | 18,601 | ||
10-Year | +136.29 | % | +8.98 | % | $ | 23,629 | ||
R6 | 0.48 | % | ||||||
6-Month | +6.38 | % | +6.38 | % | $ | 10,638 | ||
1-Year | +11.10 | % | +11.10 | % | $ | 11,110 | ||
Since Inception (5/1/13) | +17.76 | % | +8.91 | % | $ | 11,776 | ||
Advisor | 0.60 | % | ||||||
6-Month | +6.31 | % | +6.31 | % | $ | 10,631 | ||
1-Year | +10.97 | % | +10.97 | % | $ | 11,097 | ||
5-Year | +90.83 | % | +13.80 | % | $ | 19,083 | ||
10-Year | +148.47 | % | +9.53 | % | $ | 24,847 |
Distribution | 30-Day Standardized Yield7 | |||||
Share Class | Rate6 | (with waiver) | (without waiver) | |||
A | 2.60 | % | 2.80 | % | 2.80 | % |
C | 2.04 | % | 2.41 | % | 2.41 | % |
R | 2.24 | % | 2.55 | % | 2.55 | % |
R6 | 3.04 | % | 3.17 | % | 3.17 | % |
Advisor | 2.90 | % | 3.07 | % | 3.07 | % |
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.
38 | Semiannual Report
franklintempleton.com
FRANKLIN UTILITIES FUND |
PERFORMANCE SUMMARY |
All investments involve risks, including possible loss of principal. In addition to being sensitive to other factors, securities issued by utility companies have historically been 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.
Class C: | These shares have higher annual fees and expenses than Class A shares. |
Class R: | Shares are available to certain eligible investors as described in the prospectus. These shares have higher annual fees and expenses than Class A shares. |
Class R6: | Shares are available to certain eligible investors as described in the prospectus. |
Advisor Class: | Shares are available to certain eligible investors as described in the prospectus. |
1. The Fund has a fee waiver associated with its investments in a Franklin Templeton money fund, contractually guaranteed through at least its current fiscal year-end.
Class R6 has a fee waiver contractually guaranteed through at least the Fund’s current fiscal year-end. Fund investment results reflect the fee waivers, to the extent
applicable; without these reductions, 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. Six-month return has not been annualized.
4. These figures represent the value of a hypothetical $10,000 investment in the Fund over the periods indicated.
5. Figures are as stated in the Fund’s current prospectus. In periods of market volatility, assets may decline significantly, causing total annual Fund operating expenses to
become higher than the figures shown.
6. Distribution rate is based on an annualization of the respective class’s current quarterly dividend and the maximum offering price (NAV for Classes C, R, R6 and Advisor)
per share on 3/31/15.
7. The 30-day standardized yield for the 30 days ended 3/31/15 reflects an estimated yield to maturity (assuming all portfolio securities are held to maturity). It should be
regarded as an estimate of the Fund’s rate of investment income, and it may not equal the Fund’s actual income distribution rate (which reflects the Fund’s past dividends
paid to shareholders) or the income reported in the Fund’s financial statements.
franklintempleton.com
Semiannual Report | 39
FRANKLIN UTILITIES FUND
Your Fund’s Expenses
As a Fund shareholder, you can incur two types of costs:
- Transaction costs, including sales charges (loads) on Fund purchases; and
- Ongoing Fund costs, including management fees, distribu- tion and service (12b-1) fees, and other Fund expenses. All mutual funds have ongoing costs, sometimes referred to as operating expenses.
The following table shows ongoing costs of investing in the Fund and can help you understand these costs and compare them with those of other mutual funds. The table assumes a $1,000 investment held for the six months indicated.
Actual Fund Expenses
The first line (Actual) for each share class listed in the table provides actual account values and expenses. The “Ending Account Value” is derived from the Fund’s actual return, which includes the effect of Fund expenses.
You can estimate the expenses you paid during the period by following these steps. Of course, your account value and expenses will differ from those in this illustration:
1. | Divide your account value by $1,000. |
If an account had an $8,600 value, then $8,600 ÷ $1,000 = 8.6. | |
2. | Multiply the result by the number under the heading “Expenses Paid During Period.” |
If Expenses Paid During Period were $7.50, then 8.6 x $7.50 = $64.50. |
In this illustration, the estimated expenses paid this period are $64.50.
Hypothetical Example for Comparison with Other Funds
Information in the second line (Hypothetical) for each class in the table can help you compare ongoing costs of investing in the Fund with those of other mutual funds. This information may not be used to estimate the actual ending account balance or expenses you paid during the period. The hypothetical “Ending Account Value” is based on the actual expense ratio for each class and an assumed 5% annual rate of return before expenses, which does not represent the Fund’s actual return. The figure under the heading “Expenses Paid During Period” shows the hypothetical expenses your account would have incurred under this scenario. You can compare this figure with the 5% hypothetical examples that appear in shareholder reports of other funds.
Please note that expenses shown in the table are meant to highlight ongoing costs and do not reflect any transaction costs, such as sales charges. Therefore, the second line for each class is useful in comparing ongoing costs only, and will not help you compare total costs of owning different funds. In addition, if transaction costs were included, your total costs would have been higher. Please refer to the Fund prospectus for additional information on operating expenses.
40 | Semiannual Report
franklintempleton.com
FRANKLIN UTILITIES FUND
YOUR FUND’S EXPENSES
Beginning Account | Ending Account | Expenses Paid During | ||||
Share Class | Value 10/1/14 | Value 3/31/15 | Period* 10/1/14–3/31/15 | |||
A | ||||||
Actual | $ | 1,000 | $ | 1,061.90 | $ | 3.80 |
Hypothetical (5% return before expenses) | $ | 1,000 | $ | 1,021.24 | $ | 3.73 |
C | ||||||
Actual | $ | 1,000 | $ | 1,059.70 | $ | 6.37 |
Hypothetical (5% return before expenses) | $ | 1,000 | $ | 1,018.75 | $ | 6.24 |
R | ||||||
Actual | $ | 1,000 | $ | 1,060.50 | $ | 5.60 |
Hypothetical (5% return before expenses) | $ | 1,000 | $ | 1,019.50 | $ | 5.49 |
R6 | ||||||
Actual | $ | 1,000 | $ | 1,063.80 | $ | 2.47 |
Hypothetical (5% return before expenses) | $ | 1,000 | $ | 1,022.54 | $ | 2.42 |
Advisor | ||||||
Actual | $ | 1,000 | $ | 1,063.10 | $ | 3.03 |
Hypothetical (5% return before expenses) | $ | 1,000 | $ | 1,021.99 | $ | 2.97 |
*Expenses are calculated using the most recent six-month expense ratio, net of expense waivers, annualized for each class (A: 0.74%;
C: 1.24%; R: 1.09%; R6: 0.48%; and Advisor: 0.59%), multiplied by the average account value over the period, multiplied by 182/365 to
reflect the one-half year period.
franklintempleton.com
Semiannual Report | 41
FRANKLIN CUSTODIAN FUNDS | ||||||||||||||||||
Financial Highlights | ||||||||||||||||||
Franklin DynaTech Fund | ||||||||||||||||||
Six Months Ended | ||||||||||||||||||
March 31, 2015 | Year Ended September 30, | |||||||||||||||||
(unaudited) | 2014 | 2013 | 2012 | 2011 | 2010 | |||||||||||||
Class A | ||||||||||||||||||
Per share operating performance | ||||||||||||||||||
(for a share outstanding throughout the period) | ||||||||||||||||||
Net asset value, beginning of period | $ | 46.08 | $ | 42.13 | $ | 34.00 | $ | 27.66 | $ | 27.16 | $ | 23.20 | ||||||
Income from investment operationsa: | ||||||||||||||||||
Net investment income (loss)b | (0.11 | ) | (0.18 | ) | (0.12 | ) | (0.11 | ) | (0.14 | ) | (0.11 | ) | ||||||
Net realized and unrealized gains (losses) | 4.28 | 5.94 | 8.25 | 7.10 | 0.64 | 4.07 | ||||||||||||
Total from investment operations | 4.17 | 5.76 | 8.13 | 6.99 | 0.50 | 3.96 | ||||||||||||
Less distributions from net realized gains | (1.61 | ) | (1.81 | ) | — | (0.65 | ) | — | — | |||||||||
Net asset value, end of period | $ | 48.64 | $ | 46.08 | $ | 42.13 | $ | 34.00 | $ | 27.66 | $ | 27.16 | ||||||
Total returnc | 9.23 | % | 13.98 | % | 23.91 | % | 25.59 | % | 1.84 | % | 17.07 | % | ||||||
Ratios to average net assetsd | ||||||||||||||||||
Expenses | 0.89 | %e | 0.89 | %e,f | 0.94 | % | 0.96 | % | 0.97 | % | 1.03 | % | ||||||
Net investment income (loss) | (0.46 | )% | (0.41 | )% | (0.34 | )% | (0.35 | )% | (0.46 | )% | (0.44 | )% | ||||||
Supplemental data | ||||||||||||||||||
Net assets, end of period (000’s) | $ | 1,739,191 | $ | 1,504,338 | $ | 1,072,814 | $ | 898,665 | $ | 642,552 | $ | 566,764 | ||||||
Portfolio turnover rate | 16.68 | % | 26.43 | % | 35.40 | % | 16.65 | % | 30.11 | % | 31.39 | % |
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 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, and is not annualized for periods less than one year.
dRatios are annualized for periods less than one year.
eBenefit of waiver and payments by affiliates rounds to less than 0.01%.
fBenefit of expense reduction rounds to less than 0.01%.
42 | Semiannual Report | The accompanying notes are an integral part of these financial statements. franklintempleton.com
FRANKLIN CUSTODIAN FUNDS
FINANCIAL HIGHLIGHTS
Franklin DynaTech Fund (continued) | ||||||||||||||||||
Six Months Ended | ||||||||||||||||||
March 31, 2015 | Year Ended September 30, | |||||||||||||||||
(unaudited) | 2014 | 2013 | 2012 | 2011 | 2010 | |||||||||||||
Class C | ||||||||||||||||||
Per share operating performance | ||||||||||||||||||
(for a share outstanding throughout the period) | ||||||||||||||||||
Net asset value, beginning of period | $ | 40.53 | $ | 37.53 | $ | 30.52 | $ | 25.07 | $ | 24.81 | $ | 21.34 | ||||||
Income from investment operationsa: | ||||||||||||||||||
Net investment income (loss)b | (0.25 | ) | (0.46 | ) | (0.35 | ) | (0.32 | ) | (0.34 | ) | (0.28 | ) | ||||||
Net realized and unrealized gains (losses) | 3.75 | 5.27 | 7.36 | 6.42 | 0.60 | 3.75 | ||||||||||||
Total from investment operations | 3.50 | 4.81 | 7.01 | 6.10 | 0.26 | 3.47 | ||||||||||||
Less distributions from net realized gains | (1.61 | ) | (1.81 | ) | — | (0.65 | ) | — | — | |||||||||
Net asset value, end of period | $ | 42.42 | $ | 40.53 | $ | 37.53 | $ | 30.52 | $ | 25.07 | $ | 24.81 | ||||||
Total returnc | 8.84 | % | 13.13 | % | 22.97 | % | 24.67 | % | 1.05 | % | 16.26 | % | ||||||
Ratios to average net assetsd | ||||||||||||||||||
Expenses | 1.64 | %e | 1.64 | %e,f | 1.69 | % | 1.71 | % | 1.72 | % | 1.78 | % | ||||||
Net investment income (loss) | (1.21 | )% | (1.16 | )% | (1.09 | )% | (1.10 | )% | (1.21 | )% | (1.19 | )% | ||||||
Supplemental data | ||||||||||||||||||
Net assets, end of period (000’s) | $ | 246,118 | $ | 212,961 | $ | 176,556 | $ | 142,903 | $ | 105,707 | $ | 93,927 | ||||||
Portfolio turnover rate | 16.68 | % | 26.43 | % | 35.40 | % | 16.65 | % | 30.11 | % | 31.39 | % |
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 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, and is not annualized for periods less than one year.
dRatios are annualized for periods less than one year.
eBenefit of waiver and payments by affiliates rounds to less than 0.01%.
fBenefit of expense reduction rounds to less than 0.01%.
franklintempleton.com The accompanying notes are an integral part of these financial statements. | Semiannual Report | 43
FRANKLIN CUSTODIAN FUNDS |
FINANCIAL HIGHLIGHTS |
Franklin DynaTech Fund (continued) | ||||||||||||||||||
Six Months Ended | ||||||||||||||||||
March 31, 2015 | Year Ended September 30, | |||||||||||||||||
(unaudited) | 2014 | 2013 | 2012 | 2011 | 2010 | |||||||||||||
Class R | ||||||||||||||||||
Per share operating performance | ||||||||||||||||||
(for a share outstanding throughout the period) | ||||||||||||||||||
Net asset value, beginning of period | $ | 45.35 | $ | 41.58 | $ | 33.65 | $ | 27.44 | $ | 27.02 | $ | 23.13 | ||||||
Income from investment operationsa: | ||||||||||||||||||
Net investment income (loss)b | (0.16 | ) | (0.29 | ) | (0.21 | ) | (0.19 | ) | (0.22 | ) | (0.17 | ) | ||||||
Net realized and unrealized gains (losses) | 4.19 | 5.87 | 8.14 | 7.05 | 0.64 | 4.06 | ||||||||||||
Total from investment operations | 4.03 | 5.58 | 7.93 | 6.86 | 0.42 | 3.89 | ||||||||||||
Less distributions from net realized gains | (1.61 | ) | (1.81 | ) | — | (0.65 | ) | — | — | |||||||||
Net asset value, end of period | $ | 47.77 | $ | 45.35 | $ | 41.58 | $ | 33.65 | $ | 27.44 | $ | 27.02 | ||||||
Total returnc | 9.07 | % | 13.72 | % | 23.57 | % | 25.32 | % | 1.55 | % | 16.82 | % | ||||||
Ratios to average net assetsd | ||||||||||||||||||
Expenses | 1.14 | %e | 1.14 | %e,f | 1.19 | % | 1.21 | % | 1.22 | % | 1.28 | % | ||||||
Net investment income (loss) | (0.71 | )% | (0.66 | )% | (0.59 | )% | (0.60 | )% | (0.71 | )% | (0.69 | )% | ||||||
Supplemental data | ||||||||||||||||||
Net assets, end of period (000’s) | $ | 45,967 | $ | 45,230 | $ | 41,825 | $ | 33,338 | $ | 11,100 | $ | 7,034 | ||||||
Portfolio turnover rate | 16.68 | % | 26.43 | % | 35.40 | % | 16.65 | % | 30.11 | % | 31.39 | % |
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 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 is not annualized for periods less than one year.
dRatios are annualized for periods less than one year.
eBenefit of waiver and payments by affiliates rounds to less than 0.01%.
fBenefit of expense reduction rounds to less than 0.01%.
44 | Semiannual Report | The accompanying notes are an integral part of these financial statements. franklintempleton.com
FRANKLIN CUSTODIAN FUNDS |
FINANCIAL HIGHLIGHTS |
Franklin DynaTech Fund (continued) | |||||||||
Six Months Ended | Year Ended | ||||||||
March 31, 2015 | September 30, | ||||||||
(unaudited) | 2014 | 2013 | a | ||||||
Class R6 | |||||||||
Per share operating performance | |||||||||
(for a share outstanding throughout the period) | |||||||||
Net asset value, beginning of period | $ | 46.97 | $ | 42.74 | $ | 36.56 | |||
Income from investment operationsb: | |||||||||
Net investment income (loss)c | (0.02 | ) | (0.01 | ) | 0.01 | ||||
Net realized and unrealized gains (losses) | 4.37 | 6.05 | 6.17 | ||||||
Total from investment operations | 4.35 | 6.04 | 6.18 | ||||||
Less distributions from net realized gains | (1.61 | ) | (1.81 | ) | — | ||||
Net asset value, end of period | $ | 49.71 | $ | 46.97 | $ | 42.74 | |||
Total returnd | 9.45 | % | 14.45 | % | 16.90 | % | |||
Ratios to average net assetse | |||||||||
Expenses | 0.49 | %f | 0.49 | %f,g | 0.52 | % | |||
Net investment income (loss) | (0.06 | )% | (0.01 | )% | 0.08 | % | |||
Supplemental data | |||||||||
Net assets, end of period (000’s) | $ | 378,474 | $ | 342,466 | $ | 317,315 | |||
Portfolio turnover rate | 16.68 | % | 26.43 | % | 35.40 | % |
aFor the period May 1, 2013 (effective date) to September 30, 2013.
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 shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
cBased on average daily shares outstanding.
dTotal return is not annualized for periods less than one year.
eRatios are annualized for periods less than one year.
fBenefit of waiver and payments by affiliates rounds to less than 0.01%.
gBenefit of expense reduction rounds to less than 0.01%.
franklintempleton.com The accompanying notes are an integral part of these financial statements. | Semiannual Report | 45
FRANKLIN CUSTODIAN FUNDS |
FINANCIAL HIGHLIGHTS |
Franklin DynaTech Fund (continued) | ||||||||||||||||||
Six Months Ended | ||||||||||||||||||
March 31, 2015 | Year Ended September 30, | |||||||||||||||||
(unaudited) | 2014 | 2013 | 2012 | 2011 | 2010 | |||||||||||||
Advisor Class | ||||||||||||||||||
Per share operating performance | ||||||||||||||||||
(for a share outstanding throughout the period) | ||||||||||||||||||
Net asset value, beginning of period | $ | 46.87 | $ | 42.71 | $ | 34.39 | $ | 27.89 | $ | 27.33 | $ | 23.28 | ||||||
Income from investment operationsa: | ||||||||||||||||||
Net investment income (loss)b | (0.05 | ) | (0.07 | ) | (0.03 | ) | (0.03 | ) | (0.06 | ) | (0.05 | ) | ||||||
Net realized and unrealized gains (losses) | 4.35 | 6.04 | 8.35 | 7.18 | 0.62 | 4.10 | ||||||||||||
Total from investment operations | 4.30 | 5.97 | 8.32 | 7.15 | 0.56 | 4.05 | ||||||||||||
Less distributions from net realized gains | (1.61 | ) | (1.81 | ) | — | (0.65 | ) | — | — | |||||||||
Net asset value, end of period | $ | 49.56 | $ | 46.87 | $ | 42.71 | $ | 34.39 | $ | 27.89 | $ | 27.33 | ||||||
Total returnc | 9.36 | % | 14.29 | % | 24.19 | % | 25.96 | % | 2.05 | % | 17.40 | % | ||||||
Ratios to average net assetsd | ||||||||||||||||||
Expenses | 0.64 | %e | 0.64 | %e,f | 0.69 | % | 0.71 | % | 0.72 | % | 0.78 | % | ||||||
Net investment income (loss) | (0.21 | )% | (0.16 | )% | (0.09 | )% | (0.10 | )% | (0.21 | )% | (0.19 | )% | ||||||
Supplemental data | ||||||||||||||||||
Net assets, end of period (000’s) | $ | 177,393 | $ | 159,180 | $ | 122,287 | $ | 260,012 | $ | 102,221 | $ | 11,541 | ||||||
Portfolio turnover rate | 16.68 | % | 26.43 | % | 35.40 | % | 16.65 | % | 30.11 | % | 31.39 | % |
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 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 is not annualized for periods less than one year.
dRatios are annualized for periods less than one year.
eBenefit of waiver and payments by affiliates rounds to less than 0.01%.
fBenefit of expense reduction rounds to less than 0.01%.
46 | Semiannual Report | The accompanying notes are an integral part of these financial statements. franklintempleton.com
FRANKLIN CUSTODIAN FUNDS
Statement of Investments, March 31, 2015 (unaudited) | ||||
Franklin DynaTech Fund | ||||
Country | Shares | Value | ||
Common Stocks 97.4% | ||||
Aerospace & Defense 1.4% | ||||
The Boeing Co. | United States | 150,000 | $ | 22,512,000 |
Precision Castparts Corp. | United States | 70,000 | 14,700,000 | |
37,212,000 | ||||
Air Freight & Logistics 0.9% | ||||
FedEx Corp. | United States | 135,000 | 22,335,750 | |
Biotechnology 14.6% | ||||
aAlexion Pharmaceuticals Inc. | United States | 10,000 | 1,733,000 | |
aAlnylam Pharmaceuticals Inc. | United States | 165,000 | 17,229,300 | |
Amgen Inc. | United States | 150,000 | 23,977,500 | |
aBiogen Inc. | United States | 165,000 | 69,669,600 | |
aBioMarin Pharmaceutical Inc. | United States | 150,000 | 18,693,000 | |
aBluebird Bio Inc. | United States | 50,000 | 6,038,500 | |
aCelgene Corp. | United States | 600,000 | 69,168,000 | |
aCelldex Therapeutics Inc. | United States | 350,000 | 9,754,500 | |
aGilead Sciences Inc. | United States | 500,000 | 49,065,000 | |
aIncyte Corp. | United States | 220,000 | 20,165,200 | |
aKaryopharm Therapeutics Inc. | United States | 250,000 | 7,652,500 | |
aKite Pharma Inc. | United States | 100,000 | 5,768,000 | |
aMedivation Inc. | United States | 315,000 | 40,657,050 | |
aPuma Biotechnology Inc. | United States | 25,000 | 5,902,750 | |
aRegeneron Pharmaceuticals Inc. | United States | 70,000 | 31,603,600 | |
377,077,500 | ||||
Chemicals 1.7% | ||||
Cytec Industries Inc. | United States | 400,000 | 21,616,000 | |
Monsanto Co. | United States | 200,000 | 22,508,000 | |
44,124,000 | ||||
Commercial Services & Supplies 1.1% | ||||
aStericycle Inc. | United States | 200,000 | 28,086,000 | |
Communications Equipment 2.0% | ||||
aPalo Alto Networks Inc. | United States | 350,000 | 51,128,000 | |
Diversified Financial Services 1.9% | ||||
Intercontinental Exchange Inc. | United States | 100,000 | 23,327,000 | |
Moody’s Corp. | United States | 250,000 | 25,950,000 | |
49,277,000 | ||||
Electrical Equipment 0.5% | ||||
Acuity Brands Inc. | United States | 70,000 | 11,771,200 | |
Electronic Equipment, Instruments & Components 1.5% | ||||
Amphenol Corp., A | United States | 300,000 | 17,679,000 | |
aCognex Corp. | United States | 300,000 | 14,877,000 | |
aKeysight Technologies Inc. | United States | 200,000 | 7,430,000 | |
39,986,000 | ||||
Energy Equipment & Services 1.5% | ||||
aFMC Technologies Inc. | United States | 350,000 | 12,953,500 | |
Schlumberger Ltd. | United States | 300,000 | 25,032,000 | |
37,985,500 |
franklintempleton.com
Semiannual Report | 47
FRANKLIN CUSTODIAN FUNDS | ||||
STATEMENT OF INVESTMENTS (UNAUDITED) | ||||
Franklin DynaTech Fund (continued) | ||||
Country | Shares | Value | ||
Common Stocks (continued) | ||||
Health Care Equipment & Supplies 5.3% | ||||
Abbott Laboratories | United States | 500,000 | $ | 23,165,000 |
aDexCom Inc. | United States | 400,000 | 24,936,000 | |
aEdwards Lifesciences Corp. | United States | 250,000 | 35,615,000 | |
aHeartWare International Inc. | United States | 100,000 | 8,777,000 | |
aIDEXX Laboratories Inc. | United States | 165,000 | 25,489,200 | |
aNevro Corp. | United States | 100,000 | 4,793,000 | |
aThe Spectranetics Corp. | United States | 150,000 | 5,214,000 | |
Stryker Corp. | United States | 100,000 | 9,225,000 | |
137,214,200 | ||||
Health Care Providers & Services 2.9% | ||||
McKesson Corp. | United States | 200,000 | 45,240,000 | |
UnitedHealth Group Inc. | United States | 250,000 | 29,572,500 | |
74,812,500 | ||||
Health Care Technology 2.7% | ||||
aathenahealth Inc. | United States | 165,000 | 19,699,350 | |
aCerner Corp. | United States | 500,000 | 36,630,000 | |
aVeeva Systems Inc. | United States | 500,000 | 12,765,000 | |
69,094,350 | ||||
Internet & Catalog Retail 4.5% | ||||
aAmazon.com Inc. | United States | 130,000 | 48,373,000 | |
aJD.com Inc., ADR | China | 75,000 | 2,203,500 | |
aLiberty Ventures, A | United States | 250,000 | 10,502,500 | |
aNetflix Inc. | United States | 30,000 | 12,500,700 | |
aThe Priceline Group Inc. | United States | 25,000 | 29,103,750 | |
aVipshop Holdings Ltd., ADR | China | 500,000 | 14,720,000 | |
117,403,450 | ||||
Internet Software & Services 14.0% | ||||
aAlibaba Group Holding Ltd., ADR | China | 165,000 | 13,734,600 | |
aBaidu Inc., ADR | China | 125,000 | 26,050,000 | |
aDemandware Inc. | United States | 400,000 | 24,360,000 | |
aFacebook Inc., A | United States | 850,000 | 69,882,750 | |
aGoogle Inc., A | United States | 85,000 | 47,149,500 | |
aGoogle Inc., C | United States | 62,000 | 33,976,000 | |
aGrubHub Inc. | United States | 200,000 | 9,078,000 | |
aLinkedIn Corp., A | United States | 200,000 | 49,972,000 | |
MercadoLibre Inc. | Argentina | 100,000 | 12,252,000 | |
Tencent Holdings Ltd. | China | 2,500,000 | 47,499,887 | |
aTwitter Inc. | United States | 350,000 | 17,528,000 | |
aYelp Inc. | United States | 250,000 | 11,837,500 | |
363,320,237 | ||||
IT Services 4.5% | ||||
MasterCard Inc., A | United States | 650,000 | 56,153,500 | |
Visa Inc., A | United States | 900,000 | 58,869,000 | |
115,022,500 |
48 | Semiannual Report
franklintempleton.com
FRANKLIN CUSTODIAN FUNDS
STATEMENT OF INVESTMENTS (UNAUDITED)
Franklin DynaTech Fund (continued) | ||||
Country | Shares | Value | ||
Common Stocks (continued) | ||||
Life Sciences Tools & Services 3.8% | ||||
aFluidigm Corp. | United States | 150,000 | $ | 6,315,000 |
aIllumina Inc. | United States | 220,000 | 40,840,800 | |
Thermo Fisher Scientific Inc. | United States | 200,000 | 26,868,000 | |
aVWR Corp. | United States | 500,000 | 12,995,000 | |
aWaters Corp. | United States | 100,000 | 12,432,000 | |
99,450,800 | ||||
Machinery 0.7% | ||||
Flowserve Corp. | United States | 300,000 | 16,947,000 | |
Media 0.7% | ||||
aLiberty Broadband Corp., A | United States | 50,000 | 2,824,000 | |
aLiberty Broadband Corp., C | United States | 130,907 | 7,409,336 | |
Liberty Media Corp., A | United States | 200,000 | 7,710,000 | |
17,943,336 | ||||
Oil, Gas & Consumable Fuels 1.6% | ||||
Anadarko Petroleum Corp. | United States | 300,000 | 24,843,000 | |
Pioneer Natural Resources Co. | United States | 100,000 | 16,351,000 | |
41,194,000 | ||||
Pharmaceuticals 5.1% | ||||
aActavis PLC | United States | 225,000 | 66,964,500 | |
Bristol-Myers Squibb Co. | United States | 100,000 | 6,450,000 | |
aMallinckrodt PLC | United States | 100,000 | 12,665,000 | |
Merck KGaA | Germany | 200,000 | 22,485,568 | |
Perrigo Co. PLC | United States | 140,000 | 23,177,000 | |
131,742,068 | ||||
Real Estate Investment Trusts (REITs) 1.5% | ||||
American Tower Corp. | United States | 400,000 | 37,660,000 | |
Semiconductors & Semiconductor Equipment 6.6% | ||||
ARM Holdings PLC, ADR | United Kingdom | 750,000 | 36,975,000 | |
ASML Holding NV, N.Y. shs | Netherlands | 200,000 | 20,206,000 | |
Avago Technologies Ltd. | Singapore | 135,000 | 17,142,300 | |
aCavium Inc. | United States | 300,000 | 21,246,000 | |
Intel Corp. | United States | 800,000 | 25,016,000 | |
Lam Research Corp. | United States | 300,000 | 21,070,500 | |
aNXP Semiconductors NV | Netherlands | 300,000 | 30,108,000 | |
171,763,800 | ||||
Software 11.0% | ||||
aAdobe Systems Inc. | United States | 250,000 | 18,485,000 | |
aANSYS Inc. | United States | 150,000 | 13,228,500 | |
aAspen Technology Inc. | United States | 350,000 | 13,471,500 | |
CDK Global LLC | United States | 300,000 | 14,028,000 | |
aCyber-Ark Software Ltd./Israel | Israel | 150,000 | 8,335,500 | |
aHubspot Inc. | United States | 40,200 | 1,603,980 | |
Intuit Inc. | United States | 175,000 | 16,968,000 | |
aMobileye NV | United States | 150,000 | 6,304,500 |
franklintempleton.com
Semiannual Report | 49
FRANKLIN CUSTODIAN FUNDS
STATEMENT OF INVESTMENTS (UNAUDITED)
Franklin DynaTech Fund (continued) | ||||
Country | Shares | Value | ||
Common Stocks (continued) | ||||
Software (continued) | ||||
aNetSuite Inc. | United States | 400,000 | $ | 37,104,000 |
aSalesforce.com Inc. | United States | 600,000 | 40,086,000 | |
aServiceNow Inc. | United States | 600,000 | 47,268,000 | |
aSplunk Inc. | United States | 50,000 | 2,960,000 | |
aUltimate Software Group Inc. | United States | 150,000 | 25,493,250 | |
aVerint Systems Inc. | United States | 150,000 | 9,289,500 | |
aWorkday Inc. | United States | 300,000 | 25,323,000 | |
aZendesk Inc. | United States | 250,000 | 5,672,500 | |
285,621,230 | ||||
Technology Hardware, Storage & Peripherals 1.9% | ||||
Apple Inc. | United States | 400,000 | 49,772,000 | |
Textiles, Apparel & Luxury Goods 1.9% | ||||
NIKE Inc., B | United States | 300,000 | 30,099,000 | |
aUnder Armour Inc., A | United States | 250,000 | 20,187,500 | |
50,286,500 | ||||
Wireless Telecommunication Services 1.6% | ||||
aSBA Communications Corp. | United States | 350,000 | 40,985,000 | |
Total Common Stocks (Cost $1,393,080,854) | 2,519,215,921 | |||
Short Term Investments (Cost $64,810,248) 2.5% | ||||
Money Market Funds 2.5% | ||||
a,bInstitutional Fiduciary Trust Money Market Portfolio | United States | 64,810,248 | 64,810,248 | |
Total Investments (Cost $1,457,891,102) 99.9% | 2,584,026,169 | |||
Other Assets, less Liabilities 0.1% | 3,115,736 | |||
Net Assets 100.0% | $ | 2,587,141,905 |
See Abbreviations on page 129.
aNon-income producing.
bSee Note 3(f) regarding investments in Institutional Fiduciary Trust Money Market Portfolio.
50 | Semiannual Report | The accompanying notes are an integral part of these financial statements. franklintempleton.com
FRANKLIN CUSTODIAN FUNDS | ||||||||||||||||||
Financial Highlights | ||||||||||||||||||
Franklin Growth Fund | ||||||||||||||||||
Six Months Ended | ||||||||||||||||||
March 31, 2015 | Year Ended September 30, | |||||||||||||||||
(unaudited) | 2014 | 2013 | 2012 | 2011 | 2010 | |||||||||||||
Class A | ||||||||||||||||||
Per share operating performance | ||||||||||||||||||
(for a share outstanding throughout the period) | ||||||||||||||||||
Net asset value, beginning of period | $ | 70.51 | $ | 59.49 | $ | 50.13 | $ | 40.45 | $ | 41.11 | $ | 36.48 | ||||||
Income from investment operationsa: | ||||||||||||||||||
Net investment incomeb | 0.15 | 0.26 | 0.26 | 0.20 | 0.19 | 0.20 | ||||||||||||
Net realized and unrealized gains (losses) | 6.69 | 11.06 | 9.24 | 9.76 | (0.67 | ) | 4.71 | |||||||||||
Total from investment operations | 6.84 | 11.32 | 9.50 | 9.96 | (0.48 | ) | 4.91 | |||||||||||
Less distributions from: | ||||||||||||||||||
Net investment income | (0.19 | ) | (0.30 | ) | (0.14 | ) | (0.16 | ) | (0.18 | ) | (0.28 | ) | ||||||
Net realized gains | — | — | — | (0.12 | ) | — | — | |||||||||||
Total distributions | (0.19 | ) | (0.30 | ) | (0.14 | ) | (0.28 | ) | (0.18 | ) | (0.28 | ) | ||||||
Net asset value, end of period | $ | 77.16 | $ | 70.51 | $ | 59.49 | $ | 50.13 | $ | 40.45 | $ | 41.11 | ||||||
Total returnc | 9.70 | % | 19.08 | % | 19.01 | % | 24.74 | % | (1.23 | )% | 13.52 | % | ||||||
Ratios to average net assetsd | ||||||||||||||||||
Expenses | 0.89 | %e,f | 0.90 | %e,f | 0.91 | %f | 0.94 | % | 0.92 | % | 0.94 | % | ||||||
Net investment income | 0.41 | % | 0.40 | % | 0.49 | % | 0.43 | % | 0.42 | % | 0.50 | % | ||||||
Supplemental data | ||||||||||||||||||
Net assets, end of period (000’s) | $ | 7,567,083 | $ | 6,611,073 | $ | 5,305,031 | $ | 4,135,962 | $ | 3,046,277 | $ | 2,587,802 | ||||||
Portfolio turnover rate | 1.29 | % | 1.50 | % | 0.83 | % | 3.50 | % | 2.72 | % | 4.36 | % |
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 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, and is not annualized for periods less than one year.
dRatios are annualized for periods less than one year.
eBenefit of waiver and payments by affiliates rounds to less than 0.01%.
fBenefit of expense reduction rounds to less than 0.01%.
franklintempleton.com The accompanying notes are an integral part of these financial statements. | Semiannual Report | 51
FRANKLIN CUSTODIAN FUNDS |
FINANCIAL HIGHLIGHTS |
Franklin Growth Fund (continued) | ||||||||||||||||||
Six Months Ended | ||||||||||||||||||
March 31, 2015 | Year Ended September 30, | |||||||||||||||||
(unaudited) | 2014 | 2013 | 2012 | 2011 | 2010 | |||||||||||||
Class C | ||||||||||||||||||
Per share operating performance | ||||||||||||||||||
(for a share outstanding throughout the period) | ||||||||||||||||||
Net asset value, beginning of period | $ | 65.75 | $ | 55.64 | $ | 47.10 | $ | 38.16 | $ | 38.92 | $ | 34.61 | ||||||
Income from investment operationsa: | ||||||||||||||||||
Net investment income (loss)b | (0.12 | ) | (0.22 | ) | (0.13 | ) | (0.14 | ) | (0.14 | ) | (0.09 | ) | ||||||
Net realized and unrealized gains (losses) | 6.23 | 10.33 | 8.67 | 9.20 | (0.62 | ) | 4.47 | |||||||||||
Total from investment operations | 6.11 | 10.11 | 8.54 | 9.06 | (0.76 | ) | 4.38 | |||||||||||
Less distributions from: | ||||||||||||||||||
Net investment income | — | — | — | — | — | (0.07 | ) | |||||||||||
Net realized gains | — | — | — | (0.12 | ) | — | — | |||||||||||
Total distributions | — | — | — | (0.12 | ) | — | (0.07 | ) | ||||||||||
Net asset value, end of period | $ | 71.86 | $ | 65.75 | $ | 55.64 | $ | 47.10 | $ | 38.16 | $ | 38.92 | ||||||
Total returnc | 9.29 | % | 18.17 | % | 18.13 | % | 23.79 | % | (1.95 | )% | 12.69 | % | ||||||
Ratios to average net assetsd | ||||||||||||||||||
Expenses | 1.64 | %e,f | 1.65 | %e,f | 1.66 | %f | 1.69 | % | 1.67 | % | 1.69 | % | ||||||
Net investment income (loss) | (0.34 | )% | (0.35 | )% | (0.26 | )% | (0.32 | )% | (0.33 | )% | (0.25 | )% | ||||||
Supplemental data | ||||||||||||||||||
Net assets, end of period (000’s) | $ | 798,639 | $ | 662,548 | $ | 546,505 | $ | 466,205 | $ | 390,171 | $ | 349,188 | ||||||
Portfolio turnover rate | 1.29 | % | 1.50 | % | 0.83 | % | 3.50 | % | 2.72 | % | 4.36 | % |
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 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, and is not annualized for periods less than one year.
dRatios are annualized for periods less than one year.
eBenefit of waiver and payments by affiliates rounds to less than 0.01%.
fBenefit of expense reduction rounds to less than 0.01%.
52 | Semiannual Report | The accompanying notes are an integral part of these financial statements. franklintempleton.com
FRANKLIN CUSTODIAN FUNDS | ||||||||||||||||||
FINANCIAL HIGHLIGHTS | ||||||||||||||||||
Franklin Growth Fund (continued) | ||||||||||||||||||
Six Months Ended | ||||||||||||||||||
March 31, 2015 | Year Ended September 30, | |||||||||||||||||
(unaudited) | 2014 | 2013 | 2012 | 2011 | 2010 | |||||||||||||
Class R | ||||||||||||||||||
Per share operating performance | ||||||||||||||||||
(for a share outstanding throughout the period) | ||||||||||||||||||
Net asset value, beginning of period | $ | 70.05 | $ | 59.07 | $ | 49.82 | $ | 40.23 | $ | 40.94 | $ | 36.37 | ||||||
Income from investment operationsa: | ||||||||||||||||||
Net investment incomeb | 0.06 | 0.10 | 0.13 | 0.08 | 0.06 | 0.08 | ||||||||||||
Net realized and unrealized gains (losses) | 6.65 | 10.98 | 9.18 | 9.71 | (0.65 | ) | 4.72 | |||||||||||
Total from investment operations | 6.71 | 11.08 | 9.31 | 9.79 | (0.59 | ) | 4.80 | |||||||||||
Less distributions from: | ||||||||||||||||||
Net investment income | — | (0.10 | ) | (0.06 | ) | (0.08 | ) | (0.12 | ) | (0.23 | ) | |||||||
Net realized gains | — | — | — | (0.12 | ) | — | — | |||||||||||
Total distributions | — | (0.10 | ) | (0.06 | ) | (0.20 | ) | (0.12 | ) | (0.23 | ) | |||||||
Net asset value, end of period | $ | 76.76 | $ | 70.05 | $ | 59.07 | $ | 49.82 | $ | 40.23 | $ | 40.94 | ||||||
Total returnc | 9.58 | % | 18.77 | % | 18.71 | % | 24.42 | % | (1.47 | )% | 13.26 | % | ||||||
Ratios to average net assetsd | ||||||||||||||||||
Expenses | 1.14 | %e,f | 1.15 | %e,f | 1.16 | %f | 1.19 | % | 1.17 | % | 1.19 | % | ||||||
Net investment income | 0.16 | % | 0.15 | % | 0.24 | % | 0.18 | % | 0.17 | % | 0.25 | % | ||||||
Supplemental data | ||||||||||||||||||
Net assets, end of period (000’s) | $ | 589,012 | $ | 565,634 | $ | 552,391 | $ | 466,954 | $ | 283,464 | $ | 117,484 | ||||||
Portfolio turnover rate | 1.29 | % | 1.50 | % | 0.83 | % | 3.50 | % | 2.72 | % | 4.36 | % |
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 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 is not annualized for periods less than one year.
dRatios are annualized for periods less than one year.
eBenefit of waiver and payments by affiliates rounds to less than 0.01%.
fBenefit of expense reduction rounds to less than 0.01%.
franklintempleton.com The accompanying notes are an integral part of these financial statements. | Semiannual Report | 53
FRANKLIN CUSTODIAN FUNDS |
FINANCIAL HIGHLIGHTS |
Franklin Growth Fund (continued) | |||||||||
Six Months Ended | Year Ended | ||||||||
March 31, 2015 | September 30, | ||||||||
(unaudited) | 2014 | 2013 | a | ||||||
Class R6 | |||||||||
Per share operating performance | |||||||||
(for a share outstanding throughout the period) | |||||||||
Net asset value, beginning of period | $ | 70.76 | $ | 59.71 | $ | 54.58 | |||
Income from investment operationsb: | |||||||||
Net investment incomec | 0.31 | 0.55 | 0.24 | ||||||
Net realized and unrealized gains (losses) | 6.71 | 11.08 | 4.89 | ||||||
Total from investment operations | 7.02 | 11.63 | 5.13 | ||||||
Less distributions from net investment income | (0.47 | ) | (0.58 | ) | — | ||||
Net asset value, end of period | $ | 77.31 | $ | 70.76 | $ | 59.71 | |||
Total returnd | 9.94 | % | 19.59 | % | 9.40 | % | |||
Ratios to average net assetse | |||||||||
Expensesf | 0.47 | %g | 0.47 | %g | 0.48 | % | |||
Net investment income | 0.83 | % | 0.83 | % | 0.92 | % | |||
Supplemental data | |||||||||
Net assets, end of period (000’s) | $ | 1,197,113 | $ | 1,107,887 | $ | 871,260 | |||
Portfolio turnover rate | 1.29 | % | 1.50 | % | 0.83 | % |
aFor the period May 1, 2013 (effective date) to September 30, 2013.
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 shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
cBased on average daily shares outstanding.
dTotal return is not annualized for periods less than one year.
eRatios are annualized for periods less than one year.
fBenefit of expense reduction rounds to less than 0.01%.
gBenefit of waiver and payments by affiliates rounds to less than 0.01%.
54 | Semiannual Report | The accompanying notes are an integral part of these financial statements. franklintempleton.com
FRANKLIN CUSTODIAN FUNDS | ||||||||||||||||||
FINANCIAL HIGHLIGHTS | ||||||||||||||||||
Franklin Growth Fund (continued) | ||||||||||||||||||
Six Months Ended | ||||||||||||||||||
March 31, 2015 | Year Ended September 30, | |||||||||||||||||
(unaudited) | 2014 | 2013 | 2012 | 2011 | 2010 | |||||||||||||
Advisor Class | ||||||||||||||||||
Per share operating performance | ||||||||||||||||||
(for a share outstanding throughout the period) | ||||||||||||||||||
Net asset value, beginning of period | $ | 70.75 | $ | 59.66 | $ | 50.24 | $ | 40.53 | $ | 41.18 | $ | 36.53 | ||||||
Income from investment operationsa: | ||||||||||||||||||
Net investment incomeb | 0.24 | 0.43 | 0.39 | 0.32 | 0.30 | 0.29 | ||||||||||||
Net realized and unrealized gains (losses) | 6.71 | 11.08 | 9.26 | 9.78 | (0.68 | ) | 4.72 | |||||||||||
Total from investment operations | 6.95 | 11.51 | 9.65 | 10.10 | (0.38 | ) | 5.01 | |||||||||||
Less distributions from: | ||||||||||||||||||
Net investment income | (0.35 | ) | (0.42 | ) | (0.23 | ) | (0.27 | ) | (0.27 | ) | (0.36 | ) | ||||||
Net realized gains | — | — | — | (0.12 | ) | — | — | |||||||||||
Total distributions | (0.35 | ) | (0.42 | ) | (0.23 | ) | (0.39 | ) | (0.27 | ) | (0.36 | ) | ||||||
Net asset value, end of period | $ | 77.35 | $ | 70.75 | $ | 59.66 | $ | 50.24 | $ | 40.53 | $ | 41.18 | ||||||
Total returnc | 9.85 | % | 19.37 | % | 19.29 | % | 25.04 | % | (0.96 | )% | 13.82 | % | ||||||
Ratios to average net assetsd | ||||||||||||||||||
Expenses | 0.64 | %e,f | 0.65 | %e,f | 0.66 | %f | 0.69 | % | 0.67 | % | 0.69 | % | ||||||
Net investment income | 0.66 | % | 0.65 | % | 0.74 | % | 0.68 | % | 0.67 | % | 0.75 | % | ||||||
Supplemental data | ||||||||||||||||||
Net assets, end of period (000’s) | $ | 1,593,555 | $ | 1,414,980 | $ | 1,080,811 | $ | 1,399,191 | $ | 917,394 | $ | 544,936 | ||||||
Portfolio turnover rate | 1.29 | % | 1.50 | % | 0.83 | % | 3.50 | % | 2.72 | % | 4.36 | % |
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 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 is not annualized for periods less than one year.
dRatios are annualized for periods less than one year.
eBenefit of waiver and payments by affiliates rounds to less than 0.01%.
fBenefit of expense reduction rounds to less than 0.01%.
franklintempleton.com The accompanying notes are an integral part of these financial statements. | Semiannual Report | 55
FRANKLIN CUSTODIAN FUNDS | ||||
Statement of Investments, March 31, 2015 (unaudited) | ||||
Franklin Growth Fund | ||||
Country | Shares | Value | ||
Common Stocks 88.3% | ||||
Automobiles & Components 2.2% | ||||
BorgWarner Inc. | United States | 1,200,000 | $ | 72,576,000 |
Ford Motor Co. | United States | 1,200,000 | 19,368,000 | |
General Motors Co. | United States | 800,000 | 30,000,000 | |
Harley-Davidson Inc. | United States | 913,096 | 55,461,451 | |
Johnson Controls Inc. | United States | 1,600,000 | 80,704,000 | |
258,109,451 | ||||
Banks 0.7% | ||||
JPMorgan Chase & Co. | United States | 600,000 | 36,348,000 | |
Wells Fargo & Co. | United States | 750,000 | 40,800,000 | |
77,148,000 | ||||
Capital Goods 16.9% | ||||
3M Co. | United States | 855,000 | 141,032,250 | |
ABB Ltd., ADR | Switzerland | 1,500,000 | 31,755,000 | |
Allegion PLC | United States | 366,666 | 22,428,960 | |
The Boeing Co. | United States | 1,100,000 | 165,088,000 | |
Caterpillar Inc. | United States | 550,000 | 44,016,500 | |
Danaher Corp. | United States | 1,000,000 | 84,900,000 | |
Deere & Co. | United States | 500,000 | 43,845,000 | |
Emerson Electric Co. | United States | 1,100,000 | 62,282,000 | |
General Dynamics Corp. | United States | 1,000,000 | 135,730,000 | |
General Electric Co. | United States | 1,800,000 | 44,658,000 | |
Huntington Ingalls Industries Inc. | United States | 166,666 | 23,358,240 | |
Illinois Tool Works Inc. | United States | 1,000,000 | 97,140,000 | |
Ingersoll-Rand PLC | United States | 1,100,000 | 74,888,000 | |
Lockheed Martin Corp. | United States | 500,000 | 101,480,000 | |
Northrop Grumman Corp. | United States | 1,100,000 | 177,056,000 | |
Pall Corp. | United States | 1,000,000 | 100,390,000 | |
Precision Castparts Corp. | United States | 450,000 | 94,500,000 | |
Raytheon Co. | United States | 600,000 | 65,550,000 | |
Rockwell Collins Inc. | United States | 350,000 | 33,792,500 | |
aSensata Technologies Holding NV | United States | 1,400,000 | 80,430,000 | |
Stanley Black & Decker Inc. | United States | 600,000 | 57,216,000 | |
Textron Inc. | United States | 1,600,000 | 70,928,000 | |
United Technologies Corp. | United States | 900,000 | 105,480,000 | |
W.W. Grainger Inc. | United States | 550,000 | 129,695,500 | |
1,987,639,950 | ||||
Commercial & Professional Services 2.2% | ||||
Dun & Bradstreet Corp. | United States | 400,000 | 51,344,000 | |
Equifax Inc. | United States | 500,000 | 46,500,000 | |
aIHS Inc., A | United States | 700,000 | 79,632,000 | |
Robert Half International Inc. | United States | 150,000 | 9,078,000 | |
aStericycle Inc. | United States | 200,000 | 28,086,000 | |
aVerisk Analytics Inc., A | United States | 550,000 | 39,270,000 | |
253,910,000 | ||||
Consumer Durables & Apparel 2.0% | ||||
NIKE Inc., B | United States | 900,000 | 90,297,000 | |
VF Corp. | United States | 2,000,000 | 150,620,000 | |
240,917,000 | ||||
56 | Semiannual Report | franklintempleton.com |
FRANKLIN CUSTODIAN FUNDS
STATEMENT OF INVESTMENTS (UNAUDITED)
Franklin Growth Fund (continued) | ||||
Country | Shares | Value | ||
Common Stocks (continued) | ||||
Consumer Services 1.4% | ||||
Carnival Corp. | United States | 1,200,000 | $ | 57,408,000 |
Graham Holdings Co., B | United States | 80,000 | 83,970,400 | |
Starwood Hotels & Resorts Worldwide Inc. | United States | 250,000 | 20,875,000 | |
162,253,400 | ||||
Diversified Financials 2.0% | ||||
American Express Co. | United States | 600,000 | 46,872,000 | |
aBerkshire Hathaway Inc., A | United States | 184 | 40,020,000 | |
BlackRock Inc. | United States | 208,000 | 76,094,720 | |
T. Rowe Price Group Inc. | United States | 900,000 | 72,882,000 | |
235,868,720 | ||||
Energy 2.4% | ||||
Anadarko Petroleum Corp. | United States | 850,000 | 70,388,500 | |
Cabot Oil & Gas Corp., A | United States | 1,000,000 | 29,530,000 | |
aFMC Technologies Inc. | United States | 750,000 | 27,757,500 | |
Halliburton Co. | United States | 850,000 | 37,298,000 | |
National Oilwell Varco Inc. | United States | 650,000 | 32,493,500 | |
Occidental Petroleum Corp. | United States | 300,000 | 21,900,000 | |
Royal Dutch Shell PLC, A, ADR | United Kingdom | 280,000 | 16,702,000 | |
Schlumberger Ltd. | United States | 550,000 | 45,892,000 | |
281,961,500 | ||||
Food & Staples Retailing 0.5% | ||||
CVS Health Corp. | United States | 600,000 | 61,926,000 | |
Food, Beverage & Tobacco 2.6% | ||||
Brown-Forman Corp., B | United States | 350,000 | 31,622,500 | |
Bunge Ltd. | United States | 250,000 | 20,590,000 | |
Mead Johnson Nutrition Co., A | United States | 850,000 | 85,450,500 | |
aMonster Beverage Corp. | United States | 900,000 | 124,555,500 | |
PepsiCo Inc. | United States | 450,000 | 43,029,000 | |
305,247,500 | ||||
Health Care Equipment & Services 6.0% | ||||
Abbott Laboratories | United States | 900,000 | 41,697,000 | |
Aetna Inc. | United States | 400,000 | 42,612,000 | |
Baxter International Inc. | United States | 400,000 | 27,400,000 | |
Becton, Dickinson and Co. | United States | 77,700 | 11,156,943 | |
Cardinal Health Inc. | United States | 300,000 | 27,081,000 | |
aEdwards Lifesciences Corp. | United States | 200,000 | 28,492,000 | |
aEnvision Healthcare Holdings Inc. | United States | 1,600,000 | 61,360,000 | |
aExpress Scripts Holding Co. | United States | 361,648 | 31,380,197 | |
aHaemonetics Corp. | United States | 1,000,000 | 44,920,000 | |
aHenry Schein Inc. | United States | 350,000 | 48,867,000 | |
Hill-Rom Holdings Inc. | United States | 300,000 | 14,700,000 | |
aIntuitive Surgical Inc. | United States | 150,000 | 75,754,500 | |
aLaboratory Corp. of America Holdings | United States | 53,720 | 6,773,555 | |
Medtronic PLC | United States | 406,300 | 31,687,337 | |
Quest Diagnostics Inc. | United States | 900,000 | 69,165,000 | |
Stryker Corp. | United States | 400,000 | 36,900,000 | |
Teleflex Inc. | United States | 500,000 | 60,415,000 |
franklintempleton.com
Semiannual Report | 57
FRANKLIN CUSTODIAN FUNDS
STATEMENT OF INVESTMENTS (UNAUDITED)
Franklin Growth Fund (continued) | ||||
Country | Shares | Value | ||
Common Stocks (continued) | ||||
Health Care Equipment & Services (continued) | ||||
aVarian Medical Systems Inc. | United States | 300,000 | $ | 28,227,000 |
Zimmer Holdings Inc. | United States | 100,000 | 11,752,000 | |
700,340,532 | ||||
Household & Personal Products 0.2% | ||||
The Procter & Gamble Co. | United States | 335,000 | 27,449,900 | |
Insurance 0.3% | ||||
Aflac Inc. | United States | 600,000 | 38,406,000 | |
Materials 5.0% | ||||
Air Products and Chemicals Inc. | United States | 500,000 | 75,640,000 | |
Celanese Corp., A | United States | 1,200,000 | 67,032,000 | |
Cytec Industries Inc. | United States | 2,000,000 | 108,080,000 | |
Ecolab Inc. | United States | 750,000 | 85,785,000 | |
Freeport-McMoRan Inc., B | United States | 1,300,000 | 24,635,000 | |
Martin Marietta Materials Inc. | United States | 350,000 | 48,930,000 | |
Praxair Inc. | United States | 550,000 | 66,407,000 | |
Sigma-Aldrich Corp. | United States | 800,000 | 110,600,000 | |
587,109,000 | ||||
Media 1.5% | ||||
The Walt Disney Co. | United States | 1,687,290 | 176,979,848 | |
Pharmaceuticals, Biotechnology & Life Sciences 13.8% | ||||
AbbVie Inc. | United States | 400,000 | 23,416,000 | |
aActavis PLC | United States | 368,300 | 109,613,446 | |
Agilent Technologies Inc. | United States | 1,300,000 | 54,015,000 | |
Amgen Inc. | United States | 1,000,000 | 159,850,000 | |
aBiogen Inc. | United States | 500,000 | 211,120,000 | |
aCatalent Inc. | United States | 2,700,000 | 84,105,000 | |
aCelgene Corp. | United States | 780,000 | 89,918,400 | |
Eli Lilly & Co. | United States | 1,350,000 | 98,077,500 | |
aGilead Sciences Inc. | United States | 600,000 | 58,878,000 | |
aHospira Inc. | United States | 1,350,000 | 118,584,000 | |
aIllumina Inc. | United States | 400,000 | 74,256,000 | |
Johnson & Johnson | United States | 1,200,100 | 120,730,060 | |
Merck & Co. Inc. | United States | 1,000,000 | 57,480,000 | |
aMettler-Toledo International Inc. | United States | 425,000 | 139,676,250 | |
Pfizer Inc. | United States | 2,761,000 | 96,055,190 | |
Roche Holding AG, ADR | Switzerland | 1,500,000 | 51,570,000 | |
aWaters Corp. | United States | 575,000 | 71,484,000 | |
1,618,828,846 | ||||
Real Estate 0.6% | ||||
American Tower Corp. | United States | 715,000 | 67,317,250 | |
Retailing 1.5% | ||||
aAmazon.com Inc. | United States | 350,000 | 130,235,000 | |
Expedia Inc. | United States | 200,000 | 18,826,000 | |
HSN Inc. | United States | 100,000 | 6,823,000 | |
aTripAdvisor Inc. | United States | 200,000 | 16,634,000 | |
172,518,000 |
58 | Semiannual Report
franklintempleton.com
FRANKLIN CUSTODIAN FUNDS
STATEMENT OF INVESTMENTS (UNAUDITED)
Franklin Growth Fund (continued) | ||||
Country | Shares | Value | ||
Common Stocks (continued) | ||||
Semiconductors & Semiconductor Equipment 0.6% | ||||
ASML Holding NV, N.Y. shs | Netherlands | 250,000 | $ | 25,257,500 |
Intel Corp. | United States | 1,100,000 | 34,397,000 | |
Texas Instruments Inc. | United States | 250,000 | 14,296,250 | |
73,950,750 | ||||
Software & Services 10.6% | ||||
aAlibaba Group Holding Ltd., ADR | China | 480,400 | 39,988,496 | |
aAutodesk Inc. | United States | 800,000 | 46,912,000 | |
Automatic Data Processing Inc. | United States | 700,000 | 59,948,000 | |
CDK Global LLC | United States | 233,333 | 10,910,651 | |
aCheck Point Software Technologies Ltd. | Israel | 525,000 | 43,034,250 | |
Computer Sciences Corp. | United States | 1,400,000 | 91,392,000 | |
aFacebook Inc., A | United States | 400,000 | 32,886,000 | |
aFortinet Inc. | United States | 1,500,000 | 52,425,000 | |
aGoogle Inc., A | United States | 165,000 | 91,525,500 | |
aGoogle Inc., C | United States | 150,000 | 82,200,000 | |
IAC/InterActiveCorp | United States | 300,000 | 20,241,000 | |
aInformatica Corp. | United States | 800,000 | 35,084,000 | |
International Business Machines Corp. | United States | 600,000 | 96,300,000 | |
Intuit Inc. | United States | 1,000,000 | 96,960,000 | |
MasterCard Inc., A | United States | 1,000,000 | 86,390,000 | |
Microsoft Corp. | United States | 2,400,000 | 97,572,000 | |
Oracle Corp. | United States | 2,400,000 | 103,560,000 | |
Visa Inc., A | United States | 1,200,000 | 78,492,000 | |
aYahoo! Inc. | United States | 1,700,000 | 75,539,500 | |
1,241,360,397 | ||||
Technology Hardware & Equipment 7.8% | ||||
Apple Inc. | United States | 4,025,000 | 500,830,750 | |
Cisco Systems Inc. | United States | 2,945,000 | 81,061,125 | |
EMC Corp. | United States | 2,700,000 | 69,012,000 | |
Hewlett-Packard Co. | United States | 1,156,250 | 36,028,750 | |
aKeysight Technologies Inc. | United States | 650,000 | 24,147,500 | |
QUALCOMM Inc. | United States | 660,000 | 45,764,400 | |
TE Connectivity Ltd. | United States | 1,300,000 | 93,106,000 | |
aTrimble Navigation Ltd. | United States | 2,400,000 | 60,480,000 | |
910,430,525 | ||||
Transportation 7.0% | ||||
Alaska Air Group Inc. | United States | 3,200,000 | 211,776,000 | |
Allegiant Travel Co. | United States | 200,000 | 38,458,000 | |
ArcBest Corp. | United States | 260,000 | 9,851,400 | |
C.H. Robinson Worldwide Inc. | United States | 267,300 | 19,571,706 | |
Canadian National Railway Co. | Canada | 1,000,000 | 66,870,000 | |
Canadian Pacific Railway Ltd. | Canada | 500,000 | 91,350,000 | |
Expeditors International of Washington Inc. | United States | 600,000 | 28,908,000 | |
Forward Air Corp. | United States | 500,000 | 27,150,000 | |
Heartland Express Inc. | United States | 600,000 | 14,256,000 | |
aInternational Consolidated Airlines Group SA, ADR | United Kingdom | 1,400,000 | 62,608,000 | |
Kansas City Southern | United States | 400,000 | 40,832,000 | |
Ryanair Holdings PLC, ADR | Ireland | 239,200 | 15,971,384 |
franklintempleton.com
Semiannual Report | 59
FRANKLIN CUSTODIAN FUNDS
STATEMENT OF INVESTMENTS (UNAUDITED)
Franklin Growth Fund (continued) | |||||
Country | Shares | Value | |||
Common Stocks (continued) | |||||
Transportation (continued) | |||||
Union Pacific Corp. | United States | 1,200,000 | $ | 129,972,000 | |
aUnited Continental Holdings Inc. | United States | 1,050,000 | 70,612,500 | ||
828,186,990 | |||||
Utilities 0.5% | |||||
American Water Works Co. Inc. | United States | 700,000 | 37,947,000 | ||
NextEra Energy Inc. | United States | 250,000 | 26,012,500 | ||
63,959,500 | |||||
Total Common Stocks (Cost $4,198,150,055) | 10,371,819,059 | ||||
Short Term Investments 8.1% | |||||
Money Market Funds (Cost $591,636,826) 5.1% | |||||
a,bInstitutional Fiduciary Trust Money Market Portfolio | United States | 591,636,826 | 591,636,826 | ||
Principal | |||||
Amount | |||||
Repurchase Agreements (Cost $354,675,843) 3.0% | |||||
c Joint Repurchase Agreement, 0.091%, 4/01/15 | |||||
(Maturity Value $354,676,744) | $ | 354,675,843 | 354,675,843 | ||
BNP Paribas Securities Corp. (Maturity Value $49,605,090) | |||||
HSBC Securities (USA) Inc. (Maturity Value $208,340,666) | |||||
Merrill Lynch, Pierce, Fenner & Smith Inc. (Maturity Value $96,730,988) | |||||
Collateralized by U.S. Government Agency Securities, 0.146% - 0.214%, | |||||
8/26/16 - 9/12/17; and U.S. Treasury Notes, 1.50% - 2.75%, | |||||
2/28/18 - 11/15/21 (valued at $361,882,328) | |||||
Total Investments (Cost $5,144,462,724) 96.4% | 11,318,131,728 | ||||
Other Assets, less Liabilities 3.6% | 427,270,708 | ||||
Net Assets 100.0% | $ | 11,745,402,436 |
See Abbreviations on page 129.
aNon-income producing.
bSee Note 3(f) regarding investments in Institutional Fiduciary Trust Money Market Portfolio.
cSee Note 1(c) regarding joint repurchase agreement.
60 | Semiannual Report | The accompanying notes are an integral part of these financial statements. franklintempleton.com
FRANKLIN CUSTODIAN FUNDS | ||||||||||||||||||
Financial Highlights | ||||||||||||||||||
Franklin Income Fund | ||||||||||||||||||
Six Months Ended | ||||||||||||||||||
March 31, 2015 | Year Ended September 30, | |||||||||||||||||
(unaudited) | 2014 | 2013 | 2012 | 2011 | 2010 | |||||||||||||
Class A | ||||||||||||||||||
Per share operating performance | ||||||||||||||||||
(for a share outstanding throughout the period) | ||||||||||||||||||
Net asset value, beginning of period | $ | 2.48 | $ | 2.33 | $ | 2.23 | $ | 1.98 | $ | 2.11 | $ | 1.99 | ||||||
Income from investment operationsa: | ||||||||||||||||||
Net investment incomeb | 0.05 | 0.11 | 0.11 | 0.13 | 0.13 | 0.13 | ||||||||||||
Net realized and unrealized gains (losses) | (0.08 | ) | 0.16 | 0.12 | 0.26 | (0.12 | ) | 0.14 | ||||||||||
Total from investment operations | (0.03 | ) | 0.27 | 0.23 | 0.39 | 0.01 | 0.27 | |||||||||||
Less distributions from net investment | ||||||||||||||||||
income | (0.06 | ) | (0.12 | ) | (0.13 | ) | (0.14 | ) | (0.14 | ) | (0.15 | ) | ||||||
Net asset value, end of period | $ | 2.39 | $ | 2.48 | $ | 2.33 | $ | 2.23 | $ | 1.98 | $ | 2.11 | ||||||
Total returnc | (1.21 | )% | 11.86 | % | 10.72 | % | 20.38 | % | 0.01 | % | 13.90 | % | ||||||
Ratios to average net assetsd | ||||||||||||||||||
Expensese | 0.60 | %f | 0.61 | %f | 0.62 | % | 0.64 | % | 0.63 | % | 0.65 | % | ||||||
Net investment income | 4.34 | % | 4.28 | % | 4.98 | % | 5.90 | % | 6.03 | % | 6.40 | % | ||||||
Supplemental data | ||||||||||||||||||
Net assets, end of period (000’s) | $ | 52,392,776 | $ | 53,823,921 | $ | 48,320,611 | $ | 41,280,437 | $ | 32,847,934 | $ | 32,281,991 | ||||||
Portfolio turnover rate | 18.62 | % | 36.03 | % | 37.60 | % | 33.44 | % | 35.83 | % | 46.85 | % |
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 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, and is not annualized for periods less than one year.
dRatios are annualized for periods less than one year.
eBenefit of expense reduction rounds to less than 0.01%.
fBenefit 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. | Semiannual Report | 61
FRANKLIN CUSTODIAN FUNDS |
FINANCIAL HIGHLIGHTS |
Franklin Income Fund (continued) | ||||||||||||||||||
Six Months Ended | ||||||||||||||||||
March 31, 2015 | Year Ended September 30, | |||||||||||||||||
(unaudited) | 2014 | 2013 | 2012 | 2011 | 2010 | |||||||||||||
Class C | ||||||||||||||||||
Per share operating performance | ||||||||||||||||||
(for a share outstanding throughout the period) | ||||||||||||||||||
Net asset value, beginning of period | $ | 2.50 | $ | 2.35 | $ | 2.25 | $ | 2.00 | $ | 2.13 | $ | 2.00 | ||||||
Income from investment operationsa: | ||||||||||||||||||
Net investment incomeb | 0.05 | 0.09 | 0.10 | 0.12 | 0.12 | 0.12 | ||||||||||||
Net realized and unrealized gains (losses) | (0.09 | ) | 0.17 | 0.12 | 0.26 | (0.12 | ) | 0.15 | ||||||||||
Total from investment operations | (0.04 | ) | 0.26 | 0.22 | 0.38 | — | 0.27 | |||||||||||
Less distributions from net investment | ||||||||||||||||||
income | (0.05 | ) | (0.11 | ) | (0.12 | ) | (0.13 | ) | (0.13 | ) | (0.14 | ) | ||||||
Net asset value, end of period | $ | 2.41 | $ | 2.50 | $ | 2.35 | $ | 2.25 | $ | 2.00 | $ | 2.13 | ||||||
Total returnc | (1.46 | )% | 11.19 | % | 10.07 | % | 19.58 | % | (0.48 | )% | 13.76 | % | ||||||
Ratios to average net assetsd | ||||||||||||||||||
Expensese | 1.10 | %f | 1.11 | %f | 1.12 | % | 1.14 | % | 1.13 | % | 1.15 | % | ||||||
Net investment income | 3.84 | % | 3.78 | % | 4.48 | % | 5.40 | % | 5.53 | % | 5.90 | % | ||||||
Supplemental data | ||||||||||||||||||
Net assets, end of period (000’s) | $ | 28,288,349 | $ | 28,802,209 | $ | 24,016,797 | $ | 20,220,114 | $ | 16,217,805 | $ | 15,605,055 | ||||||
Portfolio turnover rate | 18.62 | % | 36.03 | % | 37.60 | % | 33.44 | % | 35.83 | % | 46.85 | % |
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 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, and is not annualized for periods less than one year.
dRatios are annualized for periods less than one year.
eBenefit of expense reduction rounds to less than 0.01%.
fBenefit of waiver and payments by affiliates rounds to less than 0.01%.
62 | Semiannual Report | The accompanying notes are an integral part of these financial statements. franklintempleton.com
FRANKLIN CUSTODIAN FUNDS
FINANCIAL HIGHLIGHTS
Franklin Income Fund (continued) | ||||||||||||||||||
Six Months Ended | ||||||||||||||||||
March 31, 2015 | Year Ended September 30, | |||||||||||||||||
(unaudited) | 2014 | 2013 | 2012 | 2011 | 2010 | |||||||||||||
Class R | ||||||||||||||||||
Per share operating performance | ||||||||||||||||||
(for a share outstanding throughout the period) | ||||||||||||||||||
Net asset value, beginning of period | $ | 2.44 | $ | 2.29 | $ | 2.20 | $ | 1.96 | $ | 2.09 | $ | 1.96 | ||||||
Income from investment operationsa: | ||||||||||||||||||
Net investment incomeb | 0.05 | 0.10 | 0.11 | 0.12 | 0.12 | 0.12 | ||||||||||||
Net realized and unrealized gains (losses) | (0.08 | ) | 0.16 | 0.10 | 0.25 | (0.12 | ) | 0.15 | ||||||||||
Total from investment operations | (0.03 | ) | 0.26 | 0.21 | 0.37 | — | 0.27 | |||||||||||
Less distributions from net investment | ||||||||||||||||||
income | (0.06 | ) | (0.11 | ) | (0.12 | ) | (0.13 | ) | (0.13 | ) | (0.14 | ) | ||||||
Net asset value, end of period | $ | 2.35 | $ | 2.44 | $ | 2.29 | $ | 2.20 | $ | 1.96 | $ | 2.09 | ||||||
Total returnc | (1.40 | )% | 11.66 | % | 10.03 | % | 19.66 | % | (0.32 | )% | 14.23 | % | ||||||
Ratios to average net assetsd | ||||||||||||||||||
Expensese | 0.95 | %f | 0.96 | %f | 0.97 | % | 0.99 | % | 0.98 | % | 1.00 | % | ||||||
Net investment income | 3.99 | % | 3.93 | % | 4.63 | % | 5.55 | % | 5.68 | % | 6.05 | % | ||||||
Supplemental data | ||||||||||||||||||
Net assets, end of period (000’s) | $ | 497,717 | $ | 514,892 | $ | 446,463 | $ | 426,525 | $ | 360,907 | $ | 370,564 | ||||||
Portfolio turnover rate | 18.62 | % | 36.03 | % | 37.60 | % | 33.44 | % | 35.83 | % | 46.85 | % |
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 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 is not annualized for periods less than one year.
dRatios are annualized for periods less than one year.
eBenefit of expense reduction rounds to less than 0.01%.
fBenefit 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. | Semiannual Report | 63
FRANKLIN CUSTODIAN FUNDS |
FINANCIAL HIGHLIGHTS |
Franklin Income Fund (continued) | |||||||||
Six Months Ended | Year Ended | ||||||||
March 31, 2015 | September 30, | ||||||||
(unaudited) | 2014 | 2013 | a | ||||||
Class R6 | |||||||||
Per share operating performance | |||||||||
(for a share outstanding throughout the period) | |||||||||
Net asset value, beginning of period | $ | 2.46 | $ | 2.31 | $ | 2.33 | |||
Income from investment operationsb: | |||||||||
Net investment incomec | 0.05 | 0.11 | 0.04 | ||||||
Net realized and unrealized gains (losses) | (0.08 | ) | 0.17 | (0.02 | ) | ||||
Total from investment operations | (0.03 | ) | 0.28 | 0.02 | |||||
Less distributions from net investment income | (0.06 | ) | (0.13 | ) | (0.04 | ) | |||
Net asset value, end of period | $ | 2.37 | $ | 2.46 | $ | 2.31 | |||
Total returnd | (1.11 | )% | 12.19 | % | 1.06 | % | |||
Ratios to average net assetse | |||||||||
Expensesf | 0.38 | %g | 0.38 | %g | 0.39 | % | |||
Net investment income | 4.56 | % | 4.50 | % | 5.21 | % | |||
Supplemental data | |||||||||
Net assets, end of period (000’s) | $ | 2,018,414 | $ | 2,108,076 | $ | 1,921,084 | |||
Portfolio turnover rate | 18.62 | % | 36.03 | % | 37.60 | % |
aFor the period May 1, 2013 (effective date) to September 30, 2013.
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 shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
cBased on average daily shares outstanding.
dTotal return is not annualized for periods less than one year.
eRatios are annualized for periods less than one year.
fBenefit of expense reduction rounds to less than 0.01%.
gBenefit of waiver and payments by affiliates rounds to less than 0.01%.
64 | Semiannual Report | The accompanying notes are an integral part of these financial statements. franklintempleton.com
FRANKLIN CUSTODIAN FUNDS
FINANCIAL HIGHLIGHTS
Franklin Income Fund (continued) | ||||||||||||||||||
Six Months Ended | ||||||||||||||||||
March 31, 2015 | Year Ended September 30, | |||||||||||||||||
(unaudited) | 2014 | 2013 | 2012 | 2011 | 2010 | |||||||||||||
Advisor Class | ||||||||||||||||||
Per share operating performance | ||||||||||||||||||
(for a share outstanding throughout the period) | ||||||||||||||||||
Net asset value, beginning of period | $ | 2.46 | $ | 2.31 | $ | 2.22 | $ | 1.97 | $ | 2.10 | $ | 1.98 | ||||||
Income from investment operationsa: | ||||||||||||||||||
Net investment incomeb | 0.05 | 0.11 | 0.12 | 0.13 | 0.13 | 0.13 | ||||||||||||
Net realized and unrealized gains (losses) | (0.08 | ) | 0.17 | 0.11 | 0.26 | (0.12 | ) | 0.14 | ||||||||||
Total from investment operations | (0.03 | ) | 0.28 | 0.23 | 0.39 | 0.01 | 0.27 | |||||||||||
Less distributions from net investment | ||||||||||||||||||
income | (0.06 | ) | (0.13 | ) | (0.14 | ) | (0.14 | ) | (0.14 | ) | (0.15 | ) | ||||||
Net asset value, end of period | $ | 2.37 | $ | 2.46 | $ | 2.31 | $ | 2.22 | $ | 1.97 | $ | 2.10 | ||||||
Total returnc | (1.15 | )% | 12.12 | % | 10.49 | % | 20.69 | % | 0.16 | % | 14.15 | % | ||||||
Ratios to average net assetsd | ||||||||||||||||||
Expensese | 0.45 | %f | 0.46 | %f | 0.47 | % | 0.49 | % | 0.48 | % | 0.50 | % | ||||||
Net investment income | 4.49 | % | 4.43 | % | 5.13 | % | 6.05 | % | 6.18 | % | 6.55 | % | ||||||
Supplemental data | ||||||||||||||||||
Net assets, end of period (000’s) | $ | 9,223,940 | $ | 9,096,269 | $ | 5,903,701 | $ | 6,444,763 | $ | 5,032,128 | $ | 4,593,709 | ||||||
Portfolio turnover rate | 18.62 | % | 36.03 | % | 37.60 | % | 33.44 | % | 35.83 | % | 46.85 | % |
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 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 is not annualized for periods less than one year.
dRatios are annualized for periods less than one year.
eBenefit of expense reduction rounds to less than 0.01%.
fBenefit 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. | Semiannual Report | 65
FRANKLIN CUSTODIAN FUNDS | ||||
Statement of Investments, March 31, 2015 (unaudited) | ||||
Franklin Income Fund | ||||
Shares/ | ||||
Country | Warrants | Value | ||
Common Stocks and Other Equity Interests 42.6% | ||||
Consumer Discretionary 3.3% | ||||
a,bDex Media Inc. | United States | 2,048,551 | $ | 8,583,429 |
Ford Motor Co. | United States | 29,593,000 | 477,631,020 | |
General Motors Co. | United States | 27,025,000 | 1,013,437,500 | |
Las Vegas Sands Corp. | United States | 1,746,000 | 96,099,840 | |
Target Corp. | United States | 18,001,000 | 1,477,342,070 | |
3,073,093,859 | ||||
Consumer Staples 0.6% | ||||
PepsiCo Inc. | United States | 6,000,000 | 573,720,000 | |
Energy 7.5% | ||||
Anadarko Petroleum Corp. | United States | 4,994,514 | 413,595,705 | |
BP PLC, ADR | United Kingdom | 30,000,000 | 1,173,300,000 | |
Canadian Oil Sands Ltd. | Canada | 17,000,000 | 132,225,205 | |
Chevron Corp. | United States | 10,500,000 | 1,102,290,000 | |
Exxon Mobil Corp. | United States | 2,000,000 | 170,000,000 | |
Halliburton Co. | United States | 7,000,000 | 307,160,000 | |
Occidental Petroleum Corp. | United States | 3,000,000 | 219,000,000 | |
Royal Dutch Shell PLC, A, ADR | United Kingdom | 25,000,000 | 1,491,250,000 | |
Schlumberger Ltd. | United States | 3,500,000 | 292,040,000 | |
Spectra Energy Corp. | United States | 10,000,000 | 361,700,000 | |
Total SA, B, ADR | France | 15,000,000 | 744,900,000 | |
The Williams Cos. Inc. | United States | 7,276,064 | 368,096,078 | |
Woodside Petroleum Ltd. | Australia | 4,000,000 | 105,203,152 | |
6,880,760,140 | ||||
Financials 2.2% | ||||
Bank of America Corp. | United States | 9,321,784 | 143,462,256 | |
cCitigroup Inc. | United States | 3,249,510 | 167,414,755 | |
Commonwealth Bank of Australia | Australia | 2,884,174 | 205,242,033 | |
HSBC Holdings PLC | United Kingdom | 20,000,000 | 170,271,362 | |
JPMorgan Chase & Co. | United States | 4,000,000 | 242,320,000 | |
MetLife Inc. | United States | 8,455,521 | 427,426,586 | |
Outfront Media Inc. | United States | 5,608,191 | 167,797,075 | |
Royal Bank of Canada | Canada | 5,000,000 | 301,010,739 | |
The Toronto-Dominion Bank | Canada | 2,000,000 | 85,612,761 | |
Wells Fargo & Co. | United States | 3,000,000 | 163,200,000 | |
2,073,757,567 | ||||
Health Care 4.9% | ||||
AstraZeneca PLC | United Kingdom | 3,000,000 | 205,860,746 | |
Bristol-Myers Squibb Co. | United States | 2,510,000 | 161,895,000 | |
Eli Lilly & Co. | United States | 12,000,000 | 871,800,000 | |
Johnson & Johnson | United States | 3,500,000 | 352,100,000 | |
Merck & Co. Inc. | United States | 12,000,000 | 689,760,000 | |
Pfizer Inc. | United States | 40,000,000 | 1,391,600,000 | |
Sanofi, ADR | France | 17,000,000 | 840,480,000 | |
4,513,495,746 | ||||
Industrials 4.2% | ||||
The Boeing Co. | United States | 2,060,000 | 309,164,800 | |
a,bCEVA Holdings LLC | United Kingdom | 91,371 | 66,244,019 | |
General Electric Co. | United States | 57,500,000 | 1,426,575,000 |
66 | Semiannual Report franklintempleton.com
FRANKLIN CUSTODIAN FUNDS
STATEMENT OF INVESTMENTS (UNAUDITED)
Franklin Income Fund (continued) | ||||
Shares/ | ||||
Country | Warrants | Value | ||
Common Stocks and Other Equity Interests (continued) | ||||
Industrials (continued) | ||||
Lockheed Martin Corp. | United States | 3,000,000 | $ | 608,880,000 |
Raytheon Co. | United States | 4,500,000 | 491,625,000 | |
Republic Services Inc. | United States | 9,500,000 | 385,320,000 | |
United Technologies Corp. | United States | 1,000,000 | 117,200,000 | |
Waste Management Inc. | United States | 8,000,000 | 433,840,000 | |
3,838,848,819 | ||||
Information Technology 1.4% | ||||
Cisco Systems Inc. | United States | 6,133,000 | 168,810,825 | |
a,dFirst Data Holdings Inc., B | United States | 21,666,666 | 121,610,425 | |
Intel Corp. | United States | 21,350,000 | 667,614,500 | |
Microsoft Corp. | United States | 8,598,701 | 349,580,189 | |
Xilinx Inc. | United States | 500,000 | 21,150,000 | |
1,328,765,939 | ||||
Materials 7.1% | ||||
Agrium Inc. | Canada | 7,000,000 | 729,890,000 | |
Alcoa Inc. | United States | 7,000,000 | 90,440,000 | |
aAngloGold Ashanti Ltd., ADR | South Africa | 2,305,669 | 21,534,948 | |
BASF SE | Germany | 5,250,000 | 522,499,118 | |
BHP Billiton PLC | Australia | 37,500,000 | 819,560,709 | |
The Dow Chemical Co. | United States | 21,745,525 | 1,043,350,289 | |
E. I. du Pont de Nemours and Co. | United States | 12,000,000 | 857,640,000 | |
Freeport-McMoRan Inc., B | United States | 19,863,000 | 376,403,850 | |
Goldcorp Inc. | Canada | 11,000,000 | 199,320,000 | |
LyondellBasell Industries NV, A | United States | 7,313,521 | 642,127,184 | |
The Mosaic Co. | United States | 8,046,000 | 370,598,760 | |
Rio Tinto PLC, ADR | United Kingdom | 21,950,000 | 908,730,000 | |
6,582,094,858 | ||||
Telecommunication Services 2.4% | ||||
AT&T Inc. | United States | 25,000,000 | 816,250,000 | |
BCE Inc. | Canada | 4,250,000 | 179,947,094 | |
CenturyLink Inc. | United States | 5,750,000 | 198,662,500 | |
Telstra Corp. Ltd. | Australia | 18,000,000 | 86,536,602 | |
Telus Corp. | Canada | 2,500,000 | 83,050,379 | |
Verizon Communications Inc. | United States | 15,000,000 | 729,450,000 | |
Vodafone Group PLC | United Kingdom | 40,727,271 | 133,166,546 | |
2,227,063,121 | ||||
Utilities 9.0% | ||||
AGL Resources Inc. | United States | 1,500,000 | 74,475,000 | |
Ameren Corp. | United States | 5,000,000 | 211,000,000 | |
American Electric Power Co. Inc. | United States | 4,000,000 | 225,000,000 | |
Dominion Resources Inc. | United States | 8,500,000 | 602,395,000 | |
Duke Energy Corp. | United States | 11,500,000 | 882,970,000 | |
a,bDynegy Inc. | United States | 11,500,000 | 361,445,000 | |
a,bDynegy Inc., wts., 10/02/17 | United States | 1,143,273 | 4,824,612 | |
Entergy Corp. | United States | 3,500,000 | 271,215,000 | |
Exelon Corp. | United States | 28,000,000 | 941,080,000 | |
FirstEnergy Corp. | United States | 4,500,000 | 157,770,000 | |
NextEra Energy Inc. | United States | 3,500,000 | 364,175,000 |
franklintempleton.com Semiannual Report | 67
FRANKLIN CUSTODIAN FUNDS | ||||
STATEMENT OF INVESTMENTS (UNAUDITED) | ||||
Franklin Income Fund (continued) | ||||
Shares/ | ||||
Country | Warrants | Value | ||
Common Stocks and Other Equity Interests (continued) | ||||
Utilities (continued) | ||||
PG&E Corp. | United States | 20,000,000 | $ | 1,061,400,000 |
Pinnacle West Capital Corp. | United States | 3,500,000 | 223,125,000 | |
PPL Corp. | United States | 9,500,000 | 319,770,000 | |
Public Service Enterprise Group Inc. | United States | 10,000,000 | 419,200,000 | |
Sempra Energy | United States | 3,500,000 | 381,570,000 | |
The Southern Co. | United States | 21,000,000 | 929,880,000 | |
SSE PLC | United Kingdom | 6,000,000 | 133,310,017 | |
TECO Energy Inc. | United States | 4,000,000 | 77,600,000 | |
Xcel Energy Inc. | United States | 18,000,000 | 626,580,000 | |
8,268,784,629 | ||||
Total Common Stocks and Other Equity Interests | ||||
(Cost $34,984,369,459) | 39,360,384,678 | |||
eEquity-Linked Securities 8.1% | ||||
Consumer Discretionary 1.4% | ||||
fBank of America Corp. into General Motors Co., 8.00%, 144A | United States | 2,820,000 | 106,226,016 | |
fBank of America Corp. into Target Corp., 6.50%, 144A | United States | 1,350,000 | 108,656,505 | |
fBarclays Bank PLC into Comcast Corp., 5.50%, 144A | United States | 2,255,000 | 123,537,469 | |
fCredit Suisse New York into Target Corp., 6.50%, 144A | United States | 1,382,000 | 108,507,730 | |
fDeutsche Bank AG/London into Ford Motor Co., 7.00%, 144A | United States | 12,500,000 | 205,611,250 | |
fDeutsche Bank AG/London into General Motors Co., 8.00%, 144A | United States | 2,800,000 | 105,440,440 | |
fThe Goldman Sachs Group Inc. into Ford Motor Co., 7.50%, 144A | United States | 15,360,000 | 252,940,800 | |
fJPMorgan Chase & Co. into Las Vegas Sands Corp., 9.00%, | ||||
senior note, 144A | United States | 1,817,000 | 100,508,445 | |
fMorgan Stanley into Ford Motor Co., 7.00%, 144A | United States | 10,000,000 | 164,737,000 | |
1,276,165,655 | ||||
Consumer Staples 0.1% | ||||
fWells Fargo & Co. into Whole Foods Market Inc., 7.00%, 144A | United States | 2,825,000 | 123,385,548 | |
Energy 1.2% | ||||
fCitigroup Inc. into Anadarko Petroleum Corp., 8.00%, 144A | United States | 1,628,000 | 140,627,617 | |
fCitigroup Inc. into Cabot Oil & Gas Corp., 7.00%, 144A | United States | 3,478,000 | 105,846,322 | |
fCredit Suisse New York into Baker Hughes Inc., 6.00%, 144A | United States | 2,025,000 | 122,458,432 | |
fCredit Suisse New York into Halliburton Co., 8.00%, 144A | United States | 1,900,000 | 87,608,620 | |
fDeutsche Bank AG/London into Anadarko Petroleum Corp., 9.50%, | ||||
144A | United States | 1,900,000 | 158,979,080 | |
fDeutsche Bank AG/London into Noble Corp. PLC, 8.50%, 144A | United States | 1,528,000 | 22,270,753 | |
fDeutsche Bank AG/London into Peabody Energy Corp., 10.00%, | ||||
144A | United States | 5,500,000 | 31,821,790 | |
fThe Goldman Sachs Group Inc. into Schlumberger Ltd., 6.00%, | ||||
144A | United States | 1,027,000 | 86,916,859 | |
f,gJPMorgan Chase & Co. into Devon Energy Corp., 7.50%, 144A | United States | 2,516,000 | 148,092,766 | |
fJPMorgan Chase & Co. into Schlumberger Ltd., 6.00%, 144A | United States | 1,045,000 | 90,166,257 | |
fRoyal Bank of Canada into Cabot Oil & Gas Corp., 6.50%, 144A | United States | 4,790,000 | 136,147,128 | |
1,130,935,624 | ||||
Financials 0.7% | ||||
fBarclays Bank PLC into Bank of America Corp., 5.50%, 144A | United States | 6,565,000 | 102,235,432 | |
fBarclays Bank PLC into Bank of America Corp., 6.00%, 144A | United States | 6,135,000 | 96,564,900 | |
fCredit Suisse New York into Metlife Inc., 6.00%, 144A | United States | 2,500,000 | 128,552,500 |
68 | Semiannual Report
franklintempleton.com
FRANKLIN CUSTODIAN FUNDS
STATEMENT OF INVESTMENTS (UNAUDITED)
Franklin Income Fund (continued) | |||||
Shares/ | |||||
Country | Warrants | Value | |||
eEquity-Linked Securities (continued) | |||||
Financials (continued) | |||||
fThe Goldman Sachs Group Inc. into Citigroup Inc., 5.00%, 144A | United States | 2,900,000 | $ | 146,212,490 | |
fRoyal Bank of Canada into Metlife Inc., 6.00%, 144A | United States | 2,950,000 | 148,355,500 | ||
621,920,822 | |||||
Health Care 0.6% | |||||
fBarclays Bank PLC into Pfizer Inc., 6.00%, 144A | United States | 6,057,000 | 211,370,523 | ||
fThe Goldman Sachs Group Inc. into Bristol-Myers Squibb Co., 6.00%, | |||||
144A | United States | 2,049,000 | 115,205,435 | ||
fJPMorgan Chase & Co. into Merck & Co. Inc., 6.00%, senior note, | |||||
144A | United States | 3,203,000 | 189,076,934 | ||
515,652,892 | |||||
Industrials 0.1% | |||||
fBarclays Bank PLC into The Boeing Co., 5.50%, 144A | United States | 650,000 | 97,537,050 | ||
Information Technology 2.2% | |||||
fBank of America Corp. into QUALCOMM Inc., 6.00%, 144A | United States | 1,400,000 | 97,265,700 | ||
fBank of America Corp. into Texas Instruments Inc., 6.00%, 144A | United States | 2,870,000 | 145,822,404 | ||
fBank of America Corp. into Xilinx Inc., 6.00%, 144A | United States | 3,425,000 | 142,744,067 | ||
fBarclays Bank PLC into Xilinx Inc., 6.00%, 144A | United States | 2,535,000 | 107,216,811 | ||
fCitigroup Inc. into Apple Inc., 7.00%, 144A | United States | 802,000 | 99,646,896 | ||
fCredit Suisse New York into Broadcom Corp., 6.00%, 144A | United States | 4,000,000 | 165,317,600 | ||
fCredit Suisse New York into Cisco Systems Inc., 6.00%, 144A | United States | 5,400,000 | 147,681,900 | ||
fCredit Suisse New York into Cisco Systems Inc., 6.00%, 144A | United States | 6,600,000 | 183,252,300 | ||
fCredit Suisse New York into Freescale Semiconductor Ltd., 7.00%, | |||||
144A | United States | 2,350,000 | 61,129,610 | ||
fDeutsche Bank AG/London into Cisco Systems Inc., 6.50%, 144A | United States | 7,900,000 | 213,125,410 | ||
fThe Goldman Sachs Group Inc. into Cisco Systems Inc., 6.50%, | |||||
144A | United States | 6,486,000 | 166,852,999 | ||
fThe Goldman Sachs Group Inc. into Intel Corp., 6.50%, 144A | United States | 5,350,000 | 172,089,170 | ||
fJPMorgan Chase & Co. into Microsoft Corp., 6.00%, senior note, | |||||
144A | United States | 4,330,000 | 181,598,468 | ||
fRoyal Bank of Canada into Microsoft Corp., 5.50%, 144A | United States | 3,100,000 | 128,929,620 | ||
2,012,672,955 | |||||
Materials 1.7% | |||||
fBarclays Bank PLC into Barrick Gold Corp., 8.00%, 144A | Canada | 8,265,000 | 96,901,340 | ||
fBarclays Bank PLC into The Dow Chemical Co., 7.00%, 144A | United States | 2,080,000 | 99,681,088 | ||
fCitigroup Inc. into Rio Tinto PLC, 9.00%, 144A | United Kingdom | 4,275,000 | 182,316,352 | ||
fDeutsche Bank AG/London into AngloGold Ashanti Ltd., 10.00%, | |||||
144A | South Africa | 6,000,000 | 59,855,880 | ||
fDeutsche Bank AG/London into Goldcorp Inc., 9.00%, 144A | Canada | 4,053,000 | 74,266,767 | ||
fDeutsche Bank AG/London into LyondellBasell Industries NV, A, 9.00%, | |||||
144A | United States | 1,846,000 | 153,147,298 | ||
fDeutsche Bank AG/London into Newmont Mining Corp., 7.50%, | |||||
144A | United States | 4,050,000 | 91,300,770 | ||
fDeutsche Bank AG/London into Newmont Mining Corp., 7.00%, | |||||
144A | United States | 6,060,000 | 135,265,260 | ||
fDeutsche Bank AG/London into The Dow Chemical Co., 7.50%, | |||||
144A | United States | 5,700,000 | 266,798,760 | ||
fMorgan Stanley into Rio Tinto PLC, 7.50%, 144A | United Kingdom | 2,400,000 | 101,025,120 |
franklintempleton.com
Semiannual Report | 69
FRANKLIN CUSTODIAN FUNDS
STATEMENT OF INVESTMENTS (UNAUDITED)
Franklin Income Fund (continued) | ||||
Shares/ | ||||
Country | Warrants | Value | ||
eEquity-Linked Securities (continued) | ||||
Materials (continued) | ||||
fRoyal Bank of Canada into LyondellBasell Industries NV, A, 8.00%, | ||||
144A | United States | 2,308,000 | $ | 197,518,640 |
fWells Fargo & Co. into Freeport-McMoRan Inc., 7.50%, 144A | United States | 4,500,000 | 91,677,600 | |
1,549,754,875 | ||||
Utilities 0.1% | ||||
fMorgan Stanley into Exelon Corp., 6.00%, 144A | United States | 2,790,000 | 94,228,902 | |
Total Equity-Linked Securities | ||||
(Cost $7,788,746,973) | 7,422,254,323 | |||
Convertible Preferred Stocks 3.3% | ||||
Consumer Discretionary 0.2% | ||||
Fiat Chrysler Automobiles NV, 7.875%, cvt. pfd. | United Kingdom | 1,200,000 | 165,264,120 | |
Energy 0.4% | ||||
fChesapeake Energy Corp., 5.75%, cvt. pfd., 144A | United States | 155,500 | 134,701,875 | |
fChesapeake Energy Corp., 5.75%, cvt. pfd., 144A | United States | 104,500 | 91,110,937 | |
Halcon Resources Corp., 5.75%, cvt. pfd., A | United States | 108,000 | 32,313,060 | |
fPenn Virginia Corp., 6.00%, cvt. pfd., 144A | United States | 700,000 | 42,623,000 | |
Rex Energy Corp., 6.00%, cvt. pfd., A | United States | 350,000 | 15,568,000 | |
Sanchez Energy Corp., 6.50%, cvt. pfd., B | United States | 1,200,000 | 49,500,000 | |
SandRidge Energy Inc., 7.00%, cvt. pfd. | United States | 800,000 | 30,900,000 | |
396,716,872 | ||||
Financials 1.6% | ||||
Bank of America Corp., 7.25%, cvt. pfd., L | United States | 699,718 | 809,573,726 | |
FelCor Lodging Trust Inc., 7.80%, cvt. pfd., A | United States | 2,800,000 | 73,220,000 | |
aFNMA, 5.375%, cvt. pfd. | United States | 4,250 | 57,375,000 | |
Wells Fargo & Co., 7.50%, cvt. pfd., A | United States | 480,000 | 587,040,000 | |
1,527,208,726 | ||||
Health Care 0.1% | ||||
aActavis PLC, 5.50%, cvt. pfd. | United States | 75,000 | 75,900,000 | |
Industrials 0.1% | ||||
a,bCEVA Holdings LLC, cvt. pfd., A-1 | United Kingdom | 2,897 | 2,897,250 | |
a,bCEVA Holdings LLC, cvt. pfd., A-2 | United Kingdom | 110,565 | 80,159,683 | |
83,056,933 | ||||
Materials 0.2% | ||||
Alcoa Inc., 5.375%, cvt. pfd. | United States | 3,056,375 | 133,991,480 | |
ArcelorMittal, 6.00%, cvt. pfd. | Luxembourg | 1,200,000 | 18,024,000 | |
152,015,480 | ||||
Telecommunication Services 0.0%† | ||||
T-Mobile US Inc., 5.50%, cvt. pfd. | United States | 777,800 | 45,625,748 | |
Utilities 0.7% | ||||
Dominion Resources Inc., 6.125%, cvt. pfd., A | United States | 1,490,000 | 83,678,400 | |
Dominion Resources Inc., 6.375%, cvt. pfd., A | United States | 2,220,000 | 107,448,000 | |
Dominion Resources Inc., 6.00%, cvt. pfd., B | United States | 1,490,000 | 84,036,000 | |
Exelon Corp., 6.50%, cvt. pfd. | United States | 2,000,000 | 97,300,000 | |
NextEra Energy Inc., 5.599%, cvt. pfd. | United States | 2,000,000 | 136,410,000 |
70 | Semiannual Report
franklintempleton.com
FRANKLIN CUSTODIAN FUNDS
STATEMENT OF INVESTMENTS (UNAUDITED)
Franklin Income Fund (continued) | |||||
Shares/ | |||||
Country | Warrants | Value | |||
Convertible Preferred Stocks (continued) | |||||
Utilities (continued) | |||||
NextEra Energy Inc., 5.799%, cvt. pfd. | United States | 1,000,000 | $ | 55,750,000 | |
NextEra Energy Inc., 5.889%, cvt. pfd. | United States | 956,500 | 62,583,795 | ||
627,206,195 | |||||
Total Convertible Preferred Stocks | |||||
(Cost $3,126,593,684) | 3,072,994,074 | ||||
Preferred Stocks 0.4% | |||||
Financials 0.4% | |||||
fAlly Financial Inc., 7.00%, pfd., 144A | United States | 60,000 | 61,584,378 | ||
aFHLMC, 8.375%, pfd., Z | United States | 15,000,000 | 62,400,000 | ||
aFNMA, 8.25%, pfd. | United States | 11,784,000 | 49,021,440 | ||
GMAC Capital Trust I, 8.125%, pfd. | United States | 3,080,420 | 80,861,025 | ||
Morgan Stanley, 6.375%, pfd., I | United States | 4,500,000 | 117,180,000 | ||
Total Preferred Stocks (Cost $860,880,500) | 371,046,843 | ||||
Principal | |||||
Amount* | |||||
Convertible Bonds 0.8% | |||||
Consumer Discretionary 0.3% | |||||
fVolkswagen International Finance, cvt., sub. note, 144A, 5.50%, | |||||
11/09/15 | Germany | 200,000,000 | EUR | 307,401,699 | |
Energy 0.4% | |||||
Alpha Natural Resources Inc., cvt., senior note, | |||||
3.75%, 12/15/17 | United States | 30,000,000 | 11,268,750 | ||
4.875%, 12/15/20 | United States | 27,500,000 | 7,167,187 | ||
f,hAmerican Energy-Permian Basin LLC, cvt., 144A, PIK, 8.00%, | |||||
5/01/22 | United States | 40,000,000 | 36,373,480 | ||
Cobalt International Energy Inc., cvt., | |||||
senior bond, 3.125%, 5/15/24 | United States | 300,000,000 | 222,562,500 | ||
senior note, 2.625%, 12/01/19 | United States | 70,000,000 | 50,968,750 | ||
Energy XXI Ltd., cvt., senior note, 3.00%, 12/15/18 | United States | 28,300,000 | 8,419,250 | ||
Stone Energy Corp., cvt., senior note, 1.75%, 3/01/17 | United States | 67,000,000 | 60,718,750 | ||
397,478,667 | |||||
Materials 0.1% | |||||
Cemex SAB de CV, cvt., sub. note, 3.75%, 3/15/18 | Mexico | 23,310,000 | 27,761,627 | ||
Molycorp Inc., cvt., senior note, 6.00%, 9/01/17 | United States | 42,000,000 | 3,739,764 | ||
31,501,391 | |||||
Total Convertible Bonds (Cost $843,988,009) | 736,381,757 | ||||
Corporate Bonds 38.2% | |||||
Consumer Discretionary 6.9% | |||||
f1011778 BC ULC/New Red Finance Inc., secured note, second lien, | |||||
144A, 6.00%, 4/01/22 | Canada | 70,000,000 | 72,887,500 | ||
f,i24 Hour Holdings III LLC, senior note, 144A, 8.00%, 6/01/22 | United States | 56,000,000 | 48,160,000 | ||
fAcademy Ltd./Finance Corp., senior note, 144A, 9.25%, 8/01/19 | United States | 67,900,000 | 72,313,500 | ||
fAltice Financing SA, secured note, | |||||
144A, 6.625%, 2/15/23 | Luxembourg | 50,000,000 | 51,468,750 | ||
first lien, 144A, 6.50%, 1/15/22 | Luxembourg | 24,100,000 | 24,717,563 |
franklintempleton.com Semiannual Report | 71
FRANKLIN CUSTODIAN FUNDS
STATEMENT OF INVESTMENTS (UNAUDITED)
Franklin Income Fund (continued) | ||||
Principal | ||||
Country | Amount* | Value | ||
Corporate Bonds (continued) | ||||
Consumer Discretionary (continued) | ||||
fAltice SA, | ||||
senior bond, 144A, 7.625%, 2/15/25 | Luxembourg | 20,000,000 | $ | 20,162,500 |
senior secured note, 144A, 7.75%, 5/15/22 | Luxembourg | 25,000,000 | 25,484,375 | |
AMC Networks Inc., 4.75%, 12/15/22 | United States | 40,000,000 | 40,024,800 | |
fArgos Merger Sub Inc., senior note, 144A, 7.125%, 3/15/23 | United States | 49,600,000 | 51,522,000 | |
Best Buy Co. Inc., senior note, 5.50%, 3/15/21 | United States | 25,000,000 | 26,500,000 | |
Cablevision Systems Corp., senior note, | ||||
8.625%, 9/15/17 | United States | 70,000,000 | 78,925,000 | |
7.75%, 4/15/18 | United States | 120,000,000 | 133,650,000 | |
CCO Holdings LLC/CCO Holdings Capital Corp., | ||||
senior bond, 5.25%, 9/30/22 | United States | 62,800,000 | 64,448,500 | |
senior bond, 5.125%, 2/15/23 | United States | 185,000,000 | 187,543,750 | |
senior bond, 5.75%, 9/01/23 | United States | 67,000,000 | 70,266,250 | |
senior bond, 5.75%, 1/15/24 | United States | 185,000,000 | 193,787,500 | |
senior note, 7.375%, 6/01/20 | United States | 60,000,000 | 64,275,000 | |
senior note, 5.25%, 3/15/21 | United States | 31,000,000 | 31,852,500 | |
senior note, 6.50%, 4/30/21 | United States | 94,500,000 | 99,579,375 | |
CCOH Safari LLC, senior note, 5.50%, 12/01/22 | United States | 40,000,000 | 41,000,000 | |
Chrysler Group LLC/CG Co-Issuer Inc., senior secured note, | ||||
8.00%, 6/15/19 | United States | 200,000,000 | 210,750,000 | |
8.25%, 6/15/21 | United States | 145,000,000 | 161,545,950 | |
Cinemark USA Inc., | ||||
senior bond, 4.875%, 6/01/23 | United States | 23,000,000 | 23,000,000 | |
senior note, 5.125%, 12/15/22 | United States | 50,000,000 | 51,000,000 | |
Clear Channel Worldwide Holdings Inc., senior sub. note, 7.625%, | ||||
3/15/20 | United States | 142,500,000 | 150,693,750 | |
fCleopatra Finance Ltd., | ||||
senior secured bond, 144A, 6.50%, 2/15/25 | Italy | 88,900,000 | 85,899,625 | |
senior secured note, 144A, 5.625%, 2/15/20 | Italy | 50,000,000 | 49,343,750 | |
senior secured note, 144A, 6.25%, 2/15/22 | Italy | 46,600,000 | 45,638,875 | |
CSC Holdings LLC, senior note, | ||||
6.75%, 11/15/21 | United States | 12,800,000 | 14,256,000 | |
f144A, 5.25%, 6/01/24 | United States | 32,600,000 | 33,333,500 | |
iCumulus Media Holdings Inc., senior note, 7.75%, 5/01/19 | United States | 50,000,000 | 49,187,500 | |
b,hDex Media Inc., senior sub. note, PIK, 14.00%, 1/29/17 | United States | 42,841,791 | 16,494,090 | |
DISH DBS Corp., | ||||
senior bond, 5.00%, 3/15/23 | United States | 240,000,000 | 233,952,000 | |
senior note, 5.125%, 5/01/20 | United States | 45,000,000 | 45,450,000 | |
senior note, 5.875%, 7/15/22 | United States | 158,000,000 | 160,962,500 | |
senior note, 5.875%, 11/15/24 | United States | 82,100,000 | 82,407,875 | |
Dollar General Corp., senior bond, 3.25%, 4/15/23 | United States | 180,000,000 | 175,222,080 | |
fFamily Tree Escrow LLC, senior note, 144A, | ||||
5.25%, 3/01/20 | United States | 8,800,000 | 9,262,000 | |
5.75%, 3/01/23 | United States | 42,500,000 | 44,837,500 | |
The Goodyear Tire & Rubber Co., senior note, | ||||
8.25%, 8/15/20 | United States | 101,800,000 | 108,162,500 | |
6.50%, 3/01/21 | United States | 62,900,000 | 67,067,125 | |
HD Supply Inc., | ||||
ffirst lien, 144A, 5.25%, 12/15/21 | United States | 80,000,000 | 82,600,000 | |
senior note, 7.50%, 7/15/20 | United States | 60,000,000 | 64,500,000 |
72 | Semiannual Report
franklintempleton.com
FRANKLIN CUSTODIAN FUNDS
STATEMENT OF INVESTMENTS (UNAUDITED)
Franklin Income Fund (continued) | ||||
Principal | ||||
Country | Amount* | Value | ||
Corporate Bonds (continued) | ||||
Consumer Discretionary (continued) | ||||
iHeartCommunications Inc., | ||||
fsecured note, 144A, 10.625%, 3/15/23 | United States | 100,000,000 | $ | 100,250,000 |
senior note, 10.00%, 1/15/18 | United States | 65,000,000 | 55,493,750 | |
hsenior note, PIK, 14.00%, 2/01/21 | United States | 126,863,512 | 100,995,534 | |
senior secured bond, first lien, 9.00%, 3/01/21 | United States | 329,775,000 | 316,996,219 | |
senior secured note, first lien, 9.00%, 12/15/19 | United States | 260,800,000 | 259,822,000 | |
senior secured note, first lien, 11.25%, 3/01/21 | United States | 50,000,000 | 51,312,500 | |
senior secured note, first lien, 9.00%, 9/15/22 | United States | 109,400,000 | 105,024,000 | |
KB Home, | ||||
senior bond, 7.50%, 9/15/22 | United States | 35,000,000 | 36,050,000 | |
senior note, 9.10%, 9/15/17 | United States | 49,000,000 | 55,125,000 | |
senior note, 7.25%, 6/15/18 | United States | 70,500,000 | 76,492,500 | |
senior note, 8.00%, 3/15/20 | United States | 20,000,000 | 21,700,000 | |
senior note, 7.00%, 12/15/21 | United States | 40,000,000 | 40,800,000 | |
Lamar Media Corp., senior sub. bond, 5.00%, 5/01/23 | United States | 39,500,000 | 40,586,250 | |
fLaureate Education Inc., 144A, 9.25%, 9/01/19 | United States | 15,000,000 | 14,250,000 | |
MGM Resorts International, senior note, | ||||
10.00%, 11/01/16 | United States | 80,000,000 | 89,000,000 | |
8.625%, 2/01/19 | United States | 44,800,000 | 51,296,000 | |
5.25%, 3/31/20 | United States | 60,000,000 | 61,044,000 | |
6.75%, 10/01/20 | United States | 27,450,000 | 29,405,812 | |
7.75%, 3/15/22 | United States | 80,000,000 | 90,300,000 | |
6.00%, 3/15/23 | United States | 35,000,000 | 36,137,500 | |
fNielsen Finance LLC/Co., senior note, 144A, 5.00%, 4/15/22 | United States | 73,000,000 | 73,638,750 | |
fNumericable Group SA, | ||||
first lien, 144A, 4.875%, 5/15/19 | France | 50,000,000 | 49,973,000 | |
senior bond, first lien, 144A, 6.25%, 5/15/24 | France | 40,000,000 | 40,725,000 | |
senior note, first lien, 144A, 6.00%, 5/15/22 | France | 65,000,000 | 65,893,750 | |
Outfront Media Capital LLC/Corp., | ||||
senior bond, 5.625%, 2/15/24 | United States | 22,700,000 | 23,863,375 | |
senior bond, 5.875%, 3/15/25 | United States | 30,000,000 | 31,837,500 | |
senior note, 5.25%, 2/15/22 | United States | 23,000,000 | 24,150,000 | |
Quebecor Media Inc., senior bond, 5.75%, 1/15/23 | Canada | 75,300,000 | 77,841,375 | |
Regal Entertainment Group, senior note, 5.75%, 3/15/22 | United States | 50,000,000 | 51,312,500 | |
fShea Homes LP/Shea Homes Funding Corp., | ||||
senior bond, 144A, 6.125%, 4/01/25 | United States | 45,000,000 | 45,562,500 | |
senior note, 144A, 5.875%, 4/01/23 | United States | 45,000,000 | 46,012,500 | |
fSirius XM Radio Inc., | ||||
senior bond, 144A, 6.00%, 7/15/24 | United States | 134,100,000 | 141,140,250 | |
senior note, 144A, 4.25%, 5/15/20 | United States | 30,500,000 | 30,271,250 | |
senior note, 144A, 5.875%, 10/01/20 | United States | 50,000,000 | 52,250,000 | |
senior note, 144A, 5.75%, 8/01/21 | United States | 45,000,000 | 46,996,875 | |
senior note, 144A, 4.625%, 5/15/23 | United States | 94,400,000 | 91,214,000 | |
fUnitymedia KabelBW GmbH, senior bond, 144A, 6.125%, 1/15/25 | Germany | 50,000,000 | 53,031,250 | |
fUnivision Communications Inc., | ||||
senior note, 144A, 8.50%, 5/15/21 | United States | 65,000,000 | 69,712,500 | |
senior secured note, first lien, 144A, 5.125%, 5/15/23 | United States | 124,500,000 | 126,990,000 | |
senior secured note, first lien, 144A, 5.125%, 2/15/25 | United States | 40,500,000 | 41,461,875 | |
fVirgin Media Secured Finance PLC, senior secured bond, first lien, | ||||
144A, 5.50%, 1/15/25 | United Kingdom | 80,000,000 | 83,250,000 | |
Visant Corp., senior note, 10.00%, 10/01/17 | United States | 46,066,000 | 41,459,400 |
franklintempleton.com Semiannual Report | 73
FRANKLIN CUSTODIAN FUNDS
STATEMENT OF INVESTMENTS (UNAUDITED)
Franklin Income Fund (continued) | ||||
Principal | ||||
Country | Amount* | Value | ||
Corporate Bonds (continued) | ||||
Consumer Discretionary (continued) | ||||
fWeyerhaeuser Real Estate Co., senior bond, 144A, 5.875%, | ||||
6/15/24 | United States | 30,000,000 | $ | 29,437,500 |
fWynn Las Vegas LLC/Capital Corp., senior bond, 144A, 4.25%, | ||||
5/30/23 | United States | 28,300,000 | 27,168,000 | |
fWynn Macau Ltd., senior note, 144A, 5.25%, 10/15/21 | Macau | 25,000,000 | 23,734,375 | |
6,385,144,073 | ||||
Consumer Staples 0.6% | ||||
fAlbertsons Holdings/Saturn Acquisition, senior note, 144A, 7.75%, | ||||
10/15/22 | United States | 18,784,000 | 20,192,800 | |
Alliance One International Inc., secured note, second lien, 9.875%, | ||||
7/15/21 | United States | 50,000,000 | 44,000,000 | |
fCott Beverages Inc., senior note, 144A, | ||||
6.75%, 1/01/20 | United States | 40,100,000 | 41,603,750 | |
5.375%, 7/01/22 | United States | 49,377,000 | 47,710,526 | |
fESAL GmbH, senior note, 144A, 6.25%, 2/05/23 | Brazil | 50,000,000 | 48,858,750 | |
fJBS USA LLC/Finance Inc., | ||||
senior bond, 144A, 5.875%, 7/15/24 | United States | 75,000,000 | 76,171,875 | |
senior note, 144A, 8.25%, 2/01/20 | United States | 50,100,000 | 53,481,750 | |
senior note, 144A, 7.25%, 6/01/21 | United States | 148,100,000 | 156,615,750 | |
fPost Holdings Inc., senior note, 144A, 6.75%, 12/01/21 | United States | 19,000,000 | 19,237,500 | |
U.S. Foods Inc., 8.50%, 6/30/19 | United States | 80,000,000 | 84,200,000 | |
592,072,701 | ||||
Energy 9.6% | ||||
Access Midstream Partner LP/ACMP Finance Corp., senior note, | ||||
4.875%, 5/15/23 | United States | 76,000,000 | 76,697,300 | |
Alpha Natural Resources Inc., | ||||
fsecond lien, 144A, 7.50%, 8/01/20 | United States | 21,600,000 | 9,066,319 | |
senior note, 6.00%, 6/01/19 | United States | 18,000,000 | 5,130,000 | |
senior note, 6.25%, 6/01/21 | United States | 40,000,000 | 10,300,000 | |
fAmerican Energy-Permian Basin LLC/AEPB Finance Corp., | ||||
senior note, 144A, | ||||
7.125%, 11/01/20 | United States | 22,500,000 | 17,381,250 | |
7.375%, 11/01/21 | United States | 20,000,000 | 15,300,000 | |
fAmerican Energy-Woodford LLC/Finance Corp., senior note, 144A, | ||||
9.00%, 9/15/22 | United States | 50,000,000 | 29,000,000 | |
Antero Resources Corp., senior note, | ||||
5.125%, 12/01/22 | United States | 143,000,000 | 137,995,000 | |
f144A, 5.625%, 6/01/23 | United States | 40,000,000 | 39,700,000 | |
Antero Resources Finance Corp., senior note, | ||||
6.00%, 12/01/20 | United States | 42,000,000 | 42,231,000 | |
5.375%, 11/01/21 | United States | 75,000,000 | 73,031,250 | |
Arch Coal Inc., | ||||
fsecured note, second lien, 144A, 8.00%, 1/15/19 | United States | 20,000,000 | 9,662,500 | |
senior note, 7.00%, 6/15/19 | United States | 111,000,000 | 26,640,000 | |
senior note, 7.25%, 6/15/21 | United States | 75,000,000 | 17,062,500 | |
Atlas Energy Holdings Operating Co. LLC/Atlas Resource Finance | ||||
Corp., senior note, 9.25%, 8/15/21 | United States | 35,000,000 | 24,675,000 | |
Berry Petroleum Co., senior bond, 6.375%, 9/15/22 | United States | 28,000,000 | 22,050,000 | |
Bill Barrett Corp., senior note, | ||||
7.625%, 10/01/19 | United States | 100,000,000 | 94,500,000 | |
7.00%, 10/15/22 | United States | 100,000,000 | 87,437,500 |
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FRANKLIN CUSTODIAN FUNDS
STATEMENT OF INVESTMENTS (UNAUDITED)
Franklin Income Fund (continued) | ||||
Principal | ||||
Country | Amount* | Value | ||
Corporate Bonds (continued) | ||||
Energy (continued) | ||||
Bonanza Creek Energy Inc., senior note, 5.75%, 2/01/23 | United States | 25,000,000 | $ | 23,125,000 |
BreitBurn Energy Partners LP/BreitBurn Finance Corp., senior bond, | ||||
7.875%, 4/15/22 | United States | 84,800,000 | 61,480,000 | |
fCalifornia Resources Corp., | ||||
senior bond, 144A, 6.00%, 11/15/24 | United States | 127,000,000 | 111,918,750 | |
senior note, 144A, 5.00%, 1/15/20 | United States | 90,000,000 | 81,675,000 | |
senior note, 144A, 5.50%, 9/15/21 | United States | 120,000,000 | 107,550,000 | |
Calumet Specialty Products Partners LP/Calumet Finance Corp., | ||||
senior note, | ||||
7.625%, 1/15/22 | United States | 20,000,000 | 20,300,000 | |
f144A, 6.50%, 4/15/21 | United States | 50,000,000 | 48,750,000 | |
Carrizo Oil & Gas Inc., senior note, | ||||
8.625%, 10/15/18 | United States | 34,800,000 | 36,453,000 | |
7.50%, 9/15/20 | United States | 21,300,000 | 21,992,250 | |
CGG SA, senior note, | ||||
6.50%, 6/01/21 | France | 108,096,000 | 86,747,040 | |
6.875%, 1/15/22 | France | 58,600,000 | 47,099,750 | |
CHC Helicopter SA, | ||||
senior note, 9.375%, 6/01/21 | Canada | 34,060,000 | 20,946,900 | |
senior secured note, first lien, 9.25%, 10/15/20 | Canada | 117,450,000 | 101,153,811 | |
Chesapeake Energy Corp., senior note, | ||||
6.50%, 8/15/17 | United States | 100,000,000 | 105,750,000 | |
7.25%, 12/15/18 | United States | 138,065,000 | 149,800,525 | |
6.875%, 11/15/20 | United States | 30,500,000 | 32,025,000 | |
5.375%, 6/15/21 | United States | 100,000,000 | 97,500,000 | |
4.875%, 4/15/22 | United States | 125,000,000 | 117,812,500 | |
5.75%, 3/15/23 | United States | 183,150,000 | 179,487,000 | |
Clayton Williams Energy Inc., senior note, 7.75%, 4/01/19 | United States | 95,585,000 | 89,371,975 | |
CONSOL Energy Inc., senior note, 5.875%, 4/15/22 | United States | 214,400,000 | 195,104,000 | |
Denbury Resources Inc., | ||||
senior bond, 6.375%, 8/15/21 | United States | 64,112,000 | 60,746,120 | |
senior note, 5.50%, 5/01/22 | United States | 195,000,000 | 176,475,000 | |
senior sub. note, 4.625%, 7/15/23 | United States | 180,000,000 | 155,250,000 | |
Diamondback Energy Inc., senior note, 7.625%, 10/01/21 | United States | 58,000,000 | 61,335,000 | |
fDrill Rigs Holdings Inc., secured note, 144A, 6.50%, 10/01/17 | United States | 32,000,000 | 25,760,000 | |
Energy Transfer Equity LP, senior bond, 5.875%, 1/15/24 | United States | 108,300,000 | 114,798,000 | |
Energy XXI Gulf Coast Inc., | ||||
7.75%, 6/15/19 | United States | 55,000,000 | 23,100,000 | |
senior note, 9.25%, 12/15/17 | United States | 247,000,000 | 167,960,000 | |
fsenior note, 144A, 6.875%, 3/15/24 | United States | 235,000,000 | 82,250,000 | |
fsenior secured note, second lien, 144A, 11.00%, 3/15/20 | United States | 71,200,000 | 67,907,000 | |
fEnQuest PLC, senior note, 144A, 7.00%, 4/15/22 | United Kingdom | 85,000,000 | 60,775,000 | |
EP Energy LLC/Everest Acquisition Finance Inc., senior note, 9.375%, | ||||
5/01/20 | United States | 35,000,000 | 36,793,750 | |
EPL Oil & Gas Inc., senior note, 8.25%, 2/15/18 | United States | 77,022,000 | 57,381,390 | |
EXCO Resources Inc., senior note, 7.50%, 9/15/18 | United States | 80,000,000 | 48,000,000 | |
fGibson Energy Inc., senior note, 144A, 6.75%, 7/15/21 | Canada | 35,000,000 | 35,875,000 | |
f,jGoodrich Petroleum Corp., second lien, 144A, 8.00%, 3/15/18 | United States | 70,000 | 70,000,000 | |
Halcon Resources Corp., senior note, | ||||
9.75%, 7/15/20 | United States | 255,000,000 | 181,050,000 | |
8.875%, 5/15/21 | United States | 159,000,000 | 111,697,500 | |
9.25%, 2/15/22 | United States | 73,100,000 | 50,804,500 |
franklintempleton.com Semiannual Report | 75
FRANKLIN CUSTODIAN FUNDS
STATEMENT OF INVESTMENTS (UNAUDITED)
Franklin Income Fund (continued) | ||||
Principal | ||||
Country | Amount* | Value | ||
Corporate Bonds (continued) | ||||
Energy (continued) | ||||
fHercules Offshore Inc., senior note, 144A, | ||||
10.25%, 4/01/19 | United States | 72,500,000 | $ | 23,018,750 |
8.75%, 7/15/21 | United States | 47,000,000 | 13,865,000 | |
7.50%, 10/01/21 | United States | 54,000,000 | 15,390,000 | |
Kinder Morgan Inc., | ||||
senior note, MTN, 7.75%, 1/15/32 | United States | 123,000,000 | 152,160,102 | |
fsenior secured bond, first lien, 144A, 5.625%, 11/15/23 | United States | 130,300,000 | 143,523,756 | |
fsenior secured note, 144A, 5.00%, 2/15/21 | United States | 10,600,000 | 11,343,558 | |
Linn Energy LLC/Finance Corp., senior note, | ||||
6.50%, 5/15/19 | United States | 275,000,000 | 232,546,875 | |
6.25%, 11/01/19 | United States | 250,000,000 | 198,750,000 | |
8.625%, 4/15/20 | United States | 142,000,000 | 122,120,000 | |
7.75%, 2/01/21 | United States | 85,000,000 | 68,000,000 | |
6.50%, 9/15/21 | United States | 55,000,000 | 42,900,000 | |
Magnum Hunter Resources Corp., senior note, 9.75%, 5/15/20 | United States | 60,000,000 | 53,700,000 | |
fMEG Energy Corp., senior bond, 144A, 7.00%, 3/31/24 | Canada | 100,000,000 | 94,750,000 | |
fMemorial Production Partners LP/Memorial Production Finance Corp., | ||||
senior note, 144A, 6.875%, 8/01/22 | United States | 40,000,000 | 35,600,000 | |
Midstates Petroleum Co. Inc./LLC, senior note, | ||||
10.75%, 10/01/20 | United States | 50,000,000 | 27,250,000 | |
9.25%, 6/01/21 | United States | 33,000,000 | 16,170,000 | |
fNGPL PipeCo LLC, secured note, 144A, 7.119%, 12/15/17 | United States | 130,000,000 | 129,350,000 | |
Niska Gas Storage Canada ULC/Niska Gas Storage Canada Finance | ||||
Corp., senior note, 6.50%, 4/01/19 | United States | 75,000,000 | 56,062,500 | |
Oasis Petroleum Inc., senior note, | ||||
7.25%, 2/01/19 | United States | 34,500,000 | 34,327,500 | |
6.50%, 11/01/21 | United States | 25,500,000 | 24,480,000 | |
6.875%, 3/15/22 | United States | 80,000,000 | 78,400,000 | |
fOcean Rig UDW Inc., senior note, 144A, 7.25%, 4/01/19 | United States | 71,000,000 | 41,268,750 | |
Offshore Group Investment Ltd., | ||||
senior bond, first lien, 7.125%, 4/01/23 | United States | 38,150,000 | 21,602,438 | |
senior secured note, first lien, 7.50%, 11/01/19 | United States | 130,000,000 | 74,425,000 | |
fParagon Offshore PLC, senior bond, 144A, 7.25%, 8/15/24 | United States | 10,650,000 | 3,621,000 | |
Peabody Energy Corp., | ||||
fsecond lien, 144A, 10.00%, 3/15/22 | United States | 110,000,000 | 97,900,000 | |
senior note, 6.00%, 11/15/18 | United States | 110,000,000 | 86,350,000 | |
senior note, 6.25%, 11/15/21 | United States | 165,000,000 | 102,093,750 | |
Penn Virginia Corp., senior note, 8.50%, 5/01/20 | United States | 160,000,000 | 149,600,000 | |
Penn Virginia Resource Partners LP/Penn Virginia Resource Finance | ||||
Corp., senior note, 6.50%, 5/15/21 | United States | 28,000,000 | 29,610,000 | |
Petrobras Global Finance BV, senior note, | ||||
5.375%, 1/27/21 | Brazil | 65,000,000 | 58,987,500 | |
4.375%, 5/20/23 | Brazil | 85,000,000 | 72,588,300 | |
PetroQuest Energy Inc., senior note, 10.00%, 9/01/17 | United States | 60,000,000 | 51,150,000 | |
Range Resources Corp., senior sub. note, 5.00%, 3/15/23 | United States | 17,800,000 | 17,800,000 | |
Regency Energy Partners LP/Regency Energy Finance Corp., | ||||
senior bond, 5.50%, 4/15/23 | United States | 46,000,000 | 47,725,000 | |
senior note, 5.875%, 3/01/22 | United States | 15,400,000 | 16,786,000 | |
senior note, 4.50%, 11/01/23 | United States | 62,000,000 | 62,620,000 | |
Rex Energy Corp., senior note, | ||||
8.875%, 12/01/20 | United States | 90,000,000 | 70,650,000 | |
f144A, 6.25%, 8/01/22 | United States | 70,000,000 | 47,425,000 |
76 | Semiannual Report franklintempleton.com
FRANKLIN CUSTODIAN FUNDS
STATEMENT OF INVESTMENTS (UNAUDITED)
Franklin Income Fund (continued) | ||||
Principal | ||||
Country | Amount* | Value | ||
Corporate Bonds (continued) | ||||
Energy (continued) | ||||
Rice Energy Inc., senior note, 6.25%, 5/01/22 | United States | 105,000,000 | $ | 102,900,000 |
fRockies Express Pipeline LLC, | ||||
senior bond, 144A, 6.85%, 7/15/18 | United States | 25,000,000 | 27,125,000 | |
senior bond, 144A, 5.625%, 4/15/20 | United States | 11,000,000 | 11,551,100 | |
senior note, 144A, 6.00%, 1/15/19 | United States | 60,000,000 | 63,975,000 | |
Sabine Pass Liquefaction LLC, | ||||
first lien, 5.625%, 2/01/21 | United States | 126,200,000 | 127,462,000 | |
first lien, 6.25%, 3/15/22 | United States | 90,000,000 | 93,375,000 | |
first lien, 5.625%, 4/15/23 | United States | 200,000,000 | 200,250,000 | |
senior secured note, first lien, 5.75%, 5/15/24 | United States | 131,900,000 | 133,219,000 | |
fsenior secured note, first lien, 144A, 5.625%, 3/01/25 | United States | 75,000,000 | 74,343,750 | |
Sabine Pass LNG LP, | ||||
first lien, 6.50%, 11/01/20 | United States | 30,000,000 | 31,200,000 | |
senior secured note, 7.50%, 11/30/16 | United States | 141,000,000 | 150,517,500 | |
Sanchez Energy Corp., senior note, | ||||
7.75%, 6/15/21 | United States | 151,100,000 | 146,567,000 | |
6.125%, 1/15/23 | United States | 170,000,000 | 153,637,500 | |
SandRidge Energy Inc., senior note, | ||||
8.75%, 1/15/20 | United States | 108,000,000 | 71,010,000 | |
7.50%, 3/15/21 | United States | 150,100,000 | 93,812,500 | |
8.125%, 10/15/22 | United States | 60,000,000 | 37,110,000 | |
7.50%, 2/15/23 | United States | 50,000,000 | 31,000,000 | |
fSM Energy Co., senior note, 144A, 6.125%, 11/15/22 | United States | 50,000,000 | 49,875,000 | |
Stone Energy Corp., senior bond, 7.50%, 11/15/22 | United States | 225,000,000 | 204,750,000 | |
fSunoco LP/Sunoco Finance Corp., senior note, 144A, 6.375%, | ||||
4/01/23 | United States | 70,000,000 | 72,275,000 | |
fUltra Petroleum Corp., senior bond, 144A, 6.125%, 10/01/24 | United States | 47,000,000 | 40,537,500 | |
W&T Offshore Inc., senior note, 8.50%, 6/15/19 | United States | 218,500,000 | 136,562,500 | |
fWhiting Petroleum Corp., senior note, 144A, 6.25%, 4/01/23 | United States | 50,000,000 | 49,812,500 | |
The Williams Cos. Inc., senior bond, 3.70%, 1/15/23 | United States | 65,000,000 | 60,185,580 | |
WPX Energy Inc., senior note, 6.00%, 1/15/22 | United States | 48,500,000 | 45,347,500 | |
8,896,172,089 | ||||
Financials 4.5% | ||||
fAshtead Capital Inc., second lien, 144A, 5.625%, 10/01/24 | United Kingdom | 30,000,000 | 31,331,250 | |
kBank of America Corp., junior sub. bond, | ||||
AA, 6.10% to 3/17/25, FRN thereafter, Perpetual | United States | 80,000,000 | 81,200,000 | |
M, 8.125% to 5/15/18, FRN thereafter, Perpetual | United States | 100,000,000 | 108,375,000 | |
U, 5.20% to 6/01/23, FRN thereafter, Perpetual | United States | 80,000,000 | 77,600,000 | |
X, 6.25% to 9/05/24, FRN thereafter, Perpetual | United States | 85,000,000 | 87,018,750 | |
kBarclays PLC, sub. bond, 8.25% to 12/15/18, FRN thereafter, | ||||
Perpetual | United Kingdom | 75,000,000 | 80,469,750 | |
CIT Group Inc., senior bond, 5.00%, 8/01/23 | United States | 60,000,000 | 61,650,000 | |
kCitigroup Inc., | ||||
junior sub. bond, 5.35% to 5/15/23, FRN thereafter, Perpetual | United States | 179,195,000 | 174,267,138 | |
junior sub. bond, 5.95% to 1/30/23, FRN thereafter, Perpetual | United States | 165,000,000 | 167,268,750 | |
junior sub. bond, M, 6.30% to 5/15/24, FRN thereafter, Perpetual | United States | 270,000,000 | 276,412,500 | |
junior sub. bond, O, 5.875% to 3/27/20, FRN thereafter, | ||||
Perpetual | United States | 160,000,000 | 162,000,000 | |
junior sub. note, 5.90% to 2/15/23, FRN thereafter, Perpetual | United States | 33,000,000 | 33,412,500 | |
kFifth Third Bancorp, junior sub. bond, 5.10% to 6/30/23, FRN thereafter, | ||||
Perpetual | United States | 54,000,000 | 51,435,000 |
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FRANKLIN CUSTODIAN FUNDS
STATEMENT OF INVESTMENTS (UNAUDITED)
Franklin Income Fund (continued) | ||||
Principal | ||||
Country | Amount* | Value | ||
Corporate Bonds (continued) | ||||
Financials (continued) | ||||
kGeneral Electric Capital Corp., junior sub. bond, C, 5.25% to 6/15/23, | ||||
FRN thereafter, Perpetual | United States | 82,400,000 | $ | 85,078,000 |
General Motors Financial Co. Inc., senior bond, 4.25%, 5/15/23 | United States | 65,209,000 | 67,716,938 | |
kThe Goldman Sachs Group Inc., junior sub. note, 5.70% to 5/10/19, | ||||
FRN thereafter, Perpetual | United States | 30,000,000 | 30,965,610 | |
kHSBC Holdings PLC, junior sub. bond, 6.375% to 9/17/24, | ||||
FRN thereafter, Perpetual | United Kingdom | 40,000,000 | 40,992,200 | |
International Lease Finance Corp., senior note, | ||||
8.75%, 3/15/17 | United States | 120,000,000 | 132,900,000 | |
8.875%, 9/01/17 | United States | 63,300,000 | 71,687,250 | |
Iron Mountain Inc., senior sub. bond, 5.75%, 8/15/24 | United States | 78,000,000 | 79,267,500 | |
iStar Financial Inc., senior note, 5.00%, 7/01/19 | United States | 98,500,000 | 98,869,375 | |
fJefferies Finance LLC/JFIN Co-Issuer Corp., senior note, 144A, | ||||
7.50%, 4/15/21 | United States | 21,000,000 | 20,343,750 | |
kJPMorgan Chase & Co., | ||||
junior sub. bond, 6.125% to 4/30/24, FRN thereafter, Perpetual | United States | 60,000,000 | 61,494,000 | |
junior sub. bond, 6.75% to 2/01/24, FRN thereafter, Perpetual | United States | 100,000,000 | 109,000,000 | |
junior sub. bond, Q, 5.15% to 5/01/23, FRN thereafter, | ||||
Perpetual | United States | 100,000,000 | 97,875,000 | |
junior sub. bond, R, 6.00% to 8/01/23, FRN thereafter, | ||||
Perpetual | United States | 105,000,000 | 106,837,500 | |
junior sub. bond, V, 5.00% to 7/30/19, FRN thereafter, | ||||
Perpetual | United States | 200,000,000 | 197,490,000 | |
junior sub. note, I, 7.90% to 4/30/19, FRN thereafter, Perpetual | United States | 815,000,000 | 881,218,750 | |
junior sub. note, X, 6.10% to 10/01/24, FRN thereafter, | ||||
Perpetual | United States | 80,000,000 | 82,600,000 | |
Kinetic Concepts Inc./USA, senior note, 12.50%, 11/01/19 | United States | 32,000,000 | 35,120,000 | |
Morgan Stanley, | ||||
kjunior sub. bond, 5.55% to 7/15/20, FRN thereafter, Perpetual | United States | 58,000,000 | 58,725,000 | |
senior note, 5.50%, 1/26/20 | United States | 70,000,000 | 79,802,170 | |
Nationstar Mortgage LLC/Nationstar Capital Corp., senior note, | ||||
9.625%, 5/01/19 | United States | 21,300,000 | 22,844,250 | |
Navient Corp., senior note, 6.125%, 3/25/24 | United States | 50,000,000 | 48,125,000 | |
fOneMain Financial Holdings Inc., senior note, 144A, | ||||
6.75%, 12/15/19 | United States | 75,000,000 | 77,625,000 | |
7.25%, 12/15/21 | United States | 75,000,000 | 78,000,000 | |
kPNC Financial Services Group Inc., junior sub. note, 4.85% to 6/01/23, | ||||
FRN thereafter, Perpetual | United States | 54,000,000 | 52,785,000 | |
Royal Bank of Scotland Group PLC, sub. note, 5.125%, 5/28/24 | United Kingdom | 41,100,000 | 43,206,375 | |
kWells Fargo & Co., junior sub. bond, S, 5.90% to 6/15/24, | ||||
FRN thereafter, Perpetual | United States | 129,500,000 | 135,165,625 | |
4,188,174,931 | ||||
Health Care 2.8% | ||||
AmSurg Corp., senior note, 5.625%, 7/15/22 | United States | 19,350,000 | 19,889,672 | |
CHS/Community Health Systems Inc., | ||||
senior note, 8.00%, 11/15/19 | United States | 129,100,000 | 137,491,500 | |
senior note, 6.875%, 2/01/22 | United States | 89,000,000 | 95,118,750 | |
senior secured note, 5.125%, 8/01/21 | United States | 48,750,000 | 50,456,250 | |
DaVita HealthCare Partners Inc., senior bond, 5.125%, 7/15/24 | United States | 76,000,000 | 77,805,000 | |
HCA Holdings Inc., senior note, 6.25%, 2/15/21 | United States | 47,200,000 | 51,150,640 |
78 | Semiannual Report franklintempleton.com
FRANKLIN CUSTODIAN FUNDS
STATEMENT OF INVESTMENTS (UNAUDITED)
Franklin Income Fund (continued) | ||||
Principal | ||||
Country | Amount* | Value | ||
Corporate Bonds (continued) | ||||
Health Care (continued) | ||||
HCA Inc., | ||||
senior note, 7.50%, 2/15/22 | United States | 150,000,000 | $ | 175,312,500 |
senior note, 5.875%, 5/01/23 | United States | 110,000,000 | 119,075,000 | |
senior secured bond, first lien, 4.75%, 5/01/23 | United States | 85,000,000 | 88,400,000 | |
senior secured bond, first lien, 5.25%, 4/15/25 | United States | 35,000,000 | 37,843,750 | |
senior secured note, 6.50%, 2/15/20 | United States | 114,300,000 | 128,987,550 | |
senior secured note, first lien, 5.00%, 3/15/24 | United States | 148,900,000 | 158,392,375 | |
f,hJaguar Holding Co. I, senior note, 144A, PIK, 9.375%, 10/15/17 | United States | 145,400,000 | 149,035,000 | |
fKindred Healthcare Inc., | ||||
senior note, 144A, 8.75%, 1/15/23 | United States | 50,000,000 | 55,000,000 | |
senior secured note, 144A, 8.00%, 1/15/20 | United States | 25,000,000 | 26,953,125 | |
Tenet Healthcare Corp., | ||||
4.375%, 10/01/21 | United States | 160,000,000 | 157,200,000 | |
senior note, 8.00%, 8/01/20 | United States | 130,000,000 | 136,825,000 | |
senior note, 8.125%, 4/01/22 | United States | 355,000,000 | 392,275,000 | |
fsenior note, 144A, 5.00%, 3/01/19 | United States | 50,450,000 | 50,197,750 | |
fsenior note, 144A, 5.50%, 3/01/19 | United States | 40,800,000 | 41,310,000 | |
senior secured note, first lien, 4.50%, 4/01/21 | United States | 85,000,000 | 83,618,750 | |
fValeant Pharmaceuticals International Inc., | ||||
senior bond, 144A, 6.125%, 4/15/25 | Canada | 62,400,000 | 64,818,000 | |
senior note, 144A, 6.75%, 8/15/18 | United States | 58,900,000 | 62,213,125 | |
senior note, 144A, 7.50%, 7/15/21 | United States | 53,900,000 | 58,498,209 | |
senior note, 144A, 5.625%, 12/01/21 | United States | 25,650,000 | 26,098,875 | |
senior note, 144A, 5.875%, 5/15/23 | Canada | 83,500,000 | 85,796,250 | |
fVPI Escrow Corp., senior note, 144A, 6.375%, 10/15/20 | United States | 42,900,000 | 44,723,250 | |
2,574,485,321 | ||||
Industrials 2.0% | ||||
fAbengoa Finance SAU, senior note, 144A, | ||||
8.875%, 11/01/17 | Spain | 100,000,000 | 101,187,500 | |
7.75%, 2/01/20 | Spain | 36,600,000 | 35,433,375 | |
fAbengoa Greenfield SA, senior note, 144A, 6.50%, 10/01/19 | Spain | 40,000,000 | 37,350,000 | |
The ADT Corp., | ||||
senior bond, 4.125%, 6/15/23 | United States | 110,000,000 | 103,125,000 | |
senior note, 5.25%, 3/15/20 | United States | 40,000,000 | 41,600,000 | |
senior note, 3.50%, 7/15/22 | United States | 58,500,000 | 53,381,250 | |
fAhern Rentals Inc., secured note, second lien, 144A, 9.50%, | ||||
6/15/18 | United States | 40,000,000 | 42,550,000 | |
fAlgeco Scotsman Global Finance PLC, | ||||
senior note, 144A, 10.75%, 10/15/19 | United Kingdom | 40,000,000 | 32,825,000 | |
senior secured note, first lien, 144A, 8.50%, 10/15/18 | United Kingdom | 98,500,000 | 97,822,812 | |
fAnna Merger Sub Inc., senior note, 144A, 7.75%, 10/01/22 | United States | 38,000,000 | 39,377,500 | |
fBombardier Inc., | ||||
144A, 5.50%, 9/15/18 | Canada | 25,000,000 | 25,000,000 | |
senior bond, 144A, 6.125%, 1/15/23 | Canada | 81,300,000 | 77,235,000 | |
senior bond, 144A, 7.50%, 3/15/25 | Canada | 50,100,000 | 49,567,688 | |
senior note, 144A, 6.00%, 10/15/22 | Canada | 35,000,000 | 33,031,250 | |
b,fCEVA Group PLC, senior note, first lien, 144A, 4.00%, 5/01/18 | United Kingdom | 186,778,982 | 169,968,874 | |
Hertz Corp., senior note, | ||||
6.75%, 4/15/19 | United States | 175,000,000 | 181,562,500 | |
5.875%, 10/15/20 | United States | 23,500,000 | 24,263,750 | |
7.375%, 1/15/21 | United States | 30,000,000 | 31,650,000 |
franklintempleton.com Semiannual Report | 79
FRANKLIN CUSTODIAN FUNDS
STATEMENT OF INVESTMENTS (UNAUDITED)
Franklin Income Fund (continued) | ||||
Principal | ||||
Country | Amount* | Value | ||
Corporate Bonds (continued) | ||||
Industrials (continued) | ||||
Navistar International Corp., senior note, 8.25%, 11/01/21 | United States | 147,975,000 | $ | 144,460,594 |
fStena AB, senior bond, 144A, 7.00%, 2/01/24 | Sweden | 51,600,000 | 50,310,000 | |
fStena International SA, secured bond, 144A, 5.75%, 3/01/24 | Sweden | 60,650,000 | 58,274,339 | |
TransDigm Inc., | ||||
senior sub. bond, 6.50%, 7/15/24 | United States | 26,500,000 | 26,765,000 | |
senior sub. note, 5.50%, 10/15/20 | United States | 59,500,000 | 59,053,750 | |
senior sub. note, 6.00%, 7/15/22 | United States | 26,800,000 | 26,900,500 | |
United Continental Holdings Inc., senior bond, | ||||
A, 6.00%, 7/15/26 | United States | 40,000,000 | 40,000,000 | |
B, 6.00%, 7/15/28 | United States | 40,000,000 | 40,150,000 | |
United Rentals North America Inc., | ||||
senior bond, 5.75%, 11/15/24 | United States | 69,700,000 | 72,313,750 | |
senior sub. note, 8.375%, 9/15/20 | United States | 45,000,000 | 48,399,750 | |
fXPO Logistics Inc., senior note, 144A, 7.875%, 9/01/19 | United States | 50,000,000 | 53,062,500 | |
1,796,621,682 | ||||
Information Technology 2.9% | ||||
fAlcatel-Lucent USA Inc., senior note, 144A, 6.75%, 11/15/20 | France | 45,900,000 | 49,113,000 | |
fBelden Inc., senior sub. note, 144A, 5.50%, 9/01/22 | United States | 40,000,000 | 41,200,000 | |
fBMC Software Finance Inc., senior note, 144A, 8.125%, 7/15/21 | United States | 112,805,000 | 103,780,600 | |
f,hBoxer Parent Co. Inc., senior note, 144A, PIK, 9.00%, 10/15/19 | United States | 65,000,000 | 53,950,000 | |
CDW LLC/Finance Corp., senior note, 8.50%, 4/01/19 | United States | 24,546,000 | 25,589,205 | |
f,hCommScope Holdings Co. Inc., senior note, 144A, PIK, 6.625%, | ||||
6/01/20 | United States | 44,400,000 | 45,732,000 | |
fCommScope Inc., | ||||
senior bond, 144A, 5.50%, 6/15/24 | United States | 85,000,000 | 85,425,000 | |
senior note, 144A, 5.00%, 6/15/21 | United States | 50,000,000 | 50,187,500 | |
First Data Corp., | ||||
senior bond, 12.625%, 1/15/21 | United States | 550,000,000 | 653,125,000 | |
senior note, 10.625%, 6/15/21 | United States | 40,780,000 | 46,591,150 | |
fsenior secured bond, second lien, 144A, 8.25%, 1/15/21 | United States | 425,000,000 | 460,062,500 | |
f,hsenior secured note, 144A, PIK, 8.75%, 1/15/22 | United States | 208,158,000 | 225,070,837 | |
fsenior secured note, first lien, 144A, 6.75%, 11/01/20 | United States | 69,726,000 | 74,432,505 | |
Freescale Semiconductor Inc., | ||||
fsecured note, 144A, 5.00%, 5/15/21 | United States | 79,450,000 | 84,217,000 | |
senior note, 10.75%, 8/01/20 | United States | 101,318,000 | 110,436,620 | |
fsenior secured note, 144A, 6.00%, 1/15/22 | United States | 118,850,000 | 129,249,375 | |
IAC/InterActiveCorp, senior note, 4.75%, 12/15/22 | United States | 45,000,000 | 44,887,500 | |
Infor (U.S.) Inc., | ||||
senior note, 9.375%, 4/01/19 | United States | 40,800,000 | 43,809,000 | |
f,gsenior secured note, 144A, 6.50%, 5/15/22 | United States | 50,000,000 | 51,375,000 | |
f,hInfor Software Parent LLC/Inc., senior note, 144A, PIK, 7.125%, | ||||
5/01/21 | United States | 29,650,000 | 29,473,879 | |
fInmarsat Finance PLC, senior note, 144A, 4.875%, 5/15/22 | United Kingdom | 45,000,000 | 44,971,875 | |
NCR Corp., senior note, | ||||
4.625%, 2/15/21 | United States | 35,000,000 | 35,218,750 | |
5.00%, 7/15/22 | United States | 50,000,000 | 50,750,000 | |
6.375%, 12/15/23 | United States | 70,000,000 | 74,900,000 | |
Sterling International Inc., senior note, 11.00%, 10/01/19 | United States | 36,400,000 | 38,766,000 | |
2,652,314,296 |
80 | Semiannual Report
franklintempleton.com
FRANKLIN CUSTODIAN FUNDS
STATEMENT OF INVESTMENTS (UNAUDITED)
Franklin Income Fund (continued) | |||||
Principal | |||||
Country | Amount* | Value | |||
Corporate Bonds (continued) | |||||
Materials 2.8% | |||||
AngloGold Ashanti Holdings PLC, senior note, 8.50%, 7/30/20 | South Africa | 35,000,000 | $ | 37,756,250 | |
fArdagh Packaging Finance PLC/Ardagh MP Holdings USA Inc., | |||||
senior note, 144A, 6.25%, 1/31/19 | Luxembourg | 43,200,000 | 43,524,000 | ||
senior note, 144A, 6.75%, 1/31/21 | Luxembourg | 22,600,000 | 22,868,375 | ||
senior note, 144A, 6.00%, 6/30/21 | Luxembourg | 45,000,000 | 44,325,000 | ||
lsenior secured note, 144A, FRN, 3.271%, 12/15/19 | Luxembourg | 25,000,000 | 24,500,000 | ||
Ball Corp., senior bond, 4.00%, 11/15/23 | United States | 100,000,000 | 98,000,000 | ||
fBeverage Packaging Holdings Luxembourg II SA, senior note, 144A, | |||||
5.625%, 12/15/16 | New Zealand | 33,000,000 | 33,165,000 | ||
fBWAY Holding Co., senior note, 144A, 9.125%, 8/15/21 | United States | 55,000,000 | 57,475,000 | ||
fCemex Finance LLC, senior secured note, | |||||
144A, 9.375%, 10/12/22 | Mexico | 56,300,000 | 64,182,000 | ||
first lien, 144A, 6.00%, 4/01/24 | Mexico | 88,400,000 | 88,510,500 | ||
fCemex SAB de CV, | |||||
first lien, 144A, 5.70%, 1/11/25 | Mexico | 80,000,000 | 79,050,000 | ||
secured note, 144A, 5.875%, 3/25/19 | Mexico | 23,800,000 | 24,603,250 | ||
secured note, 144A, 7.25%, 1/15/21 | Mexico | 111,000,000 | 118,908,750 | ||
senior secured note, 144A, 9.50%, 6/15/18 | Mexico | 105,000,000 | 117,271,875 | ||
senior secured note, 144A, 6.50%, 12/10/19 | Mexico | 40,000,000 | 42,525,000 | ||
fConsolidated Minerals Ltd., senior secured note, 144A, 8.00%, | |||||
5/15/20 | Jersey Islands | 30,000,000 | 21,112,500 | ||
Crown Americas LLC/Crown Americas Capital Corp. IV, senior bond, | |||||
4.50%, 1/15/23 | United States | 150,000,000 | 152,062,500 | ||
fFirst Quantum Minerals Ltd., senior note, 144A, | |||||
6.75%, 2/15/20 | Canada | 61,630,000 | 57,315,900 | ||
7.00%, 2/15/21 | Canada | 63,630,000 | 59,334,975 | ||
7.25%, 5/15/22 | Canada | 28,000,000 | 25,900,000 | ||
fFMG Resources (August 2006) Pty. Ltd., senior note, 144A, | |||||
g6.00%, 4/01/17 | Australia | 62,750,000 | 62,122,500 | ||
i6.875%, 2/01/18 | Australia | 31,377,777 | 30,946,333 | ||
i8.25%, 11/01/19 | Australia | 90,000,000 | 76,387,500 | ||
i6.875%, 4/01/22 | Australia | 65,000,000 | 48,262,500 | ||
HudBay Minerals Inc., senior note, | |||||
9.50%, 10/01/20 | Canada | 89,600,000 | 93,632,000 | ||
f144A, 9.50%, 10/01/20 | Canada | 15,000,000 | 15,675,000 | ||
fImperial Metals Corp., senior note, 144A, 7.00%, 3/15/19 | Canada | 10,000,000 | 9,575,000 | ||
fIneos Finance PLC, senior secured note, 144A, 8.375%, 2/15/19 | Switzerland | 42,800,000 | 45,488,268 | ||
fIneos Group Holdings SA, senior note, 144A, | |||||
5.75%, 2/15/19 | Switzerland | 27,500,000 | EUR | 29,867,846 | |
5.875%, 2/15/19 | Switzerland | 21,900,000 | 21,708,375 | ||
fKerling PLC, senior secured note, 144A, 10.625%, 2/01/17 | United Kingdom | 53,700,000 | EUR | 58,958,678 | |
fLundin Mining Corp., senior secured note, 144A, | |||||
7.50%, 11/01/20 | Canada | 30,000,000 | 31,425,000 | ||
7.875%, 11/01/22 | Canada | 25,000,000 | 26,125,000 | ||
fPlatform Specialty Products Corp., senior note, 144A, 6.50%, | |||||
2/01/22 | United States | 30,500,000 | 32,025,000 | ||
Reynolds Group Issuer Inc./LLC/SA, | |||||
first lien, 5.75%, 10/15/20 | United States | 70,800,000 | 73,366,500 | ||
senior note, 8.50%, 5/15/18 | United States | 99,900,000 | 103,146,750 | ||
senior note, 9.00%, 4/15/19 | United States | 100,100,000 | 105,355,250 |
franklintempleton.com
Semiannual Report | 81
FRANKLIN CUSTODIAN FUNDS
STATEMENT OF INVESTMENTS (UNAUDITED)
Franklin Income Fund (continued) | ||||
Principal | ||||
Country | Amount* | Value | ||
Corporate Bonds (continued) | ||||
Materials (continued) | ||||
Reynolds Group Issuer Inc./LLC/SA, (continued) | ||||
senior note, 9.875%, 8/15/19 | United States | 127,000,000 | $ | 136,683,750 |
senior note, 8.25%, 2/15/21 | United States | 45,000,000 | 48,375,000 | |
senior secured note, 7.875%, 8/15/19 | United States | 65,000,000 | 68,900,000 | |
senior secured note, 6.875%, 2/15/21 | United States | 32,500,000 | 34,368,750 | |
fSealed Air Corp., senior bond, 144A, 5.25%, 4/01/23 | United States | 48,000,000 | 50,280,000 | |
United States Steel Corp., senior note, 7.375%, 4/01/20 | United States | 35,000,000 | 35,754,250 | |
fWalter Energy Inc., | ||||
first lien, 144A, 9.50%, 10/15/19 | United States | 97,500,000 | 58,987,500 | |
hsecond lien, 144A, PIK, 11.50%, 4/01/20 | United States | 14,250,000 | 1,383,490 | |
fWise Metals Group LLC/Wise Alloys Finance Corp., senior secured | ||||
note, 144A, 8.75%, 12/15/18 | United States | 25,000,000 | 26,687,500 | |
fWR Grace & Co-Conn, senior note, 144A, 5.125%, 10/01/21 | United States | 30,000,000 | 31,200,000 | |
2,569,078,615 | ||||
Telecommunication Services 4.1% | ||||
CenturyLink Inc., | ||||
senior bond, 6.75%, 12/01/23 | United States | 47,600,000 | 52,598,000 | |
senior note, 5.80%, 3/15/22 | United States | 63,000,000 | 65,913,750 | |
fDigicel Ltd., senior note, 144A, 6.75%, 3/01/23 | Bermuda | 73,300,000 | 71,057,386 | |
Frontier Communications Corp., | ||||
senior bond, 7.625%, 4/15/24 | United States | 43,900,000 | 45,930,375 | |
senior note, 8.50%, 4/15/20 | United States | 51,150,000 | 57,671,625 | |
senior note, 9.25%, 7/01/21 | United States | 63,600,000 | 74,014,500 | |
senior note, 8.75%, 4/15/22 | United States | 48,900,000 | 54,523,500 | |
senior note, 7.125%, 1/15/23 | United States | 123,050,000 | 126,433,875 | |
Intelsat Jackson Holdings SA, senior bond, 5.50%, 8/01/23 | Luxembourg | 170,000,000 | 160,543,750 | |
Intelsat Luxembourg SA, | ||||
senior bond, 8.125%, 6/01/23 | Luxembourg | 28,000,000 | 25,795,000 | |
senior note, 7.75%, 6/01/21 | Luxembourg | 43,000,000 | 39,667,500 | |
fMillicom International Cellular SA, senior note, 144A, 6.625%, | ||||
10/15/21 | Luxembourg | 37,900,000 | 40,079,250 | |
fSoftBank Corp., senior note, 144A, 4.50%, 4/15/20 | Japan | 70,000,000 | 71,443,750 | |
Sprint Capital Corp., senior bond, 6.875%, 11/15/28 | United States | 126,000,000 | 116,235,000 | |
Sprint Communications Inc., | ||||
6.00%, 12/01/16 | United States | 164,000,000 | 171,523,500 | |
11.50%, 11/15/21 | United States | 200,000,000 | 242,500,000 | |
senior note, 9.125%, 3/01/17 | United States | 75,000,000 | 82,125,000 | |
senior note, 8.375%, 8/15/17 | United States | 172,700,000 | 188,027,125 | |
senior note, 7.00%, 8/15/20 | United States | 57,500,000 | 58,685,938 | |
senior note, 6.00%, 11/15/22 | United States | 185,000,000 | 176,443,750 | |
fsenior note, 144A, 9.00%, 11/15/18 | United States | 180,000,000 | 207,000,000 | |
Sprint Corp., | ||||
senior bond, 7.875%, 9/15/23 | United States | 187,350,000 | 192,033,750 | |
senior bond, 7.125%, 6/15/24 | United States | 245,650,000 | 241,965,250 | |
senior note, 7.625%, 2/15/25 | United States | 100,000,000 | 100,125,000 | |
T-Mobile USA Inc., | ||||
senior bond, 6.625%, 4/01/23 | United States | 50,000,000 | 52,625,000 | |
senior bond, 6.50%, 1/15/24 | United States | 32,300,000 | 33,834,250 | |
senior bond, 6.375%, 3/01/25 | United States | 43,000,000 | 44,479,200 | |
senior note, 6.464%, 4/28/19 | United States | 125,000,000 | 129,218,750 |
82 | Semiannual Report franklintempleton.com
FRANKLIN CUSTODIAN FUNDS
STATEMENT OF INVESTMENTS (UNAUDITED)
Franklin Income Fund (continued) | |||||
Principal | |||||
Country | Amount* | Value | |||
Corporate Bonds (continued) | |||||
Telecommunication Services (continued) | |||||
T-Mobile USA Inc., (continued) | |||||
senior note, 6.542%, 4/28/20 | United States | 45,000,000 | $ | 47,531,250 | |
senior note, 6.25%, 4/01/21 | United States | 100,000,000 | 104,375,000 | ||
senior note, 6.633%, 4/28/21 | United States | 50,000,000 | 52,562,500 | ||
senior note, 6.731%, 4/28/22 | United States | 50,000,000 | 52,812,500 | ||
senior note, 6.00%, 3/01/23 | United States | 30,000,000 | 30,815,700 | ||
senior note, 6.836%, 4/28/23 | United States | 50,000,000 | 52,812,500 | ||
fTelecom Italia SpA, senior note, 144A, 5.303%, 5/30/24 | Italy | 70,000,000 | 73,675,000 | ||
Verizon Communications Inc., | |||||
senior bond, 6.55%, 9/15/43 | United States | 40,000,000 | 52,015,400 | ||
senior note, 5.15%, 9/15/23 | United States | 52,700,000 | 60,461,761 | ||
fWind Acquisition Finance SA, | |||||
senior note, 144A, 7.375%, 4/23/21 | Italy | 290,000,000 | 302,143,750 | ||
senior secured note, first lien, 144A, 4.75%, 7/15/20 | Italy | 50,000,000 | 50,312,500 | ||
3,802,011,635 | |||||
Utilities 2.0% | |||||
The AES Corp., senior bond, | |||||
4.875%, 5/15/23 | United States | 110,000,000 | 106,837,500 | ||
5.50%, 3/15/24 | United States | 50,000,000 | 50,250,000 | ||
Calpine Corp., | |||||
senior bond, 5.75%, 1/15/25 | United States | 250,000,000 | 252,812,500 | ||
senior note, 5.375%, 1/15/23 | United States | 215,000,000 | 216,075,000 | ||
fsenior secured bond, first lien, 144A, 7.875%, 1/15/23 | United States | 53,270,000 | 59,140,354 | ||
fsenior secured bond, first lien, 144A, 5.875%, 1/15/24 | United States | 58,700,000 | 63,718,850 | ||
fsenior secured note, first lien, 144A, 6.00%, 1/15/22 | United States | 28,200,000 | 30,315,000 | ||
b,fDynegy Finance I Inc./Dynegy Finance II Inc., senior note, 144A, | |||||
6.75%, 11/01/19 | United States | 270,000,000 | 279,787,500 | ||
7.375%, 11/01/22 | United States | 256,700,000 | 270,818,500 | ||
bDynegy Inc., senior note, 5.875%, 6/01/23 | United States | 100,000,000 | 97,750,000 | ||
GenOn Energy Inc., senior note, 7.875%, 6/15/17 | United States | 50,000,000 | 50,000,000 | ||
fInterGen NV, | |||||
secured bond, 144A, 7.00%, 6/30/23 | Netherlands | 143,700,000 | 139,748,250 | ||
secured note, 144A, 7.50%, 6/30/21 | Netherlands | 35,800,000 | GBP | 52,335,269 | |
NGL Energy Partners LP/NGL Energy Finance Corp., senior note, | |||||
5.125%, 7/15/19 | United States | 23,200,000 | 22,852,000 | ||
6.875%, 10/15/21 | United States | 65,000,000 | 68,250,000 | ||
NRG Energy Inc., | |||||
senior bond, 6.625%, 3/15/23 | United States | 20,000,000 | 20,800,000 | ||
senior note, 6.25%, 7/15/22 | United States | 25,000,000 | 25,843,750 | ||
fNRG Yield Operating LLC, senior bond, 144A, 5.375%, 8/15/24 | United States | 39,900,000 | 41,695,500 | ||
1,849,029,973 | |||||
Total Corporate Bonds (Cost $35,203,531,241) | 35,305,105,316 | ||||
l,mSenior Floating Rate Interests 3.2% | |||||
Consumer Discretionary 1.2% | |||||
24 Hour Fitness Worldwide Inc., Term Loan, 4.75%, 5/30/21 | United States | 29,775,000 | 29,728,491 | ||
Altice Financing SA, Loans, 5.50%, 6/24/19 | Luxembourg | 49,375,000 | 50,152,656 | ||
iHeartCommunications Inc., | |||||
Tranche D Term Loan, 6.928%, 1/30/19 | United States | 727,373,595 | 693,550,723 | ||
Tranche E Term Loan, 7.678%, 7/30/19 | United States | 200,744,256 | 194,069,510 |
franklintempleton.com Semiannual Report | 83
FRANKLIN CUSTODIAN FUNDS
STATEMENT OF INVESTMENTS (UNAUDITED)
Franklin Income Fund (continued) | ||||
Principal | ||||
Country | Amount* | Value | ||
l,mSenior Floating Rate Interests (continued) | ||||
Consumer Discretionary (continued) | ||||
bR.H. Donnelley Inc., Term Loan B, 9.75%, 12/30/16 | United States | 16,357,100 | $ | 11,395,452 |
TOMS Shoes LLC, Term Loan B, 6.50%, 10/31/20 | United States | 25,000,000 | 23,208,325 | |
TWCC Holding Corp., Second Lien Term Loan, 7.00%, 6/26/20 | United States | 50,000,000 | 44,500,000 | |
Visant Corp. (Jostens), Initial Term Loan, 7.00%, 9/23/21 | United States | 99,500,000 | 100,308,438 | |
1,146,913,595 | ||||
Consumer Staples 0.1% | ||||
U.S. Foods Inc., Term Loan, 4.50%, 3/31/19 | United States | 98,250,000 | 98,381,557 | |
Energy 0.8% | ||||
hAmerican Energy - Utica LLC, Second Lien Loans, PIK, 11.00%, | ||||
9/30/18 | United States | 36,491,176 | 33,571,882 | |
Callon Petroleum Co., Second Lien Term Loan, 8.50%, 10/07/21 | United States | 79,500,000 | 77,777,474 | |
gCJ Holding Co., | ||||
B-2 Term Loan, 8.50%, 3/24/22 | United States | 50,000,000 | 44,395,850 | |
Term Loan B-1, 7.75%, 3/24/20 | United States | 50,000,000 | 44,770,850 | |
Drillships Financing Holding Inc., Tranche B-1 Term Loan, 6.00%, | ||||
3/31/21 | Marshall Islands | 246,992,462 | 189,196,226 | |
Drillships Ocean Ventures Inc. and Drillships Vent, Term Loan, 5.50%, | ||||
7/25/21 | United States | 49,750,000 | 41,441,750 | |
Fieldwood Energy LLC, Second Lien Loans, 8.375%, 9/30/20 | United States | 219,261,084 | 161,362,563 | |
NGPL Pipeco LLC, Term Loan, 6.75%, 9/15/17 | United States | 137,668,360 | 131,955,123 | |
724,471,718 | ||||
Health Care 0.1% | ||||
Community Health Systems Inc., 2021 Term D Loan, 4.25%, | ||||
1/27/21 | United States | 49,375,000 | 49,673,324 | |
Industrials 0.2% | ||||
bCEVA Group PLC, Pre-Funded L/C, 6.50%, 3/19/21 | United States | 20,320,197 | 19,062,885 | |
CEVA Intercompany BV, Dutch BV Term Loan, 6.50%, 3/19/21 | Netherlands | 21,214,286 | 19,901,652 | |
CEVA Logistics Canada ULC, Canadian Term Loan, 6.50%, | ||||
3/19/21 | Canada | 3,657,636 | 3,431,319 | |
CEVA Logistics U.S. Holdings Inc., U.S. Term Loan, 6.50%, 3/19/21 | United States | 29,261,084 | 27,450,554 | |
Navistar Inc., Tranche B Term Loan, 5.75%, 8/17/17 | United States | 36,555,232 | 36,776,099 | |
Stena International SA, Loans, 4.00%, 3/03/21 | Sweden | 99,000,000 | 89,595,000 | |
196,217,509 | ||||
Information Technology 0.6% | ||||
First Data Corp., | ||||
2018 New Dollar Term Loan, 3.674%, 3/24/18 | United States | 402,993,460 | 403,287,242 | |
Second New Dollar Term Loan, 3.674%, 3/24/17 | United States | 88,000,000 | 88,064,152 | |
Freescale Semiconductor Inc., Tranche B-4 Term Loan, 4.25%, | ||||
2/28/20 | United States | 9,949,622 | 9,983,381 | |
SRA International Inc., Term Loan, 6.50%, 7/20/18 | United States | 41,082,360 | 41,326,307 | |
542,661,082 | ||||
Materials 0.2% | ||||
FMG America Finance Inc. (Fortescue Metals Group), Loans, 3.75%, | ||||
6/30/19 | Australia | 49,747,475 | 45,110,314 | |
Walter Energy Inc., B Term Loan, 7.25%, 4/01/18 | United States | 204,400,000 | 124,902,912 | |
170,013,226 |
84 | Semiannual Report
franklintempleton.com
FRANKLIN CUSTODIAN FUNDS
STATEMENT OF INVESTMENTS (UNAUDITED)
Franklin Income Fund (continued) | |||||
Principal | |||||
Country | Amount* | Value | |||
l,mSenior Floating Rate Interests (continued) | |||||
Utilities 0.0%† | |||||
Intergen NV, Term Advance, 5.50%, 6/13/20 | Netherlands | 44,200,188 | $ | 43,003,114 | |
Total Senior Floating Rate Interests | |||||
(Cost $3,139,069,397) | 2,971,335,125 | ||||
Shares | |||||
Escrows and Litigation Trusts 0.0%† | |||||
aMotors Liquidation Co., Escrow Account | United States | 400,000,000 | 40,000 | ||
aMotors Liquidation Co., Escrow Account, cvt. pfd., C | United States | 11,000,000 | 110,000 | ||
a,nSuperMedia Inc., Litigation Trust | United States | 30,326,101 | — | ||
Total Escrows and Litigation Trusts | |||||
(Cost $2,757,417) | 150,000 | ||||
Total Investments before Short Term Investments | |||||
(Cost $85,949,936,680) | 89,239,652,116 | ||||
Principal | |||||
Amount* | |||||
Short Term Investments 2.7% | |||||
U.S. Government and Agency Securities 2.4% | |||||
oFHLB, 4/01/15 - 5/01/15 | United States | 1,362,505,000 | 1,362,493,733 | ||
oFHLMC, 4/01/15 | United States | 325,000,000 | 325,000,000 | ||
oFNMA, 4/22/15 | United States | 94,475,000 | 94,474,055 | ||
o,pU.S. Treasury Bills, 4/02/15 - 7/02/15 | United States | 446,750,000 | 446,739,263 | ||
Total U.S. Government and Agency Securities | |||||
(Cost $2,228,704,660) | 2,228,707,051 | ||||
Total Investments before Money Market Funds | |||||
(Cost $88,178,641,340) | 91,468,359,167 | ||||
Shares | |||||
Money Market Funds (Cost $280,728,942) 0.2% | |||||
a,qInstitutional Fiduciary Trust Money Market Portfolio | United States | 280,728,942 | 280,728,942 | ||
rInvestments from Cash Collateral Received for Loaned | |||||
Securities 0.1% | |||||
Money Market Funds 0.1% | |||||
a,qInstitutional Fiduciary Trust Money Market Portfolio | United States | 55,000,000 | 55,000,000 | ||
Repurchase Agreements 0.0%† | |||||
Joint Repurchase Agreement, 0.11%, 4/01/15 | |||||
(Maturity Value $5,934,512) | United States | 5,934,494 | 5,934,494 | ||
sBNP Paribas Securities Corp. (Maturity Value $5,934,512) | |||||
Collateralized by U.S. Treasury Notes, 0.375% - 2.75%, | |||||
4/15/15 - 4/30/19; U.S Treasury Strips, 8/15/15 - 11/15/23 | |||||
(valued at $6,053,184) | |||||
Total Investments from Cash Collateral Received for | |||||
Loaned Securities (Cost $60,934,494) | 60,934,494 | ||||
Total Investments (Cost $88,520,304,776) 99.3% | 91,810,022,603 | ||||
Options Written (0.0)%† | (1,492,500 | ) | |||
Other Assets, less Liabilities 0.7% | 612,666,137 | ||||
Net Assets 100.0% | $ | 92,421,196,240 |
franklintempleton.com Semiannual Report | 85
FRANKLIN CUSTODIAN FUNDS
STATEMENT OF INVESTMENTS (UNAUDITED)
Franklin Income Fund (continued) | |||||
Number of | |||||
Country | Contracts | Value | |||
tOptions Written (0.0)%† | |||||
Calls – Exchange-Traded | |||||
Financials (0.0)%† | |||||
Citigroup Inc., April Strike Price $53, Expires 4/17/15 | United States | 5,000 | $ | (230,000 | ) |
Puts – Exchange-Traded | |||||
Information Technology (0.0)%† | |||||
Google Inc., C, April Strike Price $535, Expires 4/17/15 | United States | 1,500 | (990,000 | ) | |
Xilinx Inc., April Strike Price $38, Expires 4/17/15 | United States | 2,500 | (47,500 | ) | |
(1,037,500 | ) | ||||
Energy (0.0)%† | |||||
Halliburton Co., April Strike Price $40, Expires 4/17/15 | United States | 10,000 | (100,000 | ) | |
Schlumberger Ltd., April Strike Price $77.50, Expires 4/17/15 | United States | 5,000 | (125,000 | ) | |
(225,000 | ) | ||||
(1,262,500 | ) | ||||
Total Options Written | |||||
(Premiums Received $1,880,485) | $ | (1,492,500 | ) |
See Abbreviations on page 129.
†Rounds to less than 0.1% of net assets.
*The principal amount is stated in U.S. dollars unless otherwise indicated.
aNon-income producing.
bSee Note 10 regarding holdings of 5% voting securities.
cA portion or all of the security is held in connection with written option contracts open at period end.
dSee Note 8 regarding restricted securities.
eSee Note 1(g) regarding equity-linked securities.
fSecurity 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
March 31, 2015, the aggregate value of these securities was $19,027,767,656, representing 20.59% of net assets.
gA portion or all of the security purchased on a when-issued or delayed delivery basis. See Note 1(d).
hIncome may be received in additional securities and/or cash.
iA portion or all of the security is on loan at March 31, 2015. See Note 1(h).
jPrincipal amount is stated in 1,000 Units.
kPerpetual security with no stated maturity date.
lThe coupon rate shown represents the rate at period end.
mSee Note 1(j) regarding senior floating rate interests.
nSecurity has been deemed illiquid because it may not be able to be sold within seven days. At March 31, 2015, the value of this security was $–.
oThe security is traded on a discount basis with no stated coupon rate.
pSecurity or a portion of the security has been pledged as collateral for written options contracts. At March 31, 2015, the aggregate value of these securities and/or cash
pledged as collateral was $446,739,263, representing 0.48% of net assets.
qSee Note 3(f) regarding investments in Institutional Fiduciary Trust Money Market Portfolio.
rSee Note 1(h) regarding securities on loan.
sSee Note 1(c) regarding joint repurchase agreements.
tSee Note 1(e) regarding written options.
86 | Semiannual 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 | ||||||||||||||||||
Six Months Ended | ||||||||||||||||||
March 31, 2015 | Year Ended September 30, | |||||||||||||||||
(unaudited) | 2014 | 2013 | 2012 | 2011 | 2010 | |||||||||||||
Class A | ||||||||||||||||||
Per share operating performance | ||||||||||||||||||
(for a share outstanding throughout the period) | ||||||||||||||||||
Net asset value, beginning of period | $ | 6.48 | $ | 6.53 | $ | 6.91 | $ | 6.92 | $ | 6.81 | $ | 6.69 | ||||||
Income from investment operationsa: | ||||||||||||||||||
Net investment incomeb | 0.08 | 0.17 | 0.15 | 0.20 | 0.24 | 0.25 | ||||||||||||
Net realized and unrealized gains (losses) | 0.06 | 0.01 | (0.29 | ) | 0.04 | 0.15 | 0.14 | |||||||||||
Total from investment operations | 0.14 | 0.18 | (0.14 | ) | 0.24 | 0.39 | 0.39 | |||||||||||
Less distributions from net investment | ||||||||||||||||||
income | (0.11 | ) | (0.23 | ) | (0.24 | ) | (0.25 | ) | (0.28 | ) | (0.27 | ) | ||||||
Net asset value, end of period | $ | 6.51 | $ | 6.48 | $ | 6.53 | $ | 6.91 | $ | 6.92 | $ | 6.81 | ||||||
Total returnc | 2.15 | % | 2.80 | % | (2.03 | )% | 3.49 | % | 5.93 | % | 5.94 | % | ||||||
Ratios to average net assetsd | ||||||||||||||||||
Expenses | 0.76 | %e | 0.75 | %e | 0.73 | % | 0.73 | % | 0.72 | % | 0.73 | % | ||||||
Net investment income | 2.46 | % | 2.62 | % | 2.17 | % | 2.86 | % | 3.55 | % | 3.70 | % | ||||||
Supplemental data | ||||||||||||||||||
Net assets, end of period (000’s) | $ | 4,241,263 | $ | 4,323,990 | $ | 5,138,613 | $ | 6,861,193 | $ | 6,423,821 | $ | 6,771,471 | ||||||
Portfolio turnover rate | 32.68 | % | 69.73 | % | 46.16 | % | 40.15 | % | 20.23 | % | 47.41 | % | ||||||
Portfolio turnover rate excluding mortgage | ||||||||||||||||||
dollar rollsf | 23.45 | % | 38.79 | % | 40.83 | % | 40.15 | % | 20.23 | % | 47.41 | % |
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 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, and is not annualized for periods less than one year.
dRatios are annualized for periods less than one year.
eBenefit of waiver and payments by affiliates and expense reduction rounds to less than 0.01%.
fSee Note 1(i) regarding mortgage dollar rolls.
franklintempleton.com The accompanying notes are an integral part of these financial statements. | Semiannual Report | 87
FRANKLIN CUSTODIAN FUNDS
FINANCIAL HIGHLIGHTS
Franklin U.S. Government Securities Fund (continued) | ||||||||||||||||||
Six Months Ended | ||||||||||||||||||
March 31, 2015 | Year Ended September 30, | |||||||||||||||||
(unaudited) | 2014 | 2013 | 2012 | 2011 | 2010 | |||||||||||||
Class C | ||||||||||||||||||
Per share operating performance | ||||||||||||||||||
(for a share outstanding throughout the period) | ||||||||||||||||||
Net asset value, beginning of period | $ | 6.44 | $ | 6.49 | $ | 6.86 | $ | 6.88 | $ | 6.77 | $ | 6.66 | ||||||
Income from investment operationsa: | ||||||||||||||||||
Net investment incomeb | 0.06 | 0.14 | 0.11 | 0.16 | 0.21 | 0.21 | ||||||||||||
Net realized and unrealized gains (losses) | 0.05 | 0.01 | (0.28 | ) | 0.03 | 0.15 | 0.14 | |||||||||||
Total from investment operations | 0.11 | 0.15 | (0.17 | ) | 0.19 | 0.36 | 0.35 | |||||||||||
Less distributions from net investment | ||||||||||||||||||
income | (0.09 | ) | (0.20 | ) | (0.20 | ) | (0.21 | ) | (0.25 | ) | (0.24 | ) | ||||||
Net asset value, end of period | $ | 6.46 | $ | 6.44 | $ | 6.49 | $ | 6.86 | $ | 6.88 | $ | 6.77 | ||||||
Total returnc | 1.75 | % | 2.30 | % | (2.45 | )% | 2.85 | % | 5.44 | % | 5.28 | % | ||||||
Ratios to average net assetsd | ||||||||||||||||||
Expenses | 1.26 | %e | 1.25 | %e | 1.23 | % | 1.23 | % | 1.23 | % | 1.24 | % | ||||||
Net investment income | 1.96 | % | 2.12 | % | 1.67 | % | 2.36 | % | 3.04 | % | 3.19 | % | ||||||
Supplemental data | ||||||||||||||||||
Net assets, end of period (000’s) | $ | 1,115,547 | $ | 1,190,720 | $ | 1,640,787 | $ | 2,981,724 | $ | 2,294,707 | $ | 2,484,847 | ||||||
Portfolio turnover rate | 32.68 | % | 69.73 | % | 46.16 | % | 40.15 | % | 20.23 | % | 47.41 | % | ||||||
Portfolio turnover rate excluding mortgage | ||||||||||||||||||
dollar rollsf | 23.45 | % | 38.79 | % | 40.83 | % | 40.15 | % | 20.23 | % | 47.41 | % |
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 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, and is not annualized for periods less than one year.
dRatios are annualized for periods less than one year.
eBenefit of waiver and payments by affiliates and expense reduction rounds to less than 0.01%.
fSee Note 1(i) regarding mortgage dollar rolls.
88 | Semiannual 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) | ||||||||||||||||||
Six Months Ended | ||||||||||||||||||
March 31, 2015 | Year Ended September 30, | |||||||||||||||||
(unaudited) | 2014 | 2013 | 2012 | 2011 | 2010 | |||||||||||||
Class R | ||||||||||||||||||
Per share operating performance | ||||||||||||||||||
(for a share outstanding throughout the period) | ||||||||||||||||||
Net asset value, beginning of period | $ | 6.48 | $ | 6.53 | $ | 6.90 | $ | 6.91 | $ | 6.81 | $ | 6.69 | ||||||
Income from investment operationsa: | ||||||||||||||||||
Net investment incomeb | 0.07 | 0.15 | 0.12 | 0.17 | 0.22 | 0.23 | ||||||||||||
Net realized and unrealized gains (losses) | 0.05 | 0.01 | (0.27 | ) | 0.04 | 0.14 | 0.13 | |||||||||||
Total from investment operations | 0.12 | 0.16 | (0.15 | ) | 0.21 | 0.36 | 0.36 | |||||||||||
Less distributions from net investment | ||||||||||||||||||
income | (0.10 | ) | (0.21 | ) | (0.22 | ) | (0.22 | ) | (0.26 | ) | (0.24 | ) | ||||||
Net asset value, end of period | $ | 6.50 | $ | 6.48 | $ | 6.53 | $ | 6.90 | $ | 6.91 | $ | 6.81 | ||||||
Total returnc | 1.81 | % | 2.44 | % | (2.27 | )% | 3.13 | % | 5.41 | % | 5.55 | % | ||||||
Ratios to average net assetsd | ||||||||||||||||||
Expenses | 1.11 | %e | 1.10 | %e | 1.08 | % | 1.08 | % | 1.08 | % | 1.09 | % | ||||||
Net investment income | 2.11 | % | 2.27 | % | 1.82 | % | 2.51 | % | 3.19 | % | 3.34 | % | ||||||
Supplemental data | ||||||||||||||||||
Net assets, end of period (000’s) | $ | 71,498 | $ | 74,442 | $ | 94,110 | $ | 141,140 | $ | 131,692 | $ | 140,147 | ||||||
Portfolio turnover rate | 32.68 | % | 69.73 | % | 46.16 | % | 40.15 | % | 20.23 | % | 47.41 | % | ||||||
Portfolio turnover rate excluding mortgage | ||||||||||||||||||
dollar rollsf | 23.45 | % | 38.79 | % | 40.83 | % | 40.15 | % | 20.23 | % | 47.41 | % |
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 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 is not annualized for periods less than one year.
dRatios are annualized for periods less than one year.
eBenefit of waiver and payments by affiliates and expense reduction rounds to less than 0.01%.
fSee Note 1(i) regarding mortgage dollar rolls.
franklintempleton.com The accompanying notes are an integral part of these financial statements. | Semiannual Report | 89
FRANKLIN CUSTODIAN FUNDS
FINANCIAL HIGHLIGHTS
Franklin U.S. Government Securities Fund (continued) | |||||||||
Six Months Ended | Year Ended | ||||||||
March 31, 2015 | September 30, | ||||||||
(unaudited) | 2014 | 2013 | a | ||||||
Class R6 | |||||||||
Per share operating performance | |||||||||
(for a share outstanding throughout the period) | |||||||||
Net asset value, beginning of period | $ | 6.50 | $ | 6.55 | $ | 6.76 | |||
Income from investment operationsb: | |||||||||
Net investment incomec | 0.09 | 0.19 | 0.07 | ||||||
Net realized and unrealized gains (losses) | 0.05 | 0.01 | (0.17 | ) | |||||
Total from investment operations | 0.14 | 0.20 | (0.10 | ) | |||||
Less distributions from net investment income | (0.12 | ) | (0.25 | ) | (0.11 | ) | |||
Net asset value, end of period | $ | 6.52 | $ | 6.50 | $ | 6.55 | |||
Total returnd | 2.13 | % | 3.08 | % | (1.53 | )% | |||
Ratios to average net assetse | |||||||||
Expenses | 0.47 | %f | 0.47 | %f | 0.46 | % | |||
Net investment income | 2.75 | % | 2.90 | % | 2.44 | % | |||
Supplemental data | |||||||||
Net assets, end of period (000’s) | $ | 366,326 | $ | 497,246 | $ | 480,590 | |||
Portfolio turnover rate | 32.68 | % | 69.73 | % | 46.16 | % | |||
Portfolio turnover rate excluding mortgage dollar rollsg | 23.45 | % | 38.79 | % | 40.83 | % |
aFor the period May 1, 2013 (effective date) to September 30, 2013.
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 shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
cBased on average daily shares outstanding.
dTotal return is not annualized for periods less than one year.
eRatios are annualized for periods less than one year.
fBenefit of waiver and payments by affiliates and expense reduction rounds to less than 0.01%.
gSee Note 1(i) regarding mortgage dollar rolls.
90 | Semiannual 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) | ||||||||||||||||||
Six Months Ended | ||||||||||||||||||
March 31, 2015 | Year Ended September 30, | |||||||||||||||||
(unaudited) | 2014 | 2013 | 2012 | 2011 | 2010 | |||||||||||||
Advisor Class | ||||||||||||||||||
Per share operating performance | ||||||||||||||||||
(for a share outstanding throughout the period) | ||||||||||||||||||
Net asset value, beginning of period | $ | 6.50 | $ | 6.55 | $ | 6.93 | $ | 6.94 | $ | 6.83 | $ | 6.71 | ||||||
Income from investment operationsa: | ||||||||||||||||||
Net investment incomeb | 0.08 | 0.18 | 0.16 | 0.21 | 0.25 | 0.26 | ||||||||||||
Net realized and unrealized gains (losses) | 0.06 | 0.01 | (0.29 | ) | 0.04 | 0.15 | 0.14 | |||||||||||
Total from investment operations | 0.14 | 0.19 | (0.13 | ) | 0.25 | 0.40 | 0.40 | |||||||||||
Less distributions from net investment | ||||||||||||||||||
income | (0.11 | ) | (0.24 | ) | (0.25 | ) | (0.26 | ) | (0.29 | ) | (0.28 | ) | ||||||
Net asset value, end of period | $ | 6.53 | $ | 6.50 | $ | 6.55 | $ | 6.93 | $ | 6.94 | $ | 6.83 | ||||||
Total returnc | 2.22 | % | 2.94 | % | (1.86 | )% | 3.63 | % | 6.08 | % | 6.06 | % | ||||||
Ratios to average net assetsd | ||||||||||||||||||
Expenses | 0.61 | %e | 0.60 | %e | 0.58 | % | 0.58 | % | 0.58 | % | 0.59 | % | ||||||
Net investment income | 2.61 | % | 2.77 | % | 2.32 | % | 3.01 | % | 3.69 | % | 3.84 | % | ||||||
Supplemental data | ||||||||||||||||||
Net assets, end of period (000’s) | $ | 633,389 | $ | 652,737 | $ | 949,085 | $ | 1,586,928 | $ | 1,478,504 | $ | 1,193,213 | ||||||
Portfolio turnover rate | 32.68 | % | 69.73 | % | 46.16 | % | 40.15 | % | 20.23 | % | 47.41 | % | ||||||
Portfolio turnover rate excluding mortgage | ||||||||||||||||||
dollar rollsf | 23.45 | % | 38.79 | % | 40.83 | % | 40.15 | % | 20.23 | % | 47.41 | % |
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 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 is not annualized for periods less than one year.
dRatios are annualized for periods less than one year.
eBenefit of waiver and payments by affiliates and expense reduction rounds to less than 0.01%.
fSee Note 1(i) regarding mortgage dollar rolls.
franklintempleton.com The accompanying notes are an integral part of these financial statements. | Semiannual Report | 91
FRANKLIN CUSTODIAN FUNDS | ||||
Statement of Investments, March 31, 2015 (unaudited) | ||||
Franklin U.S. Government Securities Fund | ||||
Principal | ||||
Amount | Value | |||
Mortgage-Backed Securities 97.7% | ||||
aGovernment National Mortgage Association (GNMA) Adjustable Rate 0.9% | ||||
GNMA, 1.625% - 2.00%, 10/20/39 - 5/20/40 | $ | 56,792,407 | $ | 58,998,014 |
Government National Mortgage Association (GNMA) Fixed Rate 96.8% | ||||
GNMA GP 30 Year, 8.25%, 3/15/17 - 5/15/17 | 14,649 | 14,710 | ||
GNMA GP 30 Year, 9.25%, 5/15/16 - 12/15/16 | 43,892 | 44,365 | ||
GNMA GP 30 Year, 11.25%, 10/15/15 - 12/15/15 | 4,929 | 4,952 | ||
GNMA I SF 15 Year, 6.50%, 5/15/18 | 67,434 | 69,813 | ||
GNMA I SF 30 Year, 3.50%, 4/15/43 - 5/15/43 | 45,077,960 | 48,228,016 | ||
GNMA I SF 30 Year, 4.00%, 12/15/40 - 9/15/41 | 17,515,227 | 19,037,355 | ||
GNMA I SF 30 Year, 4.50%, 2/15/39 - 6/15/39 | 52,646,988 | 58,849,600 | ||
GNMA I SF 30 Year, 4.50%, 6/15/39 - 10/15/39 | 52,696,452 | 58,383,154 | ||
GNMA I SF 30 Year, 4.50%, 10/15/39 - 1/15/40 | 46,923,444 | 52,209,712 | ||
GNMA I SF 30 Year, 4.50%, 1/15/40 - 4/15/40 | 49,998,287 | 55,506,003 | ||
GNMA I SF 30 Year, 4.50%, 4/15/40 - 6/15/40 | 57,370,895 | 63,565,611 | ||
GNMA I SF 30 Year, 4.50%, 6/15/40 | 55,032,710 | 61,450,415 | ||
GNMA I SF 30 Year, 4.50%, 7/15/40 | 42,833,078 | 47,411,954 | ||
GNMA I SF 30 Year, 4.50%, 7/15/40 | 30,780,293 | 34,239,740 | ||
GNMA I SF 30 Year, 4.50%, 7/15/40 - 8/15/40 | 43,675,909 | 48,393,299 | ||
GNMA I SF 30 Year, 4.50%, 8/15/40 - 4/15/41 | 54,622,015 | 60,541,736 | ||
GNMA I SF 30 Year, 4.50%, 4/15/41 - 6/15/41 | 30,541,813 | 34,296,649 | ||
GNMA I SF 30 Year, 5.00%, 2/15/33 - 9/15/33 | 56,094,554 | 63,114,625 | ||
GNMA I SF 30 Year, 5.00%, 9/15/33 - 1/15/34 | 56,534,487 | 63,618,005 | ||
GNMA I SF 30 Year, 5.00%, 1/15/34 - 12/15/35 | 56,869,690 | 63,886,876 | ||
GNMA I SF 30 Year, 5.00%, 3/15/36 - 8/15/39 | 55,683,406 | 62,325,696 | ||
GNMA I SF 30 Year, 5.00%, 8/15/39 - 9/15/39 | 56,469,297 | 63,248,363 | ||
GNMA I SF 30 Year, 5.00%, 9/15/39 - 10/15/39 | 55,312,910 | 62,260,743 | ||
GNMA I SF 30 Year, 5.00%,10/15/39 | 44,124,022 | 49,848,236 | ||
GNMA I SF 30 Year, 5.00%,10/15/39 - 11/15/39 | 50,975,834 | 57,752,733 | ||
GNMA I SF 30 Year, 5.00%,11/15/39 | 22,845,887 | 25,902,553 | ||
GNMA I SF 30 Year, 5.00%,11/15/39 - 12/15/39 | 53,645,386 | 60,805,068 | ||
GNMA I SF 30 Year, 5.00%,12/15/39 - 2/15/40 | 53,142,424 | 59,948,462 | ||
GNMA I SF 30 Year, 5.00%, 2/15/40 - 3/15/40 | 46,664,306 | 52,877,325 | ||
GNMA I SF 30 Year, 5.00%, 3/15/40 - 5/15/40 | 53,401,208 | 60,355,905 | ||
GNMA I SF 30 Year, 5.00%, 5/15/40 - 6/15/40 | 53,674,896 | 60,807,659 | ||
GNMA I SF 30 Year, 5.00%, 6/15/40 | 35,919,537 | 40,710,336 | ||
GNMA I SF 30 Year, 5.00%, 9/15/40 | 46,292,230 | 51,791,137 | ||
GNMA I SF 30 Year, 5.50%, 5/15/28 - 4/15/33 | 56,381,499 | 64,061,997 | ||
GNMA I SF 30 Year, 5.50%, 4/15/33 - 7/15/33 | 56,432,715 | 64,123,109 | ||
GNMA I SF 30 Year, 5.50%, 7/15/33 - 4/15/35 | 51,998,178 | 59,206,792 | ||
GNMA I SF 30 Year, 5.50%, 4/15/35 - 6/15/38 | 54,966,904 | 62,420,841 | ||
GNMA I SF 30 Year, 5.50%, 6/15/38 - 1/15/39 | 39,426,397 | 44,670,235 | ||
GNMA I SF 30 Year, 5.50%, 2/15/39 - 2/15/40 | 56,729,389 | 64,222,436 | ||
GNMA I SF 30 Year, 6.00%, 10/15/23 - 9/15/32 | 55,673,061 | 64,169,187 | ||
GNMA I SF 30 Year, 6.00%, 9/15/32 - 11/15/35 | 48,623,738 | 56,385,892 | ||
GNMA I SF 30 Year, 6.00%, 12/15/35 - 2/15/37 | 54,176,396 | 62,855,044 | ||
GNMA I SF 30 Year, 6.00%, 2/15/37 - 2/15/38 | 55,303,287 | 63,613,378 | ||
GNMA I SF 30 Year, 6.00%, 2/15/38 - 2/15/39 | 50,631,348 | 57,759,814 | ||
GNMA I SF 30 Year, 6.00%, 12/15/39 | 18,353,713 | 20,901,597 | ||
GNMA I SF 30 Year, 6.50%, 5/15/23 - 12/15/31 | 55,871,586 | 64,229,567 | ||
GNMA I SF 30 Year, 6.50%, 12/15/31 - 8/15/37 | 28,477,678 | 33,188,012 | ||
GNMA I SF 30 Year, 6.75%, 3/15/26 | 9,737 | 11,150 | ||
92 | Semiannual Report | franklintempleton.com |
FRANKLIN CUSTODIAN FUNDS
STATEMENT OF INVESTMENTS (UNAUDITED)
Franklin U.S. Government Securities Fund (continued) | ||||
Principal | ||||
Amount | Value | |||
Mortgage-Backed Securities (continued) | ||||
Government National Mortgage Association (GNMA) Fixed Rate (continued) | ||||
GNMA I SF 30 Year, 7.00%, 4/15/16 - 6/15/32 | $ | 56,717,890 | $ | 64,102,497 |
GNMA I SF 30 Year, 7.00%, 6/15/32 - 9/15/32 | 519,306 | 572,318 | ||
GNMA I SF 30 Year, 7.25%, 12/15/25 - 1/15/26 | 230,973 | 251,232 | ||
GNMA I SF 30 Year, 7.50%, 7/15/16 - 8/15/33 | 18,071,447 | 20,194,480 | ||
GNMA I SF 30 Year, 7.70%, 1/15/21 - 1/15/22 | 118,937 | 119,592 | ||
GNMA I SF 30 Year, 8.00%, 11/15/15 - 9/15/30 | 8,814,539 | 9,358,386 | ||
GNMA I SF 30 Year, 8.50%, 6/15/16 - 5/15/25 | 1,867,438 | 1,995,060 | ||
GNMA I SF 30 Year, 9.00%, 11/15/15 - 7/15/23 | 2,036,251 | 2,131,254 | ||
GNMA I SF 30 Year, 9.50%, 5/15/16 - 8/15/22 | 1,675,766 | 1,721,924 | ||
GNMA I SF 30 Year, 10.00%, 2/15/16 - 3/15/25 | 1,579,133 | 1,633,410 | ||
GNMA I SF 30 Year, 10.50%, 9/15/15 - 10/15/21 | 899,475 | 930,426 | ||
GNMA I SF 30 Year, 11.00%, 7/15/15 - 5/15/21 | 189,894 | 193,139 | ||
GNMA I SF 30 Year, 11.50%, 9/15/15 - 2/15/16 | 14,624 | 14,774 | ||
GNMA I SF 30 Year, 12.00%, 4/15/15 - 12/15/15 | 13,883 | 13,929 | ||
GNMA I SF 30 Year, 12.50%, 5/15/15 - 9/15/15 | 1,409 | 1,411 | ||
GNMA I SF 30 Year, 13.00%, 6/15/15 - 9/15/15 | 640 | 643 | ||
GNMA II GP 30 Year, 8.75%, 3/20/17 - 7/20/17 | 10,831 | 10,920 | ||
GNMA II SF 30 Year, 3.00%, 2/20/45 | 16,202,238 | 16,730,809 | ||
GNMA II SF 30 Year, 3.50%, 10/20/40 - 6/20/42 | 26,149,853 | 27,601,525 | ||
GNMA II SF 30 Year, 3.50%, 7/20/42 | 108,205,980 | 114,213,246 | ||
GNMA II SF 30 Year, 3.50%, 8/20/42 | 40,381,070 | 42,671,734 | ||
GNMA II SF 30 Year, 3.50%, 9/20/42 | 234,650,460 | 247,677,623 | ||
GNMA II SF 30 Year, 3.50%, 10/20/42 | 48,705,473 | 51,409,498 | ||
GNMA II SF 30 Year, 3.50%, 11/20/42 - 2/20/43 | 56,611,359 | 59,829,877 | ||
GNMA II SF 30 Year, 3.50%, 2/20/43 - 3/20/43 | 16,853,392 | 17,815,205 | ||
GNMA II SF 30 Year, 3.50%, 4/20/43 - 5/20/43 | 53,930,931 | 56,930,478 | ||
GNMA II SF 30 Year, 3.50%, 5/20/43 | 67,613,734 | 71,367,696 | ||
GNMA II SF 30 Year, 3.50%, 6/20/43 | 77,951,433 | 82,279,384 | ||
GNMA II SF 30 Year, 3.50%, 8/20/43 | 57,857,558 | 61,070,010 | ||
GNMA II SF 30 Year, 3.50%, 6/20/44 - 8/20/44 | 47,044,815 | 49,634,667 | ||
GNMA II SF 30 Year, 3.50%, 12/20/44 | 167,548,227 | 176,631,306 | ||
GNMA II SF 30 Year, 3.50%, 1/20/45 | 20,134,680 | 21,231,274 | ||
bGNMA II SF 30 Year, 3.50%, 4/01/45 | 69,000,000 | 72,609,026 | ||
GNMA II SF 30 Year, 4.00%, 5/20/40 - 10/20/40 | 25,504,327 | 27,392,939 | ||
GNMA II SF 30 Year, 4.00%, 11/20/40 | 76,588,054 | 82,265,117 | ||
GNMA II SF 30 Year, 4.00%, 12/20/40 | 44,490,426 | 47,786,570 | ||
GNMA II SF 30 Year, 4.00%, 1/20/41 - 6/20/41 | 48,733,043 | 52,341,284 | ||
GNMA II SF 30 Year, 4.00%, 7/20/41 | 65,758,152 | 70,629,026 | ||
GNMA II SF 30 Year, 4.00%, 9/20/41 | 75,563,611 | 81,155,759 | ||
GNMA II SF 30 Year, 4.00%, 10/20/41 | 90,135,533 | 96,807,536 | ||
GNMA II SF 30 Year, 4.00%, 11/20/41 | 80,657,848 | 86,630,560 | ||
GNMA II SF 30 Year, 4.00%, 2/20/44 - 9/20/44 | 58,910,483 | 64,194,934 | ||
GNMA II SF 30 Year, 4.00%, 10/20/44 | 89,731,318 | 96,206,330 | ||
GNMA II SF 30 Year, 4.00%, 11/20/44 | 209,593,317 | 224,770,315 | ||
GNMA II SF 30 Year, 4.00%, 12/20/44 | 208,830,129 | 224,023,523 | ||
bGNMA II SF 30 Year, 4.00%, 4/01/45 | 11,000,000 | 11,720,586 | ||
GNMA II SF 30 Year, 4.50%, 5/20/33 - 11/20/39 | 40,574,665 | 44,391,694 | ||
GNMA II SF 30 Year, 4.50%, 12/20/39 | 56,261,777 | 61,547,899 | ||
GNMA II SF 30 Year, 4.50%, 1/20/40 - 6/20/40 | 39,661,588 | 43,396,502 | ||
GNMA II SF 30 Year, 4.50%, 7/20/40 | 22,356,812 | 24,445,937 | ||
GNMA II SF 30 Year, 4.50%, 5/20/41 | 72,653,451 | 79,267,450 | ||
franklintempleton.com | Semiannual Report | 93 |
FRANKLIN CUSTODIAN FUNDS | |||||
STATEMENT OF INVESTMENTS (UNAUDITED) | |||||
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, 4.50%, 6/20/41 | $ | 21,596,220 | $ | 23,557,342 | |
GNMA II SF 30 Year, 4.50%, 6/20/41 | 88,418,703 | 96,447,881 | |||
GNMA II SF 30 Year, 4.50%, 7/20/41 | 94,072,119 | 102,616,941 | |||
GNMA II SF 30 Year, 4.50%, 8/20/41 | 11,721,446 | 12,782,851 | |||
GNMA II SF 30 Year, 4.50%, 9/20/41 | 122,450,102 | 133,499,962 | |||
GNMA II SF 30 Year, 4.50%, 10/20/41 | 92,018,179 | 100,308,060 | |||
GNMA II SF 30 Year, 4.50%, 8/20/42 | 4,469,562 | 4,878,609 | |||
GNMA II SF 30 Year, 4.50%, 2/20/44 | 58,965,904 | 64,103,411 | |||
GNMA II SF 30 Year, 5.00%, 7/20/33 - 9/20/33 | 48,509,680 | 54,436,582 | |||
GNMA II SF 30 Year, 5.00%, 10/20/33 - 3/20/36 | 56,898,490 | 63,859,180 | |||
GNMA II SF 30 Year, 5.00%, 7/20/39 - 12/20/39 | 44,723,793 | 50,185,853 | |||
GNMA II SF 30 Year, 5.00%, 4/20/40 - 5/20/40 | 33,476,731 | 37,559,143 | |||
GNMA II SF 30 Year, 5.00%, 6/20/40 - 9/20/41 | 41,893,892 | 47,008,700 | |||
GNMA II SF 30 Year, 5.50%, 6/20/34 - 11/20/34 | 44,931,812 | 50,937,504 | |||
GNMA II SF 30 Year, 5.50%, 12/20/34 - 3/20/35 | 56,336,328 | 63,868,171 | |||
GNMA II SF 30 Year, 5.50%, 5/20/35 - 4/20/38 | 50,274,928 | 56,985,521 | |||
GNMA II SF 30 Year, 5.50%, 6/20/38 - 4/20/40 | 25,102,307 | 28,313,900 | |||
GNMA II SF 30 Year, 6.00%, 10/20/23 - 6/20/35 | 54,610,487 | 63,113,285 | |||
GNMA II SF 30 Year, 6.00%, 7/20/35 - 7/20/38 | 52,378,147 | 59,945,726 | |||
GNMA II SF 30 Year, 6.00%, 8/20/38 - 7/20/39 | 20,462,654 | 23,270,607 | |||
GNMA II SF 30 Year, 6.50%, 6/20/24 - 1/20/39 | 43,565,491 | 50,855,869 | |||
GNMA II SF 30 Year, 7.00%, 2/20/28 - 7/20/33 | 8,841,894 | 10,843,968 | |||
GNMA II SF 30 Year, 7.50%, 10/20/22 - 4/20/32 | 2,132,874 | 2,497,458 | |||
GNMA II SF 30 Year, 8.00%, 8/20/16 - 6/20/30 | 1,023,290 | 1,215,993 | |||
GNMA II SF 30 Year, 8.50%, 4/20/16 - 6/20/25 | 380,907 | 408,229 | |||
GNMA II SF 30 Year, 9.00%, 8/20/16 - 11/20/21 | 82,020 | 90,394 | |||
GNMA II SF 30 Year, 9.50%, 3/20/18 - 4/20/25 | 94,143 | 101,078 | |||
GNMA II SF 30 Year, 10.00%, 8/20/15 - 3/20/21 | 129,077 | 141,339 | |||
GNMA II SF 30 Year, 10.50%, 8/20/15 - 1/20/21 | 240,598 | 250,435 | |||
GNMA II SF 30 Year, 11.00%, 10/20/15 - 1/20/21 | 45,920 | 46,516 | |||
GNMA II SF 30 Year, 11.50%, 7/20/15 - 1/20/18 | 3,976 | 4,039 | |||
GNMA II SF 30 Year, 12.00%, 9/20/15 - 12/20/15 | 2,244 | 2,256 | |||
GNMA II SF 30 Year, 12.50%, 5/20/15 - 11/20/15 | 297 | 297 | |||
6,219,379,671 | |||||
Total Mortgage-Backed Securities (Cost $5,994,087,800) | 6,278,377,685 | ||||
Shares | |||||
Short Term Investments (Cost $226,922,199) 3.5% | |||||
Money Market Funds 3.5% | |||||
c,dInstitutional Fiduciary Trust Money Market Portfolio | 226,922,199 | 226,922,199 | |||
Total Investments (Cost $6,221,009,999) 101.2% | 6,505,299,884 | ||||
Other Assets, less Liabilities (1.2)% | (77,277,436 | ) | |||
Net Assets 100.0% | $ | 6,428,022,448 |
See Abbreviations on page 129.
aThe coupon rate shown represents the rate at period end.
bSecurity purchased on a to-be-announced (TBA) basis. See Note 1(d).
cNon-income producing.
dSee Note 3(f) regarding investments in Institutional Fiduciary Trust Money Market Portfolio.
94 | Semiannual Report | The accompanying notes are an integral part of these financial statements. franklintempleton.com
FRANKLIN CUSTODIAN FUNDS | ||||||||||||||||||
Financial Highlights | ||||||||||||||||||
Franklin Utilities Fund | ||||||||||||||||||
Six Months Ended | ||||||||||||||||||
March 31, 2015 | Year Ended September 30, | |||||||||||||||||
(unaudited) | 2014 | 2013 | 2012 | 2011 | 2010 | |||||||||||||
Class A | ||||||||||||||||||
Per share operating performance | ||||||||||||||||||
(for a share outstanding throughout the period) | ||||||||||||||||||
Net asset value, beginning of period | $ | 16.58 | $ | 14.62 | $ | 14.04 | $ | 12.42 | $ | 11.44 | $ | 10.74 | ||||||
Income from investment operationsa: | ||||||||||||||||||
Net investment incomeb | 0.24 | 0.49 | 0.49 | 0.48 | 0.44 | 0.43 | ||||||||||||
Net realized and unrealized gains (losses) | 0.80 | 2.00 | 0.60 | 1.60 | 0.97 | 0.88 | ||||||||||||
Total from investment operations | 1.04 | 2.49 | 1.09 | 2.08 | 1.41 | 1.31 | ||||||||||||
Less distributions from: | ||||||||||||||||||
Net investment income | (0.25 | ) | (0.49 | ) | (0.51 | ) | (0.46 | ) | (0.43 | ) | (0.45 | ) | ||||||
Net realized gains | (0.42 | ) | (0.04 | ) | — | — | — | (0.16 | ) | |||||||||
Total distributions | (0.67 | ) | (0.53 | ) | (0.51 | ) | (0.46 | ) | (0.43 | ) | (0.61 | ) | ||||||
Net asset value, end of period | $ | 16.95 | $ | 16.58 | $ | 14.62 | $ | 14.04 | $ | 12.42 | $ | 11.44 | ||||||
Total returnc | 6.19 | % | 17.24 | % | 7.92 | % | 16.99 | % | 12.50 | % | 12.69 | % | ||||||
Ratios to average net assetsd | ||||||||||||||||||
Expenses | 0.74 | %e | 0.75 | %e,f | 0.75 | %f | 0.76 | % | 0.76 | % | 0.78 | % | ||||||
Net investment income | 2.71 | % | 3.05 | % | 3.34 | % | 3.61 | % | 3.67 | % | 3.91 | % | ||||||
Supplemental data | ||||||||||||||||||
Net assets, end of period (000’s) | $ | 4,004,688 | $ | 3,717,397 | $ | 3,275,129 | $ | 3,076,131 | $ | 2,220,083 | $ | 1,823,972 | ||||||
Portfolio turnover rate | 3.69 | % | 8.10 | % | 4.57 | % | 1.27 | % | 5.21 | % | 5.27 | % |
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 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, and is not annualized for periods less than one year.
dRatios are annualized for periods less than one year.
eBenefit of waiver and payments by affiliates rounds to less than 0.01%.
fBenefit of expense reduction rounds to less than 0.01%.
franklintempleton.com The accompanying notes are an integral part of these financial statements. | Semiannual Report | 95
FRANKLIN CUSTODIAN FUNDS |
FINANCIAL HIGHLIGHTS |
Franklin Utilities Fund (continued) | ||||||||||||||||||
Six Months Ended | ||||||||||||||||||
March 31, 2015 | Year Ended September 30, | |||||||||||||||||
(unaudited) | 2014 | 2013 | 2012 | 2011 | 2010 | |||||||||||||
Class C | ||||||||||||||||||
Per share operating performance | ||||||||||||||||||
(for a share outstanding throughout the period) | ||||||||||||||||||
Net asset value, beginning of period | $ | 16.50 | $ | 14.56 | $ | 13.98 | $ | 12.37 | $ | 11.40 | $ | 10.71 | ||||||
Income from investment operationsa: | ||||||||||||||||||
Net investment incomeb | 0.19 | 0.41 | 0.41 | 0.42 | 0.38 | 0.37 | ||||||||||||
Net realized and unrealized gains (losses) | 0.80 | 1.98 | 0.61 | 1.58 | 0.96 | 0.88 | ||||||||||||
Total from investment operations | 0.99 | 2.39 | 1.02 | 2.00 | 1.34 | 1.25 | ||||||||||||
Less distributions from: | ||||||||||||||||||
Net investment income | (0.19 | ) | (0.41 | ) | (0.44 | ) | (0.39 | ) | (0.37 | ) | (0.40 | ) | ||||||
Net realized gains | (0.42 | ) | (0.04 | ) | — | — | — | (0.16 | ) | |||||||||
Total distributions | (0.61 | ) | (0.45 | ) | (0.44 | ) | (0.39 | ) | (0.37 | ) | (0.56 | ) | ||||||
Net asset value, end of period | $ | 16.88 | $ | 16.50 | $ | 14.56 | $ | 13.98 | $ | 12.37 | $ | 11.40 | ||||||
Total returnc | 5.97 | % | 16.61 | % | 7.40 | % | 16.32 | % | 12.00 | % | 12.08 | % | ||||||
Ratios to average net assetsd | ||||||||||||||||||
Expenses | 1.24 | %e | 1.25 | %e,f | 1.25 | %f | 1.26 | % | 1.26 | % | 1.28 | % | ||||||
Net investment income | 2.21 | % | 2.55 | % | 2.84 | % | 3.11 | % | 3.17 | % | 3.41 | % | ||||||
Supplemental data | ||||||||||||||||||
Net assets, end of period (000’s) | $ | 1,051,890 | $ | 986,318 | $ | 845,173 | $ | 774,711 | $ | 528,391 | $ | 405,024 | ||||||
Portfolio turnover rate | 3.69 | % | 8.10 | % | 4.57 | % | 1.27 | % | 5.21 | % | 5.27 | % |
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 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, and is not annualized for periods less than one year.
dRatios are annualized for periods less than one year.
eBenefit of waiver and payments by affiliates rounds to less than 0.01%.
fBenefit of expense reduction rounds to less than 0.01%.
96 | Semiannual Report | The accompanying notes are an integral part of these financial statements. franklintempleton.com
FRANKLIN CUSTODIAN FUNDS | ||||||||||||||||||
FINANCIAL HIGHLIGHTS | ||||||||||||||||||
Franklin Utilities Fund (continued) | ||||||||||||||||||
Six Months Ended | ||||||||||||||||||
March 31, 2015 | Year Ended September 30, | |||||||||||||||||
(unaudited) | 2014 | 2013 | 2012 | 2011 | 2010 | |||||||||||||
Class R | ||||||||||||||||||
Per share operating performance | ||||||||||||||||||
(for a share outstanding throughout the period) | ||||||||||||||||||
Net asset value, beginning of period | $ | 16.52 | $ | 14.58 | $ | 14.00 | $ | 12.39 | $ | 11.41 | $ | 10.71 | ||||||
Income from investment operationsa: | ||||||||||||||||||
Net investment incomeb | 0.20 | 0.43 | 0.44 | 0.44 | 0.40 | 0.39 | ||||||||||||
Net realized and unrealized gains (losses) | 0.81 | 1.99 | 0.60 | 1.58 | 0.97 | 0.88 | ||||||||||||
Total from investment operations | 1.01 | 2.42 | 1.04 | 2.02 | 1.37 | 1.27 | ||||||||||||
Less distributions from: | ||||||||||||||||||
Net investment income | (0.21 | ) | (0.44 | ) | (0.46 | ) | (0.41 | ) | (0.39 | ) | (0.41 | ) | ||||||
Net realized gains | (0.42 | ) | (0.04 | ) | — | — | — | (0.16 | ) | |||||||||
Total distributions | (0.63 | ) | (0.48 | ) | (0.46 | ) | (0.41 | ) | (0.39 | ) | (0.57 | ) | ||||||
Net asset value, end of period | $ | 16.90 | $ | 16.52 | $ | 14.58 | $ | 14.00 | $ | 12.39 | $ | 11.41 | ||||||
Total returnc | 6.05 | % | 16.75 | % | 7.56 | % | 16.55 | % | 12.14 | % | 12.33 | % | ||||||
Ratios to average net assetsd | ||||||||||||||||||
Expenses | 1.09 | %e | 1.10 | %e,f | 1.10 | %f | 1.11 | % | 1.11 | % | 1.13 | % | ||||||
Net investment income | 2.36 | % | 2.70 | % | 2.99 | % | 3.26 | % | 3.32 | % | 3.56 | % | ||||||
Supplemental data | ||||||||||||||||||
Net assets, end of period (000’s) | $ | 100,435 | $ | 95,498 | $ | 86,216 | $ | 80,478 | $ | 51,732 | $ | 42,285 | ||||||
Portfolio turnover rate | 3.69 | % | 8.10 | % | 4.57 | % | 1.27 | % | 5.21 | % | 5.27 | % |
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 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 is not annualized for periods less than one year.
dRatios are annualized for periods less than one year.
eBenefit of waiver and payments by affiliates rounds to less than 0.01%.
fBenefit of expense reduction rounds to less than 0.01%.
franklintempleton.com The accompanying notes are an integral part of these financial statements. | Semiannual Report | 97
FRANKLIN CUSTODIAN FUNDS |
FINANCIAL HIGHLIGHTS |
Franklin Utilities Fund (continued) | |||||||||
Six Months Ended | Year Ended | ||||||||
March 31, 2015 | September 30, | ||||||||
(unaudited) | 2014 | 2013 | a | ||||||
Class R6 | |||||||||
Per share operating performance | |||||||||
(for a share outstanding throughout the period) | |||||||||
Net asset value, beginning of period | $ | 16.68 | $ | 14.71 | $ | 15.88 | |||
Income from investment operationsb: | |||||||||
Net investment incomec | 0.26 | 0.53 | 0.25 | ||||||
Net realized and unrealized gains (losses) | 0.81 | 2.01 | (1.17 | ) | |||||
Total from investment operations | 1.07 | 2.54 | (0.92 | ) | |||||
Less distributions from: | |||||||||
Net investment income | (0.27 | ) | (0.53 | ) | (0.25 | ) | |||
Net realized gains | (0.42 | ) | (0.04 | ) | — | ||||
Total distributions | (0.69 | ) | (0.57 | ) | (0.25 | ) | |||
Net asset value, end of period | $ | 17.06 | $ | 16.68 | $ | 14.71 | |||
Total returnd | 6.38 | % | 17.51 | % | (5.79 | )% | |||
Ratios to average net assetse | |||||||||
Expenses | 0.48 | %f | 0.48 | %f,g | 0.48 | %g | |||
Net investment income | 2.97 | % | 3.32 | % | 3.61 | % | |||
Supplemental data | |||||||||
Net assets, end of period (000’s) | $ | 235,185 | $ | 236,437 | $ | 218,746 | |||
Portfolio turnover rate | 3.69 | % | 8.10 | % | 4.57 | % |
aFor the period May 1, 2013 (effective date) to September 30, 2013.
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 shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
cBased on average daily shares outstanding.
dTotal return is not annualized for periods less than one year.
eRatios are annualized for periods less than one year.
fBenefit of waiver and payments by affiliates rounds to less than 0.01%.
gBenefit of expense reduction rounds to less than 0.01%.
98 | Semiannual Report | The accompanying notes are an integral part of these financial statements. franklintempleton.com
FRANKLIN CUSTODIAN FUNDS | ||||||||||||||||||
FINANCIAL HIGHLIGHTS | ||||||||||||||||||
Franklin Utilities Fund (continued) | ||||||||||||||||||
Six Months Ended | ||||||||||||||||||
March 31, 2015 | Year Ended September 30, | |||||||||||||||||
(unaudited) | 2014 | 2013 | 2012 | 2011 | 2010 | |||||||||||||
Advisor Class | ||||||||||||||||||
Per share operating performance | ||||||||||||||||||
(for a share outstanding throughout the period) | ||||||||||||||||||
Net asset value, beginning of period | $ | 16.68 | $ | 14.71 | $ | 14.12 | $ | 12.49 | $ | 11.50 | $ | 10.79 | ||||||
Income from investment operationsa: | ||||||||||||||||||
Net investment incomeb | 0.25 | 0.52 | 0.50 | 0.51 | 0.46 | 0.45 | ||||||||||||
Net realized and unrealized gains (losses) | 0.81 | 2.00 | 0.62 | 1.60 | 0.97 | 0.89 | ||||||||||||
Total from investment operations | 1.06 | 2.52 | 1.12 | 2.11 | 1.43 | 1.34 | ||||||||||||
Less distributions from: | ||||||||||||||||||
Net investment income | (0.26 | ) | (0.51 | ) | (0.53 | ) | (0.48 | ) | (0.44 | ) | (0.47 | ) | ||||||
Net realized gains | (0.42 | ) | (0.04 | ) | — | — | — | (0.16 | ) | |||||||||
Total distributions | (0.68 | ) | (0.55 | ) | (0.53 | ) | (0.48 | ) | (0.44 | ) | (0.63 | ) | ||||||
Net asset value, end of period | $ | 17.06 | $ | 16.68 | $ | 14.71 | $ | 14.12 | $ | 12.49 | $ | 11.50 | ||||||
Total returnc | 6.31 | % | 17.37 | % | 8.11 | % | 17.15 | % | 12.68 | % | 12.89 | % | ||||||
Ratios to average net assetsd | ||||||||||||||||||
Expenses | 0.59 | %e | 0.60 | %e,f | 0.60 | %f | 0.61 | % | 0.61 | % | 0.63 | % | ||||||
Net investment income | 2.86 | % | 3.20 | % | 3.49 | % | 3.76 | % | 3.82 | % | 4.06 | % | ||||||
Supplemental data | ||||||||||||||||||
Net assets, end of period (000’s) | $ | 625,675 | $ | 562,202 | $ | 343,082 | $ | 574,803 | $ | 347,983 | $ | 222,788 | ||||||
Portfolio turnover rate | 3.69 | % | 8.10 | % | 4.57 | % | 1.27 | % | 5.21 | % | 5.27 | % |
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 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 is not annualized for periods less than one year.
dRatios are annualized for periods less than one year.
eBenefit of waiver and payments by affiliates rounds to less than 0.01%.
fBenefit of expense reduction rounds to less than 0.01%.
franklintempleton.com The accompanying notes are an integral part of these financial statements. | Semiannual Report | 99
FRANKLIN CUSTODIAN FUNDS | ||||
Statement of Investments, March 31, 2015 (unaudited) | ||||
Franklin Utilities Fund | ||||
Country | Shares | Value | ||
Common Stocks 98.3% | ||||
Diversified Telecommunication Services 1.8% | ||||
AT&T Inc. | United States | 1,600,000 | $ | 52,240,000 |
Verizon Communications Inc. | United States | 1,200,000 | 58,356,000 | |
110,596,000 | ||||
Electric Utilities 47.4% | ||||
ALLETE Inc. | United States | 1,000,000 | 52,760,000 | |
American Electric Power Co. Inc. | United States | 4,100,000 | 230,625,000 | |
Duke Energy Corp. | United States | 3,550,000 | 272,569,000 | |
Edison International | United States | 4,400,000 | 274,868,000 | |
Entergy Corp. | United States | 1,400,000 | 108,486,000 | |
Eversource Energy | United States | 1,700,000 | 85,884,000 | |
Exelon Corp. | United States | 6,600,000 | 221,826,000 | |
FirstEnergy Corp. | United States | 2,300,000 | 80,638,000 | |
Great Plains Energy Inc. | United States | 4,300,000 | 114,724,000 | |
aHawaiian Electric Industries Inc. | United States | 1,100,000 | 35,332,000 | |
IDACORP Inc. | United States | 400,000 | 25,148,000 | |
ITC Holdings Corp. | United States | 300,000 | 11,229,000 | |
NextEra Energy Inc. | United States | 2,900,000 | 301,745,000 | |
OGE Energy Corp. | United States | 2,000,000 | 63,220,000 | |
Pinnacle West Capital Corp. | United States | 1,800,000 | 114,750,000 | |
PNM Resources Inc. | United States | 3,400,000 | 99,280,000 | |
Portland General Electric Co. | United States | 2,000,000 | 74,180,000 | |
PPL Corp. | United States | 5,000,000 | 168,300,000 | |
The Southern Co. | United States | 4,200,000 | 185,976,000 | |
SSE PLC | United Kingdom | 1,200,000 | 26,662,003 | |
UIL Holdings Corp. | United States | 700,000 | 35,994,000 | |
Westar Energy Inc. | United States | 2,700,000 | 104,652,000 | |
Xcel Energy Inc. | United States | 4,600,000 | 160,126,000 | |
2,848,974,003 | ||||
Gas Utilities 2.6% | ||||
The Laclede Group Inc. | United States | 1,400,000 | 71,708,000 | |
Northwest Natural Gas Co. | United States | 300,000 | 14,385,000 | |
ONE Gas Inc. | United States | 600,000 | 25,938,000 | |
Questar Corp. | United States | 1,705,300 | 40,688,458 | |
152,719,458 | ||||
Independent Power & Renewable Electricity Producers 0.7% | ||||
Drax Group PLC | United Kingdom | 8,000,000 | 43,178,919 | |
Multi-Utilities 33.2% | ||||
Alliant Energy Corp. | United States | 1,600,000 | 100,800,000 | |
Ameren Corp. | United States | 600,000 | 25,320,000 | |
CenterPoint Energy Inc. | United States | 6,200,000 | 126,542,000 | |
CMS Energy Corp. | United States | 4,400,000 | 153,604,000 | |
Consolidated Edison Inc. | United States | 1,000,000 | 61,000,000 | |
Dominion Resources Inc. | United States | 4,200,000 | 297,654,000 | |
DTE Energy Co. | United States | 1,700,000 | 137,173,000 | |
MDU Resources Group Inc. | United States | 4,000,000 | 85,360,000 | |
National Grid PLC | United Kingdom | 11,000,000 | 141,077,536 | |
NiSource Inc. | United States | 1,500,000 | 66,240,000 | |
NorthWestern Corp. | United States | 596,800 | 32,101,872 | |
PG&E Corp. | United States | 4,000,000 | 212,280,000 |
100 | Semiannual Report franklintempleton.com
FRANKLIN CUSTODIAN FUNDS
STATEMENT OF INVESTMENTS (UNAUDITED)
Franklin Utilities Fund (continued) | |||||
Country | Shares | Value | |||
Common Stocks (continued) | |||||
Multi-Utilities (continued) | |||||
Public Service Enterprise Group Inc. | United States | 3,300,000 | $ | 138,336,000 | |
Sempra Energy | United States | 2,400,000 | 261,648,000 | ||
TECO Energy Inc. | United States | 1,300,000 | 25,220,000 | ||
Vectren Corp. | United States | 925,100 | 40,833,914 | ||
Wisconsin Energy Corp. | United States | 1,900,000 | 94,050,000 | ||
1,999,240,322 | |||||
Oil, Gas & Consumable Fuels 9.0% | |||||
Enbridge Inc. | Canada | 800,000 | 38,566,014 | ||
Kinder Morgan Inc. | United States | 3,500,000 | 147,210,000 | ||
Plains GP Holdings LP, A | United States | 2,700,000 | 76,599,000 | ||
Spectra Energy Corp. | United States | 1,800,000 | 65,106,000 | ||
TransCanada Corp. | Canada | 1,800,000 | 76,980,417 | ||
The Williams Cos. Inc. | United States | 2,700,000 | 136,593,000 | ||
541,054,431 | |||||
Real Estate Investment Trusts (REITs) 0.2% | |||||
InfraREIT Inc. | United States | 400,000 | 11,436,000 | ||
Water Utilities 3.4% | |||||
American Water Works Co. Inc. | United States | 2,000,000 | 108,420,000 | ||
United Utilities Group PLC | United Kingdom | 7,000,000 | 96,867,793 | ||
205,287,793 | |||||
Total Common Stocks (Cost $3,776,250,386) | 5,912,486,926 | ||||
Principal | |||||
Amount | |||||
Corporate Bonds 0.9% | |||||
Electric Utilities 0.1% | |||||
Northeast Generation Co., senior secured note, B-1, 8.812%, 10/15/26 | United States | $ | 6,210,938 | 6,774,276 | |
Multi-Utilities 0.8% | |||||
Aquila Inc., senior note, 8.27%, 11/15/21 | United States | 6,100,000 | 7,698,547 | ||
MidAmerican Energy Holdings Co., senior note, 8.48%, 9/15/28 | United States | 25,000,000 | 38,313,175 | ||
46,011,722 | |||||
Total Corporate Bonds (Cost $37,455,987) | 52,785,998 | ||||
b,cSenior Floating Rate Interests (Cost $26,914,123) 0.4% | |||||
Electric Utilities 0.4% | |||||
Energy Future Intermediate Holding Co. LLC, DIP Term Loan, 6.50%, | |||||
6/19/16 | United States | 26,781,949 | 26,927,027 | ||
Total Investments before Short Term Investments | |||||
(Cost $3,840,620,496) | 5,992,199,951 |
franklintempleton.com
Semiannual Report | 101
FRANKLIN CUSTODIAN FUNDS
STATEMENT OF INVESTMENTS (UNAUDITED)
Franklin Utilities Fund (continued) | ||||
Country | Shares | Value | ||
Short Term Investments 0.3% | ||||
Money Market Funds (Cost $19,338,532) 0.3% | ||||
d,eInstitutional Fiduciary Trust Money Market Portfolio | United States | 19,338,532 | $ | 19,338,532 |
fInvestments from Cash Collateral Received for Loaned Securities | ||||
(Cost $1,468,500) 0.0%† | ||||
Money Market Funds 0.0%† | ||||
gBNY Mellon Overnight Government Fund, 0.107% | United States | 1,468,500 | 1,468,500 | |
Total Investments (Cost $3,861,427,528) 99.9% | 6,013,006,983 | |||
Other Assets, less Liabilities 0.1% | 4,865,844 | |||
Net Assets 100.0% | $ | 6,017,872,827 |
See Abbreviations on page 129.
†Rounds to less than 0.1% of net assets.
aA portion or all of the security is on loan at March 31, 2015. See Note 1(h).
bSee Note 1(j) regarding senior floating rate interests.
cThe coupon rate shown represents the rate at period end.
dNon-income producing.
eSee Note 3(f) regarding investments in Institutional Fiduciary Trust Money Market Portfolio.
fSee Note 1(h) regarding securities on loan.
gThe ratio shown is the annualized seven-day yield at period end.
102 | Semiannual Report | The accompanying notes are an integral part of these financial statements. franklintempleton.com
FRANKLIN CUSTODIAN FUNDS | ||||||||
Financial Statements | ||||||||
Statements of Assets and Liabilities | ||||||||
March 31, 2015 (unaudited) | ||||||||
Franklin | Franklin | Franklin | ||||||
DynaTech Fund | Growth Fund | Income Fund | ||||||
Assets: | ||||||||
Investments in securities: | ||||||||
Cost - Unaffiliated issuers | $ | 1,393,080,854 | $ | 4,198,150,055 | $ | 84,918,166,408 | ||
Cost - Non-controlled affiliated issuers (Note 10) | — | — | 3,260,474,932 | |||||
Cost - Sweep Money Fund (Note 3f) | 64,810,248 | 591,636,826 | 335,728,942 | |||||
Cost - Repurchase agreements | — | 354,675,843 | 5,934,494 | |||||
Total cost of investments | $ | 1,457,891,102 | $ | 5,144,462,724 | $ | 88,520,304,776 | ||
Value - Unaffiliated issuers | $ | 2,519,215,921 | $ | 10,371,819,059 | $ | 89,349,037,873 | ||
Value - Non-controlled affiliated issuers (Note 10) | — | — | 2,119,321,294 | |||||
Value - Sweep Money Fund (Note 3f) | 64,810,248 | 591,636,826 | 335,728,942 | |||||
Value - Repurchase agreements | — | 354,675,843 | 5,934,494 | |||||
Total value of investmentsa | 2,584,026,169 | 11,318,131,728 | 91,810,022,603 | |||||
Cash | — | 442,280,014 | 19,449,028 | |||||
Receivables: | ||||||||
Investment securities sold | 6,356,364 | — | 303,687,180 | |||||
Capital shares sold | 8,211,569 | 16,242,437 | 111,591,327 | |||||
Dividends and interest | 639,772 | 9,014,598 | 911,811,357 | |||||
Due from brokers | — | — | 15,900,000 | |||||
Other assets | 1,438 | 6,618 | 54,419 | |||||
Total assets | 2,599,235,312 | 11,785,675,395 | 93,172,515,914 | |||||
Liabilities: | ||||||||
Payables: | ||||||||
Investment securities purchased | 5,505,335 | 8,596,305 | 456,608,509 | |||||
Capital shares redeemed | 4,015,045 | 19,145,614 | 143,584,515 | |||||
Management fees | 985,892 | 4,328,810 | 28,249,974 | |||||
Distribution fees | 1,118,700 | 4,788,771 | 43,156,720 | |||||
Transfer agent fees | 438,992 | 3,058,665 | 13,017,617 | |||||
Options written, at value (premiums received $–, $– and $1,880,485) | — | — | 1,492,500 | |||||
Payable upon return of securities loaned | — | — | 60,934,494 | |||||
Accrued expenses and other liabilities | 29,443 | 354,794 | 4,275,345 | |||||
Total liabilities | 12,093,407 | 40,272,959 | 751,319,674 | |||||
Net assets, at value | $ | 2,587,141,905 | $ | 11,745,402,436 | $ | 92,421,196,240 | ||
Net assets consist of: | ||||||||
Paid-in capital | $ | 1,444,099,548 | $ | 5,318,370,104 | $ | 91,487,339,647 | ||
Undistributed net investment income (loss) | (11,775,311 | ) | 16,604,460 | — | ||||
Distributions in excess of net investment income | — | — | (298,399,183 | ) | ||||
Net unrealized appreciation (depreciation) | 1,126,134,747 | 6,173,669,004 | 3,286,290,857 | |||||
Accumulated net realized gain (loss) | 28,682,921 | 236,758,868 | (2,054,035,081 | ) | ||||
Net assets, at value | $ | 2,587,141,905 | $ | 11,745,402,436 | $ | 92,421,196,240 | ||
aIncludes securities loaned | $ | — | $ | — | $ | 56,218,235 |
franklintempleton.com The accompanying notes are an integral part of these financial statements. | Semiannual Report | 103
FRANKLIN CUSTODIAN FUNDS
FINANCIAL STATEMENTS
Statements of Assets and Liabilities (continued) | |||||||
March 31, 2015 (unaudited) | |||||||
Franklin | Franklin | Franklin | |||||
DynaTech Fund | Growth Fund | Income Fund | |||||
Class A: | |||||||
Net assets, at value | $ | 1,739,191,026 | $ | 7,567,082,987 | $ | 52,392,775,596 | |
Shares outstanding | 35,755,859 | 98,068,879 | 21,941,429,619 | ||||
Net asset value per sharea | $ | 48.64 | $ | 77.16 | $ | 2.39 | |
Maximum offering price per share (net asset value per share ÷ 94.25%, | |||||||
94.25% and 95.75% respectively) | $ | 51.61 | $ | 81.87 | $ | 2.50 | |
Class C: | |||||||
Net assets, at value | $ | 246,117,526 | $ | 798,638,837 | $ | 28,288,348,802 | |
Shares outstanding | 5,801,722 | 11,114,013 | 11,720,546,247 | ||||
Net asset value and maximum offering price per sharea | $ | 42.42 | $ | 71.86 | $ | 2.41 | |
Class R: | |||||||
Net assets, at value | $ | 45,966,750 | $ | 589,011,964 | $ | 497,717,009 | |
Shares outstanding | 962,152 | 7,673,767 | 211,830,498 | ||||
Net asset value and maximum offering price per share | $ | 47.77 | $ | 76.76 | $ | 2.35 | |
Class R6: | |||||||
Net assets, at value | $ | 378,473,917 | $ | 1,197,113,326 | $ | 2,018,414,355 | |
Shares outstanding | 7,613,504 | 15,484,871 | 851,528,206 | ||||
Net asset value and maximum offering price per share | $ | 49.71 | $ | 77.31 | $ | 2.37 | |
Advisor Class: | |||||||
Net assets, at value | $ | 177,392,686 | $ | 1,593,555,322 | $ | 9,223,940,478 | |
Shares outstanding | 3,579,604 | 20,601,095 | 3,892,688,560 | ||||
Net asset value and maximum offering price per share | $ | 49.56 | $ | 77.35 | $ | 2.37 |
aRedemption price is equal to net asset value less contingent deferred sales charges, if applicable.
104 | Semiannual 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) | |||||
March 31, 2015 (unaudited) | |||||
Franklin | |||||
U.S. Government | Franklin | ||||
Securities Fund | Utilities Fund | ||||
Assets: | |||||
Investments in securities: | |||||
Cost - Unaffiliated issuers | $ | 5,994,087,800 | $ | 3,842,088,996 | |
Cost - Sweep Money Fund (Note 3f) | 226,922,199 | 19,338,532 | |||
Total cost of investments | $ | 6,221,009,999 | $ | 3,861,427,528 | |
Value - Unaffiliated issuers | $ | 6,278,377,685 | $ | 5,993,668,451 | |
Value - Sweep Money Fund (Note 3f) | 226,922,199 | 19,338,532 | |||
Total value of investmentsa | 6,505,299,884 | 6,013,006,983 | |||
Restricted cash (Note 1f) | 580,000 | — | |||
Receivables: | |||||
Investment securities sold | 2,892 | 12,645,220 | |||
Capital shares sold | 5,359,880 | 7,180,817 | |||
Dividends and interest | 20,906,040 | 14,522,543 | |||
Other assets | 3,846 | 3,858 | |||
Total assets | 6,532,152,542 | 6,047,359,421 | |||
Liabilities: | |||||
Payables: | |||||
Investment securities purchased | 83,757,753 | 11,444,860 | |||
Capital shares redeemed | 11,232,251 | 10,721,456 | |||
Management fees | 2,414,039 | 2,276,755 | |||
Distribution fees | 2,248,646 | 2,203,014 | |||
Transfer agent fees | 1,289,128 | 1,144,216 | |||
Distributions to shareholders | 2,546,721 | — | |||
Due to brokers | 300,000 | — | |||
Payable upon return of securities loaned | — | 1,468,500 | |||
Accrued expenses and other liabilities | 341,556 | 227,793 | |||
Total liabilities | 104,130,094 | 29,486,594 | |||
Net assets, at value | $ | 6,428,022,448 | $ | 6,017,872,827 | |
Net assets consist of: | |||||
Paid-in capital | $ | 6,532,431,213 | $ | 3,811,195,018 | |
Undistributed net investment income (distributions in excess of net investment income) | (28,347,493 | ) | 4,823,004 | ||
Net unrealized appreciation (depreciation) | 284,289,885 | 2,151,517,584 | |||
Accumulated net realized gain (loss) | (360,351,157 | ) | 50,337,221 | ||
Net assets, at value | $ | 6,428,022,448 | $ | 6,017,872,827 | |
aIncludes securities loaned | $ | — | $ | 1,429,340 |
franklintempleton.com The accompanying notes are an integral part of these financial statements. | Semiannual Report | 105
FRANKLIN CUSTODIAN FUNDS | |||||
FINANCIAL STATEMENTS | |||||
Statements of Assets and Liabilities (continued) | |||||
March 31, 2015 (unaudited) | |||||
Franklin | |||||
U.S. Government | Franklin | ||||
Securities Fund | Utilities Fund | ||||
Class A: | |||||
Net assets, at value | $ | 4,241,262,673 | $ | 4,004,687,701 | |
Shares outstanding | 651,961,812 | 236,253,022 | |||
Net asset value per sharea | $ | 6.51 | $ | 16.95 | |
Maximum offering price per share (net asset value per share ÷ 95.75%) | $ | 6.80 | $ | 17.70 | |
Class C: | |||||
Net assets, at value | $ | 1,115,546,946 | $ | 1,051,889,867 | |
Shares outstanding | 172,597,242 | 62,310,300 | |||
Net asset value and maximum offering price per sharea | $ | 6.46 | $ | 16.88 | |
Class R: | |||||
Net assets, at value | $ | 71,497,713 | $ | 100,435,001 | |
Shares outstanding | 10,997,940 | 5,943,370 | |||
Net asset value and maximum offering price per share | $ | 6.50 | $ | 16.90 | |
Class R6: | |||||
Net assets, at value | $ | 366,326,408 | $ | 235,185,230 | |
Shares outstanding | 56,144,042 | 13,788,562 | |||
Net asset value and maximum offering price per share | $ | 6.52 | $ | 17.06 | |
Advisor Class: | |||||
Net assets, at value | $ | 633,388,708 | $ | 625,675,028 | |
Shares outstanding | 97,064,433 | 36,676,061 | |||
Net asset value and maximum offering price per share | $ | 6.53 | $ | 17.06 |
aRedemption price is equal to net asset value less contingent deferred sales charges, if applicable.
106 | Semiannual Report | The accompanying notes are an integral part of these financial statements. franklintempleton.com
FRANKLIN CUSTODIAN FUNDS | |||||||||
FINANCIAL STATEMENTS | |||||||||
Statements of Operations | |||||||||
for the six months ended March 31, 2015 (unaudited) | |||||||||
Franklin | Franklin | Franklin | |||||||
DynaTech Fund | Growth Fund | Income Fund | |||||||
Investment income: | |||||||||
Dividends: | |||||||||
Unaffiliated issuers | $ | 5,088,710 | $ | 71,575,429 | $ | 839,058,764 | |||
Non-controlled affiliated issuers (Note 10) | — | — | 9,282,000 | ||||||
Interest: | |||||||||
Unaffiliated issuers | — | 142,719 | 1,413,705,378 | ||||||
Non-controlled affiliated issuers (Note 10) | — | — | 25,759,096 | ||||||
Income from securities loaned | — | — | 1,760,709 | ||||||
Total investment income | 5,088,710 | 71,718,148 | 2,289,565,947 | ||||||
Expenses: | |||||||||
Management fees (Note 3a) | 5,647,471 | 25,290,723 | 171,169,321 | ||||||
Distribution fees: (Note 3c) | |||||||||
Class A | 2,014,387 | 8,914,637 | 39,485,980 | ||||||
Class C | 1,131,669 | 3,666,197 | 92,144,227 | ||||||
Class R | 115,160 | 1,448,081 | 1,258,966 | ||||||
Transfer agent fees: (Note 3e) | |||||||||
Class A | 1,165,492 | 6,043,148 | 19,033,475 | ||||||
Class C | 163,704 | 621,312 | 10,251,877 | ||||||
Class R | 33,332 | 490,848 | 182,076 | ||||||
Class R6 | 322 | 1,303 | 1,955 | ||||||
Advisor Class | 119,854 | 1,279,298 | 3,311,640 | ||||||
Custodian fees (Note 4) | 18,679 | 48,713 | 639,995 | ||||||
Reports to shareholders | 98,467 | 439,898 | 2,795,311 | ||||||
Registration and filing fees | 78,973 | 141,814 | 1,257,284 | ||||||
Professional fees | 27,833 | 63,511 | 409,103 | ||||||
Trustees’ fees and expenses | 4,344 | 20,279 | 184,718 | ||||||
Other | 16,319 | 68,525 | 1,491,622 | ||||||
Total expenses | 10,636,006 | 48,538,287 | 343,617,550 | ||||||
Expense reductions (Note 4) | — | (371 | ) | (714 | ) | ||||
Expenses waived/paid by affiliates (Note 3f) | (23,465 | ) | (242,641 | ) | (244,900 | ) | |||
Net expenses | 10,612,541 | 48,295,275 | 343,371,936 | ||||||
Net investment income (loss) | (5,523,831 | ) | 23,422,873 | 1,946,194,011 | |||||
Realized and unrealized gains (losses): | |||||||||
Net realized gain (loss) from: | |||||||||
Investments: | |||||||||
Unaffiliated issuers | 39,627,902 | 311,700,399 | 732,748,361 | ||||||
Non-controlled affiliated issuers (Note 10) | — | — | 35,392,215 | ||||||
Written options | — | — | 19,964,169 | ||||||
Foreign currency transactions | 75,761 | (23,660 | ) | (3,280,452 | ) | ||||
Net realized gain (loss) | 39,703,663 | 311,676,739 | 784,824,293 | ||||||
Net change in unrealized appreciation (depreciation) on: | |||||||||
Investments | 181,368,395 | 685,599,331 | (3,990,841,569 | ) | |||||
Translation of other assets and liabilities denominated in foreign | |||||||||
currencies | (180 | ) | — | (1,543,619 | ) | ||||
Net change in unrealized appreciation (depreciation) | 181,368,215 | 685,599,331 | (3,992,385,188 | ) | |||||
Net realized and unrealized gain (loss) | 221,071,878 | 997,276,070 | (3,207,560,895 | ) | |||||
Net increase (decrease) in net assets resulting from operations | $ | 215,548,047 | $ | 1,020,698,943 | $ | (1,261,366,884 | ) |
franklintempleton.com The accompanying notes are an integral part of these financial statements. | Semiannual Report | 107
FRANKLIN CUSTODIAN FUNDS | ||||||
FINANCIAL STATEMENTS | ||||||
Statements of Operations (continued) | ||||||
for the six months ended March 31, 2015 (unaudited) | ||||||
Franklin | ||||||
U.S. Government | Franklin | |||||
Securities Fund | Utilities Fund | |||||
Investment income: | ||||||
Dividends | $ | — | $ | 102,281,884 | ||
Interest | 132,696,583 | 2,099,467 | ||||
Paydown loss | (27,485,273 | ) | — | |||
Income from securities loaned | — | 465,220 | ||||
Total investment income | 105,211,310 | 104,846,571 | ||||
Expenses: | ||||||
Management fees (Note 3a) | 14,826,924 | 14,034,304 | ||||
Distribution fees: (Note 3c) | ||||||
Class A | 3,116,689 | 3,031,655 | ||||
Class C | 3,739,823 | 3,475,080 | ||||
Class R | 182,243 | 257,018 | ||||
Transfer agent fees: (Note 3e) | ||||||
Class A | 2,880,771 | 2,183,099 | ||||
Class C | 775,011 | 577,611 | ||||
Class R | 49,116 | 55,526 | ||||
Class R6 | 598 | 772 | ||||
Advisor Class | 445,614 | 341,635 | ||||
Custodian fees (Note 4) | 29,995 | 43,771 | ||||
Reports to shareholders | 298,102 | 240,879 | ||||
Registration and filing fees | 91,674 | 94,070 | ||||
Professional fees | 46,655 | 41,121 | ||||
Trustees’ fees and expenses | 15,219 | 10,852 | ||||
Other | 236,914 | 39,423 | ||||
Total expenses | 26,735,348 | 24,426,816 | ||||
Expense reductions (Note 4) | (111 | ) | — | |||
Expenses waived/paid by affiliates (Note 3f) | (60,983 | ) | (39,191 | ) | ||
Net expenses | 26,674,254 | 24,387,625 | ||||
Net investment income | 78,537,056 | 80,458,946 | ||||
Realized and unrealized gains (losses): | ||||||
Net realized gain (loss) from: | ||||||
Investments | 10,341,876 | 56,399,810 | ||||
Foreign currency transactions | — | (239,130 | ) | |||
Net realized gain (loss) | 10,341,876 | 56,160,680 | ||||
Net change in unrealized appreciation (depreciation) on: | ||||||
Investments | 40,410,540 | 203,130,191 | ||||
Translation of other assets and liabilities denominated in foreign currencies | — | 50,245 | ||||
Net change in unrealized appreciation (depreciation) | 40,410,540 | 203,180,436 | ||||
Net realized and unrealized gain (loss) | 50,752,416 | 259,341,116 | ||||
Net increase (decrease) in net assets resulting from operations | $ | 129,289,472 | $ | 339,800,062 |
108 | Semiannual 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 | |||||||||||
Six Months Ended | Year Ended | Six Months Ended | Year Ended | |||||||||
March 31, 2015 | September 30, | March 31, 2015 | September 30, | |||||||||
(unaudited) | 2014 | (unaudited) | 2014 | |||||||||
Increase (decrease) in net assets: | ||||||||||||
Operations: | ||||||||||||
Net investment income (loss) | $ | (5,523,831 | ) | $ | (8,509,059 | ) | $ | 23,422,873 | $ | 40,261,849 | ||
Net realized gain (loss) from investments and | ||||||||||||
foreign currency transactions | 39,703,663 | 105,306,700 | 311,676,739 | (18,140,011 | ) | |||||||
Net change in unrealized appreciation (depreciation) | ||||||||||||
on investments and translation of other assets and | ||||||||||||
liabilities denominated in foreign currencies | 181,368,215 | 154,336,779 | 685,599,331 | 1,629,272,278 | ||||||||
Net increase (decrease) in net assets resulting | ||||||||||||
from operations | 215,548,047 | 251,134,420 | 1,020,698,943 | 1,651,394,116 | ||||||||
Distributions to shareholders from: | ||||||||||||
Net investment income: | ||||||||||||
Class A | — | — | (17,701,490 | ) | (27,683,049 | ) | ||||||
Class R | — | — | — | (887,842 | ) | |||||||
Class R6 | — | — | (7,173,435 | ) | (8,353,795 | ) | ||||||
Advisor Class | — | — | (7,135,723 | ) | (8,082,884 | ) | ||||||
Net realized gains: | ||||||||||||
Class A | (52,815,750 | ) | (47,796,268 | ) | — | — | ||||||
Class C | (8,572,795 | ) | (8,696,764 | ) | — | — | ||||||
Class R | (1,588,330 | ) | (1,742,295 | ) | — | — | ||||||
Class R6 | (11,564,117 | ) | (13,471,107 | ) | — | — | ||||||
Advisor Class | (5,461,764 | ) | (5,233,437 | ) | — | — | ||||||
Total distributions to shareholders | (80,002,756 | ) | (76,939,871 | ) | (32,010,648 | ) | (45,007,570 | ) | ||||
Capital share transactions: (Note 2) | ||||||||||||
Class A | 142,697,808 | 320,357,428 | 320,583,408 | 275,723,858 | ||||||||
Class C | 22,560,900 | 21,692,026 | 72,076,892 | 16,016,618 | ||||||||
Class R | (1,754,707 | ) | (395,246 | ) | (29,483,575 | ) | (84,447,235 | ) | ||||
Class R6 | 14,961,376 | (7,436,944 | ) | (13,375,504 | ) | 70,430,935 | ||||||
Advisor Class | 8,956,614 | 24,965,632 | 44,790,527 | 122,013,386 | ||||||||
Total capital share transactions | 187,421,991 | 359,182,896 | 394,591,748 | 399,737,562 | ||||||||
Net increase (decrease) in net assets | 322,967,282 | 533,377,445 | 1,383,280,043 | 2,006,124,108 | ||||||||
Net assets: | ||||||||||||
Beginning of period | 2,264,174,623 | 1,730,797,178 | 10,362,122,393 | 8,355,998,285 | ||||||||
End of period | $ | 2,587,141,905 | $ | 2,264,174,623 | $ | 11,745,402,436 | $ | 10,362,122,393 | ||||
Undistributed net investment income (loss) included | ||||||||||||
in net assets: | ||||||||||||
End of period | $ | (11,775,311 | ) | $ | (6,251,480 | ) | $ | 16,604,460 | $ | 25,192,235 |
franklintempleton.com The accompanying notes are an integral part of these financial statements. | Semiannual Report | 109
FRANKLIN CUSTODIAN FUNDS | ||||||||||||
FINANCIAL STATEMENTS | ||||||||||||
Statements of Changes in Net Assets (continued) | ||||||||||||
Franklin U.S. Government | ||||||||||||
Franklin Income Fund | Securities Fund | |||||||||||
Six Months Ended | Year Ended | Six Months Ended | Year Ended | |||||||||
March 31, 2015 | September 30, | March 31, 2015 | September 30, | |||||||||
(unaudited) | 2014 | (unaudited) | 2014 | |||||||||
Increase (decrease) in net assets: | ||||||||||||
Operations: | ||||||||||||
Net investment income | $ | 1,946,194,011 | $ | 3,721,931,310 | $ | 78,537,056 | $ | 185,414,463 | ||||
Net realized gain (loss) from investments, written | ||||||||||||
options and foreign currency transactions | 784,824,293 | 3,791,361,373 | 10,341,876 | (2,377,827 | ) | |||||||
Net change in unrealized appreciation | ||||||||||||
(depreciation) on investments and translation | ||||||||||||
of other assets and liabilities denominated in | ||||||||||||
foreign currencies | (3,992,385,188 | ) | 2,070,072,850 | 40,410,540 | 13,162,088 | |||||||
Net increase (decrease) in net assets | ||||||||||||
resulting from operations | (1,261,366,884 | ) | 9,583,365,533 | 129,289,472 | 196,198,724 | |||||||
Distributions to shareholders from: | ||||||||||||
Net investment income: | ||||||||||||
Class A | (1,310,698,004 | ) | (2,604,340,271 | ) | (71,287,393 | ) | (160,609,100 | ) | ||||
Class C | (623,472,440 | ) | (1,185,274,983 | ) | (16,337,295 | ) | (40,859,974 | ) | ||||
Class R | (11,843,503 | ) | (22,900,570 | ) | (1,085,314 | ) | (2,541,019 | ) | ||||
Class R6 | (53,247,490 | ) | (108,240,006 | ) | (6,902,691 | ) | (18,975,768 | ) | ||||
Advisor Class | (236,284,731 | ) | (366,385,613 | ) | (11,471,561 | ) | (27,139,385 | ) | ||||
Total distributions to shareholders | (2,235,546,168 | ) | (4,287,141,443 | ) | (107,084,254 | ) | (250,125,246 | ) | ||||
Capital share transactions: (Note 2) | ||||||||||||
Class A | 562,336,581 | 2,315,349,376 | (96,922,717 | ) | (780,787,234 | ) | ||||||
Class C | 545,329,881 | 3,192,666,235 | (79,018,466 | ) | (439,991,270 | ) | ||||||
Class R | 1,877,172 | 39,402,467 | (3,190,960 | ) | (19,028,290 | ) | ||||||
Class R6 | (11,540,787 | ) | 59,293,823 | (132,767,657 | ) | 20,086,199 | ||||||
Advisor Class | 474,738,851 | 2,833,775,583 | (21,418,820 | ) | (290,403,556 | ) | ||||||
Total capital share transactions | 1,572,741,698 | 8,440,487,484 | (333,318,620 | ) | (1,510,124,151 | ) | ||||||
Net increase (decrease) in net assets | (1,924,171,354 | ) | 13,736,711,574 | (311,113,402 | ) | (1,564,050,673 | ) | |||||
Net assets: | ||||||||||||
Beginning of period | 94,345,367,594 | 80,608,656,020 | 6,739,135,850 | 8,303,186,523 | ||||||||
End of period | $ | 92,421,196,240 | $ | 94,345,367,594 | $ | 6,428,022,448 | $ | 6,739,135,850 | ||||
Undistributed net investment income (distributions | ||||||||||||
in excess of net investment income) included in | ||||||||||||
net assets: | ||||||||||||
End of period | $ | (298,399,183 | ) | $ | (9,047,026 | ) | $ | (28,347,493 | ) | $ | 199,705 |
110 | Semiannual 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 | ||||||
Six Months Ended | Year Ended | |||||
March 31, 2015 | September 30, | |||||
(unaudited) | 2014 | |||||
Increase (decrease) in net assets: | ||||||
Operations: | ||||||
Net investment income | $ | 80,458,946 | $ | 157,359,225 | ||
Net realized gain (loss) from investments and foreign currency transactions | 56,160,680 | 144,072,177 | ||||
Net change in unrealized appreciation (depreciation) on investments and translation of other | ||||||
assets and liabilities denominated in foreign currencies | 203,180,436 | 507,401,760 | ||||
Net increase (decrease) in net assets resulting from operations | 339,800,062 | 808,833,162 | ||||
Distributions to shareholders from: | ||||||
Net investment income: | ||||||
Class A | (56,812,584 | ) | (108,592,280 | ) | ||
Class C | (11,915,519 | ) | (24,014,791 | ) | ||
Class R | (1,227,712 | ) | (2,519,737 | ) | ||
Class R6 | (3,727,137 | ) | (7,920,985 | ) | ||
Advisor Class | (9,486,387 | ) | (15,163,367 | ) | ||
Net realized gains: | ||||||
Class A | (94,564,224 | ) | (8,070,905 | ) | ||
Class C | (25,193,938 | ) | (2,099,362 | ) | ||
Class R | (2,392,646 | ) | (208,818 | ) | ||
Class R6 | (5,738,511 | ) | (542,905 | ) | ||
Advisor Class | (14,963,811 | ) | (948,180 | ) | ||
Total distributions to shareholders | (226,022,469 | ) | (170,081,330 | ) | ||
Capital share transactions: (Note 2) | ||||||
Class A | 212,026,435 | 10,997,734 | ||||
Class C | 44,845,817 | 29,377,765 | ||||
Class R | 2,995,172 | (1,938,388 | ) | |||
Class R6 | (6,841,275 | ) | (12,216,873 | ) | ||
Advisor Class | 53,217,291 | 164,532,653 | ||||
Total capital share transactions | 306,243,440 | 190,752,891 | ||||
Net increase (decrease) in net assets | 420,021,033 | 829,504,723 | ||||
Net assets: | ||||||
Beginning of period | 5,597,851,794 | 4,768,347,071 | ||||
End of period | $ | 6,017,872,827 | $ | 5,597,851,794 | ||
Undistributed net investment income included in net assets: | ||||||
End of period | $ | 4,823,004 | $ | 7,533,397 |
franklintempleton.com The accompanying notes are an integral part of these financial statements. | Semiannual Report | 111
FRANKLIN CUSTODIAN FUNDS
Notes to Financial Statements (unaudited)
1. Organization and Significant Accounting Policies
Franklin Custodian Funds (Trust) is registered under the Investment Company Act of 1940, as amended, (1940 Act) as an open-end management investment company, consisting of five separate funds (Funds) and applies the specialized accounting and reporting guidance in U.S. Generally Accepted Accounting Principles (U.S. GAAP). The Funds offer five classes of shares: Class A, Class C, Class R, Class R6, and Advisor Class. Each class of shares differs by its initial sales load, contingent deferred sales charges, voting rights on matters affecting a single class, its exchange privilege and fees primarily due to differing arrangements for distribution and transfer agent fees.
The following summarizes the Funds’ significant accounting policies.
a. Financial Instrument Valuation
The Funds’ investments in financial instruments are carried at fair value daily. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants on the measurement date. The Funds calculate the net asset value (NAV) per share at the close of the New York Stock Exchange (NYSE), generally at 4 p.m. Eastern time (NYSE close) on each day the NYSE is open for trading. Under compliance policies and procedures approved by the Trust’s Board of Trustees (the Board), the Funds’ administrator has responsibility for oversight of valuation, including leading the cross-functional Valuation and Liquidity Oversight Committee (VLOC). The VLOC provides administration and oversight of the Funds’ valuation policies and procedures, which are approved annually by the Board. Among other things, these procedures allow the Funds to utilize independent pricing services, quotations from securities and financial instrument dealers, and other market sources to determine fair value.
Equity securities and derivative financial instruments (derivatives) listed on an exchange or on the NASDAQ National Market System are valued at the last quoted sale price or the official closing price of the day, respectively. Foreign equity securities are valued as of the close of trading on the foreign stock exchange on which the security is primarily traded or as of the NYSE close, whichever is earlier. The value is then converted into its U.S. dollar equivalent at the foreign exchange rate in effect at the NYSE close on the day that the value of the security is determined. Over-the-counter (OTC) securities are valued within the range of the most recent quoted bid and ask prices. Securities that trade in multiple markets or on multiple exchanges are valued according to the broadest and most representative market. Certain equity securities are valued based upon fundamental characteristics or relationships to similar securities. Investments in open-end mutual funds and non-registered money market funds are valued at the closing NAV.
Debt securities generally trade in the OTC market rather than on a securities exchange. The Funds’ pricing services use multiple valuation techniques to determine fair value. In instances where sufficient market activity exists, the pricing services may utilize a market-based approach through which quotes from market makers are used to determine fair value. In instances where sufficient market activity may not exist or is limited, the pricing services also utilize proprietary valuation models which may consider market characteristics such as benchmark yield curves, credit spreads, estimated default rates, anticipated market interest rate volatility, coupon rates, anticipated timing of principal repayments, underlying collateral, and other unique security features in order to estimate the relevant cash flows, which are then discounted to calculate the fair value. Securities denominated in a foreign currency are converted into their U.S. dollar equivalent at the foreign exchange rate in effect at the NYSE close on the date that the values of the foreign debt securities are determined. Repurchase agreements are valued at cost, which approximates fair value.
The Funds have procedures to determine the fair value of financial instruments for which market prices are not reliable or readily available. Under these procedures, the VLOC convenes on a regular basis to review such financial instruments and considers a number of factors, including significant unobservable valuation inputs, when arriving at fair value. The VLOC primarily employs a market-based approach which may use related or comparable assets or liabilities, recent transactions, market multiples, book values, and other relevant information for the investment to determine the fair value of the investment. An income-based valuation approach may also be used in which the anticipated future cash flows of the investment are discounted to calculate fair value. Discounts may also be applied due to the nature or duration of any restrictions on the disposition of the investments. Due to the inherent uncertainty of valuations of such investments, the fair values may differ significantly from the values that would have been used had an active market existed. The VLOC employs various methods for calibrating these valuation approaches including a
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regular review of key inputs and assumptions, transactional back-testing or disposition analysis, and reviews of any related market activity.
Trading in securities on foreign securities stock exchanges and OTC markets may be completed before the daily NYSE close. In addition, trading in certain foreign markets may not take place on every NYSE business day. Occasionally, events occur between the time at which trading in a foreign security is completed and the close of the NYSE that might call into question the reliability of the value of a portfolio security held by the Fund. As a result, differences may arise between the value of the Fund’s portfolio securities as determined at the foreign market close and the latest indications of value at the close of the NYSE. In order to minimize the potential for these differences, the VLOC monitors price movements following the close of trading in foreign stock markets through a series of country specific market proxies (such as baskets of American Depositary Receipts, futures contracts and exchange traded funds). These price movements are measured against established trigger thresholds for each specific market proxy to assist in determining if an event has occurred that may call into question the reliability of the values of the foreign securities held by the Funds. If such an event occurs, the securities may be valued using fair value procedures, which may include the use of independent pricing services.
When the last day of the reporting period is a non-business day, certain foreign markets may be open on those days that the NYSE is closed, which could result in differences between the value of the Funds’ portfolio securities on the last business day and the last calendar day of the reporting period. Any significant security valuation changes due to an open foreign market are adjusted and reflected by the Funds for financial reporting purposes.
b. Foreign Currency Translation
Portfolio securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollars based on the exchange rate of such currencies against U.S. dollars on the date of valuation. The Funds may enter into foreign currency exchange contracts to facilitate transactions denominated in a foreign currency. Purchases and sales of securities, income and expense items denominated in foreign currencies are translated into U.S. dollars at the exchange rate in effect on the transaction date. Portfolio securities and assets and liabilities denominated in foreign currencies contain risks that those currencies will decline in value relative to the U.S. dollar. Occasionally, events may impact the availability or reliability of foreign exchange rates used to convert the U.S. dollar equivalent value. If such an event occurs, the foreign exchange rate will be valued at fair value using procedures established and approved by the Board.
The Funds do not separately report the effect of changes in foreign exchange rates from changes in market prices on securities held. Such changes are included in net realized and unrealized gain or loss from investments in the Statements of Operations.
Realized foreign exchange gains or losses arise from sales of foreign currencies, currency gains or losses realized between the trade and settlement dates on securities transactions and the difference between the recorded amounts of dividends, interest, and foreign withholding taxes and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign exchange gains and losses arise from changes in foreign exchange rates on foreign denominated assets and liabilities other than investments in securities held at the end of the reporting period.
c. Joint Repurchase Agreement
Certain funds enter into a joint repurchase agreement whereby its uninvested cash balance is deposited into a joint cash account with other funds managed by the investment manager or an affiliate of the investment manager and is used to invest in one or more repurchase agreements. The value and face amount of the joint repurchase agreement are allocated to the funds based on their pro-rata interest. A repurchase agreement is accounted for as a loan by the fund to the seller, collateralized by securities which are delivered to the fund’s custodian. The fair value, including accrued interest, of the initial collateralization is required to be at least 102% of the dollar amount invested by the funds, with the value of the underlying securities marked to market daily to maintain coverage of at least 100%. Repurchase agreements are subject to the terms of Master Repurchase Agreements (MRAs) with approved coun-terparties (sellers). The MRAs contain various provisions, including but not limited to events of default and maintenance of collateral for repurchase agreements. In the event of default by either the seller or the fund, certain MRAs may permit the non-defaulting party to net and close-out all transactions, if any, traded under such agreements. The funds may sell securities it holds as collateral and apply the proceeds towards the repurchase price and any other amounts owed by the seller to the fund in the event of default by the seller. This could involve costs or delays in addition to a loss on the securities if their
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1. Organization and Significant Accounting
Policies (continued)
c. Joint Repurchase Agreement (continued)
value falls below the repurchase price owed by the seller. The joint repurchase agreement held by the funds at period end, as indicated in the Statement of Investments, had been entered into on March 31, 2015.
d. Securities Purchased on a When-Issued, Delayed Delivery and TBA Basis
Certain funds purchase securities on a when-issued, delayed delivery and to-be-announced (TBA) basis, with payment and delivery scheduled for a future date. These transactions are subject to market fluctuations and are subject to the risk that the value at delivery may be more or less than the trade date purchase price. Although the funds will generally purchase these securities with the intention of holding the securities, they may sell the securities before the settlement date. Sufficient assets have been segregated for these securities and collateral has been pledged and/or received for open TBA trades.
e. Derivative Financial Instruments
Franklin Income Fund invested in derivatives in order to manage risk or gain exposure to various other investments or markets. Derivatives are financial contracts based on an underlying or notional amount, require no initial investment or an initial net investment that is smaller than would normally be required to have a similar response to changes in market factors, and require or permit net settlement. Derivatives contain various risks including the potential inability of the counter-party to fulfill their obligations under the terms of the contract, the potential for an illiquid secondary market, and/or the potential for market movements which expose the fund to gains or losses in excess of the amounts shown in the Statements of Assets and Liabilities. Realized gain and loss and unrealized appreciation and depreciation on these contracts for the period are included in the Statements of Operations.
Collateral requirements differ by type of derivative. Collateral or initial margin requirements are set by the broker or exchange clearing house for exchange traded and centrally cleared derivatives. Initial margin deposited is held at the exchange and can be in the form of cash and/or securities.
Franklin Income Fund purchased or wrote exchange traded option contracts primarily to manage exposure to equity price risk. An option is a contract entitling the holder to purchase or sell a specific amount of shares or units of an asset or notional amount of a swap (swaption), at a specified price. Options purchased are recorded as an asset while options written are recorded as a liability. Upon exercise of an option, the acquisition cost or sales proceeds of the underlying investment is adjusted by any premium received or paid. Upon expiration of an option, any premium received or paid is recorded as a realized gain or loss. Upon closing an option other than through expiration or exercise, the difference between the premium and the cost to close the position is recorded as a realized gain or loss.
See Notes 6 and 9 regarding investment transactions and other derivative information, respectively.
f. Restricted Cash
At March 31, 2015, Franklin U.S. Government Securities Fund held restricted cash in connection with investments in certain derivative securities. Restricted cash is held in a segregated account with the fund’s custodian and is reflected in the Statements of Assets and Liabilities.
g. Equity-Linked Securities
Franklin Income Fund invests in equity-linked securities. Equity-linked securities are hybrid financial instruments that generally combine both debt and equity characteristics into a single note form. Income received from equity-linked securities is recorded as realized gains in the Statements of Operations and may be based on the performance of an underlying equity security, an equity index, or an option position. The risks of investing in equity-linked securities include unfavorable price movements in the underlying security and the credit risk of the issuing financial institution. There may be no guarantee of a return of principal with equity-linked securities and the appreciation potential may be limited. Equity-linked securities may be more volatile and less liquid than other investments held by the fund.
h. Securities Lending
Certain funds participate in an agency based securities lending program to earn additional income. The fund receives cash collateral against the loaned securities in an amount equal to at least 102% of the fair value of the loaned securities. Collateral is maintained over the life of the loan in an amount not less than 100% of the fair value of loaned securities, as determined at the close of fund business each day; any additional collateral required due to changes in security values is delivered to the
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fund on the next business day. Franklin Income Fund’s collateral is deposited into a joint cash account with other funds and is used to invest in a money market fund managed by Franklin Advisers, Inc., an affiliate of the fund, and/or a joint repurchase agreement as indicated in the Statement of Investments. Franklin Utilities Fund’s collateral is invested in a non-registered money fund as indicated in the Statement of Investments. The total cash collateral received at period end was $60,934,494 and $1,468,500 for Franklin Income Fund and Franklin Utilities Fund, respectively. The fund may receive income from the investment of cash collateral, in addition to lending fees and rebates paid by the borrower. Income from securities loaned is reported separately in the Statements of Operations. The fund bears the market risk with respect to the collateral investment, securities loaned, and the risk that the agent may default on its obligations to the fund. If the borrower defaults on its obligation to return the securities loaned, the fund has the right to repurchase the securities in the open market using the collateral received.
i. Mortgage Dollar Rolls
Franklin U.S. Government Securities Fund enters into mortgage dollar rolls, typically on a TBA basis. Mortgage dollar rolls are agreements between the fund and a financial institution to simultaneously sell and repurchase mortgage-backed securities at a future date. Gains or losses are realized on the initial sale, and the difference between the repurchase price and the sale price is recorded as an unrealized gain or loss to the fund upon entering into the mortgage dollar roll. In addition, the fund may invest the cash proceeds that are received from the initial sale. During the period between the sale and repurchase, the fund is not entitled to principal and interest paid on the mortgage backed securities. The risks of mortgage dollar roll transactions include the potential inability of the counterparty to fulfill its obligations.
j. Senior Floating Rate Interests
Certain funds invest in senior secured corporate loans that pay interest at rates which are periodically reset by reference to a base lending rate plus a spread. These base lending rates are generally the prime rate offered by a designated U.S. bank or the London InterBank Offered Rate (LIBOR). Senior secured corporate loans often require prepayment of principal from excess cash flows or at the discretion of the borrower. As a result, actual maturity may be substantially less than the stated maturity. Senior secured corporate loans in which the funds invest are generally readily marketable, but may be subject to certain restrictions on resale.
k. Income and Deferred Taxes
It is each fund’s policy to qualify as a regulated investment company under the Internal Revenue Code. Each fund intends to distribute to shareholders substantially all of its taxable income and net realized gains to relieve it from federal income and excise taxes. As a result, no provision for U.S. federal income taxes is required.
The Funds may be subject to foreign taxation related to income received, capital gains on the sale of securities and certain foreign currency transactions in the foreign jurisdictions in which the Funds invest. Foreign taxes, if any, are recorded based on the tax regulations and rates that exist in the foreign markets in which the Funds invest. When a capital gain tax is determined to apply, the Funds record an estimated deferred tax liability in an amount that would be payable if the securities were disposed of on the valuation date. As a result of several court cases, in certain countries across the European Union, the Funds have filed additional tax reclaims for previously withheld taxes on dividends earned in those countries. These additional filings are subject to various administrative proceedings by the local jurisdictions’ tax authorities within the European Union, as well as a number of related judicial proceedings. At this time, uncertainty exists as to the ultimate resolution of these proceedings, the likelihood of receipt of these reclaims, and the potential timing of payment, and accordingly, no amounts are reflected in the financial statements.
Each fund recognizes the tax benefits of uncertain tax positions only when the position is “more likely than not” to be sustained upon examination by the tax authorities based on the technical merits of the tax position. As of March 31, 2015, and for all open tax years, each fund has determined that no liability for unrecognized tax benefits is required in each fund’s financial statements related to uncertain tax positions taken on a tax return (or expected to be taken on future tax returns). Open tax years are those that remain subject to examination and are based on each tax jurisdiction’s statute of limitation.
l. Security Transactions, Investment Income, Expenses and Distributions
Security transactions are accounted for on trade date. Realized gains and losses on security transactions are determined on a specific identification basis. Interest income and estimated expenses are accrued daily. Amortization of premium and accretion of discount on debt securities are included in interest income. Paydown gains and losses are recorded separately in the Statements of Operations. Facility fees are recognized as
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1. Organization and Significant Accounting
Policies (continued)
l. Security Transactions, Investment Income, Expenses and Distributions (continued)
income over the expected term of the loan. Dividend income recorded on the ex-dividend date except for certain dividends from foreign securities where the dividend rate is not available. In such cases, the dividend is recorded as soon as the information is received by the Funds. Distributions to shareholders are recorded on the ex-dividend date and are determined according to income tax regulations (tax basis). Distributable earnings determined on a tax basis may differ from earnings recorded in accordance with U.S. GAAP. These differences may be permanent or temporary. Permanent differences are reclassified among capital accounts to reflect their tax character. These reclassifications have no impact on net assets or the results of operations. Temporary differences are not reclassified, as they may reverse in subsequent periods.
Common expenses incurred by the Trust are allocated among the funds based on the ratio of net assets of each fund to the combined net assets of the Trust. Fund specific expenses are charged directly to the fund that incurred the expense.
Realized and unrealized gains and losses and net investment income, not including class specific expenses, are allocated daily to each class of shares based upon the relative proportion of net assets of each class. Differences in per share distributions, by class, are generally due to differences in class specific expenses.
m. Accounting Estimates
The preparation of financial statements in accordance with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the amounts of income and expenses during the reporting period. Actual results could differ from those estimates.
n. Guarantees and Indemnifications
Under the Trust’s organizational documents, its officers and trustees are indemnified by the Trust against certain liabilities arising out of the performance of their duties to the Trust. Additionally, in the normal course of business, the Trust, on behalf of the Funds, enters into contracts with service providers that contain general indemnification clauses. The Trust’s maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Trust that have not yet occurred. Currently, the Trust expects the risk of loss to be remote.
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2. Shares of Beneficial Interest
At March 31, 2015, 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: | ||||||||||
Six Months ended March 31, 2015 | ||||||||||
Shares sold | 9,255,060 | $ | 434,968,544 | 12,433,586 | $ | 924,894,193 | ||||
Shares issued in reinvestment of distributions | 1,036,739 | 48,011,485 | 215,220 | 16,016,677 | ||||||
Shares redeemed | (7,179,032 | ) | (340,282,221 | ) | (8,341,420 | ) | (620,327,462 | ) | ||
Net increase (decrease) | 3,112,767 | $ | 142,697,808 | 4,307,386 | $ | 320,583,408 | ||||
Year ended September 30, 2014 | ||||||||||
Shares sold | 19,957,583 | $ | 893,692,093 | 22,635,844 | $ | 1,476,657,042 | ||||
Shares issued in reinvestment of distributions | 1,036,302 | 44,498,813 | 384,777 | 24,402,538 | ||||||
Shares redeemed | (13,817,735 | ) | (617,833,478 | ) | (18,426,891 | ) | (1,225,335,722 | ) | ||
Net increase (decrease) | 7,176,150 | $ | 320,357,428 | 4,593,730 | $ | 275,723,858 | ||||
Class C Shares: | ||||||||||
Six Months ended March 31, 2015 | ||||||||||
Shares sold | 833,505 | $ | 34,376,678 | 1,765,284 | $ | 122,538,457 | ||||
Shares issued in reinvestment of distributions | 197,997 | 8,016,890 | — | — | ||||||
Shares redeemed | (483,589 | ) | (19,832,668 | ) | (728,358 | ) | (50,461,565 | ) | ||
Net increase (decrease) | 547,913 | $ | 22,560,900 | 1,036,926 | $ | 72,076,892 | ||||
Year ended September 30, 2014 | ||||||||||
Shares sold | 1,329,394 | $ | 52,341,287 | 1,755,572 | $ | 109,225,881 | ||||
Shares issued in reinvestment of distributions | 212,392 | 8,070,893 | — | — | ||||||
Shares redeemed | (992,766 | ) | (38,720,154 | ) | (1,501,516 | ) | (93,209,263 | ) | ||
Net increase (decrease) | 549,020 | $ | 21,692,026 | 254,056 | $ | 16,016,618 | ||||
Class R Shares: | ||||||||||
Six Months ended March 31, 2015 | ||||||||||
Shares sold | 93,993 | $ | 4,340,902 | 704,645 | $ | 52,100,791 | ||||
Shares issued in reinvestment of distributions | 34,518 | 1,571,239 | — | — | ||||||
Shares redeemed | (163,776 | ) | (7,666,848 | ) | (1,105,173 | ) | (81,584,366 | ) | ||
Net increase (decrease) | (35,265 | ) | $ | (1,754,707 | ) | (400,528 | ) | $ | (29,483,575 | ) |
Year ended September 30, 2014 | ||||||||||
Shares sold | 223,778 | $ | 9,798,197 | 1,259,033 | $ | 82,452,020 | ||||
Shares issued in reinvestment of distributions | 40,870 | 1,730,443 | 13,715 | 865,946 | ||||||
Shares redeemed | (273,168 | ) | (11,923,886 | ) | (2,549,245 | ) | (167,765,201 | ) | ||
Net increase (decrease) | (8,520 | ) | $ | (395,246 | ) | (1,276,497 | ) | $ | (84,447,235 | ) |
Class R6 Shares: | ||||||||||
Six Months ended March 31, 2015 | ||||||||||
Shares sold | 308,452 | $ | 14,631,216 | 806,377 | $ | 60,272,890 | ||||
Shares issued on reinvestment of distributions | 244,640 | 11,564,117 | 88,714 | 6,605,680 | ||||||
Shares redeemed | (230,149 | ) | (11,233,957 | ) | (1,067,278 | ) | (80,254,074 | ) | ||
Net increase (decrease) | 322,943 | $ | 14,961,376 | (172,187 | ) | $ | (13,375,504 | ) | ||
Year ended September 30, 2014 | ||||||||||
Shares sold | 392,771 | $ | 17,760,072 | 1,963,079 | $ | 130,998,376 | ||||
Shares issued in reinvestment of distributions | 308,823 | 13,470,860 | 131,722 | 8,353,795 | ||||||
Shares redeemed | (835,479 | ) | (38,667,876 | ) | (1,028,486 | ) | (68,921,236 | ) | ||
Net increase (decrease) | (133,885 | ) | $ | (7,436,944 | ) | 1,066,315 | $ | 70,430,935 |
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NOTES TO FINANCIAL STATEMENTS (UNAUDITED) | |||||||||||
2. Shares of Beneficial Interest (continued) | |||||||||||
Franklin DynaTech Fund | Franklin Growth Fund | ||||||||||
Shares | Amount | Shares | Amount | ||||||||
Advisor Class Shares: | |||||||||||
Six Months ended March 31, 2015 | |||||||||||
Shares sold | 612,944 | $ | 29,304,007 | 2,500,591 | $ | 186,340,660 | |||||
Shares issued in reinvestment of distributions | 109,767 | 5,174,431 | 89,253 | 6,652,935 | |||||||
Shares redeemed | (539,628 | ) | (25,521,824 | ) | (1,987,878 | ) | (148,203,068 | ) | |||
Net increase (decrease) | 183,083 | $ | 8,956,614 | 601,966 | $ | 44,790,527 | |||||
Year ended September 30, 2014 | |||||||||||
Shares sold | 1,513,116 | $ | 68,768,455 | 6,902,426 | $ | 453,057,572 | |||||
Shares issued in reinvestment of distributions | 113,735 | 4,955,439 | 117,373 | 7,454,331 | |||||||
Shares redeemed | (1,093,743 | ) | (48,758,262 | ) | (5,135,737 | ) | (338,498,517 | ) | |||
Net increase (decrease) | 533,108 | $ | 24,965,632 | 1,884,062 | $ | 122,013,386 | |||||
Franklin U.S. Government | |||||||||||
Franklin Income Fund | Securities Fund | ||||||||||
Shares | Amount | Shares | Amount | ||||||||
Class A Shares: | |||||||||||
Six Months ended March 31, 2015 | |||||||||||
Shares sold | 1,601,601,385 | $ | 3,861,145,125 | 45,008,898 | $ | 293,135,582 | |||||
Shares issued in reinvestment of distributions | 484,977,937 | 1,170,953,309 | 9,109,377 | 59,271,456 | |||||||
Shares redeemed | (1,857,399,252 | ) | (4,469,761,853 | ) | (68,997,718 | ) | (449,329,755 | ) | |||
Net increase (decrease) | 229,180,070 | $ | 562,336,581 | (14,879,443 | ) | $ | (96,922,717 | ) | |||
Year ended September 30, 2014 | |||||||||||
Shares sold | 3,713,448,419 | $ | 9,155,988,584 | 71,829,810 | $ | 468,017,184 | |||||
Shares issued in reinvestment of distributions | 947,331,186 | 2,322,103,838 | 20,519,832 | 133,500,755 | |||||||
Shares redeemed | (3,708,820,886 | ) | (9,162,743,046 | ) | (212,106,767 | ) | (1,382,305,173 | ) | |||
Net increase (decrease) | 951,958,719 | $ | 2,315,349,376 | (119,757,125 | ) | $ | (780,787,234 | ) | |||
Class C Shares: | |||||||||||
Six Months ended March 31, 2015 | |||||||||||
Shares sold | 913,602,004 | $ | 2,228,155,467 | 9,479,764 | $ | 61,323,992 | |||||
Shares issued in reinvestment of distributions | 216,450,083 | 528,347,073 | 2,227,959 | 14,403,918 | |||||||
Shares redeemed | (908,683,721 | ) | (2,211,172,659 | ) | (23,921,141 | ) | (154,746,376 | ) | |||
Net increase (decrease) | 221,368,366 | $ | 545,329,881 | (12,213,418 | ) | $ | (79,018,466 | ) | |||
Year ended September 30, 2014 | |||||||||||
Shares sold | 2,337,404,601 | $ | 5,828,986,276 | 12,474,550 | $ | 80,745,279 | |||||
Shares issued in reinvestment of distributions | 403,069,357 | 999,703,501 | 5,546,252 | 35,857,816 | |||||||
Shares redeemed | (1,458,897,007 | ) | (3,636,023,542 | ) | (85,939,596 | ) | (556,594,365 | ) | |||
Net increase (decrease) | 1,281,576,951 | $ | 3,192,666,235 | (67,918,794 | ) | $ | (439,991,270 | ) | |||
Class R Shares: | |||||||||||
Six Months ended March 31, 2015 | |||||||||||
Shares sold | 27,996,130 | $ | 66,321,524 | 1,489,708 | $ | 9,692,892 | |||||
Shares issued in reinvestment of distributions | 4,744,231 | 11,265,279 | 159,431 | 1,036,575 | |||||||
Shares redeemed | (31,901,722 | ) | (75,709,631 | ) | (2,139,392 | ) | (13,920,427 | ) | |||
Net increase (decrease) | 838,639 | $ | 1,877,172 | (490,253 | ) | $ | (3,190,960 | ) | |||
Year ended September 30, 2014 | |||||||||||
Shares sold | 54,226,242 | $ | 131,788,544 | 2,650,032 | $ | 17,247,466 | |||||
Shares issued in reinvestment of distributions | 8,980,499 | 21,708,289 | 373,462 | 2,428,996 | |||||||
Shares redeemed | (46,938,172 | ) | (114,094,366 | ) | (5,950,807 | ) | (38,704,752 | ) | |||
Net increase (decrease) | 16,268,569 | $ | 39,402,467 | (2,927,313 | ) | $ | (19,028,290 | ) | |||
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Franklin U.S. Government | |||||||||||
Franklin Income Fund | Securities Fund | ||||||||||
Shares | Amount | Shares | Amount | ||||||||
Class R6 Shares: | |||||||||||
Six Months ended March 31, 2015 | |||||||||||
Shares sold | 7,739,140 | $ | 18,455,435 | 11,254,306 | $ | 73,405,770 | |||||
Shares issued on reinvestment of distributions | 21,405,397 | 51,257,636 | 1,007,012 | 6,571,903 | |||||||
Shares redeemed | (34,134,448 | ) | (81,253,858 | ) | (32,576,322 | ) | (212,745,330 | ) | |||
Net increase (decrease) | (4,989,911 | ) | $ | (11,540,787 | ) | (20,315,004 | ) | $ | (132,767,657 | ) | |
Year ended September 30, 2014 | |||||||||||
Shares sold | 40,517,766 | $ | 97,896,117 | 8,007,305 | $ | 52,198,801 | |||||
Shares issued in reinvestment of distributions | 44,205,466 | 107,593,287 | 2,880,560 | 18,796,291 | |||||||
Shares redeemed | (59,362,751 | ) | (146,195,581 | ) | (7,784,399 | ) | (50,908,893 | ) | |||
Net increase (decrease) | 25,360,481 | $ | 59,293,823 | 3,103,466 | $ | 20,086,199 | |||||
Advisor Class Shares: | |||||||||||
Six Months ended March 31, 2015 | |||||||||||
Shares sold | 637,996,187 | $ | 1,529,395,401 | 15,907,209 | $ | 103,905,454 | |||||
Shares issued in reinvestment of distributions | 84,505,502 | 202,321,035 | 1,548,810 | 10,108,466 | |||||||
Shares redeemed | (526,826,941 | ) | (1,256,977,585 | ) | (20,751,774 | ) | (135,432,740 | ) | |||
Net increase (decrease) | 195,674,748 | $ | 474,738,851 | (3,295,755 | ) | $ | (21,418,820 | ) | |||
Year ended September 30, 2014 | |||||||||||
Shares sold | 1,562,121,375 | $ | 3,859,740,670 | 27,080,227 | $ | 176,904,592 | |||||
Shares issued in reinvestment of distributions | 125,980,982 | 307,395,314 | 3,666,095 | 23,923,798 | |||||||
Shares redeemed | (545,540,026 | ) | (1,333,360,401 | ) | (75,256,361 | ) | (491,231,946 | ) | |||
Net increase (decrease) | 1,142,562,331 | $ | 2,833,775,583 | (44,510,039 | ) | $ | (290,403,556 | ) |
Franklin Utilities Fund | |||||
Shares | Amount | ||||
Class A Shares: | |||||
Six Months ended March 31, 2015 | |||||
Shares sold | 29,971,718 | $ | 523,222,127 | ||
Shares issued in reinvestment of distributions | 8,050,179 | 138,413,308 | |||
Shares redeemed | (26,044,499 | ) | (449,609,000 | ) | |
Net increase (decrease) | 11,977,398 | $ | 212,026,435 | ||
Year ended September 30, 2014 | |||||
Shares sold | 39,649,168 | $ | 636,235,264 | ||
Shares issued in reinvestment of distributions | 6,698,177 | 105,396,539 | |||
Shares redeemed | (46,046,709 | ) | (730,634,069 | ) | |
Net increase (decrease) | 300,636 | $ | 10,997,734 | ||
Class C Shares: | |||||
Six Months ended March 31, 2015 | |||||
Shares sold | 6,601,563 | $ | 114,778,367 | ||
Shares issued in reinvestment of distributions | 1,809,184 | 31,007,146 | |||
Shares redeemed | (5,869,220 | ) | (100,939,696 | ) | |
Net increase (decrease) | 2,541,527 | $ | 44,845,817 | ||
Year ended September 30, 2014 | |||||
Shares sold | 9,642,854 | $ | 153,687,794 | ||
Shares issued in reinvestment of distributions | 1,349,832 | 21,125,954 | |||
Shares redeemed | (9,258,751 | ) | (145,435,983 | ) | |
Net increase (decrease) | 1,733,935 | $ | 29,377,765 |
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2. Shares of Beneficial Interest (continued) | ||||||
Franklin Utilities Fund | ||||||
Shares | Amount | |||||
Class R Shares: | ||||||
Six Months ended March 31, 2015 | ||||||
Shares sold | 1,290,599 | $ | 22,510,243 | |||
Shares issued in reinvestment of distributions | 204,604 | 3,509,713 | ||||
Shares redeemed | (1,332,485 | ) | (23,024,784 | ) | ||
Net increase (decrease) | 162,718 | $ | 2,995,172 | |||
Year ended September 30, 2014 | ||||||
Shares sold | 2,212,911 | $ | 35,338,931 | |||
Shares issued in reinvestment of distributions | 168,631 | 2,642,310 | ||||
Shares redeemed | (2,515,315 | ) | (39,919,629 | ) | ||
Net increase (decrease) | (133,773 | ) | $ | (1,938,388 | ) | |
Class R6 Shares: | ||||||
Six Months ended March 31, 2015 | ||||||
Shares sold | 730,242 | $ | 12,992,548 | |||
Shares issued on reinvestment of distributions | 547,160 | 9,465,648 | ||||
Shares redeemed | (1,665,290 | ) | (29,299,471 | ) | ||
Net increase (decrease) | (387,888 | ) | $ | (6,841,275 | ) | |
Year ended September 30, 2014 | ||||||
Shares sold | 1,158,712 | $ | 18,704,736 | |||
Shares issued in reinvestment of distributions | 534,709 | 8,463,891 | ||||
Shares redeemed | (2,387,364 | ) | (39,385,500 | ) | ||
Net increase (decrease) | (693,943 | ) | $ | (12,216,873 | ) | |
Advisor Class Shares: | ||||||
Six Months ended March 31, 2015 | ||||||
Shares sold | 7,423,977 | $ | 131,239,947 | |||
Shares issued in reinvestment of distributions | 1,317,469 | 22,791,915 | ||||
Shares redeemed | (5,771,847 | ) | (100,814,571 | ) | ||
Net increase (decrease) | 2,969,599 | $ | 53,217,291 | |||
Year ended September 30, 2014 | ||||||
Shares sold | 17,575,665 | $ | 278,956,564 | |||
Shares issued in reinvestment of distributions | 912,471 | 14,538,476 | ||||
Shares redeemed | (8,103,315 | ) | (128,962,387 | ) | ||
Net increase (decrease) | 10,384,821 | $ | 164,532,653 |
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 |
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NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
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 |
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. Distribution fees are not charged on shares held by affiliates. Under the Funds’ Class A reimbursement distribution plans, the Funds reimburse Distributors for costs incurred in connection with the servicing, sale and distribution of each fund’s shares up to the maximum annual plan rate for each class. Under the Class A reimbursement distribution plans, costs exceeding the maximum for the current plan year cannot be reimbursed in subsequent periods. In addition, under the
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3. Transactions with Affiliates (continued)
c. Distribution Fees (continued)
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 U.S. | ||||||||||
Franklin | Franklin | Franklin | Government | Franklin | ||||||
DynaTech Fund | Growth Fund | Income Fund | Securities Fund | Utilities Fund | ||||||
Reimbursement Plans: | ||||||||||
Class A | 0.25 | % | 0.25 | % | 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 period:
Franklin U.S. | ||||||||||
Franklin | Franklin | Franklin | Government | Franklin | ||||||
DynaTech Fund | Growth Fund | Income Fund | Securities Fund | Utilities Fund | ||||||
Sales charges retained net of commissions | ||||||||||
paid to unaffiliated broker/dealers | $ | 799,161 | $ | 2,060,089 | $ | 10,948,292 | $ | 433,979 | $ | 700,052 |
CDSC retained | $ | 19,335 | $ | 42,065 | $ | 1,748,055 | $ | 28,268 | $ | 83,559 |
e. Transfer Agent Fees
Each class of shares, except for Class R6, pays transfer agent fees to Investor Services for its performance of shareholder servicing obligations and reimburses Investor Services for out of pocket expenses incurred, including shareholding 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 period ended March 31, 2015, the Funds paid transfer agent fees as noted in the Statements of Operations of which the following amounts were retained by Investor Services:
Franklin U.S. | ||||||||||
Franklin | Franklin | Franklin | Government | Franklin | ||||||
DynaTech Fund | Growth Fund | Income Fund | Securities Fund | Utilities Fund | ||||||
Transfer agent fees | $ | 748,069 | $ | 3,472,294 | $ | 12,117,760 | $ | 2,105,608 | $ | 1,388,470 |
f. Investments in Institutional Fiduciary Trust Money Market Portfolio
The Funds invest in Institutional Fiduciary Trust Money Market Portfolio (Sweep Money Fund), an affiliated open-end management investment company. Management fees paid by the Funds are waived on assets invested in the Sweep Money Fund, as noted in the Statements of Operations, in an amount not to exceed the management and administrative fees paid directly or indirectly by the Sweep Money Fund. Prior to October 1, 2013, the waiver was accounted for as a reduction to management fees.
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NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
g. Other Affiliated Transactions
At March 31, 2015, one or more of the funds in Franklin Fund Allocator Series owned a percentage of the following funds’ outstanding shares.
Franklin U.S. | |||||||||
Franklin | Franklin | Franklin | Government | Franklin | |||||
DynaTech Fund | Growth Fund | Income Fund | Securities Fund | Utilities Fund | |||||
14.12 | % | 9.13 | % | 2.09 | % | 4.18 | % | 3.77 | % |
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 period ended March 31, 2015, 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, 2014, the capital loss carryforwards were as follows: | |||||||||||
Franklin U.S. | |||||||||||
Franklin | Franklin | Franklin | Government | ||||||||
DynaTech Fund | Growth Fund | Income Fund | Securities Fund | ||||||||
Capital loss carryforwards subject to expiration: | |||||||||||
2015 | $ | — | $ | — | $ | — | $ | 28,034,940 | |||
2016 | — | 13,543,792 | — | 20,514,778 | |||||||
2017 | 10,234,999 | — | — | 18,668,917 | |||||||
2018 | — | — | 2,672,493,978 | 16,923,309 | |||||||
2019 | — | — | — | 4,445,156 | |||||||
Capital loss carryforwards not subject to expiration: | |||||||||||
Short term | — | 14,372,615 | — | 112,026,737 | |||||||
Long term | — | 47,914,506 | — | 170,079,195 | |||||||
Total capital loss carryforwards | $ | 10,234,999 | a | $ | 75,830,913 | b | $ | 2,672,493,978 | $ | 370,693,032 |
aIncludes $10,234,999 from the merged Franklin Global Communications Fund and Franklin Technology Fund, which may be carried over to offset future capital gains,
subject to certain limitations.
bIncludes $13,543,792 from the merged Franklin Capital Growth Fund, which may be carried over to offset future capital gains, subject to certain limitations.
For tax purposes, the Funds may elect to defer any portion of a post-October capital loss or late-year ordinary loss to the first day of the following fiscal year. At September 30, 2014, Franklin DynaTech Fund deferred late-year ordinary losses of $6,251,481.
At March 31, 2015, the cost of investments and net unrealized appreciation (depreciation) for income tax purposes were as follows:
Franklin | Franklin | Franklin | |||||||
DynaTech Fund | Growth Fund | Income Fund | |||||||
Cost of investments | $ | 1,458,520,664 | $ | 5,149,261,681 | $ | 88,714,155,665 | |||
Unrealized appreciation | $ | 1,132,059,214 | $ | 6,206,294,754 | $ | 9,839,895,459 | |||
Unrealized depreciation | (6,553,709 | ) | (37,424,707 | ) | (6,744,028,521 | ) | |||
Net unrealized appreciation (depreciation) | $ | 1,125,505,505 | $ | 6,168,870,047 | $ | 3,095,866,938 |
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5. Income Taxes (continued) | ||||||
Franklin U.S. | ||||||
Government | Franklin | |||||
Securities Fund | Utilities Fund | |||||
Cost of investments | $ | 6,221,031,780 | $ | 3,861,211,050 | ||
Unrealized appreciation | $ | 303,702,299 | $ | 2,200,047,354 | ||
Unrealized depreciation | (19,434,195 | ) | (48,251,421 | ) | ||
Net unrealized appreciation (depreciation) | $ | 284,268,104 | $ | 2,151,795,933 |
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 discount and premiums, corporate actions and equity-linked securities.
6. Investment Transactions
Purchases and sales of investments (excluding short term securities) for the period ended March 31, 2015, were as follows:
Franklin U.S. | |||||||||||||
Franklin | Franklin | Franklin | Government | Franklin | |||||||||
DynaTech Fund | Growth Fund | Income Fund | Securities Fund | Utilities Fund | |||||||||
Purchases | $ | 487,811,998 | $ | 338,247,348 | $ | 16,935,112,798 | $ | 2,128,052,420 | $ | 463,587,402 | |||
Sales | $ | 395,350,320 | $ | 128,635,457 | $ | 17,475,356,714 | $ | 2,688,083,935 | $ | 221,439,702 | |||
Transactions in options written during the period ended March 31, 2015, were as follows: | |||||||||||||
Number of | Premiums | ||||||||||||
Contracts | Received | ||||||||||||
Franklin Income Fund | |||||||||||||
Options outstanding at September 30, 2014 | — | $ | — | ||||||||||
Options written | 193,500 | 21,844,654 | |||||||||||
Options expired | (169,500 | ) | (19,964,169 | ) | |||||||||
Options exercised | — | — | |||||||||||
Options closed | — | — | |||||||||||
Options outstanding at March 31, 2015 | 24,000 | $ | 1,880,485 |
See Notes 1(e) and 9 regarding derivative financial instruments and other derivative information, respectively.
7. Credit Risk
At March 31, 2015, Franklin Income Fund had 38.47% of its portfolio invested in high yield, senior secured floating rate notes, or other securities rated below investment grade. These securities may be more sensitive to economic conditions causing greater price volatility and are potentially subject to a greater risk of loss due to default than higher rated securities.
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FRANKLIN CUSTODIAN FUNDS
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
8. Restricted Securities
Certain funds invest in securities that are restricted under the Securities Act of 1933 (1933 Act) or which are subject to legal, contractual, or other agreed upon restrictions on resale. Restricted securities are often purchased in private placement transactions, and cannot be sold without prior registration unless the sale is pursuant to an exemption under the 1933 Act. Disposal of these securities may require greater effort and expense, and prompt sale at an acceptable price may be difficult. The funds may have registration rights for restricted securities. The issuer generally incurs all registration costs.
At March 31, 2015, Franklin Income Fund held investments in restricted securities, excluding certain securities exempt from registration under the 1933 Act deemed to be liquid, as follows:
Acquisition | ||||||
Shares | Issuer | Date | Cost | Value | ||
21,666,666 | First Data Holdings Inc., B (Value is 0.13% of Net Assets) | 6/26/14 | $ | 86,666,664 | $ | 121,610,425 |
9. Other Derivative Information
At March 31, 2015, Franklin Income 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 | Statement of Assets and | Statement of Assets and | |||
Hedging Instruments | Liabilities Location | Fair Value | Liabilities Location | Fair Value | |
Equity contracts | Investments, at value | $ — | Options written, at value | $ | 1,492,500 |
For the period ended March 31, 2015, the effect of derivative contracts in Franklin Income Fund’s Statement of Operations was as follows:
Change in | |||||
Unrealized | |||||
Derivative Contracts | Realized | Appreciation | |||
Not Accounted for as | Gain (Loss) | (Depreciation) | |||
Hedging Instruments | Statement of Operations Locations | for the Period | for the Period | ||
Equity contracts | Net realized gain (loss) from written options / Net | ||||
change in unrealized appreciation (depreciation) | |||||
on investments | $ | 19,964,169 | $ | 387,985 |
For the period ended March 31, 2015, the average month end fair value of derivatives represented less than 0.01% of average month end net assets. The average month end number of open derivative contracts for the period was 4.
See Notes 1(e) and 6 regarding derivative financial instruments and investment transactions, respectively.
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NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
10. Holdings of 5% Voting Securities of Portfolio Companies
The 1940 Act defines “affiliated companies” to include investments in portfolio companies in which a fund owns 5% or more of the outstanding voting securities. Investments in “affiliated companies” for Franklin Income Fund for the period ended March 31, 2015, were as shown below.
Number of | Number of | ||||||||||||
Shares/ | Shares/ | ||||||||||||
Warrants/ | Warrants/ | ||||||||||||
Principal | Principal | ||||||||||||
Amount* | Amount* | ||||||||||||
Held at | Held at | ||||||||||||
Beginning | Gross | Gross | End | Value at | Investment | Realized | |||||||
Name of Issuer | of Period | Additions | Reductions | of Period | End of Period | Income | Gain (Loss) | ||||||
Non-Controlled Affiliates | |||||||||||||
Agrium Inc. | 7,500,000 | — | (500,000 | ) | 7,000,000 | $ | 729,890,000 | a | $ | 9,282,000 | $ | (1,162,050 | ) |
CEVA Group PLC, first lien, 144A, 7.00%, | |||||||||||||
3/01/21 | 15,000,000 | — | (15,000,000 | ) | — | — | 122,500 | (600,000 | ) | ||||
CEVA Group PLC, Pre-Funded L/C, 6.50%, | |||||||||||||
3/19/21 | 20,320,197 | — | — | 20,320,197 | 19,062,885 | 642,062 | — | ||||||
CEVA Group PLC, secured note, 144A, 9.00%, | |||||||||||||
9/01/21 | 20,000,000 | — | (20,000,000 | ) | — | — | 240,000 | (1,050,000 | ) | ||||
CEVA Group PLC, senior note, first lien, 144A, | |||||||||||||
4.00%, 5/01/18 | 186,778,982 | — | — | 186,778,982 | 169,968,874 | 3,714,826 | — | ||||||
CEVA Holdings LLC | 91,371 | — | — | 91,371 | 66,244,019 | — | — | ||||||
CEVA Holdings LLC, cvt. pfd., A-1 | 2,897 | — | — | 2,897 | 2,897,250 | — | — | ||||||
CEVA Holdings LLC, cvt. pfd., A-2 | 110,565 | — | — | 110,565 | 80,159,683 | — | — | ||||||
Dex Media Inc. | 2,048,551 | — | — | 2,048,551 | 8,583,429 | — | — | ||||||
Dex Media Inc., senior sub. note, PIK, 14.00%, | |||||||||||||
1/29/17 | 41,400,812 | 1,448,756 | (7,777 | )b | 42,841,791 | 16,494,090 | 1,448,756 | — | |||||
Dex Media West LLC, Term Loan B, 8.00%, | |||||||||||||
12/30/16 | 1,482,107 | — | (1,482,107 | ) | — | — | 7,705 | 39,792 | |||||
Dynegy Finance I Inc./Dynegy Finance II Inc., | |||||||||||||
senior note, 144A, 6.75%, 11/01/19 | — | 270,000,000 | — | 270,000,000 | 279,787,500 | 7,745,625 | — | ||||||
Dynegy Finance I Inc./Dynegy Finance II Inc., | |||||||||||||
senior note, 144A, 7.375%, 11/01/22 | — | 256,700,000 | — | 256,700,000 | 270,818,500 | 8,045,941 | — | ||||||
Dynegy Holdings Inc., Escrow Account | 1,024,235,000 | — | (1,024,235,000 | )b | — | — | — | — | |||||
Dynegy Inc. | 16,000,000 | — | (4,500,000 | ) | 11,500,000 | 361,445,000 | — | (32,212,411 | ) | ||||
Dynegy Inc., senior note, 5.875%, 6/01/23 | 105,000,000 | — | (5,000,000 | ) | 100,000,000 | 97,750,000 | 2,953,003 | 56,616 | |||||
Dynegy Inc., wts., 10/02/17 | 1,143,273 | — | — | 1,143,273 | 4,824,612 | — | — | ||||||
Dynegy Roseton Danskammer Pass Through | |||||||||||||
Trust, Escrow Account, B | 40,000,000 | — | — | 40,000,000 | — | — | — | ||||||
cR.H. Donnelley Inc., Term Loan B, 9.75%, | |||||||||||||
12/30/16 | 22,277,846 | — | (5,920,746 | ) | 16,357,100 | 11,395,452 | 838,678 | (464,162 | ) | ||||
Total Affiliated Securities (Value is 2.29% of Net Assets) | $ | 2,119,321,294 | $ | 35,041,096 | $ | (35,392,215 | ) |
*In U.S. dollars unless otherwise indicated.
aAs of March 31, 2015, no longer an affiliate.
bGross reduction was the result of a corporate action.
cCompany is a wholly owned subsidiary of Dex Media Inc.
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NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
11. 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 12, 2016. This Global Credit Facility provides a source of funds to the Borrowers for temporary and emergency purposes, including the ability to meet future unanticipated or unusually large redemption requests.
Under the terms of the Global Credit Facility, the Funds shall, in addition to interest charged on any borrowings made by the Funds and other costs incurred by the Funds, pay their share of fees and expenses incurred in connection with the implementation and maintenance of the Global Credit Facility, based upon their relative share of the aggregate net assets of all of the Borrowers, including an annual commitment fee of 0.07% based upon the unused portion of the Global Credit Facility. These fees are reflected in other expenses in the Statements of Operations. During the period ended March 31, 2015, the Funds did not use the Global Credit Facility.
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 March 31, 2015, 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: | ||||||||
Equity Investments:a | $ | 2,519,215,921 | $ | — | $ | — | $ | 2,519,215,921 |
Short Term Investments | 64,810,248 | — | — | 64,810,248 | ||||
Total Investments in Securities | $ | 2,584,026,169 | $ | — | $ | — | $ | 2,584,026,169 |
Franklin Growth Fund | ||||||||
Assets: | ||||||||
Investments in Securities: | ||||||||
Equity Investments:a | $ | 10,371,819,059 | $ | — | $ | — | $ | 10,371,819,059 |
Short Term Investments | 591,636,826 | 354,675,843 | — | 946,312,669 | ||||
Total Investments in Securities | $ | 10,963,455,885 | $ | 354,675,843 | $ | — | $ | 11,318,131,728 |
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NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
12. Fair Value Measurements (continued) | |||||||||
Level 1 | Level 2 | Level 3 | Total | ||||||
Franklin Income Fund | |||||||||
Assets: | |||||||||
Investments in Securities: | |||||||||
Equity Investments:b | |||||||||
Energy | $ | 6,880,760,140 | $ | 396,716,872 | $ | — | $ | 7,277,477,012 | |
Financials | 3,853,053,758 | 118,959,378 | — | 3,972,013,136 | |||||
Industrials | 3,772,604,800 | 149,300,952 | — | 3,921,905,752 | |||||
Information Technology | 1,207,155,514 | — | 121,610,425 | 1,328,765,939 | |||||
Utilities | 8,759,580,824 | 136,410,000 | — | 8,895,990,824 | |||||
All Other Equity Investmentsa | 17,408,272,932 | — | — | 17,408,272,932 | |||||
Equity-Linked Securities | — | 7,422,254,323 | — | 7,422,254,323 | |||||
Convertible Bonds | — | 736,381,757 | — | 736,381,757 | |||||
Corporate Bonds | — | 35,235,105,316 | 70,000,000 | 35,305,105,316 | |||||
Senior Floating Rate Interests | — | 2,971,335,125 | — | 2,971,335,125 | |||||
Escrows and Litigation Trusts | — | — | 150,000 | c | 150,000 | ||||
Short Term Investments | 782,468,205 | 1,787,902,282 | — | 2,570,370,487 | |||||
Total Investments in Securities | $ | 42,663,896,173 | $ | 48,954,366,005 | $ | 191,760,425 | $ | 91,810,022,603 | |
Liabilities: | |||||||||
Other Financial Instruments | |||||||||
Options Written | $ | 1,492,500 | $ | — | $ | — | $ | 1,492,500 | |
Franklin U.S. Government Securities Fund | |||||||||
Assets: | |||||||||
Investments in Securities: | |||||||||
Mortgage-Backed Securities | $ | — | $ | 6,278,377,685 | $ | — | $ | 6,278,377,685 | |
Short Term Investments | 226,922,199 | — | — | 226,922,199 | |||||
Total Investments in Securities | $ | 226,922,199 | $ | 6,278,377,685 | $ | — | $ | 6,505,299,884 | |
Franklin Utilities Fund | |||||||||
Assets: | |||||||||
Investments in Securities: | |||||||||
Equity Investmentsa | $ | 5,912,486,926 | $ | — | $ | — | $ | 5,912,486,926 | |
Corporate Bonds | — | 52,785,998 | — | 52,785,998 | |||||
Senior Floating Rate Interests | — | 26,927,027 | — | 26,927,027 | |||||
Short Term Investments | 19,338,532 | 1,468,500 | — | 20,807,032 | |||||
Total Investments in Securities | $ | 5,931,825,458 | $ | 81,181,525 | $ | — | $ | 6,013,006,983 |
aFor detailed categories, see the accompanying Statement of Investments.
bIncludes common, preferred and convertible preferred stocks as well as other equity investments.
cIncludes securities determined to have no value at March 31, 2015.
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 end of the period.
13. New Accounting Pronouncements
In June 2014, the Financial Accounting Standards Board issued Accounting Standards Update (ASU) No. 2014-11, Transfers and Servicing (Topic 860), Repurchase-to-Maturity Transactions, Repurchase Financings, and Disclosures. The ASU changes the accounting for certain repurchase agreements and expands disclosure requirements related to repurchase agreements, securities lending, repurchase-to-maturity and similar transactions. The ASU is effective for interim and annual reporting periods beginning after December 15, 2014. Management has reviewed the requirements and believes the adoption of this ASU will not have a material impact on the financial statements.
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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.
Abbreviations | |||
Currency | Selected Portfolio | ||
EUR | Euro | ADR | American Depositary Receipt |
GBP | British Pound | DIP | Debtor-In-Possession |
FHLB | Federal Home Loan Bank | ||
FHLMC | Federal Home Loan Mortgage Corp. | ||
FNMA | Federal National Mortgage Association | ||
FRN | Floating Rate Note | ||
GP | Graduated Payment | ||
L/C | Letter of Credit | ||
MTN | Medium Term Note | ||
PIK | Payment-In-Kind | ||
SF | Single Family |
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Shareholder Information
Board Review of Investment Management Agreement
At a meeting held February 24, 2015, the Board of Trustees (Board), including a majority of non-interested or independent Trustees, approved renewal of the investment management agreement for each of the five separate funds in Franklin Custodian Funds (Fund(s)). In reaching this decision, the Board took into account information furnished throughout the year at regular Board meetings, as well as information prepared specifically in connection with the annual renewal review process. Information furnished and discussed throughout the year included investment performance reports and related financial information for each Fund, along with periodic reports on expenses, shareholder services, legal and compliance matters, pricing, brokerage commissions and execution and other services provided by the Investment Manager (Manager) and its affiliates, as well as marketing support payments made to financial intermediaries. Information furnished specifically in connection with the renewal process included a report for each Fund prepared by Lipper, Inc. (Lipper), an independent organization, as well as additional material, including a Fund profitability analysis prepared by management. The Lipper reports compared each Fund’s investment performance and expenses with those of other mutual funds deemed comparable to the Fund as selected by Lipper. The Fund profitability analysis discussed the profitability to Franklin Templeton Investments (FTI) from its overall U.S. fund operations, as well as on an individual fund-by-fund basis. Additional material accompanying such profitability analysis included information on a fund-by-fund basis listing portfolio managers and other accounts they manage, as well as information on management fees charged by the Manager and its affiliates to U.S. mutual funds and other accounts, including management’s explanation of differences where relevant. Such material also included a memorandum prepared by management describing project initiatives and capital investments relating to the services provided to the Funds by the FTI organization, as well as a memorandum relating to economies of scale and an analysis concerning transfer agent fees charged by an affiliate of the Manager. The Board also received a report on all marketing support payments made by FTI to financial intermediaries during the past year.
In considering such materials, the independent Trustees received assistance and advice from and met separately with independent counsel. While the investment management agreements for all Funds were considered at the same Board meeting, the Board dealt with each Fund separately. In approving continuance of the investment management agreement for each Fund, the Board, including a majority of independent Trustees, determined that the existing management fee structure was fair and reasonable and that continuance of the investment management agreement was in the best interests of each Fund and its shareholders. While attention was given to all information furnished, the following discusses some primary factors relevant to the Board’s decision.
NATURE, EXTENT AND QUALITY OF SERVICES. The Board was satisfied with the nature and quality of the overall services provided by the Manager and its affiliates to the Funds and their shareholders. In addition to investment performance and expenses discussed later, the Board’s opinion was based, in part, upon periodic reports furnished it showing that the investment policies and restrictions for each Fund were consistently complied with as well as other reports periodically furnished the Board covering matters such as the compliance of portfolio managers and other management personnel with the code of ethics adopted throughout the Franklin Templeton fund complex, the adherence to fair value pricing procedures established by the Board, and the accuracy of net asset value calculations. The Board also noted the extent of benefits provided Fund shareholders from being part of the Franklin Templeton family of funds, including the right to exchange investments between the same class of shares of different funds without a sales charge, the ability to reinvest Fund dividends into other funds and the right to combine holdings in other funds to obtain a reduced sales charge. Favorable consideration was given to management’s continual efforts and expenditures in establishing effective business continuity plans and developing strategies to address cybersecurity threats. Additionally, the Board noted the Manager’s continued attention to pricing and valuation issues, particularly with respect to complex securities. Among other factors taken into account by the Board were the Manager’s best execution trading policies, including a favorable report by an independent portfolio trading analytical firm that also covered FOREX transactions. Consideration was also given to the experience of each Fund’s portfolio management team, the number of accounts managed and general method of compensation. In this latter respect, the Board noted that a primary factor in management’s determination of a portfolio manager’s bonus compensation was the relative investment performance of the funds he or she managed and that a portion of such bonus was required to be invested in a predesignated list of funds within such person’s fund management area so as to be aligned with the interests of shareholders. The Board also took
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into account the quality of transfer agent and shareholder services provided Fund shareholders by an affiliate of the Manager and the continual enhancements to the Franklin Templeton website. Particular attention was given to management’s conservative approach and diligent risk management procedures, including continual monitoring of counterparty credit risk and attention given to derivatives and other complex instruments including expanded collateralization requirements. The Board also took into account, among other things, management’s efforts in establishing a global credit facility for the benefit of the Funds and other accounts managed by FTI to provide a source of cash for temporary and emergency purposes or to meet unusual redemption requests as well as the strong financial position of the Manager’s parent company and its commitment to the mutual fund business as evidenced by its continued subsidization of money market funds.
INVESTMENT PERFORMANCE. The Board placed significant emphasis on the investment performance of each Fund in view of its importance to shareholders. While consideration was given to performance reports and discussions with portfolio managers at Board meetings during the year, particular attention in assessing performance was given to the Lipper reports furnished for the agreement renewals. The Lipper reports prepared for each individual Fund showed the investment performance of its Class A shares during 2014 and the previous 10-year period ended December 31, 2014, in comparison with a performance universe selected by Lipper. Investment performance was shown on a total return basis for all Funds with income return being shown as well for those Funds having income as an investment objective element. The following summarizes the performance results for each Fund.
Franklin DynaTech Fund – This Fund’s investment performance was shown in comparison to a performance universe consisting of the Fund and all retail and institutional multi-cap growth funds as classified by Lipper. The Lipper report showed the Fund’s total return for 2014 to be in the second-lowest performing quintile of its performance universe and on an annualized basis to be in the middle performing quintile of such universe for each of the previous three- and five-year periods and in the second-highest performing quintile for the previous 10-year period. The Board found the Fund’s performance as shown in the Lipper report to be acceptable.
Franklin Growth Fund – The Fund’s investment performance was shown in comparison to a performance universe consisting of all retail and institutional multi-cap core funds as classified by Lipper. The Lipper report showed the Fund’s total return during 2014 to be in the highest performing quintile of such performance universe and on an annualized basis to be in the middle performing quintile for the previous three- and five-year periods, and in the highest performing quintile of such universe for the previous 10-year period. The Board was satisfied with the Fund’s overall performance as shown in the Lipper report.
Franklin Income Fund – The Fund’s investment performance was shown in comparison to a performance universe consisting of the Fund and all other retail and institutional mixed-asset target allocation moderate funds as classified by Lipper. The Lipper report showed the Fund’s income return during 2014 to be in the highest quintile of its performance universe and its income return on an annualized basis during each of the previous three-, five- and 10-year periods to also be in the highest quintile of such performance universe. The Lipper report showed the Fund’s total return during 2014 to be in the second-lowest performing quintile of its Lipper performance universe, and on an annualized basis to be in either the highest or second-highest performing quintile of such universe during each of the previous three-, five- and 10-year periods. The Board was satisfied with the Fund’s performance as shown in the Lipper report and noted that its income return for 2014 was 4.98%.
Franklin U.S. Government Securities Fund – This Fund’s investment performance was shown in comparison to a performance universe consisting of all retail and institutional Ginnie Mae funds as classified by Lipper. The Fund’s Lipper report showed its income return during 2014 to be in the second-highest quintile of its Lipper performance universe and its income return on an annualized basis to be in the second-highest quintile of such universe during each of the previous three-, five- and 10-year periods. The Fund’s Lipper report showed its total return to be in the lowest performing quintile of its performance universe during 2014, and its total return on an annualized basis to be in the second-lowest performing quintile of such universe for the previous three-, five- and 10-year periods. The Board found such comparative performance to be acceptable in view of the Fund’s income investment objective and conservative policy of investing only in plain vanilla Ginnie Mae pass-through securities, which impacted performance during the period. The Board also noted that the Fund’s total return for the annualized five-year period was only 14 basis points below the performance universe median for such period.
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Board Review of Investment Management
Agreement (continued)
Franklin Utilities Fund – This Fund’s investment performance was shown in comparison to a performance universe consisting of all retail and institutional utility funds as classified by Lipper. The Fund’s Lipper report showed its income return during 2014 to be in the second-highest quintile of such universe, and its income return on an annualized basis to be in the second-highest quintile of such performance universe during each of the previous three-, five- and 10-year periods. The Fund’s total return during 2014 was in the highest performing quintile of its performance universe, and on an annualized basis was in the second-highest performing quintile of such universe during each of the previous three-, five- and 10-year periods. The Board was satisfied with the Fund’s performance as shown in the Lipper report.
COMPARATIVE EXPENSES. Consideration was given to a comparative analysis of the management fees and total expense ratio of each Fund compared with those of a group of other funds selected by Lipper as constituting its appropriate Lipper expense group. Lipper expense data is based upon information taken from each fund’s most recent annual report, which reflects historical asset levels that may be quite different from those currently existing, particularly in a period of market volatility. While recognizing such inherent limitation and the fact that expense ratios generally increase as assets decline and decrease as assets grow, the Board believed the independent analysis conducted by Lipper to be an appropriate measure of comparative expenses. In reviewing comparative costs, Lipper provides information on each Fund’s contractual investment management fee in comparison with the contractual investment management fee that would have been charged by other funds within its Lipper expense group assuming they were similar in size to the Fund, as well as the actual total expenses of the Fund in comparison with those of its Lipper expense group. The Lipper contractual investment management fee analysis considers administrative charges as being part of management fees, and total expenses, for comparative consistency are shown by Lipper for Fund Class A shares. The results of such expense comparisons showed for each Fund that its contractual investment management fee rate was below the median of its Lipper expense group and its actual total expense ratio was in the least expensive quintile of its Lipper expense group. Based upon the above, the Board was satisfied with the management fee and actual total expense ratio of each Fund in comparison to its respective Lipper expense group as shown in the Lipper reports.
MANAGEMENT PROFITABILITY. The Board also considered the level of profits realized by the Manager and its affiliates in connection with the operation of each Fund. In this respect, the Board reviewed the Fund profitability analysis that addresses the overall profitability of Franklin Templeton’s U.S. fund business, as well as its profits in providing management and other services to each of the individual funds during the 12-month period ended September 30, 2014, being the most recent fiscal year-end for Franklin Resources, Inc., the Manager’s parent. In reviewing the analysis, the Board recognized that allocation methodologies are inherently subjective and various allocation methodologies may be reasonable while producing different results. In this respect, the Board noted that while management continually makes refinements to its methodologies in response to organizational and product related changes, the overall approach as defined by the primary drivers and activity measurements has remained consistent with that used in the Funds’ profitability report presentations from prior years. Additionally, the Funds’ independent registered public accounting firm had been engaged by the Manager to periodically review the reasonableness of the allocation methodologies to be used solely by the Funds’ Board in reference to the profitability analysis. In reviewing and discussing such analysis, management discussed with the Board its belief that costs incurred in establishing the infrastructure necessary for the type of mutual fund operations conducted by the Manager and its affiliates may not be fully reflected in the expenses allocated to each Fund in determining its profitability, as well as the fact that the level of profits, to a certain extent, reflected operational cost savings and efficiencies initiated by management. The Board also took into account management’s expenditures in improving shareholder services provided the Funds, as well as the need to implement systems and meet additional regulatory and compliance requirements resulting from statutes such as the Sarbanes-Oxley and Dodd-Frank Acts and recent SEC and other regulatory requirements. In addition, the Board considered a third-party study comparing the profitability of the Manager’s parent on an overall basis to other publicly held managers broken down to show profitability from management operations exclusive of distribution expenses, as well as profitability including distribution expenses. The Board also considered the extent to which the Manager and its affiliates might derive ancillary benefits from fund operations, including revenues generated from transfer agent services and
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potential benefits resulting from personnel and systems enhancements necessitated by fund growth, increased leverage with service providers and counterparties, allocation of fund brokerage and the use of commission dollars to pay for research. Based upon its consideration of all these factors, the Board determined that the level of profits realized by the Manager and its affiliates from providing services to each Fund was not excessive in view of the nature, quality and extent of services provided.
ECONOMIES OF SCALE. The Board also considered whether economies of scale are realized by the Manager as the Funds grow larger and the extent to which this is reflected in the level of management fees charged. While recognizing that any precise determination is inherently subjective, the Board noted that based upon the Fund profitability analysis, it appears that as some funds get larger, at some point economies of scale do result in the Manager realizing a larger profit margin on management services provided such a fund. The Board also noted that economies of scale are shared with each Fund and its shareholders through management fee breakpoints so that as a Fund grows in size, its effective management fee rate declines. The fee structure under the investment management agreement with each Fund provides an initial fee of 0.625% on the first $100 million of assets; 0.50% on the next $150 million of assets; 0.45% on the next $7.25 billion of assets; and declining thereafter until reaching a breakpoint of 0.35% for assets in excess of $50 billion, with such breakpoints continuing in the case of Franklin Income Fund and Franklin Utilities Fund to 0.345% on assets in excess of $65 billion and 0.34% on assets in excess of $80 billion. Existing breakpoints continue beyond the year-end asset size of each Fund other than Franklin Income Fund whose assets had grown to approximately $92.5 billion at December 31, 2014. In discussing additional breakpoints for such Fund, management expressed the view that its fee structure reaches a relatively low rate quickly anticipating economies of scale as assets increase and pointed out the Fund’s favorable contractual management fee and total expense comparison within its Lipper expense group as previously discussed under “Comparative Expenses.” The Board also noted economies of scale are realized from asset growth in excess of a fund’s last breakpoint since this results in an overall lower management fee rate. While intending to monitor future growth of Franklin Income Fund, the Board believed that to the extent economies of scale may be realized by the Manager and its affiliates, the schedule of fees under the investment management agreement for this Fund as well as for each of the other Funds provides a sharing of benefits with the Fund and its shareholders.
Proxy Voting Policies and Procedures
The Trust’s investment manager has established Proxy Voting Policies and Procedures (Policies) that the Trust uses to determine how to vote proxies relating to portfolio securities. Shareholders may view the Trust’s complete Policies online at franklintempleton.com. Alternatively, shareholders may request copies of the Policies free of charge by calling the Proxy Group collect at (954) 527-7678 or by sending a written request to: Franklin Templeton Companies, LLC, 300 S.E. 2nd Street, Fort Lauderdale, FL 33301, Attention: Proxy Group. Copies of the Trust’s proxy voting records are also made available online at franklintempleton.com and posted on the U.S. Securities and Exchange Commission’s website at sec.gov and reflect the most recent 12-month period ended June 30.
Quarterly Statement of Investments
The Trust files a complete statement of investments with the U.S. Securities and Exchange Commission for the first and third quarters for each fiscal year on Form N-Q. Shareholders may view the filed Form N-Q by visiting the Commission’s website at sec.gov. The filed form may also be viewed and copied at the Commission’s Public Reference Room in Washington, DC. Information regarding the operations of the Public Reference Room may be obtained by calling (800) SEC-0330.
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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. N/A
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 ensure that information required to be disclosed in the Registrant’s filings under the Securities Exchange Act of 1934 and the Investment Company Act of 1940 is recorded, processed, summarized and reported within the periods specified in the rules and forms of the Securities and Exchange Commission. Such information is accumulated and communicated to the Registrant’s management, including its principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure. The Registrant’s management, including the principal executive officer and the principal financial officer, recognizes that any set of controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives.
Within 90 days prior to the filing date of this Shareholder Report on Form N-CSR, the Registrant had carried out an evaluation, under the supervision and with the participation of the Registrant’s management, including the Registrant’s principal executive officer and the Registrant’s principal financial officer, of the effectiveness of the design and operation of the Registrant’s disclosure controls and procedures. Based on such evaluation, the Registrant’s principal executive officer and principal financial officer concluded that the Registrant’s disclosure controls and procedures are effective.
(b) Changes in Internal Controls. There have been no significant changes in the Registrant’s internal controls or in other factors that could significantly affect the internal controls subsequent to the date of their evaluation in connection with the preparation of this Shareholder Report on Form N-CSR.
Item 12. Exhibits.
(a)(1) Code of Ethics
(a)(2) Certifications pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 of Laura F. Fergerson, Chief Executive Officer - Finance and Administration, and Gaston Gardey, Chief Financial Officer and Chief Accounting Officer
(b) Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 of Laura F. Fergerson, Chief Executive Officer - Finance and Administration, and Gaston Gardey, Chief Financial Officer and Chief Accounting Officer
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
FRANKLIN CUSTODIAN FUNDS
By /s/Laura F. Fergerson
Laura F. Fergerson
Chief Executive Officer - Finance and Administration
Date May 27, 2015
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
By /s/Laura F. Fergerson
Laura F. Fergerson
Chief Executive Officer - Finance and Administration
Date May 27, 2015
By /s/Gaston Gardey
Gaston Gardey
Chief Financial Officer and Chief Accounting Officer
Date May 27, 2015